Global power company AES Corp. said Friday it is selling a 15 per cent stake in itself to China's investment arm for $1.58 billion in a move to raise cash to develop projects around the world.
AES also said its third-quarter profit jumped 28 per cent year-over-year, as improved performance by its generation businesses in Chile and the Philippines and its Brazilian utilities offset weak demand and prices in North America.
AES provides power in 29 countries, with more than two-thirds of its revenue generated outside of the U.S. China Investment Corp. will acquire 125.5 million shares of AES stock for $12.60 each, representing a 9 per cent discount to the stock's Thursday closing price of $13.86. The company also signed a letter of intent with CIC to raise $571 million of equity for an approximate 35 per cent stake in AES' wind generation business.
In September, The Wall Street Journal, citing people familiar with the matter, reported CIC's interest in AES.
The move by CIC, which has about $300 billion in assets, reflects China's attempt to diversify its $2 trillion in foreign currency reserves. CIC and other state-controlled companies have been buying assets around the world, including oil and gas companies and stakes in financial companies. As part of the deal, CIC will get a seat on the company's board of directors.
Paul Hanrahan, AES' president and CEO, said in an interview that the deal with CIC "will now allow us to unlock the potential in our development pipeline."
He said the investment will bolster the company's balance sheet, provide access to capital for acquisitions and give AES a partner in a region of the world where its business is growing. Hanrahan added that the capital injection will lead to more investment and jobs in the U.S. AES is looking to invest in renewable energy and emerging markets.
The Arlington, Virginia-based company said it expects the necessary government approvals to be complete by the first half of 2010.
AES said its net income for the quarter ended Sept. 30 totalled $185 million, or 28 cents per share, compared with profit of $145 million, or 22 cents per share, for the year-ago quarter. Excluding one-time items, the company reported a profit of 26 cents a share for the quarter compared with 31 cents per share in the year-ago quarter, which was in line with analysts' consensus estimate.
Revenue fell to $3.8 billion from $4.3 billion.
The company said 76 per cent of the revenue decline was due to the strengthening of the dollar compared with foreign currencies, especially the Brazilian real. Lower commodity prices meant lower revenue at its generation businesses in Chile, New York, Hungary and Northern Ireland.
The company also increased the midpoint of its adjusted earnings per share for 2009 by 1 cent to $1.09 per share. Analysts have predicted profit of $1.10 per share, on average.
AES shares rose 56 cents, or 4 per cent, to $14.42 in trading Friday afternoon. The shares have ranged between $4.80 and $15.44 over the past year.