American Electric Power Co. Inc. executives say they plan to begin an auction of their contracted renewables portfolio in early September and are looking first and foremost to sell the asset group to one buyer.
Speaking to analysts and investors on the heels of reporting AEP’s second-quarter results, CEO Nick Akins and CFO Julie Sloat said potential acquirers have shown “robust” interest in the renewables assets, which AEP said in February it would look to sell. The portfolio comprises 1,365MW of generation assets – 1,200MW of that is wind power – in 11 states. Texas accounts for the largest share of the group at 583MW.
As of June 30, the AEP team accorded its renewables assets (which include a 235MW wind project in Kansas that the company is in talks to sell separately) a book value of $1.2 billion and early this year said it expected the sale to allow them to grow AEP’s five-year capital expenditures budget by $1.5 billion. Akins told analysts he’s confident any deal(s) can be realized relatively quickly based on the interest that has already been shown in the assets.
“There are other folks in the market as well,” Sloat said. “That's why I think we need to get out there as soon as we can and get business taken care of.”
Columbus-based AEP produced a net profit of $525 million, versus $578 million in the prior-year period, on revenues of $4.6 billion that were up 21% from 2021’s Q2. Adjusted earnings were $618 million versus $590 million, with the company’s vertically integrated utilities growing profits $73 million and essentially offsetting a one-time charge to reflect executives’ expectation they will sell their Kentucky assets for less than previously thought.
AEP’s load growth during the quarter was impressive at 3.5%, with commercial customers consuming 4.1% more GWh than in the spring of 2021 and industrial sales climbing 5.3% while residential load rose 1.2%. Sloat said commercial growth was consistent across AEP’s service territory, which covers parts of 11 states, and that nine of the company’s 10 largest sales segments saw growth – with only hospitals down year over year. On the industrial side, chemicals companies and oil and gas exploration firms posted double-digit growth while metals and paper manufacturers and petroleum products companies also showed strong growth.
“We know the headlines are full of messages about a pending recession but our sales statistics through the first half of the year show our service territory is still firmly in the expansion phase of the business cycle,” Sloat added. “We're mindful of the difficult monetary policy decisions being contemplated by the Federal Reserve […] and recognize some of these decisions could impact our customer's growth opportunities going forward. But so far, we're seeing little evidence that has dampened the economic activity within our footprint through the first two quarters of this year.”
Shares of AEP (Ticker: AEP) fell slightly July 27 to about $96. Year to date, they’re up about 8%, pushing the company’s market capitalization to about $49 billion.
