AES prepares for layoffs at US utilities as part of wider restructuring effort
Two AES Corp. subsidiaries, Indianapolis Power & Light and Dayton Power & Light, say they plan to layoff about 160 employees in the second quarter.
The layoffs are part of a broader reorganization under way at AES that has been hastened by activist investor ValueAct Capital Management, which took a stake in the company earlier this year and is pushing for a clean energy focus.
AES said the reorganization is the next step of its ongoing strategy to simplify its portfolio, optimize its cost structure and reduce its carbon intensity.
In January, AES announced that ValueAct Capital Management has taken a stake in the company. The company said that the investment company’s founder, Jeffrey Ubben, would join AES’ board of directors to help push for cleaner energy resources and work with AES on its plan to sell coal-fired plants, reduce debt and develop more solar power and battery storage.
“We are in the midst of a major transition,” AES CEO Andres Gluski told Bloomberg. “We’re growing a lot of renewables, and we are selling our legacy coal assets.”
Gluski said Ubben has been talking with AES over the years and supports the changes that company is making. “He’s very interested in the AES platform as a way to adopt cleaner and more efficient technologies,” Gluski told the news outlet.
The announcement of the layoffs was taken as a positive sign by Bank of America Merrill Lynch analyst Julien Dumoulin-Smith, despite AES’ stock being one of the worst performers in the S&P 500 Utilities Index last year.
The layoffs, the largest in the company’s recent history, are an indication there could be upside, and possibly an increase in earnings guidance, from the $50 million of annual cost savings AES has talked about in recent years, Dumoulin-Smith wrote in an note to investors.
The cost cuts are part of AES’s reorganization plan that includes shrinking company’s global footprint down to 16 countries from 28. AES is also consolidating its five operating business units into one and create three new units focused on growth in U.S. Renewables, Central America, and South America.
The company also plans to sell $2 billion in assets in its non-Americas units, and is shedding its coal-fired plants in an effort to reduce its emissions profile. As of November 2017, about 37% of AES’ power production came from coal. The company’s goal is to reduce that to 33% by the end of 2020. These goals could also be seen in AES' joint venture with Siemens to form energy storage company, Fluence.
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