American Electric Power (AEP) has entered into an agreement to sell its 625MW solar photovoltaic (PV) portfolio in New Mexico to investment firm Exus Asset Holdings. The portfolio, comprising 15 projects across the state, is valued at approximately $230 million. The assets are currently owned by New Mexico Renewable Development LLC (NMRD), a 50-50 joint venture between AEP and PNM Resources, a New Mexico-based electricity holding company.
The majority of NMRD's solar capacity is in the development phase, with nine operational projects totaling 185MW and six projects in the development stage, projected to have a capacity of around 440MW. The sale, expected to close in February 2024, will see the proceeds evenly distributed between AEP and PNM.
AEP's decision to divest these assets aligns with its broader strategy to simplify operations, focus on core regulated activities, and “de-risk” the business, according to AEP's Chair, President, and CEO Julie Sloat. This move follows AEP's August 2023 sale of a 1.3GW solar and wind portfolio for $1.5 billion to a joint venture between renewables developer Invenergy and Blackstone Infrastructure Partners. The company aims to redirect its focus toward regulated businesses, particularly in grids and transmission.
As part of its five-year investment plan announced in November, AEP allocated over half of the $43 billion funding to transmission and distribution businesses. The company sees significant opportunities in investing in its wires infrastructure, emphasizing the potential for returns under US rate base legislation, where utilities can receive a rate of return based on the value of their held assets, including transmission lines.
AEP's strategic shift mirrors a broader trend among utilities, with Duke Energy committing $75 billion to transmission upgrades in its 10-year plan and divesting much of its generation business.