American Electric Power (NASDAQ:AEP) said Tuesday it has entered into an agreement to sell its Kentucky operations to Algonquin Power & Utilities (NYSE:AQN) for $2.85 billion.
Kentucky Power serves about 165,000 customers in 20 eastern counties and is easily the smallest of AEP’s seven operating companies. AEP Kentucky Transco is a regulated transmission business operating exclusively in the state.
Algonquin’s regulated utility business, Liberty Utilities, will acquire both subsidiaries. The sale is expected to close in the second quarter of 2022, pending regulatory approvals.
AEP said it expects to net approximately $1.45 billion in cash after taxes and transaction fees. Its CEO, Nick Akins, said the sale strengthens the Columbus, Ohio-based company’s “ability to invest in projects that will support a resilient, cleaner energy system.”
The transaction’s proceeds will be used to eliminate AEP’s forecasted equity needs in 2022 as the company invests in regulated renewables, transmission and other projects, the company said.
Kentucky Power owns 1,075 MW of generation, including Big Sandy, a 295-MW gas-fired facility that burned coal as late as 2015. It also operates and owns 50% of the 1.56-GW coal-fired Mitchell plant.
The sale must be approved by Kentucky regulators and FERC and is also subject to clearance under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 and from the Committee on Foreign Investment in the United States.
AEP said in April it was conducting a strategic review of its Kentucky operations. It held a competitive process as part of the review. (See AEP’s Akins Lambasts FERC’s RTO Adder Proposal in Earnings Call.)
