AEP's $3.3 Billion in Projects Cover Permian Basin, Other High-Growth Areas

Researched by Industrial Info Resources (Sugar Land, Texas)--Summer may be over, but American Electric Power Company (NYSE:AEP) (AEP) (Columbus, Ohio) has a sunny outlook following its third-quarter results, which indicated that warmer-than-expected weather and a series of transmission and natural gas-generation investments were paying off. Industrial Info is tracking more than $3.3 billion in active projects involving AEP, including more than $758 million worth that are nearing or under construction.

Click on the image at right for a graph detailing the top 10 U.S. states for AEP projects, by investment value.

Texas's Permian Basin has made headlines in recent months for its lack of sufficient midstream infrastructure to match the rapidly growing oil and gas production. But industry in the area also is in need of electricity transmission, which AEP and the Lower Colorado River Authority, a public utility, are addressing with the Far West Texas Project, a network of transmission lines in the westernmost areas serviced by the Electric Reliability Council of Texas (ERCOT).

Three sections of the 345-kilovolt Far West Texas Project are set to begin construction early next year, with completion currently slated for third-quarter 2020:

• $85 million Fort Stockton-to-Bakersfield line, running 68 miles; see project report
• $65 million Barstow-to-Solstice line, running 52 miles; see project report
• $52 million Solstice-to-Sand Lake line, running 52 miles; see project report

Industrial Info is tracking more than $135 million in additional projects related to the Far West Texas plan, including transmission line rebuilds and substation upgrades.

Farther south, AEP aims to meet the growing demand in Maverick County with an estimated $42 million transmission line running 42 miles, from its Brackettville Substation to its Escondido Switching Station. For more information, see Industrial Info's project report.

Nicholas Akins, the chief executive officer of AEP, acknowledged in a quarterly earnings-related conference call that the company's return on equity for its Texas subsidiary was lower in this past quarter when compared with the same period last year, but attributed it to "a lot of intensive capital investments going on in that territory." He added: "Lag has become somewhat of a factor there, but we fully intend on catching up with the construction activity out there."

Earlier this summer, AEP completed work on Duke Energy Corporation's (NYSE:DUK) (Charlotte, North Carolina) $328 million Greentown-Reynolds transmission line, which runs about 64 miles between Duke's substations in Greentown and Reynolds, Indiana. AEP and Duke are continuing with the estimated $400 million Reynolds-Rockport line, which runs 176 miles from Reynolds to Duke's substation in Rockport, Indiana. It is expected to wrap up in the summer of 2019. For more information, see Industrial Info's project reports on the Greentown-Reynolds line and the Reynolds-Rockport line.

West Virginia is another top spot for AEP projects, with one transmission improvement project nearing completion and another seeking permits. The $56 million Fayette County Area Transmission Improvement Project, which is expected to wrap up toward the end of the year, involves constructing a new substation, upgrading two others and constructing 16 miles of line. AEP's Appalachian subsidiary also is proposing an estimated $90 million improvement project in Lincoln and Logan counties that would include 24 miles of new line and two new substations. For more information, see Industrial Info's reports on the Fayette County and Lincoln/Logan County projects.

"You can see the continued growth of transmission [business], with over half of our capital budget deployed on this business, with a long runway ahead of us," Akins said in the conference call. "And growing distribution companies with infrastructure replacement, resiliency and revitalization through technology [will] be a continued, growing wedge of the capital that we can deploy." He later added: "We have a real opportunity to invest as we see fit, but it also fits within the general framework of our overall capital strategy around the regulated transmission and distribution business."

Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, six offices in North America and 12 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle™, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities. Follow IIR on: Facebook - Twitter - LinkedIn. For more information on our coverage, send inquiries to info@industrialinfo.com or visit us online at http://www.industrialinfo.com/.