AES stock rallied early Wednesday following reports that the renewable power company is mulling a potential sale. The rally comes after President Donald Trump released an executive order on Monday ending subsidies for green energy sources.
Virginia-based AES is exploring options, including a potential sale, amid takeover interest, Bloomberg reported late Tuesday citing anonymous sources. Bloomberg named private equity and infrastructure investors Brookfield Asset Management, BlackRock and Global Infrastructure Partners as interested parties.
AES is a provider of renewable energy, pursuing data center deals with clients including Microsoft, Alphabet's Google and Amazon. The company also owns utilities in Indiana and Ohio.
AES stock has fallen 63% from a December 2022 high.
AES stock jumped nearly 17% early Wednesday on the report. Shares had dropped almost 4% Tuesday after the White House released its new renewable energy executive order.
Energy Executive Order
The White House late Monday released the new executive order that eliminates subsidies for "unreliable" green energy sources, like wind and solar. The order claims that such projects displace "affordable, reliable" dispatchable domestic energy sources, which "compromises our electric grid." Dispatchable energy sources include conventional energy sources like fossil fuels. Trump's announcement claims that reliance on green subsidies threatens national security by making the U.S. dependent on supply chains controlled by foreign adversaries.
The executive order aims to eliminate taxpayer-funded green energy as well as support for green energy sources and supply chains built in or controlled by "foreign adversaries." The EO also builds on Trump's new tax and spending bill by strengthening repeals and modifications to wind, solar and green energy tax cuts.
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The Treasury secretary has been ordered to within 45 days terminate clean electricity production and investment tax credits for wind and solar facilities as part of the Internal Revenue Code. There are some additional "beginning of construction" revisions, including restricting safe harbor provisions unless a "substantial portion of a subject facility has been built."
During that time period, the Department of the Interior will determine if wind and solar facilities have been given any preferential treatment compared to dispatchable energy sources. The Secretary of the Interior will then revise any regulations or policies to eliminate any such preferences for wind and solar.
The Treasury and Interior departments will submit their findings to the president after the 45 day period in order to plan for the next steps.
Solar Stocks
Morgan Stanley in a Tuesday research note wrote that energy companies AES and NextEra Energy may be the most affected by the executive order, The Fly reported. The firm noted that the EO directs agencies to adjust construction guidelines for tax credit eligibility, implement FEOC restrictions and remove preferential policies for renewables from the Department of Interior.
The order targets clean tech, solar stocks and other renewable developers the most, primarily AES and NextEra. It looks "less meaningful" for the likes of GE Vernova, Bloom Energy, Plug Power, First Solar and Fluence Energy.
RBC Capital analyst Shelby Tucker noted that the plan to curtail renewables does not come as a surprise following commentary from members of the House Freedom Caucus last week, according to The Fly. Tucker expects more pressure on the sector as the order leaves the solar industry in another state of limbo while awaiting the Treasury interpretation. Meanwhile, it is still unclear how the Trump administration plans to redefine the "beginning of construction."
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