AEP Plans Big Investments in Transmission Projects

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Written by John Egan for Industrial Info Resources (Sugar Land, Texas)--Investments in transmission projects, rather than generation or environmental remediation, will be the largest cluster of capital spending at American Electric Power Company (NYSE:AEP) (Columbus, Ohio) for the next several years. Nick Akins, AEP's president and chief executive, told attendees at the Edison Electric Institute's (EEI) financial conference in late 2013 that AEP will invest about $4.5 billion in regulated transmission projects over 2014-16.

Looking beyond 2016, Akins projected annual transmission-related investments of at least $1 billion each in 2017 and 2018. Market factors, like connecting renewable energy projects to the grid, improving reliability and replacing aging infrastructure, are factors driving this transmission investment.

Across the 11 states where it operates, AEP expects to invest about $2.9 billion in regulated generation projects and $3.1 billion in regulated distribution projects over the 2014-16 period, Akins told the EEI event, held in Orlando, Florida. Overall capital investment over that period will total about $11.4 billion, including investment of about $3.1 billion in its regulated electric distribution networks in those 11 states.

"The less we have to spend on centralized generation, the better off we are," Akins said in a recent interview with the Columbus Dispatch newspaper. "We are now at a point where we can start defining our success. Before, we had a huge anvil we were dragging around, whether it be environmental expense or whether it be other things we were dealing with that were reactionary. We're finally at a point where we can map out the strategy of this company going forward. It is exhilarating."

The expanded investment in transmission marks a departure for AEP, the crown jewel of which traditionally has been its mostly coal-fired generation fleet. That fleet, now about 38,000 megawatts (MW), has been shrinking in recent years as tougher environmental regulations has forced AEP to shutter coal-fired generators in Virginia, West Virginia, Kentucky, Indiana, Ohio, Texas and Oklahoma. The company also has invested more than $7 billion over the last decade installing pollution-control equipment to bring some coal-fired generators into compliance with tougher environmental rules.

For more on Akins, AEP's business strategy and U.S. energy policy, see June 27, 2012, article - AEP's Akins Chills with Drums While Seeking Changes in U.S. Energy Policy. For more on the capital investment plans of one AEP subsidiary, Appalachian Power Company (Roanoke, Virginia), see August 14, 2013, article - AEP Unit Plans Hefty Outlays for Transmission Projects.

AEP's transmission investment plan builds on a large base of more than 36,000 circuit-miles of transmission lines with capacities of between 69 kilovolts (kV) and 765 kV. Industrial Info is tracking 10 active AEP transmission projects with total investment value (TIV) of about $1.9 billion. The largest of these projects include:

• Greentown-Rockport Grassroot Transmission Line, a $950 million, 240-mile, 765-kV project in Indiana. This project, part of a joint venture with Duke Energy Corporation (NYSE:DUK) (Charlotte, North Carolina), was scheduled to begin turning dirt by year-end 2013 and be operating by year-end 2017.
• North Edinburg - Loma Alta Grassroot Transmission Line, a $325 million project of 345-kV lines that will stretch for about 100 miles in Texas. AEP is a participant in this project, not the operator. This project is scheduled to kick off in early 2014 and be complete by mid-2016.
• Laredo - Lower Rio Grande Valley Grassroot Transmission Line, a $300 million, 163-mile, 345-kV project in Texas scheduled to begin turning dirt by year-end 2013 and be operating by year-end 2016.
• Valliant-Northwest Texarkana Grassroot Transmission Line, a $155 million, 76-mile, 345-kV project in Texas and Oklahoma scheduled to kick off by year-end 2013 and be operating by late 2016.
• Shipe Road - Kings River Grassroot Transmission Line, a $115 million, 48-mile, 345-kV project in Arkansas scheduled to kick off in mid-2014 and be in service by mid-2017.

"As the North American Power business continues to change, AEP is showing industry leadership by investing in transmission projects," said Brock Ramey, Industrial Info's North American Power Manager. "Many, if not most, of these projects are being made to support federal and state policies to increase the amount of renewable energy in the nation's electric mix, as well as extend and strengthen the transmission grid."

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