AES was one of the first companies to voluntarily help reduce greenhouse … Contact online >>
AES was one of the first companies to voluntarily help reduce greenhouse
Our people are our energy and have transformed AES into the type of energy
The first publicly-traded US energy company to issue a Climate Scenario
They are the foundation that allows us to achieve our company''s far-reaching
We are all in need of more sustainable solutions to power our lives and our
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From its founding and to today, AES has led lasting positive change in the energy sector based on its stakeholders'' most critical needs.
Reproduction in whole or in part in any form or medium without the express written permission of The AES Corporation is prohibited. AES and the AES logo are trademarks of The AES Corporation.
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The AES Corporation, together with its subsidiaries, operates as a diversified power generation and utility company in the United States and internationally.
The company owns and/or operates power plants to generate and sell power to customers, such as utilities, industrial users, and other intermediaries; owns and/or operates utilities to generate or purchase, distribute, transmit, and sell electricity to end-user customers in the residential, commercial, industrial, and governmental sectors; and generates and sells electricity on the wholesale market.
It uses various fuels and technologies to generate electricity, such as coal, gas, hydro, wind, solar, and biomass, as well as renewables comprising energy storage and landfill gas.
The company owns and/or operates a generation portfolio of approximately 34,596 megawatts and distributes power to 2.6 million customers.
The company was formerly known as Applied Energy Services, Inc. and changed its name to The AES Corporation in April 2000.
The AES Corporation was incorporated in 1981 and is headquartered in Arlington, Virginia.
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AES Corporation
The Development of PURPA: Late 1970s
AES was the invention of Roger W. Sant and Dennis W. Bakke, who had served together in the Federal Energy Administration (FEA) during the Nixon and Ford administrations in the early to mid-1970s. Sant had been a lecturer at the Stanford School of Business; Bakke, a Harvard MBA and career government employee, was his assistant. As part of their work at the FEA, the two had been instrumental in drafting preliminary versions of the Public Utility Regulatory Policies Act (PURPA).
The law was part of the federal government''s attempt to deal with America''s energy crisis, which, according to prevailing opinion at the time, was caused largely by American dependence on foreign oil. Seeking to reduce this dependence, PURPA mandated that electrical utilities fulfill any need they might have for new power by seeking out qualified cogenerators and independent, small-scale, private-sector power producers. The law further stipulated that the cost of power provided by these facilities be less than a utility''s "avoided cost"--that is, the cost incurred by the utility if it generated the power itself.
Prior to PURPA, by contrast, utilities typically secured additional power by building a new power-generating facility, which was usually oil dependent. Otherwise they purchased new power on the open market from yet another oil-dependent utility. PURPA, however, changed that, since it effectively required utilities to fulfill their energy needs by turning instead to cogenerators and other oil-independent power producers.
PURPA was enacted into law in 1978--four years after Sant and Bakke had left the government to found an energy research institute, or "think tank," at Carnegie Mellon University. That was also the year in which President Carter declared America''s energy crisis to be the "moral equivalent of war," as Americans experienced oil and gas shortages, long lines at the gas pumps, and fear of what the crisis portended for its future. Because of their formative work experience in government at the height of this crisis and their subsequent related work experience in academe, Sant and Bakke were well familiar with the contours of this problem--and familiar as well with the rapidly emerging business opportunities spawned by the new law.
What Sant and Bakke were quick to realize--and, at the time, were virtually alone in recognizing--was that PURPA had the paved the way for a burgeoning market in independent, private-sector power production. In part this was because of the new law''s mandate that outside purchases of power be made from cogenerators and independent, small-scale, private-sector power producers. It also stemmed, however, from the fact that PURPA shielded new producers from costly state government regulation and subjected them instead to less onerous federal rules and strictures. In practice, this meant that new producers typically could undercut a utility''s "avoided cost."
Applied Energy Sources Is Established: 1981
AES was founded in 1981 as Applied Energy Sources, and it took several years for Sant and Bakke to taste real success. The novelty of their idea and the untested nature of the market in which they sought to do business made it difficult to attract capital financing. Investors were understandably wary and skeptical of the firm''s chances for success. One year''s worth of effort netted the firm only $1.1 million in venture capital--a inadequate sum on which to build an electric power company. "From 1981 to 1985," reported the Washington Post, "one potential project participant after another--including ARCO, IBM, Bechtel Corp. and other large companies--marched in and then backed out of agreements with tiny AES."
The firm''s luck took a turn for the better in 1985, when Sant and Bakke invested all of AES''s assets in a single deal: a Beaver Valley, Pennsylvania, coal-burning plant. The deal was closed in September 1985 and the plant commenced production in 1987, marking a turning point for the company, which would never again have to depend upon the success of a single project for its very survival.
By then, in fact, AES had two plants up and running: its Beaver Valley facility supplied 125 megawatts of electricity to residents and commercial outfits in the Pittsburgh area; its Deepwater, Texas, power plant, which, fueled by petroleum coke, went on line in June 1986, supplied 143 megawatts of electricity to homeowners and businesses in the Houston area. Financial arrangements for Deepwater had been completed on December 30, 1983, and, in addition to AES, involved 12 other companies: ARCO, Bechtel, J.P. Morgan, eight supporting banks, and the General Electric Credit Corporation.
It was an auspicious start for the struggling company, which, over the course of the next 11 years (1984-94), proceeded to build or acquire ten new power plants. According to an article in a 1993 issue of Financial World magazine, the average utility, by contrast, might "build one large facility every 10 or 15 years." AES sales, consequently, more than tripled in two years, rising from only $55.4 million in 1988 to $190.2 million in 1990. Sales grew an additional 75 percent the following year, while net company income witnessed similarly spectacular growth, soaring from $1.6 million in 1988 to $42.6 million in 1991.
Buoyed by its success, the company changed its name from Applied Energy Sources to AES and became a publicly traded company on the NASDAQ stock exchange in 1991--the company listed on the New York Stock Exchange in 1996. Company stock began and closed the year priced at $22.18 a share, with investors earning 66 cents per share. Sant assumed the position of company chairman, while Bakke became the firm''s president and CEO. Together, they owned approximately 27 percent of all AES stock.
These investments yielded very good results. A November 1993 report by the investment banking firm of Kidder Peabody, for example, found that from 1988 to 1992 AES revenues grew at an annual compounded rate of 64 percent. Company earnings during that same time period, the report noted, likewise soared at an annual rate of 136 percent. In 1991, AES was recognized by the leading chronicler of American business, Forbes magazine, as one of "America''s fastest growing companies," an honor it again earned in 1992 and 1993.
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