American Electric Power’s plan, announced Oct. 26, to sell its Kentucky operations will mark the first time in some eight decades that the Ohio-based giant will have sold a regulated utility. But, Chairman, President and CEO Nick Akins told analysts and investors said soon after, it’s likely not the last notable divestiture his team will look to orchestrate.
The leaders of AEP expect to net $1.45 billion from the sale of Kentucky Power Co. and AEP Kentucky Transco to a subsidiary of Algonquin Power & Utilities Corp. when the parties’ deal closes next year. While the sale will add slightly to AEP’s 2022 profits, Akins and his team also said it will eliminate their need to raise equity next year and let them further invest in clean energy projects. And that last point should be the big takeaway, Akins said: AEP’s Kentucky sale and those of other assets – including a commercial barge unit in 2015 – fit into a plan that seeks to lift its margins and reposition the company for the energy future.
“It’s a quite a move for AEP to get to a point where […], first of all, we became fully regulated and then we started to look at that portfolio to determine what’s the best approach to fuel $20 billion in potential renewables investments,” Akins said on a Oct. 28 conference call discussing AEP’s third-quarter results. The planned Kentucky sale, he added, “really should shine a light in terms of the seriousness of making sure we’re managing that portfolio in a proper way.”
Speaking to AEP’s Q3 numbers – net income of $796 million on revenues of $4.6 billion – Akins said the company’s service territory, which spans 11 states, is recovering more quickly than expected from the shocks of the COVID-19 pandemic “and is well-positioned for future economic growth.” Residential demand, he added, was down slightly from the same period of 2020 but still above that of 2019 as more people continue to work from home. (Industrial customers’ demand, however, was still 3% lower than two years prior.)
AEP shares (Ticker: AEP) were changing hands Friday around $84.50. They are down slightly over the past six months.