Dive Brief:
- American Electric Power's (AEP) renewable energy subsidiary agreed to acquire Sempra Renewables for approximately $1.056 billion, including 724 MW of operating wind generation and battery assets, AEP said Tuesday.
- Sempra Energy's non-utility operating subsidiary owned all or part of seven wind farms and one battery installation, and three of AEP's operating units currently have power purchase agreements with two of the wind projects. The deal contributes to AEP's goals to reduce carbon emissions 60% below 2000 levels by 2030.
- AEP recently signed an agreement with the Texas-based Santa Rita East Wind Project to purchase a 75% interest (227 MW). The project is under construction and completion is expected in mid-2019. With a 1,302 MW renewable portfolio, AEP said it will be the seventh largest utility owner of U.S. competitive wind generation after the Sempra transaction and the completion of Santa Rita.
Dive Insight:
A growing number of energy companies are making commitments to carbon reduction and renewable energy in the United States. AEP said its generation capacity has diversified from 70% coal-fueled in 2005 to 47% today, while adding natural gas and renewables. The Sempra renewables transaction will continue that shift in AEP's generation mix.
| Generation | Present Day Mix | Post Sempra Transaction Mix |
|---|---|---|
| Coal | 47% | 46% |
| Natural gas | 28% | 27% |
| Renewables | 14% | 16% |
| Nuclear | 11% | 11% |
SOURCE: AEP
The Sempra acquisition would more than double AEP's wind portfolio. Currently, the utility has 351 MW of contracted renewable generation, of which 261 MW is from wind projects in Texas.
"We targeted $2.2 billion of capital investment in competitive, contracted renewables by 2023. Adding these high-quality renewable assets to our portfolio will achieve a significant portion of that goal this year," Nicholas Akins, CEO, president and chairman of AEP, said in a press statement.
The deal is expected to close in the second half of 2019, pending federal regulatory approval.
Last summer, Sempra Energy disclosed company plans to sell its 2,600 MW renewable energy portfolio and two natural gas storage facilities, to focus on "the overlooked opportunity around the dividend" and cutting debt, Sempra CEO Jeffrey Martin said last June during an analyst day meeting.
Sempra announced last September the first of a multi-phase initiative to optimize its portfolio, spinning off solar and battery storage and other renewable assets for $1.54 billion to Consolidated Edison. That acquisition, which included one wind facility, involved about 980 MW of installed capacity.
Sempra's activist investors, Elliott Management and Bluescape Resources, have called for the company to spin off its U.S. liquefied natural gas (LNG) businesses and its businesses in Latin America. The company created a new LNG and business development committee in September as part of an agreement with the investment management firms.
In June, Martin said Sempra's businesses in Chile and Peru are "self funding," addressing claims that the company was spending too much money overseas.
Sempra won Texas regulatory approval last March to acquire Oncor Electric and its bankrupt parent company Energy Future Holdings for $9.45 billion. The company also owns investor-owned utility San Diego Gas & Electric, which faces an increasing amount of wildfire liabilities in California.
