COLUMBUS, Ohio, Sept. 14, 2016 /PRNewswire/ -- American
Electric Power (NYSE: AEP) has signed an agreement to sell four
competitive power plants totaling approximately 5,200 megawatts
(MW) for approximately $2.17 billion
to a newly formed joint venture of Blackstone (NYSE: BX) and
ArcLight Capital Partners LLC (ArcLight).
The sale agreement includes:
- Lawrenceburg Generating Station, 1,186 MW natural gas,
Lawrenceburg, Indiana
- Waterford Energy Center, 840 MW natural gas, Waterford, Ohio
- Darby Generating Station, 507 MW natural gas, Mount Sterling, Ohio
- Gen. James M. Gavin Plant, 2,665
MW coal, Cheshire, Ohio
AEP announced in January 2015 that
the company was exploring strategic alternatives for these power
plants, including a potential sale. All of this generating capacity
is located in the region served by the PJM
Interconnection.
"AEP's long-term strategy has been to become a fully regulated,
premium energy company focused on investment in infrastructure and
the energy innovations that our customers want and need. This
transaction advances that strategy and reduces some of the business
risks associated with operating competitive generating assets,"
said Nicholas K. Akins, AEP
chairman, president and chief executive officer.
"Our employees have done an incredible job operating these power
plants in PJM, and I'm confident that they will contribute to the
future success of Blackstone and ArcLight. We will continue to
operate these plants safely in the coming months while working
closely with the Blackstone and ArcLight teams to obtain the
regulatory approvals necessary to complete the sale. We also will
be working with employees and community leaders to ensure a smooth
transition," Akins said.
"Blackstone and ArcLight are two of the leading private equity
funds focused on energy infrastructure, with significant
investments and experience owning and operating power generation in
North America and Europe. Combined they have owned and operated
more than 38,000 megawatts of power generation globally, including
operations in the PJM Interconnection, New York ISO and Electric
Reliability Council of Texas
competitive markets in the United
States," Akins said.
The sale is expected to close in the first quarter of 2017. AEP
expects to net approximately $1.2
billion in cash after taxes, repayment of debt associated
with these assets and transaction fees. The company is evaluating
options and will share details about its plans for investment of
the proceeds from this transaction at an analyst day Nov. 1. These plans may involve reinvestment in
its regulated businesses, including transmission; renewable
projects; additional debt retirement; and share buybacks.
AEP expects to record an after-tax gain of approximately
$140 million from the sale, subject
to inventory true-ups, income tax and other adjustments.
The sale is subject to regulatory approvals from the Federal
Energy Regulatory Commission, the Indiana Utility Regulatory
Commission and federal clearance pursuant to the Hart-Scott-Rodino
Antitrust Improvements Act of 1976.
Goldman Sachs and Co. served as AEP's lead financial advisor for
the strategic evaluation of these assets. Citigroup Global Markets
Inc. also served as a financial advisor for AEP during the process.
Simpson Thacher and Bartlett
served as legal counsel.
AEP owns 2,677 MW of additional competitive generation in
Ohio. The company is continuing an
independent strategic evaluation of that generation while also
working on the restructuring of Ohio electricity regulations to allow those
assets to be acquired by AEP Ohio for the benefit of its customers.
AEP also is continuing a separate strategic review of its 48 MW
hydroelectric Racine Plant in Racine,
Ohio.
American Electric Power is one of the largest electric utilities
in the United States, delivering
electricity and custom energy solutions to nearly 5.4 million
customers in 11 states. AEP owns the nation's largest electricity
transmission system, a more than 40,000-mile network that includes
more 765-kilovolt extra-high voltage transmission lines than all
other U.S. transmission systems combined. AEP also operates 224,000
miles of distribution lines. AEP ranks among the nation's largest
generators of electricity, owning approximately 31,000 megawatts of
generating capacity in the U.S. AEP also supplies 3,200 megawatts
of renewable energy to customers. AEP's utility units operate as
AEP Ohio, AEP Texas, Appalachian Power (in Virginia and West
Virginia), AEP Appalachian Power (in Tennessee), Indiana Michigan Power, Kentucky
Power, Public Service Company of Oklahoma, and Southwestern Electric Power
Company (in Arkansas, Louisiana and east Texas). AEP's headquarters are in Columbus, Ohio.
This report made by American Electric Power and its Registrant
Subsidiaries contains forward-looking statements within the meaning
of Section 21E of the Securities Exchange Act of 1934. Although AEP
and each of its Registrant Subsidiaries believe that their
expectations are based on reasonable assumptions, any such
statements may be influenced by factors that could cause actual
outcomes and results to be materially different from those
projected. Among the factors that could cause actual results to
differ materially from those in the forward-looking statements are:
the economic climate, growth or contraction within and changes in
market demand and demographic patterns in AEP's service territory;
inflationary or deflationary interest rate trends; volatility in
the financial markets, particularly developments affecting the
availability of capital on reasonable terms and developments
impairing AEP's ability to finance new capital projects and
refinance existing debt at attractive rates; the availability and
cost of funds to finance working capital and capital needs,
particularly during periods when the time lag between incurring
costs and recovery is long and the costs are material; electric
load, customer growth and the impact of competition, including
competition for retail customers; weather conditions, including
storms and drought conditions, and AEP's ability to recover
significant storm restoration costs; the costs of, and
transportation for, fuels and the creditworthiness and performance
of fuel suppliers and transporters; availability of necessary
generating capacity and the performance of AEP's generating plants;
AEP's ability to recover fuel and other energy costs through
regulated or competitive electric rates; AEP's ability to build
transmission lines and facilities (including the ability to obtain
any necessary regulatory approvals and permits) when needed at
acceptable prices and terms and to recover those costs; new
legislation, litigation and government regulation, including
oversight of nuclear generation, energy commodity trading and new
or heightened requirements for reduced emissions of sulfur,
nitrogen, mercury, carbon, soot or particulate matter and other
substances, or additional regulation of fly ash and similar
combustion products that could impact the continued operation, cost
recovery, and/or profitability of AEP's generation plants and
related assets; evolving public perception of the risks associated
with fuels used before, during and after the generation of
electricity, including nuclear fuel; a reduction in the federal
statutory tax rate that could result in an accelerated return of
deferred federal income taxes to customers; timing and resolution
of pending and future rate cases, negotiations and other regulatory
decisions, including rate or other recovery of new investments in
generation, distribution and transmission service and environmental
compliance; resolution of litigation; AEP's ability to constrain
operation and maintenance costs; AEP's ability to develop and
execute a strategy based on a view regarding prices of electricity
and other energy-related commodities; prices and demand for power
that AEP generates and sells at wholesale; changes in technology,
particularly with respect to new, developing, alternative or
distributed sources of generation; AEP's ability to recover through
rates or market prices any remaining unrecovered investment in
generating units that may be retired before the end of their
previously projected useful lives; volatility and changes in
markets for capacity and electricity, coal, and other
energy-related commodities, particularly changes in the price of
natural gas and capacity auction returns; changes in utility
regulation and the allocation of costs within regional transmission
organizations, including ERCOT, PJM and SPP; the transition to
market for generation in Ohio,
including the implementation of ESPs and AEP's ability to recover
investments in its Ohio generation
assets; AEP's ability to successfully and profitably manage its
separate competitive generation assets; changes in the
creditworthiness of the counterparties with whom AEP has
contractual arrangements, including participants in the energy
trading market; actions of rating agencies, including changes in
the ratings of AEP debt; the impact of volatility in the capital
markets on the value of the investments held by AEP's pension,
other postretirement benefit plans, captive insurance entity and
nuclear decommissioning trust and the impact of such volatility on
future funding requirements; accounting pronouncements periodically
issued by accounting standard-setting bodies; and other risks and
unforeseen events, including wars, the effects of terrorism
(including increased security costs), embargoes, cyber security
threats and other catastrophic events.
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SOURCE American Electric Power