AEP announces $2.6 billion stock offering with forward sale agreements

American Electric Power (NASDAQ: AEP) announced a registered underwritten offering of $2.6 billion in common stock shares. The utility company said all shares are expected to be borrowed by forward counterparties from third parties and sold to underwriters in connection with forward sale agreements.

BofA Securities, Goldman Sachs & Co. LLC and Morgan Stanley serve as joint book-running managers for the offering. AEP will enter into forward sale agreements with Bank of America N.A., Goldman Sachs & Co. LLC and Morgan Stanley & Co. LLC under which the company will issue and sell the shares at an initial forward sale price equal to the underwriters' purchase price, subject to adjustments.

The underwriters received a 30-day option to purchase up to an additional $390 million of AEP shares on the same terms. If exercised, AEP expects to enter additional forward sale agreements for those shares.

Settlement of the forward sale agreements is expected to occur on or before May 31, 2028. AEP may elect cash settlement or net share settlement for all or part of its obligations under the agreements, subject to certain conditions.

If AEP chooses physical settlement, the company expects to use net proceeds for general corporate purposes, including capital contributions to utility subsidiaries, acquisitions and debt repayment.

The offering operates under an effective shelf registration statement filed with the U.S. Securities and Exchange Commission. AEP serves 5.6 million customers across 11 states and operates the nation's largest electric transmission system with 40,000 line miles. The Columbus, Ohio-based company has approximately 32,000 megawatts of owned and contracted generating capacity.

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