Dive Brief:

• American Electric Power has agreed to sell four fossil fuel plants in Ohio and Indiana, months after federal regulators rejected power purchase agreements that would have helped prop up some of the company's struggling plants.
• On Sept. 13, media reports surfaced AEP was in talks with Blackstone Group LP and ArcLight Capital Partners LLC to sell three gas plants and one coal plant, valued at $2.1 billion. The utility confirmed the sale Sept. 14. 
• The plants under negotiation include the 2,665 MW coal-fired Gavin Power Plant, the 1,186 MW Lawrenceburg natural gas plant, the 840 MW Waterford gas plant and the 507 MW Darby gas plant. 

Dive Insight:

Months after announcing it would attempt to spin off its generating assets in Ohio and other Midwestern states, AEP announced Sept. 14 it had found a buyer for four of them. 

Blackstone and ArcLight will buy the four plants, adding to their substantial power plant holdings. Combined, the two private equity firms have owned and operated more than 38,000 MW of generation globally, including plants in PJM, NYISO, ERCOT and others, according to an AEP statement. 

AEP, along with fellow Ohio utility FirstEnergy, won a major victory earlier this year when Ohio regulators approved subsidies for struggling generation in the state. But the Federal Energy Regulatory Commission subsequently blocked the power purchase agreements underpinning the arrangement, sending the utilities back to the drawing board.

While pursuing the sale of some units, AEP Ohio has also been pushing for re-regulation of the state's energy markets. While that could be a long slog, the utility has indicated it would sell even more generation if some kind of arrangement cannot be reached.

AEP originally sought support for 2,671 MW from nine generating units — Unit 1 at the Cardinal coal plant, Units 4-6 at the Conesville plant, Units 1-4 at the Stuart plant and Unit 1 at Zimmer.

The utility is hoping to determine by early next year whether re-regulation is possible, but will likely need some assistance from FirstEnergy and Dayton Power & Light help move the idea ahead. 

"I think the best route of success is going to be getting the IOUs on board. That's something we'd really like to have," AEP Ohio President Julie Sloat said recently. 

In the statement announcing the sale, AEP said it is "continuing an independent strategic evaluation of [Midwestern] generation while also working on the restructuring of Ohio electricity regulations to allow those assets to be acquired by AEP Ohio for the benefit of its customers."

The parties expect the sale to close in the first quarter of 2017.