AEP to sell river transport operations to American Commercial Lines

American Electric Power (NYSE: AEP), which on June 1 shut thousands of MWs of coal-fired capacity, said Oct. 1 that it has signed a $550-million agreement to sell its coal-hauling commercial barge transportation subsidiary, AEP River Operations LLC, to American Commercial Lines (ACL).

ACL, already a major barge company on the inland river system, is owned by Platinum Equity.

AEP River Operations is a commercial inland barge company delivering about 45 million tons of products annually, including 10 million tons of coal. AEP River Operations has 56 towboats, 2,301 barges and 1,090 employees. The company is headquartered in Chesterfield, Missouri, with operations in Paducah, Kentucky, and Convent, Algiers and Belle Chasse, Louisiana.

AEP announced in March that the company was exploring strategic alternatives for AEP River Operations, including a potential sale. AEP acquired the business, formerly known as MEMCO, in 2001 from Progress Energy.  

“AEP is focused on delivering customer and shareholder value as a regulated utility company. AEP River Operations has an incredible legacy of success, but operating a commercial barge transportation company no longer fits well with our strategy,” said Nicholas K. Akins, AEP chairman, president and chief executive officer.

Upon close of the sale, ACL will acquire AEP River Operations by purchasing all the stock of AEP Resources, the parent company of AEP River Operations. ACL will assume all assets and liabilities of AEP River Operations.

AEP expects to net approximately $400 million in cash after taxes, debt retirement and transaction fees. The company will invest the proceeds in its regulated business. AEP expects to record a net gain of approximately $125 million from the sale in the fourth quarter of 2015, subject to working capital and other adjustments.

The sale of AEP River Operations is subject to regulatory approval including federal clearance under the Hart-Scott-Rodino Antitrust Improvements Act of 1976. The sale is expected to close in the fourth quarter of 2015. Morgan Stanley was the advisor for AEP during the strategic evaluation of AEP River Operations.

AEP will retain ownership of its captive barge fleet that delivers coal to the company’s regulated coal-fueled power plants owned by Appalachian Power, Kentucky Power and Indiana Michigan Power. AEP has signed a contract with ACL to dispatch and operate AEP’s captive barge fleet through the end of 2016. The captive barge fleet delivers about 19 million tons of coal annually to AEP’s regulated power plants. The fleet has 12 towboats, 498 barges and 229 employees.

AEP said it is still conducting an independent strategic evaluation of its competitive generation business, which features mostly coal-fired capacity. No decision has been made about the future of that business.

The coal units that AEP shut as of June 1 went down due largely to the federal Mercury and Air Toxics Standards (MATS). The shut plants/units include Indiana Michigan Power’s Tanners Creek plant, with Indiana Michigan Power still operating its bigger Rockport coal plant. Other units shut included Kentucky Power’s 800-MW Big Sandy Unit 2 (Kentucky Power has replaced that with half of the cleaner-emitting Mitchell coal plant in West Virginia), the Kammer plant in northern West Virginia and the Kanawha River plant in southern West Virginia.

American Electric Power is one of the largest electric utilities in the United States, delivering electricity to nearly 5.4 million customers in 11 states. AEP ranks among the nation’s largest generators of electricity, owning nearly 32,000 megawatts of generating capacity in the U.S.

About Barry Cassell 20414 Articles
Barry Cassell is Chief Analyst for GenerationHub covering coal and emission controls issues, projects and policy. He has covered the coal and power generation industry for more than 24 years, beginning in November 2011 at GenerationHub and prior to that as editor of SNL Energy’s Coal Report. He was formerly with Coal Outlook for 15 years as the publication’s editor and contributing writer, and prior to that he was editor of Coal & Synfuels Technology and associate editor of The Energy Report. He has a bachelor’s degree from Central Michigan University.