American Electric Power Co. (AEP) has agreed to sell its unregulated renewables portfolio of wind and solar projects to IRG Acquisition Holdings — a deal that will net electric utility AEP about $1.2 billion.

The 14 large-scale assets included in the deal have a combined 1,365-megawatt (MW) capacity—mostly wind—and are spread across 11 states, with long-term contracts in place with other utilities, corporations and municipalities, AEP said. The portfolio has an enterprise value of $1.5 billion, including project debt, AEP said.

News of the agreement with IRG, a partnership owned by Invenergy, CDPQ and funds managed by Blackstone Infrastructure, came on Feb. 22—about a year after AEP first announced plans to sell the assets and launch a competitive bidding process. The process began in August 2022.

The sale is expected to close in second-quarter 2023, subject to satisfaction of customary closing conditions, Columbus, Ohio-based AEP said.

“We’re committed to de-risking the company and prioritizing investments in our core regulated businesses,” AEP President and CEO Julie Sloat said. “The proceeds from the sale will be directed to the significant pipeline of opportunities we have to enhance service for customers across our footprint and advance our clean energy transition.”

The company said it expects the sale to result in an after-tax loss ranging from $100 million to $150 million for first-quarter 2023.

Operating earnings guidance remained at $5.19 to $5.39 per share with a 6% to7% long-term growth rate.

AEP shifts business strategy

AEP is shifting attention to its regulated business. During the next five years, the company said it intends to invest about $40 billion in its regulated wires and generation business. The company plans to add “17,000 MW of new generation resources and more resilient, efficient transmission and distribution infrastructure to serve customers,” according to an AEP press release.

With about 26,000 MW of diverse generating capacity, AEP is one of the largest electricity producers in the U.S. Its portfolio includes more than 7,100 MW of renewable energy.

AEP said it aims to increase its renewable generation portfolio to about 50% of its total capacity by 2030 as the company aims for net-zero CO2 emissions by 2045.

Its latest efforts included signing a power purchase agreement (PPA) for a 188-MW solar project near South Bend, Indiana. The PPA between Lightsource BP and AEP subsidiary AEP Energy Partners was announced Feb. 23. Lightsource plans to build and operate the Honeysuckle Solar project, potentially reducing CO2 emissions by 204,000 metric tons each year.

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Sloat said AEP plans to add more than 15 gigawatts of new renewable resources over the next decade. 

“This transition allows us to add fuel-free generation for the benefit of our customers,” she said. “At the same time, the $26 billion we plan to invest in our transmission and distribution systems over the next five years will help ensure the continued delivery of safe, reliable and affordable power to serve our communities.”

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