AEP American Electric Power Company Inc

By Matt Jarzemsky and Cassandra Sweet 

Blackstone Group LP and ArcLight Capital Partners LLC are nearing a deal to buy four Midwest power plants from American Electric Power Co. for about $2.1 billion, according to people familiar with the matter.

The private-equity firms plan to acquire the coal-fired Gavin Power Plant in Cheshire, Ohio, and three natural-gas plants in Indiana and Ohio, the people said. The deal could be announced as soon as Tuesday, they added.

The deal comes amid a slump in wholesale electricity rates, sparked by a slide in natural-gas prices and tepid demand for electricity. That has put pressure on independent power generators like the ones AEP is selling. Unlike plants that generate power for customers of regulated utilities, independent plants sell to other utilities, at market rates.

Wholesale power prices have averaged about $34.10 a megawatt-hour so far this year in 13 mid-Atlantic and Midwestern states, 21% below last year's average price, according to a Wall Street Journal analysis of data from the Energy Department.

AEP is selling the plants as part of a move away from wholesale power markets and toward its regulated utilities.

The Columbus, Ohio, company owns or operates more than 60 power plants across the U.S. About 60% of them are fueled with coal and 23% with natural gas, while 5% are run with nuclear reactors and the rest with wind and hydro power, according to the company.

The private-equity firms' multiyear investment horizon gives them an opportunity to bet on a rebound in the wholesale power market. New York-based Blackstone, the largest private-equity manager by assets, raised one of the world's largest energy funds in early 2014 and has ramped up spending on oil-and-gas deals in recent months.

Boston-based ArcLight, an energy-focused private-equity firm founded in 2001, has invested about $16.8 billion since then, according to its website.

Write to Matt Jarzemsky at matthew.jarzemsky@wsj.com and Cassandra Sweet at cassandra.sweet@wsj.com

(END) Dow Jones Newswires

September 14, 2016 02:48 ET (06:48 GMT)

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