Activist ValueAct takes AES stake in push for cleaner energy

SAN FRANCISCO • Activist investor ValueAct Capital Management LP has taken a stake in international power producer AES Corp, and the fund’s founder Jeffrey Ubben will join its board to help push for cleaner energy resources.

Jeffrey Ubben

Ubben will work on the company’s plan to sell coal assets, reduce debt and develop more solar power and battery storage

Ubben will work with AES on the company’s plan to sell coal assets, reduce debt and develop more solar power and battery storage, according to AES. ValueAct, based in San Francisco, declined to comment.

Institutional investors are increasingly pressing companies to address environmental, social and governance issues that could result in higher expenses decades down the road. The idea is to protect returns over an indefinite investment horizon as opposed to focusing on short-term profit.

“Ubben has been talking to us over the years,” AES CEO Andres Gluski said in a phone interview. “I think he’s supportive of the changes we’ve made and will be making to the company. He’s very interested in the AES platform as a way to adopt cleaner and more efficient technologies.”

AES’ shares have languished as it works to sell assets and achieve an investment-grade credit rating by 2020. The company, which owns seven utilities and does business in 16 countries including the US and UK, was among the worst performers in the S&P 500 Utilities Index last year. Gluski has been increasing the power producer’s investments in clean energy, buying solar developer sPower with Alberta Investment Management Corp for US$853 million (RM3.38 billion) and forming a battery venture with industrial giant Siemens AG.

AES surged as much as 7.2% in after-market trading to US$11.49. It closed at US$10.72 on Wednesday.

Major Transition

“We are in the middle of a major transition,” Gluski said. “We’re growing a lot of renewables, and we are selling our legacy coal assets.”

ValueAct typically takes stakes in companies and agitates for changes such as management shakeups and shifts in strategic direction. It has generally targeted companies already in transition, and Arlington, Virginia- based AES fits that description as it moves toward renewable energy for future growth. The stake in the power generator marks ValueAct’s first time taking a position in a company for environmental reasons.

As of November 2017, about 37% of AES’s power production still came from coal. The company set a goal of reducing that to 33% by the end of 2020, according to a January investor presentation.

ValueAct manages more than US$15 billion, according to the company’s website. It has active stakes in companies including private equity giant KKR & Co, Morgan Stanley, Rolls-Royce Holdings plc, 21st Century Fox Inc, Baker Hughes Inc and Microsoft Corp, data compiled by Bloomberg show. — Bloomberg