Tuesday, March 19, 2019

AEP Buys Sempra’s Renewables Portfolio in $1.1B Deal

By Tom Kleckner

American Electric Power will buy Sempra Energy’s renewable business in a $1.056 billion deal that will triple AEP’s renewable portfolio, the companies announced Tuesday.

Sempra’s Sempra Renewables subsidiary owns all or part of seven wind farms and one battery installation in seven states, with a total capacity of 724 MW. Five of the wind farms are jointly owned with BP Wind Energy, which will retain its ownership share.

Sempra Renewables owns the Apple Blossom Wind project in Michigan and the Black Oak Getty Wind project in Minnesota. It holds interests with BP in Colorado (Cedar Creek 2 Wind), Hawaii (Auwahi Wind, which also includes battery storage), Indiana (Fowler Ridge 2 Wind), Kansas (Flat Ridge 2 Wind) and Pennsylvania (Mehoopany Wind).

The facilities have an average capacity factor of 37%. The energy is contracted out through long-term, power-purchase agreements with investor-owned utilities, municipal utilities and electric cooperatives, with an average remaining life of 16 years.

AEP will also acquire all Sempra Renewables wind projects in development.

AEP Renewables, AEP’s competitive renewable subsidiary, owns 351 MW of contracted renewable generation. It has wind and solar projects in Texas (261 MW wind), California (20 MW solar), Nevada (50 MW solar) and Utah (20 MW solar).

AEP Renewables also recently signed an agreement to purchase a 75% interest, worth 227 MW of capacity, in Invenergy’s Santa Rita East Wind Project under construction west of San Angelo, Texas. AEP will acquire its share of the project upon completion later this year. Invenergy will retain the remaining 25%.

With 1,302 MW of renewable generation in 11 states, AEP will become the seventh largest utility owner of competitive wind generation in the United States upon the completion of the Sempra transaction and Santa Rita construction.

Sempra Renewables’ Apple Blossom Wind Farm | Sempra Renewables

Following the 2018 collapse of its $4.5 billion, 2-GW Wind Catcher project, AEP said it would focus on smaller renewable projects as part of its plan to reduce carbon dioxide emissions 80% from 2000 levels by 2050. (See AEP to Focus on Smaller Renewable Projects.)

“Our long-term strategy is focused on diversifying our generation portfolio, including expanding our ownership of renewable generation,” said AEP CEO Nick Akins in a statement.

AEP’s generation capacity in 2005 was 70% coal-fueled, 19% natural gas and 4% renewable. After the Sempra transaction’s closure, the mix will be 46% coal, 27% gas and 16% renewable.

The deal includes $551 million in cash, assumption of $343 million in existing project debt and $162 million in tax equity obligation. It is part of the company’s planned $2.2 billion investment in contracted renewables by 2023.

The transaction is expected to close in the second quarter of 2019 and is subject to FERC approval and Hart-Scott-Rodino clearance.

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