American Electric Power took a $2.3 billion accounting hit on its deregulated coal-fired assets in Ohio, the utility announced during its third-quarter earnings report Tuesday.
The pre-tax impairment is related to AEP’s evaluation of 2,684 MWs in Ohio merchant generation. Those sites include Cardinal, Conesville, Stuart and Zimmer power plants currently operating under AEP unit Ohio Power.
“As of September 30, 2016, the remaining net book value of these assets is $50 million,” according to the AEP filing with the U.S. Securities and Exchange Commission.
“Management continues to evaluate potential alternatives for the remaining merchant generation assets,” the SEC filing added. “These potential alternatives may include, but are not limited to, propose restructuring of Ohio electricity regulations to allow certain of these assets to be acquired by OPCo for the benefit of its customers, transfer or sale of AEP’s ownership interests, or a wind down of merchant coal-fired generation fleet operations.”
The writedown helped tag the Columbus, Ohio-based AEP with a $766 million net loss for the three months ending Sept. 30.
The Ohio plants were not the only part of the impairment saddled by the utility. It also includes the competitive portion of the Oklaunion Plant in Texas, Desert Sky and Trent Mesa wind farms and some other coal-related properties.
AEP has sought several options in dealing with its money-losing coal-fired plants in the competitive generation market of Ohio. Earlier this year, the Public Utilities Commission of Ohio approved a rate agreement which could have guaranteed AEP some profit on the plants, but that was shot down by federal regulators.
Despite the writedown, AEP’s third-quarter operating earnings rose about $120 million year over year, to $640 million. The utility announced plans to invest about $17 billion through 2019 on its core regulated operations and contracted renewable generation, part of that coming from proceeds after the sale of some of its competitive generation portfolio.
In September, AEP revealed a deal to sell 5,200 MW of competitive generation assets to a joint venture of Blackstone and ArcLight Capital Partners.