AEP-Duke to Build Transmission Line - Analyst Blog

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Pioneer Transmission, a joint venture formed by American Electric Power Co. Inc. ( AEP ) and Duke Energy Corporation ( DUK ), will begin the engineering and permitting activities of their Greentown-New Reynolds project in 2012. The total cost of the venture is expected to run into $245 million. The aim of the project is to improve regional power system reliability and market efficiency, while enabling public policy mandates, like low emission of toxic products.

Under the Greentown-New Reynolds initiative, the joint venture will construct a 66-mile, 765-kilovolt electric transmission line in Indiana between the existing Greentown substation, which is approximately 15 miles east of Kokomo and a new substation called New Reynolds, which is about 20 miles north of Lafayette. However, the actual route of the transmission line has not yet been determined. The 765-kilovolt electric transmission line will enable easy interconnection of multiple power line voltages.

This endeavor has been chosen as one of the 17 Multi-Value Projects ("MVPs") included in the Midwest Transmission Expansion Plan. These MVP projects have the capacity to generate economic benefits that range from 1.8 to 3 times the incurred cost.

American Electricand Duke Energy joined forces in 2008 to form Pioneer Transmission. Per the agreement, these entities, both jointly and independently sometimes, pursue commercial transmission projects. In fact, the Greentown-New Reynolds task is part of a larger 240-mile transmission project in Indiana that was planned by the Pioneer Transmission joint venture in 2008 between Duke's Greentown substation and American Electric's Rockport substation near Evansville. The total cost of this project is expected to be $950 million.

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. Going forward, the company offers stable earnings through consistent performance in core regulated operations, growth through transmission network expansion and an above-average dividend yield.

However, tepid economies in a number of its service states restrict opportunities for growth. We are also concerned about the uncertainty surrounding pending regulatory cases, its predominantly fossil-fuel based generation assets and lower wholesale sales. The company presently retains a short-term Zacks #3 Rank (Hold) that corresponds with our long-term Neutral recommendation on the stock.

AMER ELEC PWR ( AEP ): Free Stock Analysis Report

DUKE ENERGY CP ( DUK ): Free Stock Analysis Report

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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 Nasdaq, Inc.

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

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