UBS Downgrades AES Corp. (AES) to Sell
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UBS downgraded AES Corp. (NYSE: AES) from Neutral to Sell with a price target of $11.00.
Analyst Julien Dumoulin-Smith commented, "AES Corporation shares continued to outperform its peers, trading at historic P/E highs not seen since late 2009. In retrospect, AES LatAm subsidiaries have lagged. AES Gener has fallen ~30% since June, underperforming the LatAm markets and AES Corp, which is up ~7%. AES' LatAm subsidiaries account for ~$4.80 (29% of total equity value per Holdco debt). We emphasize the Chilean underperformance is tied to concerns on pricing pressures from recent auctions in which renewables successfully undercut conventional resources at an average price of $47.59/MWh in late August. While AES's Chilean contracts remain largely long-dated into the early 2020's (this auction was for 2021), it is the first substantial indication of wider pressure from renewables on recontracting prices. We expect the latest pricing to prove the new normal (if not trending lower). Bottom line, with this sub having been the source of much of the capacity expansion and EPS growth through this decade, we see risks to backwardated cash flow, with FCF topping out in 2019."
Shares of AES Corp. closed at $12.85 yesterday.
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