AES CORPORATION
U-1/A, 2001-01-04
COGENERATION SERVICES & SMALL POWER PRODUCERS
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    As filed with the Securities and Exchange Commission on January 4, 2001

                                                          File No . 70-9779

                               UNITED STATES
                     SECURITIES AND EXCHANGE COMMISSION
                           WASHINGTON, D.C. 20549
                --------------------------------------------
                              AMENDMENT NO. 3
                                     TO
                            FORM U-1 APPLICATION
                                   UNDER
               THE PUBLIC UTILITY HOLDING COMPANY ACT OF 1935
                --------------------------------------------


                            The AES Corporation
                              Dennis W. Bakke
                               Roger W. Sant
                           1001 North 19th Street
                            Arlington, VA 22209

            (Name of company or companies filing this statement
                and address of principal executive offices)
                --------------------------------------------

                            William R. Luraschi
                       General Counsel and Secretary
                            The AES Corporation
                           1001 North 19th Street
                            Arlington, VA 22209

                 (Name and addresses of agents for service)
                --------------------------------------------
              TheCommission is requested to send copies of all
           notices, orders and communications in connection with
                            this Application to:

Clifford (Mike) M. Naeve, Esq.                J. A. Bouknight, Jr., Esq.
Judith A. Center, Esq.                        Steptoe & Johnson LLP
Paul Silverman, Esq.                          1330 Connecticut Avenue, N.W.
William C. Weeden                             Washington, D.C.  20036
Skadden, Arps, Slate,
Meagher & Flom LLP
1440 New York Avenue, N.W.
Washington, D.C.  20005



AES hereby amends and restates its Application to read as follows:

            APPLICATION FOR AUTHORIZATION TO ACQUIRE SECURITIES
        UNDER SECTIONS 9(A)(2) AND 10 AND FOR AN EXEMPTION PURSUANT
          TO SECTION 3(A)(5) OF THE PUBLIC UTILITY HOLDING COMPANY
                                ACT OF 1935

               INTRODUCTION AND REQUEST FOR COMMISSION ACTION

           The AES Corporation ("AES"), Dennis W. Bakke and Roger W. Sant
request that the Securities and Exchange Commission ("SEC" or "Commission")
approve under Sections 9(a)(2) and 10 of the Public Utility Holding Company
Act of 1935, as amended ("PUHCA" or the "Act") AES's proposal to acquire
all of the equity securities of IPALCO Enterprises, Inc. ("IPALCO"), a
public utility holding company exempt from all provisions of the Act, other
than Sections 9(a)(2) and 10, pursuant to Section 3(a)(1) in accordance
with Rule 2 under the Act. AES is a public utility holding company exempt
by Commission order from all provisions of the Act other than Sections
9(a)(2) and 10 pursuant to Section 3(a)(5). AES Corp., Holding Co. Act
Release No. 27063 (Aug. 20, 1999) ("AES"). AES also requests that the
Commission issue an order determining that following the acquisition, AES
and each of its subsidiaries will continue to be exempt from the provisions
of the Act, other than Sections 9(a)(2) and 10, under Section 3(a)(5).(1) Mr.
Bakke and Mr. Sant request approval under Sections 9(a)(2) and 10 in
connection with the proposed transaction.

ITEM 1. DESCRIPTION OF THE TRANSACTION

        A. SUMMARY OF THE TRANSACTION

           Under an Agreement and Plan of Share Exchange dated as of July
15, 2000, between AES and IPALCO ("Share Exchange Agreement"), IPALCO and
AES will effect a share exchange in which IPALCO will become a wholly-owned
subsidiary of AES (the "Transaction"). Each outstanding share of IPALCO
common stock will be converted into the right to receive shares of AES
common stock with a market value of $25.00 (subject to adjustment as
described in the Share Exchange Agreement). The Share Exchange Agreement is
attached to this Application as Annex A to Exhibit C-1.

-----------

1        Some AES subsidiaries also will continue to be exempt from the Act
         as exempt wholesale generators ("EWGs"), under Section 32 of the
         Act, as foreign utility companies ("FUCOs"), under Section 33 of
         the Act, or as qualifying facilities ("QFs"), under Section 210(e)
         of the Public Utility Regulatory Policies Act of 1978, and Part
         292 of Title 18 of the Code of Federal Regulations.


           Following the Transaction, AES will hold IPALCO as a first-tier,
direct subsidiary, and IPALCO's subsidiaries will retain their current
direct or indirect relationship with IPALCO. IPALCO will continue as an
Indiana corporation with its principal executive offices in Indianapolis,
Indiana, and AES will continue to be a Delaware corporation with its
principal executive offices in Arlington, Virginia.

           The Transaction offers important benefits to IPALCO's utility
customers and shareholders. AES's international and diversified experience
in competitive power markets will supply IPALCO's public utility
subsidiary, Indianapolis Power & Light Company ("IPL") with substantial
additional resources needed to provide efficient and reliable service in
the increasingly competitive electric utility industry. The Transaction
also will provide significant benefits to AES and its current utility
subsidiary, Central Illinois Light Company ("CILCO"). These potential
benefits include strengthening AES's ability to compete in the changing
electric utility industry by expanding the scope of its operations and
customer base; adding to its operations some of the most efficient coal
fired electric generating plants in the Midwest; and gaining a highly
respected brand name. Both IPALCO and CILCORP will benefit from resulting
economies of scale in the generation and retail segments of their business.
In light of these potential benefits, the AES board of directors
unanimously determined that the Transaction is in the best interests of AES
and its stockholders and should thus proceed. The IPALCO Board of Directors
made a similar unanimous determination and resolved to recommend that the
IPALCO shareholders vote to approve the Transaction.(2)

-----------

2        The Transaction does not require AES stockholder approval because
         the number of shares to be issued in the Transaction does not
         exceed 20% of the number of AES shares outstanding immediately
         prior to the Transaction.


           The Share Exchange Agreement is subject to the approval of
IPALCO's shareholders and is expected to be approved at a special meeting
of IPALCO shareholders to be held on October 20, 2000. The Transaction also
requires the approval of the Federal Energy Regulatory Commission ("FERC").
AES and IPALCO filed an application for such approval on November 14, 2000.
The Transaction also is subject to the notification and reporting
requirements of the Hart-Scott-Rodino Antitrust Improvements Act of 1976
(the "HSR Act"). AES and IPALCO made the required HSR Act filings on
November 8, 2000.

           The Transaction is not subject to the jurisdiction of the
Indiana Utility Regulatory Commission ("IURC"). Section 8-1-2-83(a) of the
Indiana Code states that "no public utility . . . shall sell, assign,
transfer, lease or encumber its franchise, works, or system . . . without
approval of the [IURC]." The Indiana Supreme Court has held that transfers
of securities of public utility holding companies are exempt from this
approval requirement. Indiana Bell Tel. Co. v. Indiana Util. Regulatory
Comm'n, 715 N.E.2d 351 (Ind. 1999). Because the Transaction involves the
acquisition of securities of a holding company rather than a direct
acquisition of assets covered by Section 8-1-2-83(a), it is the type of
transaction that the Indiana Supreme Court has ruled does not require IURC
approval. A state commission certification in accordance with the
requirements of Section 33(a)(2) of the Act will be sought from the IURC.
Receipt of this certification is a precondition to completion of the
Transaction. The IURC issued this certification on September 28, 2000.

           Upon consummation of the Transaction, AES will own IPALCO, an
intrastate exempt holding company under Section 3(a)(1) of the Act, and its
direct and indirect subsidiaries, including IPL, a utility subsidiary
principally engaged in the generation, transmission, distribution and sale
of electric energy in central Indiana and the sale of steam in
Indianapolis, Indiana. After giving effect to the Transaction, IPALCO 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, IPALCO will continue to claim an exemption from registration
under Section 3(a)(1) and Rule 2.

           AES currently owns all of the common stock of CILCORP Inc.
("CILCORP"), an Illinois public utility holding company exempt from
regulation under the Act by reason of an exemption under Section 3(a)(1) of
the Act by Rule 2 under the Act, and the parent of CILCO, an electric and
gas utility company. As discussed more fully below, AES will commit to
enter into an agreement with an unaffiliated person within three years from
completion of the Transaction to divest its ownership of all utility assets
of CILCO subject to the jurisdiction of the Commission. AES has had
preliminary discussions with potential acquirors of CILCO's utility assets
subject to the Commission's jurisdiction. Following completion of such a
divestiture process, IPL would be the only public utility subsidiary of
AES. For the reasons set forth below, AES will qualify for an exemption
from registration under Section 3(a)(5) of the Act.

         B. DESCRIPTION OF PARTIES TO THE TRANSACTION

            1.  THE AES CORPORATION

           AES, incorporated in Delaware, is a United States-based
multinational electric power generation and energy distribution company,
with operations in 17 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, with the exception
of CILCO, either are QFs or are owned by either EWGs or FUCOs. On an actual
pro rata consolidated basis as of December 31, 1999, AES received over 97
percent of its revenues from electric generation and distribution
activities in 1999.(3) AES's remaining revenues during 1999 came from such
energy-related activities as the sale of steam and other commodities
connected with its cogeneration operations, as well as operational,
construction and project development services, and gas and power
marketing.(4) As the indirect owner of CILCO, AES is a public utility
holding company under the Act. It is exempt from all provisions of the Act
other than Section 9(a)(2) pursuant to an exemption under Section 3(a)(5)
granted by the Commission in an order dated August 20, 1999. AES, supra.
Exhibit K-2 lists all AES subsidiaries and their respective jurisdictions
of organization.

------------

3        Of this amount, on a pro forma basis and assuming ownership of
         CILCO by AES for the entire year of 1999, 89 percent of revenues
         came from operations that are exempt from Commission jurisdiction.

4        AES Power, a wholly owned subsidiary of AES active in power
         marketing, generated less than 1 percent of AES's 1999 net income.
         CEMIG, a Brazilian utility in which AES has an equity investment,
         has operated a small gas distribution company, Gasmig, since 1995.
         AES also owns NewEnergy Inc., an energy services provider, Titan
         Energy, a natural gas marketing company, one wholly-owned
         telecommunications subsidiary, AES Redibol, and a 50 percent
         interest in three other telecommunications subsidiaries, AES Vant,
         Eletronet, and Infovias. AES Altai engages in heat distribution
         operations in Kazakhstan. As discussed elsewhere in this
         Application, CILCO engages in retail gas operations. Finally, 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, which generates
         electricity in Hungary.


           AES has grown since its founding in 1981 to become one of the
largest global electricity suppliers, if not the largest. As of June 30,
2000, AES owns and/or operates (entirely or in part) a diverse
international portfolio of electric power plants with a total capacity of
40,442 megawatts ("MW"), including plants that are part of distribution
companies in which AES has an interest. Of that total, 7,786 MW (19 plants)
are located in the United States, 5,763 MW (6 plants) are in the United
Kingdom, 885 MW (6 plants) are in Argentina, 754 MW (8 plants) are in
China, 1,281 MW (3 plants) are in Hungary, 9,256 MW (52 plants) are in
Brazil,7,774 MW (7 plants) are in Kazakhstan, 210 MW (1 plant) are in the
Dominican Republic, 110 MW (1 plant) are in Canada, 695 MW (2 plants) are
in Pakistan, 1,254 MW (3 plants) are in Australia,405 MW (1 plant) are in
the Netherlands, 2,265 MW (7 plants) are in Venezuela, 420 MW (1 plant) are
in India, 823 MW (3 plants) are in the Republic of Georgia, 484 MW (1
plant) are in Mexico, and 277 MW (4 plants) are in Panama. Of the total
capacity, 32,656 MW of AES's 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. In
addition to its 100 percent interest in CILCORP, AES has majority ownership
in 3 distribution companies in Argentina, 1 in Brazil, 1 in the Republic of
Georgia, 1 in Kazakhstan, 2 in El Salvador, 1 in Venezuela, and 1 in the
Dominican Republic; a 50 percent interest in a distribution company in
India; and less than majority ownership in 3 distribution companies in
Brazil. AES's 14 foreign distribution companies serve a total of
approximately 16 million customers with sales of nearly 132,000
gigawatt-hours. On a net equity basis, AES's ownership in these companies
represents approximately 5.3 million foreign customers and approximately
39,800 gigawatt-hours.

           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 1999,
total assets grew by approximately 1,800 percent to $20.9 billion, revenues
grew by approximately 1,600 percent to $3.3 billion, and net income grew by
nearly 1,400 percent to $228 million.(7) Excluding the effects of non-cash
foreign currency losses, net income for 1999 was $378 million, which would
represent a growth from 1990 of 2,339 percent. From the end of 1999 to the
end of 2000, it is expected that AES's total assets will have expanded by
approximately 45 percent to approximately $30.3 billion, revenues will have
risen approximately 102 percent to approximately $6.6 billion, and net
income will have grown approximately 187 percent to approximately $655
million.(8) Excluding the effects of non-cash foreign currency transaction
losses in 1999, net income will have grown approximately 73 percent. In the
10 year period between year-end 1990 and 2000, AES's growth in total
assets, revenues and net income is expected to be approximately 2,655
percent, 3,353 percent and 4,124 percent, respectively.

------------

5        On a net equity basis, i.e., actual ownership interest, AES has
         30,809 MW of capacity, of which 23,023 MW is foreign-based.

6        Determined in accordance with Generally Accepted Accounting
         Principles ("GAAP").

7        See AES Annual Report on Form 10-K for the fiscal year ended
         December 31, 1999 at Exhibit G-5.

8        This application includes certain forward-looking information
         concerning AES that involves risk and uncertainty, including
         certain assumptions regarding the future performance of AES.
         Actual results and trends may differ materially depending upon a
         variety of factors applicable to AES. Specifically, statements
         regarding AES's expected assets, revenues, and income are
         forward-looking statements and subject to fluctuation, are not
         guarantees of future performance, and are subject to risks,
         uncertainties, and other important factors, including those that
         could cause actual results to differ materially from expectations.
         In any event, this particular forward-looking statement
         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.


           AES has continued its growth in 2000. Thus far in 2000, AES has
acquired or achieved commercial operations for 7 power plants totaling
2,265 MW in Venezuela, a 600 MW plant in the Republic of Georgia, a 1,000
MW plant in Argentina, a 360 MW plant in the United Kingdom, and a 360 MW
plant in Bangladesh. In 2000, AES also expects to achieve financial closing
on its acquisition of a 1,580 MW plant in the U.S., a 120 MW plant in the
Dominican Republic, a 1,200 MW plant in the U.S., a 250 MW plant in Poland,
a 670 MW plant in Bulgaria, a 160 MW electric generating plant in Sri
Lanka, a 450 MW plant in Bangladesh, and a 112 MW plant in Tanzania. Also
in 2000, AES is expected to complete construction of and/or begin
operating, a 600 MW plant in Brazil. Combining the 131 power plants
currently in operation, planned for acquisition in 2000 or projected to
begin operations in 2000, AES is expected to have a minimum of 44,342 MW of
generating capacity by the end of the current calendar year.(9) As a
result, the power generation capacity of companies in which AES has an
interest will have grown by 5,009 percent in 9 years.(10)

--------

9        Of this 44,342 MW, 34,976 MW will be foreign. On a net equity
         basis, AES is expected to have a generating capacity of 33,825 MW
         at year-end 2000; 24,459 MW of which will be foreign.

10       4,543 percent on a net equity basis.


           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 1999, companies in which AES had an interest served
approximately 15.9 million customers in the U.S. and abroad and sold over
123,000 gigawatt-hours of power.(11) Thus far in 2000, AES has acquired 87
percent of an electric distribution company serving 1.13 million customers
in Venezuela and 100 percent of three electric distribution companies in El
Salvador that together serve approximately 3.5 million customers.

           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 $28
billion, an increase of 3,600 percent in approximately 9 years.

           Exhibit K-12 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-12 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 generation and distribution businesses worldwide.

--------

11       Approximately 4.3 million customers and 31,244 gigawatt-hours on a
         net equity basis.


           2. MESSRS. BAKKE AND SANT

           While not parties to the Transaction, Messrs. Dennis W.
Bakke and Roger W. Sant seek Commission approval under Sections 9(a)(2) and
10 in connection with it. Mr. Bakke is AES's President and Chief Executive
Officer. Mr. Sant is AES's the Chairman of the Board of Directors. Each of
these individuals owns more than five percent, but less than ten percent of
AES's common stock.

           3. IPALCO ENTERPRISES, INC.

           IPALCO was incorporated as a utility holding company in the
State of Indiana in 1983. It has two first-tier subsidiaries: IPL and
Mid-America Capital Resources, Inc. ("Mid-America"). For 1999, IPALCO's
consolidated assets, revenues and net income were $2.316 billion, $835
million and $129 million, respectively. As noted above, IPALCO is an exempt
holding company under Section 3(a)(1) pursuant to Rule 2.

           IPL is the electric utility company subsidiary of IPALCO. It
engages primarily in generating, transmitting, distributing and selling
electric energy in the city of Indianapolis and neighboring cities, towns,
communities, and adjacent rural areas, all within the state of Indiana, the
most distant point being about 40 miles from Indianapo lis. It also
produces, distributes and sells steam within a limited area in
Indianapolis. As of December 31, 1999, IPL served approximately 433,025
retail electric customers. At the end of 1999, the electric utility assets
of IPL were $1.9 billion. In 1999, IPL received $800.4 million in electric
utility revenues. IPL owns and operates three primarily coal-fired electric
generating plants, one steam production plant that is coal and gas-fired,
and a separately sited gas-fired combustion turbine. These facilities have
total gross nameplate ratings of 3,104 MW, their winter capability is 3,136
MW and their summer capability is 3,035 MW. They also have a gross steam
generation capacity of 1,990 Mlbs. (thousands of pounds) per hour.

           At the end of 1999, IPL's transmission system included 457
circuit miles of 345,000 volt lines, 359 circuit miles of 138,000 volt
lines and 269 circuit miles of 34,500 volt lines. Above-ground distribution
and service facilities include 19,892 wire miles of conductor. Underground
distribution and service facilities include 686 miles of conduit and 6,487
wire miles of conductor. Underground street lighting facilities include 108
miles of conduit and 760 wire miles of conductor. Also included in the
system are 73 bulk power substations and 69 distribution substations. Steam
distribution properties include 22 miles of mains with 238 customer
connections. At the end of 1999, IPL had total assets, operating revenues
and net income of $2.0 billion, $834.7 million and $143.0 million,
respectively. In March 2000, IPL entered into an agreement to sell all of
its steam system assets to Citizens Gas & Coke Utility.

           Mid-America is the holding company for IPALCO's unregulated
activities. Its subsidiaries are Mid-America Energy Resources, Inc.
("Energy Resources"), Indianapolis Campus Energy, Inc. ("ICE"), Cleveland
Thermal Energy Corporation ("Cleveland Thermal") and Cleveland District
Cooling Corporation ("Cleveland Cooling"). Energy Resources operates a
district cooling system in downtown Indianapolis, Indiana. ICE owns and
operates an energy system under contract to Eli Lilly and Company to
provide cooling capacity to the Lilly Technology Center, in Indianapolis,
Indiana. Agreement was reached in March 2000 to sell these Energy Resources
and ICE facilities to Citizens Gas & Coke Utility. Cleveland Thermal owns
and operates a district heating system in Cleveland, Ohio. Cleveland
Cooling owns and operates a district cooling system also located in
Cleveland. Cleveland Thermal and Cleveland Cooling conduct business jointly
under the name Cleveland Energy Resources.

           As of December 31, 1999 Mid-America also had investments in
Internet Capital Group, Inc. ("ICG") and EnerTech Capital Partners II L.P.
("EnerTech"), a venture capital fund. At December 31, 1999, Mid-America
held 1,030,600 shares of ICG. During 2000, it sold all but 5,100 of those
shares. During 1999, Mid-America made a commitment to invest $15 million in
EnerTech. At December 31, 1999, Mid-America had funded $1.5 million of that
commitment and expects to fund the balance during 2000.

           As of December 31, 1999, Mid-America and its subsidiaries had 82
employees. It had 1999 revenues of $34.3 million.

           C. TERMS OF THE TRANSACTION

           Under the Share Exchange Agreement, IPALCO's shareholders will
be entitled to receive shares of AES common stock in exchange for each
share of IPALCO common stock they own in accordance with an exchange ratio
specified in the Share Exchange Agreement. Subject to adjustment as
described below, the exchange ratio will be determined by dividing $25.00
("Per Share Amount") by the average of the daily closing sale price per
share of AES common stock as reported on the New York Stock Exchange
Composite Tape on each of the 20 trading days ending on the date
immediately prior to the fifth trading day before the closing of the share
exchange, provided that the average trading price is greater than or equal
to $31.50. If the average closing price is below $31.50, the exchange ratio
will be determined by dividing the Per Share Amount by $31.50. Accordingly,
subject to an adjustment described below, each IPALCO shareholder will
receive a maximum of 0.794 shares of AES common stock in exchange for each
share of IPALCO common stock. AES will pay cash in lieu of issuing any
fractional shares. If the value of AES common stock to be received by
IPALCO's shareholders is below $21.00, IPALCO has the right to terminate
the transaction.

           The Per Share Amount, however, may be adjusted upon the
occurrence of certain events. If the share exchange occurs after the
Trigger Date (as defined below), the Per Share Amount will be increased by
$0.15 plus a daily increase equal to $0.375 per calendar quarter (the
equivalent of $0.00411 per day). The Trigger Date is defined as the latest
of (i) March 31, 2001, (ii) the date which is 30 days after certification
to the Commission required from the IURC under Section 33(a)(2) of the Act
is issued, or (iii) the date on which all the conditions to closing (other
than receipt approval by the Commission of the share exchange and the
exemption of AES from registration as a holding company under PUHCA) have
been satisfied or waived by AES. Notwithstand ing the foregoing, the
Trigger Date will not occur if the approval required by the FERC is not
received until after the receipt of the Commission's approval referred to
above.

           Under the terms of the Share Exchange Agreement, each option to
purchase a share of IPALCO stock outstanding and unexercised at the
effective time of the share exchange will be assumed by AES and will
thereafter be deemed to constitute an option to acquire shares of AES
common stock. The number of shares of AES common stock that will be subject
to the assumed stock options will be determined by multiplying the number
of shares of IPALCO common stock subject to the stock option by the
exchange ratio, rounded to the nearest whole share. The exercise price of
such assumed stock options will be the exercise price per share of IPALCO
common stock under the original stock option divided by the exchange ratio.
The assumed stock options will otherwise be subject to the same terms as
the existing stock options.

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 PROVISIONS

           Sections 9(a)(2), 10, and 3(a)(5) of the Act are directly or
indirectly applicable to the proposed Transaction.

           Section 9(a)(2) makes it unlawful for any person to acquire,
directly or indirectly, the securities of a public utility company without
Commission approval under the standards of Section 10, if the acquisition
would cause that person to become an affiliate of that public utility and
any other public utility or holding company. The term "affiliate" for this
purpose means any person that directly or indirectly owns, controls, or
holds with power to vote, five percent or more of the outstanding voting
securities of the specified company.

           As a result of the Transaction, AES will acquire indirectly more
than five percent of the voting securities of IPL, a public utility
company, and following the Transaction, AES will be affiliated with two
public utilities - IPL and CILCO. Accordingly, the Transaction requires
Commission approval under the standards of Section 10. In addition to AES,
Messrs. Bakke and Sant and Sant seek this approval.(12)

-----------

12       Mr. Bakke and Mr. Sant each own as individuals more than 5 percent,
         but less than 10 percent, of AES's common stock. These individuals
         are thus indirect affiliates of CILCO and through the Transaction
         would become indirect affiliates of IPL. They therefore require
         Commission authorization under Sections 9(a)(2) and 10 to acquire,
         through AES, an interest in IPL. However, the Commission has found
         in Atlee M. Kohl, Holding Co. Act Release No. 22440 (April 1,
         1982), that while individuals are subject to Sections 9(a)(2) and
         10, they are not required to satisfy the standards of Section 10
         to the same degree that a company would under similar
         circumstances. In particular, unless the Commission declares under
         Sections 2(a)(7)(B) and 2(b) that an individual is a holding
         company, neither Section 11(b)(1) nor Section 10(c)(2) will apply
         to acquisitions by that individual of 5 percent or more of the
         voting securities of more than one public utility company. This
         means that issues related to system integration for the most part
         are excluded from any Section 10 analysis relating to acquisitions
         by individuals. The issues relevant to those acquisitions arise
         primarily under Section 10(b), i.e., interlocking relations or
         concentrations of control, reasonableness of consideration, and
         complexity of capital structure. These matters are discussed in
         Item 3.A.1 of this Application, and the indirect acquisitions by
         Messrs. Bakke and Sant do not alter the analysis presented there.
         Given the inapplicability of Sections 11(b)(1) and 10(c)(2) to
         Messrs. Bakke and Sant, authorizing AES to acquire IPALCO would a
         fortiori demonstrate that their indirect acquisitions satisfy the
         requirements of Sections 9(a)(2) and 10.

         Messrs. Bakke and Sant therefore request that the Commission grant
         them authorization under Sections 9(a)(2) and 10 at the same time
         that it grants AES such authorization. It should be emphasized
         that there is no need for the Commission separately to assess
         compliance with Section 9(a)(2) with respect to these individuals,
         as it has full jurisdiction over a corporate entity, AES, whose
         request to acquire IPALCO and IPL is the primary subject of this
         application.


           AES believes, for reasons explained below, that following the
Transaction it will qualify for an exemption under Section 3(a)(5) of the
Act. Accordingly it requests that the Commission issue an order granting an
exemption under that provision. Section 3(a)(5) requires the Commission to
exempt any holding company from the provisions of the Act if that company
is not, and does not derive any material part of its income from a
subsidiary that is, a company whose principal business within the U.S. is
that of a public utility company, unless and except insofar as the
Commission finds the exemption detrimental to the public interest or the
interest of investors or consumers.

           A. SECTION 10

           Sections 10(b), 10(c) and 10(f) of the Act set forth the
statutory standards to be considered by the Commission in evaluating the
Transaction.

           1. SECTION 10(b).

           Under Section 10(b) of the Act, the Commission must approve the
Transaction unless it finds that:

           (1) the Transaction will tend towards interlocking relations or
      the concentration of control of public-utility companies, of a kind
      or to an extent detrimental to the public interest or the interest of
      investors or consumers;

           (2) the consideration, including all fees, commissions and other
      remuneration, to whomsoever paid, to be given, directly or
      indirectly, in connection with the acquisition of securities or
      utility assets is not reasonable or does not bear a fair relation to
      the sums invested in or the earning capacity of the utility assets to
      be acquired or the utility assets underlying the securities to be
      acquired; or

           (3) the Transaction will unduly complicate the capital structure
      of the holding-company system of AES or will be detrimental to the
      public interest or the interest of investors or consumers or the
      proper functioning of that holding company system.

                  (a) DETRIMENTAL "INTERLOCKING RELATIONS" OR "CONCENTRA-
                      TION OF CONTROL."

           The Transaction will not result in detrimental interlocking
relations or concentration of control. AES and IPALCO currently have no
common directors, but following consummation of the Transaction there may
be common directors and officers of AES, IPALCO, and IPL. These potential
interlocking relationships, however, would serve to integrate the merging
companies effectively and efficiently and can be found in virtually every
merger transaction subject to Section 9(a). They would thus conform with
industry practice accepted by the Commission and would not be detrimental
to consumers, investors or the public.

           The Transaction also will not result in a detrimental
concentration of control. The expected increase in size of AES's public
utility operations resulting from the Transaction will not make the
combined companies large in the aggregate. Instead, the Transaction will
place two small utilities under common ownership, with their combined
operations remaining, as explained further below, small by local, regional,
and national standards. The utility operations of the combined companies
would continue to be much smaller than almost all of its neighboring
utilities and holding company systems such as Ameren Corporation, American
Electric Power Company, and Cinergy Corp., which are among the largest
utilities in the country.(13) As a consequence, the merged company will not
be able to dominate the region. Following the Transaction, AES will have
total utility assets of $2.6 billion, total utility revenues of $1.4
billion, and will serve approximately 622,000 electric customers and
197,000 gas customers. The utility activities of AES following the
Transaction will be confined exclusively to the States of Illinois and
Indiana. The Commission has approved a number of transactions which
resulted in holding companies of a much larger size.(14) Moreover, as
previously noted, AES will commit to enter into an agreement with an
unaffiliated person within three years of completion of the Transaction to
divest all assets of CILCO subject to Commission jurisdiction. Following
such a divestiture, AES's activities and assets subject to Commission
jurisdiction would be limited to those of IPL, all of which are confined to
Indiana.

           Section 10(b)(1) also requires the Commission to consider
possible anticompetitive effects of a proposed merger. The Commission has
concurrent jurisdiction with the Department of Justice (the "DOJ"), the
Federal Trade Commission (the "FTC"), and FERC in this case to consider the
competitive effects of the Transaction. As required by the HSR Act, AES and
IPALCO filed Notification and Report Forms with the DOJ and the FTC on
November 8, 2000 describing how the Transaction will affect competition.
The applicable waiting period under the HSR Act must expire or be
terminated by the FTC before AES can proceed to complete the Transaction.
In addition, AES and IPALCO filed with FERC on November 14, 2000 an
application for approval of the merger under Section 203 of the Federal
Power Act. FERC has immediate jurisdiction over both CILCO's and IPL's
utility operations and will assess the competitive effects of the
Transaction. This filing, which is attached as Exhibit D-1, contains a
detailed explanation of why the Transaction will not produce any adverse
competitive effects. FERC will not approve the Transaction absent a finding
that it is in the public interest and will not adversely affect
competition.

-----------

13       As of December 31, 1999, Ameren had consolidated assets of $9.2
         billion and operating revenues of $3.5 billion, AEP had
         consolidated assets of $21.5 billion and consolidated operating
         revenues of $6.9 billion, and Cinergy had consoli dated assets of
         $9.6 billion and consolidated operating revenues of $5.2 billion.

14       See, e.g., TUC Holding Co., Holding Co. Act Release No. 26749
         (Aug. 1, 1997) ("TUC Holding"). TUC Holding has utility assets of
         approximately $19.6 billion, operating utility revenues of
         approximately $6.9 billion and approxi mately 2.7 million utility
         customers. See also NIPSCO Industries, Inc. Holding Co. Act
         Release No. 26975 (Feb. 10 1999); CINergy Corp., Holding Co. Act
         Release No. 26146 (Oct. 21, 1994); National Grid Group plc,
         Holding Co Act Release No. 27154 (March 15, 2000) ("National
         Grid").


           The analysis performed by Dr. William Hieronymus of the
consulting firm of PHB/Hagler Bailly in connection with the FERC
application, attached to this Application as part of Exhibit D-1, explains
why the combination of AES and IPALCO will not have anticompetitive
effects. This analysis considers the impact on competition of combining
IPL's generation and transmission assets with those of CILCO and other
capacity of AES relevant to FERC competition analysis. Dr. Hieronymus found
that approximately 3,900 MW of additional capacity owned by AES, located
primarily in New England, New York, Ontario, PJM, and SPP was too remote
from the relevant markets to have significance for analyzing the
Transaction's effects on competition. He concluded that the Transaction
would not increase either AES's or IPALCO's ability or incentive to
exercise anticompetitive market power in wholesale electric markets. He
found that the Transaction would not result in any violation of the "safe
harbor" limits contained in the merger guidelines used by the FERC.

           This conclusion is not surprising given the relatively small
presence of CILCO and IPL within the region and their historical lack of
interaction. CILCO owns or controls only about 1,150 MW of generating
capacity, while there are about 58,000 MW in the reliability region in
which it operates, the Mid-American Interconnected Network. The peak summer
capacity of IPL's generation is approximately 3,035 MW, while there are
about 110,000 MW in its region, the East Central Area Reliability Council.
The combined company will own less than 3 percent of the total capacity in
the Mid-America Interconnected Network and the East Central Area
Reliability Coordination Agreement regions.

           Dr. Hieronymus also found that the Transaction would not
adversely affect competition in the transmission market. CILCO is a member
of the Midwest Independent System Operator (the "MISO"), a FERC-approved
independent system operator that is scheduled to begin operations on June
1, 2001. AES also has committed that IPL, as an AES subsidiary, will join a
regional transmission organization ("RTO") if the FERC deems it necessary
to avoid an evidentiary hearing in its review of the Transaction. The
Commission can thus conclude that the Transaction will not adversely affect
competition. Indeed, for the reasons stated below, the Commission may
conclude that the Transaction will facilitate even greater competition in
electric wholesale and retail markets.

           Recent developments in the U.S. electric industry demonstrate a
clear transition from a system of regulated monopolies to one of market
competition. FERC already has introduced competition into wholesale
electric markets through its many orders authorizing market-based rates for
wholesale power sales and a series of orders mandating non-discriminatory
access to electric transmission facilities and encouraging the formation of
regional transmission organizations.

           Moreover, AES commits to enter into an agreement with an
unaffiliated person within three years of completion of the Transaction to
divest its ownership of all assets of CILCO which are subject to regulation
under the Act. This would reduce the size of AES's public utility holdings
and correspondingly diminish any concerns about the size and market share
of AES's utility business.

           Additional benefits accompanying the Transaction are outlined in
Item 3(A)(2)(b) of this Application, and are benefits which the Commission
has weighed against any concerns about concentration of control it has had
in other transactions. See American Electric Power Co., Holding Co. Act
Release No. 20633 (July 21, 1978).

           For all of these reasons, AES maintains that the Transaction
will not result in a concentration of control that will be detrimental to
the public interest. On the contrary, it will facilitate an actual increase
in competition in regional electricity markets.

           (b) FAIRNESS OF CONSIDERATION.

           Section 10(b)(2), as applied to the Transaction, provides that
the Commission shall approve the Transaction unless it finds that the
consideration paid by AES to the shareholders of IPALCO is not reasonable
or does not bear a fair relation to the earning capacity of the utility
assets underlying the IPALCO shares. In determining whether the
consideration for an acquisition meets the fair and reasonable test of
Section 10(b)(2), the Commission has considered whether the price resulted
from arm's-length negotiations and whether each party's Board of Directors
has approved the purchase price.(15) The Commission also considers the
opinions of investment bankers and the earnings, dividends, and book and
market value of the shares of the company to be acquired.(16)

----------

15       American Natural Gas Co., Holding Co. Act Release No. 15620 (Dec.
         12, 1966) (holding that evidence of arm's-length negotiations can
         provide support for concluding that proposed consideration is just
         and reasonable); Consolidated Natural Gas Co., Holding Co. Act
         Release No. 25040 (Feb. 14, 1990) (holding that approval of an
         acquisition by the Boards of Directors of the parties can provide
         support for concluding that proposed consideration is just and
         reasonable).

16       National Grid (finding that opinions of investment bankers of the
         parties provide support for concluding that consideration is fair
         from a financial point of view).


           Under the Share Exchange Agreement, each owner of
pre-Transaction IPALCO common stock will be entitled to receive shares of
AES common stock, and cash in lieu of fractional shares of AES common
stock, in accordance with the provisions of the Share Exchange Agreement
described above. The consideration to be paid to IPALCO shareholders was
the result of arm's-length negotiations between the management and
financial and legal advisors of AES and IPALCO over a period of several
months, as explained in detail at pages 18 through 21 of the Registration
Statement. (Exhibit. C-1) The Boards of Directors of AES and IPALCO
approved the Transaction in separate meetings.

           As noted in the Registration Statement, a nationally-recognized
investment banking firm retained by IPALCO, UBS Warburg, LLC, reviewed
extensive information concerning IPL and analyzed the respective conversion
ratios employing several valuation methodologies for purposes of evaluating
the fairness to IPALCO's shareholders of the consideration offered by AES.
In connection with the approval of the Share Exchange Agreement, IPALCO's
Board of Directors considered UBS Warburg's opinion to the effect that the
aggregate consideration to be received by IPALCO common shareholders in
connection with the Transaction is fair to such holders from a financial
point of view. This fairness opinion is attached to this Application as
Annex B to Exhibit C-1 and incorporated herein by reference.

           In rendering its fairness opinion, UBS Warburg performed a
number of analyses relevant to the fairness of the Transaction
consideration, including comparing select historical and projected
operating performance data of IPALCO with that of similar companies and
discounted cash flow analyses. In preparing its opinion, UBS Warburg
reviewed, among other things, both public and non-public historical and
projected financial information and forecasts related to the earnings,
assets, business, dividends, cash flow, and prospects of IPALCO, and
comparable companies. A detailed summary of the financial opinions is
contained at pages 23 to 30 of the Registration Statement (Exhibit C-1).

           Moreover, following the receipt of the Registration Statement
containing this fairness opinion, IPALCO's common shareholders will vote on
whether to approve the Transaction at a meeting to be held on October 20,
2000. An affirmative vote of the shareholders will be further evidence that
the consideration they will receive is fair.

           In light of the fairness opinion of UBS Warburg and considering
all relevant factors, AES believes that the aggregate consideration to be
paid is reasonable and bears a fair relation to the earnings capacity of
the utility assets underlying IPALCO's shares. Accordingly, the
consideration to be paid by AES meets the standards of Section 10(b)(2).

           (c) REASONABLENESS OF FEES.

           AES submits the overall fees, commissions, and expenses incurred
and to be incurred in connection with the Transaction to be reasonable and
fair, given the relative size and complexity of the Transaction and its
anticipated benefits to the public, investors, and consumers and thus meet
the standards of Section 10(b)(2). This conclusion is supported by the
consistency of these fees, commissions, and expenses with recent Commission
precedent.

           As stated in Item 2 above, the parties expect to incur a total
of approximately $28 million in fees, commissions and expenses in
connection with the Transaction. This amount compares favorably with the
fees associated with recent transactions approved by the Commission.(17)

           (d) CAPITAL STRUCTURE AND THE PUBLIC INTEREST

           Section 10(b)(3) requires the Commission to determine whether
the Transaction will unduly complicate AES's capital structure or would be
detrimental to the public interest, the interests of investors or
consumers, or the proper functioning of AES's system.

           Following the Transaction, AES will have a capital structure
which is substantially similar to capital structures which the Commission
has approved in other orders.(18) Upon completion of the Transaction, AES
will own 100 percent of the shares of IPALCO Common Stock and 100 percent
of the shares of CILCORP common stock. The Transaction will not affect the
outstanding securities of IPALCO. For these reasons, AES believes that the
Transaction will not unduly complicate its capital structure.

----------

17       See TUC Holding Co. (estimated fees and expenses of $37 million);
         Kansas Power & Light Co., Holding Co. Act Release No. 25465 (Feb.
         5, 1992) (estimated fees and expenses of approximately $30
         million); New Century Energies, Inc., Holding Co. Act Release No.
         26748 (Aug. 1, 1997) (estimated fees and expenses of $23.5
         million).

18       See, e.g., TUC Holding Co.; CINergy Corp., Holding Co. Act Release
         No. 26146 (Oct. 21, 1994); Entergy Corp., Holding Co. Act Release
         No. 25952 (Dec. 17, 1993); American Electric Power Co. and Central
         and South West Corp., Holding Co. Act Release No. 27186 (June 14,
         2000); New Century Energies, Inc., Holding Co. Act Release No.
         27212 (Aug. 16, 2000). In each of these orders, the Commission
         approved mergers which resulted in a holding company acquiring 100
         percent of a utility operating company's common stock.


Set forth below are summaries of the historical capital structures of AES
(including CILCORP) and IPALCO as of June 30, 2000, and the pro forma
consolidated capital structures of AES and IPALCO as of that date:

<TABLE>
<CAPTION>

                                               Table 1
                            AES (Including CILCORP) and IPALCO Historical
                    Capital Structures as of June 30, 2000 (dollars in millions)
                                             (unaudited)

                                                      AES                          IPALCO

<S>                                           <C>             <C>             <C>          <C>
Common Stock Equity                           $3,990          17.4%           $666         42.8%

Preferred Stock of Sub-                            -           0.0%            $59          3.8%
sidiary

Preferred Securities                          $1,528           6.7%              -          0.0%

Minority Interest                             $1,720           7.5%              -          0.0%

Long-term Debt                               $15,720          68.5%           $824         53.0%

Short-term Debt                                    -           0.0%             $6          0.4%

Total Capitalization                         $22,958         100.0%         $1,555        100.0%

</TABLE>


           AES's Post-Transaction Consolidated Capital Structure
                            As of June 30, 2000
                           (dollars in millions)
                                (unaudited)

                                             AES

Common Stock Equity                 $4,656         19.0%

Preferred Securities                $1,528          6.2%

Minority Interest                   $1,779          7.3%

Long-term Debt                     $16,544         67.5%

Short-term Debt                         $6          0.0%

Total Capitalization               $24,513        100.0%


                  The ratio of consolidated common equity to total
capitalization of the combined companies will be, on an unaudited pro forma
basis, 19 percent. This figure is less than the ratio of approximately 30
percent that the Commission has deemed traditionally acceptable on policy
grounds. This requirement, however, applies to registered holding companies
and is based on requirements that the Commission finds conducive to good
public utility management. AES, however, is predominantly a non-utility
energy provider, and its shareholders are accustomed to levels of debt that
exceed the traditional Commission standard, which in any event applies to
registered, rather than exempt, holding companies. In addition, the level
of debt assumed by AES does not represent a risk to IPL ratepayers, who
will remain unaffected by it. IPL will retain a level of common equity well
above the level that the Commission deems prudent for traditional public
utility companies, and its financings will continue to be subject to IURC
jurisdiction. In addition, as discussed earlier in Item 1(B)(1), AES
believes that the Transaction, by achieving efficiencies and economies,
will benefit the interests of the public, consumers and investors and will
not impair the proper functioning of the holding company system.

                  Set forth below are summaries of the historical capital
structures of AES, excluding CILCORP's jurisdictional utility assets, and
IPALCO as of June 30, 2000, and the pro forma consolidated capital
structures of AES and IPALCO as of that date:



                                  Table 2
          AES (Excluding CILCORP PUHCA-Jurisdictional Assets) and
            IPALCO Historical Capital Structures as of June 30,
                         2000 (dollars in millions)

                                        AES                      IPALCO

Common Stock Equity             $3,990      17.4%            $666      42.8%
Preferred Stock of                   -       0.0%             $59       3.8%
Subsidiary
Preferred Securities            $1,528       6.7%               -       0.0%
Minority Interest               $1,720       7.5%               -       0.0%
Long-term Debt                 $15,720      68.5%            $824      53.0%
Short-term Debt                      -       0.0%              $6       0.4%
Total Capitalization           $22,958     100.0%          $1,555     100.0%


 AES's Post-Transaction Consolidated Capital Structure as of June 30, 2000
                           (dollars in millions)
                                (unaudited)

                                       AES

Common Stock Equity             $4,656      19.0%
Preferred Securities            $1,528       6.2%
Minority Interest               $1,779       7.3%
Long-term Debt                 $16,544      67.5%
Short-term Debt                     $6       0.0%
Total Capitalization           $24,513     100.0%


                  Table 2 does not differ from Table 1, as a divestiture of
CILCORP's jurisdictional utility assets is not expected to impact the
capital structure of AES. Debt associated with the acquisition of CILCORP
is expected to remain with AES. Moreover, AES at this time is unable to
predict with any degree of accuracy any potential gain or loss resulting
from the divestiture, which would be the only item associated with the
divestiture to impact AES's common stock equity. Therefore, AES has
concluded that any change in the capital structure would be minimal and is
not recorded in the above table.

                  2.       SECTION 10(c).

                           (a)      SECTION 10(c)(1).

                  Under Section 10(c)(1), the Commission must not approve
an acquisition which is "unlawful under the provisions of Section 8" or
"detrimental to the carrying out of the provisions of Section 11." Section
8 prohibits an acquisition by a registered holding company of an interest
in an electric utility and a gas utility serving substan tially the same
territory without the express approval of the state commission when state
law prohibits or requires approval of the acquisition. Section 8 applies
only to registered holding companies and is thus inapplicable to the
Transaction. The Transaction does not require any approvals under Indiana
law and is not unlawful under the laws of that state.

                  Section 11(b)(1) requires a registered holding company,
with limited exceptions, to limit its operations to a "single integrated
public-utility system, and to such other businesses as are reasonably
incidental, or economically necessary or appropriate to the operations of
such integrated public-utility system."

                  Section 2(a)(29) provides separate definitions for
"integrated pub lic-utility system" for gas and electric companies. For
electric utility companies, the term means:

                  a system consisting of one or more units of generating
                  plants and/or transmission lines and/or distributing
                  facilities, whose utility assets, whether owned by one or
                  more electric utility companies, are physically
                  interconnected or capable of physical interconnection and
                  which under normal conditions may be economically
                  operated as a single interconnected and coordi nated
                  system . . . .

For gas utilities, the term means:

                  a system consisting of one or more gas utility companies
                  which are so located and related that substantial
                  economies may be effectuated by being operated as a
                  single coordinated system confined in its operations to a
                  single area or region . . . [p]rovided, that gas utility
                  companies deriving natural gas from a common source of
                  supply may be deemed to be included in a single area or
                  region.

With respect to either type of company, the system must be:

                  confined in its operations to a single area or region, in
                  one or more States, not so large as to impair
                  (considering the state of the art and the area or region
                  affected) the advantages of localized management,
                  efficient operation, and the effectiveness of regulation.
                  . . .(19)

-----------

19       For gas companies, utilities deriving natural gas from a common
         source of supply may be deemed to be included in a single area or
         region.


                  Section 11(b)(1) permits the acquisition and retention of
more than one integrated utility system only if the requirements of Section
11(b)(1)(A),(B) and (C) are satisfied.

                  The Commission consistently has recognized that strict
compliance with the standards of Section 11 is not required where the
resulting holding company is exempt under Section 3. See, e.g., Gaz
Metropolitain, Inc., Holding Co. Act Release No. 26170, 58 SEC 189 (Nov.
23, 1994) ("Gaz Metropolitain"). Nonetheless, in applying Section 10(c)(1)
to an exempt holding company, the Commission focuses on whether the
acquisition would be detrimental to the core concerns of Section 11, namely
the protection of the public interest and the interests of investors and
consumers. WPL Holdings, Holding Co. Act Release No. 24590 (Feb. 26, 1988),
aff'd in part and rev'd in part sub nom. Wisconsin Environmental Decade,
Inc. v. S.E.C., 882 F.2d 523 (D.C. Cir. 1989); WPL Holdings, Inc., Holding
Co. Act Release No. 26856 (April 14, 1998). In addition:

         The Commission has previously determined that a holding company
         may acquire utility assets that will not, when combined with its
         existing utility assets, make up an integrated system or comply
         fully with the ABC clauses, provided that there is a de facto
         integration of contiguous utility properties and the holding
         company will be exempt from registration under section 3 of the
         Act following the acquisition.

WPS Resources Corp., Holding Co. Act Release No. 26922 (Sept. 28, 1998)
(citing BL Holding Corp., Holding Co. Act Release No. 26875 (May 15, 1998);
TUC Holding; Gaz Metropolitain.).

                  The Transaction is fully consistent with the standards of
Section 10(c)(1) as applied to exempt holding companies. It will combine,
via common ownership by AES, CILCO's electric and gas system with IPL's
electric system, producing a combined enterprise that will better serve the
needs of its customers and the interests of its investors by offering more
efficient energy supply and delivery service in competitive markets. The
Transaction will not impede the ability of the Illinois Commerce Commission
("ICC") or the IURC to carry out their statutory responsibilities with
respect to the utility activities of CILCO or IPL. The utility operations
of the combined enterprise will continue to be regulated by the ICC and the
IURC after the merger.

                  CILCO's existing gas and electric systems meet the de
facto integration standard. The service territories of CILCO's existing gas
and electric systems overlap. Moreover, the gas and electric systems have
been combined for many years and share corporate services.

                  The CILCO and IPL electric systems will be coordinated
primarily through common ownership by AES during the period of that
ownership and through application of the considerable expertise that AES is
able to contribute to their operations. The acquisition of IPALCO by AES
can result in increased operating efficiency at IPALCO and CILCORP by
utilizing economies of scale in the generation and retail segments of the
business. Areas such as fuel procurement, environmental compliance, labor
relations, billing, customer service and marketing are targeted for
improvement. The efficiencies may come from either the elimination of
duplicated resources or improved unit costs resulting from spreading common
fixed costs over a larger customer base. Although the CILCO and IPL
electric systems will not be a single integrated system under the
Commission's current interpretation as it is applied to registered holding
companies, an exempt company need not satisfy the standards of Section 11,
nor the requirements of the ABC clauses. WPS Resources (approving merger of
two electric systems which are not jointly dispatched and which do not
constitute a single integrated system); Sierra Pacific Resources, Holding
Co. Act Release No. 27054 (July 26, 1999) (same).

                  First, although the utility systems of CILCO and IPL will
"lack[] economic joint dispatch, the two systems will be coordinated . . .
 ." WPS Resources, at 11. CILCO and IPL will be able to integrate many
services, including accounting and finance, information services, external
relations, legal and executive administration, customer service, and
marketing and sales.

                  Second, while the electric service territories of the
CILCO and IPL public utility systems do not overlap, they are in close
proximity. Id. at 12.

                  Finally, as noted above, the Transaction will produce a
combined entity that will be able to compete more efficiently and
effectively in providing energy services to customers. Thus, the Commission
should find that the Transaction would not be detrimental to the interest
of Section 11, and thereby satisfies the requirements of Section 10(c)(1).

                           (b)      SECTION 10(C)(2).

                  Section 10(c)(2) requires that the Commission not approve
an acquisition unless "the Commission finds that such acquisition will
serve the public interest by tending towards the economical and efficient
development of an integrated public-utility system."

                  The Commission has interpreted Section 10(c)(2) to permit
the approval of acquisitions resulting in more than one integrated system.
"[W]e have indicated in the past that acquisitions may be approved even if
the combined system will not be a single integrated system. Section
10(c)(2) requires only that the acquisition tend 'towards the economical
and the efficient development of an integrated public-utility system.'"(20)
The Commission has held that "where a holding company will be exempt from
registration under Section 3 of the Act following an acquisition of
non-integrating utility assets, it suffices for purposes of Section
10(c)(2) to find benefits to one integrated system."(21)


--------

20       Gaz Metropolitain, 58 SEC at 192 (quoting Union Electric Company,
         Holding Co. Act Release No. 18368, 45 SEC 489, 504-06 (April 10,
         1974), aff'd without op. sub nom. City of Cape Girardeau v. SEC,
         521 F.2d 324 (D.C. Cir. 1975)).

21       TUC Holding Co., supra.

                  In this case, both the CILCO and IPL utility systems will
realize a number of benefits from the Transaction. The Transaction will
combine via AES ownership two companies with complementary operations and
expertise, and provide important strategic, financial and other benefits to
the merging companies, shareholders and customers.

                  The Transaction will have a number of operational
benefits that will result in economic efficiencies for both utility
systems. As discussed above, economies will result from combining and
coordinating operations of CILCO and IPL with respect to corporate
functions, including accounting and finance, human resources, information
services, external relations, legal and executive administration. In
addition, AES expects that the Transaction will result in various cost
savings through the integration of corporate programs (e.g., insurance,
advertising), customer support functions (e.g., customer service, marketing
and sales) and an increased ability to meet competition in energy markets.
A number of recent Commission orders have noted the importance such
benefits have for satisfying the Act's integration requirements. New
Century Energies, Inc., Holding Co. Act Release No. 27212 (Aug. 16, 2000);
American Electric Power Co., Holding Co. Act Release No. 27186 (June 14,
2000). The Transaction also will allow CILCO and IPL to offer a greater
range of services to customers, making them more competitive, and will
provide significantly increased financial resources to both companies,
making them better able to meet customer needs. The Commission previously
has found that similar benefits satisfied the affirmative finding required
under Section 10(c)(2). See, e.g., WPL Holdings, Inc., Holding Co. Act
Release No. 25096; 50 S.E.C. 233, 237 (May 25, 1990) (benefits supporting
Section 10(c)(2) finding include "[a] structure that could more effectively
address the growing national competition in the energy industry, refocus
various utility activities, facilitate selective diversification into
non-utility business . . . and provide additional flexibility for financing
 . . ."). Accordingly, the Commission should find that the requirements of
Section 10(c)(2) are satisfied with regard to the Transaction.

                  3.       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, (quoting and citing Electric Bond and
Share Company, Holding Co. Act Release No. 11004, 1952 WL 1058 (Feb. 6,
1952) ("Electric Bond and Share")). For the reasons set forth below, AES
will qualify for a Section 3(a)(5) exemption upon completion of the
Transaction.

                           (a)      MATERIALITY OF CILCO/IPL REVENUES

                  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 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 Ltd, Holding Co. Act Release
No. 25647 (Oct. 6, 1992) (citing to percentages of holding company total
revenues and net assets); Consumers' Gas Co., Holding Co. Act Release No.
14956 (Oct. 17, 1963) (comparing U.S. utility and holding company revenues,
net income, and net assets). Most recently, the Commission has stated that
it usually relies on a comparison of gross revenues, referred to as the
"gross-to-gross" test, which may be adjusted to account for specific
features of a particular situation. NIPSCO Industries, Inc., Holding Co.
Act Release No. 26975 (Feb. 10, 1999) ("NIPSCO"); AES.

                  The Commission similarly has no strict test for
determining materiality of income under Section 3(a)(5), and it has noted
that "factors other than mere percentages must be taken into consideration"
when applying the materiality standard. AES, slip opinion at 30 (citing the
discussion of the Section 3(a)(1) exemption found in NIPSCO, supra). The
Commission has also stated that its "interpretation of the term 'material'
under each section of 3(a) must be informed by the underlying policy
concerns that exemption addresses." AES at 15. 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 and IURC have such ability here.

                  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 revenues. 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 & Co., Holding Co. Act Release No. 1882 (Jan. 15, 1940). See also
Cities Service Co., Holding Co. Act Release No. 2444, 8 SEC 318 (Dec. 23,
1940) ("Cities Service") (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 (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)). Most recently, in AES the Commission
found on the basis of factors that included the absence of abuses that the
Act was intended to prevent, the Commission's reporting requirements, and
regulatory authority of the state in question, that 10.35 percent of net
operating revenues was not material for the purposes of a Section 3(a)(5)
exemption.(22) AES at 15-16.

--------

22       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 a gas
         utility than for an electric utility. The Commission thus
         concluded that where a predominantly electric system (such as
         NIPSCO, AES) acquired an exclusively gas system (Bay State,
         CILCO), a reliance on gross revenues comparisons would distort the
         relative sizes of the merging companies.

                  Although AES has committed to divest CILCO's
jurisdictional assets, a review of the combined contributions of CILCO and
IPL to AES's total operations (including CILCORP and IPALCO), from the
perspective of a variety of financial indicators, reveals that total
utility activities and assets constitute a relatively small 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. Set forth below
in Table 3 are the percentages, on a pro forma basis for 1998-2000, of
gross revenues;(23) operating income (expressed as earnings before interest
and taxes); net income; unleveraged net income (expressed as post tax
income, excluding interest expense); and net assets of CILCO and IPL, to
the total gross revenues; operating income; net income; unleveraged net
income; and net assets of AES as a whole.

--------

23       Because the proposed Transaction would combine a predominantly
         electric company (AES, including CILCORP) with an exclusively
         electric company (IPL), a net operating revenues percentage would
         not differ materially from a gross revenues percentage.


                                  Table 3
                       CILCO and IPL Contributions To
                  AES/IPALCO Consolidated Holding Company
                     (Proportional Consolidation Basis)
                                ($Millions)
-------------------------------------------------------------------------------
                                           1998            1999          2000**
-------------------------------------------------------------------------------
GROSS REVENUES*                           26.37%          24.31%         16.02%
CILCO                                      538              562           578
CILCORP (excluding CILCO)                   21              19             11
IPL                                        786              800           839
IPALCO (excluding IPL)                      35              34             34
AES (excluding CILCORP and IPALCO)        3,640            4,189         7,388
AES/CILCORP/IPALCO                        5,020            5,604         8,850
-------------------------------------------------------------------------------
OPERATING INCOME                          26.23%          20.83%         16.26%
CILCO                                       93              55            112
CILCORP (excluding CILCO)                  (1)             (14)           (8)
IPL                                        261              268           271
IPALCO (excluding IPL)                     (1)               -             2
AES (excluding CILCORP and IPALCO)         997             1,242         1,977
AES/CILCORP/IPALCO                        1,349            1,551         2,354
-------------------------------------------------------------------------------
NET INCOME                                39.61%         42.94%***       24.15%
CILCO                                       41              16             51
CILCORP (excluding CILCO)                  (25)            (17)           (38)
IPL                                        140              137           139
IPALCO (excluding IPL)                     (10)             (9)           (6)
AES (excluding CILCORP and IPALCO)         311              229           642
AES/CILCORP/IPALCO                         457              356           788
-------------------------------------------------------------------------------
UNLEVERAGED NET INCOME****                23.52%          16.56%         11.55%
CILCO                                       59              34             70
CILCORP (excluding CILCO)                  (17)              9             10
IPL                                        179              176           177
IPALCO (excluding IPL)                      16              18             16
AES (excluding CILCORP and IPALCO)         775             1,031         1,871
AES/CILCORP/IPALCO                        1,012            1,268         2,144
-------------------------------------------------------------------------------
NET ASSETS                                19.87%          12.10%         9.18%
CILCO                                     1,024            1,056         1,056
CILCORP (excluding CILCO)                  288              775           775
IPL                                       1,953            1,979         1,935
IPALCO (excluding IPL)                     166              337           335
AES (excluding CILCORP and IPALCO)        11,550          20,928         28,484
AES/CILCORP/IPALCO                        14,981          25,075         32,585
-------------------------------------------------------------------------------
*      In calculating the gross revenues percentage, the numerator is equal
       to the total gross business revenues of IPALCO and CILCO, excluding
       all revenues from non-utility activities. The denominator is
       comprised of all business revenues (including revenues from all
       IPALCO/IPL and CILCORP non-utility activities) plus all of AES's
       business revenues.

**     Projected.

***    During 1999, the Brazilian Real experienced a significant
       devaluation relative to the U.S. Dollar, resulting in significant
       foreign currency transaction losses during 1999. As a result, AES
       recorded approximately $150 million, after taxes, of noncash foreign
       currency transaction losses on its investments in Brazilian
       affiliates during 1999. Absent these developments, AES net income
       excluding CILCORP and IPALCO would have been $379 million, yielding
       a 30.2% contribution to net income by IPALCO and IPL.

****   See discussion infra regarding impact of AES leveraged capital
       structure on net income calculations.

                  The AES data contained in Table 3 is compiled on a
proportional consolidation basis rather than in accordance with GAAP. On a
proportional consolidation basis, revenues 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.(24) On a proportional consolida tion basis,
revenues from sales made by these less than majority-owned investments are
included as revenues in statements of operations. On financial statements
prepared in accordance with GAAP, on the other hand, returns from less than
majority-owned projects are not reported as revenues, but instead are
reported as equity in earnings of affiliates (gross of income taxes). Thus,
although GAAP-based data is the appropriate data for use in other contexts,
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 IPL's business for purposes of the
Commission's materiality analysis.

--------

24       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.

                  Commission precedent supports appropriate adjustments to
financial data reported on the basis of prescribed, conventional accounting
treatments, where, in light of the policies underlying the Act, they would
more accurately represent the 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
Co., Holding Co. Act Release No. 11711 (Feb. 13, 1953) (applying propor
tional consolidation approach to re-state and allocate income and balance
sheet amounts to reflect ownership percentages) and Sioux City Gas and
Electric Co., Holding Co. Act Release No. 9303 (Sept. 8, 1949) (applying
proportional consolidation approach to evaluation of dividend coverage
ratios). See also Consolidated Cities Light, Power & Traction Co., Holding
Co. Act Release No. 4130 (Feb. 23, 1943) (consideration of company's
"indirect" sources of income, such as payments by another company of its
interest and sinking fund requirements on outstanding debt). In AES the
Commission agreed that use of proportional consolidation was appropriate
for determining whether income from CILCO was material for purposes of
Section 3(a)(5). The Commission noted in this connection that it has
"traditionally focused on revenues, rather than net income, in measuring
the materiality of a subsidiary under Section 3(a)" and that proportional
consolidation would allow the Commission "to consider the revenues
generated by companies whose results are reflected on AES's financial
statements under the equity method." AES at 14.

                  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 would
underestimate significantly the extent of AES's foreign operations.(25)

--------

25       AES also has calculated the percentages set forth in Table 3 in
         accordance with GAAP. Such calculations are set forth in Exhibit
         K-4. As explained above, however, use of this GAAP-based data
         understates the size of AES's worldwide business relative to CILCO
         and IPL, whereas data compiled on a proportional consolidation
         basis provides a more accurate comparison of the size of IPL and
         CILCO to the size of the AES/CILCORP/IPALCO merged company.

                  Although Table 3 includes data for 1998, 1999, and 2000,
given AES's phenomenal growth, the 2000 data is by far the most relevant
for purposes of comparing the relative size of IPL and CILCO with AES. As
the description in Item 1, Section B above notes, AES's revenues increased
approximately 1,600 percent between 1990 and 1999. A projection of AES
shows that AES's revenues will increase approximately 76 percent between
1999 and 2000. Unlike a traditional utility company, whose financial
results are relatively static over time or who has year-to-year variations
(perhaps attributable to weather conditions, or one-time extraordinary
changes) that can best be viewed over a 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
will be quite a different company at the end of 2000 than it was in 1999.
As reflected in Table 3, a projection of AES shows that between the end of
1998 and the end of 2000 on a proportional consolidated basis its gross
revenues will have grown 103 percent, from $3,640 million to $7,388
million; operating income will have grown 98 percent, from $997 million to
$1,977 million; net income will have grown 106 percent, from $311 million
to $642 million; unleveraged net income will have grown 141 percent, from
$775 million to $1,871 million; and net assets will have grown 147 percent,
from $11,550 million to $28,484 million.(26) Therefore, in light of AES's
significant growth from the years 1998 through 2000, the financial data for
1998 and 1999 do not provide an accurate picture of the relative size of
AES in relation to utility operations of CILCO and IPL.

--------

26       Similarly, use of an average of financial information for the
         years 1998 through 2000 also significantly understates the extent
         of AES's operations and therefore also proves inadequate. A
         projection of AES shows that AES's 2000 gross revenues are 88.7
         percent greater than the average of AES's gross revenues for the
         years 1998 through 1999. Further, AES' 2000 operating income is
         76.5 percent greater than the two-year average; 2000 net income is
         137.7 percent greater than the two-year average; and 2000 net
         assets are 75.4 percent greater than the two-year average.

                  Table 3 sets forth the relative sizes of the combined
utility business of CILCO and IPL and the merged AES/CILCORP/IPALCO holding
company based on five financial yardsticks. In this instance, because AES,
CILCO and IPL are all engaged primarily in electric generation,
transmission and distribution operations, the analysis does not present
data concerning net operating revenues.

                  A comparison of AES and CILCO/IPL net income may obscure
the true scope of IPL's business vis-a-vis that of AES. Net income is
sensitive to differences in capital structure, and AES, on the one hand,
and CILCO and IPL, on the other, 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 either CILCO or IPL. Comparing the unleveraged
net incomes of CILCO and IPL 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. For example, as
reflected in Table 3, a projection of AES shows that CILCO and IPL would
represent 11.6 percent of 2000 total holding company unleveraged net
income, compared to 24.2 percent of 2000 total holding company net income.
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. This issue
is present in the case of AES, CILCO and IPL, as AES maintains a more
highly leveraged capital structure than does either CILCO or IPL. A more
accurate comparison of the scope of the businesses of CILCO and IPL, on the
one hand, to that of AES after the Transaction, on the other, is achieved
by comparing gross revenues, operating income and net assets.

                  As reflected in Table 3, a projection of AES shows that
for 2000, CILCO's and IPL's contributions to AES's gross revenues;
operating income; unleveraged net income, and net assets were 16.02, 16.26,
11.55, and 9.18 percent, respectively.

                  While these data show that the relative size of AES and
the combined utility operations of IPL and CILCO somewhat exceeds previous
Commission rulings on Section 3(a)(5) exemptions, AES's rapid current and
projected growth demonstrates that current Commission standards will be met
in the very near future. Moreover, Commission precedent supports a
temporary relaxation of strict requirements under the Act where "'the
overall consequence . . . is to make nearer the ultimate goal of
compliance." Kansas Power & Light Co., Holding Co. Act Release No. 25465
(Feb. 5, 1992) (citing Electric Bond & Share Co., Holding Co. Act Release
No. 11004 (Feb. 6, 1952)). In this instance, because of the differing
nature of AES's, CILCO's, and IPL's operations, certain of the financial
yardsticks, particularly net income, tend to overstate the two utility
companies' contributions to the merged AES/CILCORP/IPALCO system. Thus, as
explained below, the Table 3 data comparing gross revenues, operating
income, unleveraged net income and net assets present the most accurate
representation of the relative size of CILCO and IPL to the merged
AES/CILCORP/IPALCO system.

                  It should be emphasized that the Commission has 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."(27) Id.

--------

27       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.

                      (b) MATERIALITY OF IPL REVENUES

                  As noted previously, AES will commit to enter into an
agreement with an unaffiliated person within three years of completion of
the Transaction to divest its ownership of the assets and business of CILCO
that are subject to Commission jurisdiction under the Act. Table 4 below
sets forth IPL's contribution to AES's revenues, other than revenues
contributed by CILCO's PUHCA-jurisdictional utility activities.(28)

--------

28         Exhibit K-4 sets forth the percentages for IPL contributions in
           accordance with GAAP.

<TABLE>
<CAPTION>

                                  Table 4
                            IPL Contributions To
                  AES/IPALCO Consolidated Holding Company
                     (Proportional Consolidation Basis)
                                   ($MM)

                                                                 1998            1999          2000**

<S>                                                             <C>             <C>             <C>
GROSS REVENUES*                                                 16.71%          15.39%          9.87%
IPL                                                              786             800             839
IPALCO                                                            35              34             34
AES (excluding CILCO PUHCA-jurisdictional activities)           3,883           4,365           7,634
AES/IPALCO                                                      4,704           5,200           8,507

OPERATING INCOME                                                20.23%          17.68%         11.83%
IPL                                                              261             268             271
IPALCO                                                           (1)              -               2
AES (excluding CILCO PUHCA-jurisdictional activities)           1,029           1,248           2,014
AES/IPALCO                                                      1,288           1,516           2,287

NET INCOME                                                      32.49%          39.57%         18.36%
IPL                                                              140             137             139
IPALCO                                                           (10)            (9)             (6)
AES (excluding CILCO PUHCA-jurisdictional activities)            301             218             624
AES/IPALCO                                                       431             346             757

UNLEVERAGED NET INCOME                                          19.23%          14.64%          8.43%
IPL                                                              179             176             177
IPALCO                                                            16              18             16
AES (excluding CILCO PUHCA-jurisdictional activities)            736            1,008           1,907
AES/IPALCO                                                       931            1,202           2,100

NET ASSETS                                                      13.41%          8.02%           6.01%
IPL                                                             1,953           1,979           1,935
IPALCO                                                           166             337             335
AES (excluding CILCO PUHCA-jurisdictional activities)           12,449          22,346         29,902
AES/IPALCO                                                      14,568          24,662         32,172

*    In calculating the gross revenues percentage, the numerator is equal
     to the total gross business revenues of IPL, excluding all revenues
     from non-utility activities (nearly all of which are from steam
     sales). The denominator is comprised of all business revenues
     (including revenues from all IPALCO and IPL non-utility activities)
     plus all of AES's business revenues (including projected revenues from
     CILCO's generation, which is expected to be held by AES as an EWG).
**   Projected.
</TABLE>

                  Table 4 shows that the acquisition of IPL, without CILCO
PUHCA-jurisdictional businesses, fully falls within existing Commission
precedent. In this case for the year 2000, a projection of AES shows that
IPL revenues represent 9.87 percent of AES's gross revenues, 11.83 percent
of its operating income, 8.43 percent of unleveraged net income, and 6.01
percent of its net assets. On the basis of prior Commission determinations,
these contributions clearly are not a material portion of AES's income.

                       (c) SIZE OF UTILITY 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."(29)
This concern about size under Section 3(a)(5) was articulated in Cities
Service, 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,
non-utility domestic businesses. The Commission emphasized that the fact
that a holding company's domestic utility 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. Cities Service, 8 SEC
at 334-335. The Commission reiterated this point in AES. AES at 17-18.

--------

29       Gaz Metropolitain, 58 SEC at 193 (quoting Electric Bond and Share).

                  The merged AES/CILCORP/IPALCO system will satisfy both
the "small in size" standard and the policy concern underlying the
standard. CILCO's and IPL's U.S. utility operations, considered in the
aggregate, 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
those that confronted the Commission in early cases such as Electric Bond
and Share and Cities Service. There 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 *20. 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 and growing 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 17 foreign countries. AES owns and/or operates (entirely or
in part) 32,656 MW of generating capacity located outside of the United
States.(30) As demonstrated on Exhibit K-12, 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 14 companies located outside of the United States that sell
electricity directly to commercial, industrial, governmental, and
residential customers. These 14 companies serve a total of approximately 16
million foreign customers with sales of approximately 132,000
gigawatt-hours. On a net equity basis, AES's ownership in these companies
represents approximately 5.3 million foreign customers and foreign sales of
approximately 39,800 gigawatt-hours. AES's projections for the year 2000
show that its operations continue to be predominantly foreign.
Specifically, its foreign operations will contribute, on a proportional
consolidation basis, 79 percent of AES's gross revenues and 70 percent of
AES's operating income.

                  As the facts set forth in this Application demonstrate,
AES continues to be a global energy company whose present business, both
domestic and foreign, is primarily 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. Given that its business and experience
has always been within the utility industry, primarily the deregulated and
competitive sectors of that industry, it is, as the Commission affirmed in
AES, the type of company for which the 3(a)(5) exemption was designed.(31)

--------

30       23,023 MW on a net equity basis.

31       For example, in 1999, AES earned 92 percent of its pro-forma
         revenues on a proportional consolidation basis, from exempt
         utility operations. On a pro-forma GAAP basis, AES earned 89
         percent of its revenues from its exempt utility business. (On an
         actual, as reported, basis, these amounts were 98 percent and 97
         percent from proportional consolidation and GAAP, respectively.)
         In 1999, a combined AES/IPALCO (including CILCO) would have earned
         79 percent of its revenues on a proportional consolidation basis
         from exempt utility operations. On a GAAP basis, a combined
         AES/IPALCO would have earned 74 percent of its gross revenues from
         exempt utility operations. (On a combined AES/IPALCO basis, only
         giving effect to the actual results of CILCO during 1999, these
         amounts would be 83 percent and 78 percent for proportional
         consolidation and GAAP, respectively).

                  As with its acquisition of CILCO, AES's acquisition of
IPALCO 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 both CILCO and IPL to
compete more effectively in restructured energy markets. This distinguishes
AES 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 AES the
exemption in connection with its acquisition of IPL will ensure that the
Section 3(a)(5) exemption continues to be available to those companies for
which it was intended, and not to those companies that 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.

                  The U.S. utility operations of CILCO and IPL 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." Cities Service
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. 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. Electric Bond and
Share, 1952 WL 1058 at *16. 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. The Commission cited 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 "approxi mately 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 and IPL's combined 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 served 21.2 percent of all customers in the
states where it did business, provided 18.2 percent of all gas consumed and
accounted for 19.2 percent of total gas reserves. CILCO and IPL, on the
other hand, serve only 3.9 percent of all utility customers served by
utilities doing business in Illinois and Indiana and account for only 3.5
percent of all utility assets and only 3.6 percent of total utility
revenues (see Exhibit K-5). 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 seven utility companies larger than CILCO and IPL
combined in Illinois and Indiana in terms of revenues and assets and nine
that are larger in terms of customers (see Exhibit K-5), while only one gas
company was larger than Electric Bond in its three-state service area.
Cities Service, in sharp contrast to CILCO and IPL, had operations in 19
states, compared to CILCO's and IPL's operations in only two states. It
also should be noted that an analysis of the size of CILCO's and IPL's
utility activities should reflect the realities of today's public utility
markets. Since 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 Commission precedent, 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. The utility operations of CILCO and IPL
are small in size relative to other utilities, whether on a state,
regional(32), or national basis. The data establishes that the activities
of CILCO and IPL are small in scale.

--------

32       The Region for these purposes is defined as the States of Illinois
         and Indiana and the six states bordering them - Iowa, Kentucky,
         Michigan, Missouri, Ohio, and Wisconsin.

                           (d)      SIZE OF COMBINED CILCO/IPL OPERATIONS

                  Exhibit K-6 compares CILCO/IPL's combined electric and
gas utility activities to other regional combination electric and gas
utilities, again in terms of revenues, assets and customers.(33) According
to all three measures, CILCO/IPL's combined electric and gas utility
business accounts for:

                 o         2.9 percent of the Region's combination electric
                           and gas utility revenue,
                 o         2.8 percent of the Region's combination electric
                           and gas utility assets, and
                 o         2.7 percent of the Region's combination electric
                           and gas utility customers.(34)

--------

33       The data contained in Exhibit K-6 through K-12 was analyzed,
         organized and graphed by LECG, Inc. ("LECG"), an economic
         consulting service located in Washington, DC. The source of LECG's
         data was Resource Data International, Inc., which utilizes Federal
         Energy Regulatory Commission Form 1 filings and Securities and
         Exchange Commission Forms 10-K and 10-Q filings as sources. At the
         time this Application was filed, the most recent data that had
         been collected and evaluated related to conditions as of December
         31, 1998. AES will update this Application with more recent data
         as it becomes available, but it believes that the data submitted
         remains valid for purposes of ordinal classification and relative
         comparisons.

34       The Commission found in AES that CILCO's gas utility revenues,
         assets, and customers are small on a state, regional, and national
         basis. Since that determination in August 1999, no transactions or
         other market developments have occurred that have altered the
         absolute or relative size of CILCO's gas operations to any
         material degree. Because its proposed acquisition of IPALCO does
         not affect the size of AES's gas utility operations, this
         Application does not treat this matter in any greater detail.

Out of 19 combination electric and gas utilities in the Region, CILCO/IPL
is ranked 15th in terms of assets and customers and 14th in terms of
revenue. The 14 combination companies larger than CILCO/IPL in terms of
assets and customers hold 93.7 percent of the assets and serve 93.8 percent
of the customers. The 13 combination companies larger than CILCO/IPL in
terms of revenue have 91.8 percent of the all regional revenues. Only 5.3
percent of the Region's combination electric and gas utility revenues are
earned by combination electric and gas utility companies with less revenues
than CILCO/IPL; only 3.5 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/IPL; and only 3.5 percent of the
Region's combination electric and gas utility customers are served by
combination electric and gas utilities with fewer customers than CILCO/IPL.

                  Exhibit K-7 compares CILCO/IPL's total utility activities
to all other regional utilities (electric, gas and combination electric and
gas), again in terms of assets, revenues and customers. According to all
three measures, CILCO/IPL's combined electric and gas utility business
accounts for:

                 o         1.8 percent of Region's utility revenues,
                 o         1.7 percent of Region's utility assets, and
                 o         1.8 percent of Region's utility customers.

Out of 45 investor-owned utilities in the Region, CILCO/IPL would be ranked
17th in terms of revenue, 19th in terms of assets, and 21st in terms of
customers. The 16 largest utilities in terms of revenue earn 87.2 percent
of the utility revenues, the 18 largest utilities in terms of assets have
91.1 percent of the utility assets, and the 20 largest utilities in terms
of customers serve 92.2 percent of the utility customers. Only 10.9 percent
of the Region's total utility revenues are earned by utility companies with
less revenues than CILCO/IPL; only 7.2 percent of the Region's total
utility assets are owned by utility companies with fewer assets than
CILCO/IPL; and only 6 percent of the Region's total utility customers are
served by utilities with fewer customers than CILCO/IPL.

                  Exhibit K-8 compares CILCO/IPL'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/IPL's combined electric and gas utility business accounts
for:

                 o         1.1 percent of U.S. combination electric and gas
                           utility revenue,
                 o         1.1 percent of U.S. combination electric and gas
                           utility assets, and
                 o         1.0 percent of U.S. combination electric and gas
                           utility customers.

In terms of revenues, CILCO/IPL would rank 31st of combined gas and
electric companies in the U.S. The 30 companies larger than CILCO/IPL in
terms of revenue earn 91.7 percent of combined gas and electric company
revenues. In terms of assets, CILCO/IPL also is ranked 32nd. The 31
companies larger than CILCO/IPL in terms of assets have 92.4 percent of the
assets. In terms of customers, CILCO/IPL is ranked 31st. The 30 companies
larger than CILCO/IPL in terms of customers serve 91.5 percent of the
customers. Only 7.2 percent of U.S. combination electric and gas utility
revenues are earned by combination electric and gas utility companies with
fewer revenues than CILCO/IPL; only 6.5 percent of U.S. combination
electric and gas utility assets are owned by combination electric and gas
utility companies with fewer assets than CILCO/IPL; and only 7.4 percent of
U.S. combination electric and gas utility customers are served by
combination electric and gas utilities with fewer customers than CILCO/IPL.

                  Exhibit K-9 further compares CILCO/IPL'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/IPL's combined electric and gas
utility business accounts for:

                 o         0.6 percent of U.S. utility revenues,
                 o         0.5 percent of U.S. utility assets, and
                 o         0.5 percent of U.S. utility customers.

In terms of revenue, CILCO/IPL would be ranked 50th of investor-owned
utilities. The 49 companies larger than CILCO/IPL in terms of revenue earn
84.2 percent of utility revenues. In terms of assets, CILCO/IPL ranks 52nd.
The 51 companies larger than CILCO/IPL in terms of assets have 86.4 percent
of utility assets. In terms of customers, CILCO/IPL is ranked 51st. The 50
companies larger than CILCO/IPL serve 69.3 percent of utility customers.
Only 15.2 percent of U.S. utility revenues are earned by utility companies
with fewer revenues than CILCO/IPL; only 13.1 percent of U.S. utility
assets are owned by utility companies with fewer assets than CILCO/IPL; and
only 15.1 percent of U.S. utility customers are served by utilities with
fewer customers than CILCO/IPL.

                         (e) SIZE OF IPL OPERATIONS

                  Following divestiture of CILCO's PUHCA-jurisdictional
assets, the absolute and relative size of AES's utility operations would
drop correspondingly. Exhibit K-10 compares IPL's electric utility
activities to other Indiana electric utilities in terms of assets, revenues
and customers. According to all three measures, IPL's electric utility
business accounts for:

                 o         4.3 percent of Indiana electric utility
                           revenues;
                 o         4.9 percent of Indiana electric utility assets,
                           and
                 o         6.0 percent of Indiana electric utility
                           customers.

Out of six investor-owned electric utility companies in Indiana, IPL is
ranked fourth in terms of assets and revenues and number three in terms of
customers. The three largest electric utility companies in Indiana in terms
of revenues and assets earn 91.5 percent of electric utility revenues and
have 92.1 percent of the electric utility assets. The two largest electric
utility companies in Indiana in terms of customers serve 86.4 percent of
all electric utility customers. Only 4.1 percent of Indiana electric
utility revenues are earned by electric utility companies with less
revenues than IPL; only 3.0 percent of Indiana' electric utility assets are
owned by electric utility companies with fewer assets than IPL; and only
1.7 percent of Indiana electric utility customers are served by electric
utilities with fewer customers than IPL.

                  Exhibit K-11 compares IPL's electric utility activities
to other regional electric utilities in terms of assets, revenues and
customers. According to all three measures, IPL's electric utility business
accounts for:

                 o         1.7 percent of the Region's electric utility
                           revenues,
                 o         1.5 percent of the Region's electric utility
                           assets, and
                 o         2.0 percent of the Regions's electric utility
                           customers.

Out of 18 investor-owned electric utility companies in the Region, IPL is
ranked number 13 based on revenues and assets and customers. The electric
utility companies in the Region larger than IPL earn 94.8 percent of
electric utility revenues, have 95.7 percent of electric utility assets and
serve 94.6 percent of electric utility customers. Only 3.5 percent of the
Region's electric utility revenues are earned by electric utility companies
with fewer revenues than IPL; only 2.8 percent of the Region's electric
utility assets are owned by electric utility companies with fewer assets
than IPL; and only 3.5 percent of the Region's electric utility customers
are served by electric utilities with fewer customers than IPL.

                  The Exhibits described above clearly indicate that IPL's
utility operations are small in size, particularly when compared to other
utilities in the state and the Region. Comparing the size of IPL's utility
operations to all United States utilities, again in terms of revenues,
assets and customers, makes it even clearer that IPL's utility operations
are small in size.

                  Exhibit K-12 compares IPL's electric utility activities
to all other United States electric utilities in terms of assets, revenues
and customers. According to all three measures, IPL's electric utility
business accounts for:

                 o         0.4 percent of U.S. electric utility revenues,
                 o         0.4 percent of U.S. electric utility assets, and
                 o         0.5 percent of U.S. electric utility customers.

In terms of revenue, IPL is ranked 61st of electric utilities. The 60
electric utility companies larger than IPL earn 94 percent of electric
utility company revenues. In terms of assets, IPL ranks 66th. The 65
electric utility companies larger than IPL own 95.9 percent of electric
utility assets. In terms of customers, IPL is ranked 58th. The 57 companies
larger than IPL in terms of customers serve 92.7 percent of electric
utility customers. Only 5.6 percent of U.S. electric utility revenues are
earned by electric utility companies with less revenues than IPL; only 3.7
percent of United States electric utility assets are owned by electric
utility companies with fewer assets than IPL; and only 6.8 percent of
United States electric utility customers are served by electric utilities
with fewer customers than IPL.

                  The above data demonstrates clearly that IPL is small in
size, measured by all relevant yardsticks. For this reason, AES's
acquisition of IPL complies fully with Commission precedent applying
Section 3(a)(5).

         D.       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, which
to issue its approval will examine whether the Transaction (1) will
adversely affect competition; (2) will adversely affect the wholesale rates
of IPL and CILCO; and (3) will have an adverse effect on federal or state
regulation. AES and IPALCO filed an application for approval with the FERC
on November 14, 2000.

                  The IURC must confirm to the Commission under Section
33(a)(2), that it has the authority and resources to protect Indiana
consumers and that it intends to exercise such authority. It did so in a
letter to the Commission dated September 28, 2000.

                  After AES's acquisition of IPALCO, IPL's operations will
continue to be subject to regulation by the FERC and the IURC, both of
which regulate utility transactions with affiliates. With respect to the
IURC, the Indiana Code specifically grants the IURC jurisdiction over
affiliate transactions with electric and gas public utilities "to the
extent of access to all accounts and records of joint or general expenses,
any portion of which may be applicable to such transactions, and to the
extent of authority to require such reports to be submitted by such
affiliated interests, as the [IURC] may prescribe." Ind. Code ss.
8-1-2-49(2). Thus, the IURC 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 IPL or if any costs associated
with such entity are allocated to IPL. In addition, the Indiana Code
requires that management, construction, engineering, or similar contracts
that a utility makes with an affiliated interest must be filed with the
IURC and will not be effective until filed. The IURC may disapprove any
contract that it finds, after investigation and a hearing, not to be in the
public interest.

                  After AES's acquisition of IPALCO, 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
ICC 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 has adopted rules and
regulations governing the relationship between electric utilities and their
affiliates. See 83 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.

                  Furthermore, AES will file certificates with the
Commission under Rule 24, within 60 days after the end of each calendar
quarter beginning January 1, 2001, for a period of three years, and then
every six months thereafter, that provide to the Commission the following
information:

        o         a statement of income and balance sheet, for the 12-month
                  period then ending, of (i) AES, (ii) IPALCO and (iii)
                  IPL, (iv) CILCORP, and (v) CILCO;

        o         updated Table 3 and 4 (see pages 28 and 34 supra)

        o         for AES, IPALCO, and CILCORP: (i) the total number of
                  megawatts of generating capacity; (ii) the revenues
                  earned from such generating capacity; (iii) the change in
                  such capacity and revenues since the filing of the
                  previous certificate and (iv) the location of any
                  additional capacity;

        o         for both AES, IPALCO, and CILCORP: (i) the amount of
                  electric transmission and electric and gas distribution
                  assets owned; (ii) the revenues from such assets and
                  (iii) the change in such assets since the filing of the
                  previous certificate;

        o         information regarding any sale or transfer of any CILCO
                  or IPL electric and/or gas utility assets to any
                  affiliate company in the AES system; and

        o         copies of any applications to and orders from the ICC
                  that relate to AES's ownership of or oversight over the
                  operation of CILCORP and/or CILCO, and copies of any
                  applications to and orders from the IURC that relate to
                  AES's ownership of or oversight over the operation of
                  IPALCO and/or IPL.

ITEM 4.           REGULATORY APPROVAL

                  The Share Exchange Agreement is subject to the approval
of IPALCO's shareholders and is expected to be approved by IPALCO's
shareholders at a special meeting to be held October 20, 2000. The
Transaction also is subject to approval by the FERC. AES and IPALCO filed
an application for this approval on November 14, 2000. The Transaction is
subject to the notification and reporting requirements of the HSR Act. AES
and IPALCO made the necessary filings under this statute on November 14,
2000. Section 33(a)(2) of the Act requires that the IURC must make a
certification to the Commission under that section in connection with the
Transaction. The IURC made that certification in a letter to the Commission
dated September 28, 2000.

ITEM 5.           PROCEDURE

                  The Commission issued and published a notice with respect
to the filing of this Application on December 29, 2000. That notice
specified a date of not later than January 23, 2001 by which comments may be
entered. AES requests that the Commission enter not later than March 1,
2001 an order granting and permitting this Application to become effective.

                  AES hereby (i) waives a recommended decision by a hearing
officer, (ii) waives a recommended decision by any other responsible
officer or the Commission, (iii) consents that the Division of Investment
Management may assist in the preparation of the Commission's decision and
(iv) waives a 30-day waiting period between the issuance of the
Commission's order and the date on which it is to become effective.

ITEM 6.           EXHIBITS AND FINANCIAL STATEMENTS

A-1      Articles of Incorporation of AES (Exhibit 3.1 to AES's Quarterly
         Report on Form 10-Q for the quarter ended June 30, 1998, filed
         August 14, 1998, File No. 1-12291,
         and incorporated herein by reference)
A-2      By-Laws of AES (Exhibit 3.2 to AES's Quarterly Report on Form 10-Q
         for the quarter ended June 30, 1998, filed August 14, 1998, File
         No. 1-12291, and incorporated herein by reference)
A-3      Articles of Incorporation of IPALCO (Exhibit 3.1 to IPALCO's
         Quarterly Report on Form 10-Q for the quarter ended June 30, 1997,
         filed August 13, 1997, File No.
         1-8644, and incorporated herein by reference)
A-4      By-Laws of IPALCO (Exhibit 3.2 to IPALCO's Quarterly Report on
         Form 10-Q for the quarter ended March 31, 1999 (Exhibit G-4
         hereto), filed May 14, 1999, File No. 1-8644, and incorporated
         herein by reference)

B-1      Agreement and Plan of Share Exchange (Annex A to Exhibit C-1 hereto)

C-1      Registration Statement of AES on Form S-4, as amended (File No.
         333-43908, filed August 16, 2000, and amended September 1 and
         September 14, 2000, and incorporated herein by reference)

D-1      Application to FERC together with testimony and exhibits
         (previously filed)

E-1      AES organization chart (to be filed by amendment)
E-2      IPALCO organization chart (to be filed by amendment)
E-3      Combined company organization chart after the Transaction (to be
         filed by amendment)

F-1      Opinions of AES and IPALCO 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, 1998 (File No. 1-12291, filed March 30, 1999, and
         incorporated herein by reference)
G-2      AES's Quarterly Report on Form 10-Q for the quarters ended March
         31, 1999, June 30, 1999 and September 30, 1999 (File No. 1-12291
         and incorporated herein by reference)
G-3      IPALCO's Annual Report on Form 10-K for the fiscal year ended
         December 31, 1998 (File No. 1-8644, filed February 25, 1999, and
         incorporated herein by reference)
G-4      IPALCO's Quarterly Report on Form 10-Q for the quarters ended
         March 31, 1999, June 30, 1999 and September 30, 1999 (File No.
         1-8644 and incorporated herein by reference)
G-5      AES's Annual Report on Form 10-K for the fiscal year ended
         December 31, 1999 (File No. 0-19281, filed March 30, 2000, and
         incorporated herein by reference)
G-6      IPALCO's Annual Report on Form 10-K for the fiscal year ended
         December 31, 1999 (File No. 1-8644, filed March 1, 2000, and
         incorporated herein by reference)

H-1      Proposed Form of Notice (previously filed)

K-1      AES Subsidiaries (previously filed)
K-2      Generating Plants in Operation (previously filed)
K-3      Global Map of Generating Plants and Distribution Companies
         (previously filed)
K-4      GAAP Basis Presentation of CILCO/IPL and IPL Contributions To AES
         Consolidated Holding Company (previously filed) K-5 Market Shares
         for Utilities in Illinois and Indiana (previously filed) K-6
         Market Shares for Gas and Electric Utilities in Illinois, Indiana
         and Bordering States (previously filed) K-7 Market Shares for
         Utilities in Illinois, Indiana and Bordering States (previously
         filed) K-8 Market Shares for Gas and Electric Utilities in the US
         (previously filed) K-9 Market Shares for Utilities in the US
         (previously filed) K-10 Market Shares for Electric Utilities in
         Indiana (previously filed) K-11 Market Shares for Electric
         Utilities in Indiana and Bordering States (previously filed) K-12
         Market Shares for Electric Companies in the US (previously filed)
         K-13 IURC Letter to the Securities and Exchange Commission
         (previously filed)

         B.       FINANCIAL STATEMENTS

FS-1     AES Consolidated Balance Sheet as of December 31, 1998 (previously
         filed with the Commission in AES's Annual Report on Form 10-K for
         the year ended December 31, 1998 (Exhibit G-1 hereto), filed March
         30, 1999, File No. 1-12291,
         and incorporated herein by reference)
FS-2     AES Consolidated Balance Sheet as of September 30, 1999
         (previously filed with the Commission in AES's Quarterly Report on
         Form 10-Q for the quarter ended September 30, 1999 (Exhibit G-2
         hereto), filed November 15, 1999, File No.
         1-12291, and incorporated herein by reference)
FS-3     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 10-K for the year ended December 31, 1998
         (Exhibit G-1 hereto), filed March 30, 1999, File No. 1-12291, and
         incorporated herein by reference)
FS-4     AES Consolidated Statement of Income for the 9 months ended
         September 30, 1999 (previously filed with the Commission in AES's
         Quarterly Report on Form 10-Q for the quarter ended September 30,
         1999 (Exhibit G-2 hereto), filed November 15, 1999, File No.
         1-12291, and incorporated herein by reference)
FS-5     IPALCO Consolidated Balance Sheet as of December 31, 1998
         (previously filed with the Commission in IPALCO's Annual Report on
         Form 10-K for the year ended December 31, 1998 (Exhibit G-3
         hereto), filed February 25, 1999, File No. 1-8644,
         and incorporated herein by reference)
FS-6     IPALCO Consolidated Balance Sheet as of September 30, 1999
         (previously filed with the Commission in IPALCO's Quarterly Report
         on Form 10-Q for the quarter ended September 30, 1999 (Exhibit G-4
         hereto), filed November 12, 1999, File No.
         1-8644, and incorporated herein by reference)
FS-7     IPALCO Consolidated Statement of Income for the 12 months ended
         December 31, 1998 (previously filed with the Commission in
         IPALCO's Annual Report on Form 10-K for the year ended December
         31, 1998 (Exhibit G-3 hereto), filed February 25, 1999, File No.
         1-8644, and incorporated herein by reference)
FS-8     IPALCO Consolidated Statement of Income for the 9 months ended
         September 30, 1999 (previously filed with the Commission in
         IPALCO's Quarterly Report on Form 10-Q for the quarter ended
         September 30, 1999 (Exhibit G-4 hereto), filed November 12, 1999,
         File No. 1-8644, and incorporated herein by reference)
FS-9     AES Consolidated Balance Sheet as of December 31, 1999 (previously
         filed with the Commission in AES's Annual Report on Form 10-K for
         the year ended December 31, 1999 (Exhibit G-5 hereto), filed March
         30, 2000, File No. 1-12291,
         and incorporated herein by reference)
FS-10    AES Consolidated Statement of Income for the 12 months ended
         December 31, 1999 (previously filed with the Commission in AES's
         Annual Report on Form 10-K for the year ended December 31, 1999
         (Exhibit G-5 hereto), filed March 30, 2000, File No. 1-12291, and
         incorporated herein by reference)
FS-11    IPALCO Consolidated Balance Sheet as of December 31, 1999
         (previously filed with the Commission in IPALCO's Annual Report on
         Form 10-K for the year ended December 31, 1999 (Exhibit G-6
         hereto), filed March 1, 2000, File No. 1-8644,,
         and incorporated herein by reference)
FS-12    IPALCO Consolidated Statement of Income for the 12 months ended
         December 31, 1999 (previously filed with the Commission in
         IPALCO's Annual Report on Form 10-K for the year ended December
         31, 1999 (Exhibit G-6 hereto), filed March 1, 2000, File No.
         1-8644,, and incorporated herein by reference)



                [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]


                                 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, and the undersigned individuals have signed this Application on
their own behalf.

                             The AES Corporation


                             By:  /s/  Barry J. Sharp
                                  -----------------------------------------
                                  Name:   Barry J. Sharp
                                  Title:  Senior Vice President and Chief
                                          Financial Officer


                                  /s/  Dennis W. Bakke
                                  ---------------------------------------
                                       Dennis W. Bakke


                             By:  /s/  Roger W. Sant
                                  ---------------------------------------
                                       Roger W. Sant


Date:  January 4, 2001






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