SWEPCO parent announces plans to invest $17.3 billion over next three years on utility upgrades, renewables

American Electric Power (AEP), the parent company of Southwestern Electric Power Co., said today (Nov. 1) that it plans to increase its capital spending in core operations over the next three years to become more profitable.

To support stronger earnings growth, AEP said it plans to invest approximately $17.3 billion over the period 2017 to 2019 in its core regulated operations and contracted renewables. AEP’s increased capital investment plan includes the reinvestment of $2.2 billion in proceeds expected from the sale of part of its competitive generation portfolio. AEP announced an agreement in September to sell 5,200 megawatts of competitive generation.

“AEP has successfully refocused our business with 97% of our forecasted earnings coming from our regulated operations. We are in a unique position because we have the ability to fuel solid earnings growth through organic investment in our regulated businesses. That organic growth will provide enhanced reliability for our customers along with stable, positive returns for our shareholders,” said company chairman, president and CEO Nicholas Akins.

In September, AEP signed an agreement to sell four competitive power plants totaling 5,200 megawatts (MW) for approximately $2.17 billion to a newly formed joint venture of Blackstone and ArcLight Capital Partners LLC.

The sale agreement includes three natural gas plants in Lawrenceburg Ind., and Waterford and Darby, Ohio, and a 2,665 megawatt, coal-fired plant in Cheshire, Ohio. AEP first announced in January 2015 that the company was exploring strategic alternatives for these power plants, including a potential sale. All of this generating capacity is located in the region served by the PJM Interconnection.

The sale is expected to close in the first quarter of 2017. AEP expects to net approximately $1.2 billion in cash after taxes and repayment of debt associated with these assets and transaction fees.

AEP said it plans to invest approximately $9 billion in its transmission business over the next three years, more than half of the company’s total capital investment forecast, to enhance customer reliability. AEP Transmission Holding Co. is expected to become one of AEP’s largest subsidiary companies by 2019, contributing approximately 90 cents per share to AEP’s total regulated earnings by 2019.

AEP OnSite Partners and AEP Renewables already have projects in nine states with a strong pipeline of additional opportunities. AEP expects to invest approximately $1 billion in renewable energy projects from 2017 through 2019.

AEP’s SWEPCO subsidiary serves more than 527,000 customers in western Arkansas, northwest and central Louisiana, northeast Texas and the Texas Panhandle. In August, the Shreveport-based utility accepted Request for Proposals (RFP) for the purchase of wind energy assets as the company seeks to add more renewable energy to its diverse resource mix.

The RFPs were for projects that can be placed in commercial operation by Dec. 31, 2018, and must be interconnected to the Southwest Power Pool (SPP) and located in Arkansas, Louisiana, Texas, Oklahoma, Kansas or Missouri.

Despite the increased capital spending projections, the Ohio utility giant today reported a third quarter loss of $766 million on revenue of $4.7 billion. The third quarter results included a $2.3 billion write-down of 2,684 megawatts of power generation at four coal-fired plants in Ohio.

One of the nation’s largest utility operators, the Columbus, Ohio-based energy giant operates AEP Ohio, AEP Texas, Appalachian Power (in Virginia and West Virginia), AEP Appalachian Power (in Tennessee), Indiana Michigan Power, Kentucky Power, Public Service Company of Oklahoma, and SWEPC0.