COLUMBUS, Ohio, April 28, 2004 -
American Electric Power (NYSE: AEP) and Enron Corp. have reached a proposed settlement agreement regarding the Bammel storage reservoir and related pipeline and compressor assets.
In June 2001 AEP purchased Houston Pipe Line Co. from Enron and entered into a 30-year pre-paid lease arrangement for Bammel. Enron filed bankruptcy six months later and the lease became part of the bankruptcy proceedings.
Under terms of the agreement, AEP will pay $115 million to acquire - among other assets - all of Enron´s interests in the 7,000-acre underground Bammel storage reservoir near Houston, the related Bammel Loop, Texas Loop and Houston City Loop pipelines, appurtenant wells, compressors and other equipment, and 10.5 billion cubic feet (bcf) of natural gas in the Bammel storage reservoir. AEP and Enron will mutually release the other from all claims associated with Bammel and the related assets. The parties´ respective trading claims are not covered.
The proposed settlement is subject to bankruptcy court approval. The acquisition of the Bammel-related assets may require certain federal or state regulatory clearance.
"This is a significant step that puts the non-trading exposure risk from Enron´s bankruptcy behind us," said Michael G. Morris, AEP chairman, president and chief executive officer. "Once the settlement agreement gains necessary approvals, we will have title to the Bammel storage reservoir and related pipeline assets, which are important to the operation of Houston Pipe Line."
Houston Pipe Line includes approximately 4,000 miles of natural gas intrastate and gathering pipelines.
The proposed settlement does not cover AEP´s suit in Texas federal court against Bank of America claiming fraud, breaches of contractual covenants and negligent misrepresentations by Bank of America in connection with AEP´s purchase of the Houston Pipe Line stock, the Bammel storage lease and related contractual agreements. Bank of America claims a security interest in approximately 55 bcf of cushion gas purportedly in the Bammel storage reservoir.
American Electric Power owns and operates more than 42,000 megawatts of generating capacity in the United States and select international markets and is the largest electricity generator in the U.S. AEP is also one of the largest electric utilities in the United States, with more than 5 million customers linked to AEP’s 11-state electricity transmission and distribution grid. The company is based in Columbus, Ohio.
These reports made by AEP and its registrant subsidiaries contain forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934. Although AEP and 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; available sources and costs of fuels; 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; new legislation and government regulation including requirements for reduced emissions of sulfur, nitrogen, carbon and other substances; resolution of pending and future rate cases, negotiations and other regulatory decisions (including rate or other recovery for environmental compliance); oversight and/or investigation of the energy sector or its participants; resolution of litigation (including pending Clean Air Act enforcement actions and disputes arising from the bankruptcy of Enron Corp.); AEP’s ability to reduce its operation and maintenance costs; the success of disposing of investments that no longer match AEP’s corporate profile; AEP’s ability to sell assets at attractive prices and on other attractive terms; international and country-specific developments affecting foreign investments including the disposition of any current foreign investments; the economic climate and growth in AEP’s service territory and changes in market demand and demographic patterns; inflationary trends; AEP’s ability to develop and execute on a point of view regarding prices of electricity, natural gas, and other energy-related commodities; changes in the creditworthiness and number of 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 and preferred stock; volatility and changes in markets for electricity, natural gas, and other energy-related commodities; changes in utility regulation, including the establishment of a regional transmission structure; accounting pronouncements periodically issued by accounting standard-setting bodies; the performance of AEP’s pension plan; prices for power that AEP generates and sells at wholesale; and changes in technology and other risks and unforeseen events, including wars, the effects of terrorism (including increased security costs), embargoes and other catastrophic events.