American Electric Power (AEP) has completed the purchase of Sempra Renewables including the developer’s 724MW of operating wind generation and battery assets for over $1bn.
AEP will pay Sempra $584 million in cash, which includes $33 million in working capital, and assume $470 million in existing project debt and tax equity obligations.
The purchase includes all or part of seven wind farms and one energy storage installation in seven US states.
Five of the wind farms are jointly owned with BP Wind Energy, which will retain its ownership share of those projects, while Sempra Renewables 20 employees will join AEP Clean Energy Resources.
AEP chief executive Nicholas Akins said: “The addition of these high-quality renewable assets and the experience of our new employees will support our long-term strategy to diversify our generation fleet.
“We’ve targeted a total of $2.2bn in capital investment in competitive, contracted renewables by 2023.”
Akins added: “The long-term contracts and attractive returns associated with these existing assets will be immediately accretive to earnings and solidify our projected 5-7% earnings growth rate.”
The seven operating wind farms have an average capacity factor of 37% and are located in Colorado, Hawaii, Indiana, Kansas, Michigan, Minnesota and Pennsylvania.
All of them have long-term, power purchase agreements for 100% of the energy produced with investment-grade investor-owned utilities, municipal utilities and electric cooperatives.
The agreements have an average remaining life of 16 years.
AEP operating units AEP Ohio, Indiana Michigan Power and Southwestern Electric Power Company have PPAs with two of the wind farms.
AEP Renewables also recently signed a separate agreement to purchase a 75% (227MW) stake in the Santa Rita East Wind project being built west of San Angelo, Texas.
AEP Renewables will acquire its share of the project upon completion, which is expected in June.
With this acquisition, AEP’s renewable generation portfolio will increase to 1302MW.
AEP’s generation capacity has shrunk from 70% coal-fuelled in 2005 to 46% today, while its natural gas capacity increased from 19% in 2005 to 27% today, and its renewable generation capacity increased from 4% in 2005 to 16% today.
Wells Fargo Securities served as the exclusive financial advisor and Bryan Cave Leighton Paisner served as legal advisor for AEP on the acquisition.