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The AES Corporation (AES)Stock (Electric Utilities Industry, Energy Industry, Services Industry)
[edit] Business Segments [edit] Generation (55%)The Generation segment is responsible for running electricity generation plants powered by either coal, natural gas, water, biomass, or wind, and selling electricity to wholesale customers in 26 countries. In Latin America, the company's main source of revenue, AES generates 21% of the total electrical capacity in the state of São Paulo, Brazil making it the ninth-largest generator in Brazil.[8] AES also produces 12% of Argentina's total electricity and is the second-largest generator of power in Chile.[9] AES also owns 17 power plants in the northeastern and western U.S.[10] In 2007, about 62% of this segment's contracts were for five years or longer. [edit] Utilities (37%)The Utilities segment is responsible for transporting electricity directly to over 11 million consumers.[11] The company's Utilities operations range in structure from simple distribution systems to fully integrated utilities that generate, transmit, and distribute power. AES is part owner of Brazil's largest electricity distribution company in terms of revenue and electricity distributed, AES Electropaulo.[12] In El Salvador, AES provides electricity to over 80% of the country's population.[13] In North America, AES owns IPL, a utilities company that supplies energy to roughly 465,000 customers in Indianapolis.[14] The Utilities businesses do not face as much competition as AES' Generation segment because of the government regulation of utilities that prevents competitors from freely entering the market.[15] [edit] Other (7%)The Other segment consists mostly of AES' alternative energy products and services. AES's alternative energy business includes wind-powered electricity generation stations and products designed to reduce the output of greenhouse gases from fossil fuel generators.[16] [edit] Business Financials AES' Revenue, Operating Income and Net Income[18] (in millions USD)
[edit] Key Trends and Forces [edit] Rising coal and natural gas prices increase AES' cost of salesBetween 2006 and 2007, the average yearly price of coal, used to power plants that produce about 33% of AES' total electrical output, rose from $49.09 to $65.73 per metric ton.[20][21] These rising prices led to an increase in AES' cost of sales from about 70% of revenue to about 75% of revenue between 2006 and 2007.[22] This trend continued into 2008 as the average price of coal between January 2008 and May 2008 reached nearly $120 per metric ton.[23] During the same period of time, the price of natural gas used to generate electricity rose from $7.11 to $7.30 per thousand cubic feet.[24] AES is especially exposed to rising commodities prices because its long-term contracts with customers give it few opportunities to pass on increased costs.[25] [edit] Nationalization in Latin America threatens AES' operationsOn January 8, 2007, Hugo Chavez, president of Venezuela, announced a plan to nationalize Venezuela's electrical energy industry.[26] As part of Chavez's plan, AES was forced to sell its Venezuelan electric utilities company EDC to the Venezuelan government for $739 million.[27] The transaction resulted in a $680 million loss on the value of AES's assets in Venezuela.[28] Venezuela is not the only Latin American country to move toward nationalization; Bolivian president Evo Morales nationalized the country's oil and natural gas industries, even going so far as to send in troops to enforce the government's policies.[29]  [edit] Exchange rates resulting in a weak U.S. dollar boost AES' international revenuesDuring 2007, the U.S. dollar depreciated in relation to the Brazilian real and the euro and appreciated relative to the Argentinean peso and the Chilean peso.[31] Despite the slight appreciation of the dollar against the Argentinean and Chilean peso, AES reported that favorable exchange rates resulted in a $636 million revenue boost in 2007.[32] When foreign currencies depreciate relative to the dollar (or when the dollar appreciates), the USD value of AES' international revenue decreases. On the other hand, a relatively weak USD boosts international revenue, as sales in other currencies convert to a larger number of dollars. [edit] Key Competitors
 The AES Corporation2004 Data 2005 Data 2006 Data 2007 Data 2008 Data Most Recent Data Available [edit] References
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