IRG Acquisition Holdings, owned by Invenergy, and CDPQ, and funds managed by Blackstone, will acquire the assets. The deal value includes project-level debt of $200mn. Post tax and transaction costs, AEP expects to net $1.2bn of cash proceeds from the sale. The acquisition will be financed by debt from Banco Santander, Rabobank, and Natixis. AEP had announced its intention to divest the unregulated renewables portfolio in Feb’22 and launched a competitive bidding process for the assets in Aug’22. Enerdatics observes that the deal represents Invenergy’s first major acquisition of operating, contracted assets, and marks a shift from its strategy of selling developed projects to other independent power producers (IPPs).
The transacted portfolio comprises 14 projects, representing 1.2 GW of wind capacity, 165 MW of solar capacity, and 5 MW of co-located battery energy storage systems (BESS), spread across 11 states. The projects were operationalized during 2009-2021, giving the portfolio a weighted average maturity of 5.4 years. All the projects are contracted under long-term power purchase agreements (PPAs) with utilities and corporations such as Consumers Energy, Public Service Company of Colorado, and Novartis, with a weighted average remaining contractual life of 11 years.
During the last year, several utilities in the US announced intentions to sell unregulated renewables portfolios and instead focus their investments on their core, regulated business, specifically transmission assets. Enerdatics believes that the trend is driven by increased competition in the unregulated renewables market post the passage of the Inflation Reduction Act (IRA), which is spurring companies to simplify and de-risk their holdings. Further, the sale proceeds will enable utilities to avoid tapping debt markets for their expansion plans, at a time when rising interest rates are increasing the cost of capital. AEP’s peer Duke Energy also announced plans to sell its renewable energy portfolio in Aug’22. ConEdison’s $6.4bn sale to RWE in 2022 also underscores the benefit of such a move.
The above analysis is proprietary to Enerdatics’ energy analytics team, based on the current understanding of the available data. The information is subject to change and should not be taken to constitute professional advice or a recommendation.
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