American Electric Power (AEP) on Feb. 12 announced that its competitive renewable energy subsidiary has signed an agreement to acquire Sempra Renewables LLC and its 724 megawatts of operating wind generation and battery assets for approximately $1.056 billion, including $551 million in cash, assumption of $343 million in existing project debt and $162 million in tax equity obligation.
The final acquisition cost will be subject to closing and working capital adjustments, AEP said.
Sempra Renewables, a subsidiary of investor-owned Sempra Energy, jointly owns all or part of seven wind farms and one battery installation in seven states. Five of the wind farms are jointly owned with BP Wind Energy. BP Wind Energy will retain its ownership share of those projects.
The seven operating wind farms have an average capacity factor of 37 percent and are located in Colorado, Hawaii, Indiana, Kansas, Michigan, Minnesota and Pennsylvania. They all have long-term, power purchase agreements for 100 percent of the energy produced with investment-grade investor-owned utilities, public power utilities and electric cooperatives. The project PPAs 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.
Investor-owned AEP expects to finance the acquisition with a combination of debt, equity, and/or equity-linked securities. The transaction is expected to close in the second quarter of 2019 and is subject to approvals from the Federal Energy Regulatory Commission and Hart-Scott-Rodino clearance.
AEP Renewables also recently signed a separate agreement to purchase a 75 percent interest (227 MW) in the Santa Rita East Wind Project currently under construction west of San Angelo, Texas. AEP Renewables will acquire its share of the project upon completion in mid-2019.
AEP’s competitive renewable generation portfolio currently includes 351 MW of contracted renewable generation including wind and solar projects in Texas (261 MW wind), California (20 MW solar), Nevada (50 MW solar) and Utah (20 MW solar).
The portfolio will grow to 1,302 MW of renewable generation in 11 states after close of the Sempra transaction and completion of Santa Rita, which AEP said will make it the seventh largest utility owner of competitive wind generation in the United States.
After closure of the Sempra transaction, AEP’s renewable generation portfolio will increase to 16 percent, coal will be 46 percent, natural gas will be 27 percent and nuclear generation will remain the same.
In 2018, Sempra Energy said that it intended to sell several energy infrastructure assets, including its entire portfolio of U.S. wind and U.S. solar assets, as well as certain U.S. midstream assets.