8-KMaterial Agreements

AMERICAN ELECTRIC POWER CO INC 8-K Report, Material Agreement (Sep 15, 2016)

Filed September 15, 2016For Securities:AEP

Summary

American Electric Power Company, Inc. (AEP) announced on September 13, 2016, that its subsidiaries, AEP Generation Resources Inc. and AEP Generating Company, have entered into a definitive agreement to sell four electricity generation plants to a joint venture formed by affiliates of The Blackstone Group and ArcLight Capital Partners LLC. The total sale price is approximately $2.17 billion in cash, subject to certain customary adjustments at closing. This divestiture includes approximately 5,200 megawatts of coal and natural gas-fired generation capacity located in the PJM Interconnection wholesale market. The sale is a significant strategic move for AEP, likely aimed at streamlining its generation portfolio and potentially reducing exposure to certain types of generation assets. Investors should monitor the closing conditions, including regulatory approvals and consent decree modifications, as they are key to the completion of this substantial transaction.

Key Highlights

  • 1AEP subsidiaries to sell four power generation plants for approximately $2.17 billion cash.
  • 2The sale involves approximately 5,200 MW of coal and natural gas-fired generation capacity.
  • 3The assets are located in the PJM Interconnection wholesale market.
  • 4The buyers are a joint venture by affiliates of The Blackstone Group and ArcLight Capital Partners LLC.
  • 5The transaction is subject to customary closing conditions, including regulatory approvals (FERC, Indiana Utility Regulatory Commission, HSR Act).
  • 6A modification of a Consent Decree related to the Clean Air Act also requires court approval.
  • 7The transaction is expected to close within six months.

Frequently Asked Questions

AEP is selling four electric generation plants: Gavin Plant (2,665 MW coal-fired), Darby Plant (507 MW natural gas-fired), Waterford Plant (840 MW natural gas-fired), and Lawrenceburg Plant (1,186 MW natural gas-fired). These facilities collectively represent approximately 5,200 MW of generating capacity in the PJM Interconnection wholesale market.

The assets are being sold to a newly formed joint venture by affiliates of The Blackstone Group and ArcLight Capital Partners LLC.

The sale is expected to bring approximately $2.17 billion in cash to AEP, subject to adjustments related to coal inventory, pre-closing capital expenditures, and other customary items at closing. This cash infusion could be used for debt reduction, reinvestment, or shareholder returns.

Key conditions include obtaining approvals from the Federal Energy Regulatory Commission (FERC), the Indiana Utility Regulatory Commission, the expiration of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act, and a modification approved by the U.S. District Court for the Southern District of Ohio concerning a Consent Decree related to the Clean Air Act.