(Bloomberg) -- American Electric Power Co. agreed to sell its Kentucky operations to Algonquin Power & Utilities Corp. for $1.5 billion to fund more clean energy and transmission projects.
The deal includes Kentucky Power and AEP Kentucky Transco, according to a statement Tuesday. AEP in April initiated a strategic review of its Kentucky operations.
Ohio-based AEP, once a classic coal-burning utility, now has a goal for renewables to account for 50% of its generating capacity by 2030 as investors have pushed power companies to cut emissions. Selling the Kentucky operations will help fund that effort and forego a plan to issue about $1.4 billion in stock next year.
“The sale will strengthen AEP's ability to invest in projects that will support a resilient, cleaner energy system,” Nicholas K. Akins, AEP's chief executive officer, said in the statement.
AEP shares rose as much as 2.5% Tuesday after the close of regular trading on Wall Street.
Kentucky Power owns 1,075 megawatts of generation including Big Sandy, a 295-megawatt natural gas-fueled plant, and operates the 1,560-megawatt coal-fueled Mitchell Plant in West Virginia, and owns 50% of that plant.
“It's a way of raising capital,” said Paul Patterson, an analyst for Glenrock Associates. “I don't think they felt like Kentucky was their best utility property.”
The sale impacts 360 employees, including 315 who work for Kentucky Power and 45 from AEP whose roles support Kentucky operations. These workers will transfer to Liberty, the regulated business of parent company Algonquin, when the sale is completed.
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