COLUMBUS, Ohio, Oct. 10, 2006 – American Electric Power (NYSE: AEP) will form a joint venture company to fund and own new electric transmission assets in Texas, the company announced today.
The joint venture company, when created, would include AEP and an outside company. Discussions are ongoing with potential partners. AEP anticipates the transmission joint venture will be active in early 2007.
“Texas faces a significant – and growing – need for transmission investment to address existing areas of congestion and to support the competitive generation market in the state,” said Michael G. Morris, AEP’s chairman, president and chief executive officer. “Gov. Rick Perry recognized that last week when he said the state will ensure that sufficient transmission capacity is added to support development of new wind farms.
“As owner of the nation’s largest and most robust transmission system, AEP has extensive expertise in transmission planning, siting, construction and operation, both in Texas and throughout our service territories in 10 other states,” Morris said. “Meeting the transmission needs in Texas is a good business opportunity for us.”
Creating a joint venture company to pursue Texas transmission opportunities allows the participants to share the often significant capital investment necessary to complete these important infrastructure projects. As conceived by AEP, the joint venture company could invest up to $1 billion in new transmission projects in Texas and would own the assets. The company would be created as a utility and would be subject to the rules and regulations governing utilities within the Electric Reliability Council of Texas (ERCOT). AEP would be responsible for developing, building and operating the assets for the joint venture company.
“Texas continues to make strides toward encouraging investment in transmission infrastructure,” Morris said. “The state has a streamlined annual review process for recovery of transmission costs, which reduces regulatory lag while offering a return on equity that is similar to other state regulatory returns. The process is one of the most progressive in the country.”
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 36,000 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 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). American Electric Power, based in Columbus, Ohio, is celebrating its 100th anniversary in 2006.
This report made by AEP and certain of its 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: electric load and customer growth; weather conditions, including storms; available sources and costs of, and transportation for, fuels and the creditworthiness of fuel suppliers and transporters; availability of generating capacity and the performance of AEP’s generating plants; the ability to recover regulatory assets and stranded costs in connection with deregulation; the ability to build or require generating capacity when needed at acceptable prices and terms and to recover those costs through applicable rate cases or competitive rates; the ability to recover increases in fuel and other energy costs through regulated or competitive electric rates; new legislation, litigation and government regulation including requirements for reduced emissions of sulfur, nitrogen, mercury, carbon and other substances; timing and resolution of pending and future rate cases, negotiations and other regulatory decisions (including rate or other recovery for new investments, transmission service and environmental compliance);resolution of litigation (including pending Clean Air Act enforcement actions and disputes arising from the bankruptcy of Enron Corp. and related matters); AEP´s ability to constrain its operation and maintenance costs; AEP´s ability to sell assets at acceptable prices and on other acceptable terms; the economic climate and growth in AEP´s service territory and changes in market demand and demographic patterns; inflationary and interest rate trends; 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; changes in the financial markets, particularly those affecting the availability of capital and AEP´s ability to refinance existing debt at attractive rates; actions of rating agencies, including changes in the ratings of debt; volatility and changes in markets for electricity, natural gas, and other energy-related commodities; changes in utility regulation, including implementation of EPACT and membership in and integration into regional transmission structures; accounting pronouncements periodically issued by accounting standard-setting bodies; the performance of AEP´s pension and other postretirement benefit plans; prices 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.