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AEP to Purchase Ceredo Generating Station From Reliant Energy

Posted on: Thursday, 11 August 2005, 09:01 CDT

COLUMBUS, Ohio, Aug. 11 /PRNewswire-FirstCall/ -- American Electric Power announced today that its Appalachian Power utility subsidiary has agreed to purchase the Ceredo Generating Station from a subsidiary of Reliant Energy for approximately $100 million.

The transaction, which is contingent on the receipt of required regulatory approvals from the Federal Energy Regulatory Commission (FERC), West Virginia Public Service Commission, and federal clearance pursuant to the Hart-Scott- Rodino Antitrust Improvements Act of 1976, is expected to close in the first quarter of 2006.

The Ceredo Generating Station, located near Ceredo, W.Va., is a natural- gas, simple-cycle power plant with a nominal generating capacity of 505 megawatts. AEP's Pro Serv subsidiary designed and built the plant for Columbia Energy. It was completed and began commercial operation in 2001. The plant has five employees who will have the opportunity to transfer to AEP.

"The purchase of the Ceredo Plant is part of our broad strategy to meet the growing electricity needs of our customers in our seven eastern states," said Michael G. Morris, AEP's chairman, president and chief executive officer. "As with the purchase of the Waterford Energy Center in Ohio (announced by AEP May 27), this plant adds low-cost, recently constructed capacity to help us keep pace with growth in our peak demand and maintain the 15 percent reserve margin required by the PJM Interconnection to ensure reliability. As a bonus with this acquisition, AEP engineers designed and built this plant, so we know what we are buying.

"We will operate this plant as peaking generation designed for use only when electricity demand is high. This purchase does not change our desire to build new clean-coal, IGCC (Integrated Gasification Combined Cycle) plants. The IGCC plants we would build on our system will be baseload generation used to supply the expected day-to-day electricity needs of our customers," Morris said.

Appalachian Power President and COO Dana Waldo said demand for electricity in West Virginia and Virginia is growing every year. "In December 2004, Appalachian Power reached an all-time peak in the demand for electricity from our customers in West Virginia and Virginia. Just last month, we reached a summertime peak. That makes it very clear that we need this additional capacity in times of high demand for electricity. But, purchasing this plant doesn't change the need for additional baseload clean-coal generation for AEP or the potential for West Virginia to be the site for one of AEP's IGCC clean- coal plants," Waldo said.

AEP has filed with the Public Utilities Commission of Ohio (PUCO) seeking cost recovery for a 600-megawatt power plant using IGCC clean-coal technology. The plant, which will be the largest commercial-scale IGCC plant in the United States, will be built in southern Ohio, once cost-recovery is received from the PUCO, and be in operation by 2010.

A second 600-megawatt IGCC plant is under consideration by AEP for Ohio, West Virginia or Kentucky, but no decision has been announced.

When the transaction closes, AEP will operate the Ceredo Generating Station as part of the company's generation pool that provides power to AEP's utility units serving customers in Indiana, Kentucky, Michigan, Ohio, Tennessee, Virginia and West Virginia.

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);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.

American Electric Power

CONTACT: Media, Melissa McHenry, Manager, Corporate Media Relations,+1-614-716-1120, or Analysts, Julie Sloat, Vice President, Investor Relations,+1-614-716-2885, both of American Electric Power

Web site: http://www.aep.com/

Company News On-Call: http://www.prnewswire.com/comp/042050.html

Source: PRNewswire-FirstCall

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