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AEP

American Electric (AEP) to Sell Commercial Barge Business

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American Electric Power Co., Inc.AEP has entered into a definitive agreement to divest the commercial barge transportation unit of its subsidiary, AEP River Operations, to American Commercial Lines ("ACL"), owned by Platinum Equity. The transaction is valued at $550 million.

With a focus on augmenting its earnings base, American Electric is committed toward strengthening its regulated businesses. Although the utility's River Operations has had a legacy of successes, operating a commercial barge transportation company no longer fits in with its strategy. On the other hand, ACL has been in the barge transportation business for 100 years and is one of the premier liquid and dry cargo barge lines in the country.

Earlier in the year, American Electric revealed that it was looking for strategic alternatives for AEP River Operations, including a potential sale. The company had acquired the business, formerly known as MEMCO, in 2001 from Progress Energy.

Headquartered in Chesterfield, MI, AEP River Operations delivers approximately 45 million tons of products annually, including 10 million tons of coal. It operates in Paducah, KY and Convent, Algiers and Belle Chasse, LA.

With the completion of the sale, American Electric plans to retain ownership of its captive barge fleet that delivers coal to its regulated coal-fueled power plants owned by Appalachian Power, Kentucky Power and Indiana Michigan Power.

The sale of AEP River Operations is scheduled to close in the fourth quarter of 2015 subject to regulatory approval including federal clearance pursuant to the Hart-Scott-Rodino Antitrust Improvements Act of 1976.

American Electric has plans to invest the proceeds in its regulated business. The company expects to register a net gain of about $125 million from the sale in the fourth quarter of 2015, subject to working capital and other adjustments.

Zacks Rank

American Electric currently has a Zacks Rank #2 (Buy). Some of the other favorably ranked companies in the utility sector include Brookfield Infrastructure Partners L.P. BIP , Dynegy Inc. DYN and Talen Energy Corporation TLN , all with a Zacks Rank #1 (Strong Buy).

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AMER ELEC PWR (AEP): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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