The AES Corporation (NYSE: AES) announced today that it priced its offering of 10,000,000 Equity Units. The Company has granted to the underwriters an option to purchase up to an additional 1,500,000 Units, solely to cover over-allotments. The offering is being made under the Company's existing shelf registration statement previously filed with the Securities and Exchange Commission and is expected to close on March 11, 2021.
The Units will initially consist of an aggregate of 1,000,000 shares of 0% Series A Cumulative Perpetual Convertible Preferred Stock (the "Convertible Preferred Stock"), with an aggregate liquidation preference of $1.0 billion, and contracts to purchase, for an aggregate of $1.0 billion, shares of the Company's common stock (the "Common Stock"). The purchase contracts are expected to settle on February 15, 2024 (subject to early settlement in certain circumstances) for a number of shares of Common Stock per purchase contract equal to $100, divided by the market value of the Common Stock determined during a period prior to settlement, but not to exceed 3.8640 shares (which is approximately equal to $100, divided by the closing price of the Common Stock on March 4, 2021).
Quarterly contract adjustment payments equivalent to 6.875% per year will be made on the stated amount of $100 per Unit, subject to the Company's right to defer contract adjustment payments. The Convertible Preferred Stock initially will not bear any dividends and the liquidation preference of the Convertible Preferred Stock will not accrete.
The Convertible Preferred Stock will have an initial conversion rate of 31.5428 shares of the Common Stock per share of the Convertible Preferred Stock, equivalent to an initial conversion price of approximately $31.70, subject to adjustment. The initial conversion price represents a premium of approximately 22.5% above the closing price of the Common Stock on March 4, 2021. Each share of Convertible Preferred Stock may be converted only after being separated from the Units and, prior to February 15, 2024, only upon the occurrence of certain fundamental change events if such fundamental change event occurs prior to a successful remarketing of the Convertible Preferred Stock. Upon any such conversion, the Company will deliver in respect of each $1,000 liquidation preference of the Convertible Preferred Stock being converted (i) one share of the Company's 0% Series B Preferred Stock or, solely with respect to conversions in connection with a redemption, up to $1,000 in cash and (ii) shares of Common Stock, if any, in respect of any conversion value in excess of the liquidation preference of the Convertible Preferred Stock being converted. The Convertible Preferred Stock is expected to be remarketed during either an optional remarketing period beginning on, and including, November 15, 2023 and ending on, and including, February 1, 2024 or a final remarketing period beginning on, and including, February 7, 2024 and ending on, and including, February 13, 2024. Upon any successful remarketing, dividends may become payable on the Convertible Preferred Stock, the conversion rate of the Convertible Preferred Stock may be increased, and the earliest redemption date for the Convertible Preferred Stock may be changed to a later date that is on or prior to March 21, 2025.
The Convertible Preferred Stock is perpetual, but the Company may redeem all or any portion of the outstanding Convertible Preferred Stock from and after March 22, 2024 (which date may be changed to a later date as described above), at a redemption price equal to 100% of the liquidation preference thereof, plus any accumulated and unpaid dividends (if the dividend rate of the Convertible Preferred Stock is increased upon a successful remarketing).
The Company may pay contract adjustment payments on the Units and dividend payments on the Convertible Preferred Stock (if the dividend rate of the Convertible Preferred Stock is increased upon a successful remarketing) in cash, shares of the Common Stock or a combination of cash and shares of the Common Stock, at the Company's election, unless the Company has previously irrevocably elected a contract adjustment payment method or dividend payment method, as the case may be, to apply, and the Company may defer contract adjustment payments on the Units.
The Company will receive gross proceeds of $1.0 billion from the sale of the Units, before deducting the underwriters' discounts and commissions and offering expenses (excluding any exercise of the over-allotment option).
The Company intends to use the net proceeds from the offering to develop its renewables business, U.S. utility businesses, LNG infrastructure and for other developments determined by management.
Citigroup Global Markets Inc., Goldman Sachs & Co. LLC, BofA Securities and Morgan Stanley & Co. LLC are acting as joint book-running managers of this offering.
About AES
The AES Corporation (NYSE: AES) is a Fortune 500 global energy company accelerating the future of energy. Together with our many stakeholders, we're improving lives by delivering the greener, smarter energy solutions the world needs. Our diverse workforce is committed to continuous innovation and operational excellence, while partnering with our customers on their strategic energy transitions and continuing to meet their energy needs today. For more information, visit www.aes.com.
