The leaders of American Electric Power Co. have received interest from a “robust” list of possible buyers for their unregulated renewable energy assets and expect to strike a deal for the portfolio in the coming months.
AEP Chairman and CEO Nick Akins and President and CFO Julie Sloat announced early this year they planned to bring to market a portfolio comprising 1,365MW of generation assets in 11 states. They began that process nearly two months ago and Sloat on Oct. 27 said the team expects to be able to sign a sale agreement early next year. The transaction would then close by mid-2023.
Speaking to analysts and investors after reporting AEP’s third-quarter results – operating profits of $831 million on revenues of $5.5 billion, up year over year from $717 million and $4.6 billion, respectively – Akins said the interested parties that have inquired about the renewables group includes “the usual suspects that you would think of and beyond.” He added that the suitors are split roughly 60/40 in favor of strategic buyers over investment firms and others.
“We're very happy with the responses we received,” Akins said. “They'll go into the confidential rooms and all that kind of stuff and more due diligence will be done and we'll go through the process with them.”
The planned sale of AEP’s unregulated renewables – Akins and Sloat this summer said they have a collective book value of about $1.2 billion – is one of a handful of such deals in the market today. Duke Energy Corp. and Eversource Inc. also have put assets on the sale block and Germany’s RWE AG early this month said it will pay about $6.8 billion for the renewable energy portfolio of Consolidated Edison Inc.
The AEP team plans to use the proceeds from the unregulated renewables sale to grow their investment in transmission projects in coming years. Akins and Sloat – who will step into Akins’ CEO role Jan. 1 – are targeting $40 billion in capital investments from 2023 to 2027; nearly $11 billion of that number is allocated to distribution assets, $9.1 billion to transmission projects and nearly $9 billion to regulated renewables investments.
Shares of AEP (Ticker: AEP) fell slightly to $87.18 on Oct. 27. Over the past six months, they have lost about 15% of their value, trimming the company’s market value to about $45 billion.
