AEP launches $2 billion common stock offering

COLUMBUS, Ohio - American Electric Power (NASDAQ:AEP), a major utility operator with a market capitalization of $55.54 billion, has initiated a $2 billion public offering of its common stock, with Citigroup and Barclays serving as the joint book-running managers. According to InvestingPro data, the company operates with a significant debt burden of $46 billion, making this equity offering a strategic move to strengthen its balance sheet. The transaction includes a forward sale component, where AEP will enter into agreements with Citibank, N.A., and Barclays Bank PLC, referred to as the forward counterparties.

Under these forward sale agreements, AEP will agree to sell an aggregate of $2 billion worth of shares to the counterparties at a price equivalent to the underwriters’ purchase price, with certain adjustments. The underwriters also have an option to buy an additional $300 million in shares within a 30-day period, which would lead to additional forward sale agreements. This capital raising effort comes as InvestingPro analysis shows the company’s current ratio at 0.44, indicating that short-term obligations exceed liquid assets.

The settlement of these agreements is expected by December 31, 2026, with AEP retaining the option to choose between cash settlement or net share settlement. Should AEP opt for physical settlement, the company plans to allocate the net proceeds towards general corporate purposes. These may include capital contributions to its utility subsidiaries, potential acquisitions, and debt repayment.

This offering is part of an effective shelf registration statement filed with the U.S. Securities and Exchange Commission. It should be noted that this news release does not constitute an offer to sell or a solicitation of an offer to buy the securities described herein.

American Electric Power, headquartered in Columbus, Ohio, is committed to delivering reliable and affordable power. The company has outlined a $54 billion investment plan from 2025 through 2029 to enhance customer service and meet the growing energy demands in its service regions. AEP’s extensive operations include the nation’s largest electric transmission system and a significant electricity production capacity. InvestingPro data reveals the company’s strong dividend history, having maintained payments for 55 consecutive years with a current yield of 3.54%. For deeper insights into AEP’s financial health and growth prospects, investors can access the comprehensive Pro Research Report, available exclusively to InvestingPro subscribers.

The information provided in this article is based on a press release statement by American Electric Power.

In other recent news, American Electric Power (AEP) reported its fourth-quarter 2024 earnings, which showed a slight miss in earnings per share (EPS) and revenue compared to analysts’ expectations. The company posted an EPS of $1.24, narrowly missing the forecast of $1.25, and revenue of $4.69 billion, which fell short of the expected $4.87 billion. Despite the quarterly shortfall, AEP demonstrated strong annual performance with a 7% increase in annual earnings and announced a dividend increase. In a move to enhance its infrastructure, AEP, along with its affiliate Transource Energy, plans to invest approximately $1.7 billion in transmission system upgrades across several states. Additionally, Mizuho Securities raised its price target for AEP shares to $106 from $93, maintaining a Neutral rating, reflecting confidence in the company’s new leadership team. The company is also undergoing changes in its leadership and board, with the resignation of Executive Vice President Therace M. Risch and board member Donna A. James not seeking re-election. These developments come as AEP navigates a period of significant investment and strategic adjustments.

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