Power Generator AES to Take Over New Energy Ventures
AES Corp., a world-wide power generation company, announced that
it has entered into a definitive agreement to acquire New Energy
Ventures Inc. (NEV), an energy service firm for large commercial
and industrial buyers, in a transaction valued at approximately $90
The move came a day after AES received U.S. approval for its
acquisition of Central Illinois Power & Light. Both moves
signaled the company's diversification downstream from power
generation into delivery.
Dennis Bakke, president and chief executive officer of AES,
said: "We are pleased that customer choice in the U.S. electricity
market has matured to the point where AES's participation in this
exciting aspect of the business now makes sense. New Energy
Ventures has been the leader in shaping policies to create truly
competitive markets in states where the utility industry is being
deregulated, and is a competitor to be reckoned with in every
AES intends to finance the acquisition through a combination of
cash, debt and AES common stock. AES will acquire all of the
outstanding shares of New Energy Ventures from its current owners,
UniSource Energy Corp., the parent of Tucson Electric Power and New
Energy Holdings L.L.C. (which is owned by senior management of New
Michael R. Peevey, president of New Energy Ventures, said the
acquisition "brings together two leaders and pioneers in the
worldwide restructuring of the electric industry." Peevey, a former
president of Southern California Edison, formed the company in 1995
to take advantage of the opening of a competitive electric power
market in California. Since then NEV has expanded its operations to
other states where deregulation has taken hold.
Lewis Phelps, a spokesman for NEV, claimed first place for the
company in the California power market and "a strong second in New
York. We're in Pennsylvania too and we'll be going into other
states as they deregulate. We're opening up new markets and
creating a market presence." He defended last year's losses as
necessary for a company in a new industry setting out to capture
market share against the likes of other top full service energy
firms such as PG&E, Duke Energy and Enron Corp. "It takes deep
pockets to compete in this league."
"New Energy Ventures will be significantly strengthened both
financially and operationally, and the combination of the companies
will position us well wherever competition occurs," Peevey said.
NEV was primarily responsible for a net loss of $8.1 million, or
$0.25 per share for Unisource' unregulated affiliates in 1998. That
followed on a 1997 loss of $5.4 million, or $0.17 per share. A
Unisource spokesman said the Arizona utility had every confidence
in the long term success of the venture, but could no longer afford
to support the firm's growth. "We wanted to keep a share in NEV,
but AES wanted 100%," he added.
NEV focuses on supplying the energy needs of multi-site large
commercial and industrial customers on a shared savings basis. NEV
takes a percentage - typically 25% - of the savings between the
customer's stated tariff rate and the amount they actually pay for
energy supplied through NEV. The service firm also will analyze a
customer's energy use and equip and finance more efficient
NEV's largest customer is the Defense Department's facilities in
California. It also has the western distributorship for Allied
Signal's microturbines and is involved with companies supplying
diesel and solar turbines. "We aren't dedicated to any single
technology," Phelps said.
New Energy Ventures will retain its identity as a separate
company within the AES structure. New Energy Ventures' people will
also remain in place.
The planned transaction requires approval of the Federal Energy
Regulatory Commission and also requires clearance under the
Hart-Scott-Rodino Anti-Trust Act. Both are expected to be obtained
within 30 to 60 days.
AES is a leading global power company that currently owns or has
an interest in 104 power facilities totaling more than 31,000 MW in
the United States, Canada, Australia, Argentina, Brazil, the
Dominican Republic, Panama, Mexico, Pakistan, India, Bangladesh,
the Netherlands, Hungary, Kazakhstan, China and the United Kingdom.
AES also distributes electricity to nearly 14 million customers.
In addition to having assets in excess of $10 billion, the company
has more than $5 billion of projects in construction or late stages