American Electric Power (AEP) announced that its competitive renewable energy subsidiary, AEP Clean Energy Resources, has completed the purchase of Sempra Renewables and its 724 MW of operating wind generation and battery assets. The cost: approximately $1.05 billion.
The purchase includes all or part of seven wind farms and one battery installation in seven states. Five of the wind farms are jointly owned with BP Wind Energy. BP Wind Energy will retain its ownership share of those projects. Twenty employees will join AEP Clean Energy Resources from Sempra Renewables.
“The addition of these high-quality renewable assets and the experience of our new employees will support our long-term strategy to diversify our generation fleet,” said Nicholas K. Akins, AEP chairman, president, and CEO. We’ve targeted a total of $2.2 billion in capital investment in competitive, contracted renewables by 2023. The long-term contracts and attractive returns associated with these existing assets will be immediately accretive to earnings and solidify our projected 5 to 7% earnings growth rate.”
AEP will pay Sempra $584 million in cash, which includes $33 million in working capital, and assume $470 million in existing project debt and tax equity obligations, subject to adjustments. In addition, AEP reaffirms its 2019 operating earnings guidance range of $4.00 to $4.20per share.
The seven operating wind farms have an average capacity factor of 37%. They are located in Colorado, Hawaii, Indiana, Kansa, Michigan, Minnesota, and Pennsylvania. They all have long-term, power purchase agreements (PPAs) for 100% of the energy produced with investment-grade investor-owned utilities, municipal utilities and electric cooperatives. The project PPAs have an average remaining life of 16 years. AEP operating units AEP Ohio, Indiana Michigan Power and Southwestern Electric Power Company have PPAs with two of the wind farms.
AEP Renewables also recently signed a separate agreement to purchase a 75% interest (227 MW) in the Santa Rita East Wind Project currently under construction west of San Angelo, Texas. AEP Renewables will acquire its share of the project upon completion, which is expected in June. With this acquisition, AEP’s competitive renewable generation portfolio has grown to 1,075 MW of renewable generation in 11 states. It will increase to 1,302 MW upon completion of the Santa Rita project.
AEP plans to cut its carbon dioxide emissions 80% from 2000 emission levels by 2050. The company is developing a more balanced portfolio of power generation to help achieve this target. AEP’s generation capacity has gone from 70% coal-fueled in 2005 to 46% today. Its natural gas capacity increased from 19% in 2005 to 27% today, and its renewable generation capacity has increased from 4% in 2005 to 16% today. AEP’s nuclear generation capacity has increased from 6% in 2005 to 7% today.
Wells Fargo Securities LLC served as the exclusive financial advisor and Bryan Cave Leighton Paisner served as legal advisor for AEP for the acquisition.
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