COLUMBUS, Ohio, April 27, 2010 – American Electric Power (NYSE: AEP) managed the economic upheaval of 2009 and outperformed expectations, but is now taking actions to address the lingering effects of the economic downturn and ensure sustainable financial performance, according to Michael G. Morris, AEP’s chairman, president and chief executive officer. Morris addressed shareholders at the company’s annual meeting today in Frankfort, Ky.
Morris announced that AEP’s Board of Directors declared the company’s 400th consecutive quarterly common stock dividend and increased the dividend by one cent per quarter to 42 cents per share, the first dividend increase since December 2007. The dividend will be payable June 10, 2010, to shareholders of record as of May 10, 2010. AEP has paid a cash dividend on its common stock every quarter since July 1910.
“Our performance in 2009 was extraordinary considering the significant economic uncertainties we encountered. Our very successful $1.6 billion equity offering helped maintain the strength of our balance sheet, and our financial discipline, combined with the regulatory success in many of the states where we operate, helped us achieve 2009 ongoing earnings of $2.97 per share, well within our guidance range,” Morris said.
During 2009, AEP received orders from state utility regulators granting rate increases that supplied $725 million in incremental rate relief for the company, recognized the increased costs of providing service to customers and recovered capital investments in environmental compliance equipment, reliability enhancements and energy efficiency programs. AEP received an additional $25 million in rate recovery from Texas regulators April 15 for generation investments and distribution reliability enhancements.
“Unfortunately, despite our success in managing the significant challenges of 2009, we continue to see lingering effects from the global recession. There are signs of improvement in parts of our service area, but we don’t see electricity demand nearing pre-recession levels for some time. Therefore, we must realign our cost structure with our new economic reality. By responding in a financially responsible way, we can continue to provide value for our shareholders, reward our employees and deliver reliable, affordable electricity to our customers,” Morris said.
AEP announced a voluntary severance program for all employees April 14 with a goal of reducing its workforce between 5 percent and 10 percent, returning to the employment levels of 2004 and 2005. Additionally, the company began an initiative to identify process improvements and other efficiencies that can deliver sustainable cost savings.
Morris highlighted AEP’s continued legacy of technological advancement. The company completed the world’s first fully integrated carbon capture and storage equipment at its Mountaineer Plant in West Virginia. The 20-megawatt validation of a chilled ammonia system for carbon capture and storage began operating in September 2009. AEP also secured $334 million, up to 50 percent of the project costs, in stimulus funding from the Department of Energy to advance the chilled ammonia technology to full commercial scale at Mountaineer by 2015. Additionally, AEP moved forward with deployment of advanced “smart” meters in four states and received $75 million in federal stimulus funding to support a gridSMARTSM
technology demonstration program in Ohio that includes installing smart meters and distributed energy sources, new distribution grid technologies, plug-in hybrid electric vehicles, and programs to help customers manage electricity use and costs.
AEP also completed repairs on Unit 1 of its Cook Nuclear Station, bringing the unit back on line at reduced power in December 2009. Unit 1 is expected to return to full power by the end of 2011 after new low-pressure turbine rotors are installed. Cook Unit 1 was damaged by turbine vibrations and a resulting fire in September 2008. The scope of the repairs exceeded anything previously attempted in the industry.
AEP will continue to invest approximately $2 billion in capital on its system in 2010 and 2011, including continuing construction of the John W. Turk Jr. Plant, a 600-megawatt ultra-supercritical coal-fueled plant in Arkansas scheduled for completion in 2012, and the J. Lamar Stall Unit, a 500-megawatt natural-gas fueled plant in Louisiana scheduled for completion in mid-2010. AEP also will pursue approximately $120 million in new transmission investments within its service area through its new transmission company, AEP Transmission Co., and will continue seeking necessary approvals for extra-high voltage transmission projects under development with joint venture partners as part of its efforts to lead development of a national electric superhighway system.
In business items at the annual shareholders meeting, AEP shareholders re-elected 13 directors to hold office until the next annual meeting or until the election of successors. Directors elected to the board are: Morris, 63, of Columbus; E.R. Brooks, 72, of Granbury, Texas; Donald M. Carlton, 72, of Austin, Texas; James F. Cordes, 69, of The Woodlands, Texas; Ralph D. Crosby Jr., 62, of McLean, Va.; Linda A. Goodspeed, 48, of Franklin, Tenn.; Thomas E. Hoaglin, 60, of Columbus; Lester A. Hudson Jr., 70, of Charlotte, N.C.; Lionel L. Nowell III, 55, of Cos Cob, Conn.; Richard L. Sandor, 68, of Chicago; Kathryn D. Sullivan, 58, of Columbus; Sara Martinez Tucker, 55, of San Francisco; and John F. Turner, 68, of Moose, Wyo.
Approximately 93 percent of shares voted approved amendments to the American Electric Power System Long-Term Incentive Plan.
Approximately 98 percent of shares voted ratified the firm of Deloitte & Touche LLP as AEP’s independent auditors for 2010.
American Electric Power is one of the largest electric utilities in the United States, delivering electricity to more than 5 million customers in 11 states. AEP ranks among the nation’s largest generators of electricity, owning nearly 38,000 megawatts of generating capacity in the U.S. AEP also owns the nation’s largest electricity transmission system, a nearly 39,000-mile network that includes more 765-kilovolt extra-high voltage transmission lines than all other U.S. transmission systems combined. AEP’s transmission system directly or indirectly serves about 10 percent of the electricity demand in the Eastern Interconnection, the interconnected transmission system that covers 38 eastern and central U.S. states and eastern Canada, and approximately 11 percent of the electricity demand in ERCOT, the transmission system that covers much of Texas. AEP’s utility units operate as AEP Ohio, AEP Texas, Appalachian Power (in Virginia and West Virginia), AEP Appalachian Power (in Tennessee), Indiana Michigan Power, Kentucky Power, Public Service Company of Oklahoma, and Southwestern Electric Power Company (in Arkansas, Louisiana and east Texas). AEP’s headquarters are in Columbus, Ohio.
This report made by American Electric Power and its Registrant Subsidiaries contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934. Although AEP and each of its Registrant Subsidiaries believe that their expectations are based on reasonable assumptions, any such statements may be influenced by factors that could cause actual outcomes and results to be materially different from those projected. Among the factors that could cause actual results to differ materially from those in the forward-looking statements are: the economic climate and growth in, or contraction within, AEP’s service territory and changes in market demand and demographic patterns; inflationary or deflationary interest rate trends; volatility in the financial markets, particularly developments affecting the availability of capital on reasonable terms and developments impairing AEP’s ability to finance new capital projects and refinance existing debt at attractive rates; the availability and cost of funds to finance working capital and capital needs, particularly during periods when the time lag between incurring costs and recovery is long and the costs are material; electric load and customer growth; weather conditions, including storms, and AEP’s ability to recover significant storm restoration costs through applicable rate mechanisms; available sources and costs of, and transportation for, fuels and the creditworthiness and performance of fuel suppliers and transporters; availability of necessary generating capacity and the performance of AEP’s generating plants; AEP’s ability to recover Indiana Michigan Power’s Donald C. Cook Nuclear Plant Unit 1 restoration costs through warranty, insurance and the regulatory process; AEP’s ability to recover regulatory assets and stranded costs in connection with deregulation; AEP’s ability to recover increases in fuel and other energy costs through regulated or competitive electric rates; AEP’s ability to build or acquire generating capacity, including the Turk Plant, and transmission line facilities (including the ability to obtain any necessary regulatory approvals and permits) when needed at acceptable prices and terms and to recover those costs (including the costs of projects that are cancelled) through applicable rate cases or competitive rates; new legislation, litigation and government regulation, including requirements for reduced emissions of sulfur, nitrogen, mercury, carbon, soot or particulate matter and other substances or additional regulation of flyash and similar combustion products that could impact the continued operation and cost recovery of AEP’s plants; timing and resolution of pending and future rate cases, negotiations and other regulatory decisions (including rate or other recovery of new investments in generation, distribution and transmission service and environmental compliance); resolution of litigation (including AEP’s dispute with Bank of America); AEP’s ability to constrain operation and maintenance costs; AEP’s ability to develop and execute a strategy based on a view regarding prices of electricity, natural gas and other energy-related commodities; changes in the creditworthiness of the counterparties with whom AEP has contractual arrangements, including participants in the energy trading market; actions of rating agencies, including changes in the ratings of debt; volatility and changes in markets for electricity, natural gas, coal, nuclear fuel and other energy-related commodities; changes in utility regulation, including the implementation of electric security plans and related regulation in Ohio and the allocation of costs within regional transmission organizations, including PJM and SPP; accounting pronouncements periodically issued by accounting standard-setting bodies; the impact of volatility in the capital markets on the value of the investments held by AEP’s pension, other postretirement benefit plans and nuclear decommissioning trust and the impact on future funding requirements; prices and demand for power that AEP generates and sells at wholesale; changes in technology, particularly with respect to new, developing or alternative sources of generation; and other risks and unforeseen events, including wars, the effects of terrorism (including increased security costs), embargoes and other catastrophic events.