COLUMBUS, Ohio, Aug. 8, 2007 – American Electric Power (NYSE: AEP) announced today that it has agreed to purchase a natural gas-fired power plant under construction near Dresden, Ohio, from Dresden Energy LLC, a subsidiary of Dominion (NYSE: D), for approximately $85 million.
The transaction is contingent on AEP gaining federal clearance pursuant to the Hart-Scott-Rodino Antitrust Improvements Act of 1976 and the transfer of necessary permits by the Ohio Power Siting Board. The transaction is expected to close in the third quarter.
Construction began on the Dresden plant in 2001. All major equipment necessary for completion of construction has been procured and is on site. The company expects the plant to be operational in 2009 or 2010.
When completed, Dresden will be a nominal 580-megawatt natural gas-fired combined-cycle plant.
“The acquisition of the Dresden plant is part of our ongoing efforts to ensure we have sufficient generating capacity to meet the growing electricity needs of customers in our eastern seven states,” said Michael G. Morris, AEP’s chairman, president and chief executive officer. “Our strategy for meeting the growth in demand in our eastern states includes both the construction of new baseload generation, like the two clean-coal Integrated Gasification Combined Cycle generation projects we are pursuing in West Virginia and Ohio, and the acquisition of intermediate- and peaking-load gas-fired plants when the price is right.
“During the last three years we have acquired more than 2,900 megawatts of relatively new gas-fired generating capacity at a price well below the cost to build new generation,” Morris said. “The acquisition of the Dresden plant, when added to our other generation activities, provides the most cost-effective solution to meet our customers’ energy needs.”
The Dresden plant will help AEP keep pace with growth in peak demand in its eastern service area and help the company maintain the 15 percent reserve margin required by the PJM Interconnection to ensure reliability. When the transaction closes and construction is completed, Dresden will be owned by AEP Generating Company, a subsidiary of AEP, and will be operated as part of the company’s generation pool that provides power to AEP’s utility units serving customers in Indiana, Kentucky, Michigan, Ohio, Tennessee, Virginia and West Virginia.
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 more than 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 AEP 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: 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; 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 when needed at acceptable prices and terms and to recover those costs 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; 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 operation and maintenance costs; 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; 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 the potential for new legislation in Ohio and membership in and integration into regional transmission organizations; 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; other risks and unforeseen events, including wars, the effects of terrorism (including increased security costs), embargoes and other catastrophic events.