COLUMBUS, Ohio, June 11, 2003 — American Electric Power is soliciting bids for the purchase of all the generating assets of its AEP Texas Central Co. subsidiary (formerly known as Central Power and Light).
AEP has retained Credit Suisse First Boston LLC (CSFB) as its exclusive financial advisor for the sale.
AEP announced its intent to divest these assets Dec. 17, 2002. AEP Texas Central received approval from the Public Utility Commission of Texas (PUCT) May 9, 2003, to sell its generation assets in order to accurately determine their market value and the company’s associated stranded costs — the amount that the book value exceeds the market value of the assets. Senate Bill 7 on electric restructuring provides for recovery of stranded costs as part of the transition to the competitive market.
The assets to be sold include 12 separate plant sites and 29 generating units with a facility net generating capacity of 4,497 megawatts. The plants had a net book value of approximately $1.8 billion on Dec. 31, 2001. The assets include eight natural gas-fired generating plants, one coal-fired plant, the subsidiary’s 7.8 percent ownership share in another coal-fired plant, a small hydro facility, and the subsidiary’s 25.2 percent share of ownership in the South Texas Project Nuclear Plant.
The divestiture plan does not include power plants owned by other AEP subsidiaries in Texas – AEP Texas North Company (formerly West Texas Utilities) or Southwestern Electric Power Company (SWEPCO) — as AEP is not seeking stranded cost recovery for those generating assets.
CSFB is assisting AEP in the process of identifying qualified bidders for the assets based on level of interest, operational experience and financial capability. The sale will be conducted as a two-stage, sealed-bid process. All inquiries from potential purchasers should be directed to Mujeeb Qazi of CSFB at (212) 538-1780 or by email to Saritha Peruri at CSFB ([email protected]).
Texas restructuring legislation provides several options for determining stranded costs including sale of the assets, creating and issuing stock for a generating subsidiary, or using administrative models to value the assets. AEP sought approval to sell its plants because it believes that at this time sale of these assets is the best method available in the statute to accurately determine their stranded costs.
The divestiture timeline seeks to complete sale of the assets in time to file for stranded cost recovery in September 2004. Senate Bill 7 allows AEP Texas Central to issue securitization revenue bonds to recover its stranded costs. The principal and interest on the securitization revenue bonds would be recovered over approximately 15 years through an increased wires charge.
The 54 MW of facility net listed for the Oklaunion plant is AEP Texas Central’s 7.8 percent share of the plant. The Brownsville Public Utilities Board, the Oklahoma Municipal Power Authority, and AEP subsidiaries Public Service Company of Oklahoma and AEP Texas North jointly own the remainder. AEP Texas Central owns 630 MW or 25.2 percent of the facility net of the South Texas Project. Other partial owners are City Public Service of San Antonio, Austin Energy, and Texas Genco LP. The sale of AEP Texas Central’s portion of the South Texas Project and Oklaunion includes a right of first refusal provision for the facilities’ co-owners after final purchase bids are accepted.
American Electric Power owns and operates more than 42,000 megawatts of generating capacity in the United States and select international markets and is the largest electricity generator in the U.S. AEP is also one of the largest electric utilities in the United States, with almost 5 million customers linked to AEP’s 11-state electricity transmission and distribution grid. The company is based in Columbus, Ohio.
News releases and other information about AEP, including information about the bidding process for purchase of the assets, can be found on the World Wide Web at http://www.aep.com .