AES Corp., a world-wide power generation company, announced thatit has entered into a definitive agreement to acquire New EnergyVentures Inc. (NEV), an energy service firm for large commercialand industrial buyers, in a transaction valued at approximately $90million.

The move came a day after AES received U.S. approval for itsacquisition of Central Illinois Power & Light. Both movessignaled the company’s diversification downstream from powergeneration into delivery.

Dennis Bakke, president and chief executive officer of AES,said: “We are pleased that customer choice in the U.S. electricitymarket has matured to the point where AES’s participation in thisexciting aspect of the business now makes sense. New EnergyVentures has been the leader in shaping policies to create trulycompetitive markets in states where the utility industry is beingderegulated, and is a competitor to be reckoned with in everyderegulated state.”

AES intends to finance the acquisition through a combination ofcash, debt and AES common stock. AES will acquire all of theoutstanding shares of New Energy Ventures from its current owners,UniSource Energy Corp., the parent of Tucson Electric Power and NewEnergy Holdings L.L.C. (which is owned by senior management of NewEnergy Ventures).

Michael R. Peevey, president of New Energy Ventures, said theacquisition “brings together two leaders and pioneers in theworldwide restructuring of the electric industry.” Peevey, a formerpresident of Southern California Edison, formed the company in 1995to take advantage of the opening of a competitive electric powermarket in California. Since then NEV has expanded its operations toother states where deregulation has taken hold.

Lewis Phelps, a spokesman for NEV, claimed first place for thecompany in the California power market and “a strong second in NewYork. We’re in Pennsylvania too and we’ll be going into otherstates as they deregulate. We’re opening up new markets andcreating a market presence.” He defended last year’s losses asnecessary for a company in a new industry setting out to capturemarket share against the likes of other top full service energyfirms such as PG&E, Duke Energy and Enron Corp. “It takes deeppockets to compete in this league.”

“New Energy Ventures will be significantly strengthened bothfinancially and operationally, and the combination of the companieswill 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. Thatfollowed on a 1997 loss of $5.4 million, or $0.17 per share. AUnisource spokesman said the Arizona utility had every confidencein the long term success of the venture, but could no longer affordto 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 largecommercial and industrial customers on a shared savings basis. NEVtakes a percentage – typically 25% – of the savings between thecustomer’s stated tariff rate and the amount they actually pay forenergy supplied through NEV. The service firm also will analyze acustomer’s energy use and equip and finance more efficientinstallations.

NEV’s largest customer is the Defense Department’s facilities inCalifornia. It also has the western distributorship for AlliedSignal’s microturbines and is involved with companies supplyingdiesel and solar turbines. “We aren’t dedicated to any singletechnology,” Phelps said.

New Energy Ventures will retain its identity as a separatecompany within the AES structure. New Energy Ventures’ people willalso remain in place.

The planned transaction requires approval of the Federal EnergyRegulatory Commission and also requires clearance under theHart-Scott-Rodino Anti-Trust Act. Both are expected to be obtainedwithin 30 to 60 days.

AES is a leading global power company that currently owns or hasan interest in 104 power facilities totaling more than 31,000 MW inthe United States, Canada, Australia, Argentina, Brazil, theDominican 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 companyhas more than $5 billion of projects in construction or late stagesof development.

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