American Electric Power (NASDAQ:AEP) and Liberty Utilities (NYSE:AQN) have shelved their plans to exchange AEP’s Kentucky operations for $2.6 billion, ending two years of attempts to gain the transaction’s approval.
AEP announced Monday that it and Canada’s Algonquin Power & Utilities, Liberty Utilities’ parent company, have mutually agreed to cancel the deal two weeks before either party could independently pursue termination rights. In a press release, AEP characterized the sale’s collapse as a reaffirmation “of its commitment to Kentucky customers.”
The company said it now must take “swift and decisive action to be best positioned in the near term while continuing to develop a long-term strategy for Kentucky.” That means filing a base rate case with the Kentucky Public Service Commission for 2024 that will include securitizing retired coal generation.
“As a partner in Eastern Kentucky for more than 100 years, we’re renewing our focus on bringing opportunities to the region and supporting the communities we serve,” AEP CEO Julie Sloat said. “We are working diligently to reimagine our strategy with the goal of not just supporting Kentucky but being an essential part of its economic and energy future. “We believe there are opportunities ahead for our Kentucky operations, and we will focus our efforts on economic development, reliability and controlling cost impacts to customers.”
Late last month, the Kentucky PSC, the Kentucky Office of the Attorney General and Kentucky Industrial Utility Customers urged FERC to halt the sale for a second time. They argued that Kentucky customers would pay larger bills through increased zonal transmission rates under Liberty ownership. (See Kentucky Officials Ask FERC to Deny AEP-Liberty Deal.)
FERC first rejected the sale in late 2022, indicating that the companies needed to pledge more consumer protections.
In a separate press release, Algonquin Power CEO Arun Banskota said the management team and board of directors decided “after careful consideration” that the transaction was not in Algonquin’s best interest “in light of the evolving macro environment.”
“I would like to thank the teams who have worked tirelessly throughout this entire process. Looking forward, [Algonquin] remains supported by a high-quality asset base [and] a strong balance sheet, and is well positioned to deliver sustainable, long-term growth, capitalize on the energy transition and create value for shareholders,” Banskota said.
AEP also announced it had elevated interim Kentucky Power President and COO Cindy Wiseman to permanent president and CEO.
“Wiseman’s experience overseeing customer service, economic development and government affairs positions her well to redefine the company moving forward,” AEP said.
AEP reaffirmed its 2023 earnings guidance range of $5.19 to $5.39/share and an annual long-term growth rate of 6 to 7%. It said proceeds from its recently announced plan to sell its 1,365-MW unregulated, contracted renewables portfolio to IRG Acquisition Holdings for an expected $1.2 billion will compensate for previously forecasted proceeds from its Kentucky operations sale. AEP also said its equity financing forecast remains unchanged absent the transaction.
