FERC okays sale of stake in Indiana utility to an outside investor

The Federal Energy Regulatory Commission on Jan. 22 approved a deal where indirect interests in Indianapolis Power & Light would be sold by AES Corp. (NYSE: AES) in order to raise money for that utility, including money needed to comply with federal mandates like the Mercury and Air Toxics Standards (MATS).

On Dec. 23, 2014 Indianapolis Power & Light and CDP Infrastructure Fund GP filed an application seeking authorization for the disposition by Indianapolis Power & Light and acquisition by CDP Fund of certain securities that will result in the indirect disposition of between 15% and 32.65% of Indianapolis Power & Light’s voting securities.

Indianapolis Power & Light (IPL) operates within the geographic footprint of the Midcontinent Independent System Operator (MISO) as a traditional vertically-integrated electric utility engaged in the generation, transmission, and distribution of electric power to retail customers in metropolitan Indianapolis and surrounding Indiana communities. It owns and operates electric generating stations with an aggregate capacity of approximately 3,100 MW (summer rating).

All of the common stock of Indianapolis Power & Light is indirectly owned by AES through intermediate holding companies. CDP Fund 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 manages private and public pension funds in the Province of Québec.

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.”

IPL is completing a $1.4bn capital expenditure program to comply with environmental regulations and meet the future needs of its customers, including retrofits to some coal-fired capacity, conversion to natural gas of other coal capacity and a new gas-fired power plant. This program includes the projects previously approved by the Indiana Utility Regulatory Commission to comply with MATS, construct the 671-MW Eagle Valley combined cycle gas turbine plant, and convert 200 MW from coal to natural gas. It also includes projects to comply with wastewater treatment requirements and convert an additional 410 MW from coal to natural gas, which are pending regulatory approval at this point following an October 2014 application at the IURC. After completion of this capital expenditure program, IPL’s coal capacity will decrease to approximately 44% in 2017, from 74% today.

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.