American Electric Power, Algonquin Power pull Kentucky asset deal (update)
Gargolas/iStock via Getty Images

Update 10:45am: Adds comment from AQN investor.
American Electric Power (NASDAQ:AEP) and Algonquin Power & Utilities (NYSE:AQN) said Monday they agreed to terminate AEP's previously announced plan to sell its Kentucky operations to Algonquin's Liberty Utilities subsidiary for $2.6B.
AEP (AEP) said it is "taking swift and decisive action to be best positioned in the near-term, while continuing to develop a long-term strategy for Kentucky," and in the near-term will "focus on right-sizing its rate base to better meet the region's needs and address costs."
The company said it plans to file a base rate case in Kentucky in June with a six-month expected commission approval process, and will securitize retired coal assets through the Kentucky commission's approval.
AEP (AEP) reaffirmed its FY 2023 earnings guidance of $5.19-$5.39/share with an annual long-term growth rate of 6%-7%, and said its equity financing plan is unchanged following the change in strategy.
Algonquin (AQN) said its prior full-year estimate of $0.55-$0.61 adjusted EPS remains unchanged. Algonquin shares rose 1.1%.
âRegulators were about to put this ill-conceived deal out of its misery so it was smart for Algonquin to kill it," Chris DeMuth Jr, Partner of Rangeley Capital, told Seeking Alpha in an interview. "This is extraordinarily good news for AQN shareholders. Without the deal, the stock is quite cheap. The market is missing a beat to price in how cheap; the underreaction presents an opportunity in the AQN stock. Merger arbs are usually betting on deals getting done; this was a rare case where AQN holders were rooting for the deal to break. As a standalone it should trade in the double digits and probably will soon.â
Kentucky regulators and attorney general recently asked the Federal Energy Regulatory Commission to reject the sale to Liberty.