American Electric Power Company Inc. (AEP) along with its partner FirstEnergy Corporation (FE) stated that they will file to withdraw applications seeking approval from state regulatory agencies (Virginia, Maryland and West Virginia) for the Potomac-Appalachian Transmission Highline (PATH) project. The decision came after the announcement of indefinite suspension of the $2 billion project by the regional grid operator Pennsylvania – New Jersey – Maryland regional transmission organization (PJM) Interconnection. The project was initially planned to be completed by June 1, 2012.
The project was a proposed 276 mile, 765 kilovolt electric power transmission line designed to supply power from the Amos Substation located in Putnam County, West Virginia, to a proposed electrical substation that was to be constructed in Frederick County, Maryland. Currently, PJM expects slower demand growth for electricity in the Mid-Atlantic States and has therefore put the project on hold to focus more on electrical-transmission reliability problems.
American Electric Power’s original partner in the project was the erstwhile Allegheny Energy Inc. However, in February 2011, the company merged with FirstEnergy to create one of the nation’s largest power companies. The combined company is made up of 10 utilities serving 6.1 million customers from Ohio to New Jersey, with $16 billion in annual revenue and $1.4 billion in profit.
In January this year, American Electric Power marginally missed the Street expectations for the fourth quarter of 2010. In the reported quarter, the company with ongoing earnings of 38 cents a share came marginally below the Zacks Consensus Estimate of 39 cents. The company’s results also came way below the year-ago quarterly earnings of 50 cents a share. Overall, the company witnessed three consecutive quarters of increased industrial sales in its service area. Going forward, the Zacks Consensus Estimates for first quarter 2011 and fiscal year 2011 are currently at 81 cents per share and $3.14 per share, respectively.
Columbus, Ohio-based American Electric Power is one of the largest public utility holding companies, catering to approximately 5.2 million customers spread over 11 states. In light of the weakness in the economies of the states in its service area along with a high exposure to industrial customers, we currently have a Zacks #3 Rank (Hold) on the stock, along with a longer-term Neutral recommendation.
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