AEP Announces Pricing of Common Stock Offering with a Forward Component

Rhea-AI Summary

American Electric Power (AEP) has announced the pricing of a registered underwritten offering of 19,607,844 shares of its common stock at $102.00 per share. The company entered into forward sale agreements with Citibank, N.A. and Barclays Bank PLC, with settlement expected by December 31, 2026.

The underwriters have a 30-day option to purchase up to an additional 2,941,176 shares under the same terms. If AEP chooses physical settlement, the net proceeds will be used for general corporate purposes, including capital contributions to utility subsidiaries, acquisitions, and/or debt repayment.

The offering is led by Citigroup, Barclays, BofA Securities, and Wells Fargo Securities as lead book-running managers, with additional financial institutions participating in various roles.

Positive

• Significant capital raise of approximately $2 billion through stock offering
• Flexibility in settlement options (cash, physical, or net share settlement)
• Strong backing from major financial institutions

Negative

• Potential dilution for existing shareholders
• Long settlement period extending to December 2026 creates execution uncertainty

Insights

Financial Analyst

AEP's pricing of 19.6 million shares at $102.00 per share (a 2.1% discount to current trading price) represents a significant capital raising initiative structured with notable flexibility. The forward sale agreements with Citibank and Barclays allow settlement anytime through December 31, 2026, giving management considerable optionality in timing the actual share issuance and capital deployment.

At the announced price, the base offering would raise approximately $2 billion, potentially increasing to $2.3 billion if underwriters exercise their additional share option. This represents about 3.6% of AEP's current market capitalization—a meaningful but not transformative capital raise.

The forward structure provides three key advantages: 1) It locks in today's price while deferring actual issuance, 2) It allows AEP to align share issuance timing with capital deployment needs, reducing interim dilution, and 3) It preserves flexibility through cash settlement options if market conditions change.

While the offering creates potential dilution for existing shareholders, the stated uses for proceeds—capital contributions to utility subsidiaries, acquisitions, and debt repayment—suggest a balanced approach to capital allocation that could drive future growth and financial stability if executed effectively.

Utility Sector Specialist

This $2 billion capital raise with settlement flexibility through 2026 gives AEP substantial financial capacity for its utility operations. The structure suggests management anticipates significant capital requirements but wants deployment flexibility—a prudent approach given the long-term nature of utility capital projects.

The stated potential use for "capital contributions to utility subsidiaries" is particularly noteworthy. For regulated utilities like AEP, such investments typically go toward rate base growth, which can generate regulated returns that help offset dilution impacts over time. This approach aligns with how utilities typically fund infrastructure improvements.

The mention of potential acquisitions indicates AEP may be considering inorganic growth opportunities within its regulated footprint. The debt repayment option could improve financial metrics if deployed toward higher-cost debt in the current interest rate environment.

The participation of multiple top-tier financial institutions as book-running managers (Citigroup, Barclays, BofA Securities, Wells Fargo Securities, Goldman Sachs, J.P. Morgan, and others) signals strong institutional confidence in AEP's capital allocation strategy. Without specific project details, however, the true impact on long-term value creation remains to be determined by execution.

COLUMBUS, Ohio, March 24, 2025 /PRNewswire/ -- American Electric Power (Nasdaq: AEP) today announced the pricing of a registered underwritten offering of 19,607,844 shares of its common stock at a price to the public of $102.00 per share. Subject to certain conditions, all shares are expected to be borrowed by the forward counterparties (as defined below) (or their respective affiliates) from third parties and sold to the underwriters and offered in connection with the forward sale agreements described below. Citigroup, Barclays, BofA Securities and Wells Fargo Securities are acting as lead book-running managers for this offering. Goldman Sachs & Co. LLC, J.P. Morgan, Mizuho, Morgan Stanley, MUFG and Scotiabank are also acting as lead book-running managers and RBC Capital Markets and KeyBanc Capital Markets are acting as co-managers for this offering.

In connection with the offering, AEP entered into forward sale agreements with each of Citibank, N.A. and Barclays Bank PLC (the "forward counterparties") under which AEP agreed to issue and sell to the forward counterparties an aggregate of 19,607,844 shares of its common stock. In addition, the underwriters of the offering have been granted a 30-day option to purchase up to an additional 2,941,176 shares of AEP's common stock upon the same terms. If the underwriters exercise their option to purchase additional shares, AEP expects to enter into additional forward sale agreements with the forward counterparties with respect to the additional shares.

Settlement of the forward sale agreements is expected to occur on or prior to December 31, 2026. AEP may, subject to certain conditions, elect cash settlement or net share settlement for all or a portion of its rights or obligations under the forward sale agreements.

If AEP elects physical settlement of the forward sale agreements, it expects to use the net proceeds for general corporate purposes, which may include capital contributions to its utility subsidiaries, acquisitions and/or repayment of debt.

The offering is made under an effective shelf registration statement filed with the U.S. Securities and Exchange Commission. This news release does not constitute an offer to sell or a solicitation of an offer to buy the securities described herein, nor shall there be any sale of these securities in any state or jurisdiction in which such an offer, solicitation or sale would be unlawful prior to registration or qualification under the securities law of any such jurisdiction. The offer may be made only by means of a prospectus and the related prospectus supplement. Copies of these documents may be obtained by contacting Citigroup by calling 1-800-831-9146, or by mail at Citigroup c/o Broadridge Financial Solutions, 1155 Long Island Avenue, Edgewood, New York 11717; Barclays Capital Inc. by calling 1-888-603-5847, or by mail at Barclays c/o 1155 Long Island Avenue, Edgewood, New York 11717, or by email at barclaysprospectus@broadridge.com; BofA Securities by mail at BofA Securities, NC1-022-02-25, 201 North Tryon Street, Charlotte, North Carolina 28255-0001, Attention: Prospectus Department, or by email at dg.prospectus_requests@bofa.com; or Wells Fargo Securities by calling 1-800-645-375, or by mail at Wells Fargo Securities, 90 South 7^th Street, 5^th Floor, Minneapolis, Minnesota 55402, or by email at WFScustomerservice@wellsfargo.com.

ABOUT AEP
Our team at American Electric Power (Nasdaq: AEP) is committed to improving our customers' lives with reliable, affordable power. We are investing $54 billion from 2025 through 2029 to enhance service for customers and support the growing energy needs of our communities. Our nearly 16,000 employees operate and maintain the nation's largest electric transmission system with 40,000 line miles, along with more than 225,000 miles of distribution lines to deliver energy to 5.6 million customers in 11 states. AEP also is one of the nation's largest electricity producers with approximately 29,000 megawatts of diverse generating capacity. We are focused on safety and operational excellence, creating value for our stakeholders and bringing opportunity to our service territory through economic development and community engagement. Our family of companies includes AEP Ohio, AEP Texas, Appalachian Power (in Virginia, West Virginia and Tennessee), Indiana Michigan Power, Kentucky Power, Public Service Company of Oklahoma, and Southwestern Electric Power Company (in Arkansas, Louisiana, east Texas and the Texas Panhandle). AEP also owns AEP Energy, which provides innovative competitive energy solutions nationwide. AEP is headquartered in Columbus, Ohio.

This report made by American Electric Power contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934. Although AEP believe that its expectations are based on reasonable assumptions, any such statements may be influenced by factors that could cause actual outcomes and results to be materially different from those projected. Among the factors that could cause actual results to differ materially from those in the forward-looking statements are: changes in economic conditions, electric market demand and demographic patterns in AEP service territories; the economic impact of increased global trade tensions including the conflicts in Ukraine and the Middle East, and the adoption or expansion of economic sanctions or trade restrictions; inflationary or deflationary interest rate trends; new legislation adopted in the states in which we operate that alters the regulatory framework or that prevents the timely recovery of costs and investments; volatility and disruptions in the financial markets precipitated by any cause, including fiscal and monetary policy, turmoil related to federal budget or debt ceiling matters, particularly developments affecting the availability or cost of capital to finance new capital projects and refinance existing debt; the availability and cost of funds to finance working capital and capital needs, particularly if expected sources of capital such as proceeds from the sale of assets, subsidiaries and tax credits, and anticipated securitizations, do not materialize or do not materialize at the level anticipated, and during periods when the time lag between incurring costs and recovery is long and the costs are material; decreased demand for electricity; weather conditions, including storms and drought conditions, and AEP's ability to recover significant storm restoration costs; limitations or restrictions on the amounts and types of insurance available to cover losses that might arise in connection with natural disasters or operations; the cost of fuel and its transportation, the creditworthiness and performance of fuel suppliers and transporters and the cost of storing and disposing of used fuel, including coal ash and spent nuclear fuel; the availability of fuel and necessary generation capacity and the performance of generation plants; AEP's ability to recover fuel and other energy costs through regulated or competitive electric rates; the ability to transition from fossil generation and the ability to build or acquire renewable generation, transmission lines and facilities (including the ability to obtain any necessary regulatory approvals and permits) when needed at acceptable prices and terms, including favorable tax treatment, and to recover those costs; the impact of pandemics and any associated disruption of AEP's business operations due to impacts on economic or market conditions, costs of compliance with potential government regulations, electricity usage, supply chain issues, customers, service providers, vendors and suppliers; new legislation, litigation and government regulation, including changes to tax laws and regulations, oversight of nuclear generation, energy commodity trading and new or modified requirements related to emissions of sulfur, nitrogen, mercury, carbon, soot or particulate matter and other substances that could impact the continued operation, cost recovery, and/or profitability of generation plants and related assets; the impact of federal tax legislation, including potential changes to existing tax incentives, on results of operations, financial condition, cash flows or credit ratings; the risks associated with fuels used before, during and after the generation of electricity and the byproducts and wastes of such fuels, including coal ash and spent nuclear fuel; timing and resolution of pending and future rate cases, negotiations and other regulatory decisions, including rate or other recovery of new investments in generation, distribution and transmission service and environmental compliance; resolution of litigation or regulatory proceedings or investigations; AEP's ability to efficiently manage and recover operation, maintenance and development project costs; prices and demand for power generated and sold at wholesale; changes in technology, particularly with respect to energy storage and new, developing, alternative or distributed sources of generation; AEP's ability to recover through rates any remaining unrecovered investment in generation units that may be retired before the end of their previously projected useful lives; volatility and changes in markets for coal and other energy-related commodities, particularly changes in the price of natural gas; the impact of changing expectations and demands of customers, regulators, investors and stakeholders, including development, adoption, and use of artificial intelligence by us, our customers and our third party vendors and focus on environmental, social and governance concerns; changes in utility regulation and the allocation of costs within regional transmission organizations, including ERCOT, PJM and SPP; changes in the creditworthiness of the counterparties with contractual arrangements, including participants in the energy trading market; actions of rating agencies, including changes in the ratings of debt; the impact of volatility in the capital markets on the value of the investments held by AEP's pension, other postretirement benefit plans, captive insurance entity and nuclear decommissioning trust and the impact of such volatility on future funding requirements; accounting standards periodically issued by accounting standard-setting bodies; other risks and unforeseen events, including wars and military conflicts, the effects of terrorism (including increased security costs), embargoes, wildfires, cyber security threats and other catastrophic events; and the ability to attract and retain the requisite work force and key personnel.

 

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SOURCE American Electric Power

FAQ

What is the price per share for AEP's new stock offering in March 2025?

AEP priced its common stock offering at $102.00 per share.

How many shares is AEP offering in its March 2025 stock offering?

AEP is offering 19,607,844 shares, with an option for underwriters to purchase an additional 2,941,176 shares.

When is the settlement date for AEP's forward sale agreements?

Settlement is expected to occur on or prior to December 31, 2026.

What will AEP use the proceeds from the stock offering for?

AEP plans to use the net proceeds for general corporate purposes, including capital contributions to utility subsidiaries, acquisitions, and/or debt repayment.

Which banks are the lead book-running managers for AEP's 2025 stock offering?

Citigroup, Barclays, BofA Securities, and Wells Fargo Securities are the lead book-running managers.