AES-3C Maritza, the subsidiary of AES Corp (NYSE:AES), has recently entered into a heads of Terms Agreement with NEK. The agreement concerns an already existing power purchase agreement. NEK, being the state owned wholesale power company, purchases part of the electricity from AES. As per the amendments dictated by the HTA, NEK’s capacity will be reduced by 14%. The HTA also asks NEK to pay complete outstanding receivables, worth $236 million, in return. The agreement is expected to be signed by the end of 3Q2015.
The decision might seem favorable under the current scenario; AES-3C would finally be obtaining their outstanding receivables. Unfortunately, the reduction in capacity would mean that adjusted earnings would also be affected by 3-cents annually. NEK, itself has been facing liquidity issues, which has caused a long delay in the payment of outstanding receivables. Although, not much seems to be changing this year as the company adjusted its 2015 forecast in light of present dealings, but AES is planning to improve in 2016.
President of AES, Andres R. Gluski, has met with the president of Dominican Republic, Danilo Medina, to discuss the expansion of the company into that region. AES is planning to invest $125 million in power projects across the nation. The projects are planned to be up and running by 3Q2016. The projects are aimed at saving the country a huge amount on fuel costs, depending on the oil prices at that time. Current estimates suggest that the country would be saving around $500 million on fuel alone.
The negotiations with the Bulgarian government, on outstanding receivables, had been initiated in Feb 2015. The problem had been taking a toll on the earnings of AES from its European operations, with the cash flow declining by $180 million. Once the debt is paid, the company expects to continue operations till the end of its tenure in 2026.
AES Corp (NYSE:AES) closed at $13.33, gaining 0.68% on April 21. The company has 703.2 million shares being traded in the market, with a 52-week range of $11.53-$15.65.