AEP and Great Plains Energy Form Competitive Transmission Company

First projects to include 200 miles of 345-kV transmission in Missouri

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Apr 04, 2012, 07:45 ET

COLUMBUS, Ohio, April 4, 2012 /PRNewswire/ -- American Electric Power (NYSE: AEP) and Great Plains Energy (NYSE: GXP) have formed a new company to develop and invest in transmission. Through Transource Energy(SM) LLC (Transource), AEP and Great Plains Energy initially plan to pursue competitive transmission projects in the PJM Interconnection, Southwest Power Pool (SPP) and Midwest ISO (MISO) transmission regions. AEP owns 86.5 percent of Transource. Great Plains Energy owns 13.5 percent.

"Our nation and utility customers have benefited from the significant transmission investments made by AEP and other utilities decades ago, but it is critical that we move forward with substantial new transmission investment. Transmission infrastructure expansion is essential to ensure that the U.S. continues to have a reliable transmission grid to support both fundamental changes in how we generate electricity and future economic growth," said Nicholas K. Akins, AEP president and chief executive officer. "Order 1000, issued by the Federal Energy Regulatory Commission last year, creates new opportunities for competitive transmission investment by giving incumbent and non-incumbent transmission developers similar cost-recovery mechanisms for regional and interregional projects. Increased competition in the transmission space will foster cost-effective grid expansion for the benefit of customers."

"Our new venture will complement the transmission investments that AEP has been making through our existing transmission partnerships and state-level transmission companies, while giving us the flexibility to focus resources on the competitive transmission opportunities created by Order 1000," said Lisa Barton, executive vice president of AEP Transmission. "AEP continues to lead the industry in transmission design, engineering and construction innovation. Transmission infrastructure improves reliability, promotes access to renewable energy resources and enhances the efficiency of regional energy markets for the benefit of customers. Our experience and expertise put us in a unique position to provide creative, efficient transmission solutions that will help ensure future access to affordable and reliable electricity."

Great Plains Energy will seek regulatory approval to transfer two SPP-approved regional transmission projects, located in Missouri, to Transource. The Sibley-Nebraska City line is a 175-mile, 345-kilovolt (kV) line linking the Nebraska City substation (owned by Omaha Public Power District) near Nebraska City, Neb., with the Sibley substation near Sibley, Mo. Transource would construct and own approximately 170 miles of the project. Omaha Public Power District would construct the remainder of the transmission line. The project, estimated to cost approximately $380 million, has an anticipated in-service date of 2017.

The Iatan-Nashua line is a 30-mile, 345-kV line from the Iatan substation near Weston, Mo., to the Nashua substation near Smithville, Mo. The Iatan-Nashua project, estimated to cost approximately $54 million, has an anticipated in-service date of 2015.

Transource expects to file an application with the Missouri Public Service Commission this summer for line certificates granting authority to construct, own and operate the two SPP regional projects. Transource also intends to apply for a FERC formula rate for the Missouri projects later this year.

"These projects provide a foundation for the future growth of Transource. Great Plains Energy's strategic location between the SPP and MISO interface and its utility presence in Missouri and Kansas provide Transource with additional growth opportunities," Barton said.

Great Plains Energy is a holding company headquartered in Kansas City, Mo. Great Plains Energy owns the Kansas City Power & Light Co. (KCP&L) and KCP&L Greater Missouri Operations Co. Great Plains Energy's electric utilities serve more than 800,000 customers in 47 counties in Missouri and Kansas with a combined diverse generation platform of approximately 6,600 megawatts. The companies operate more than 3,600 miles of transmission lines.

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 nearly 39,000 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 and north Texas). AEP's headquarters are in Columbus, Ohio. News releases and other information about AEP can be found at www.aep.com.

Information about Transource can be found at www.transourceenergy.com.

This report made by American Electric Power contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934. Although AEP believes that its 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; the ability to recover regulatory assets and stranded costs in connection with deregulation; the ability to recover increases in fuel and other energy costs through regulated or competitive electric rates; the ability to build or acquire generating capacity when needed at acceptable prices and terms and to recover those costs through applicable rate cases; new legislation, litigation and government regulation, including requirements for reduced emissions of sulfur, nitrogen, mercury, carbon 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.); AEP's ability to constrain its operation and maintenance costs; AEP's ability to sell assets at acceptable prices and on other acceptable terms, including rights to share in earnings derived from the assets subsequent to their sale; the economic climate and growth in its service territory and changes in market demand and demographic patterns; inflationary trends; its 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 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; volatility and changes in markets for electricity, natural gas and other energy-related commodities; changes in utility regulation, including membership and integration into regional transmission structures; 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; and other risks and unforeseen events, including wars, the effects of terrorism (including increased security costs), embargoes and other catastrophic events.

SOURCE American Electric Power