AEP plans US Securities and Exchange Commission filing

Oct. 30, 2000
American Electric Power Co. Inc. Monday said it will seek authorization from the US Securities and Exchange Commission to divide the regulated and unregulated portions of the company into two separate corporations that will provide 'options for unlocking shareholder value.' Chairman Linn Draper Jr. said corporate separation is the company's highest priority between now and 2002.


American Electric Power Co. Inc. (AEP) Monday said it will seek authorization from the US Securities and Exchange Commission to divide the regulated and unregulated portions of the company into two separate corporations that will provide "options for unlocking shareholder value."

One corporation will hold AEP's utility and nonutility subsidiaries whose revenues derive from competitive activities and the second will hold AEP's utility subsidiaries that are subject to regulation by at least one state utility commission, Linn Draper Jr., chairman, said at a meeting with financial analysts.

Draper did not specifically say if AEP is preparing for an initial public offering (IPO) of stock in the company holding the unregulated assets. But other large utilities, including Southern Co. and Reliant Energy Inc., have sold or plan to sell shares in the deregulated units to capitalize on their earnings potential.

"A lot depends on market conditions at the time the restructuring is completed," said a spokesman.

News of the proposed split helped send shares of American Electric up $2, or 5%, to $41.94 late Monday on the New York Stock Exchange.

"Corporate separation is our highest priority, and we plan to restructure by the end of 2001," Draper said. That is about the same time that state deregulation plans that affect 25,000 Mw of the company's 38,000 Mw power generating capacity will be completed.

The SEC filing is required before companies regulated under the Public Utility Holding Company Act of 1935 can make organizational changes.

"Our focus for growth moving forward, plain and simple, will be the wholesale business�generation and related energy assets, wholesale marketing and trading," Draper said. "With our large generating fleet and very successful trading organization, we are already in an excellent position as our markets move toward deregulation and competition."

Earlier this year, AEP filed business separation plans in Ohio and Texas, as required by restructuring legislation in those states. Among other things, the plans separate all or most of the company's generation assets in Texas and Ohio from its transmission and distribution assets in those states.

Draper said the plan to be filed with the SEC extends the concepts included in the state business separation plans to the entire corporation, providing the company greater flexibility to make business decisions in the increasingly competitive energy marketplace.

AEP's wholesale and trading group will market the output of the plants. Plant availability in AEP's eastern region is up almost 4% over last year, while operations and maintenance expenses are down almost 13% since 1998, executives said.

Draper said AEP is restructuring the company to provide maximum flexibility to achieve value from its wires business when restructuring is complete. In the short term, he said, AEP will aggressively manage its costs. Draper added that the company plans no expansion in the distribution business in the US and internationally.

Draper also told the analysts that AEP had decided not to pursue the combination of Yorkshire and SEEBOARD, two UK companies. AEP owns 100% of SEEBOARD and shares ownership of Yorkshire on an equal basis with Xcel Energy.

"Given the way the retail market has evolved in the UK, we've concluded that there are better opportunities for enhancing the value of our UK investments," Draper said.