Joint venture buys three gas plants, one coal plant from AEP

natural gas power plant august elp 3

American Electric Power will sell four Midwest power plants for $2.17 billion to a joint venture newly started by two equity funds.

Ohio-based AEP is selling the one coal-fired and three natural gas-fired plants to a joint venture of Blackstone and ArcLight Capital Partners.

The sale agreement includes:

·      Lawrenceburg Generating Station, 1,186 MW natural gas, Lawrenceburg, Indiana

·      Waterford Energy Center, 840 MW natural gas, Waterford, Ohio

·      Darby Generating Station, 507 MW natural gas, Mount Sterling, Ohio

·      Gen. James M. Gavin Plant, 2,665 MW coal, Cheshire, Ohio

AEP announced in January 2015 that the company was exploring strategic alternatives for these power plants, including a potential sale. All of this generating capacity is located in the region served by the PJM Interconnection.

"AEP's long-term strategy has been to become a fully regulated, premium energy company focused on investment in infrastructure and the energy innovations that our customers want and need. This transaction advances that strategy and reduces some of the business risks associated with operating competitive generating assets," AEP CEO Nicholas Akins said in a statement.

"Our employees have done an incredible job operating these power plants in PJM, and I'm confident that they will contribute to the future success of Blackstone and ArcLight. We will continue to operate these plants safely in the coming months while working closely with the Blackstone and ArcLight teams to obtain the regulatory approvals necessary to complete the sale. We also will be working with employees and community leaders to ensure a smooth transition," Akins said.

Blackstone and ArcLight now own and operate more than 38,000 MW of power generation globally combined, Akins noted. Those plants include operations in the PJM Interconnection, New York ISO and Electric Reliability Council of Texas competitive.

The sale is expected to close in the first quarter of 2017. AEP expects to net approximately $1.2 billion in cash after taxes, repayment of debt associated with these assets and transaction fees. The company is evaluating options and will share details about its plans for investment of the proceeds from this transaction at an analyst day Nov. 1. These plans may involve reinvestment in its regulated businesses, including transmission; renewable projects; additional debt retirement; and share buybacks.

AEP expects to record an after-tax gain of approximately $140 million from the sale, subject to inventory true-ups, income tax and other adjustments.

The sale is subject to regulatory approvals from the Federal Energy Regulatory Commission, the Indiana Utility Regulatory Commission and federal clearance pursuant to the Hart-Scott-Rodino Antitrust Improvements Act of 1976.

AEP owns 2,677 MW of additional competitive generation in Ohio. Overall the company has more than five million customers in 11 states and 31,000 MW of generating capacity.

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