Columbus, OH-based American Electric Power (AEP) announced Wednesday that it is soliciting bids for all 29 of the power generation units (4,497 MW) of its AEP Texas Central Co. subsidiary (formerly known as Central Power and Light) in an effort to accurately determine their market value and the company’s associated stranded costs. The assets include 12 separate plant sites with a net book value of $1.8 billion as of Dec. 31, 2001.

Its plan to divest these assets, which was first announced Dec. 17, 2002 (see Power Market Today, Dec. 18, 2002), received approval from the Public Utility Commission of Texas (PUCT) on May 9, 2003. Under the approval, PUCT said AEP Texas Central Co. could sell its generation assets in order to determine by how much the book value exceeds the market value of the assets.

State Senate Bill 7 on electric restructuring provides for recovery of stranded costs as part of the transition to the competitive market. The bill allows AEP Texas Central to issue securitization revenue bonds to recover its stranded costs. The principal and interest on the securitization revenue bonds would be recovered over 15 years through an increased wires charge.

The assets include eight natural gas-fired generating plants, one coal-fired plant, the subsidiary’s 7.8% ownership share in another coal-fired plant, a small hydro facility, and the subsidiary’s 25.2% share of ownership in the South Texas Project Nuclear Plant.

AEP noted that the divestiture plan does not include power plants owned by other AEP subsidiaries in Texas – AEP Texas North Company (formerly West Texas Utilities) or Southwestern Electric Power Company (SWEPCO) — as AEP is not seeking stranded cost recovery for those generating assets.

Under Texas restructuring legislation, companies have several options for determining stranded costs including sale of the assets, creating and issuing stock for a generating subsidiary, or using administrative models to value the assets. AEP said it sought approval to sell its plants because it believes that at this time the sale of these assets is the best method available in the statute to accurately determine their stranded costs.

AEP Texas Central Co. said it hopes to sell the assets in time to file for stranded cost recovery in September 2004. The company has retained Credit Suisse First Boston LLC (CSFB) as its financial advisor for the sale. The sale will be conducted as a two-stage, sealed-bid process. Interested parties can contact Mujeeb Qazi of CSFB at (212) 538-1780 or by email to Saritha Peruri at CSFB (saritha.peruri@csfb.com).

Plants included in the divestiture include:

AEP noted that the sale of AEP Texas Central’s portion of the South Texas Project and Oklaunion plants includes a right of first refusal provision for the facilities’ co-owners after final purchase bids are accepted.

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