By Ted Caddell
American Electric Power has hired in
vestment bank Goldman Sachs to investigate the sale of its merchant generation fleet in Ohio and Indiana, both coal- and natural gas-fired.
TheStreet, which first reported the news, said the plants — with a combined capacity of about 8,000 MW — could fetch $2.8 billion to $3.6 billion, based on a price of $350 to $450 per kilowatt. AEP officials confirmed hiring Goldman Sachs but said no decisions have been made.
Melissa McHenry, an AEP spokeswoman, identified the nine plants as:
- Gavin – 2,665 MW
- Cardinal Unit 1 – 595 MW
- Conesville Units 5 & 6 – 810 MW
- Waterford – 840 MW
- Darby – 507 MW
- Conesville Unit 4 – 339 MW
- Zimmer – 330 MW
- Stuart – 603 MW
- Lawrenceburg – 1,186 MW
All of the plants are in Ohio except for Lawrenceburg, which is in Indiana. They represent a total of 7,875 MW.
The news isn’t exactly unexpected. AEP officials have been saying for the past several months that such a deal could be in the company’s future.
AEP Ohio President Pablo Vegas told Columbus Business First in an interview late last year that the plants in question are struggling to remain profitable.
“Those power plants that are on the economic bubble today are essentially coal plants and nuclear plants,” Vegas said. “They’re struggling in the PJM market to cover their fixed costs.”
AEP has gone before the Public Utilities Commission of Ohio seeking long-term guaranteed rates for some of its largest plants in an effort to remain competitive. (See AEP Seeks State Backing for Aging Ohio Coal Plant.)
If PUCO doesn’t rule in AEP’s favor, this could be the backup plan.
Other companies have taken steps to reduce their exposure to the volatility in merchant generation.
Duke Energy exited the field, selling its interest in 11 plants in Ohio, Pennsylvania and Illinois and its retail energy business for $2.8 billion to Dynegy. PPL is in the process of spinning off its generation in a joint venture with Riverstone Holdings.