Strategy & Management
Our Strategy For Sustainability
Our corporate Vision, Mission, Strategy & Values statements outline the principles that guide our business. Our effort to integrate corporate sustainability with our business strategy and daily decision-making has prompted us to take a wider view of what a sustainable future looks like for AEP. For more details on AEP's vision, mission and values, please visit www.AEP.com/about.
We strive to put people first – the health and safety of our employees and contractors working for AEP and the welfare of the communities in which we operate are very important to us. AEP elevated oversight of environment, safety and health to the executive vice president level in 2007 to underscore the critical importance of safety and environmental sustainability to the company's future and the increasing stature of AEP as a leader in corporate sustainability.
Our customers and communities rely on us to meet their energy needs in ways that improve their quality of life and protect the environment today and for future generations. Our challenge is to help our customers understand the true value of electricity – from the raw materials to the impacts on the environment – and offer ways to encourage energy efficiency and give them greater control over use and cost. We also have to obtain adequate and timely recovery of AEP's costs and earn a reasonable return for our shareholders on the investments we make in the company.
Our Challenges & Our Opportunities
Our ability to address climate change will require new technology coupled with policies and regulations to support its deployment; legislative and regulatory support for energy efficiency programs and initiatives to help our customers decrease their demand and usage; expansion of the transmission grid to facilitate fuel diversity; renewable energy growth and reliability; continued availability of greenhouse gas offsets; and additional plant efficiencies. Before we invest in these solutions we collaborate with our stakeholders to ensure that we can recover our costs from these investments while meeting any new mandates.
Our projected earnings growth rate of 5 percent to 9 percent per year through 2010 is based on making capital investments and securing timely regulatory recovery. Our business strategy is based on the idea that sustained capital investment supports earnings growth. We have delivered on this strategy in 2006 and 2007 and will do so again.
Our capital investment outlook presents opportunities from the short to the long term. We are investing $2.5 billion per year to improve plant efficiency and reliability to keep our coal plants economically viable. Concurrently, we are completing our $5.4 billion environmental retrofit program to comply with current mandates; investing $1.3 billion in new generation facilities to meet growing demand within our service territory; and conducting research and feasibility studies on carbon capture and storage technology. With regulatory approval, we intend to invest $1 billion to $2 billion to modernize our electric distribution infrastructure through gridSMARTSM.
Our long-term vision is for an interstate transmission system that will minimize environmental impacts, reduce land use and provide electricity more reliably and efficiently. We intend to have a carbon retrofit solution commercially available for our coal plants, have advanced coal plants commercially operational, and possibly pursue a nuclear construction and operating license within the next decade. For more information, visit www.AEP.com/investors/annrep.
Managing Our Risk
AEP uses an enterprisewide approach for risk management that encompasses all business units and aligns with our major business functions. Our objective is to review the company's total risk profile to assure accountability for the identification, measurement, evaluation and management of risk.
The Risk Executive Committee, which includes AEP senior leadership and risk managers, approves and monitors key risk factors and ensures they are integrated in strategic planning. This includes climate change, which we consider to be a potential high-impact risk. The committee determines which risks require an independent assessment and which risk factors are best measured through the business units. The Audit Committee of the Board of Directors regularly receives summary reports regarding the company's risks.
Ethics & Compliance
AEP's commitment to high ethical standards comes from the collective ethics, character and integrity of our employees. We are committed to do what's right, at the right time, all of the time. We regularly survey and discuss AEP's ethical standards with our employees and, while there is opportunity for improvement, they give the company high marks. Our employees generally believe that the company's leaders will do what's right, not just what's profitable. Employees have also told us that they see AEP managers living the company's values of safety, justice and fairness, trustworthiness, responsibility, environmental stewardship, citizenship, respect and caring.
AEP requires all employees to abide by its Principles of Business Conduct. We provide a 24-hour, toll-free anonymous concerns line for reporting and receiving help with ethical issues. We communicate the numbers and types of concerns that are raised and how we resolve them and continually look for new ways to allow employees to raise and discuss ethical questions because we understand that keeping our values in the forefront is the key to maintaining an ethical culture.
Ethics and compliance are areas of ongoing focus for the company. We are committed to strengthening our programs and continuing to instill high standards of integrity and behavior throughout the company.
