AEP files application with FERC for sale of its Kentucky operations to Liberty
American Electric Power (AEP) announced Monday it had filed a new application with the Federal Energy Regulatory Commission seeking approval to sell its Kentucky operation to Liberty, an indirect subsidiary of Algonquin Power & Utilities Corp.
The companies said they are asking for an expedited review of the application to close the transaction by April 26, 2023. Previously, FERC denied approval of the sale, saying that Ontario-based Algonquin had not provided sufficient assurances that rates would not climb as a result of the $2.6 billion transaction.
AEP and Liberty announced the deal in October 2022, with AEP’s CEO, Nick Akins, saying the plan would improve AEP’s margins and fund its energy transition investments. The deal includes 1,075 MW of generation and more than 1,200 miles of transmission facilities generating about $550 million in revenues a year. The Kentucky operation employs more than 420 people and provides services to nearly 165,000 customers in 20 eastern Kentucky counties.
FERC denied the plan in December 2022 with prejudice and outlined additional information about customer protections needed for approval.
“AEP and Liberty are committed to the sale and are requesting FERC’s accelerated review of the application so customers in eastern Kentucky can begin benefiting from the transaction,” said Julie Sloat, AEP president and chief executive officer. “In addition to the Kentucky sale, AEP remains focused on advancing the strategic initiatives we have outlined, including the sale of our competitive renewables portfolio and the strategic review of our retail business. These actions are consistent with the equity financing plan, operating earnings guidance, and long-term growth rate of 6-7% announced at our analyst day last October.”
The companies said the new application addresses FERC’s concerns and provides several financial measures Liberty will take over the next five years, including maintaining the return on equity; maintaining the current cost cap on equity; financing future credit investment at the current credit rating; and capping certain operating and administrative costs.
The transaction also includes benefits for eastern Kentucky customers, including a $40 million fund to offset volatile fuel rates through 2023, a “rate holiday” on the collection of the Big Sandy decommissioning rider for three years, and more than 100 new jobs and expanded local management.
