AEP Resources' Wielgus: Electricity Decisions Await North American Energy Users, Providers

Sept. 14, 1998•News Release

HOUSTON, Sept. 14, 1998 -- Efforts throughout North America to bring competition to the electric industry are forcing both energy users and providers to examine future needs. "It's obvious that energy users will face new decisions," said Paul Wielgus, AEP Resources' vice president, North American development. "AEP Resources is working with large commercial and industrial customers throughout North America who are interested in converting non-core assets -- on-site generation units or energy handling facilities -- to contracted services that include guaranteed savings and reliability. They focus on their core business while we manage energy needs. "But traditional energy providers also face decisions," Wielgus said. "In Canada, AEP Resources is working with municipal utilities preparing for the future competitive marketplace. They want to capture the benefits while reducing the associated risks. We have the expertise to assist municipals with both of us sharing the rewards." Wielgus made his comments while attending the 17th Congress of the World Energy Council in Houston, where AEP Resources is an exhibitor (booth 2301, George R. Brown Convention Center). Competition for electricity assets or projects has become global, with expected or ongoing changes in many countries attracting interest from companies around the world. "The global electricity industry has undergone dramatic change in recent years, an evolution that will continue in the foreseeable future," Wielgus explained. "Many factors drive this change, but the common element is the recognition of the need for reliable, inexpensive electricity to make a nation's industries and economy competitive in the global marketplace." AEP Resources, a subsidiary of American Electric Power (NYSE: AEP), pursues energy-related global investment opportunities and projects. AEP Resources owns 50 percent of Yorkshire Electricity Group, a regional electric company in the United Kingdom; 70 percent of a two-unit power plant nearing completion in central China; and 20 percent of Pacific Hydro, an Australian company that develops and operates hydroelectric facilities. AEP Resources is actively pursuing greenfield development projects or business and asset acquisition throughout North America, Latin America, Europe and the Asia/Pacific region. The company monitors global developments from its offices in Columbus, Ohio; London; Singapore; Toronto; Beijing; and Sydney, Australia. "Many countries, like the United States, Australia, Canada and the United Kingdom, are moving from a highly regulated electricity market to a competitive market," Wielgus said. "Others, like Brazil and Mexico, have begun, or are considering, selling government-owned electricity assets to private entities. And developing nations like China are recognizing the need for additional electricity generation or transmission and distribution facilities to support development and economic growth." Changes in North America are altering the status of generating assets. "In the United States we are seeing generating assets for sale," Wielgus said. "And in Ontario, a province that is moving quickly toward competition in Canada, the primary utility's generation is being placed in a separate company. In the future competitive environment, generating assets will no longer be guaranteed the regulated rate of return for serving a territory. Instead, these assets will compete with others for a market-based rate of return." AEP Resources' capabilities are a good fit with the needs of the North American electricity market, Wielgus said. "AEP, our parent company, has almost a century of success as a very efficient, low-cost provider of electricity," Wielgus said. "AEP built and operates some of the world's most efficient coal-fired power plants in the United States. It built and operates a 22,000-mile transmission grid and a 105,000-mile distribution network to move electricity from the plants to customers. These historic strengths are assets when we participate in projects around the world." Developments in other regions of the world include: LATIN AMERICA The Latin American electric power industry is in the midst of an evolution. "Latin American countries are emerging from years of unstable economies," said Jim Sweeney, AEP Resources' vice president, Latin American development. "Strong economic plans have resulted in reduced inflation, stronger currencies and growth through economic development opportunities. The countries have also established themselves as competitive participants in international markets. "This growth places new demands on the electricity infrastructure. Also, many countries are privatizing government-owned electricity systems to accommodate growth and benefit from open, competitive marketplaces as well as to reduce government debt. But Latin America also offers significant opportunities for greenfield projects because of the tremendous growth in energy demand. Brazil is one of the world's leading growth markets and other countries in the region are not far behind." EUROPE The European Union is sparking change in the continent's electricity industry. "Electricity markets throughout Europe are opening because of a directive from the European Union," said David Mustine, AEP Resources' senior vice president, European development. "Also, privatization is widespread. The pace of change varies from rapid in a very dynamic market in the United Kingdom to more moderate in Germany and Italy, but change is evident in all countries. "The changes are attractive to energy companies like AEP Resources, since they provide investment opportunities," Mustine said. "But any move that decreases energy costs is also important for competitiveness. For instance, a 1996 report showed that European chemical manufacturers paid 45 percent more for energy than their American competitors." ASIA/PACIFIC The downturn in the Asian economy has slowed the pace of electricity projects in the region, but hasn't eliminated the need. "The Asia/Pacific market has massive long-term growth prospects, but the shortage of available project financing in the region has altered the timetable for many electricity projects," said Donald Boyd, AEP Resources' senior vice president, Asia/Pacific development. "Still, opportunities do exist. "Many countries in the region recognize the need for increased electricity generation to support future economic growth and development," Boyd said. "In some countries, existing generation or distribution assets are expected to be on the market, either through privatization of government assets or corporate refocusing by asset owners." 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.

For More Information, Contact: Pat D. Hemlepp Manager, Media Relations American Electric Power 614/223-1620

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