CIC to take 15-% stake in US power producer AES

US-based global power producer and distributor AES Corporation, which supplies power to 29 countries, said that it will sell $ 1.58 bn in stock to a subsidiary of China's sovereign-wealth fund China Investment Corporation (CIC), for a 15 % stake in the company to raise funds for expansion.
Virginia-based AES signed a stock purchase agreement with a wholly owned investment subsidiary of CIC to raise $ 1.58 bn of new equity, where CIC will acquire 125.5 mm shares of AES stock for $ 12.60 per share for an approximate 15 % stake in the company.

AES, a Fortune 500 Company also announced the signing of a letter of intent with CIC to raise an additional $ 571 mm of equity for an approximate 35 % interest in its wind generation business. It will also give the $ 200 bn sovereign-wealth fund a board seat in the company, which currently has 10 members.
AES owns and operates a diverse portfolio of power generation and distribution businesses in 29 countries. More than two-thirds of AES' revenue is generated outside of the United States. AES seeks to invest in high-growth areas of the power sector, including renewable energy and emerging markets.

With 2008 revenues of $ 16 bn, AES owns and manages $ 35 bn in total assets and gets more than 80 % of its revenue from outside the US. BusinessWeek had named AES to its 2009 ''BW 50 Best Performers'' list.
AES has 1,300 MW of wind-power projects under development and has applied for stimulus money to fund a renewable-energy-storage project.

Paul Hanrahan, president and CEO of AES, stated, ''We see tremendous potential for growth in meeting demand for affordable and sustainable power throughout the world. Having CIC as a partner will enhance our financial flexibility, provide capital needed to move more quickly on our project development pipeline, and offer broader access to high quality investment opportunities.''
In a statement AES said that the stock purchase agreement is subject to completion of regulatory reviews and receipt of applicable approvals, including the Committee on Foreign Investment in the US (CFIUS) and the antitrust review under Hart-Scott-Rodino Act.

But way back in 2005, the US government had rejected China National Offshore Oil Corp's proposal to acquire Unocal Oil Company for $ 18.5 bn citing security concerns, which was finally acquired by US oil major Chevron.
The new Chinese investment by its sovereign-wealth fund will again raise hackles in Washington, which is wary of Chinese investments in its resources sector. Although this time, China is not acquiring the whole company, the US will not forget in a hurry that Beijing had rejected Coca-Cola's $ 2.4-bn acquisition bid of Beijing-based Chinese juice maker Huiyuan Juice in March.

Beijing issued rules in 2006 that bar foreign ownership of companies in power generation, weapons and other industries, but fruit juice makers were not mentioned.
China also prevented the world's second largest private equity firm, the US-based Carlyle Group from acquiring China's largest construction equipment maker, Xugong, in July. This was despite the Chinese company had sought Carlyle's backing to expand in the US market and Carlyle later twice scaled back its planned investment in an effort to secure approval by even agreeing to a minority stake of 45 %.