American Electric Power (AEP) has signed an agreement to sell CitiPower, AEP’s retail electricity and gas supply and electricity distribution subsidiary in Australia, to Cheung Kong Infrastructure Holdings (CKI) and Hong Kong Electric (HKE).
CitiPower, headquartered in Melbourne, owns and manages the electricity distribution network that serves approximately 264,000 customers in the Melbourne central business district and inner suburbs, an area that accounts for 25% of the employment for the state of Victoria. CitiPower is also a national energy company in Australia, offering electricity, gas and related services through its offices in Melbourne, Sydney, Brisbane and Adelaide.
Concurrent with the sale, Origin Energy will purchase the electricity retail business of CitiPower from CKI and HKE.
The CitiPower transaction is valued at approximately $855 million. Under terms of the agreement, AEP will receive net cash of approximately $181 million and use the proceeds from the CitiPower sale to reduce debt.
AEP will recognise an after-tax loss on the sale of approximately $125 million in the second quarter, a portion of which may be recognised as an impairment of goodwill under a recent change in accounting rules. Included is a foreign exchange loss of approximately $14 million previously reflected in AEP shareholders’ equity.
The transaction does not require regulatory approval and is expected to be completed by August 30th.
AEP acquired CitiPower from Entergy in December 1998 for $1.1 billion.