Valley Electric board members approved a voluntary dissolution of the cooperative. Pending due diligence, SWEPCO will purchase the VEMCO assets for approximately $94m, and assume certain other liabilities.
The company will also provide payment for the VEMCO patronage capital at closing, currently estimated at about $30m. A purchase agreement is expected by the end of the year, and a VEMCO membership vote to dissolve is anticipated in January or February next year.
If the transaction is completed, VEMCO customers are expected to save a projected average of 20% annually as a result of SWEPCO’s lower retail rates. SWEPCO’s rates are currently 25% below the Louisiana average and 37% below the national average, based on average monthly residential use of 1,000kWh.
Paul Chodak, president and chief operating officer of SWEPCO, said: “We are extremely pleased that Valley selected SWEPCO to provide VEMCO customers with competitive rates and available long-term generation to meet future electricity needs.
“We will now focus on completing the necessary approvals and working soon with our new customers and our new employees on transition and system integration issues moving forward.”
The agreement also calls for the transfer of 101 VEMCO employees to SWEPCO. SWEPCO already is interconnected at transmission voltage with VEMCO. SWEPCO anticipates taking responsibility for providing service to the customers and facilities by mid-year 2010, subject to all regulatory approvals.
The Louisiana Public Service Commission and the Arkansas Public Service Commission must approve the transaction, as well as the AEP board of directors. Approval by the Public Utilities Commission of Texas (PUCT) is not required, but the PUCT will be notified. Additionally, receipt of required regulatory approvals must come from the Rural Utilities Service and the National Rural Utilities Cooperative Finance Corporation.
