US power utility AES has announced a long-term strategy to exit completely from coal by the end of 2025 and triple its renewables portfolio by 2027.
AES will add 25–30GW of solar, wind and energy storage across its power generation portfolio.
The company has set an annualised growth target for adjusted earnings per share (EPS) of between 6% and 8% between 2023 and 2027, from a base of its reaffirmed 2023 guidance of $1.65–1.75.
This growth is expected to come from the renewables’ contribution and from investments in the rate base at the company’s utilities strategic business unit. This growth is expected to be partially offset by lower contributions from the energy infrastructure SBU as the company intends to exit from coal by the end of 2025.
AES also plans to invest to deliver annual rate base growth of 10% at its utilities in the US.
AES president and CEO Andrés Gluski stated: “AES is uniquely positioned to create value for our shareholders in the once-in-a-lifetime energy transition we are currently living through. Through 2027, we expect to nearly triple our renewables capacity by adding 25–30GW of solar, wind and energy storage to our portfolio, while simultaneously delivering annual rate base growth of 10% at our US utilities.
“Our diversified portfolio will support and enable this growth as we advance our transformation by fully exiting coal by year-end 2025.”
AES executive vice-president and chief financial officer Steve Coughlin stated: “With our new strategic business units, we have aligned our management and operations of our businesses to execute on our long-term strategy, and this structure now better reflects the focused company that AES is today.”
“We expect to deliver on our strategic and financial objectives, including strong growth in adjusted EPS and adjusted EBITDA [earnings before interest income and expense, taxes, depreciation and amortisation], while continuing to yield an attractive dividend for our shareholders.”
For 2023, the company projected an adjusted EBITDA guidance of between $2.6bn and $2.9bn. This growth is expected to come from new renewable projects coming online, along with prior-year one-time expenses at its US utilities.
However, it could be hit by lower margins from its liquefied natural gas (LNG) business due to the normalisation of LNG prices and the roll-off of gas supply contracts and lower coal margins.