After waiting two and a half years, American Electric Powercompleted its $4.6 billion purchase of Central and South West Corp.last week following approval from the Securities and ExchangeCommission (SEC). The deal creates the U.S.’s largest electricutility with annual revenues of $12.5 billion, assets of more than$35 billion, more than 4.8 million customers in 11 states, and38,000 MW of power generation in the U.S.

AEP chairman E. Linn Draper Jr. said the company’s post-mergerstrategy consists of three key elements: wholesale, energy deliveryand retail. “Each of these business lines has its owncharacteristic set of skills and capital requirements, but the twothat will be most important for us initially are the wholesale andenergy delivery businesses. We are already substantial players inthe wholesale business and expect to continue to grow. People whofollow our industry know that our energy trading business hasquickly grown from a startup two years ago into the second-leadingtrader of electricity and a top-20 trader of natural gas today…We haven’t made a firm decision that retail is a business that wewant to be in, but our instincts are that we probably will,” hesaid.

The merged company will retain the American Electric Power nameand will continue trading on the New York Stock Exchange under the”AEP” stock symbol. Each share of CSW stock will be converted to0.6 shares of AEP stock. No action is required by holders ofexisting AEP stock.

The merger creates an energy company with combined, combined1999 electricity sales of almost 200 million MWh, an energy tradingoperation that ranked second in U.S. electricity volume and in thetop 20 in natural gas in 1999, more than 38,000 miles oftransmission lines and more than 186,000 miles of distributionlines. Efficiencies gained through the merger will result in atleast $2 billion in savings over 10 years.

Rocco Canonica

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