Indiana Michigan Power, an operating unit of
American Electric Power Co., Inc.
), has decided to retire unit 4 of Tanners Creek generating plant
in Lawrenceburg, Ind. This coal-fueled plant has an electric
generation capacity of 500 megawatt (MW).
In Feb 2013, the company was provided an option to either refuel
Tanners Creek 4 or to retire the unit. However, taking into
account its projections for limited electricity demand growth and
the amount of generation currently available to serve Indiana
Michigan Power customers, the company concluded that it is not
financially feasible to refuel Tanners Creek 4. The company
expects flat electricity demand and believes that Indiana
Michigan Power customers currently do not require additional
In Jun 2011, the company had declared that by mid 2015, it will
shut down units 1-3 that have a generation capacity of 495 MW.
Therefore, by 2015, all 4 generating units at Tanners Creek will
The decision to retire unit 4 is part of its strategy to strike a
balance between optimizing resource needs and keeping
environmental costs under control. This would help the utility to
maintain a disciplined capital investment strategy. Approximately
115 employees working at the plant will be affected by this
decision. The company indicated that these employees will be
considered for severance benefits, if it fails to position them
in their other facilities.
The company stated that the retirement of the plant will neither
impact its 2013 operating earnings guidance of $3.05 to $3.25 per
share nor its long-term earnings growth rate of 4% to 6%.
Earlier the company had announced that it will retire 6,676 MW of
coal-fueled generation. Shuttering Tanners Creek 4 would help in
retiring a total of 7,176 MW of coal-fueled generation by early
In July this year, the company also decided to shut down unit 5
of its coal-fueled Muskingum River Plant in 2015. It had
previously announced for the closure of the other 4 units. Taking
into account the closure of the 5th unit, AEP Ohio's total
generation capacity will come to 10,725 MW, comprising mainly of
fully controlled coal-fueled plants, natural gas-fueled combined
cycle and combustion turbines, and a small hydro plant.
We remind investors that in June this year, President Obama
unveiled a fresh climate change strategy aimed at limiting
pollution from existing coal-fired power plants. He issued
directives asking environmental regulators to set up carbon
pollution standards for active plants.
Apart from complying with environmental rules, the company is
also facilitating its customers with its gridSMART program that
helps in giving more accurate information of their energy
consumption and improved billing accuracy. Recently, the company
has filed a request with the Public Utilities Commission of Ohio
to expand this program.
These efforts would boost the share price of the company.
However, we remain concerned about the tepid economies in a
number of its service states and soft second quarter results due
to a decline in residential, commercial and industrial sales. The
company presently retains a short-term Zacks Rank #3 (Hold).
Stocks that are worth considering in the space are
Huaneng Power International, Inc.
Brookfield Infrastructure Partners L.P.
Integrys Energy Group, Inc.
). While Huaneng Power carries a short-term Zacks Rank #1 (Strong
Buy), Brookfield Infrastructure and Integrys Energy Group hold a
Zacks Rank #2 (Buy).
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