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Dollars Blowing in the Wind

By Brian Gorman
January 13, 2005

AES (NYSE: AES) evidently believes there is some change in the air, and it is positioning itself accordingly. Although the energy company's latest acquisition isn't likely to make a huge impact on the bottom line, the deal provides for an entree into a growing area.

The Arlington, Va.-based company announced Wednesday that it purchased SeaWest Holdings, a wind power project developer, for $60 million. In addition, AES will purchase and build a 120-megawatt wind power project in Texas at an estimated cost of $165 million. In terms of pure generating scale, SeaWest is pretty small; the firm's facilities have the capacity to generate approximately 500 MW of power, The Washington Post reports. By comparison, AES has an interest in assets with 38 gigawatts of capacity.

Nevertheless, the prospects for wind power are quite encouraging. Global demand for wind power is expected to grow 15% annually from 46,000 MW in 2004 to 112,000 MW in 2010, according to Domestically, while federal energy legislation remains stalled in Congress, a number of states are considering or passing their own mandates for renewable energy generation. Furthermore, the federal government's extension of tax credits for wind power stations provides an incentive to keep on building.

Meanwhile, AES continues to recover after the harrowing period following the collapse of Enron, when it and other firms, including Calpine (NYSE: CPN), took body blows. As Fool contributor David Meier has written, the sector has been on the mend, with AES itself having recently received a credit upgrade from Standard & Poor's. With its latest purchase and its improving financial profile, AES may have the wind at its back. Investors interested in the developing wind power industry should keep their eyes on the company.

Fool contributor Brian Gorman does not own shares of any of the companies mentioned.