American Electric Power (AEP) has sold four competitive natural gas and coal power plants‚ a total of 5.2 GW, and plans to invest the proceeds from the sale in its regulated business.

AEP completed the sale of the plants to Lightstone Generation LLC, a joint venture of Blackstone and an affiliate of ArcLight Capital Partners LLC, for about $2.1 billion. The company said it would net approximately $1.2 billion in cash after taxes, repayment of debt associated with these assets, and transaction fees. It has recorded an after-tax gain of about $130 million from the sale, the company said.

The plants include the 1,186-MW natural gas–fired Lawrenceburg Generating Station in Lawrenceburg, Ind.; the 840-MW natural gas–fired Waterford Energy Center in Waterford, Ohio; the 507-MW natural gas–fired Darby Generating Station in Mount Sterling, Ohio; and the 2,665-MW coal-fired Gen. James M. Gavin Plant in Cheshire, Ohio. All the plants are located in a region served by the PJM Interconnection.

One of the largest electric utilities in the U.S., AEP says it has seen profitability decline in its competitive operations. In November, the company reported a $2.3 billion “impairment” largely relating to its ownership share of 2,684 MW of competitive generation in Ohio, including its Cardinal, Conesville, Stuart, and Zimmer plants. It also noted declines associated with the competitive portion of the Oklaunion Plant in Texas, Desert Sky and Trent Mesa wind farms, and other coal-related properties.

Nicholas K. Akins, AEP’s chairman, president, and CEO, said the proposed sale of the four plants in Indiana and Ohio would “significantly reduce the risk and earnings volatility associated with our competitive businesses.”

Proceeds from the sale of the four plants will be invested in transmission and contracted renewables within its regulated business, AEP said. A capital forecast made public earlier in January suggests that $17.3 billion in capital will be allocated to AEP’s regulated businesses and contracted renewables.

The company’s generating resource portfolio is currently composed mostly of coal (47%), 27% of natural gas, 7% of nuclear, 13% of hydro, wind, solar, and pumped hydro, and 6% of energy efficiency or demand response. Gas’s share is anticipated to rise to 30% in the future, while coal’s share could drop to 42%, the company indicates. AEP is also planning more wind and solar additions, to increase its renewables’ share to 14%.


Sonal Patel, associate editor (@POWERmagazine, @sonalcpatel)