American Electric Power Co. Inc. (AEP): New Analyst Report from Zacks Equity Research - Zacks Equity Research Report

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Summary:
We are upgrading our recommendation on American Electric Power Company, Inc. to Outperform from Neutral based on the company's regulated business mix, its increasing focus on transmission as a growth driver and planned capital spending program. Earnings in the first quarter of 2014 beat the Zacks Consensus Estimate by 26.4% and improved 43.8% year over year supported by favorable weather and high power prices. To comply with the Obama climate plan, American Electric is increasing its gas capacity as opposed to coal. Moreover, the company will benefit from attractive growth opportunities in the shale rich regions of Texas and Ohio.

Overview:

Columbus, OH-based American Electric Power Company, Inc. 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., serving more than five million customers in 11 states with nearly 38,000 MW of generating capacity and nearly 40,000 miles of electricity transmission system network. Its service area includes Arkansas, Indiana, Kentucky, Louisiana, Michigan, Ohio, Oklahoma, Tennessee, Texas, Virginia and West Virginia. The company derives revenues mainly from power-generating activities. Approximately 60% of the company's power is generated from coal, 23% from natural gas and oil, 5% from nuclear energy, and the remaining 12% from wind, water, pumped storage, and other sources.

American Electric Power also owns a service company subsidiary, American Electric Power Service Corporation (AEPSC). AEPSC provides accounting, administrative, information systems, engineering, financial, legal, maintenance and other services.

American Electric Power's public utility subsidiaries are Appalachian Power Company, Columbus Southern Power Company, Indiana Michigan Power Company, Kentucky Power Company, Kingsport Power Company, Ohio Power Company, Public Service Company of Oklahoma, Southwestern Electric Power Company, AEP Texas Central Company, AEP Texas North Company, Wheeling Power Company and AEP Generating Company.

Appalachian Power Company (APCo) is engaged in the generation, transmission and distribution of electric power in southwestern Virginia and southern West Virginia. In addition to its AEP System interconnections, APCo is interconnected with the following unaffiliated utility companies: Carolina Power & Light Company, Duke Carolina and Virginia Electric and Power Company. APCo has several points of interconnection with Tennessee Valley Authority (TVA). APCo is a member of the Regional Transmission Organization (RTO) PJM Interconnection LLC (PJM).

Columbus Southern Power Company (CSPCo) is engaged in the generation, transmission and distribution of electric power in Ohio consisting of the City of Columbus and a predominantly rural area in south central Ohio. In addition to its AEP System interconnections, CSPCo is interconnected with the following unaffiliated utility companies: Duke Ohio, DP&L and Ohio Edison Company. CSPCo is also a member of PJM.

Indiana Michigan Power Company (I&M) is engaged in the generation, transmission and distribution of electric power in northern and eastern Indiana and southwestern Michigan. In addition to its AEP System interconnections, I&M is interconnected with the following unaffiliated utility companies: Central Illinois Public Service Company, Duke Ohio, Commonwealth Edison Company, Consumers Energy Company, Illinois Power Company, Indianapolis Power & Light Company, Louisville Gas and Electric Company, Northern Indiana Public Service Company, Duke Indiana and Richmond Power & Light Company. I&M is also a member of PJM.

Kentucky Power Company (KPCo) is engaged in the generation, transmission and distribution of electric power in eastern Kentucky. In addition to its AEP System interconnections, KPCo is interconnected with the following unaffiliated utility companies: Kentucky Utilities Company and East Kentucky Power Cooperative Inc. KPCo is also interconnected with TVA and is a member of PJM.

Kingsport Power Company (KgPCo) provides electric service to retail customers in Kingsport and northeastern Tennessee. Kingsport Power Company does not own any generating facilities and is a member of PJM. It purchases electric power from APCo for distribution to its customers.

Ohio Power Company (OPCo) is engaged in the generation, transmission and distribution of electric power in the northwestern, east central, eastern and southern sections of Ohio. In addition to its AEP System interconnections, OPCo is interconnected with the following unaffiliated utility companies: Duke Ohio, The Cleveland Electric Illuminating Company, DP&L, Duquesne Light Company, Kentucky Utilities Company, Monongahela Power Company, Ohio Edison Company, The Toledo Edison Company and West Penn Power Company. OPCo is a member of PJM.

Public Service Company of Oklahoma (PSO) is engaged in the generation, transmission and distribution of electric power in eastern and southwestern Oklahoma. In addition to its AEP System interconnections, PSO is interconnected with Empire District Electric Company, Oklahoma Gas and Electric Company, Southwestern Public Service Company and Westar Energy, Inc. PSO is a member of RTO Southwest Power Pool (SPP).

Southwestern Electric Power Company (SWEPCo) is engaged in the generation, transmission and distribution of electric power in northeastern Texas, northwestern Louisiana and western Arkansas. In addition to its AEP System interconnections, SWEPCo is interconnected with Cleco Corp., Empire District Electric Co., Entergy Corp. and Oklahoma Gas & Electric Co. SWEPCo is also a member of SPP.

AEP Texas Central Company (TCC) is engaged in the transmission and distribution of electric power to retail customers through Retail Electric Providers (REPs) in southern Texas. In addition to its AEP System interconnections, TCC is a member of the independent system operator Electric Reliability Council of Texas (ERCOT).

AEP Texas North Company (TNC) is engaged in the transmission and distribution of electric power to retail customers through REPs in west and central Texas. In addition to its AEP System interconnections, TNC is also a member of ERCOT.

Wheeling Power Company (WPCo) provides electric service to retail customers in northern West Virginia. WPCo does not own any generating facilities. WPCo is a member of PJM. It purchases electric power from OPCo for distribution to its customers.

AEP Generating Company (AEGCo) is an electric generating company. AEGCo wholesales power to I&M, CSPCo and KPCo.


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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Stocks

Referenced Stocks: PSO , TCC , TNC , AEP

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