AEP Focused on Strategy to Support Long-Term Earnings Growth, Shareholders Learn at Company's Annual Meeting

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Apr 24, 2012, 01:21 ET

TULSA, Okla., April 24, 2012 /PRNewswire/ -- American Electric Power (NYSE: AEP) continues to make progress on initiatives designed to deliver long-term shareholder value while managing near-term regulatory challenges in Ohio and lethargic economic recovery in some sectors, according to Nicholas K. Akins, AEP's president and chief executive officer. Akins addressed shareholders at the company's annual meeting today in Tulsa, Okla.

"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," Akins said.

AEP will increase its capital investments to approximately $3.1 billion in 2012, from $2.7 billion in 2011. As part of those investments, AEP will complete construction of the John W. Turk Jr. Plant, a 600-megawatt, ultra-supercritical coal-fueled plant in Arkansas, in late 2012. The company completed its Dresden Plant, a 580-megawatt, combined-cycle natural gas plant in Ohio, in February.

AEP will invest approximately $922 million in transmission projects in 2012, including $350 million within the company's traditional service area through AEP Transmission Co., and $116 million through the company's joint venture projects primarily in Texas and Kansas. AEP recently announced the formation of Transource Energy(SM) LLC, a new joint venture with Great Plains Energy, to invest in competitive transmission opportunities created by Order 1000, which was issued by the Federal Energy Regulatory Commission in 2011.

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. The company also provides energy solutions, including demand response and energy efficiency services, nationwide. AEP Retail Energy now has more than 100,000 customers.

Akins highlighted the company's commitment to financial discipline to help manage the near-term financial impacts of the lingering economic recovery, low power prices and the transition to a fully competitive environment in Ohio.

"Economic recovery continues, although at a slower pace than we had hoped. 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," Akins said.

"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," Akins said. "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."

Akins highlighted AEP's strong performance for shareholders. AEP's 2011 earnings were $3.12 per share on an ongoing basis (earnings excluding special items) and exceeded 2010 ongoing earnings per share of $3.03. First-quarter 2012 earnings were $0.80 per share ongoing, compared with $0.82 per share ongoing in first-quarter 2011.

"AEP's shareholders received a more than 20 percent return on their investment in 2011, including dividends that increased by more than 2 percent late in the year," Akins said. "Our continued solid performance in the first quarter of 2012 is particularly noteworthy considering that we experienced near record-setting mild weather in the quarter.

"We remain focused on providing future value for our shareholders and are committed to long-term earnings growth of 4 to 6 percent. We're confident that with the vast expertise and continued dedication of our employees, we will execute successfully on our strategy and achieve that commitment," Akins said.

In business items at the annual shareholders meeting, AEP shareholders elected 12 directors. Directors re-elected to the board are: Nicholas K. Akins, 51, of Dublin, Ohio; David J. Anderson, 62, of Morristown, N.J.; James F. Cordes, 71, of The Woodlands, Texas; Ralph D. Crosby Jr., 64, of McLean, Va.; Linda A. Goodspeed, 50, of Memphis, Tenn.; Thomas E. Hoaglin, 62, of Columbus; Michael G. Morris, 65, of Northville, Mich.; Richard C. Notebaert, 65, of Chicago; Lionel L. Nowell III, 57, of Cos Cob, Conn.; Richard L. Sandor, 71, of Chicago; Sara Martinez Tucker, 57, of San Francisco; and John F. Turner, 70, of Moose, Wyo.

Approximately 95 percent of shares voted indicated support for AEP's senior officer incentive plan.

Approximately 98 percent of shares voted ratified the firm of Deloitte & Touche LLP as AEP's independent public accounting firm for 2012.

Approximately 95 percent of shares voted supported an annual advisory vote on the company's named executive officer compensation.

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 Texas). AEP's headquarters are in Columbus, Ohio.

This report made by American Electric Power and its Registrant Subsidiaries contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934. Although AEP and each of 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 forwardlooking statements are: the economic climate and growth in, or contraction within, AEP's service territory and changes in market demand and demographic patterns; inflationary or deflationary interest rate trends; volatility in the financial markets, particularly developments affecting the availability of capital on reasonable terms and developments impairing AEP's ability to finance new capital projects and refinance existing debt at attractive rates; the availability and cost of funds to finance working capital and capital needs, particularly during periods when the time lag between incurring costs and recovery is long and the costs are material; electric load, customer growth and the impact of retail competition, particularly in Ohio due to the February 2012 Public Utilities Commission of Ohio rehearing order; weather conditions, including storms, and AEP's ability to recover significant storm restoration costs through applicable rate mechanisms; available sources and costs of, and transportation for, fuels and the creditworthiness and performance of fuel suppliers and transporters; availability of necessary generating capacity and the performance of AEP's generating plants; AEP's ability to resolve I&M's Donald C. Cook Nuclear Plant Unit 1 restoration and outage-related issues through warranty, insurance and the regulatory process; AEP's ability to recover regulatory assets and stranded costs in connection with deregulation; AEP's ability to recover increases in fuel and other energy costs through regulated or competitive electric rates; AEP's ability to build or acquire generating capacity, and transmission lines and facilities (including the ability to obtain any necessary regulatory approvals and permits) when needed at acceptable prices and terms and to recover those costs (including the costs of projects that are cancelled) through applicable rate cases or competitive rates; new legislation, litigation and government regulation, including oversight of nuclear generation, energy commodity trading and new or heightened requirements for reduced emissions of sulfur, nitrogen, mercury, carbon, soot or particulate matter and other substances or additional regulation of fly ash and similar combustion products that could impact the continued operation and cost recovery of AEP's plants and related assets; a reduction in the federal statutory tax rate; timing and resolution of pending and future rate cases, negotiations and other regulatory decisions, including rate or other recovery of new investments in generation, distribution and transmission service and environmental compliance; resolution of litigation; AEP's ability to constrain operation and maintenance costs; AEP's 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 of the counterparties with whom AEP has contractual arrangements, including participants in the energy trading market; actions of rating agencies, including changes in the ratings of AEP debt; volatility and changes in markets for electricity, natural gas, coal, nuclear fuel and other energy-related commodities; changes in utility regulation, including the implementation of Electric Security Plans and the expected legal separation and transition to market for generation in Ohio and the allocation of costs within regional transmission organizations, including PJM and SPP; accounting pronouncements periodically issued by accounting standard-setting bodies; the impact of volatility in the capital markets on the value of the investments held by AEP's pension, other postretirement benefit plans, captive insurance entity and nuclear decommissioning trust and the impact on future funding requirements; prices and demand for power that AEP generates and sells at wholesale; changes in technology, particularly with respect to new, developing or alternative sources of generation; AEP's ability to recover through rates or market prices any remaining unrecovered investment in generating units that may be retired before the end of their previously projected useful lives; AEP's ability to successfully manage negotiations with stakeholders and obtain regulatory approval to terminate or amend the Interconnection Agreement and break up or modify the AEP Power Pool; evolving public perception of the risks associated with fuels used before, during and after the generation of electricity, including nuclear fuel; and other risks and unforeseen events, including wars, the effects of terrorism (including increased security costs), embargoes, cyber security threats and other catastrophic events.

SOURCE American Electric Power