Why AES Corporation Stock Flopped Today

The latest political developments in Washington, D.C., cast a shadow over renewable energy stocks on Monday. Reacting to news that very late-stage revisions to the One, Big, Beautiful Bill would impose a new set of taxes on the solar and wind segments, investors traded out of energy companies involved in those niches.

One victim was the renewables-embracing AES Corporation (NYSE: AES), whose shares took it on the chin with a nearly 2% decline on the day. Meanwhile, the benchmark S&P 500 index closed Monday 0.5% higher.

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Big, beautiful... and still controversial

In an attempt to get the controversial bill into sufficient shape to maximize its chances for passing, Republican senators on Monday introduced taxes for certain wind and solar projects. Earlier versions of the bill only brought forward the expiration dates of current tax incentives for these forms of energy.

Image source: Getty Images.

As of midafternoon Monday, senators were to discuss and vote on numerous amendments to the bill, including the proposed renewables taxes.

Although AES is not a pure-play renewable energy company, it has enthusiastically embraced such forms of power generation. At the moment, 52% of the company's total deployed power assets fall under the renewable umbrella.

The threat of higher costs

That diversification is likely a main reason why the investor reaction to the news wasn't more drastically negative. If those proposed new solar and wind levies make their way into the final bill and it's passed, AES will still have plenty of traditional power assets that won't (at least for now) be subject to them.

What's more concerning for the long term is that, like many old-line power companies making a shift to green energy, AES has poured billions of dollars into developing renewable solutions. The proposed withdrawal of tax incentives in the bill were concerning enough; the company could be looking at rather significant tax bills once its in-development projects come onstream.

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Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.