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AEP, CSW Sticking to Core Wholesale, Delivery
After waiting two and a half years, American Electric Power completed its $4.6 billion purchase of Central and South West Corp. last week following approval from the Securities and Exchange Commission (SEC). The deal creates the U.S.'s largest electric utility with annual revenues of $12.5 billion, assets of more than $35 billion, more than 4.8 million customers in 11 states, and 38,000 MW of power generation in the U.S.
AEP chairman E. Linn Draper Jr. said the company's post-merger strategy consists of three key elements: wholesale, energy delivery and retail. "Each of these business lines has its own characteristic set of skills and capital requirements, but the two that will be most important for us initially are the wholesale and energy delivery businesses. We are already substantial players in the wholesale business and expect to continue to grow. People who follow our industry know that our energy trading business has quickly grown from a startup two years ago into the second-leading trader of electricity and a top-20 trader of natural gas today. ..We haven't made a firm decision that retail is a business that we want to be in, but our instincts are that we probably will," he said.
The merged company will retain the American Electric Power name and will continue trading on the New York Stock Exchange under the "AEP" stock symbol. Each share of CSW stock will be converted to 0.6 shares of AEP stock. No action is required by holders of existing AEP stock.
The merger creates an energy company with combined, combined 1999 electricity sales of almost 200 million MWh, an energy trading operation that ranked second in U.S. electricity volume and in the top 20 in natural gas in 1999, more than 38,000 miles of transmission lines and more than 186,000 miles of distribution lines. Efficiencies gained through the merger will result in at least $2 billion in savings over 10 years.
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