Thanks for pointing out the usage.
Separately, this post is about how China is expanding its renewable electricity production and US is retreating from it. This is not about fossil fuel vs renewables debate. That is a different debate. Why I am pointing that is, if you are interested in a partisan argument, you will reframe the debate as fossil vs renewables.
I looked at AES. It seems they have very high debt ($30B) and FCF TTM is negative ($2.6B).
Too hard pile.
When you are looking at Utility or REIT you should not be surprised to see they carry significant debt. When a company is investing heavily, the FCF is often misleading, you should focus on the cash flow from operations to determine the cash generation ability of the business. See below, how heavily they were investing in the last 5 years. Also, the cash flow in operations were somewhat impacted by the heavy spending they were doing on all the prep work they were doing on the investment.
While they have $26 B long-term debt and $30 B total debt, their asset base is $45 B.
You choose the shoe that fits you…
$30B debt for a $9B market company is not sustainable. They are giving out 5% dividends while taking on more and more debt.
This is all similar to GM which needs constant level of high capital infusion at negative margins.
I guess you have not read or taken a second to process what I wrote. If someone is going to be alarmed by the cap-ex increasing debt, and not differentiating between maintenance cap-ex vs growth cap-ex…
Then you should stick with the companies that are within your circle of competence.
A glance of $AES balance sheet shows $30 B debt and it scares investors is understandable. $AES owns a mix of regulated utilities, unregulated power business, and international utilities, etc. They are all separate subsidiaries, where AES even sold part of the equity on some of these subsidiaries. While you are seeing a $30 B debt on the consolidated balance sheet, most of these debt are at subsidiary level and non-recourse the recourse debt to the parent is far less. I understand these are nuanced details, unless someone research the company deep enough, may not understand the details.
TMF used to have a service called “pay dirt”, most of the rec’s were dirt only, but they had a love of hairballs. So, I guess, some of that has rubbed on to me… 
Look at the contract expiration date, these are long-lived contracts, and the customers are very diversified. There are another 6 more slides.. This is just the renewables segment alone.
In this post $AES: AES Corporation - #26 by Kingran
I have shared the SOTP valuation by MS analysts. You can make your adjustments, but in various scenarios, the stock price is cheap.
I have seen some short-term, intermediate term noise/ fear mis-prices equity and one’s ability to identify them, then buy and sit tight for couple of years for the situation to resolve, results in significant gains. I have posted few such ideas in Liquid Lounge - Motley Fool Community board.
Just a couple, Citi, no one wanted to touch at < $45, nearly doubled in 2 years, while yielding 5% dividend, $BABA same around $70 for 2 years, now it is almost double. I am sure there are other ideas I have posted that might have failed.
You can just invest in Index and can make decent gains, and for those who enjoy the game, and have the time and energy, there are opportunities.
There are many shoes on the shelf, wear the ones that fit.
Total recourse debt is $5.8 B out of $30 B+ consolidated debt. Details matter, but often many investors, stock screens and algo’s miss.
My post is not an argument for/against fossil fuels. It simply points out that the amount of installed capacity for an energy source is not an accurate representation of how much that source is being used. Also need to know the capacity factor or utilization rate.
For example, it seems very plausible that much of the construction of energy plants in China is not motivated by energy economics but rather by politics or the need to create jobs. China is largely a command economy after all and provincial governors often need infrastructure projects to look good.
That’s why it is important to know in addition to how many coal plants or solar farms are being built, how much each are being used.
Context matters.
That post is not an answer for you. I just happened to address that on reply to your post. Yes, I understand that provincial governments in competition with each other, build excess capacity, and/ also excess fossil fuel capacity is build as a backup.
A discussion about investing instead of politics! How refreshing! There is still hope for METaR!
Thank you!
Thank you!
Thank you!
The Captain
Rising debt, declining revenues and declining margins are not signs of a sound business.
But does the Earth care about which is the bigger number? Or does the Earth care that an additional 21GW worth of coal will be burned every year for the next 40-60 years? The USA is retiring a net of about 8GW coal this year, so net China+USA, the Earth is in the hole by 13GW of coal.
Obviously it’s a lot better for them to be doing 153GW renewable + 21GW coal than to be doing less renewable and more coal, but the Earth only “cares” about the net numbers and how much bad stuff is being poured out of smokestacks each year.
It’s even worse than retreating from it. For some reason, the USA has gotten into a mode of delaying everything important until it’s either too late or almost too late. In this case, retreating from solar is one thing, but not investing in a modern grid is arguably the worse thing. Investing into a modern grid would go a long way toward encouraging private investment into various sources of power. But right now, it’s difficult to get investment because you have no idea when you might be able to “go online” with your new power due to the grid(s) being extremely backlogged. I’d argue that the national electric grid(s) are very similar to the national interstate highway system, and is something worth receiving substantial federal funding (as opposed to so many other things that are primarily single-state benefit that are NOT worth funding federally).
If you had read the article, it points out there is no plan to run these at maximum capacity for years. But rather to meet peak demands. So utilization will be low. Of course, they could be lying or misleading or just hopeful.
JimA
Germany showed the world how stupid it is to follow ideology and forget practical thinking, no nuclear, no Nordstream, and lovely high energy prices.
Fossil fuels should be phased out as renewables become plentiful and more reliable. For example, now replace peaker plants with battery storage. Save Gaia and save Cash.
The Captain
Having godparented a huge number of kids, with ancillary duties from diapers through tutoring college level multi-variate calculus, my answer to “For some reason” is they feel oppressed by reality….
As mentioned in another thread, US power generation from coal is up almost 17% this year over 2024. There also appears to be an increase in capacity factor this year, so power companies are running their coal plants more. There is little fear of the EPA or some other federal regulator coming down on them, so they are burning more of the black stuff.
US Electricity generation from coal, January through June
2023: 299,635 GWh
2024: 302,767 GWh
2025: 353,566 GWh
Data from here.
~ ~ ~ ~ ~ ~ ~
Regarding China, I will believe they are reducing their coal plant operations when I see it. So far, there is little evidence of a reduction. Below is China’s energy obtained from coal, in exajoules, for each year shown.
China, energy from coal
2018: 80.47 EJ
2019: 82.52
2020: 84.25
2021: 87.54
2022: 87.83
2023: 90.65
2024: 92.16
For comparison, US energy from coal was 7.90 EJ last year.
The source for this coal information is the Statistical Review of World Energy released this year.
_ Pete
I medium agree. Renewables won’t become more plentiful without foresight and investment. One problem with fossil fuels is that they will become more and more expensive as supply dwindles. China’s push in renewables didn’t originate in tree hugging and patchouli. It was driven by economics.
China focused on renewable energy build out first. That investment will lead to their AI dominance. The US focused on AI build out first. That investment will lead to the US losing ground on AI dominance as the grid becomes more and more strained.
Coincidence is in the habit of happening! Just in this morning!
Question, supply and demand, which do you do first and why? Monday morning quarterbacking is easy. We did not have that ease last Friday. What we should focus on is how to get out of the mess. But first, were the Chineses smarter than the West or poorer in hydrocarbons?
If asked, I would recommend encouraging homeowners to install solar plus storage wherever possible. Charge the batteries at night at low rates and sell it back to the utility during daylight peak demand hours. An investment that pays for itself.
AI is here to stay and grow. As I said before AI is a question of quantity, more and bigger energy hungry brains.
How much energy does the human brain use?
For the average adult in a resting state, the brain consumes about 20 percent of the body’s energy. The brain’s primary function — processing and transmitting information through electrical signals — is very, very expensive in terms of energy use.
It just sits there and thinks? Right!
The Captain
…will take effect before the opening bell on September 22…
Enphase has shrunk in size and will be demoted to the S&P SmallCap 600 index.
DB2
