American Electric Power
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AEP Adds Transmission JV Stakes to For-Sale List

July 31, 2023
Executives are still examining their options for a third venture as they continue to focus the utility on its regulated businesses.

The leaders of American Electric Power Co. have decided to put on the sale block its stakes in two transmission joint ventures as part of their plan to streamline the Columbus-based company and focus on its regulated businesses.

President and CEO Julie Sloat and her team said in May they were exploring the idea of offloading their Prairie Wind Transmission and Pioneer Transmission holdings in Kansas and Indiana, respectively, as well as their stake in a larger transmission portfolio under the Transource name. (They also have struck a deal to sell AEP’s unregulated renewables group for $1.5 billion and are looking to sell several other subsidiaries.) Any Transource deal is still being considered but Prairie Wind and Pioneer are now on the market.

AEP owns 50% of Pioneer (Duke Energy Corp. is an equal partner) and 25% of Prairie Wind, where Evergy Inc. is a 50% owner and a unit of Berkshire Hathaway Energy also owns 25%. Combined, AEP has invested $123 million in the two ventures’ property, plant and equipment and its portion of their rate base in the first six months of the year was $107 million. (By comparison, Transource has assets in six states and is 86.5% owned by AEP, with Evergy controlling the remainder. More than half of AEP’s $430 million in investments in that venture have been made in Missouri.)

On a July 27 conference call, Sloat said the transmission investment sales are happening primarily because she wants AEP to focus on its core business and be able to tell a cleaner story to investors.

“We don’t need to engage in asset sales to make the balance sheet work. What we need to do is make sure we’re being as efficient as possible,” Sloat told analysts. “I want to make sure that every dollar we do put to work is one that makes sense for our customers but also is something that makes sense for our service territories.”

Sloat and CFO Ann Kelly announced the transmission venture sale plan along with AEP’s second-quarter earnings, which came in at $521 million, slightly below prior-year numbers, on revenues of $4.4 billion. Higher interest rates and mild spring weather compared to 2022 weighed on those numbers, the executives said. Normalized residential sales fell 2.4% year over year while industrial sales were essentially flat. Commercial sales, however, grew nearly 8%--in line with Q1’s number—thanks in part to strong economic development momentum in Ohio and Texas.

Shares of AEP (Ticker: AEP) were up slightly to $85.45 on the afternoon of July 28, recovering some of the ground they lost on the heels of the earnings report. Year to date, they have fallen about 10%, trimming the company’s market capitalization to about $44 billion.

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