AEP’s Transmission Assets Sale: A Boost to Earnings and Balance Sheet
American Electric Power (AEP) has taken a significant step towards addressing its balance sheet concerns by selling a minority equity interest in its transmission assets to a consortium formed by KKR and PSP. The deal, worth $2.82 billion, will see the consortium acquire a 19.9% ownership stake in AEP’s Ohio and I&M transmission companies.
Immediate Accretion to EPS Expected
Morgan Stanley analysts believe the deal will have an immediate positive impact on AEP’s earnings per share (EPS), alleviating a major balance sheet overhang and reducing EPS execution risk. The firm expects AEP to address its earnings growth rate and range upon closing of the deal.
AEP’s Equity Needs Addressed
The sale is expected to address 52% of AEP’s equity needs, as outlined in its plan. This development is likely to boost investor confidence in the company’s ability to meet its financial obligations.
Morgan Stanley’s Bullish Stance
Morgan Stanley has an Overweight rating on AEP shares, with a price target of $103. The firm’s analysts are optimistic about the company’s prospects, citing the deal’s potential to drive earnings growth and improve its balance sheet.
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