AES Continues to Charm Wall Street Analysts

By Jerry Knight
Monday, October 31, 2005

Every week the Bloomberg news service compiles a list of companies that get the best rankings from Wall Street analysts. And every week for months, AES Corp. of Arlington has been on that list, ranking among the 30 most highly recommended stocks in the Standard & Poor's 500-stock index.


Yes, the same AES whose stock plunged from $70 a share to less than a buck three years ago when the electricity generating business blew up after the Enron scandal.

AES, a global power producer, narrowly escaped bankruptcy in 2002 after a rapid expansion left it vulnerable to the collapse of energy prices in 2001 and upheavals in Latin American countries where the company is heavily invested.

The stock has clawed its way back to $15.51 a share at Friday's close, gaining more than 40 percent in the past 12 months.

And despite its troubled past, investors and analysts don't seem bothered by an accounting problem that popped up over the summer. In July, the company announced that it was delaying its second-quarter financial report, which was due in early August, and would restate its 2002, 2003 and 2004 financial reports. The problem was accounting for deferred taxes on deals to acquire foreign power plants in previous years.

Financial restatements have been a kiss of death for stocks like Fannie Mae because once the auditors start scrutinizing the books, they often find far more problems than they were looking for.

But AES stock has barely budged. Credit rating agencies, which often issue warnings in response to upcoming restatements, instead reaffirmed their ratings on AES.

Jonathan Cho of Fitch Ratings said AES's credit wasn't hurt "because these are all non-cash related transactions. It doesn't affect their debt, interest expense or cash flow. It would be much more of a concern if it affected cash flow or debt."

AES has 123 power plants in 26 countries. The company is the biggest player in the international power generation business and a contender in deals around the world.

When Romania decided to privatize its electrical system this year, AES was one of the bidders for its plants. When Vietnam went looking for private investors to build a new power plant, AES became a top candidate. When Bulgaria needed a new power plant, AES got the contract to build and operate it.

While three-quarters of its operations and 90 percent of its employees are outside the United States, AES owns Indiana Power & Light Corp., a major utility. The company has 20 U.S. plants, some selling power to utility companies under long-term contracts, others generating electricity that is sold on the competitive market.

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AES Daily Stock Closes
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SOURCE: Bloomberg | GRAPHIC: The Washington Post - October 31, 2005
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