American Electric Power Company Inc.
) announced its plan to shut down three coal-fired power stations
by 2016 in order to comply with the rules of Environmental
Protection Agency ("EPA"), as reported by the media.
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This is not the first time that the company is taking such an
initiative. In June 2011, the company had made a compliance plan as
per which it would retire approximately 6,000 megawatts ("MW") of
coal-fueled power generation, upgrade or install new advanced
emissions reduction equipment on another 10,100 MW, refuel 1,070 MW
of coal generation and build 1,220 MW of natural gas-fueled
generation. Further, the compliance plan included permanently
retiring the 630 MW Kammer Plant, 400 MW Kanawha River Plant, and
1,050 MW Philip Sporn Power Plant. These plants did not comply with
The company is focusing on making substantial capital investment
and incurring additional operational costs to comply with new
environmental control requirements. At the same time, it is not
willing to spend billions for the modernization or modification of
As of June 30, 2012, AEP System had a total generating capacity of
37,035 MW, of which 23,900 MW are coal fired. The company expects
investment in the range of $6 billion to $7 billion between 2012
and 2020 to meet the proposed environmental requirements. This
includes investments to convert 1,055 MW of coal generation to
natural gas capacity.
Columbus, Ohio-based American Electric Power is a public utility
holding company, which through directly and indirectly-owned
subsidiaries generates, transmits, and distributes electricity,
natural gas, and other commodities. The company is one of the
largest integrated utilities in the U.S. with coal-fired generating
capacity of more than 39,000 MW and nearly 39,000 mile of
electricity transmission system network. The company derives
revenue mainly from power-generating activities.
Nearly 66% of the company's power is generated from coal, 22% from
natural gas and oil, 6% from nuclear energy, and the remaining 6%
from wind, water, pumped storage, and other sources. The
predominantly fossil-fuel based generation assets and the lowest
natural gas prices in a decade are coming in the way of the
company's growth. Per the U.S. Energy Department, natural
gas-produced electricity is expected to grow 23% in 2012 as
coal-fired electricity drops by 12%.
However, being one of the largest investor-owned utility holding
companies in the country, with a major presence in Ohio, the
company offers stable earnings through consistent performance in
core regulated operations, growth through transmission network
expansion and an above-average dividend yield. The company
presently retains a short-term Zacks #3 Rank (Hold) that
corresponds with our long-term Neutral recommendation on the stock.
Some of the company's main competitors include
NextEra Energy, Inc.
Duke Energy Corporation