SAO PAULO, May 15 (Reuters) - Brazilian power company Auren said on Wednesday it signed an agreement to buy the Brazilian operation of AES Corp in a stock and cash deal.

Auren, which has operations as power supplier and generator, said the combined group would own 8.8 gigawatt in energy installed capacity, with an annual 3.5 billion reais ($681.5 million) earnings before interest, taxes, depreciation and amortization (EBITDA) based on numbers from 2023.

The deal's exchange ratio stood at about 0.76 Auren share for each AES Brasil share.

Under the agreement, shareholders from renewable power generator AES Brasil would choose to receive 10%, 50% or 100% of the exchange ratio for their holdings in cash.

Auren said the transaction would consolidate its leadership as the largest supplier of energy in Brazil, giving "an additional competitive advantage" with the power generation capacity from AES.

AES Corp, the controlling shareholder of AES Brasil, has informed it will choose to be paid entirely in cash.

In a separate statement, AES Corp said the deal would generate approximately $640 million in proceeds for the company.

"With this transaction, AES is continuing to simplify its portfolio, while meeting its strong balance sheet objectives," AES Chief Executive and President Andres Gluski said in a statement. ($1 = 5.1361 reais) (Reporting by Roberto Samora and Andre Romani Editing by Chris Reese and Leslie Adler)