April 26, 2000•News Release
COLUMBUS, Ohio, April 26, 2000 – Despite disappointing financial results, 1999 was a year of solid achievements for American Electric Power (NYSE: AEP), according to E. Linn Draper Jr., AEP's chairman, president and chief executive officer.
"You all know that 1999 was roundly disappointing," Draper told shareholders attending AEP's annual meeting today. "Our earnings suffered from the Cook nuclear plant outage and warmer-than-normal weather. Earnings per share were down 4.3 percent. Our stock price fell 32 percent, a casualty of our poor earnings performance, the delay in the approval of our merger with Central and South West Corp. (NYSE: CSR), and the downdraft of a market that sold off traditional stocks with impunity in favor of anything-dot-com.
"But in terms of progress toward our vision of the new AEP, 1999 was a year of solid achievements," Draper said. "The completion of our merger with CSW and the restart of Cook both came into view, and we sharpened our focus on integrating the new bricks and mortar of the market-driven age: energy, information and people.
"In short, we laid the foundation for building an AEP that will win in the competitive energy marketplace."
Draper noted that the merger, announced in December 1997, has gained all necessary approvals except the final one from the Securities and Exchange Commission, which is expected to act soon. "We expect the merger to become final by June 1," he said.
Draper also noted progress toward the restart of Cook Unit 2.
"The plant's restart will return a major source of capacity to our system and help balance our generating fleet," Draper said. "But more than that, we will be bringing on a plant with even greater operating potential than it had before the outage. And it will be led by a new team that we've put in place during the last two years that brings a new approach to the plant's management.
"Our goal is to increase the plant's capacity factor from its historic 61-percent level to the mid-80 percent range while continuing Cook's outstanding safety level."
Draper also said the company will seek both a license renewal for Cook and permission to increase the plant's power rating by 5 percent.
"All of these steps will make Cook more attractive to keep, sell or operate through a joint venture that could reduce plant costs," Draper said.
AEP is preparing for the start of retail competition in the electricity industry and is developing its retail strategy for restructured electricity markets.
The company has been successful in the wholesale and energy trading markets. "AEP is now the second-largest electricity trader in the United States and our natural gas trading operation is on a similar growth path," Draper said. "And just a few years ago we weren't even in the trading business."
Draper touched on other new business initiatives involving AEP, including:
- America's Fiber Network, a super-regional fiber optics company with a network of more than 7,000 route miles. AEP is the largest equity holder in this new company, which will connect major markets in the eastern U.S. to secondary markets with a growing need for broadband access to support communications and Internet-related growth.
- Lectrix, a company created by AEP, Bechtel Enterprises Holdings Inc. and Siemens Power Transmission & Distribution Inc. to provide industrial power quality solutions and transmission network enhancements.
- Two business-to-business e-commerce initiatives. The first is a 15-company consortium that will launch an Internet marketplace for the purchase of goods and services between the energy industry and its suppliers. The for-profit exchange has good growth prospects and the potential to significantly reduce procurement costs. The second is an Internet-based energy trading platform created by AEP and five other companies, all among the nation's largest gas and electricity traders.
"Incentives created by competition are driving innovations in our traditional operations while opening up new business opportunities with good growth potential," Draper said.
The key to future success will be to continue the company's push to reinvent AEP, Draper said.
"We are going to move aggressively to grow our trading and marketing businesses and expand operations to be a leader in all energy commodities," Draper said. "We will acquire generation and natural gas assets that complement this strategy, and we will develop generation projects that produce superior returns or serve as a basis to further expand our commodity business.
"We will also continue to pursue new business opportunities and technical innovations, whether in e-commerce, fiber optics or other businesses that fit well with our asset and talent base."
In business items, shareholders reelected nine directors to the company's board of directors, approved the accounting firm of Deloitte & Touche LLP as independent auditors for 2000, and approved the company's long-term incentive plan.
Directors who were re-elected were Draper; John P. DesBarres, Rancho Palos Verdes, Calif.; Robert W. Fri, Washington, D.C.; Lester A. Hudson Jr., Greenville, S.C.; Leonard J. Kujawa, Atlanta; Donald G. Smith, Roanoke, Va.; Linda Gillespie Stuntz, Washington, D.C.; Kathryn D. Sullivan, Columbus, Ohio; and Morris Tanenbaum, Sho0rt Hills, N.J.
Under terms of the merger, six directors representing CSW will become directors of AEP upon the consummation of the merger. The six -- E.R. Brooks, Dallas; Donald M. Carlton, Austin, Texas; William R. Howell, Dallas; James L. Powell, Fort McKavett, Texas; Richard L. Sandor, Chicago; and Thomas V. Shockley III, Dallas -- were listed in AEP's proxy as standing for re-election only if the merger had been completed prior to the annual meeting. The six will be appointed to the board when the merger is completed and will stand for election at the 2001 annual shareholders meeting.
AEP, a global energy company, is one of the United States' largest investor-owned utilities, providing energy to 3 million customers in Indiana, Kentucky, Michigan, Ohio, Tennessee, Virginia and West Virginia. AEP has holdings in the United States, the United Kingdom, China and Australia. Wholly owned subsidiaries provide power engineering, energy consulting and energy management services around the world. The company is based in Columbus, Ohio. On Dec. 22, 1997, AEP announced a definitive merger agreement for a tax-free, stock-for-stock transaction with Central and South West Corp., a public utility holding company based in Dallas.
For More Information, Contact:
Pat D. Hemlepp
Manager, Media Relations
American Electric Power
614/223-1620