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Power Generator AES to Take Over New Energy Ventures

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 million.

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 deregulated state."

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 Energy Ventures).

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 installations.

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 of development.

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