The AES Corporation (AES) said it plans to arrange finance with the help of a new syndicated senior secured term loan facility up to an aggregate principal amount of $1.05 billion to fund its DPL Inc. (DPL) buy. Under the facility, AES Corp. will issue debt securities and utilize the proceeds to pay certain fees and expenses related to the DPL transaction.
In April this year, AES Corp. had entered into a definitive agreement to acquire DPL Inc., the parent company of Dayton Power & Light Company, for a total value of $4.7 billion. It had agreed to pay $30 per share in cash to DPL shareholders. It will pay a total of $3.5 billion in cash for the equity and $1.2 billion in net debt for the total transaction. Upon closing of the transaction, DPL will become a wholly owned subsidiary of AES Corporation.
In May 2011, AES Corp. reported adjusted EPS of 22 cents in the first quarter of 2011, below the Zacks Consensus EPS Estimate of 26 cents. Adjusted EPS for the reported quarter fell short of the year-ago EPS of 28 cents.
AES Corp. reported cash and cash equivalents of slightly above $2 billion at the end of the reported period, down from $2.6 billion at the end of fiscal 2010. Long-term liabilities decreased to $21.8 billion from approximately $22 billion at fiscal-end 2010.
For fiscal 2011, AES Corp. reaffirmed its adjusted earnings per share guidance in the range of 97 cents to $1.03 per share that was primarily adjusted for acquisition costs of approximately 11 cents per share. The guidance range of $1.27–$1.37 for 2012 takes into account the benefits from the DPL acquisition in the range of 5 cents to 7 cents per share, contributions from projects coming on-line in 2011, and year-over-year improvements in operations.
AES Corp. has business exposure in 28 countries around the globe, which insulates it from any region-specific risk. With a base of fossil fuel plants, the company is predominantly involved in long-term contracts, which do not allow for any rate base growth in the near term for its regulated utilities. Additionally, the company has a successful track record in the U.S. utility sector with its investment in Indianapolis Power & Light Company (IPL).
However, AES Corp’s focus on long-term supply contracts exposes the company to commodity price risk and its significant presence around the globe makes it vulnerable to foreign currency volatility. Taking these factors into account the company presently retains a short-term Zacks #3 Rank (Hold) that corresponds with our long-term Neutral recommendation on the stock.
The AES Corporation is a global power company with generation and distribution businesses. Through a diverse portfolio of thermal and renewable fuel sources, the company provides affordable and sustainable energy to 28 countries.
AES CORP (AES): Free Stock Analysis Report
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