AEP / Coal

AEP takes $2.3B write-down of coal plants to avoid Ohio’s ‘deregulation debacle’

Columbus-based AEP is one of the biggest electric utilities in the U.S., with more than 5 million customers in 11 states

Columbus-based AEP is one of the biggest electric utilities in the U.S., with more than 5 million customers in 11 states

COLUMBUS — “American Electric Power Company Inc. CEO Nick Akins often peppers his public comments with references to music or movies.

It’s a way to translate complicated public policy and energy issues through the lens of popular culture. On Tuesday, his quote previewed the theme of comments by executives of the Columbus-based electric utility.

‘When you stop chasing the wrong things, you give the right things the chance to catch you,’ Akins said from New York City after AEP released its third-quarter earnings and addressed analysts and investors.

‘A repositioning’

The wrong things to AEP are its unregulated operations, centered in Ohio, which it has worked in recent years to move away from, through either divestiture or re-regulation. Its power plants here compete against other companies, often underperform, and contribute volatility to the company’s otherwise stable earnings.

Since 1999 Ohio’s power generation has been unregulated, giving power customers the opportunity to choose who supplies their electricity. Distribution remains regulated and controlled by the state’s utilities.

…It signaled a finish to the job Tuesday – what Akins repeatedly labeled as a ‘de-risking’ – in announcing a $2.3 billion pre-tax impairment charge to write down the value of the rest of its unregulated power plants.

The charge led to a $766 million loss on revenue of $4.7 billion for the quarter, compared with a $518 million profit on $4.4 billion in revenue in the same quarter last year. AEP’s write-down includes its remaining Ohio coal-fired plants – more than 2,600 megawatts of power in the Cardinal, Conesville, Stuart and Zimmer plants– plus some operations in Texas.

But CFO Brian Tierney said AEP’s balance sheet can withstand the impairment. It puts the financial impact of what he calls Ohio’s ‘deregulation debacle’ behind the company, leading to a ‘significantly smaller financial footprint in Ohio.’

…Though written off and referred to as an afterthought, AEP still owns the four remaining coal-fired plants. Since summer lobbyists have worked the Ohio Statehouse to convince lawmakers to enact a re-regulated solution that it says would let it maintain ownership.

Otherwise, it will sell them, either to other power companies who are co-owners of the plant or to others, Tierney said. There is interest from both types, executives said.”

— Tom Knox, Columbus Business First

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