Filings Under the Public Utility Holding Company Act of 1935, as Amended (``Act'')

[Federal Register Volume 64, Number 117 (Friday, June 18, 1999)]
[Notices]
[Pages 32904-32906]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-15482]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 35-27036]


Filings Under the Public Utility Holding Company Act of 1935, as 
Amended (``Act'')

June 11, 1999.
    Notice is hereby given that the following filing(s) has/have been 
made with the Commission pursuant to provisions of the Act and rules 
promulgated under the Act. all interested persons are referred to the 
application(s) and/or declaration(s) for

[[Page 32905]]

complete statements of the proposed transaction(s) summarized below. 
The application(s) and/or declaration(s) and any amendments is/are 
available for public inspection through the Commission's Branch of 
Public Reference.
    Interested persons wishing to comment or request a hearing on the 
applications(s) and/or declaration(s) should submit their views in 
writing by July 6, to the Secretary, Securities and Exchange 
Commission, Washington, D.C. 20549-0609, and serve a copy on the 
relevant applicant(s) and/or declarant(s) at the address(es) specified 
below. Proof of service (by affidavit or, in case of an attorney at 
law, by certificate) should be filed with the request. Any request for 
hearing should identify specifically the issues of facts or law that 
are disputed. A person who so requests will be notified of any hearing, 
if ordered, and will receive a copy of any notice or order issued in 
the matter. After July 6, 1999, the application(s) and/or 
declaration(s), as filed or as amended, may be granted and/or permitted 
to become effective.

AES Corporation (70-9465)

    The AES Corporation (``AES''), Arlington, Virginia, a Delaware 
corporation not currently subject to the Act, has filed an application 
under section 3(a)(5) of the Act. AES requests an order exempting it 
from all provisions of the Act except section 9(a)(2) upon consummation 
of the transaction described below.
    AES is a United States-based multinational electric power 
generation and energy distribution company with operations in 16 
countries worldwide. AES is engaged principally in the development, 
ownership and operation of electric generating plants and electric and 
gas distribution companies, all of which are, or are owned by, exempt 
wholesale generators as defined in section 32 of the Act, foreign 
utility companies as defined in section 33 of the Act, or qualifying 
facilities under the Public Utility Regulatory Policies Act. Revenues 
from electric generation and distribution activities accounted for over 
95% of revenues in 1997 and in 1998. Other activities include the sale 
of steam and other commodities related to AES' cogeneration operations, 
as well as operational, construction and project development services, 
and gas and power marketing.\1\ AES does not currently have any public-
utility subsidiary or affiliate.
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    \1\ AES Power, a wholly owned subsidiary that engages in power 
marketing, generated less than 1% of AES' 1998 net income.
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    Since AES was founded in 1981, it has grown to become one of the 
largest, if not the largest, global electricity suppliers. AES 
currently owns and/or operates, entirely or in part, a diverse 
international portfolio of electric power plants with a total project 
capacity of 26,466 megawatts (``MW''), including plants that are part 
of distribution companies in which AES has an interest. On a total 
project basis, 20,017 MW of this generating capacity is located outside 
the United States. On a net equity basis, i.e., pro-rated to reflect 
AES' actual ownership interests, AES has 17,618 of capacity, of which 
11,194 is foreign-based.
    AES also owns partial interests (both majority and minority) in 
companies that distribute and sell electricity directly to commercial, 
industrial, governmental and residential customers. AES has majority 
ownership in three distribution companies in Argentina, one in Brazil, 
one in the country of Georgia, one in Kazakhstan and one in El 
Salvador; and less than majority ownership in three additional 
distribution companies in Brazil. AES also recently acquired the right 
to purchase a 50% interest in a distribution company in the Dominican 
Republic and expects to close on the purchase soon. These eleven 
companies serve a total of approximately 13.6 million foreign customers 
with sales of nearly 107,000 gigawatt hours. On a net equity basis, 
AES' ownership in these companies will represent approximately 3.6 
million foreign customers following the closing of the Dominican 
Republic acquisition and sales of approximately 29,000 gigawatt hours 
by the end of 1999.
    The application states that AES has grown rapidly throughout this 
decade.\2\ In 1990, the year before it went public, AES had total 
assets of $1.1 billion, operating revenues of $190.2 million and net 
income of $15.5 million, all determined in accordance with Generally 
Accepted Accounting Principles (``GAAP''). By the end of 1998, AES' 
total assets, gross revenues and net income, determined in accordance 
with GAAP, were $10.8 billion, $2.4 billion and $311 million, 
respectively.
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    \2\ In the eight-year period between year end 1990 and 1998, 
AES' growth in total assets, revenues and net income was 882%, 
1,162% and 1,906%, respectively.
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    AES has continued its fast-paced growth in 1999. Combining 101 
power plants currently in operation or projected to begin operations 
and plants to be acquired, AES expects to have a minimum of 27,798 MW 
of total project generating capacity by the end of 1999, of which 
20,017 MW will be foreign. On a net equity basis, AES is expected to 
have a generating capacity of 18,950 MW by year end 1999, of which 
11,194 MW will be foreign. As a result, the power generation capacity 
of companies in which AES has an interest will have grown by 3,027% on 
a total project basis and 2,093% on a net equity basis in the eight 
years from 1991 to 1999.
    The growth of AES' distribution business in 1999 also has been 
fast-paced. In 1996, AES purchased its first interests in a 
distribution company. By the end of 1998, companies in which AES had an 
interest served approximately 13 million customers and sold over 
102,000 gigawatt-hours of power (approximately 3.1 million customers 
and 25,000 gigawatt-hours on a net equity basis). Thus far in 1999, AES 
has acquired the interests or rights to acquire interests in 
distribution companies in Georgia and the Dominican Republic, mentioned 
above, and the right to increase its ownership interests in two 
Brazilian distribution companies.
    AES' market capitalization has mirrored its growth over the decade. 
AES' public offering in 1991 valued the company at $750 million. At 
present, AES' market capitalization has risen to approximately $10 
billion, an increase of 1,233% in approximately eight years.
    As part of this growth, AES intends to acquire CILCORP Inc. 
(``CILCORP''), an Illinois public-utility holding company exempt from 
registration under section 3(a)(1) of the Act by rule 2. Through the 
acquisition, AES would acquire CILCORP's Illinois public-utility 
subsidiary, Central Illinois Light Company (``CILCO'').\3\
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    \3\ CILCORP is also the parent of three first-tier nonutility 
subsidiaries: QST Enterprises Inc., a company formed to facilitate 
CILCORP's expansion into nonregulated energy and related services 
businesses; CILCORP Investment Management Inc., which invests in 
leveraged leases, energy-related projects and affordable residential 
housing; and CILCORP Ventures Inc., which primarily invests in 
energy-related products and services.
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    CILCORP had consolidated assets, revenues and net income for the 
year ending December 31, 1997 of $1.335 billion, $558 million and $16.4 
million, respectively. For 1998, CILCORP's consolidated assets, 
revenues and net income were $1.313 billion, $559 million and $16.3 
million, respectively.
    CILCO is engaged in the generation, transmission, distribution and 
sale of electric energy in an area of approximately 3,700 square miles 
in central and east-central Illinois, and the

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purchase, distribution, transportation and retail sale of natural gas 
in an area of approximately 4,500 square miles in central and east-
central Illinois. As of December 31, 1998, CILCO served approximately 
253,000 customers: 189,000 retail electric customers and 197,000 gas 
customers, including 837 industrial, commercial and residential gas 
transportation customers.\4\ CILCO is subject to regulation by the 
Illinois Commerce Commission (``Illinois Commission'').
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    \4\ Of the 253,000 individual customers served by CILCO, some 
take electric service only, some take gas service only, and some 
take both.
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    For the year ended December 31, 1997, CILCO had total assets, 
operating revenues and net income of $1.023 billion, $546.9 million and 
$50.3 million, respectively. Electric utility assets were $723.8 and 
gas utility assets were $290.5. In 1997, electric utility revenues were 
$338.1 million (625% of total operating revenues) and gas utility 
revenues were $208.8 million (38% of total operating revenues).
    At the end of 1998, CILCO had total assets, operating revenues and 
net income of $1.024 billion, $532.3 million and $41 million, 
respectively. Electric utility assets were $729.1 million and gas 
utility assets were $286.2 million. In 1998, CILCO earned $360 million 
in electric utility revenues (68% of total operating revenues) and 
$172.3 million in gas utility revenues (32% of total operating 
revenues).
    Under a Merger Agreement dated November 22, 1998 between AES and 
CILCORP, Midwest Energy, Inc. (``Midwest Energy''), a wholly owned 
Illinois subsidiary of AES, will be merged with and into CILCORP, with 
CILCORP as the surviving corporation (the ``Transaction''). Following 
the Transaction, CILCORP will be a direct subsidiary of AES and 
CILCORP's subsidiaries will maintain their current structure as direct 
or indirect subsidiaries, as the case may be, of CILCORP.
    CILCORP's shareholders approved the Merger Agreement at a special 
meeting held on May 20, 1999. The merger also requires approval by the 
Federal Energy Regulatory Commission and is subject to the notification 
and reporting requirements of the Hart-Scott-Rodino Antitrust 
Improvements Act of 1976. The Transaction does not require approval 
under section 9(a)(2) of the Act, because AES will acquire only one 
public-utility company through the Transaction.\5\
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    \5\ See Coral Petroleum, Inc., Holding Co. Act Release No. 21632 
(June 19, 1980).
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    The Illinois Commission approved the reorganization with respect to 
the gas utility operations of CILCO by order dated March 10, 1999.\6\ 
As contemplated by section 33(a)(2) of the Act, the Illinois Commission 
has informed the Commission, by letter dated March 10, 1999, that it 
has the authority and resources to protect Illinois consumers in 
accordance with Illinois law, and intends to exercise its authority.
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    \6\ Central Illinois Light Co., order approving petition 
pursuant to section 16-111(g) of the Public Utilities Act, Dkt. No. 
98-0882 (Mar. 10, 1999). Under the Illinois Public Utilities Act, 
the Illinois Commission does not have pre-approval jurisdiction over 
the Transaction with respect to CILCO's electric operations. 
Illinois restructuring legislation removed the state commission's 
authority over the sale or other transfer of electric assets to 
affiliated or unaffiliated entities until January 1, 2005.
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    AES request an exemption from registration under section 3(a)(5) of 
the Act following the Transaction. AES states that it will be a holding 
company that ``is not, and derives no material part of its income, 
directly or indirectly, from any one or more subsidiary companies which 
are, a company or companies the principal business of which within the 
United States is that of a public-utility company.'' The application 
further states that CILCORP will continue to qualify for exemption 
under section 3(a)(1) of the Act following the Transaction because both 
it and CILCO will be ``predominantly intrastate in character'' and will 
``carry on their business substantially in'' Illinois, the state in 
which both are organized.

    For the Commission by the Division of Investment Management, 
under delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 99-15482 Filed 6-17-99; 8:45 am]
BILLING CODE 8010-01-M