AES Corp. has set the table to take another big bite of theMidwest power generation market after agreeing to buy IPALCOEnterprises Inc. of Indiana for $3.04 billion in stock and assumeddebt. The Arlington, VA, power plant developer, which expects toclose the sale early in 2001, plans to build additional facilitiesin IPALCO’s Indiana territory and eventually begin sellingelectricity in the growing Chicago marketplace.

AES plans to install fiber-optic lines along Indianapolis-based IPALCO’s power-line and natural-gas pipeline routes, with a long-range scheme to construct telecommunications networks through its energy rights-of-way. The agreement will give the largest U.S. power plant developer its second buy in the Midwest market after purchasing Cilcorp. Inc. of Peoria, IL, last year for $1.3 billion (see NGI, June 21, 1999). The Cilcorp purchase gave AES about 190,000 electric and 200,000 gas customers in central Illinois.

AES’s offer of $25 a share in stock is 16% more than IPALCO’sclose was on Friday (July 14), and the agreement also includes anoffer to take on $890 million in debt following regulatoryapproval. The transaction is expected to be tax-free to IPALCOshareholders, accounted for as a pooling-of-interests, and alsowill be accretive to AES earnings. After regulatory and shareholderapproval, IPALCO would become a wholly owned subsidiary of AES. Itsheadquarters would remain in Indianapolis.

AES CEO Dennis W. Bakke said the company was “thrilled” to be inthe Indiana market, and said AES would build on a “solid foundationof customer service and community involvement” that IPALCO hadbuilt over the years.

IPALCO owns three power plants in Indiana, which produce about3,000 MW of coal-fueled electricity. It owns Indianapolis Power& Light Co., which has 433,000 customers in central Indiana,and which had sales of $835 million in 1999.

Earlier this year, IPALCO considered going private, according toPresident John Hodowal, because officials determined that based onchanges to state law, the Indiana company eventually would have tocompete with larger plants for customers. A few months ago when itbegan discussions in this direction, Hodowal said AES approachedofficials to talk about the buy.

Founded in 1981, global powerhouse AES already has more than 141power projects in 20 countries, totaling more than 48,000 MW, andhas made its biggest mark on the international scene. It alsodistributes electricity in 10 countries through 21 distributionbusinesses. However, in recent years it has turned more attentionto the U.S. market.

In May, AES won a bid to purchase a 70% interest in the 1,580 MW Mohave Generating Station in Laughlin, NV, for nearly $667 million (see NGI, May 15). It purchased New Energy Ventures LLC in 1999 for about $90 million to expand into direct power sales to businesses. Its clients include New York City’s Rockefeller Center and Bloomingdale’s department stores. The company has grown by developing new electric generating facilities and acquiring generating facilities and electric distribution businesses.

The power hungry Midwest has seen other companies snatching up smaller ones in hopes of generating more customers and power. Edison International of Rosemead, CA, bought 16 power plants from Chicago’s Unicom Corp. last year for $4.8 billion (see NGI, May 31, 1999). Also in 1999, Houston-based Dynegy bought Illinova Corp. for $4 billion, and plans to spend another $2 billion on more plants in the next two years (see NGI, June 21, 1999).

Carolyn Davis, Houston

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