Indianapolis seeks FERC okay on capital infusion, equity sale

Indianapolis Power & Light filed on Dec. 23 with the Federal Energy Regulatory Commission for an approval of a recently-announced deal for a Canadian company to take a stake in IPL parent companies in order to finance various IPL projects, including new air emissions initiatives.

IPL is an indirect, wholly owned subsidiary of AES Corp. (NYSE: AES). Investor CDP Infrastructure Fund GP under this deal will purchase minority interests in the common stock of two of IPL’s intermediate parent companies. The applicants requested that the commission approve the transaction no later than Jan. 31, 2015, which will allow closing of the transaction shortly thereafter.

All of the common stock of IPL is indirectly owned by AES through a chain of intermediate holding companies. AES owns 100% of the membership interests in AES U.S.Holdings LLC, and AES Holdings in turn owns 100% of the stock of AES U.S. Investments. AES Investments owns 100% of the stock of IPALCO Enterprises, and IPALCO in turn owns 100% of the common stock of IPL. AES Holdings and AES Investments have recently been interposed in the ownership chain of IPL for purposes of this transaction. IPL is the sole material asset of AES Holdings, AES Investments and IPALCO.

CDP Fund is a New York general partnership and investment fund that holds a variety of energy investments in the U.S. CDP Fund is a wholly-owned subsidiary of Caisse de dépôt et placement du Québec (“the Caisse”).The Caisse, which manages public and private pension funds in the Province of Québec, was founded in 1965 by an act of the National Assembly of Canada and is organized under the laws of Québec. Among other things, the Caisse owns an indirect, controlling interest in Gaz Métro Limited Partnership, the principal distributor of natural gas in the Province of Québec. 

The transaction for which approval is sought will occur in two steps.

  • In the first step, CDP Fund will pay cash consideration of approximately $244m to AES Holdings for the acquisition of 15% of the common stock of AES Investments.
  • In the second step, CDP Fund will purchase a nominal amount of IPALCO stock and thereafter make capital contributions to IPALCO in an amount up to approximately $349m in response to the issuance of one or more capital calls from IPALCO. IPALCO will issue shares of its common stock to CDP Fund in return for each capital contribution in a total amount of up to 17.65% of IPALCO’s total outstanding common stock. As a result, CDP Fund will acquire an attributable, indirect ownership interest in IPL ranging from approximately 15% to 30% depending upon capital calls made by IPALCO. 

In sum, under the transaction CDP Fund will become an indirect, minority investor in IPL having certain investor protection rights, and AES will retain majority ownership and control.

This deal was first announced on Dec. 15. “We are pleased to announce this strategic partnership with CDPQ, which will support IPL’s strong investment program in gas-fired generation and environmental upgrades,” said Andrés Gluski, AES President and Chief Executive Officer, in a Dec. 15 statement. “These transactions are in line with our demonstrated ability to incorporate financial partners at the business- and project-level. We look forward to working with CDPQ on additional partnering opportunities in the United States and other select countries in the Americas.”

About Barry Cassell 20414 Articles
Barry Cassell is Chief Analyst for GenerationHub covering coal and emission controls issues, projects and policy. He has covered the coal and power generation industry for more than 24 years, beginning in November 2011 at GenerationHub and prior to that as editor of SNL Energy’s Coal Report. He was formerly with Coal Outlook for 15 years as the publication’s editor and contributing writer, and prior to that he was editor of Coal & Synfuels Technology and associate editor of The Energy Report. He has a bachelor’s degree from Central Michigan University.