“Last year we completed our efforts to refocus our company on what we do best -- generate, transmit and distribute electricity,” Morris said. “We essentially completed the sale of non-core assets, reduced debt and met our earnings target, while our dedicated employees overcame some of the worst challenges that Mother Nature can dish out. At the same time, we restructured the company and created seven operating units to improve our customer focus and move decision-making authority closer to those customers.
“We had a really good year, but we’re not resting on our laurels. We have much more to accomplish,” Morris added.
AEP has largely completed its plan to divest assets unrelated to its core, domestic utility operations. The company sold generation in the United Kingdom and its interest in a power plant in China, the Louisiana Intrastate Gas pipeline and storage operation, its controlling interest in Houston Pipe Line Company, four domestic independent power projects and AEP Coal assets in Ohio and Kentucky. AEP continues to own a small interest in a renewable energy company in Australia as well as an interest in a small gas-fired power plant in Mexico, both of which the company intends to divest.
With the proceeds from its asset sales, AEP launched a debt and equity repurchase program to strengthen its balance sheet. The company implemented the share repurchase program March 9 with an accelerated buy-back of 12.5 million AEP shares. AEP also initiated a debt buy-back of $800 million in parent and utility debt to help the company maintain a debt ratio of below 60 percent capitalization as it begins a $3.7 billion capital investment program to enhance the environmental performance of its coal-fired generating fleet.
Additionally, AEP will invest more than $1 billion in its energy delivery operations in 2005 to enhance the reliability of its extensive transmission and distribution system. As part of this investment, construction has begun on the first expansion of AEP’s 765-kV network in several decades. After a 15-year permitting process, construction is more than 40 percent complete on the 90-mile Wyoming-Jackson’s Ferry 765-kV transmission line to reinforce the company’s transmission network serving southern West Virginia, southwestern Virginia and eastern Kentucky. With a projected cost of $289 million, completion of the line is scheduled for mid-2006.
Much of AEP’s energy in 2005 will focus on regulatory activity, according to Morris. “As we move forward with our need to make significant investments in our vast generation fleet, our goal is to persuade our regulators that improving the environmental performance of our plants absolutely is in the best interests of our customers, our shareholders and the people who live in the communities where our facilities are located. The end result will be cleaner air for everyone, a fair return for our shareholders and the assurance of reasonable electricity rates for our customers for years to come,” Morris said.
Ohio regulators approved AEP’s rate stabilization plan for 2006 to 2008 in January 2005. A settlement agreement is awaiting approval in the Oklahoma rate case, and a Texas rate case is still pending. AEP is also seeking stranded cost recovery in Texas, as authorized by Texas deregulation, on AEP Texas Central Co. generating assets. The company expects to file its stranded-cost recovery case mid-year and anticipates a decision around the end of 2005.
Continuing its long tradition of technological innovation, AEP is pioneering construction of the largest Integrated Gasification Combined Cycle (IGCC) clean-coal plant in the world. The company announced the plant in 2004 and will finalize the site selection and seek cost recovery in 2005.
“Keeping coal a viable energy option requires advanced generation technologies. Increasingly stringent air-quality regulations and the possibility of eventual constraints on carbon dioxide emissions make IGCC the right investment and the most environmentally responsible choice for future coal-fired generation,” Morris said.
Morris reaffirmed AEP’s ongoing earnings guidance of $2.30 to $2.50 per share for 2005 and indicated that the company will continue to evaluate a possible dividend increase in 2005. AEP also plans to fully fund its pension liabilities by the end of the year.
“AEP is in the business of providing electric service in a cost-effective, environmentally responsible manner for generations to come. We do a pretty good job at it, but are committed to getting even better,” Morris said.
In business items, AEP shareholders re-elected 11 directors to hold office until the next annual meeting or until election of successors. Directors elected to the board are: Morris, 58, of Columbus, Ohio; E.R. Brooks, 67, of Granbury, Texas; Donald M. Carlton, 67, of Austin, Texas; John P. Desbarres, 65, of Park City, Utah; Robert W. Fri, 69, of Washington, D.C.; William R. Howell, 69, of Dallas; Lester A. Hudson Jr., 65, Charlotte, N.C.; Lionell L. Nowell III, 50, Purchase, N.Y.; Richard L. Sandor, 63, Chicago; Donald G. Smith, 69, Roanoke, Va.; and Kathryn D. Sullivan, 53, Columbus, Ohio.
A significant majority of shares voted (96 percent) ratified the firm of Deloitte & Touche LLP as AEP’s independent auditors for 2004.
Eighty-nine percent of shares voted accepted amendments to the 2000 Long-Term Incentive Plan as proposed by AEP Directors. The Long-Term Incentive Plan was initially approved by shareholders in 2000 to promote the interests of AEP and its shareholders by strengthening AEP’s ability to attract, motivate and retain employees and Directors, to align further the interests of AEP’s management with the shareholders, and to provide an additional incentive for employees and Directors to promote the financial success and growth of AEP.
American Electric Power owns more than 36,000 megawatts of generating capacity in the United States and is the nation´s largest electricity generator. 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.
MEDIA CONTACT:
Melissa McHenry
Manager, Corporate Media Relations
614/716-1120
ANALYSTS CONTACT:
Julie Sloat
Vice President, Investor Relations
614/716-2885
Melissa McHenry
Manager, Corporate Media Relations
614/716-1120
ANALYSTS CONTACT:
Julie Sloat
Vice President, Investor Relations
614/716-2885