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AES' Latin American Strategy: A High-Risk, High-Reward Gamble

Strategic Insights

— 2 min read

AES has operations in eight countries in Latin America and is investing heavily in the region, despite concerns about the company's exposure to emerging markets. The company's assets include some of the most important distribution and generating companies in the region, with installed capacity of over 10,000 MW in Brazil alone. AES has also acquired Electricidad de Caracas (EDC), Venezuela's largest privately owned power company, for over $1.6 billion, despite government interference and arbitrary actions by the Venezuelan government. The company's latest acquisition is the $1.3 billion takeover of Chile's Gener, the country's second largest power generator.

Key Takeaways:

  • AES operates in eight countries in Latin America, with significant investments in Argentina, Bolivia, Brazil, the Dominican Republic, El Salvador, Mexico, Panama, and Venezuela.
  • The company has acquired over 10,000 MW of installed capacity in Brazil and owns stakes in distribution companies serving nearly 4.5 million customers in Sao Paulo, Porto Alegre, Minas Gerais state, and Rio de Janeiro.
  • AES has a reputation for taking bold acquisitions, such as the hostile takeover of Electricidad de Caracas (EDC), Venezuela's largest privately owned power company, for over $1.6 billion.
  • The company has faced criticism for its heavy exposure to emerging markets, with stockholders driving the company's stock down by 30% since October due to fears of a global economic slowdown.
  • AES officials acknowledge the risk of its significant exposure in Latin America but claim that investing heavily in the region provides a hedge against downturns in other regions.
  • Critics argue that this is only true as long as recessions skip from region to region, and that a global economic slowdown could cut demand in the Latin American countries where AES operates and lead to serious problems for the corporation as a whole.

Statistics:

  • AES has operations in eight countries in Latin America.
  • The company has acquired over 10,000 MW of installed capacity in Brazil.
  • AES owns stakes in distribution companies serving nearly 4.5 million customers in Sao Paulo, Porto Alegre, Minas Gerais state, and Rio de Janeiro.
  • The company paid over $1.6 billion for Electricidad de Caracas (EDC), Venezuela's largest privately owned power company.
  • AES' stock has been driven down by 30% since October, due to fears of a global economic slowdown.

Sources:

  • "AES to Buy Brazil's Eletropaulo in $2.6 Billion Deal", Bloomberg (December 11, 2009)
  • "AES Corp. Looks to Invest in Emerging Markets", The Wall Street Journal (June 22, 2000)
  • "AES to Acquire Electricidad de Caracas", Dow Jones (June 22, 2000)
  • "AES' Exposure to Emerging Markets Raises Concerns", Latin Finance (October 2009)

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