AEP Sells Four Power Plants, Three In Ohio; Blames Deregulation

Independent U.S. power companies have been taking a beating as cheap natural gas price, rising demand for renewable energy and energy conservation initiatives continue to plague the wholesale electricity market.

The sale is expected to close in 1Q2017, pending regulatory approval. American Electric expects to net about $1.2-billion in cash after taxes, repayment of debt and transaction fees.

American Electric Power Company Inc (NYSE:AEP) went up +0.33% during trading on 9/14/2016, hitting $64.76.

Electric utility major, American Electric Power Co., Inc.

The power plants include 1,186MW gas-fired power plant in Lawrenceburg, Indiana; 840MW Waterford Energy Center in Waterford, Ohio; 507MW Darby gas-fired power plant in Mount Sterling, Ohio; and 2,665MW Gen. James M. Gavin coal-fired power plant in Cheshire, Ohio.

American Electric fell 1.4 percent to $63.81 in NY trading. 2815071 shares were traded on American Electric Power Company, Inc.'s last session.

American Electric, Blackstone, Entergy Corp and NextEra Energy now sport a Zacks Rank #3 (Hold).

AEP chief executive officer Nick Akins had said earlier this month that the company received "robust interest" in its plants up for sale and that he hoped a deal would be reached "soon".

"When shareholders buy AEP stock and when you buy a utility stock typically they're looking for stable returns on their investment and competitive power generation business is more volatile, and there's more risk associated with a return on those assets". In our view, the less likely scenario is state legislation that would allow transition and investment in the assets and address the Federal Energy Regulatory Commission's denial of AEP's affiliate sales waiver. He added that the company would likely sell the nine generating units in OH covered in the blocked PPAs and other remaining plants if state lawmakers don't act on reforms. The forecast of 14 polled investment analysts covering the stock advises investors to Buy stake in the company.

Arclight and Blackstone "are significantly involved already in owning generation assets", Bloomberg Intelligence utility analyst Kit Konolige said by phone Wednesday. "A private equity firm is able to handle the feast-or-famine cycles". The company said it is considering its options for investing those proceeds and added that details would be shared during an analyst day in November. Strategic evaluation of 2,677 megawatts of competitive generation in OH continues, according to the statement.

The sale is subject to approval by the U.S. Federal Energy Regulatory Commission, the Indiana Utility Regulatory Commission and antitrust clearance, American Electric said. A 48-megawatt hydroelectric plant in Racine, Ohio, also may be sold, the company said. American Electric Power Company Inc has recorded a 50-day moving average of $66.86 and 200-day moving average of $66.07.

  • Zachary Reyes