Thursday, October 1, 2015

AEP to sell most of its river operations to ACBL

This is big. I'm trying to get more details.

From the news release:

COLUMBUS, Ohio, Oct. 1, 2015 – American Electric Power (NYSE: AEP) has signed an agreement to sell its commercial barge transportation subsidiary, AEP River Operations LLC, to American Commercial Lines (ACL), owned by Platinum Equity, for approximately $550 million.
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.
“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. ACL shares our commitment to safety and customer service, and several members of their management team know first-hand the exceptional value and potential of AEP River Operations’ employees and fleet,” Akins said.
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 pursuant to 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 is still conducting an independent strategic evaluation of its competitive generation business. No decision has been made about the future of that business.  

Non-coal news roundup, 10/1/2015

According to this article, the new Ohio River bridge at downtown Louisville could be open for traffic by this coming January.

The New York Times weighs in on the algae bloom. I was up on the bridge yesterday morning, and the muddy river looked almost like a honeycomb with circles of brown water surrounded by rings of green. There's still some algae along the shore despite the cool weather and now rain, which is supposed to get worse this weekend.

And if you want to read a primer on sand used in hydraulic fracturing, check out this piece, which mentions the river down in it.

Coal roundup

The other day I went out looking for boats, but I didn't see any. I figured they were all still waiting in line at Lock 52.

Traffic is down here because coal is down. Here are some coal-related stories that came up in my Twitter feed this morning that may help explain some of that.

The Wall Street Journal looks at the impact of an oversupply in international coal markets on one company in particular. Excerpt:

Like other commodities, the coal market is mired in a glut. In recent months, the oversupply in coal has been exacerbated by rising output from troubled mining companies, which have been able to slash costs. That has dashed hopes for a recovery in prices either this year or next, traders and analysts say, and has put pressure on miners that took on debt to snap up assets when prices were higher.

Then there are a couple of articles from SNL Financial. First up is a look at how the retirement of a number of coal-fired power plants is affecting specific mines.

In 2014, the coal sector sold 3.7 million tons of coal to power plants that are now slated for closure by the end of this year. In total, about 5% of 2014 coal deliveries went to plants that are now expected to shut down in 2015. More U.S. coal buyers are slated to come offline every year through 2020.

I did a much, much shorter analysis a week or so ago.

Increased use of low-cost natural gas, clean air regulations and other factors have led to a 25 percent decrease in the use of bituminous coal in U.S. power plants in the past five years.

This is more long-term, but the EPA has issued a new rule that eliminates the discharge of certain metals in wastewater from power plants. You can figure it will affect coal-burning plants a lot more than those that burn gas.

The final rule is the first nationally applicable limit on the amount of toxic metals and other harmful pollutants that steam power plants are allowed to discharge, and is the first update to the effluent guidelines in over 30 years. The rule targets coal- and natural gas-fired, nuclear and other power plants that use steam.
I'm guessing we'll hear more about the impact of this rule when utilities such as AEP, FirstEnergy and Duke release their third-quarter earnings reports over the next six weeks.