AEP Signs Agreement to Sell Distributed Resources Business to Basalt

Rhea-AI Summary

American Electric Power (Nasdaq: AEP) announced an agreement to sell its distributed resources business, AEP OnSite Partners, to Basalt Infrastructure Partners. The sale is projected to net AEP $315 million in cash after taxes and fees, with the transaction expected to close in Q3 2024 pending regulatory approvals. The sale will impact 45 employees, all of whom Basalt plans to retain. AEP will use the proceeds to support its financing plan and invest in regulated operations to enhance reliable and affordable energy services. RBC Capital Markets acted as AEP's financial advisor, and Morgan Lewis & Bockius LLP served as legal counsel.

Positive

• AEP expects to net $315 million in cash after taxes and transaction fees.
• Proceeds will support AEP's financing plan and investments in regulated operations.
• Basalt plans to retain all 45 impacted employees.
• The sale aligns with AEP's strategy to focus on its regulated operations.
• RBC Capital Markets served as AEP's financial advisor, indicating a well-advised transaction.

Negative

• The sale is subject to regulatory approvals, which may cause delays.
• Potential risks associated with the Federal Energy Regulatory Commission and Hart-Scott-Rodino Act clearances.
• AEP is divesting a business unit with over 300 megawatts of projects, potentially reducing its market diversity.

Insights

Financial Analyst

American Electric Power (AEP)'s decision to sell its distributed resources business, AEP OnSite Partners, to Basalt Infrastructure Partners for approximately $315 million in cash is a strategic move aimed at strengthening its balance sheet. The cash infusion after taxes and transaction fees is slated to support AEP's financing plan, thereby allowing the company to focus on its regulated operations. This shift underscores AEP's commitment to providing reliable and affordable energy while pursuing its extensive investment plan of $43 billion over the next five years. The financial boost will be particularly beneficial as AEP makes significant investments to modernize the grid and reduce carbon emissions. Investors should note the potential of a more focused and financially robust AEP post-sale. However, the successful completion is contingent on regulatory approvals, which could introduce some uncertainty.

Energy Market Analyst

The divestiture of AEP OnSite Partners aligns with broader industry trends where large energy providers are streamlining operations to concentrate on core business areas. AEP OnSite's portfolio of over 300 megawatts in behind-the-meter and distributed energy resources is quite significant. The transfer of these assets to Basalt, an infrastructure investment firm, indicates a strategic repositioning for AEP. This move could lead to a more focused approach on grid modernization and renewable energy investments. Retaining all 45 employees ensures continuity and operational stability for the distributed resources business, which could maintain service levels for existing customers such as schools, municipalities and hospitals. However, shareholders might want to monitor how quickly AEP can reinvest the proceeds into its core operations and the regulatory hurdles the sale might encounter.

COLUMBUS, Ohio, May 13, 2024 /PRNewswire/ -- American Electric Power (Nasdaq: AEP) has entered into an agreement to sell its distributed resources business, AEP OnSite Partners ("OnSite"), to funds advised by Basalt Infrastructure Partners LLC. AEP expects to net approximately $315 million in cash after taxes and transaction fees, subject to customary closing adjustments. The sale is expected to close in the third quarter of 2024, pending regulatory approvals.

"I'm grateful to the AEP OnSite Partners team and thank them for their contributions to AEP over the past decade. This sale will allow the distributed resources business and its valued employees to continue to succeed," said Ben Fowke, AEP interim chief executive officer and president. "AEP is focused on a strong balance sheet as we direct capital to our regulated operations to provide reliable, affordable energy to our customers. The proceeds from the sale will be used to support our financing plan as we make these investments to benefit customers and deliver value to all of our stakeholders."

AEP OnSite Partners owns, operates and maintains behind-the-meter assets and distributed energy resources and sells the output to schools, municipalities, hospitals and other commercial and industrial customers. Their portfolio consists of more than 300 megawatts of projects at almost 100 sites across the U.S. The sale directly impacts 45 employees, which includes AEP OnSite Partners employees and other AEP employees who support the business. Basalt plans to retain all 45 employees.

The sale is subject to regulatory approval from the Federal Energy Regulatory Commission and federal clearance pursuant to the Hart-Scott-Rodino Antitrust Improvements Act of 1976.

RBC Capital Markets served as AEP's financial advisor for the sale process. Morgan Lewis & Bockius LLP served as legal counsel to AEP.

At American Electric Power, based in Columbus, Ohio, we understand that our customers and communities depend on safe, reliable and affordable power. Our nearly 17,000 employees operate and maintain more than 40,000 miles of transmission lines, the nation's largest electric transmission system, and more than 225,000 miles of distribution lines to deliver power 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, including nearly 6,000 megawatts of renewable energy. AEP is investing $43 billion over the next five years to make the electric grid cleaner and more reliable. We are on track to reach an 80% reduction in carbon dioxide emissions from 2005 levels by 2030 and have a goal to achieve net zero by 2045. AEP is recognized consistently for its focus on sustainability, community engagement and inclusion. AEP's family of companies includes utilities AEP Ohio, AEP Texas, Appalachian Power (in Virginia and West Virginia), AEP Appalachian Power (in 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. For more information, visit aep.com.

 

View original content to download multimedia:https://www.prnewswire.com/news-releases/aep-signs-agreement-to-sell-distributed-resources-business-to-basalt-302143920.html

SOURCE American Electric Power

FAQ

What is AEP's recent business transaction involving AEP OnSite Partners?

AEP has agreed to sell its distributed resources business, AEP OnSite Partners, to Basalt Infrastructure Partners.

How much will AEP net from the sale of AEP OnSite Partners?

AEP expects to net approximately $315 million in cash after taxes and transaction fees.

When is the expected closing date for AEP's sale of AEP OnSite Partners to Basalt?

The sale is expected to close in the third quarter of 2024, pending regulatory approvals.

What will AEP do with the proceeds from the sale of AEP OnSite Partners?

AEP will use the proceeds to support its financing plan and invest in regulated operations to improve energy reliability and affordability.

How many employees will be affected by the sale of AEP OnSite Partners?

The sale will directly impact 45 employees, all of whom Basalt plans to retain.