COLUMBUS, Ohio, Aug. 2, 2005 -- American Electric Power (NYSE: AEP), through its Columbus Southern Power (CSP) utility subsidiary, has signed an agreement to purchase Monongahela Power Company’s Ohio transmission and distribution operations for approximately $55 million, plus traditional working capital adjustments. Monongahela Power is a subsidiary of Allegheny Energy (NYSE: AYE).
If the Public Utilities Commission of Ohio (PUCO) orders AEP to go through with this transaction, the transaction will be contingent on the receipt of required regulatory approvals from the U.S. Securities and Exchange Commission (SEC), the Federal Energy Regulatory Commission (FERC), and Hart-Scott-Rodino clearance by the Department of Justice or the Federal Trade Commission. If approved, the parties expect to complete the sale by the end of 2005.
The purchase agreement responds to an order issued by the PUCO on June 14, 2005, that ordered CSP and Monongahela Power to discuss potential terms and conditions of a transaction through which Monongahela Power would transfer its Ohio service territory to CSP. The order was issued in an effort to resolve issues related to Monongahela Power’s planned transition to market-based rates in Ohio.
“We are pleased that the negotiations with Allegheny were productive and that we were able to comply with the Commission’s order,” said Kevin E. Walker, president and chief operating officer of AEP Ohio. “We now will focus on working with these communities and their leaders, as well as our new customers and our new employees on transition and system integration issues moving forward.”
According to the terms of the purchase agreement, AEP will acquire 29,000 Monongahela Power customers in six counties located in southeastern Ohio, and all transmission and distribution assets located in Ohio serving those customers, including 1,167 distribution line miles, 59 transmission line miles and 19 substations. The agreement also calls for the transfer of 24 Allegheny employees to AEP. The sale will include a power purchase agreement under which Allegheny will provide AEP 100 percent of its power requirements to serve the retail load in this area through May 31, 2007. AEP already is interconnected at transmission voltages with this service territory. CSP intends to take responsibility for providing service to the customers and facilities on Jan. 1, 2006, subject to regulatory approvals.
AEP Ohio provides electricity to 1.4 million customers of major AEP subsidiaries Columbus Southern Power Company and Ohio Power Company in Ohio, and Wheeling Power Company in the northern panhandle of West Virginia. AEP Ohio is based in Gahanna, Ohio, and is a unit of American Electric Power.
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.
This report made by AEP and certain of its 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 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; 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); 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 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 AEP´s service territory and changes in market demand and demographic patterns; inflationary trends; 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 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 and other risks and unforeseen events, including wars, the effects of terrorism (including increased security costs), embargoes and other catastrophic events.
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