AES 1Q2018 Earnings (05/08/2018): Strategy & tactics are clear but vision’s cloudy; regardless undervalued

We understand what AES is doing, but we don’t know where it’s going. We can’t answer what AES wants to be when it’s done restructuring?It used to be that AES wanted to be global IPP player.
AES reached agreement to complete troubled Alto Maipo hydro-plant in Panama
We believe improving global economy will provide strong tailwind
AES means to focus on renewables and gas plants in US, so we look for sale of DPL&IPL to fund 10GW of utility-scale solar
We continue to feel AEPS guidance through 2021 is conservative: We feel it’s closer to 13%
AES is trading as if growth is negative
Gas-to-power could be major LT growth source, particularly in Asia – reentry into China?
AES trusts its MCAC LNG strategy and energy storage projects may boost MT-to-LT growth
Achieving investment-grade-credit may be a good strategy
Issues surrounding AES, include, but aren’t limited to: 1) paying more than nominal dividend, 2) hasn’t disavowed share buybacks, 3) growth trajectory isn’t at potential, and 4) we can’t say what AES is anymore, in our view

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AES 4Q2017 Earnings (02/27/2018): 2018 AEPS guidance surprises but LT guidance conservative in our view

AES provided robust 2018E AEPS guidance of $1.15-$1.25 vs. our $1.13 estimate and $1.15 consensus
Robust guidance comes from continued growth projects, corporate tax changes, cost savings, asset sales, and debt reduction
AES looks to complete its troubled Alto Maipo hydro plant in Panama
AES means to focus on renewables and gas plants in US, so we look for sale of DPL&IPL to fund 10GW of utility-scale solar
We continue to feel AEPS guidance through 2021 is conservative: We feel it’s closer to 13%
Gas-to-power could be major LT growth source, particularly in Asia – reentry into China?
Issues surrounding AES, include, but aren’t limited to: 1) paying more than nominal dividend, 2) hasn’t disavowed share buybacks, and 3) growth trajectory isn’t at potential, in our view
Raised our NIV/share to $49 from $48 & ST-Target/share to $22 from $19.

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2018 Industry Update: Economic growth should favor commodities-driven businesses in 2018

Warmer than normal winter:
Weak gas prices:
However, 4Q2017 and 1Q2018 power gross profit could be better than expectations:
Similarly, we’d expect natural gas infrastructure businesses to perform well for 4Q2017 and 1Q2018:
We expect economic growth to surpass 4% for 2018:
Strong economic performance should lead to strong power sector performance:
Commensurately, we expect natural gas infrastructure businesses to perform well:
Adjusted for seasonality, we expect natural gas prices to creep up throughout 2018 and, given normal weather, we’d expect natural gas prices to average at or just below $3.50 for 2018 with an exit price of some $3.65-$3.75:
Conclusion: Going into 2018, we believe that natural gas prices will stage a moderate recovery, but power margins should do better benefiting from accelerating economic activity. Individually, we continue to like… . However, the real star may be … . Among the utility names, we like … due to their growth prospects. We also look for … to outperform as … .

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AES 3Q2017: We expect strengthening global economy to provide strong tailwind

As expected, AES looks to complete Alto Maipo
We believe improving global economy will provide strong tailwind
We continue to feel AEPS guidance through 2020 is conservative: We feel it’s closer to 11%, given organic growth should be some 4% and with 1% inflation, AES is already at 5% CAGR
Then new projects totaling some 6.6GW (up from 4.6GW at 2/2017) on base of some 27.0 net GW, about a 25% increase, should boost growth above 8%-10% guidance
But, AES is trading as if growth prospects are negative
Gas-to-power could be major LT growth source, particularly in Asia – reentry into China?
Philippines exit is a surprise
AES pointing towards its MCAC LNG strategy and energy storage projects to boost MT-to-LT growth
Issues surrounding AES, include, but are not limited to: 1) continues to pay more than a nominal dividend, 2) hasn’t disavowed share buybacks, and 3) growth trajectory isn’t at potential, in our view

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