AEP weighing sale of merchant generation business
- American Electric Power (AEP) has hired Goldman Sachs & Co. to explore potential merchant power plant sales. The move, reported first by The Street, could signal the Ohio-based utility will follow industry the industry trend of selling off unregulated power plants.
- AEP could sell any and all of the seven plants in its merchant portfolio, sources told the finance website. The plants — five coal and two natural gas — are located in the PJM Interconnection.
- No sale plans or deadlines for decisions have been reached, Bloomberg reports. AEP confirmed to the Street it has retained Goldman and is considering selling its merchant business.
In the last few years, Ameren, Duke and PPL have all unloaded their merchant power plant businesses, abandoning the volatility of unregulated electricity markets and returning to their core business as rate-regulated utilities.
Now, AEP seems poised to move in that direction, as reports surface that the utility has hired Goldman Sachs to help it assess what to do with its merchant generation fleet. Sources told The Street that, like in the case of Duke and PPL, owning plants in unregulated markets is outside of the utility's profile.
"The company has a much cleaner story with the merchant business gone," one source told the finance site.
AEP is the sixth largest utility in the U.S. and its merchant generation fleet has 7,923 MW of capacity in the PJM Interconnection. Bloomberg reports that analysts estimate its value at between $2.8 and $3.6 billion, but no decisions have yet been made to sell. Two other power companies own stakes in the AEP merchant plants.
One source told The Street there were no guarantees AEP would be able to spin off its unregulated power business. Last year, AES announced intentions to sell the generation fleet of its Dayton Power & Light subsidiary, but later pulled the deal.
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