AES Corp (NYSE:AES), a cogeneration and small power production company currently trading near its 52-week low at $13.05 with a market capitalization of $9.29 billion, has completed a significant financial transaction, securing $500 million through the offering of junior subordinated notes. According to InvestingPro analysis, the company appears undervalued at current levels, while maintaining an attractive 5.19% dividend yield. The notes, which carry a 6.950% fixed-to-fixed reset rate, are due in 2055.
The Arlington, Virginia-based company, which operates under the name 01 Energy & Transportation, stated on Monday that the offering was made under its existing shelf registration statement. The public offering price was set at 99.9% of the principal amount.
InvestingPro data reveals that AES currently operates with a total debt burden of $30.15 billion, making debt management a crucial aspect of its financial strategy. For deeper insights into AES's debt structure and financial health metrics, investors can access the comprehensive Pro Research Report, available exclusively to InvestingPro subscribers.
AES entered into an underwriting agreement with prominent financial institutions including J.P. Morgan Securities LLC, Wells Fargo (NYSE:WFC) Securities, LLC, Morgan Stanley (NYSE:MS) & Co. LLC, and Credit Agricole (OTC:CRARY) Securities (USA) Inc. This agreement was central to the successful completion of the notes offering.
Interest on these notes will accrue from the date of issuance and is payable semi-annually. The notes will initially bear a fixed interest rate of 6.950% per annum until July 15, 2030, after which the rate will reset based on the five-year U.S. Treasury Rate plus a spread of 2.890%.
AES has the option to defer interest payments for up to 20 consecutive semi-annual periods, provided that no event of default is ongoing. Furthermore, the company retains the right to redeem the notes, in whole or in part, at specific times until their maturity, under the terms specified in the indenture.
The indenture governing the notes was established in a previous agreement with Deutsche Bank (ETR:DBKGn) Trust Company Americas, who serves as the trustee. This foundational document, along with the underwriting agreement and the form of notes, are incorporated by reference into the registration statement.
In other recent news, AES Corp. has been under the analyst's lens with BofA Securities initiating an Underperform rating due to potential risks in the company's ambitious renewable energy expansion plans. The company aims to nearly triple its renewable energy capacity by 2027, however, BofA Securities points to potential execution risks that could impede this trajectory.
Concurrently, AES Corp. reported mixed third-quarter results with earnings per share surpassing expectations at $0.71, exceeding the analyst consensus of $0.59, while the company's revenue of $3.29 billion fell short of the projected $3.46 billion. Analysts from Susquehanna have revised their stock price target for AES, reducing it from $24 to $21, but maintained a positive view on the stock.
AES Corp. continues to benefit from the rising demand for data center power, completing the construction of 1.2 gigawatts of new projects since August, marking a year-to-date total of 2.8 GW. The company has also reaffirmed its full-year 2024 adjusted EPS guidance range of $1.87 to $1.97, aligning with the $1.92 consensus, and expects results to be in the upper half of that range.
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