American Electric Power (NASDAQ:AEP) said Thursday that it plans to sell its AEP Energy competitive retail business in PJM as it continues to simplify and de-risk its operations.
CEO Julie Sloat told analysts on a quarterly earnings call that the company has completed a strategic review of AEP Energy, which serves 700,000 electricity and gas customers in six states and D.C. She said AEP will include its unregulated distributed resources business in the sale, which she expects to close in the first half of 2024.
“We’re focused on our core regulated utility operations and continue to evaluate all value additive potential activities to enhance their performance and look for opportunities to recycle capital,” Sloat said.
To that end, AEP is selling its 50% share in the solar-focused New Mexico Renewable Development joint venture with Public Service Company of New Mexico. Sloat said AEP is also pursuing a strategic review of its ownership interests in three non-core transmission joint venture businesses, Prairie Wind Transmission, Pioneer Transmission and Transource Energy, to determine whether they fit with the company’s long-term plan.
“Active review of our portfolio allows us to continue prioritizing investment in our regulated utilities to enhance service for our customers,” Sloat said.
AEP in February reached an agreement with IRG Acquisition Holdings to sell 1,365 MW in unregulated contracted renewable assets comprising 14 large-scale projects. The sale is pending FERC approval, but AEP hopes to close the transaction by July.
Sloat said $1.2 billion of the sale’s cash proceeds will be funneled into AEP’s regulated businesses as the company transforms its generation fleet.
“Actively managing our portfolio also means staying flexible and being ready to change our focus and adapt our strategy when it becomes clear that certain transactions or initiatives may no longer be viable,” she said, a nod to AEP’s termination last month of its Kentucky businesses’ sale.
AEP is renewing its focus on the Kentucky region, Sloat said, saying that Kentucky Power’s first-quarter return on equity of 2.9% “does not reflect a financially healthy utility.” She said AEP will be addressing the utility’s underperformance over the next year and will file a base case with Kentucky regulators in June to take effect in January.
AEP reported first-quarter earnings of $397 million ($0.77/share). That compares unfavorably to the same period a year ago when earnings were $714.7 million ($1.41/share). The company’s operating earnings per share of $1.11 fell short of the Zacks consensus estimate of $1.14.
AEP’s share price gained 57 cents during the day, closing at $91.44.
OGE Earnings Miss Expectations
OGE Energy (NYSE:OGE), Oklahoma Gas & Electric’s parent company, reported earnings Thursday of $38.3 million ($0.19/diluted share), compared to last year’s first quarter of $279.5 million ($1.39/diluted share). Earnings just missed financial analysts’ expectations of $0.20/diluted share.
“We’re off to a really strong start for the year,” CEO Sean Trauschke said, pointing out that the first quarter typically represents less than 10% of utilities’ earnings. “However, this quarter does provide momentum for the year. And I really like what I see.”
OGE is working through three requests for proposals to meet its capacity needs. Trauschke said not all the responses have delivered full value, so the company will issue a new integrated resource plan later this year with updated planning assumptions.
“Our goal is to implement a generation plan that supports our customers and business smoothing investments in the steady incremental way without large spikes or bumps,” he said.
OGE’s share price closed at $37.33 after the earnings release, a gain of 52 cents for the day.
