-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Dy+NqvoqAbEk1a7/03GCpqe9UBa2F1fZE3m0iWEL1AKf5FWxHsHlOOQeUVNPBe1S HIPAmrAIa7XNIDvGEgYlEQ== 0000950172-99-000723.txt : 19990615 0000950172-99-000723.hdr.sgml : 19990615 ACCESSION NUMBER: 0000950172-99-000723 CONFORMED SUBMISSION TYPE: U-1/A PUBLIC DOCUMENT COUNT: 15 FILED AS OF DATE: 19990610 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AES CORPORATION CENTRAL INDEX KEY: 0000874761 STANDARD INDUSTRIAL CLASSIFICATION: COGENERATION SERVICES & SMALL POWER PRODUCERS [4991] IRS NUMBER: 541163725 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: U-1/A SEC ACT: SEC FILE NUMBER: 070-09465 FILM NUMBER: 99644229 BUSINESS ADDRESS: STREET 1: 1001 N 19TH ST STREET 2: STE 2000 CITY: ARLINGTON STATE: VA ZIP: 22209 BUSINESS PHONE: 7035221315 U-1/A 1 AMENDMENT 1 TO FORM U-1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM U-1 ----------------------------------------- AMENDMENT NO. 1 TO APPLICATION UNDER THE PUBLIC UTILITY HOLDING COMPANY ACT OF 1935 ---------------------------------------------------- The AES Corporation 1001 North 19th Street Arlington, VA 22209 (Name of company filing this statement and address of principal executive offices) ------------------------------------------------------------------ None (Name of top registered holding company parent of each applicant or declarant) --------------------------------- William R. Luraschi General Counsel and Secretary The AES Corporation 1001 North 19th Street Arlington, VA 22209 (Name and address of agent for service) ---------------------------------- The Commission is also requested to send copies of any communications in connection with this matter to: Clifford M. Naeve, Esq. Judith A. Center, Esq. Kathleen A. Foudy, Esq. Skadden, Arps, Slate, Meagher & Flom L.L.P. 1440 New York Avenue, N.W. Washington, D.C. 20005 APPLICATION FOR EXEMPTION FROM THE PROVISIONS OF THE PUBLIC UTILITY HOLDING COMPANY ACT OF 1935 PURSUANT TO SECTION 3(a)(5) THE APPLICATION PREVIOUSLY FILED IN THIS PROCEEDING IS HEREBY AMENDED AND RESTATED IN ITS ENTIRETY TO READ AS FOLLOWS: INTRODUCTION AND REQUEST FOR COMMISSION ACTION The AES Corporation ("AES") hereby applies for an order from the United States Securities and Exchange Commission (the "Commission") to the effect that upon consummation of the merger transaction described in Item 1 below, the resulting public utility holding company, and every subsidiary company thereof as such, will be exempt from the provisions of the Public Utility Holding Company Act of 1935, as amended ("PUHCA" or "the Act"), other than Section 9(a)(2), pursuant to Section 3(a)(5) of the Act.1 ITEM 1. DESCRIPTION OF THE TRANSACTION A. SUMMARY OF THE TRANSACTION Pursuant to a Merger Agreement dated November 22, 1998 between AES and CILCORP Inc. ("CILCORP"), Midwest Energy, Inc., an Illinois corporation and wholly-owned subsidiary of AES, will be merged with and into CILCORP, with CILCORP as the surviving corporation (the "Transaction"). As a result of the Transaction, each outstanding share of common stock of CILCORP ("CILCORP Shares") and each associated purchase right under the Rights Agreement, dated as of October 29, 1996, between Continental Stock Transfer and Trust Company and CILCORP will be converted into the right to receive $65.00 (subject to adjustment as described in the Merger Agreement) in cash, without interest. The Merger Agreement is attached to this Application as Exhibit B-1. Following the Transaction, CILCORP will be a first-tier, 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. In addition, CILCORP will continue to be an Illinois corporation with its principal - --------------- 1 Some AES subsidiaries also will continue to be exempt from the Act as exempt wholesale generators ("EWGs"), pursuant to Section 32 of the Act, as foreign utility companies ("FUCOs"), pursuant to Section 33 of the Act, or as qualifying facilities ("QFs"), pursuant to Section 210(e) of the Public Utility Regulatory Policies Act of 1978, and the implementing rules of the Federal Energy Regulatory Commission. 1 executive offices in Peoria, Illinois and AES will continue to be a Delaware corporation with its principal executive offices in Arlington, Virginia. The merger will provide important benefits to CILCORP's utility customers and shareholders. AES's international and diversified experience in competitive power markets will provide CILCORP's public utility subsidiary, Central Illinois Light Company ("CILCO"), the resources necessary to provide quality customer services in a deregulated environment. Pursuant to the Electric Service Customer Choice and Rate Relief Law of 1997, which was enacted in Illinois in December 1997 and becomes effective in October 1999, industrial and commercial customers will be able to choose their own retail electric power providers. Residential customers will have the same choice sometime thereafter, ultimately leading to open choice for all Illinois electricity customers by mid-year 2002. This deregulation will result in direct competition for customers and will create demand for a broader range of services at competitive prices. AES's worldwide experience and management resources, coupled with CILCORP's utility expertise in Illinois, will facilitate enhanced customer services at competitive prices. The Merger Agreement is subject to the approval of CILCORP's shareholders and was approved at a special meeting of CILCORP shareholders held on May 20, 1999. The Merger also is subject to approval by the Federal Energy Regulatory Commission ("FERC"). An application for such approval was filed with the FERC on February 19, 1999. See Exhibit D-2. The Merger also is subject to the notification and reporting requirements of the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the "HSR Act"). On February 22, 1999, the Federal Trade Commission granted early termination of the HSR Act waiting period. In addition, CILCO provided notice to the Illinois Commerce Commission ("ICC") pursuant to Section 16-111(g) of the Illinois Public Utilities Act regarding the Transaction, and filed a petition with the ICC for an order finding that the ICC has no pre-approval jurisdiction over the Transaction, or, in the alternative, for an order approving the Transaction with respect to CILCO's gas operations.2 See Exhibit D-1. After the filing of its petition, CILCO withdrew its request that the ICC make a ruling on the jurisdictional issue. The ICC held an evidentiary hearing on February 5, 1999 and issued an order approving the Transaction with respect to CILCO's gas operations on March 10, 1999. See Exhibit K-17. CILCO also requested that the ICC issue a state commission certification in accordance with the requirements of Section 33(a)(2) - --------------- 2 Pursuant to the Illinois Public Utilities Act, the ICC does not have preapproval jurisdiction over the Transaction with respect to CILCO's electric operations. Illinois restructuring legislation removed ICC authority over the sale or other transfer of electric assets to affiliated or unaffiliated entities until January 1, 2005. 2 of the Act. The ICC issued such certification by letter to the Commission dated March 10, 1999. See Exhibit K-18.3 Upon consummation of the Transaction, AES will own CILCORP, an intrastate exempt holding company under Section 3(a)(1) of the Act, and its direct and indirect subsidiaries, including CILCO, a utility subsidiary principally engaged in the generation, transmission, distribution and sale of electric energy, and the purchase, distribution, transportation and sale of natural gas in central and east-central Illinois. After giving effect to the Transaction, CILCORP will remain predominantly an intrastate holding company that will not derive any material part of its income from an out-of-state utility subsidiary. Accordingly, CILCORP will continue to claim an exemption from registration under PUHCA pursuant to Section 3(a)(1) and Rule 2. For the reasons set forth herein, AES will qualify for an exemption from registration under Section 3(a)(5) of the Act. B. DESCRIPTION OF PARTIES TO THE TRANSACTION 1. AES CORPORATION AES, incorporated in Delaware, 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 either are (or are owned by) EWGs, FUCOs or QFs. Revenues from electric generation and distribution activities accounted for over 95 percent of revenues in 1997 and again in 1998. Other activities include the sale of steam and other commodities related to AES's cogeneration operations, as well as operational, construction and project development services, and gas and power marketing.4 AES currently is not a holding company subject to the provisions of the Act because none of its subsidiaries is a public utility company as defined by the Act. Exhibit K-2 lists all AES subsidiaries and their respective jurisdictions of organization. AES has grown since its founding in 1981 to become one of the largest, if not the largest, global electricity suppliers. AES currently owns and/or - --------------- 3 The Transaction is not subject to pre-approval by this Commission under Section 9(a)(2) of the Act, since AES will acquire and own only one PUHCA-jurisdictional public utility company upon consummation of the Transaction. See Coral Petroleum, Inc., Rel. No. 35-21, 632 (1980). 4 AES Power, a wholly owned subsidiary of AES active in power marketing, generated less than 1 percent of AES's1998 net income. In addition, CEMIG, in which AES has a minority investment, has operated a small gas distribu tion company, Gasmig, since 1995. 3 operates (entirely or in part) a diverse international portfolio of electric power plants with a total capacity of 26,466 megawatts ("MW"), including plants that are part of distribution companies in which AES has an interest. Of that total, 6,449 MW (fifteen plants) are located in the United States, 1,818 MW (five plants) are in the United Kingdom, 885 MW (six plants) are in Argentina, 817 MW (eight plants) are in China, 1,281 MW (three plants) are in Hungary, 6,456 MW (41 plants) are in Brazil, 5,384 MW (seven plants) are in Kazakhstan, 210 MW (one plant) are in the Dominican Republic, 110 MW (one plant) are in Canada, 695 MW (two plants) are in Pakistan, 1,254 MW (three plants) are in Australia, 405 MW (one plant) are in the Netherlands, 420 MW (one plant) are in India and 282 MW (two plants) are in Panama. 20,017 MW of this generating capacity is located outside the United States.5 As noted above, 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 percent 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's ownership in these companies will represent approximately 3.6 million foreign customers and sales of approximately 28,000 gigawatt-hours. Pending increases in AES's ownership in two Brazilian distribution companies will raise the company's net equity share to approximately 3.7 million foreign customers and approximately 29,000 gigawatt-hours. In addition to power generation and distribution, AES owns and operates the Lyukobanya Coal Mine in Hungary. The mine has an output of approximately one million tons per year of brown coal and is the sole supplier of AES Borsod. AES has grown rapidly throughout this decade. In 1990, the year before it went public, AES had total assets of $1.1 billion, revenues of $190.2 million and net income of $15.5 million.6 By the end of 1997, total assets grew by approximately 700 percent to $8.9 billion, revenues grew by approximately 640 percent to $1.4 billion, and net income grew by nearly 1,100 percent to $185 million. From the end of 1997 to the end of 1998, AES's total assets expanded 21 percent to $10.8 billion, revenues rose 71 percent to $2.4 billion and net income grew 68 percent to $311 million. In the eight year period between year-end 1990 and 1998, AES's growth in total assets, revenues and net income were 882 percent, 1,162 percent and 1,906 percent, respectively. - --------------- 5 On a net equity basis, i.e., actual ownership interest, AES has 17,618 MW of capacity, of which 11,194 MW is foreign-based. 6 Determined in accordance with Generally Accepted Accounting Principles ("GAAP"). 4 AES has continued its growth in 1999. Thus far in 1999, AES has acquired or achieved commercial operations for two power plants totaling 282 megawatts ("MW") in Panama, a 420 MW plant in India and three power plants totaling 1,254 MW in Australia. The company also recently completed financing for the purchase of six power plants totaling 1,424 MW in New York.7 In 1999, AES also expects to achieve financial closing on its acquisition of the four electric generating plants of CILCO (1,152 MW). Also in 1999, AES is expected to complete construction of and begin operating a 180 MW coal-fired plant in the United States. Combining the 101 power plants currently in operation, planned for acquisition in 1999 or projected to begin operations in 1999, AES is expected to have a minimum of 27,798 MW of generating capacity by the end of the current calendar year.8 As a result, the power generation capacity of companies in which AES has an interest will have grown by 3,027 percent in 8 years.9 10 The growth of AES's distribution business 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.11 Thus far in 1999, AES has acquired 75 percent of a distribution company serving 370,000 customers in the country of Georgia and rights to purchase 50 percent of an electric distribution company serving approximately 270,000 customers in the Dominican Republic. In addition, AES recently acquired the right to increase its ownership stakes in its Brazilian distribution companies, Light and Metropolitana, by 27 percent and 30 percent, respectively, and expects to acquire such additional ownership during 1999. AES's market capitalization has mirrored its growth over the decade. AES's public offering in 1991 valued the company at $750 million. At present, AES's market capitalization has risen to approximately $10 billion, an increase of 1,233 percent in approximately 8 years. - --------------- 7 These generating assets of New York State Electric and Gas Corporation ("NYSEG") will be owned by a wholly-owned subsidiary of AES that has EWG status. 8 Of this 27,798 MW, 20,017 MW will be foreign. On a net equity basis, AES is expected to have a generating capacity of 18,950 MW at year-end 1999; 11,194 MW of which will be foreign. 9 This projection conservatively assumes AES growth only from AES projects under development which are expected to be operational in this period and from existing projects which AES already has committed to acquire during this period. 10 2,093 percent on a net equity basis. 11 Approximately 3.1 million customers and 25,000 gigawatt-hours on a net equity basis. 5 Exhibit K-3 lists the AES subsidiary companies which own generation facilities currently in operation, and also includes company operating locations, power generation capacities, AES net equity interests, and the regulatory status of the companies and/or generating facilities (i.e., whether QF, EWG, or FUCO). Exhibit K-3 also lists the distribution companies in which AES owns an interest, including location, regulatory status and the nature of AES's interest. Exhibit K-4 depicts the locations of AES's current and prospective generation and distribution businesses worldwide. 2. CILCORP CILCORP was incorporated as a utility holding company in the State of Illinois in 1985. CILCORP is the parent of four first-tier subsidiaries: CILCO, QST Enterprises Inc. ("QST"), CILCORP Investment Management Inc. ("CIM"), and CILCORP Ventures Inc. ("CVI"). The consolidated assets, revenues and net income of CILCORP for the year ending December 31, 1997 were $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. CILCORP is exempt from the provisions of PUHCA (except for Section 9(a)(2)) under Section 3(a)(1) pursuant to Rule 2. CILCO, the primary business subsidiary of CILCORP, is an electric and gas utility 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 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; approximately 189,000 retail electric customers and approximately 197,000 gas customers, including 837 industrial, commercial and residential gas transportation customers that purchase gas directly from suppliers for transportation through CILCO's system. At the end of 1997, the electric utility assets of CILCO were $723.8 million and the gas utility assets were $290.5 million. At the end of 1998, the electric utility assets of CILCO were $729.1 million and the gas utility assets were $286.2 million. In 1997, CILCO earned $338.1 million in electric utility revenues (62 percent of total operating revenue) and $208.8 million in gas utility revenues (38 percent of total operating revenue). In 1998, CILCO earned $360.0 million in electric utility revenues (68 percent of total operating revenue) and $172.3 million in gas utility revenues (32 percent of total operating revenue). CILCO owns and operates two steam-electric generating plants, one cogeneration plant and two combustion turbine-generators. These facilities had an available summer capability of 1,152 megawatts in 1998. At the end of 1998, CILCO's transmission system included approximately 285 circuit miles operating at 138,000 volts, 48 circuit miles operating at 345,000 volts and 16 principal substations with an installed capacity of 2,150,000 kilovolt-amperes. In 1998, the system peak demand was 1,195 megawatts for electric activities and the peak day natural gas send-out was 327,328 million cubic feet. CILCO had total assets, operating revenues and net income of $1.023 billion, $546.9 million and $50.3 million, respectively, for the year ending December 31, 1997. 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. 6 CILCO has two wholly-owned subsidiaries, CILCO Exploration and Development Company ("CEDCO") and CILCO Energy Corporation ("CECO"). CEDCO was formed to engage in the exploration and development of gas, oil, coal, and other mineral resources. QST was formed in December 1995 to facilitate CILCORP's expansion into non-regulated energy and related services businesses. QST has three wholly-owned first-tier subsidiaries: QST Energy, Inc. ("QST Energy"), CILCORP Infraservices, Inc. ("CII") and QST Environmental, Inc. ("QST Environmental"). QST Energy has one wholly-owned subsidiary: QST Energy Trading Inc. ("QST Trading"). QST Environmental has six active wholly-owned subsidiaries: Keck Instruments, Inc., QST Architectural Services, Inc., National Professional Casualty Co., Chemrox, Inc., Environmental Staffing Solutions, Inc., and ESE Land Corporation. QST Environmental also holds interests in ESE, Inc. and ESE New York, P.C. QST provides non-regulated energy and energy-related services to retail and wholesale customers through QST Energy, which began operations in 1996. QST Energy competed against marketers, brokers and utility affiliates to market and provide energy and related services to customers of utilities and other energy providers who have the ability to choose a supplier. QST Trading was a wholesale natural gas and electric power marketer which purchased, sold, and brokered energy and capacity at market-based rates to other marketers, including QST Energy, utilities and other customers. In June of 1998, CILCORP announced that it was reevaluating its strategy for QST Energy, and indicated that the company would focus on opportunities for profitable growth in Illinois, de-emphasizing energy trading activities at QST. After further consideration, CILCORP decided to wind down the operations of QST Energy and QST Trading, except to the extent required to fulfill commitments to existing customers and counterparties. Once these commitments are fulfilled, the operations of QST Energy and QST Trading will be completely wound down. QST Environmental is an environmental consulting and engineering firm serving governmental, industrial and commercial customers. In late 1998, CILCORP decided to sell QST Environmental and expects that the sale will be completed before the end of June 1999. In August of 1998, QST completed the sale of QST Communications Inc., formerly a wholly-owned QST subsidiary which provides telecommunications services. As a result of the winding down and sale of various QST operations, CILCORP is reporting the results of QST and certain of its subsidiaries as discontinued operations. For the year ending December 31, 1998, QST had total assets and a net loss of $121.6 million and $21.9 million, respectively. 7 CII provides utility operation and maintenance services. CII currently serves one customer in central Illinois. CIM invests in a diversified portfolio of long-term financial investments which currently include leveraged leases, energy-related projects and affordable residential housing. CIM has four wholly-owned subsidiaries: CILCORP Lease Management, Inc., CIM Leasing, Inc., CIM Air Leasing, Inc., and CIM Energy Investments, Inc. For the year ending December 31, 1998, CIM had total assets, revenues and net income of $162.5 million, $11.1 million and $4.3 million, respectively. CVI primarily invests in ventures in energy-related products and services. CVI has an 80 percent interest in the Agricultural Research and Development Corporation and has one wholly-owned subsidiary, CILCORP Energy Services Inc., ("CESI"). CESI's primary business is the sale of non-regulated energy services, including non-regulated sales of natural gas. For the year ending December 31, 1998, CVI had total assets, revenues and a net loss of $7.8 million, $13.5 million and $1.4 million, respectively. ITEM 2. FEES, COMMISSIONS AND EXPENSES The fees, commissions and expenses to be paid or incurred, directly or indirectly, by all parties in connection with the Transaction are estimated to total approximately $28 million. ITEM 3. APPLICABLE STATUTORY PROVISION SECTION 3(A)(5) Under Section 3(a)(5), a holding company and its subsidiaries will be exempt from the provisions of the Act (except for Section 9(a)(2)) if the holding company is not and does not derive any material part of its income from a subsidiary whose principal business within the U.S. is that of a public utility company. As the Commission has noted, the Section 3(a)(5) exemption is meant to be available to a holding company system with foreign operations whose U.S. utility operations "account for no material part of the holding company's income" and are "small in size". Gaz Metropolitain, Inc., Rel. No. 26170 (1994) (quoting and citing Electric Bond and Share Company, Rel. No. 11004, 1952 WL 1058 (1952) ("Electric Bond and Share")). For the reasons set forth below, it is clear that AES will qualify for a Section 3(a)(5) exemption upon completion of the Transaction. A. MATERIALITY OF CILCO INCOME In the relatively few cases decided under Section 3(a)(5) where the Commission has addressed the materiality of the U.S. utility subsidiary, the 8 Commission has considered the relative size of the U.S. utility subsidiary's operations, expressed as a percentage of the applicant holding company's total operations, based upon a variety of financial yardsticks. See, e.g., Gaz Metropolitain (citing to U.S. utility contributions to holding company total consolidated revenues, net income, and net utility plant); TransCanada Pipelines Limited, Rel. No. 35-25647 (1992)(citing to percentages of holding company total revenues and net assets); Consumers' Gas Company, Rel. No. 35-14956 (1963)(comparing U.S. utility and holding company revenues, net income, and net assets). In considering these various financial measurements, the Commission has not indicated that any given one is entitled to particular deference. The Commission similarly has not applied a strict percentage test of materiality under Section 3(a)(5). The Commission has granted Section 3(a)(5) exemptions where the U.S. utility subsidiary represented less than approximately 5 percent of total holding company operations. See, e.g., Gaz Metropolitain; TransCanada Pipelines. The Commission also has indicated that a holding company that derived approximately 46 percent of its total business revenues from a utility subsidiary (in the form of fees for underwriting services) received a material amount of income from such subsidiary. H.M. Byllesby & Company, Rel. No. 1882 (1940). See also Cities Service Company, 8 SEC 318 (1940)(noting in dicta that U.S. utility subsidiary contributions to holding company of approximately 30 percent of gross revenues and 45 percent of net fixed assets would be considered material). See also NIPSCO Industries, Inc., Rel. No. 35-26975 (Feb. 10, 1999) ("NIPSCO") (in the Section 3(a)(1) context, the Commission has emphasized that there is no strict percentage test for assessing materiality under Section 3(a)(1)). It should be noted that the Commission Staff has recommended that the Commission adopt a more flexible standard for exemptions under Section 3(a), urging the agency to take into account the ability of affected state commissions to "adequately protect utility consumers against any detriment that might be associated with certain activities of exempt holding companies." The Regulation of Public-Utility Holding Companies (June 1995), pp. 119-120. As explained below, the ICC has such ability here. A review of CILCO's contributions to AES's total operations (including CILCORP), from the perspective of a variety of financial indicators, reveals that CILCO's utility activities and assets constitute only a very minor percentage of AES's overall business, a percentage that will become increasingly minor over time, as the size of AES's business continues to grow.12 Set forth below in Table 1 are the percentages, on a pro forma basis for 1996-1998, of gross revenues, net operating revenues13, operating income, net income, and net assets of CILCO, to the total combined gross revenues, net operating revenues, operating income, net income, and net assets of AES as a whole. - --------------- 12 In fact, AES expects that CILCO's activities and assets as a percentage of AES's overall business will trend down to below 10 percent within five years. 13 Net operating revenues are gross revenues less cost of purchased gas for retail gas distribution and the cost of fuel for electric generation, for both AES and CILCO. 9 CILCO Contributions To AES/CILCORP Consolidated Holding Company (Proportional Consolidation Basis) ($MM) 1996 1997 1998 GROSS REVENUES* 31.26% 21.24% 12.81% AES 1,149 2,045 3,640 CILCO 524 553 538 CILCORP (excluding CILCO) 3 5 21 AES/CILCORP 1,676 2,603 4,199 NET OPERATING REVENUES 26.66% 17.75% 10.35% AES 891 1,557 3,011 CILCO 325 337 350 CILCORP (excluding CILCO) 3 5 21 AES/CILCORP 1,219 1,899 3,382 OPERATING INCOME 21.05% 14.59% 8.54% AES 365 608 997 CILCO 96 103 93 CILCORP (excluding CILCO) (5) (5) (1) AES/CILCORP 456 706 1,089 NET INCOME 27.45% 24.88% 12.54% AES 125 185 311 CILCO 42 50 41 CILCORP (excluding CILCO) (14) (34) (25) AES/CILCORP 153 201 327 NET ASSETS 20.07% 9.12% 7.78% AES 3,876 9,883 11,851 CILCO 1,036 1,023 1,024 CILCORP (excluding CILCO) 250 312 289 AES/CILCORP 5,162 11,218 13,164 * In calculating the gross revenues percentage, the numerator is equal to the total gross business revenues of CILCO, which include revenues from minor non-utility activities (nearly all of which are from service transactions with CILCORP affiliates). The denominator is comprised of all CILCORP business revenues (including revenues from all CILCO activities and CILCORP non-utility activities) plus all of AES's business revenues. 10 The AES data contained in Table 1 is compiled on a proportional consolidation basis rather than in accordance with GAAP. On a proportional consolidation basis, revenues, income and assets are allocated to AES on a pro rata basis in proportion to the ownership percentages held by AES in each of the projects/companies in which it has an equity interest. AES holds a less-than-50 percent equity interest in a number of projects that generate substantial revenues.14 On a proportional consolidation basis, revenues from sales made by these minority-interest investments are included as revenues in statements of operations. On financial statements prepared in accordance with GAAP, on the other hand, returns from minority-interest projects are not reported as revenues, but instead are reported as equity in earnings of affiliates (net of income taxes). Thus, using GAAP-based data here would understate the revenues AES earns from its electric business. The proportional consolidation data provides a more accurate representation of the size of AES's generation and distribution business relative to that of CILCO's business. Commission case law provides support for making appropriate adjustments to financial data reported on the basis of prescribed, conventional accounting treatments, where such adjustments would yield a more accurate picture, from a PUHCA perspective, of a company's operations, revenues, or other pertinent criteria. For example, on several occasions, the Commission has considered proportional consolidation data. See, e.g., Northern New England Company, et al., Rel. No. 11711 (February 13, 1953) (1953 SEC LEXIS 875) (applying proportional consolidation approach to re-state and allocate income and balance sheet amounts to reflect ownership percentages) and Sioux City Gas and Electric Company, Rel. No. 9303 (September 8, 1949) (1949 SEC LEXIS 613) (applying proportional consolidation approach to evaluation of dividend coverage ratios). See also Consolidated Cities Light, Power & Traction Company, et al., Rel. No. 4130 (February 23, 1943) (1943 SEC LEXIS 556) (consideration of company's "indirect" sources of income, such as payments by another company of its interest and sinking fund requirements on outstanding debt). Moreover, it generally is recognized that proportional accounting is an acceptable approach for accounting for joint ventures in the utility industry. See CCH Accountants SEC Practice Manual P. 4330 "[w]here pro-rata consolidation is a widespread industry practice, as in the case of utilities, it - --------------- 14 AES holds majority equity interests in a number of projects/companies. Under GAAP, revenues and income from such projects are included in AES's consolidated financial statements in the same manner as wholly-owned projects. However, the revenue impact of these holdings is far outweighed by the exclusion of minority-owned projects from the calculation of AES's GAAP-based gross revenues. 11 will continue to be permitted"). Proportional consolidation also has been used historically by the oil and gas industry, where multinational oil companies commonly own fractional interests in oil field production rights and facilities. Proportional consolidation also has been adopted recently by other industries, including some joint ventures in the telecommunication and satellite industries. The AES businesses which, for financial reporting purposes, are accounted for using the equity method, are similar to joint venture utility projects that use the proportional consolidation method. Each project is governed by a joint venture agreement, and these joint venture agreements provide for the management of the company, setting of budgets, appointment of directors and transfer of shares. Moreover, AES always is an active partner with significant management responsibility and representation on the board, and usually is responsible for directly staffing specific needs of the business. The pro-rata approach used with proportional consolidation paints a more accurate picture of the size and configuration of AES and the relative contributions from each of its businesses. For this reason, in non-SEC matters, including presentations to investors and analysts, AES has used proportional consolidation to describe the minority businesses which are accounted for under the equity method in its GAAP financials. In addition, proportional consolidation is consistent with the status of the minority-interest businesses as subsidiary companies of AES. AES owns at least 10 percent of the voting securities of such companies, and as noted above, participates in their management and operation. Therefore, it is appropriate to allocate the revenues and assets of these companies to AES on a pro-rata basis. To do otherwise significantly would underestimate the extent of AES's foreign operations.15 Although Table 1 includes data for 1996, 1997 and 1998, given AES's phenomenal growth, the 1998 data is by far the most relevant for purposes of comparing the relative size of CILCO and AES. As the description in Item 1, Section B above notes, AES's revenues increased approximately 640 percent between 1990 and 1997, and increased by 71 percent from 1997 to 1998. Unlike a traditional utility company, whose financial results are relatively static over time or who have year-to-year variations (perhaps attributable to weather conditions, or one-time extraordinary changes) that can best be viewed over a - --------------- 15 AES also has calculated the percentages set forth in Table 1 in accordance with GAAP. Such calculations are set forth in Exhibit K-5. As explained above, however, use of this GAAP-based data understates the size of AES's worldwide business relative to CILCO, whereas data compiled on a propor tional consolidation basis provides a more accurate comparison of the size of CILCO to the size of the AES/CILCORP merged company. 12 several-year period, AES has experienced and will continue to experience rapid growth through project development and acquisitions. In fact, in light of its rapid growth, AES was quite a different company at the end of 1998 than it was in 1996 or even 1997. As reflected in Table 1, between the end of 1996 and 1998, AES gross revenues grew 217 percent, from $1.15 billion to $3.64 billion; net operating revenues grew 238 percent, from $891 million to $3.01 billion; operating income grew 173 percent, from $365 million to $997 million; net income grew 149 percent, from $125 million to $311 million; and net assets grew 205 percent, from $3.88 billion to $11.85 billion.16 Therefore, in light of AES's significant growth from the years 1996 through 1998, the financial data for 1996 and 1997 do not provide an accurate picture of the relative size of AES and its current foreign operations. Thus, to avoid a misleading comparison, greatest weight should be given to AES's most recent financial results (1998) in evaluating the relative contribution of CILCO to the holding company. Table 1 demonstrates the relative size of AES and the merged AES/CILCORP holding company based on five financial yardsticks. In this instance, because of the differing nature of AES's and CILCO's operations, certain of the financial yardsticks, particularly gross revenues and net income, tend to overstate CILCO's contributions to the merged AES/CILCORP holding company. Thus, as explained below, the Table 1 data comparing net operating revenues, operating income and net assets present the most accurate representation of the relative size of CILCO to the merged AES/CILCORP holding company. There are several reasons why a comparison of gross revenues presents a misleading picture of the relative size of AES and CILCO. First, between 30 and 40 percent of CILCO's gross revenues over the past four years were earned from its natural gas business, whereas virtually all of AES's current revenues have been derived from electric generation and distribution. The Commission has recognized the difficulty of making size comparisons between an electric company and a natural gas distribution company based upon gross revenues. Houston Industries, Inc., Rel. No. 35-26744 (1997); NIPSCO, supra. In NIPSCO, the Commission observed that the "[c]omponents of gross revenues are different for electric and gas utilities" and that "pass-through costs" (e.g., purchased gas and fuel for electric generation) constitute a larger part of gross revenues for - --------------- 16 Similarly, use of an average of financial information for the years 1996 through 1998 also significantly understates the extent of AES's operations and therefore also proves inadequate. AES's 1998 gross revenues are 52 percent greater than the average of AES's gross revenues for the years 1996 through 1998. AES's 1998 net operating revenues are 54 percent greater than the average of AES's net operating revenues for the years 1996 through 1998; 1998 operating income is 46 percent greater than the three-year average; 1998 net income is 43 percent greater than the three-year average; and 1998 net assets are 51 percent greater than the three-year average. 13 a gas utility than for an electric utility. The Commission thus concluded that where a predominantly electric system (NIPSCO) acquired an exclusively gas system (Bay State), a reliance on gross revenues comparisons would distort the relative sizes of the merging companies. The same considerations apply in this instance. Here AES, almost exclusively an electric company, is acquiring CILCO, a company earning a substantial portion of its gross revenues from gas distribution. Although AES does not, for the most part, have automatic "pass-throughs" of its electric fuel costs in the manner of a domestic regulated electric utility, subtracting AES's electric fuel and purchased gas costs (as well as CILCO's electric fuel and purchased gas costs) from gross revenues reveals the impact of different operating margins of the two companies. In 1998 CILCO had operating revenues of $532.3 million and net income of $41 million -- a margin of 7.6 percent. AES reported revenues of $2.4 billion and net income of $311 million --a margin of approximately 13 percent. Part of this differential also can be explained by the fact that CILCO provides service which is subject to rate regulation (including, inter alia, tariff provisions for electric fuel cost recovery and pass-through of purchased gas costs which provide automatic recoupment from ratepayers), while AES conducts the vast bulk of its business in unregulated, competitive markets. A comparison of AES and CILCO net income also may obscure the true scope of CILCO's business vis-a-vis that of AES. Net income is sensitive to differences in capital structure, and AES and CILCO have disparate capital structures driven by differences in their respective business operations. AES uses project financing for much of its investment, and thus has proportionally larger interest expenses than does CILCO.17 Since interest is deducted before calculating net income, comparisons based on net income may result merely from differences in capital structure rather than differences in size or scope of business operations. Such is the case with AES and CILCO, because AES maintains a more highly leveraged capital structure than does CILCO. A more accurate comparison of the scope of CILCO's business vis-a-vis the merged AES holding company is achieved by comparing net operating revenues, operating income and net assets. - --------------- 17 For example, comparing the unleveraged net income of CILCO to the unleveraged net income of the AES holding company provides a better understanding of the relative size of the CILCO and AES holding company business operations. (Unleveraged net income is calculated by determining net income on a before-interest expense, after-tax basis.) For example, CILCO would represent 8.26 percent of 1998 total holding company unleveraged net income, compared to 12.54 percent of total holding company net income on a GAAP basis. 14 Table 1 shows that in 1998, CILCO's contributions to AES's total net operating revenues, operating income, and net assets were 10.35, 8.54 and 7.78 percent, respectively. In fact, as noted above, AES expects CILCO's contributions to AES's gross revenues, net operating revenues, operating income, net income and net assets to trend down to below 10 percent within five years. The results of the analysis demonstrate that CILCO will not make a contribution to AES's total operations that is sufficiently appreciable so as to be deemed "material" within the Commission's understanding of materiality under Section 3(a). In NIPSCO, for example, the Commission recently determined that a utility's contributions to net operating revenues of 10.8 percent to 11.2 percent and to operating income of 7.1 percent to 8.7 percent would not be considered material in the context of Section 3(a)(1). In making such determination, the Commission noted that Section 3(a)(1) "has no specific numerical tests to guide a finding that a public-utility subsidiary is material" and that the Commission has not "embraced any numerical bright-line test of materiality under section 3(a)(1)." See NIPSCO, slip op. at 34-35. Instead, the Commission noted that "factors other than mere percentages must be taken into consideration in determining the application of the materiality standard of section 3(a)(1)" and noted the Division of Investment Management's recommendation (set forth in its 1995 study, supra) that the Commission "adopt a more flexible standard for exemptions under section 3(a) that would consider the facts and circumstances of each situation and take into account the ability of the affected state regulators to adequately protect the interests of utility consumers." Id. See also Atlanta Gas Light Company, Rel. No. 35-26482 (1996)(granting Section 3(a)(1) exemption to holding company with an out-of-state subsidiary representing over 6 percent of the holding company's consolidated operating revenues and total net assets).18 B. SIZE OF CILCO OPERATIONS In Gaz Metropolitain, the Commission stated that the standard under which a foreign holding company system could be exempted under Section 3(a)(5) included, in addition to an inquiry into materiality, an assessment of whether U.S. utility operations were "small in size."19 This concern about size under Section 3(a)(5) was articulated in Cities Service Company, where the Commission stated, based on the legislative history of the Act, that the size standard was established in order to prevent abuse of the Section 3(a)(5) exemption by holding companies that had very large, nonutility domestic businesses. The Commission emphasized that the fact that a holding company's domestic utility - --------------- 18 Although Section 3(a)(1) sets forth a different standard for exemption than Section 3(a)(5), both Section 3(a)(5) and Section 3(a)(1) incorporate the concept of "materiality." The Act does not suggest that the term would have different meanings in the two sections. Thus, the Commission's analysis of materiality in the Section 3(a)(1) context does provide insight into the concept of materiality in the Section 3(a)(5) context. 19 58 SEC Docket 189 at 193 (1994) (quoting Electric Bond and Share). 15 income is not material to its total income is irrelevant if the holding company is so large that domestic utility activity is still large in an absolute sense. 8 SEC 318, 334-335 (1940). The merged AES/CILCORP holding company will satisfy both the "small in size" standard and the policy concern underlying the standard. CILCO's U.S. utility operations clearly are "small in size," both in terms of prior Commission precedent and as compared to other state regional and U.S. utilities today. Moreover, AES has significant foreign operations, and its existing domestic activity consists of owning and operating EWG and QF facilities, and engaging in energy marketing. The context of this transaction is sharply different from that which confronted the Commission in Electric Bond and Share and Cities Service. In those cases, the applicants seeking exemption under Section 3(a)(5) were companies with little or no foreign business of any sort, and with very large domestic non-utility businesses. As the Commission pointed out, granting a Section 3(a)(5) exemption under such circumstances would necessarily mean that the exemption "[w]ould not be contingent on the existence in the system of foreign operations and an exemption would be afforded even where the holding company system has no foreign interest, a result obviously not intended by Congress." Electric Bond and Share, 1952 WL 1058 at 19. In denying exemptions to Electric Bond and Share and Cities Service, the Commission also expressed its concern that Section 3(a)(5) not be used as an exemption for large U.S. non-utility enterprises that could not qualify for exemption under Section 3(a)(3). Unlike either Electric Bond and Share or Cities Service, AES has very significant foreign electric generation and distribution operations and is without question a global provider of electric services. AES has electric generation and/or distribution operations in 16 countries. AES owns and/or operates (entirely or in part) 20,017 MW of generating capacity located outside of the United States.20 As demonstrated on Exhibit K-23, this foreign generation capacity constitutes a significant portion of AES's total generating capacity. In addition, AES owns partial interests (both majority and minority) in ten companies located outside of the United States that sell electricity directly to commercial, industrial, governmental, and residential customers; and expects to close soon on the acquisition of 50 percent of the shares of an eleventh electric distribution company. These eleven companies serve a total of approximately 13.6 million foreign customers with sales of approximately 107,000 gigawatt-hours. On a net equity basis, AES's ownership in these companies will represent approximately 3.6 million foreign customers and foreign sales exceeding 28,000 gigawatt-hours. Pending increases in AES's ownership in two Brazilian distribution companies this year will increase the company's net equity share to approximately 3.7 million foreign customers and foreign sales of approximately 29,000 gigawatt-hours by year-end 1999. As demonstrated on Exhibit K-23, in 1998, 100 percent of the distribution company customers served by AES were located outside of the United States and 100 percent of the gigawatt-hours - ---------------- 20 11,194 MW on a net equity basis. 16 provided by such companies were provided outside of the United States.21 Companies in which AES has an ownership interest supply approximately half of the electricity in Northern Ireland, 40 percent of the electricity in Panama, 30 percent of the electricity in the Dominican Republic, 19 percent of the electricity in Hungary, 18 percent of the electricity in Kazakhstan, and 10 percent of the electricity in Pakistan. Moreover, as illustrated on Exhibit K-1, 96 percent of AES employees are located outside of the United States, and only 6 percent of AES employees speak English as a first language. Furthermore, as demonstrated in Exhibits K-19 through K-22, AES's foreign operations contribute significantly to AES's gross revenues, net operating revenues, operating income, and assets. For example, in 1998, on a proportional consolidation basis, AES's foreign operations contributed 83 percent of AES's gross revenues, 84 percent of AES's net operating revenues, 70 percent of AES's operating income, and 73 percent of AES's assets. On a total project basis, those percentages increase to 93 percent of gross revenues, 94 percent of net operating revenues, 87 percent of operating income, and 91 percent of assets. As also demonstrated in Exhibits K-19 through K-22, the percentage contribution of AES's foreign operations has increased considerably since 1996. Based on conservative projections of AES growth in 1999 (see footnote 9), AES anticipates that in 1999, AES's foreign operations will contribute, on a proportional consolidation basis, 78 percent of AES's gross revenues, 82 percent of AES's net operating revenues and 64 percent of AES's operating income. On a total project basis, those percentages increase to 92 percent of AES's gross revenues, 94 percent of AES's net operating revenues and 88 percent of AES's net operating income. As AES continues its growth as a global energy company, the percentage of AES's gross revenues, net operating revenues, operating income, and assets resulting from AES's foreign operations in the year 2000 will be greater than the percentages in 1999. While AES does have operations within the United States, its domestic businesses are all either QFs or EWGs, which are deemed not to be public utility companies under the Act and which the Commission does not need to regulate to protect the interests of U.S. ratepayers and investors. The Commission Staff has recognized that ownership of QF and EWG interests by foreign utility companies ("FUCOs") should not defeat FUCO status. The Southern Company, 1996 SEC No-Act. LEXIS 496 (No-Action Letter Issued May 10, 1996). Just as QF and EWG investments do not transform a FUCO into a holding company subject to the potential full brunt of jurisdiction under the Act, AES's domestic QF and EWG investments should not prevent AES from qualifying for a Section 3(a)(5) exemption, where its only other current investments are FUCOs and foreign EWGs and its proposed single U.S. regulated utility investment is small in size from any relevant perspective. - --------------- 21 The addition of CILCO in 1999 will provide AES its first and only domestic distribution customers and sales: approximately 252,800 customers and sales of approximately 6,152 gigawatt-hours. 17 As the facts set forth in this Application demonstrate, AES is a global energy company whose present business, both domestic and foreign, is the "exempt utility" business -- i.e., the business of EWGs, QFs and power marketers in the United States and EWGs and FUCOs outside the United States. As a company engaged in the "exempt utility" business, AES is the type of company for which the 3(a)(5) exemption was designed -- a company whose business and experience is in the utility industry. See The AES Corporation, Rel. No. 35-25539 (May 21, 1992) (granting AES a Section 3(a)(5) application upon AES's acquisition of indirect ownership interests of an electric utility company in Northern Ireland, where AES's existing business was the development, ownership, operation, and maintenance of qualifying facilities in the United States). AES's acquisition of CILCORP is a natural outgrowth and consequence of AES's corporate focus, i.e., a natural outgrowth of AES's business of being a global energy provider. For example, AES has extensive business expertise in competitive domestic and foreign energy markets which will enable CILCO to compete more effectively in restructured energy markets. This benefit was recognized by the ICC when it adopted as a finding of fact CILCO's statement that AES's acquisition of CILCORP will provide CILCO with "access to the extensive experience of AES in energy markets around the world" and that "CILCO expects to draw on the experience of AES to improve CILCO's operating efficiency and customer service." See ICC March 10, 1999 order at 5, 9. As such, AES easily can be distinguished from Electric Bond and Share and Cities Service, each non-utility (and non-exempt utility) companies seeking to own large domestic utility companies even though as a non-utility each had, at best, limited experience with the utility industry, domestic or foreign. Granting a Section 3(a)(5) exemption to AES, a global energy provider engaged in the exempt utility business, helps to ensure that the Section 3(a)(5) exemption is granted to those companies for which it was intended, and not to those companies who seek exemption under Section 3(a)(5) as a means of evading the restriction on exemption under Section 3(a)(3). See Electric Bond and Share; Cities Service. CILCO's U.S. utility operations are small in size, both in terms of prior Commission precedent and when compared to other regional and U.S. utilities. In denying the Cities Service exemption application, the Commission held that Cities Service and its utility subsidiaries: (i) comprised "one of the most important public utility holding company systems in the United States," (ii) "controlled a far-flung utility empire with assets valued at more than $400,000,000," and (iii) had operations that extended to "20 states and Canada with an estimated population in the areas served of approximately 4,500,000." Id. at 336. In Electric Bond and Share, Electric Bond and Share Company ("Electric Bond") sought to be relieved of its commitment to dispose of the common stock it held in United Gas Corporation ("United"), its gas utility subsidiary, through exemptions under, inter alia, Section 3(a)(5) of PUHCA. 33 SEC 21 (1952). 18 Applying the "small in size" standard developed in Cities Service, the Commission held that the gas utility operations of United, a recently acquired subsidiary of Electric Bond, were "very substantial" in magnitude and, therefore, rejected the application. Id. at 43. The Commission focused on the fact that United operated the second largest gas distribution operations in its region, and accounted "for a large and significant part of the natural gas distribution business in the United States." Id. at 43-44. The Commission cited to the following facts in its analysis of the magnitude of United's gas utility operations: o United's non-industrial gas distribution operations were "approximately twice as large as those carried on in the entire State of Mississippi, slightly greater than those in the State of Louisiana, and about 25 percent of those in the State of Texas. With one exception, there [was] no company whose residential and commercial gas distribution operations in the three (3) state area [were] as large as those of United." o Within the three-state region in which it operated, United served "approximately 21.1 percent of all residential and commercial customers, with approximately 18.2 percent of all the residential and commercial gas consumed and accounted for approximately 19.2 percent of the total gross residential and commercial gas revenues." o United's gas distribution operations were large in relation to other gas distributors in the United States. The absolute size of CILCO's utility business clearly is smaller when compared to modern utility companies than the utility businesses of Electric Bond and Cities Service in their day. Electric Bond's gas operations were in three states - Texas, Louisiana and Mississippi - in which Electric Bond served 21.2 percent of all customers, provided 18.2 percent of all gas consumed and accounted for 19.2 percent of total gas reserves. CILCO, on the other hand, operates only in one state, in which it only serves 5.4 percent of all gas utility customers, accounts for only 5.9 percent of all gas utility assets and accounts for only 5.8 percent of total gas revenues (see Exhibit K-15). In Gaz Metropolitain, on the other hand, the Commission granted a Section 3(a)(5) exemption to Gaz Metropolitain, whose domestic utility subsidiary, Vermont Gas Systems, Inc., had a state-wide franchise to sell natural gas at retail and appeared at that time to deliver nearly all of the natural gas sold at retail in Vermont. In addition, there are four gas companies larger than CILCO in the state of Illinois (see Exhibit K-15), while only one gas company was larger than Electric Bond in its three-state service area. Cities Service, in sharp contrast to CILCO, had operations in 19 states, compared to CILCO's single-state operations. It also should be noted that an analysis of the size of CILCO's utility activities should reflect the realities of today's public utility markets. Since 19 the time of Cities Service and Electric Bond, utility operations have become larger enterprises commensurate with growth in population and number of utility customers, as well as increased electricity and gas consumption per utility customer. Recently, the size of public utility companies has grown and will continue to grow in the wake of consolidations undertaken in response to increased competition and restructuring initiatives. It is clear from the case law, in particular Electric Bond and Share, that the Commission is concerned with the size of the holding company's U.S. utility operations as compared to state, regional and national competitors. CILCO's utility operations are small in size relative to other utilities, whether on a state, regional22, or national basis. The data establishes that the activities of CILCO, in terms of electric and gas utility activities considered separately and in terms of combined utility activity, are small in scale. Exhibit K-14 compares CILCO's electric utility activities to other Illinois electric utilities in terms of assets, revenues and customers. According to all three measures, CILCO's electric utility business accounts for: o 2.8 percent of Illinois' electric utility revenues; o 2.7 percent of Illinois' electric utility assets, and o 3.4 percent of Illinois' electric utility customers. Only 2.0 percent of Illinois' electric utility revenues are earned by electric utility companies with fewer revenues than CILCO; only 0.8 percent of Illinois' electric utility assets are owned by electric utility companies with fewer assets than CILCO; and only 0.1 percent of Illinois' electric utility customers are served by electric utilities with fewer customers than CILCO. Exhibit K-15 compares CILCO's gas utility activities to other Illinois state gas utilities in terms of assets, revenues and customers. According to all three measures, CILCO's gas utility business accounts for: o 5.8 percent of Illinois' gas utility revenues; o 5.9 percent of Illinois' gas utility assets, and o 5.4 percent of Illinois' gas utility customers. Only 0.3 percent of Illinois' gas utility revenues are earned by gas utility companies with fewer revenues than CILCO; only 0.2 percent of Illinois' gas utility assets are owned by gas utility companies with fewer assets than CILCO; and only 0.4 percent of Illinois' gas utility customers are served by gas utilities with fewer customers than CILCO. - --------------- 22 The Region is defined as the State of Illinois and the five states bordering Illinois - Indiana, Kentucky, Missouri, Iowa, and Wisconsin. 20 Exhibit K-16 compares CILCO's total utility activities to all other Illinois utilities (electric, gas and combination electric and gas), again in terms of assets, revenues and customers. According to all three measures, CILCO's combined electric and gas utility business accounts for: o 3.5 percent of Illinois' utility revenues; o 3.0 percent of Illinois' utility assets, and o 4.2 percent of Illinois' utility customers. Only 2.6 percent of Illinois' total utility revenues are earned by utility companies with fewer revenues than CILCO; only 1.5 percent of Illinois' total utility assets are owned by utility companies with fewer assets than CILCO; and only 0.1 percent of Illinois' total utility customers are served by utilities with fewer customers than CILCO. Exhibit K-6 compares CILCO's electric utility activities to other regional electric utilities in terms of assets, revenues and customers. According to all three measures, CILCO's electric utility business accounts for: o 0.9 percent of the Region's electric utility revenues, o 1.0 percent of the Region's electric utility assets, and o 1.1 percent of the Regions's electric utility customers. Only 3 percent of the Region's electric utility revenues are earned by electric utility companies with fewer revenues than CILCO; only 3.5 percent of the Region's electric utility assets are owned by electric utility companies with fewer assets than CILCO; and only 3.5 percent of the Region's electric utility customers are served by electric utilities with fewer customers than CILCO. Exhibit K-7 compares CILCO's gas utility activities to other regional gas utilities, also in terms of assets, revenues and customers. According to all three measures, CILCO's gas utility business accounts for: o 1.7 percent of the Region's gas utility revenue, o 1.9 percent of the Region's gas utility assets, and o 1.5 percent of the Region's gas utility customers. Only 4.4 percent of the Region's gas utility revenues are earned by gas utility companies with fewer revenues than CILCO; only 5.7 percent of the Region's gas utility assets are owned by gas utility companies with fewer assets than CILCO; and only 2.9 percent of the Region's gas utility customers are served by gas utilities with fewer customers than CILCO. Exhibit K-8 compares CILCO's combined electric and gas utility activities to other regional combination electric and gas utilities, again in terms of revenues, assets and customers. According to all three measures, CILCO's combined electric and gas utility business accounts for: 21 o 2.5 percent of the Region's combination electric and gas utility revenue, o 2.5 percent of the Region's combination electric and gas utility assets, and o 2.9 percent of the Region's combination electric and gas utility customers. Only 5.6 percent of the Region's combination electric and gas utility revenues are earned by combination electric and gas utility companies with fewer revenues than CILCO; only 5.5 percent of the Region's combination electric and gas utility assets are owned by combination electric and gas utility companies with fewer assets than CILCO; and only 5 percent of the Region's combination electric and gas utility customers are served by combination electric and gas utilities with fewer customers than CILCO. Exhibit K-9 compares CILCO's total utility activities to all other regional utilities (electric, gas and combination electric and gas), again in terms of revenues, assets and customers. According to all three measures, CILCO's combined electric and gas utility business accounts for: o 1.1 percent of the Region's utility revenues, o 1.2 percent of the Region's utility assets, and o 1.3 percent of the Region's utility customers. Only 8.8 percent of the Region's total utility revenues are earned by utility companies with fewer revenues than CILCO; only 8.4 percent of the Region's utility assets are owned by utility companies with fewer assets than CILCO; and only 3.9 percent of the Region's utility customers are served by utilities with fewer customers than CILCO. The Exhibits described above clearly indicate that CILCO's utility operations are small in size, particularly when compared to other utilities in the state and the Region. Comparing the size of CILCO's utility operations to all United States utilities, again in terms of revenues, assets and customers, makes it even clearer that CILCO's utility operations are small in size. Exhibit K-10 compares CILCO's electric utility activities to all other United States electric utilities in terms of assets, revenues and customers. According to all three measures, CILCO's electric utility business accounts for: o 0.2 percent of U.S. electric utility revenues, o 0.2 percent of U.S. electric utility assets, and o 0.2 percent of U.S. electric utility customers. Only 1.6 percent of U.S. electric utility revenues are earned by electric utility companies with fewer revenues than CILCO; only 2.2 percent of United 22 States electric utility assets are owned by electric utility companies with fewer assets than CILCO; and only 1.9 percent of United States electric utility customers are served by electric utilities with fewer customers than CILCO. Exhibit K-11 compares CILCO's gas utility activities to all United States gas utilities, also in terms of assets, revenues and customers. According to all three measures, CILCO's gas utility business accounts for: o 0.5 percent of U.S. gas utility revenue, o 0.5 percent of U.S. gas utility assets, and o 0.4 percent of U.S. gas utility customers. Only 7.3 percent of U.S. gas utility revenues are earned by gas utility companies with fewer revenues than CILCO; only 8.5 percent of U.S. gas utility assets are owned by gas utility companies with fewer assets than CILCO; and only 6 percent of U.S. gas utility customers are served by gas utilities with fewer customers than CILCO. Exhibit K-12 compares CILCO's combined electric and gas utility activities to all U.S. combination electric and gas utilities, again in terms of revenues, assets and customers. According to all three measures, CILCO's combined electric and gas utility business accounts for: o 0.7 percent of U.S. combination electric and gas utility revenue, o 0.7 percent of U.S. combination electric and gas utility assets, and o 0.7 percent of U.S. combination electric and gas utility customers. Only 2.8 percent of U.S. combination electric and gas utility revenues are earned by combination electric and gas utility companies with fewer revenues than CILCO; only 3.2 percent of U.S. combination electric and gas utility assets are owned by combination electric and gas utility companies with fewer assets than CILCO; and only 3.9 percent of U.S. combination electric and gas utility customers are served by combination electric and gas utilities with fewer customers than CILCO. Exhibit K-13 compares CILCO's total utility activities to all other U.S. utilities (electric, gas and combination electric and gas), again in terms of revenues, assets and customers. According to all three measures, CILCO's combined electric and gas utility business accounts for: o 0.2 percent of U.S. utility revenues, o 0.2 percent of U.S. utility assets, and o 0.3 percent of U.S. utility customers. 23 Only 6.1 percent of U.S. utility revenues are earned by utility companies with fewer revenues than CILCO; only 6.3 percent of U.S. utility assets are owned by utility companies with fewer assets than CILCO; and only 7.6 percent of U.S. utility customers are served by utilities with fewer customers than CILCO. It is clear from the data described above that the utility activities of CILCO, in terms of combined utility activity and in terms of electric and gas utility activities considered separately, whether on a state, regional or national basis, are small in scale. C. PUBLIC INTEREST Under the "unless and except" clause of Section 3(a), the Commission has the authority to deny a request for exemption if it were to determine that granting the exemption would be "detrimental to the public interest or the interest of investors or consumers." No such concerns, however, are presented with respect to this Transaction and request for exemption. The Transaction will result in a holding company which will be well-equipped to respond effectively to the changing nature of the electric and gas industries, thus promoting the interests of both investors and ratepayers. The Transaction is subject to approval by the FERC and the ICC. As explained earlier, the ICC approved the Transaction with respect to CILCO's gas operations. After noting that AES "is a global energy company that operates electric generation facilities in the United States and in foreign countries ... [and] also owns foreign electric distribution businesses, mostly in South America, and a small amount of gas distribution in foreign countries ...[and] does not own or operate any regulated utilities in the United States," the ICC found that AES's acquisition of CILCORP would not adversely affect CILCO's ability to perform its duties under the Illinois Public Utilities Act with respect to its gas operations. Specifically, the ICC found that: o AES's acquisition of CILCORP will not diminish CILCO's ability to provide adequate, reliable, efficient, safe and least-cost gas public utility service; o AES's acquisition of CILCORP will not result in the unjustified subsidization of non-utility activities by CILCO or its customers with respect to CILCO's gas operations; o costs and facilities are fairly and reasonably allocated between utility and non-utility activities in such a manner that the Commission may identify those costs and facilities which are properly included by CILCO for ratemaking purposes for its gas utility operations; 24 o AES's acquisition of CILCORP will not significantly impair CILCO's ability to raise necessary capital on reasonable terms or to maintain a reasonable capital structure with respect to its gas utility operations; o CILCO will remain subject to all applicable laws, regulations, rules, decisions and policies governing the regulation of Illinois public utilities with respect to CILCO's gas utility operations: o AES's acquisition of CILCORP is not likely to have a significant adverse effect on competition in the Illinois gas utility markets over which the Commission has jurisdiction; and o AES's acquisition of CILCORP is not likely to result in any adverse rate impacts on retail gas customers of CILCO. See March 10, 1999 ICC Order at 9-10 (see Exhibit K-17). Although the ICC's jurisdictional focus was limited to the transfer of CILCO's gas operations, most of its findings (for example, the Transaction's impact on capital structure and affiliate transactions) are applicable to CILCO as a whole, including its electric operations. In addition, in a letter issued to the Commission pursuant to Section 33(a)(2), the ICC acknowledged that AES "currently holds, and intends to continue to hold and acquire, ownership interest in electric and natural gas facilities in one or more foreign countries." The ICC then certified to the Commission that it has "the authority and resources to protect Illinois consumers in accordance with the Illinois statutes ... and intends to exercise such authority." After AES's acquisition of CILCORP, CILCO's operations will continue to be subject to regulation by the FERC and the ICC, both of whom regulate utility transactions with affiliates. With respect to the ICC, the Illinois Public Utilities Act specifically grants the ICC jurisdiction over affiliate transactions with electric and gas public utilities, "to the extent of access to all accounts and records of such affiliated interest relating to such transactions, including access to accounts and records of joint and general expenses with the electric or gas public utility any portion of which is related to such transactions; and to the extent of authority to require such reports with respect to such transactions to be submitted by such affiliated interests, as the [ICC] may prescribe". Illinois Public Utilities Act, Section 7-101(2)(ii). Thus, the Commission has broad authority to access the books and records of any member of the AES corporate family, wherever located, if such AES entity engages in transactions with CILCO or if any costs associated with such entity are allocated to CILCO. In addition, the ICC recently adopted rules and regulations governing the relationship between electric utilities and their affiliates. See 83 25 Illinois Administrative Code Part 450. Pursuant to such rules, transactions between electric utilities and their affiliates are prohibited from subsidizing the affiliate. To that end, transfers of goods and services between electric utilities and their affiliates must be approved by the ICC (unless approval has been waived by statute or ICC rule). In addition, the ICC has access to the electric utility's books and records regarding affiliate transactions and electric utilities must conduct biennial internal audits regarding affiliate transactions, which provide assurance that non-utility activities are not subsidized by the electric utility or its customers. ITEM 4. REGULATORY APPROVAL The Merger Agreement is subject to the approval of CILCORP's shareholders and was approved by CILCORP's shareholders at a special meeting held May 20, 1999. The Merger also is subject to approval by the FERC. An application for such approval was filed with the FERC on February 19, 1999. See Exhibit D-2. The Merger also is subject to the notification and reporting requirements of the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the "HSR Act"). On February 22, 1999, the Federal Trade Commission granted early termination of the HSR Act waiting period. In addition, as noted above, all necessary State approvals for the transaction have been received. The ICC has approved the Transaction with respect to the transfer of CILCO's gas operations. See Exhibit K-17. The ICC also has issued a certification in accordance with the requirements of Section 33(a)(2) of the Act. See Exhibit K-18. ITEM 5. PROCEDURE AES respectfully requests that the Commission issue its order granting and permitting the requested exemption as soon as practicable, but in any event not later than July 6, 1999. It is submitted that a recommended decision by a hearing or other responsible officer of the Commission is not needed for approval of the proposed Transaction. The Division of Investment Management may assist in the preparation of the Commission's decision. There should be no waiting period between issuance of the Commission's order and the date on which it is to become effective. 26 ITEM 6. EXHIBITS AND FINANCIAL STATEMENTS A. EXHIBITS Exhibits attached to this Amendment No. 1 supplement and, where applicable, replace the exhibits previously filed in this proceeding. A-1 Articles of Incorporation of AES A-2 By-Laws of AES A-3 Articles of Incorporation of CILCORP A-4 By-Laws of CILCORP A-5 Articles of Incorporation of Midwest Energy, Inc. A-6 By-Laws of Midwest Energy, Inc. B-1 Agreement and Plan of Merger (Exhibit A to Exhibit D-2 hereto) C-1 Definitive Proxy Statement relating to the special meeting of shareholders of CILCORP, Inc. to approve the merger with Midwest Energy, Inc. (File No. 1-8946, filed on March 24, 1999, and incorporated herein by reference) D-1 Petition to the Illinois Commerce Commission, filed on December 11, 1998, together with testimony and exhibits (Exhibit F to Exhibit D-2 hereto) D-2 Application to FERC, filed on February 19, 1999, together with testimony and exhibits E-1 AES organization chart (to be filed by amendment) E-2 CILCORP organization chart (to be filed by amendment) E-3 Combined company organization chart after the Transaction (to be filed by amendment) F-1 Opinion of Counsel (to be filed by amendment) F-2 Past Tense Opinion of Counsel (to be filed by amendment with Rule 24 certificate) G-1 AES's Annual Report on Form 10-K for the fiscal year ended December 31, 1997 (File No. 1-12291, filed March 30, 1998, and incorporated herein by reference) G-2 AES' Quarterly Report on Form 10-Q for the quarters ended March 31, 1998, June 30, 1998 and September 30, 1998 (File No. 1-12291 and incorporated herein by reference) G-3 CILCORP's Annual Report on Form 10-K for the fiscal year ended December 31, 1997 (File No. 1-8946, filed March 18, 1998, and incorporated herein by reference) G-4 CILCORP's Quarterly Report on Form 10-Q for the quarters ended March 31, 1998, June 30, 1998 and September 30, 1998 (File No. 1-8946 and incorporated herein by reference) 27 G-5 AES's Annual Report on Form 10-K for the fiscal year ended December 31, 1998 (File No. 1-12291, filed March 30, 1999, and incorporated herein by reference) G-6 CILCORP's Annual Report on Form 10-K for the fiscal year ended December 31, 1998 (File No. 1-8946, filed March 26, 1999, and incorporated herein by reference) H-1 Proposed Form of Notice K-1 AES Employees K-2 AES Subsidiaries K-3 Generating Plants in Operation K-4 Global Map of Generating Plants and Distribution Companies K-5 CILCO Contributions To AES Consolidated Holding Company (GAAP Basis) K-6 Market Shares for Electric Companies in Illinois and Bordering States K-7 Market Shares for Gas Companies in Illinois and Bordering States K-8 Market Shares for Combined Gas and Electric Companies in Illinois and Bordering States K-9 Market Shares for Utilities in Illinois and Bordering States K-10 Market Shares for Electric Companies in the U.S. K-11 Market Shares for Gas Companies in the U.S. K-12 Market Shares for Combined Gas and Electric Companies in the U.S. K-13 Market Shares for Utility Companies in the U.S. K-14 Market Shares for Electric Companies in Illinois K-15 Market Shares for Gas Companies in Illinois K-16 Market Shares for Utilities in Illinois K-17 Order Issued by the Illinois Commerce Commission pursuant to petition filed by CILCO (March 10, 1999) K-18 Letter from Richard L. Mathias, Chairman of the Illinois Commerce Commission to the Securities and Exchange Commission (March 10, 1999) K-19 AES Foreign Breakout: Gross Revenues K-20 AES Foreign Breakout: Net Operating Revenues K-21 AES Foreign Breakout: Operating Income K-22 AES Foreign Breakout: Assets K-23 AES Foreign Breakout for Generation, Power Plants and Distribution B. FINANCIAL STATEMENTS FS-1 AES Consolidated Balance Sheet as of December 31, 1997 (previously filed with the Commission in AES's Annual Report on Form 10K for the year ended December 31, 1997 (Exhibit G-1 hereto), filed March 30, 1998, File No. 1- 12291, and incorporated herein by reference) FS-2 AES Consolidated Balance Sheet as of September 30, 1998 (previously filed with the Commission in AES's Quarterly Report on Form 10-Q for the quarter ended September 30, 1998 (Exhibit G-2 hereto), filed November 16, 1998, File No. 1-12291, and incorporated herein by reference) 28 FS-3 AES Consolidated Statement of Income for the 12 months ended December 31, 1997 (previously filed with the Commission in AES's Annual Report on Form 10K for the year ended December 31, 1997 (Exhibit G-1 hereto), filed March 30, 1998, File No. 1-12291, and incorporated herein by reference) FS-4 AES Consolidated Statement of Income for the 9 months ended September 30, 1998 (previously filed with the Commission in AES's Quarterly Report on Form 10-Q for the quarter ended September 30, 1998 (Exhibit G-2 hereto), filed November 16, 1998, File No. 1-12291, and incorporated herein by reference) FS-5 CILCORP Consolidated Balance Sheet as of December 31, 1997 (previously filed with the Commission in CILCORP's Annual Report on Form 10K for the year ended December 31, 1997 (Exhibit G-3 hereto), filed March 18, 1998, File No. 1-8946, and incorporated herein by reference) FS-6 CILCORP Consolidated Balance Sheet as of September 30, 1998 (previously filed with the Commission in CILCORP's Quarterly Report on Form 10-Q for the quarter ended September 30, 1998 (Exhibit G-4 hereto), filed November 10, 1998, File No. 1-8946, and incorporated herein by reference) FS-7 CILCORP Consolidated Statement of Income for the 12 months ended December 31, 1997 (previously filed with the Commission in CILCORP's Annual Report on Form 10K for the year ended December 31, 1997 (Exhibit G-3 hereto), filed March 18, 1998, File No. 1-8946, and incorporated herein by reference) FS-8 CILCORP Consolidated Statement of Income for the 9 months ended September 30, 1998 (previously filed with the Commission in CILCORP's Quarterly Report on Form 10-Q for the quarter ended September 30, 1998 (Exhibit G-4 hereto), filed November 10, 1998, File No. 1-8946, and incorporated herein by reference) FS-9 AES Consolidated Balance Sheet as of December 31, 1998 (previously filed with the Commission in AES's Annual Report on Form 10K for the year ended December 31, 1998 (Exhibit G-5 hereto), filed March 30, 1999, File No. 1- 12291, and incorporated herein by reference) FS-10 AES Consolidated Statement of Income for the 12 months ended December 31, 1998 (previously filed with the Commission in AES's Annual Report on Form 10K for the year ended December 31, 1998 (Exhibit G-5 hereto), filed March 30, 1999, File No. 1-12291, and incorporated herein by reference) FS-11 CILCORP Consolidated Balance Sheet as of December 31, 1998 (previously filed with the Commission in CILCORP's Annual Report on Form 10K for the year ended December 31, 1998 (Exhibit G-6 hereto), filed March 26, 1999, File No. 1-8946, and incorporated herein by reference) FS-12 CILCORP Consolidated Statement of Income for the 12 months ended December 31, 1998 (previously filed with the Commission in CILCORP's Annual Report on Form 10K for the year ended December 31, 1998 (Exhibit G-6 hereto), filed March 26, 1999, File No. 1-8946, and incorporated herein by reference) 29 SIGNATURE Pursuant to the requirements of the Public Utility Holding Company Act of 1935, the undersigned company has duly caused this Application to be signed on its behalf by the undersigned thereunto duly authorized. The AES Corporation By: /s/ William R. Luraschi ----------------------------------- Name: William R. Luraschi Title: General Counsel and Secretary Date: June 8, 1999 30 EX-99.1 2 EXHIBIT K-2 EXHIBIT K-2 AES SUBSIDIARIES
Subsidiary Jurisdiction ---------- ------------ AEE2, L.L.C. Delaware AES (India) Private Limited India AES - MS Pty Ltd. Australia AES Alamitos Development, Inc. Delaware AES Alamitos, L.L.C. Delaware AES Allegheny, Inc. Delaware AES Altoona, Inc. Delaware AES Americas International Holdings, Limited Bermuda AES Americas Investments, Inc. Delaware AES Americas, Inc. Delaware AES Andean Partners, L.P. Delaware AES Andes II, Inc. Delaware AES Andes III, Inc. Delaware AES Andes, Inc. Delaware AES Andino, L.L.C Delaware AES Angel Falls, L.L.C. Delaware AES Anhui Power Co. Ltd. British Virgin Islands AES Anhui Power Company (L) Ltd. Labuan AES Aramtermelo Holdings B.V. Netherlands AES Argentina Operations, Ltd. Cayman Islands AES Argentina, Inc. Delaware AES Aurora, Inc. Delaware AES Australia Holding B.V. Netherlands AES Balboa, Inc. Delaware AES Bandeirante Empreendimentos Ltda. Brazil AES Bandeirante, Ltd. Cayman Islands AES Barry Operations Ltd. United Kingdom AES Barry, Ltd. United Kingdom AES Beauvior B.V. Netherlands AES Beaver Valley, Inc. Delaware AES Big Sky, L.L.C. Delaware AES Borsodi Avamtermelo Kft Hungary AES Brasil Ltda. Brazil AES Brazil Holdings, Inc. Delaware AES Brazil International Holdings, Limited Bermuda AES Brazil, Inc. Delaware AES Bucks County, Inc. Delaware AES California Management Co., Inc. Delaware AES Canada, Inc. Delaware AES Canal Power Services, Inc. Delaware AES Canal, Ltd. Cayman Islands AES Caracoles I Cayman Islands AES Caracoles II Cayman Islands AES Caracoles III L.P. Cayman Islands AES Caracoles SRL Argentina AES Caribbean Holdings, Inc. Delaware AES Caribbean Services, Inc. Delaware AES Cayman Empreendimentos Ltda. Brazil AES Cayman Guaiba, Ltd. Cayman Islands AES Cayman I Cayman Islands AES Cayman II Cayman Islands AES Cayman Islands Holdings, Ltd. Cayman Islands AES Cayman Pampas, Ltd. Cayman Islands AES Cayuga, L.L.C. Delaware AES Cemig Empreendimentos, Inc. Cayman Islands AES Cemig Holdings, Inc. Delaware AES Central America Power Ventures, Ltd. Cayman Islands AES Central American Management Services, Inc. Delaware AES Cerros Negros Holdings, Ltd. Cayman Islands AES Chengdu Power Co. (L) Ltd. Malaysia AES Chesapeake, Inc. Delaware AES Chigen Co. Ltd. British Virgin Islands AES Chigen Company (L) Limited Malaysia AES China Company Cayman Islands AES China Generating Co. Ltd. China AES China Holding Co. (L) Ltd. Malaysia AES Cilcorp Funding, L.L.C. Delaware AES Colstrip, L.L.C. Delaware AES Connecticut Management, Inc. Delaware AES Constructors, Inc. Delaware AES Coral Reef, LLC Cayman Islands AES Costa Rica Hydroelectrica, Ltd. Cayman Islands AES Creative Resources, L.P. Delaware AES Dahe Power Co. Ltd. British Virgin Islands AES Deepwater Owner Trust Delaware AES Deepwater, Inc. Delaware AES Del Sol, Inc. Cayman Islands AES Development of Argentina S.A. Argentina AES Distribucion Dominicana, Ltd. Cayman Islands AES Distribuidores Salvadorenos Limitada San Salvador AES Distribuidores Salvadorenos Y Campania San Salvador AES Dominican Holdings, Inc. DE/USA AES Eagle, Inc. Delaware AES Eastern Energy, L.P. Delaware AES Edelap Funding Corporation, L.L.C. Delaware AES El Salvador, Ltd. El Salvador AES Electric Investments, Ltd. Bermuda AES Electric, Ltd. United Kingdom AES Elsta B.V. Netherlands AES Emerald III, Inc. Delaware AES Emerald, Ltd. Cayman Islands AES Energen, Ltd. Cayman Islands AES Energia Cartagena S.R.L. Spain AES Energia de Mexico, S.A. de C.V. Mexico AES Energia SRL Italy AES Energy (Asia) Pte Ltd. Singapore AES Energy Canada, Inc. Canada AES Energy Mexico, Inc. Delaware AES Energy, Ltd. Bermuda AES Engineering, Ltd. Cayman Islands AES Enterprise, Inc. Delaware AES Europe S.A. France AES Forca Empreendimentos Ltda. Brazil AES Forca, Ltd. Cayman Islands AES FSC Corporation Barbados AES Gas Empreendimentos Ltda. Brazil AES Gas Power, Inc. Delaware AES Generacion Dominicana, Ltd. Cayman Islands AES Gerasul Empreendimentos Ltda. Brazil AES Gerasul, Ltd. Cayman Islands AES Global Power Holdings, B.V. Netherlands AES Goldfields Power B.V. Netherlands AES GPH, L.L.C. Delaware AES Granbury, L.P. Delaware AES Great Falls, B.V. Netherlands AES Greenfield, L.L.C. Delaware AES Greenidge, L.L.C Delaware AES Guaiba Empreendimentos Ltda. Brazil AES Guaiba II Empreendimentos Ltda. Brazil AES Haripur (Pvt.) Limited Bangladesh AES Harriman Cove, Inc. Delaware AES Hawaii Management Company, Inc. Delaware AES Hawaii, Inc. Delaware AES Hazleton, Inc. Delaware AES HGP, Inc. Delaware AES Hickling, L.L.C. Delaware AES HLP, Inc. Delaware AES Holdings Limited Cayman Islands AES Hungary Investment Ltd. Hungary AES Hungary Limited United Kingdom AES Huntington Beach Development, Inc. Delaware AES Huntington Beach, L.L.C. Delaware AES IB Valley Holding Mauritius AES Inchon Generating Ltd. Korea AES India, L.L.C. Delaware AES Indian Queens Power Ltd. United Kingdom AES Intercon II, Ltd. Cayman Islands AES Intercon, Ltd. Cayman Islands AES Interenergy, Ltd. Cayman Islands AES International Holdings II, Ltd. British Virgin Islands AES International Holdings, Ltd. British Virgin Islands AES International Power Marketing, Inc. Delaware AES Investments II, Ltd. Cayman Islands AES Ironwood Funding, L.L.C. Delaware AES Ironwood, Inc. Delaware AES Ironwood, L.L.C. Delaware AES Isthmus Energy, S.A. Panama AES Jennison, L.L.C. Delaware AES Joshua Tree, Inc. Delaware AES Juniata, Inc. Delaware AES Kelanitissa (Private) Limited Sri Lanka AES King Harbor, Inc. Delaware AES Kingston, Inc. Canada AES Korea, Inc. Delaware AES Korean Investments, L.L.C. Delaware AES La Gloria II, Inc. Delaware AES la Playa Holdings, B.V. Netherlands AES Lal Pir Limited Pakistan AES Lal Pir, L.L.C. Delaware AES Las Mareas, Inc. Delaware AES las Palmas, L.L.C. Delaware AES Latrobe Valley, BV Netherlands AES Light II, Inc. Delaware AES Londonderry, L.L.C. Delaware AES Los Mina Finance Company Cayman Islands AES Los Mina Holdings, Inc. Delaware AES Madison Holdings BV Netherlands AES Mayan Holdings, S. de R.L. de C.V. Mexico AES Medway Electric Limited United Kingdom AES Medway Operations Limited United Kingdom AES Meghnaghat Limited Bangladesh AES Merida B.V. Netherlands AES Merida III, S. de R.L. de C.V. Mexico AES Merida Management Services, S. de R.L. de C.V. Mexico AES Merida Operaciones SRL de CV Mexico AES Mexico Development, S. de R.L. de C.V. Mexico AES Mexico Farms, Inc. Delaware AES Monroe Holdings B.V. Netherlands AES Monterey, Inc. Delaware AES Monticello B.V. Netherlands AES Mount Vernon B.V. Netherlands AES Mt. Stuart B.V. Netherlands AES Mt. Stuart General Partnership Australia AES New York Funding, L.L.C. Delaware AES New York Holdings, L.L.C. Delaware AES Nograd Holdings B.V. Netherlands AES NY, L.L.C. Delaware AES NY2, L.L.C. Delaware AES NY3, L.L.C. Delaware AES Oasis Private Ltd. Singapore AES Ocean Springs, Ltd. Cayman Islands AES Oklahoma Management Co., Inc. Delaware AES Operations Colombia Ltda. Colombia AES OPGC Holding Mauritius AES Orient, Inc. Delaware AES Orissa Operations Private Limited India AES Pacific, Inc. Delaware AES Pak Gen (Pvt) Company Pakistan AES Pak Gen Holdings, Inc. Pakistan AES Pakistan (Holdings) Limited United Kingdom AES Pakistan (Pvt) Ltd. Pakistan AES Pakistan Holdings Mauritius AES Pakistan Operations, Ltd. Delaware AES Panama Energy, S.A. Panama AES Panama Holding, Ltd. Cayman Islands AES Parana Gas S.A. China AES Parana Holdings, Ltd. Cayman Islands AES Parana I Limited Partnership Cayman Islands AES Parana IHC, Ltd. Cayman Islands AES Parana II Limited Partnership Cayman Islands AES Parana SCA Partnership Argentina AES Parana Sociedad Anonima Argentina AES Partington Ltd. United Kingdom AES Pasadena, Inc. Delaware AES Peru S.R.L. Peru AES Phoenix Ltd. Hungary AES PJM, Inc. Delaware AES Placerita, Incorporated Delaware AES Power North, Inc. Delaware AES Power, Inc. Delaware AES Prachinburi Holdings B.V. Netherlands AES Prescott, L.L.C. Delaware AES Puerto Rico, Inc. Delaware AES Puerto Rico, L.P. Delaware AES Pumped Storage Arkansas, L.L.C. Delaware AES Red Oak, Inc. Delaware AES Red Oak, L.L.C. Delaware AES Redondo Beach, L.L.C. Delaware AES Rio Diamante, Inc. Delaware AES Rio Ozama Holdings, Ltd. Cayman Islands AES River Bend, L.L.C. Delaware AES Riverside, Inc. Delaware AES Rock Springs, B.V. Netherlands AES San Nicolas, Inc. Delaware AES Santa Ana, Ltd. Cayman Islands AES Services, Ltd. Cayman Islands AES Shady Point, Inc. Delaware AES Silk Road Holdings B.V. Netherlands AES Silk Road Ltd. United Kingdom AES Silk Road, Inc. Delaware AES Somerset, L.L.C. Delaware AES South City, L.L.C. Delaware AES Southington Holdings, Inc. Delaware AES Southington, L.L.C. Delaware AES Southland Funding, L.L.C. Delaware AES Southland Holdings, L.L.C. Delaware AES Southland, L.L.C. Delaware AES Sul Distribuidora Gaucha de Energia S.A. Brazil AES Sul Funding, L.L.C. Delaware AES Summit Generation Ltd. United Kingdom AES Sunbelt, L.L.C. Delaware AES Suntree Power Ltd. Kazakstan AES Taiwan, Inc. Delaware AES Tau Power B.V. Netherlands AES Termosul Empreendimentos Ltda. Brazil AES Terneuzen Cogen B.V. Netherlands AES Terneuzen Engineering B.V. Netherlands AES Terneuzen Management Services B.V Netherlands AES Thames, Inc. Delaware AES Tisza Holdings B.V. Netherlands AES Trading Limited Cayman Islands AES Transgas Empreendimentos Ltda. Brazil AES Transpower - Taiwan Taiwan AES Transpower Australia Pty Ltd. Australia AES Transpower Private Ltd. Singapore AES Transpower, Inc. Mauritius AES Transpower, Inc. (DE) Delaware AES Treasure Cove, Ltd. Cayman Islands AES Trust I Delaware AES Trust II Delaware AES Trust III Delaware AES Trust IV Delaware AES Trust V Delaware AES Turbine Equipment, Inc. Delaware AES Turkish Holdings B.V. Netherlands AES Tyneside Ltd. United Kingdom AES U&K Holdings B.V. Netherlands AES UK Holdings, Ltd. United Kingdom AES Uruguaiana Empreedimentos Ltda. Brazil AES Uruguaiana, Inc. Cayman Islands AES Venezuela Holdings, B.V. Netherlands AES Venezuela, C.A. Venezuela AES Victoria Holdings B.V. Netherlands AES Victoria Partners B.V. Netherlands AES Warrior Run Funding, L.L.C. Delaware AES Warrior Run, Inc. Delaware AES Western Australia Holdings B.V. Netherlands AES Western Maryland Management Co., Inc. Delaware AES Westover, L.L.C. Delaware AES White Cliffs B.V. Netherlands AES WR Limited Partnership Delaware AES Yucatan, S. de R.L. de C.V. Mexico AES ZEG Holdings B.V. Netherlands AES Zemplen Ltd. Hungary AES-CLESA Services Limitada San Salvador AES-ST Ekibastuz, LLP Kazakstan AES-TB Power Company Limited Cayman Islands AES/Sonat Adelanto, Inc. Delaware AES/Sonat Power, L.L.C. Virginia AESE SRL Italy AESEBA S.A. Argentina Altoona Cogeneration Partners, L.P. Pennsylvania Anhui Liyuan - AES Power Co., Ltd. China Belfast West Power Limited Northern Ireland Blank Inc Venezuela Blue Mountain Power LP Pennsylvania Blue Mountain Power, Inc. Delaware Borsod Energetikia, Kft. Hungary BV Partners Delaware Camille, Ltd. Cayman Islands Cavanal Minerals, Inc. Delaware Cayman Energy Traders Cayman Islands Central Dique, S.A. Argentina Central Termica San Nicolas S.A. Argentina Chengdu AES Kaihua Gas Turbine Power Co. Ltd. China Chiahui Power Corporation Taiwan Chongqing Nanchuan Aixi Power Company Limited China Cloghan Limited Northern Ireland Cloghan Point Holdings Limited Northern Ireland CMS Generation San Nicolas Company Michigan Coal Creek Minerals, Inc. Delaware Compagnia Energetica de Minas Gerais Brazil Companhia Centro-Oeste de Distribuicao de Energia Eletrica Brazil Compania de Inversiones en Electricidad, S.A. Argentina DEMEX, Inc. Delaware DEMSA, Inc. Delaware DOC Dominicana, S.A. Dominican Republic DOC Guatemala S.A. Guatemala Dominican Power Metering, Ltd. Cayman Islands Dominican Power Partners LDC Cayman Islands Eden Village Produce Limited Northern Ireland Elsta BV Netherlands Elsta BV & Co. CV Netherlands Emerald Power Holdings C.V. Netherlands Empresa Distribuidora de Energia Norte S.A. Argentina Empresa Distribuidora de Energia Sur S.A. Argentina Empresa Distribuidora La Plata, S.A. Argentina Global Power Holdings CV Netherlands Hefei Zhongli Energy Co. Ltd. China Hidroelectrica Rio Juramento S.A. Argentina Hidrotermica San Juan S.A. Argentina Hispaniola Power Ventures, Ltd. Cayman Islands Hunan Xiangci - AES Hydro Power Company Ltd. China Inversora AES Americas S.A. Argentina Inversora de San Nicolas S.A. Argentina Ir. G. Passchier Management B.V. Netherlands Jiaozuo AES Wan Fang Power Company Limited China JSC Telasi Republic of Georgia Kilroot Electric Limited Cayman Islands Kilroot Power Limited Northern Ireland Kingston CoGen Limited Partnership Canada La Plata Holdings Delaware La Plata Holdings, Inc. Delaware La Plata I Empreendimentos Ltda. Brazil La Plata I, Inc. Delaware La Plata II Empreendimentos Ltda. Brazil La Plata II, Inc. Delaware La Plata III, Inc. Delaware La Plata IV, L.L.C. Delaware Light Servicos de Eletricidade S.A. Brazil LIGHT.COM, Inc. Delaware LIGHT.COM, L.L.C. Delaware Loy Yang Energy Pty Ltd. Australia Loy Yang Finance Corporation Pty Ltd Australia Loy Yang Management Pty Limited Australia Luz del Plata S.A. Argentina Medway Power Limited United Kingdom Merco Intercon, Ltda. Brazil Midwest Energy, Inc. Illinois Mountain Minerals, Inc. Delaware myLIGHT.COM, Inc. Delaware myLIGHT.COM, L.L.C. Delaware NIGEN Limited Northern Ireland Nogradszen Kft Hungary Northern/AES Energy, LLC Minnesota Placerita Oil Co., Inc. Delaware San Francisco Energy Company, L.P. Delaware Shazia S.R.L. Argentina Southern Electric Brazil Participacoes, Ltda. Brazil Terneuzen Cogen B.V. Netherlands The AES Corporation Delaware Tisza Eromu Rt. Hungary Twin Rivers Power, Inc. Delaware UK Asset Management Services, Ltd. United Kingdom UK Energy Holdings Limited United Kingdom Wildwood Funding, Ltd. Cayman Islands Wildwood II, Ltd. Cayman Islands Wuhu Shaoda Electric Power Development Co. Ltd. China Wuxi AES CAREC Gas Turbine Power Company Limited China Wuxi AES Zhong Hang Power Company Limited China Yangcheng International Power Generating Co. Ltd. China Yangchun Fuyang Diesel Engine Power Co. Ltd. China Zarnowicka Elektrownia Gazowa Sp.zo.o. Poland
EX-99.2 3 EXHIBIT K-3
Exhibit K-3 GENERATING PLANTS IN OPERATION AES Capacity AES Equity Regulatory Company Country (MW) Interest (%) (MW) Status - ------- ------- ---- ----------- ------ ------ AES Deepwater USA 143 100.00 143.00 QF AES Beaver Valley USA 125 80.00 100.00 QF AES Placerita USA 120 100.00 120.00 QF AES Thames USA 181 100.00 181.00 QF AES Shady Point USA 320 100.00 320.00 QF AES Hawaii USA 180 100.00 180.00 QF NGE Generation (6 plants) USA 1,424 100.00 1,424.00 EWG AES Alamitos USA 2,083 100.00 2,083.00 EWG AES Redondo Beach USA 1,310 100.00 1,310.00 EWG AES Huntington Beach USA 563 100.00 563.00 EWG AES Kingston Canada 110 50.00 55.00 EWG AES San Nicolas Argentina 650 69.00 448.50 EWG AES Cabra Corral Argentina 102 98.00 99.96 FUCO AES El Tunal Argentina 10 98.00 9.80 FUCO AES Sarmiento Argentina 33 98.00 32.34 FUCO AES Ullum Argentina 45 98.00 44.10 FUCO AES Quebrada Argentina 45 100.00 45.00 FUCO Fontes Nova - Light Brazil 144 13.75 19.80 FUCO Ilha dos Pombos - Light Brazil 164 13.75 22.55 FUCO Nilo Pecanha - Light Brazil 380 13.75 52.25 FUCO Pereira Passos - Light Brazil 100 13.75 13.75 FUCO CEMIG (37 plants) Brazil 5,668 20.96* 1,188.14 FUCO EGE Bayano Panama 192 49.00 94.08 FUCO EGE Chiriqui Panama 90 49.00 44.10 FUCO AES Los Mina Dom. Rep. 210 100.00 210.00 EWG ECOGEN (2 plants) Australia 966 100.00 966.00 FUCO AES Mt. Stuart Australia 288 100.00 288.00 FUCO AES Xiangci - Cili China 26 51.00 13.26 FUCO AES Wuxi China 63 55.00 34.65 FUCO Wuhu China 250 25.00 62.50 FUCO Yangchun China 15 25.00 3.75 FUCO Chengdu Lotus City China 48 35.00 16.80 FUCO AES Jiaozou China 250 70.00 175.00 FUCO AES Hefei China 115 70.00 80.50 FUCO AES Fuling Aixi China 50 70.00 35.00 FUCO AES Ekibastuz Kazakhstan 4,000 70.00 2,800.00 FUCO AES Ust-Kamenogorsk GES Kazakhstan 332 85.00 282.20 FUCO AES Shulbinsk GES Kazakhstan 702 85.00 596.70 FUCO AES Ust-Kamenogorsk TETS Kazakhstan 240 85.00 204.00 FUCO AES Leninogorsk TETS Kazakhstan 50 85.00 42.50 FUCO AES Sogrinsk TETS Kazakhstan 50 85.00 42.50 FUCO AES Capacity AES Equity Regulatory Company Country (MW) Interest (%) (MW) Status - ------- ------- ---- ----------- ------ ------ AES Semipalatinsk TETS Kazakhstan 10 85.00 8.50 FUCO OPGC India 420 49.00 205.80 FUCO AES Lal Pir Pakistan 351 90.00 315.90 FUCO AES Pak Gen Pakistan 344 90.00 309.60 FUCO AES Borsod Hungary 171 96.00 164.16 FUCO AES Tisza II Hungary 860 96.00 825.60 FUCO AES Tiszapalkonya Hungary 250 96.00 240.00 FUCO AES Elsta Netherlands 405 50.00 202.50 FUCO Medway U.K. 688 25.00 172.00 FUCO AES Indian Queens U.K. 140 100.00 140.00 EWG Kilroot U.K. 520 47.00 244.40 FUCO Belfast West U.K. 240 47.00 112.80 FUCO AES Barry U.K. 230 100.00 230.00 FUCO --- ------ TOTALS 26,466 17,617.99 Percentage of Foreign Generation 75.63% 63.54%
ELECTRIC DISTRIBUTION COMPANIES Company Location AES Interest Regulatory Status - ------- -------- ------------ ----------------- AES EDEN Argentina Majority FUCO AES EDES Argentina Majority FUCO AES EDELAP Argentina Majority FUCO AES Sul Brazil Majority FUCO Light Servicios de Electricidade, S.A. Brazil Minority FUCO o Electropaulo Metropolitana, S.A. Brazil Minority FUCO Cemig, S.A. Brazil Minority FUCO AES CLESA El Salvador Majority FUCO AES Telasi Georgia Majority FUCO ALTAI Kazakhstan Majority FUCO EDE Este ** Dominican 50% FUCO Republic
* CEMIG owns 21.648% of 36 plants accounting for 5,458 MW and 3.14% of 1 plant accounting for 210 MW. ** Closing expected in June of 1999. EX-99.3 4 EXHIBIT K-4 Exhibit K-4 [Map] Map of the world, including national borders. The map identifies the location of AES's generating plants (designated by purple triangles), distribution companies (designated by red squares), projects under construction or advanced development (designated by orange circles with orange borders) and pending acquisitions (designated by black squares). In cases where numerous generating plants are located in the same country or region within a country, the multiple plants may be designated by a large purple triangle and footnoted in order to identify the number of generating plants represented by such box. AES has ninety-six generating plants located in the following countries: the United States - fifteen, Canada - one, Panama - two, the Dominican Republic - one, Argentina - six, Brazil - forty-one, the United Kingdom - five, the Netherlands - one, Hungary - three, Pakistan - two, India - one, Kazakhstan - seven, China - eight, Australia - three. AES has ten distribution companies (and expects to achieve financial closing on an eleventh in the Dominican Republic this June) located in the following countries: Brazil - four, Argentina - three, El Salvador - one, Georgia - one, Kazakhstan - one, Dominican Republic - one. AES has eighteen projects under construction or advanced development located in the following countries; the United States - three, Mexico - one, Puerto Rico - one, Brazil - one, Argentina - two, the United Kingdom - two, Hungary - one, Poland - one, Egypt - one, India - one, Sri Lanka - one, Bangladesh - two, China - one. AES has one pending acquisition in the United States (CILCORP). EX-99.4 5 EXHIBIT K-5 EXHIBIT K-5 CILCO Contributions To AES/CILCORP Consolidated Holding Company (GAAP Basis) ($MM)
1996 1997 1998 GROSS REVENUES* 38.47% 28.09% 18.19% AES 835 1,411 2,398 CILCO 524 553 538 CILCORP (excluding CILCO) 3 5 21 AES/CILCORP 1,362 1,969 2,957 NET OPERATING REVENUES 34.50% 25.63% 16.06% AES 614 973 1,809 CILCO 325 337 350 CILCORP (excluding CILCO) 3 5 21 AES/CILCORP 942 1,315 2,180 OPERATING INCOME 26.02% 22.10% 11.27% AES 278 368 733 CILCO 96 103 93 CILCORP (excluding CILCO) (5) (5) (1) AES/CILCORP 369 466 825 NET INCOME 27.45% 24.88% 12.54% AES 125 185 311 CILCO 42 50 41 CILCORP (excluding CILCO) (14) (34) (25) AES/CILCORP 153 201 327 NET ASSETS 21.11% 9.99% 8.47% AES 3,622 8,909 10,781 CILCO 1,036 1,023 1,024 CILCORP (excluding CILCO) 250 312 289 AES/CILCORP 4,908 10,244 12,094
* In calculating the gross revenues percentage, the numerator is equal to the total gross business revenues of CILCO, which include revenues from minor non-utility activities (nearly all of which are from service transactions with CILCORP affiliates). The denominator is comprised of all CILCORP business revenues (including revenues from all CILCO activities and CILCORP non-utility activities) plus all of AES's business revenues. EX-99.5 6 EXHIBIT K-14 Exhibit K-14 Market Shares for Electric Companies in Illinois (Companies Listed in Order of Customers Served) - -------------------------------------------------------------------------------- [Vertical Bar Chart] X-axis (bottom of chart): Unicom Corp. Ameren Corp. Illinova Corp. Cilcorp, Inc. Everyone else Y-axis (left side of chart): Market Share Percentages (listed in increments of 10 percent between and including 0 and 70%) [Bar Chart lists market shares for electric companies in Illinois in terms of assets, revenues and number of customers. The companies are listed in the order of customers served as provided below. Assets, revenues and customers are represented by green, violet and red bars, respectively.] Electric Utility Assets Revenues Customers - ---------------- ------ -------- --------- Unicom Corp. 58.8% 59.5% 60.3% Ameren Corp. 23.3% 23.9% 26.3% Illinova Corp. 14.4% 11.8% 9.9% Cilcorp, Inc. 2.7% 2.8% 3.4% Everyone else 0.8% 2.0% 0.1% MARKET SHARE FOR ELECTRIC COMPANIES IN ILLINOIS COMPANIES SORTED BY ASSETS Assets Share of Cumulative Holding Company (millions of $) Rank Total Share - -------------------------------------------------------------------------------- Unicom Corp. 26,322 1 58.8% 58.8% Ameren Corp. 10,446 2 23.3% 82.1% Illinova Corp. 6,465 3 14.4% 96.5% CILCORP, INC. 1,187 4 2.7% 99.2% Everyone else combined 366 0.8% 100% Total 44,786 MARKET SHARE FOR ELECTRIC COMPANIES IN ILLINOIS COMPANIES SORTED BY REVENUE Revenue Share of Cumulative Holding Company (millions of $) Rank Total Share - -------------------------------------------------------------------------------- Unicom Corp. 7,176 1 59.5% 59.5% Ameren Corp. 2,889 2 23.9% 83.4% Illinova Corp. 1,420 3 11.8% 95.2% CILCORP, INC. 338 4 2.8% 98.0% Everyone else combined 241 2.0% 100% Total 12,064 MARKET SHARE FOR ELECTRIC COMPANIES IN ILLINOIS COMPANIES SORTED BY NUMBER OF CUSTOMERS Customers Share of Cumulative Holding Company (thousands) Rank Total Share - -------------------------------------------------------------------------------- Unicom Corp. 3,420 1 60.3% 60.3% Ameren Corp. 1,495 2 26.3% 86.6% Illinova Corp. 559 3 9.9% 96.5% Cilcorp, Inc. 194 4 3.4% 99.9% Mount Carmel Public Utility Co. 6 5 0.1% 100.0% Electric Energy, Inc. 0 6 0.0% 100.0% Everyone else combined 6 0.1% 100% Total 5,674 EX-99.6 7 EXHIBIT K-15 Exhibit K-15 Market Shares for Gas Companies in Illinois (Companies Listed in Order of Customers Served) - -------------------------------------------------------------------------------- [Vertical Bar Chart] X-axis (bottom of chart): Nicor, Inc. Peoples Energy Corp. Illinova Corp. Ameren Corp. Cilcorp, Inc. Everyone else Y-axis (left side of chart): Market Share Percentages (listed in increments of 10 percent between and including 0 and 60%) [Bar Chart lists market shares for gas companies in Illinois in terms of assets, revenues and number of customers. The companies are listed in the order of customers served as provided below. Assets, revenues and customers are represented by green, violet and red bars, respectively.] Electric Utility Assets Revenues Customers - ---------------- ------ -------- --------- Nicor, Inc. 45.3% 45.5% 49.8% Peoples Energy Corp. 32.0% 32.5% 25.9% Illinova Corp. 9.7% 9.3% 10.6% Ameren Corp. 6.9% 6.6% 7.9% Cilcorp, Inc. 5.9% 5.8% 5.4% Everyone else 0.2% 0.3% 0.4% MARKET SHARE FOR GAS COMPANIES IN ILLINOIS COMPANIES SORTED BY ASSETS Assets Share of Cumulative Holding Company (millions of $) Rank Total Share - -------------------------------------------------------------------------------- Nicor, Inc. 2,956 1 45.3% 45.3% Peoples Energy Corp. 2,083 2 32.0% 77.3% Illinova Corp. 634 3 9.7% 87.0% Ameren Corp. 447 4 6.9% 93.9% CILCORP, INC. 383 5 5.9% 99.8% Everyone else combined 16 0.2% 100.0% Total 6,519 MARKET SHARE FOR GAS COMPANIES IN ILLINOIS COMPANIES SORTED BY REVENUE Revenue Share of Cumulative Holding Company (millions of $) Rank Total Share - -------------------------------------------------------------------------------- Nicor, Inc. 1,731 1 45.5% 45.5% Peoples Energy Corp. 1,238 2 32.5% 78.1% Illinova Corp. 354 3 9.3% 87.4% Ameren Corp. 250 4 6.6% 93.9% CILCORP, INC. 219 5 5.8% 99.7% Everyone else combined 12 0.3% 100.0% Total 3,803 MARKET SHARE FOR GAS COMPANIES IN ILLINOIS COMPANIES SORTED BY NUMBER OF CUSTOMERS Customers Share of Cumulative Holding Company (thousands) Rank Total Share - -------------------------------------------------------------------------------- Nicor, Inc. 1,848 1 49.8% 49.8% Peoples Energy Corp. 963 2 25.9% 75.7% Illinova Corp. 394 3 10.6% 86.3% Ameren Corp. 294 4 7.9% 94.2% CILCORP, INC. 200 5 5.4% 99.6% Everyone else combined 14 0.4% 100.0% Total 3,714 EX-99.7 8 EXHIBIT K-16 Exhibit K-16 Market Shares for Utilities in Illinois (Companies Listed in Order of Customers Served) - -------------------------------------------------------------------------------- [Vertical Bar Chart] X-axis (bottom of chart): Unicom Corp. Nicor, Inc. Ameren Corp. Peoples Energy Corp. Illinova Corp. Cilcorp, Inc. Everyone else Y-axis (left side of chart): Market Share Percentages (listed in increments of 10 percent between and including 0 and 60%) [Bar Chart lists market shares for utilities in Illinois in terms of assets, revenues and number of customers. The companies are listed in the order of customers served as provided below. Assets, revenues and customers are represented by green, violet and red bars, respectively.] Electric Utility Assets Revenues Customers - ---------------- ------ -------- --------- Unicom Corp. 50.9% 44.8% 36.5% Nicor, Inc. 5.7% 10.8% 19.7% Ameren Corp. 21.1% 19.6% 19.1% Peoples Energy Corp. 4.0% 7.7% 10.3% Illinova Corp. 13.7% 11.1% 10.2% Cilcorp, Inc. 3.0% 3.5% 4.2% Everyone else 1.5% 2.6% 0.1% MARKET SHARE FOR UTILITIES IN ILLINOIS COMPANIES SORTED BY ASSETS Assets Share of Cumulative Holding Company (millions of $) Rank Total Share - -------------------------------------------------------------------------------- Unicom Corp. 26,322 1 50.9% 50.9% Ameren Corp. 10,893 2 21.1% 72.0% Illinova Corp. 7,099 3 13.7% 85.7% Nicor, Inc. 2,956 4 5.7% 91.5% Peoples Energy Corp. 2,083 5 4.0% 95.5% CILCORP, INC. 1,570 6 3.0% 98.5% Everyone else combined 763 1.5% 100% Total 51,686 MARKET SHARE FOR UTILITIES IN ILLINOIS COMPANIES SORTED BY REVENUE Revenue Share of Cumulative Holding Company (millions of $) Rank Total Share - -------------------------------------------------------------------------------- Unicom Corp. 7,176 1 44.8% 44.8% Ameren Corp. 3,139 2 19.6% 64.3% Illinova Corp. 1,774 3 11.1% 75.4% Nicor, Inc. 1,731 4 10.8% 86.2% Peoples Energy Corp. 1,238 5 7.7% 93.9% CILCORP, INC. 557 6 3.5% 97.4% Everyone else combined 417 2.6% 100% Total 16,031 MARKET SHARE FOR UTILITIES IN ILLINOIS COMPANIES SORTED BY NUMBER OF CUSTOMERS Customers Share of Cumulative Holding Company (thousands) Rank Total Share - -------------------------------------------------------------------------------- Unicom Corp. 3,420 1 36.5% 36.5% Nicor, Inc. 1,848 2 19.7% 56.2% Ameren Corp. 1,789 3 19.1% 75.3% Peoples Energy Corp. 963 4 10.3% 85.5% Illinova Corp. 953 5 10.2% 95.7% CILCORP, INC. 395 6 4.2% 99.9% Everyone else combined 9 0.1% 100% Total 9,378 EX-99.8 9 EXHIBIT K-17 Exhibit K-17 STATE OF ILLINOIS ILLINOIS COMMERCE COMMISSION CENTRAL ILLINOIS LIGHT COMPANY : : PETITION PURSUANT TO SECTION : 16-111(G) OF THE PUBLIC UTILITIES ACT : 98-0882 REQUESTING THE ILLINOIS COMMERCE : COMMISSION TO ENTER AN ORDER : FINDING IT HAS NO PRE-APPROVAL : JURISDICTION OVER CERTAIN : REORGANIZATIONS, OR, IN THE : ALTERNATIVE, APPROVING THE : REORGANIZATIONS WITH RESPECT TO THE : GAS OPERATIONS OF CENTRAL ILLINOIS : LIGHT COMPANY PURSUANT TO THE : PROVISIONS OF SECTION 7-204 OF THE : PUBLIC UTILITIES ACT. : ORDER By the Commission: I. PROCEDURAL HISTORY On December 14, 1998, Central Illinois Light Company ("CILCO") filed a petition with the Illinois Commerce Commission ("Commission") pursuant to Section 16-111(g) of the Public Utilities Act ("Act") (220 ILCS 5/16-111(g)), seeking a determination that the Commission does not have pre-approval jurisdiction of two proposed reorganizations involving CILCO's parent corporation, CILCORP Inc. ("CILCORP"). In the alternative, CILCO requested entry of an order pursuant to Section 7-204 of the Act (220 ILCS 5/7-204) seeking an expedited order of the Commission approving the two reorganizations with respect to CILCO's gas operations. The first reorganization involves a transaction by which The AES Corporation ("AES") will acquire ownership and control of CILCORP, which owns all of the common stock of CILCO. As a result of the second reorganization, which will occur only at the discretion of AES, AES will acquire direct ownership of all of CILCO's common stock. Local Union No. 51, International Brotherhood of Electrical Workers, AFL-CIO ("Local No. 51, IBEW") filed a petition to intervene. That petition was allowed by the Hearing Examiner. Pursuant to proper legal notice, a prehearing conference was held in this matter on January 13,1999, and an evidentiary hearing was held on February 5,1999, at the Commission's offices in Springfield, Illinois. Appearances were entered by counsel on behalf of CILCO, the Commission Staff, and Local No. 51, IBEW. At the hearing on February 5,1999, CILCO submitted the testimony of William M. Shay, a Senior Vice President of CILCO, Nicholas T. Shay, CILCO's Director of Rates and Regulatory Affairs, and Robert J. Sprowls, Vice President and Chief Financial Officer of CILCO. Mr. Robert Plaza, Case Manager for Staff, testified that Staff had no objection to the proposed reorganizations and did not oppose the granting of the application. At the conclusion of the hearing on February 5, 1999, the record was marked "Heard and Taken." CILCO, Staff and Local No. 51, IBEW, waived the filing of initial and reply briefs and the service of the Hearing Examiner's proposed order. II. DESCRIPTION OF THE PROPOSED REORGANIZATIONS CILCORP is an Illinois corporation and the owner of a majority of the voting capital stock of CILCO. Under date of November 22, 1998, CILCORP entered into an Agreement and Plan of Merger ("Agreement") with AES, a Delaware corporation, and Midwest Energy, Inc. ("Midwest"), an Illinois corporation and a wholly-owned subsidiary of AES. Pursuant to the Agreement, Midwest will be merged into CILCORP, and CILCORP will be the surviving corporation. The capital stock of CILCORP issued and outstanding immediately prior to the merger will be canceled and extinguished and converted into the right to receive $65 per share, and AES, as the owner of all the capital stock of Midwest, will become the owner of all the capital stock of CILCORP. Under the Agreement, a second proposed merger may occur. In the second merger, CILCORP will be merged into AES, CILCORP will cease to exist, and AES will become the owner of a majority of the voting capital stock of CILCO. 2 CILCO is a combination gas and electric utility providing retail gas and electric service to customers in Illinois. Midwest was created by AES solely for the purpose of effecting the first merger. AES is a global energy company that operates electric generation facilities in the United States and in foreign countries. AES also owns foreign electric distribution businesses, mostly in South America, and a small amount of natural gas distribution in foreign countries. AES does not own or operate any regulated utilities in the United States. III. APPLICABLE LAW The action of the Commission in this proceeding is governed by Section 7-204 of the Act relating to the approval of reorganizations. Under Section 7-204, the term "reorganization" is defined as "any transaction which, regardless of the means by which it is accomplished, results in a change of a majority of the voting capital stock of an Illinois public utility; or the ownership or control of any entity which owns or controls a majority of the voting capital stock of a public utility . . . ." This section further provides that the "Commission shall not approve any proposed reorganization if the Commission finds, after notice and hearing, that the reorganization will adversely affect the utility's ability to perform its duties under this Act." In reviewing the proposed reorganization, the Commission is required by Section 7-204 to find that: (1) the proposed reorganization will not diminish the utility's ability to provide adequate, reliable, efficient, safe and least-cost public utility service; (2) the proposed reorganization will not result in the unjustified subsidization of non-utility activities by the utility or its customers; (3) costs and facilities are fairly and reasonably allocated between utility and non-utility activities in such a manner that the Commission may identify those costs and facilities which are properly included by the utility for ratemaking purposes; 3 (4) the proposed reorganization will not significantly impair the utility's ability to raise necessary capital on reasonable terms or to maintain a reasonable capital structure; (5) the utility will remain subject to all applicable laws, regulations, rules, decisions and policies governing the regulation of Illinois public utilities; (6) the proposed reorganization is not likely to have a significant adverse effect on competition in those markets over which the Commission has jurisdiction; and (7) the proposed reorganization is not likely to result in any adverse rate impacts on retail customers. Section 7-204(c) provides that the Commission shall not approve a reorganization without ruling on: (i) the allocation of any savings resulting from the proposed reorganization; and (ii) whether the companies should be allowed to recover any costs incurred in accomplishing the proposed reorganization and, if so, the amount of costs eligible for recovery and how the costs will be allocated. Section 7-204(f) provides that "in approving any proposed reorganization pursuant to this Section the Commission may impose such terms, conditions or requirements as, in its judgment, are necessary to protect the interests of the public utility and its customers." After CILCO filed its petition in this proceeding, the Commission entered an order in MidAmerican Energy Company, Docket No. 98-0853. In that docket, which involved a merger of the parent of a combination gas and electric utility, the Commission exercised pre-approval jurisdiction under Section 7-204 of the Act with regard to the gas operations of the utility. In view of the decision in that case, CILCO acknowledges that the Commission has effectively determined that with respect to CILCO's gas operations, the Commission has jurisdiction over the reorganization proposed in this proceeding. Accordingly, without waiving its jurisdictional argument, CILCO has withdrawn its request 4 that the Commission make a specific ruling on the jurisdictional issue in this proceeding, and CILCO requests the Commission to approve the proposed reorganization, based upon the evidence submitted in this proceeding. IV. REQUEST FOR EXPEDITED TREATMENT CILCO requests that the Commission expedite its consideration of the reorganizations proposed in this proceeding and issue an order in this docket by the end of March. In support of its request, CILCO pointed out that CILCORP and AES had not expected that a separate approval proceeding would be required in Illinois, and had planned to have all other regulatory approvals secured so that the mergers could be finalized prior to the middle of 1999. CILCO explained that a closing before the end of June is essential, among other reasons, for CILCO's participation in the initial opening of the Illinois electricity markets on October 1, 1999. CILCO stated that the expectation that no regulatory approval would be required in Illinois was part of the attraction of the merger transactions for AES and CILCORP. The requirement for an additional, unanticipated regulatory approval with respect to CILCO's gas operations adds uncertainty to the proposed mergers. CILCO expressed further concern that federal regulators may wait until state regulators have completed their review before acting on the merger proposals, and that state approval may become crucial in soliciting stockholder approval. For all these reasons, CILCO requested that this proceeding be considered on an expedited basis to assure that it does not interfere with the merger timetable that has been established or endanger the closing of the merger transactions. V. SECTION 7-204 CRITERIA A. CILCO'S ABILITY TO PROVIDE ADEQUATE, RELIABLE, EFFICIENT, SAFE AND LEAST-COST PUBLIC UTILITY SERVICE. With regard to the quality of ClLCO's future customer service, Mr. Shay testified that the proposed reorganizations will involve only CILCORP, Midwest, and AES. The mergers will have no direct effect upon ClLCO other than a change in the ownership of the capital stock of CILCO's parent, and, thereafter, a possible change in the direct ownership of CILCO's common stock. CILCO's gas utility operations and assets and the capital structure of CILCO's gas utility operations will not change as a result of the reorganizations. CILCO's gas operations are not involved in the proposed mergers, and CILCO does not expect 5 any changes in the provision of gas service or its gas budgets because of the proposed mergers. CILCO's ability to perform its duties under the Act will not be impaired. CILCO adds that in all likelihood, its abilities to provide adequate, reliable, efficient, safe and least-cost public utility service will be enhanced by the mergers and that there will be a positive benefit to the public. Mr. Shay testified that the reorganizations will provide an enlarged financial base and access to the extensive experience of AES in energy markets around the world. CILCO asserts that its is an efficient, low-cost provider of energy, and has demonstrated its commitment to the deregulation of retail energy markets through its leadership in offering choice to all customers, including residential customers, through pilot open access programs for both natural gas and electricity. CILCO believes that if it is unable to enlarge its financial and skill base, there is less assurance that CILCO can remain a viable, separate competitor in Illinois, offering an additional option to customers seeking competitive energy services. In addition to the enlarged financial base that will result from the proposed reorganizations, CILCO expects to draw on the experience of AES to improve CILCO's operating efficiency and customer service. B. UNJUSTIFIED SUBSIDIZATION OF NON-UTILITY ACTIVITIES BY CILCO OR ITS CUSTOMERS. CILCO witness Shay testified that because the proposed reorganizations do not directly involve CILCO, CILCO will continue to operate in the same way as before the reorganizations. All the guidelines and procedures currently applicable to CILCO's non-utility transactions will remain applicable after the reorganizations and assure that there is no subsidization of non-utility activities by CILCO's gas operations or CILCO's gas customers. Mr. Shay stated that CILCO has on file with the Commission guidelines and procedures covering transactions between CILCO and its affiliates. These guidelines were adopted and filed pursuant to the Commission's Order in Docket No. 84-0413. In addition, CILCO has filed guidelines and procedures with the Commission applicable to non-utility activities of CILCO. These guidelines and procedures were adopted pursuant to the rule recently approved by the Commission at 83 Ill. Adm. Code, Part 506, Accounting for Non-Public Utility Business of Gas Utilities. Mr. Shay testified that these two sets of procedures assure that there will be no subsidization of affiliate or other non-utility transactions by CILCO's gas utility operations or CILCO's gas customers. 6 CILCO is required by the Commission's rules to make biennial audits of its compliance with the guidelines and procedures described by Mr. Shay. CILCO recently completed those audits and filed them with the Commission on December 1, 1998. The audits found that CILCO was in compliance with the guidelines covering affiliate and other non-utility transactions. Audits of affiliate and non-utility transactions will be performed at two-year intervals in the future, and Mr. Shay testified that the audits and the reports filed with the Commission provide continuing assurance that there will be no subsidy of non-utility activities by CILCO or its customers. C. FAIR AND REASONABLE ALLOCATION OF COSTS AND FACILITIES BETWEEN CILCO'S ILLINOIS GAS UTILITY OPERATIONS AND NON-UTILITY ACTIVITIES. Mr. Shay testified that the guidelines and procedures applicable to non-utility activities assure that costs and facilities are fairly and reasonably allocated between utility and non-utility activities. The procedures applicable under 83 Ill. Adm. Code, Part 506, require that all non-utility transactions be recorded in sub-accounts. The sub-accounts facilitate review of non-utility transactions and cost allocations by the Commission as well as by CILCO's own auditors, and assist in assuring proper allocation of costs and facilities for ratemaking purposes. D. IMPAIRMENT OF THE ABILITY OF CILCO'S GAS UTILITY OPERATIONS TO RAISE NECESSARY CAPITAL ON REASONABLE TERMS OR TO MAINTAIN A REASONABLE CAPITAL STRUCTURE. CILCO witness Sprowls testified that the proposed reorganizations will not impair CILCO's ability to raise capital on reasonable terms, and will not impair CILCO's ability to maintain a reasonable capital structure. Mr. Sprowls stated that the balance sheet and capitalization of CILCO will not be changed by the proposed mergers, and CILCO's financial ratios will not be changed as a result of the proposed mergers. After the mergers, CILCO will continue to have the ability to raise capital through the issuance of short-term debt, and, with Commission approval, the issuance of long-term debt and preferred stock. Mr. Sprowls testified that CILCO's debt and preferred stock ratings were placed on credit watch with negative implications following the announcement of the proposed merger transactions, but Mr. Sprowls stated that 7 this is a normal practice. CILCO's ratings will be more carefully analyzed by the rating agencies after the mergers are completed, and Mr. Sprowls testified that the ratings should remain at investment grade. Mr. Sprowls further testified that common equity capital is provided to CILCO through retained earnings. If common equity is required in greater amounts than normal, CILCO can reduce the amount of dividends payable to its parent corporation. If common equity capital is required in excess of earnings, the parent corporation would have to invest additional capital, out of cash flow, retained earnings, borrowings, or the issuance of common equity or preferred stock by the parent. CILCO has not required an infusion of common equity capital in excess of its own earnings since it became a subsidiary of CILCORP in 1985, and CILCO does not anticipate the need for the investment of common equity capital for its gas operations within the foreseeable future. However, if investments of common equity capital were required after the mergers, the larger financial base of AES would likely make it easier to obtain such capital. In supplemental testimony, Company witness Shay confirmed that in the absence of advance approval of the Commission, no debt incurred by AES will have any recourse against the funds or other assets of CILCO's gas utility. E. CONTINUED APPLICATION OF ALL APPLICABLE LAWS, REGULATIONS, RULES, DECISIONS AND POLICIES GOVERNING THE REGULATION OF ILLINOIS PUBLIC UTILITIES TO CILCO'S GAS UTILITY OPERATIONS. Mr. Shay testified that CILCO will continue to operate as a regulated public utility after the proposed reorganizations, and will remain subject to all requirements applicable to public utilities. The reorganizations will cause no change affecting the regulation of CILCO as a public utility. F. IMPACT OF PROPOSED REORGANIZATION ON COMPETITION IN THE NATURAL GAS UTILITY MARKET OVER WHICH THE COMMISSION HAS JURISDICTION. Mr. Shay testified that the proposed reorganization will have no adverse effects in the retail gas sales markets in Illinois. AES is not engaged in the sale or delivery of gas at wholesale or retail to any customers in Illinois or adjoining states. On the basis of these facts, Mr. Shay concluded that the level of competition in Illinois gas markets will not be diminished in 8 any manner as a result of the proposed reorganizations. Mr. Shay added that the proposed reorganizations are more likely to have a positive effect on competition in Illinois, because CILCO will be part of a larger and economically stronger corporate system, which should enhance CILCO's ability to remain a separate utility and compete with other gas utilities and marketers in Illinois. G. RATE IMPACT OF PROPOSED REORGANIZATIONS ON RETAIL CUSTOMERS. Mr. Shay testified that the proposed reorganizations will not directly affect CILCO's gas operations, and will not result in any increase in the costs incurred by CILCO in providing gas service. Therefore, the proposed mergers will have no rate impact on CILCO's retail gas customers. CILCO indicated in response to Staff data request ML-3 that AES will take a role in the management of CILCO's gas operations in the same manner as CILCORP does at the present time, by electing the Board of Directors, assuring that capable management of CILCO gas operations is being provided, and reviewing the results of operations. To the extent AES personnel take a direct role in the management of gas operations, there would be corresponding reduction in the need for management personnel employed directly by CILCO. Accordingly, CILCO does not expect an increase in the overall costs of gas operations as the result of AES participation in the management of CILCO gas operations. In supplemental testimony, CILCO witness Shay stated that CILCO has no current plans to file a gas rate case. H. ALLOCATION OF SAVINGS AND COSTS ASSOCIATED WITH THE PROPOSED REORGANIZATIONS. Section 7-204(c) of the Act requires the Commission to rule on the allocation of any savings resulting from the proposed reorganizations. This Section also requires the Commission to rule whether the reorganizing companies should be allowed to recovery any costs incurred in accomplishing the proposed reorganizations, and if so, the amount of costs eligible for recovery and how the costs will be allocated. Mr. Shay testified that the proposed mergers involving CILCORP and AES are different from situations in which two public utilities or their holding companies merge. In those cases, it is often possible to reduce operating costs and produce savings by combining operations and eliminating duplicative 9 resources, functions or personnel. No such operational synergies will occur as a result of the mergers proposed in this case, and none are intended. AES is not a regulated public utility and does not own or operate any regulated public utility in the United States. CILCO will remain a separate, public, SEC-reporting company, with preferred stock that is publicly traded. The proposed mergers are strategic in nature, to provide AES a mid-west presence and a base from which to grow in the Illinois energy markets, and perhaps beyond, and to provide CILCO a broader financial base and an assured future as a separate operating utility. For these reasons, CILCO does not anticipate any measurable savings in the operation of its gas utility business as a result of the proposed mergers. In his supplemental testimony, Mr. Shay stated that if savings did unexpectedly result from the mergers in the future, CILCO would not in any future gas rate case request any different treatment for those savings than for any other reduction in the cost of providing gas service. In addition, Mr. Shay stated that CILCO would not seek recovery in any future gas rate case of the costs incurred, including the premium paid by AES for CILCORP's stock, in accomplishing the mergers. These undertakings assure that if the proposed reorganizations do result in any savings in gas operating costs in the future, the Commission will be free to allocate those savings to CILCO's gas customers in any future gas rate case. VI. SECTION 7-204A Section 7-204A of the Act sets forth information to be furnished in connection with certain applications for approval of reorganizations under Section 7-204. Although Section 7-204A is not applicable to CILCO, because CILCO became a subsidiary of CILCORP prior to 1989, CILCO provided to Staff all the information required under Section 7-204A, or proxies for that information, as requested by Staff. VII. FINDINGS AND ORDERING PARAGRAPHS The Commission, having considered the entire record, is of the opinion and finds that: (1) CILCO is an Illinois corporation providing natural gas service to customers in the State of Illinois and is a public utility within the meaning of the Act; (2) the Commission has jurisdiction over CILCO and the subject matter of this proceeding; 10 (3) the recitals of fact and conclusions reached in the prefatory portion of this Order are supported by the evidence of record, and are hereby adopted as findings of fact; (4) the proposed reorganizations meet the criteria set forth in Section 7-204 of the Act with respect to CILCO gas operations, in that: a) the proposed reorganizations will not diminish CILCO's ability to provide adequate, reliable, efficient, safe and least-cost gas public utility service; b) the proposed reorganizations will not result in the unjustified subsidization of non-utility activities by CILCO or its customers with respect to CILCO's gas operations; c) costs and facilities are fairly and reasonably allocated between utility and non-utility activities in such a manner that the Commission may identify those costs and facilities which are properly included by CILCO for ratemaking purposes for its gas utility operations; d) the proposed reorganizations will not significantly impair CILCO's ability to raise necessary capital on reasonable terms or to maintain a reasonable capital structure with respect to its gas utility operations; e) CILCO will remain subject to all applicable laws, regulations, rules, decisions and policies governing the regulation of Illinois public utilities with respect to CILCO's gas utility operations; f) the proposed reorganization is not likely to have a significant adverse effect on competition in the Illinois gas utility markets over which the Commission has jurisdiction; g) the proposed reorganizations are not likely to result in any adverse rate impacts on retail gas customers of CILCO; 11 (5) CILCO has furnished information specified in Section 7-204A adequate to enable the Staff to review and analyze the proposed reorganizations; (6) the proposed reorganizations will not adversely affect the ability of CILCO to perform its duties under the Act with respect to its gas utility operations; (7) any savings resulting from the proposed reorganizations with respect to CILCO's gas utility operations shall be reflected in CILCO's cost of service for recognition in future rate proceedings; (8) transaction costs, including the premium paid for CILCORP's stock, with respect to CILCO's gas utility operations portion of the reorganizations shall be recorded below-the-line at the holding company level; (9) transition costs that result directly from the reorganizations shall not be recovered from CILCO's gas customers; (10) the application of CILCO for approval of the proposed reorganizations with respect to CILCO's gas utility operations should be approved; (11) the consent, authority and approval of the Commission should be granted to CILCO to do any and all other things not contrary to law or to the rules and regulations of the Commission that are incidental, necessary or appropriate to the performance of any and all acts specifically authorized by the Commission in this Order. IT IS THEREFORE ORDERED that approval is hereby granted to Central Illinois Light Company, with respect to its gas utility operations, for the reorganizations that are the result of the transactions in which The AES Corporation will acquire ownership and control of CILCORP Inc., and, at the discretion of The AES Corporation, The AES Corporation will acquire direct ownership of a majority of the voting capital stock of Central Illinois Light Company. 12 IT IS FURTHER ORDERED that Central Illinois Light Company shall file with the Commission written notice of completion of the reorganizations and the effective date thereof within 30 days after the effective dates of the respective reorganizations. IT IS FURTHER ORDERED that the consent, authority and approval of the Commission are granted to Central Illinois Light Company to do any and all other things not contrary to law or to the rules and regulations of the Commission that are incidental, necessary or appropriate to the performance of any and all acts specifically authorized by the Commission in this Order. IT IS FURTHER ORDERED that subject to the provisions of Section 10-113 of the Public Utilities Act and 83 Ill. Adm. Code 200.880, this Order is final; it is not subject to the Administrative Review Law. By order of the Commission this 10th day of March, 1999. (SIGNED) RICHARD L. MATHIAS Chairman (SEAL) 13 EX-99.9 10 EXHIBIT K-18 Exhibit K-18 [Letterhead] [State of Illinois] [Illinois Commerce Commission] 150 NORTH LASALLE STREET SUITE C-800 CHICAGO, ILLINOIS 60601-3104 March 10, 1999 TEL: (312) 814-2859 FAX: (312) 814-1818 [Richard L. Mathias] [Chairman] Securities and Exchange Commission 450 Fifth Street, NW Washington, DC 20549 Ladies and Gentlemen: We are writing to you with respect to Central Illinois Light Company ("CILCO") and its parent, CILCORP Inc., and the pending merger transaction involving CILCORP Inc. and The AES Corporation. We have been advised that The AES Corporation, through its subsidiaries (other than CILCORP Inc. or subsidiaries of CILCORP Inc.), affiliates, or through other entities, currently holds, and intends to continue to hold and acquire, ownership interest in electric and natural gas facilities in one or more foreign countries. We submit this letter pursuant to the requirements of Section 33(a)(2) of the Public Utility Holding Company Act of 1935, as amended (the "Act"). A 1997 Illinois law implemented changes to historical utility regulation. The law required all regulated electric utilities to reduce their rates to residential consumers in 1998 and, subject to certain specified exceptions, froze such electric rates until 2005. While neither the utilities nor the Illinois Commerce Commission ("Commission") can change bundled electric rates until 2005, the Commission retains jurisdiction to set rates for unbundled delivery service. In addition, electric utilities are subject to other statutory provisions that require a sharing of revenues with consumers if the utility earns more than certain specified thresholds. However, the restructuring legislation gave electric utilities great flexibility in writing down assets and Securities and Exchange Commission Page 2 June 2, 1999 accelerating depreciation, so utilities may be able to avoid triggering the over-earning threshold. Also, the legislation removed Commission authority over the sale, lease or other transfer of assets to affiliated or unaffiliated entities until January 1, 2005. Also, the Commission has jurisdiction over electric and gas delivery system reliability. However, the Commission cannot order a utility to construct additional generation. Finally, while the Commission's authority to approve or disapprove some merger and reorganization transactions has been suspended until 2005, regulated utilities are required to provide the Commission with a 30-day advanced notice of any proposed transaction, with supporting documentation, and to file certain reports thereafter. The Illinois Commerce Commission hereby certifies to you that we have the authority and resources to protect Illinois consumers in accordance with the Illinois statutes discussed in the previous paragraph. We intend to exercise such authority. Sincerely, Illinois Commerce Commission /s/ Richard L. Mathias ---------------------------------------- Richard L. Mathias Chairman cc: Mr. Edward J. Griffin, DeFrees & Fiske Mr. Robert W. Wason, Security and Exchange Commission EX-99.10 11 EXHIBIT K-19 Exhibit K-19 AES Foreign Breakout Gross Revenues - -------------------------------------------------------------------------------- [Vertical Bar Chart] X-axis (bottom of chart): 1996 1997 1998 1999 Y-axis (left side of chart): Percentages of AES Gross Revenues earned by AES's foreign operations, on a GAAP basis, Proportional Consolidated basis, and a Total Project basis (listed in increments of 10 percent between and including 0 and 100%) [Bar Chart provides the below-listed percentages of AES gross revenues earned by AES's foreign operations on a GAAP basis, Proportional Consolidated basis, and a Total Project basis. GAAP percentages are reflected by violet bars, Proportional Consolidated percentages are reflected by red bars, and Total Project percentages are reflected by green bars] Proportional Total Year GAAP Consolidated Project - ---- ---- ------------ ------- 1996 33% 52% 83% 1997 58% 72% 90% 1998 76% 83% 93% 1999* 70% 78% 92% * Assumes CILCORP operations for the last two months of 1999. EX-99.11 12 EXHIBIT K-20 Exhibit K-20 AES Foreign Breakout Net Operating Revenues - -------------------------------------------------------------------------------- [Vertical Bar Chart] X-axis (bottom of chart): 1996 1997 1998 1999 Y-axis (left side of chart): Percentages of AES Net Operating Revenues earned by AES's foreign operations, on a GAAP basis, Proportional Consolidated basis, and a Total Project basis (listed in increments of 10 percent between and including 0 and 100%) [Bar Chart provides the below-listed percentages of AES net operating revenues earned by AES's foreign operations on a GAAP basis, Proportional Consolidated basis, and a Total Project basis. GAAP percentages are reflected by violet bars, Proportional Consolidated percentages are reflected by red bars, and Total Project percentages are reflected by green bars] Proportional Total Year GAAP Consolidated Project - ---- ---- ------------ ------- 1996 32% 54% 86% 1997 55% 72% 92% 1998 77% 84% 94% 1999* 74% 82% 94% * Assumes CILCORP operations for the last two months of 1999. EX-99.12 13 EXHIBIT K-21 Exhibit K-21 AES Foreign Breakout Operating Income - -------------------------------------------------------------------------------- [Vertical Bar Chart] X-axis (bottom of chart): 1996 1997 1998 1999 Y-axis (left side of chart): Percentages of AES Operating Income earned by AES's foreign operations, on a GAAP basis, Proportional Consolidated basis, and a Total Project basis (listed in increments of 10 percent between and including 0 and 100%) [Bar Chart provides the below-listed percentages of AES operating income earned by AES's foreign operations on a GAAP basis, Proportional Consolidated basis, and a Total Project basis. GAAP percentages are reflected by violet bars, Proportional Consolidated percentages are reflected by red bars, and Total Project percentages are reflected by green bars] Proportional Total Year GAAP Consolidated Project - ---- ---- ------------ ------- 1996 9% 32% 67% 1997 30% 58% 83% 1998 59% 70% 87% 1999* 53% 64% 88% * Assumes CILCORP operations for the last two months of 1999. EX-99.13 14 EXHIBIT K-22 Exhibit K-22 AES Foreign Breakout Assets - -------------------------------------------------------------------------------- [Vertical Bar Chart] X-axis (bottom of chart): 1996 1997 1998 1999 Y-axis (left side of chart): Percentages of AES Assets held by AES's foreign operations, on a GAAP basis, Proportional Consolidated basis, and a Total Project basis (listed in increments of 10 percent between and including 0 and 100%) [Bar Chart provides the below-listed percentages of AES assets held by AES's foreign operations on a GAAP basis, Proportional Consolidated basis, and a Total Project basis. GAAP percentages are reflected by violet bars, Proportional Consolidated percentages are reflected by red bars, and Total Project percentages are reflected by green bars] Proportional Total Year GAAP Consolidated Project - ---- ---- ------------ ------- 1996 52% 52% 80% 1997 82% 77% 93% 1998 74% 73% 91% 1999* * Numbers not available EX-99.14 15 EXHIBIT K-23
Exhibit K-23 AES Foreign Breakout for Generation, Power Plants and Distribution - ------------------------------------------------------------------------------------------------------------------------------------ THE AES CORPORATION - ------------------------------------------------------------------------------------------------------------------------------------ AES 1991 1992 1993 1994 1995 1996 1997 1998 6/30/99 12/31/99 2000 - ------------------------------------------------------------------------------------------------------------------------------------ GENERATION - IN OPERATION Capacity (MW) 889 1,829 2,479 2,505 3,383 9,655 17,682 23,086 26,466 27,798 31,892 Foreign 0 760 1,410 1,436 2,314 8,586 16,613 18,061 20,017 20,017 24,111 Domestic 889 1,069 1,069 1,069 1,069 1,069 1,069 5,025 6,449 7,781 7,781 Percentage Foreign 0% 42% 57% 57% 68% 89% 94% 78% 76% 72% 76% - ------------------------------------------------------------------------------------------------------------------------------------ AES Equity (MW) 864 1,401 1,850 1,863 2,221 6,429 9,697 14,596 17,618 18,950 21,251 Foreign 0 357 806 819 1,177 5,385 8,653 9,596 11,194 11,194 13,495 Domestic 864 1,044 1,044 1,044 1,044 1,044 1,044 5,000 6,424 7,756 7,756 Percentage Foreign 0% 25% 44% 44% 53% 84% 89% 66% 64% 59% 64% - ------------------------------------------------------------------------------------------------------------------------------------ NUMBER OF PLANTS - IN OPERATION 5 8 9 10 15 26 75 85 96 101 107 --------------------- Foreign 0 2 3 4 9 20 69 76 81 81 87 Domestic 5 6 6 6 6 6 6 9 15 20 20 Percentage Foreign 0% 25% 33% 40% 60% 77% 92% 89% 84% 80% 81% - ------------------------------------------------------------------------------------------------------------------------------------ DISTRIBUTION COMPANIES Number of Customers 0 0 0 0 0 2,700,000 8,197,000 12,982,000 13,622,000 13,874,800 13,874,800 Foreign 0 0 0 0 0 2,700,000 8,197,000 12,982,000 13,622,000 13,622,000 13,622,000 Domestic 0 0 0 0 0 0 0 0 0 252,800 252,800 Percentage Foreign 0% 0% 0% 0% 0% 100% 100% 100% 100% 98% 98% - ------------------------------------------------------------------------------------------------------------------------------------ AES Equity 0 0 0 0 0 371,250 2,407,550 3,139,527 3,552,027 3,944,938 3,944,938 Foreign 0 0 0 0 0 371,250 2,407,550 3,139,527 3,552,027 3,692,138 3,692,138 Domestic 0 0 0 0 0 0 0 0 0 252,800 252,800 Percentage Foreign 0% 0% 0% 0% 0% 100% 100% 100% 100% 94% 94% - ------------------------------------------------------------------------------------------------------------------------------------ GWH 0 0 0 0 0 19,981 64,686 102,036 106,890 113,042 113,042 Foreign 0 0 0 0 0 19,981 64,686 102,036 106,890 106,890 106,890 Domestic 0 0 0 0 0 0 0 0 0 6,152 6,152 Percentage Foreign 0% 0% 0% 0% 0% 100% 100% 100% 100% 95% 95% - ------------------------------------------------------------------------------------------------------------------------------------ AES Equity GWH 0 0 0 0 0 2,747 19,808 24,950 27,927 35,170 35,170 Foreign 0 0 0 0 0 2,747 19,808 24,950 27,927 29,018 29,018 Domestic 0 0 0 0 0 0 0 0 0 6,152 6,152 Percentage Foreign 0% 0% 0% 0% 0% 100% 100% 100% 100% 83% 83% - ------------------------------------------------------------------------------------------------------------------------------------
Total AES MW [Vertical Bar Chart] X-axis (bottom of chart): Years 1991 through and including 2000. Y-axis (left side of chart): Megawatt capacity of AES power plants (listed in increments of 2,000 megawatts between and including 0 and 26,000 megawatts). [Bar Chart lists two sets of data (i) megawatt capacity of foreign AES power plants and (ii) megawatt capacity of domestic AES power plants. Foreign capacity is represented by blue bars and domestic capacity is represented by yellow bars.]
Foreign Domestic Year Capacity Capacity ---- -------- -------- (MW) (MW) 1991 0 889 1992 760 1,069 1993 1,410 1,069 1994 1,436 1,069 1995 2,314 1,069 1996 8,586 1,069 1997 16,613 1,069 1998 18,061 5,025 6/30/99 20,017 6,449 12/31/99 20,017 7,781 2000 24,111 7,781
AES Equity MW [Vertical Bar Chart] X-axis (bottom of chart): Years 1991 through and including 2000. Y-axis (left side of chart): Megawatt capacity of AES power plants in terms of AES equity in such plants (listed in increments of 1,000 megawatts between and including 0 and 14,000 megawatts). [Bar Chart lists two sets of data (i) megawatt capacity of foreign AES power plants in terms of AES equity in such plants and (ii) megawatt capacity of domestic AES power plants in terms of AES equity in such plants. Foreign capacity is represented by blue bars and domestic capacity is represented by yellow bars.]
Foreign Domestic Year Capacity Capacity ---- -------- -------- (MW) (MW) 1991 0 864 1992 357 1,044 1993 806 1,044 1994 819 1,044 1995 1,177 1,044 1996 5,385 1,044 1997 8,653 1,044 1998 9,596 5,000 6/30/99 11,194 6,424 12/31/99 11,194 7,756 2000 13,495 7,756
Total AES Plants [Vertical Bar Chart] X-axis (bottom of chart): Years 1991 through and including 2000. Y-axis (left side of chart): Number of AES power plants (listed in increments of 5 plants between and including 0 and 90 plants). [Bar Chart lists two sets of data (i) number of foreign AES power plants and (ii) number of domestic AES power plants. The number of foreign power plants is represented by blue bars and the number of domestic power plants is represented by yellow bars.]
Foreign Domestic Year Plants Plants ---- -------- -------- 1991 0 5 1992 2 6 1993 3 6 1994 4 6 1995 9 6 1996 20 6 1997 69 6 1998 76 9 6/30/99 81 15 12/31/99 81 20 2000 87 20
Total AES Distribution Customers [Vertical Bar Chart] X-axis (bottom of chart): Years 1996 through and including 2000. Y-axis (left side of chart): Total AES distribution customers (listed in increments of 1,000,000 customers between and including 0 and 14,000,000 customers). [Bar Chart lists two sets of data (i) total foreign AES distribution customers and (ii) total domestic AES distribution customers. The number of foreign customers is represented by blue bars and the number of domestic customers is represented by yellow bars.]
Foreign Domestic Year Customers Customers ---- --------- --------- 1996 2,700,000 0 1997 8,197,000 0 1998 12,982,000 0 6/30/99 13,622,000 0 12/31/99 13,622,000 252,800 2000 13,622,000 252,800
AES Equity Customers [Vertical Bar Chart] X-axis (bottom of chart): Years 1996 through and including 2000. Y-axis (left side of chart): Total AES distribution customers on a net equity basis (listed in increments of 200,000 customers between and including 0 and 3,800,000 customers). [Bar Chart lists two sets of data (i) total foreign AES distribution customers on a net equity basis and (ii) total domestic AES distribution customers on a net equity basis. The number of foreign customers is represented by blue bars and the number of domestic customers is represented by yellow bars.]
Foreign Domestic Year Customers Customers ---- --------- --------- 1996 371,250 0 1997 2,407,550 0 1998 3,139,527 0 6/30/99 3,552,027 0 12/31/99 3,692,138 252,800 2000 3,692,138 252,800
Total AES GWH [Vertical Bar Chart] X-axis (bottom of chart): Years 1996 through and including 2000. Y-axis (left side of chart): Total AES gigawatt-hour sales (listed in increments of 10,000 gigawatt-hours between and including 0 and 120,000 gigawatt-hours). [Bar Chart lists two sets of data (i) gigawatt-hour sales of foreign AES operations and (ii) gigawatt-hour sales of domestic AES operations. Foreign sales are represented by blue bars and domestic sales are represented by yellow bars.]
Foreign Domestic Year Sales Sales ---- ------- -------- (GWH) (GWH) 1996 19,981 0 1997 64,686 0 1998 102,036 0 6/30/99 106,890 0 12/31/99 106,890 6,152 2000 106,890 6,152
AES Equity GWH [Vertical Bar Chart] X-axis (bottom of chart): Years 1996 through and including 2000. Y-axis (left side of chart): Total AES gigawatt-hour sales on a net equity basis (listed in increments of 2,000 gigawatt-hours between and including 0 and 30,000 gigawatt-hours). [Bar Chart lists two sets of data (i) gigawatt-hour sales of foreign AES operations on a net equity basis and (ii) gigawatt-hour sales of domestic AES operations on a net equity basis. Foreign sales are represented by blue bars and domestic sales are represented by yellow bars.]
Foreign Domestic Year Sales Sales ---- ------- -------- (GWH) (GWH) 1996 2,747 0 1997 19,808 0 1998 24,950 0 6/30/99 27,927 0 12/31/99 29,018 6,152 2000 29,018 6,152
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