International power generation developer AES Corp. continued anaggressive acquisition strategy yesterday with the purchase of all13.6 million shares of Peoria, IL-based CILCORP, parent of CentralIllinois Light Co., for $65 per share, a 22% premium. The value ofthe transaction is about $885 million.
The deal marks AES’s foray into domestic energy distribution,but the independent power producer is buying a company with astrong rate of return and a similar competitive outlook. AES’s TomTribone, senior vice president, said the Illinois utility companyis the “most competitive electric and gas supplier” in the state.”It is important to note that Illinois has enacted a far-sightedrestructuring plan that embodies a vision for the industry that isshared by both companies,” he added.
Electric restructuring legislation enacted last year gaveCILCORP a new 16% return on equity in its power business (17% nextyear) and set a schedule for competition. One-third of the state’slarger retail power customers begin choosing alternative suppliersnext October.
CILCORP is on the progressive side of electric and gasrestructuring. A portion of CILCO’s 193,000 electric retailcustomers and 202,000 natural gas customers in central and eastcentral Illinois have been able to choose alternative supplierssince 1996.
“They felt we were an ideal company to put their imprint on,particularly because of our philosophy of competition. It’s reallyantithetical to the monopoly utility mentality. We’ve broken rankswith that,” said CILCORP’s Gary Ebeling. “We’re the right vehiclefor them to attack the Illinois market.”
The purchase also adds $1.3 billion in gas and electricdistribution and power generation assets in the Midwest to AES’s$11 billion international asset base. CILCO has two baseloadcoal-fired power plants, one cogeneration unit and several peakingturbines for a total capacity of about 1,152 MW, which equals about90% of its average power requirements. AES CEO Dennis Bakke notedthe deal gives AES a strong base of operations in the midwesternU.S. where power prices spiked significantly in June.
In 1997, CILCORP had total revenues of $976 million. It employsabout 1,800 people. Arlington, VA-based AES Corp. posted revenuesfor the first three months of 1998 of $1.8 billion, a 99% increaseover the same period last year. Its net income was up 58% to $79million, or $0.43/share, excluding special items, during the thirdquarter. The company owns 90 power plants with 27,000 MW ofgeneration in 12 countries. AES also distributes electricity tonearly 13 million customers. In May, AES completed its purchase ofthree electric generating stations with 3,956 MW of capacity fromSouthern California Edison.
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