American Electric Power (NYSE: AEP) President and CEO Nick Akins told shareholders at an April 24 annual meeting that the company continues to make progress on initiatives designed to deliver long-term shareholder value, including completion this year of the new coal-fired Turk power plant.
Akins said that AEP is making progress while also managing near-term regulatory challenges in Ohio and lethargic economic recovery in some sectors.
“We’re entering an exciting chapter in AEP’s 106-year history as we begin to make significant investments to transform our generation fleet, transmission business and regulated utilities through the end of the decade,” Akins said. “We’ve proven that we can execute very successfully within the regulated utility space, which generates a significant portion of our earnings and supports our dividend. At the same time, we are focused on successfully managing the move to a competitive generation model in Ohio and growing a retail energy company that will operate in several states and hedge the value of our competitive generation assets. We also will continue to leverage our transmission expertise by expanding our transmission investments both within and outside of our traditional footprint.”
AEP will increase its capital investments to approximately $3.1bn in 2012, from $2.7bn in 2011. As part of those investments, AEP will complete construction of the John W. Turk Jr. plant, a 600-MW, ultra-supercritical coal-fueled plant in Arkansas, in late 2012. The company completed its Dresden plant, a 580-MW, combined-cycle natural gas plant in Ohio, in February.
AEP will invest approximately $922m in transmission projects in 2012, including $350m within the company’s traditional service area through AEP Transmission Co., and $116m through the company’s joint venture projects primarily in Texas and Kansas. AEP recently announced the formation of Transource Energy LLC, a new joint venture with Great Plains Energy, to invest in competitive transmission opportunities created by Order 1000, which was issued by FERC in 2011.
AEP and Great Plains Energy (NYSE: GXP) announced the formation of Transource on April 4. Through Transource, AEP and Great Plains Energy initially plan to pursue competitive transmission projects in the PJM Interconnection, Southwest Power Pool and Midwest ISO transmission regions. AEP owns 86.5% of Transource and Great Plains Energy owns 13.5%.
To prepare for a competitive electricity environment in Ohio, AEP Retail Energy acquired BlueStar Energy in March. BlueStar, based in Chicago, provides electric supply for retail customers in Ohio, Illinois and other deregulated electricity markets. It also provides energy solutions, including demand response and energy efficiency services, nationwide. AEP Retail Energy now has more than 100,000 customers.
“Economic recovery continues, although at a slower pace than we had hoped,” Akins noted. “Industrial growth continues to be encouraging and is happening faster in the states that we serve than in the overall U.S. economy. That should eventually trickle down and fuel growth in the commercial and residential sectors. Industrial sales increased 4.1 percent in 2011 compared with 2010, and we’ve seen additional growth of 2.2 percent already in the first quarter of 2012. Sales to residential and commercial customers have been essentially flat since 2010.”
He added: “We remain mindful of the impact of the economy on our customers and the impact of lower demand, low power prices and the loss of Ohio customers on our earnings. We continue to diligently control costs and have initiated an effort to evaluate our operations and ensure that we have the right resources in the right places to achieve our strategy. At the same time, we have proposed, and are strongly advocating for, a revised electric security plan in Ohio that addresses customer concerns and maintains the financial integrity of AEP, while still supporting competition in the state.”
In business items at the annual shareholders meeting, AEP shareholders elected 12 directors. Directors re-elected to the board are: Akins, 51, of Dublin, Ohio; David Anderson, 62, of Morristown, N.J.; James Cordes, 71, of The Woodlands, Texas; Ralph Crosby Jr., 64, of McLean, Va.; Linda Goodspeed, 50, of Memphis, Tenn.; Thomas Hoaglin, 62, of Columbus; Michael Morris, 65, of Northville, Mich.; Richard Notebaert, 65, of Chicago; Lionel Nowell III, 57, of Cos Cob, Conn.; Richard Sandor, 71, of Chicago; Sara Martinez Tucker, 57, of San Francisco; and John Turner, 70, of Moose, Wyo.
AEP is one of the largest electric utilities in the U.S., delivering electricity to more than 5 million customers in 11 states. AEP ranks among the nation’s largest generators of electricity, owning nearly 39,000 MW of 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-kV extra-high voltage transmission lines than all other U.S. transmission systems combined.