AEP to Sell Four Competitive Power Plants to Blackstone and ArcLight Joint Venture

Gavin Plant

(Story by Rachel Hammer)

AEP has signed an agreement to sell four competitive power plants totaling approximately 5,200 megawatts (MW) to a newly formed joint venture of Blackstone and ArcLight Capital Partners LLC for approximately $2.17 billion. The plants involved in the transaction are Darby, Gavin, Lawrenceburg and Waterford. The sale is expected to close in the first quarter of 2017.

“AEP’s long-term strategy has been to become a fully regulated, premium energy company focused on investment in infrastructure and the energy innovations that our customers want and need. This transaction advances that strategy and reduces some of the business risks associated with operating competitive generating assets,” said Nick Akins, chairman, president and chief executive officer.

“Our employees have done an incredible job operating these power plants, and I’m confident they will contribute to the future success of Blackstone and ArcLight. We will continue to operate these plants safely in the coming months while working closely with the Blackstone and ArcLight teams to obtain the regulatory approvals necessary to complete the sale. We will also be working with employees and community leaders to ensure a smooth transition,” Akins said.

The sale directly impacts nearly 400 AEP employees. Approximately 360 employees at the four plants and another dozen employees from Supply Chain are essential to plant operations and will transfer to the new owner upon transaction completion.

Some employees in Engineering Services and AEP Energy Partners who directly support these facilities also are impacted by the transaction. AEP will work with these individuals to evaluate the options available to them which may include transfer to the buyer, reassignment, other employment within AEP, retirement or severance.

These employees are being advised of their status in a series of employee meetings.

“These assets, both the physical generating assets and the people who operate and maintain them, have provided tremendous value to AEP and its customers. I know I speak for leaders across AEP when I say that we greatly appreciate all they have done to provide reliable and efficient electric service in the most professional manner. The joint venture is acquiring an outstanding team,” said Mark McCullough, executive vice president – Generation.

McCullough noted that AEP is working with Blackstone and ArcLight and with employees to assure as smooth a transition as possible. “I recognize that this has been, and for yet a bit longer continues to be a period of uncertainty. There will be several meetings and communications over the next several weeks for the purpose of answering employee questions at the plant sites, as well as for affected support employees. In this interim, it will be very important for absolutely everyone to focus on the task at hand and to work safely at all times,” he said.

The company is evaluating options and will share details about its plans for investment of the proceeds from this transaction at a later date. These plans may include reinvestment in its regulated businesses, including transmission; new renewable projects; debt retirement; share buybacks; and other alternatives.

Blackstone and ArcLIght are two of the leading private equity funds focused on energy infrastructure with significant investments and experience owning and operating power generation in North America and Europe. Combined they have owned and operated more than 38,000 megawatts of power generation globally, including operations in the PJM Interconnection, New York ISO and Electric Reliability Council of Texas competitive markets in the United States.

AEP owns 2,677 MW of additional competitive generation in Ohio (Conesville, Cardinal, Stuart and Zimmer) and is continuing an independent strategic evaluation of that generation while also working on the restructuring of Ohio electricity regulations to allow those assets to be acquired by AEP Ohio for the benefit of its customers. AEP also is continuing a strategic review of its 48-MW hydroelectric Racine Plant in Racine, Ohio.

Darby Plant is a 507-megawatt natural gas simple cycle combustion turbine facility located near Mt. Sterling, Ohio. The plant has six generating units. Units 1-4 went into service in 2001; Units 5 and 6 went into service in 2002. AEP purchased the plant from DPL Energy in 2007.

Gavin Plant, 2,665 MW, is a two-unit coal-fired generating facility located at Cheshire, Ohio. Its two units went into service in 1974 and 1975, respectively. At the time they were built, these were the world’s largest generating units. The plant is fully equipped with environmental control equipment including flue gas desulfurization systems, selective catalytic reduction systems, low-NOx burners and electrostatic precipitators.

Lawrenceburg Plant is an 1,186-MW natural gas plant located at Lawrenceburg, Ind. Its two units went into service in 2004. The combined-cycle facility has four gas turbine generators, four heat recovery steam generators (HRSGs) and two gas turbines. AEP purchased Lawrenceburg in 2007 from an affiliate of the Public Service Enterprise Group.

Waterford Plant is an 840-MW natural gas combined cycle generating facility located at Waterford (Washington County), Ohio.  The plant has three General Electric 7FA combustion turbines that exhaust into heat recovery steam generators (HRSGs). The steam from the HRSGs feeds a 400-MW GE steam turbine. AEP purchased Waterford from an affiliate of Public Service Enterprise Group in 2005. The plant began commercial operation in 2003.