AES sees revenues from Fluence storage venture soaring

AES Corp. expects Fluence Energy LLC, its energy storage partnership with Siemens AG, to generate $500 million in revenue this year and $3 billion per year by 2025 as decarbonization efforts expand worldwide.

In June, Fluence launched a sixth-generation "standardized technology stack" that AES said is easy to "rapidly and cost-effectively deploy." It said the modular design enables scale from 1-MW to 1-GW systems and said in its second-quarter earnings presentation Aug. 6 that it has 800 MW of orders already lined up. Fluence had a 1.6-GW backlog of energy storage projects as of the end of the second quarter.

AES President and CEO Andres Gluski said AES and Siemens are looking for a financial investor to take a roughly 10% stake in Fluence. "We would like to have a marker from a transaction" to help determine Fluence's value ahead of a potential IPO in two to three years, Gluski said.

Meanwhile, the coronavirus pandemic and its impact on second-quarter results did not turn out to be as "severe" as AES had initially feared, leaving the company room to pursue the decarbonization of its global assets.

During the quarter, the impact of COVID-19 on system demand was less than AES projected, and the company said it continues to expect an extended U-shaped demand recovery, reaching pre-COVID levels only in 2021.

Gluski told analysts that AES is pursuing decarbonization of its asset base while it is anticipating using $550 million in asset sales as part of its 2020 parent capital allocation plan.

Gluski noted that at the end of 2019, AES saw 45% of its megawatt-hours of generation come from coal-fired facilities, but that dropped to 34% by August 2020. It is expecting a further drop to 30% by the end of 2020 and a decline to 10% by year-end 2030.

In the second quarter, AES signed agreements to sell three coal-fired plants with roughly 2,000 MW of combined capacity in India and the Dominican Republic, which "decreased generation from coal by 11 percentage points," Gluski said.

Also in the second quarter, the company signed or awarded contracts totaling 852 MW of new renewables and energy storage, bringing the year-to-date total for 2020 to 1.53 GW. AES said 50% of the new projects are in South America, 38% are in the U.S., and 12% are in the Mexico, Central America and Caribbean region.

Of the year-to-date total, 41% are wind projects, 36% are solar and 23% are energy storage.

The company said it has a 6.2-GW backlog of renewables, 59% of which is secured under contracts. AES told analysts that 40% of the backlog is wind projects, 38% is solar, 13% is storage and 9% is hydroelectric.

Gluski also noted that AES put out a request for proposals in June for 1 GW of carbon-free energy from newly constructed renewable projects in the PJM Interconnection LLC region.

In Brazil, AES bought an 18.5% interest in AES Tietê in the second quarter, which increased its ownership to 43% in a company that has 3.7 GW of renewables.

AES on Aug. 6 posted adjusted earnings of 25 cents per share for the second quarter, a drop from 26 cents per share in the year-ago period. The S&P Capital IQ consensus normalized EPS estimate for the quarter was 24 cents.