About Our Business

Strategy for Growth

Discipline, continuous improvement, smart investment decisions and execution underpin our strategy for growth. We are adjusting to a number of new realities – stagnant demand for our product, a slow economic recovery, an abundance of low-cost shale gas, the need for a more resilient grid, retirement of approximately 6,600 MW of our coal units by 2016, new technologies that require greater grid flexibility, and increasing threats of physical and cyber-attacks on the grid. Yet, this is as much an exciting time as it is a challenging time for our business and our industry.

AEP is at a point in its history where it has capital to deploy because our environmental investments are nearly complete, giving us more flexibility to focus on growth areas of the company. We have a firm financial platform and a regulatory compact that supports investments in infrastructure and the customer experience. In addition to refurbishing the grid and building new infrastructure, our plan is to invest in technologies that improve reliability, operational efficiency and customer service. Our strategy is to bring our investments closer to what our customers value.

In many ways, the electric grid is a social safety net. Our strategy will strengthen this safety net to improve quality of life, customer satisfaction and system reliability, and provide our employees with a safe and engaging workplace that rewards entrepreneurship and collaboration.

Although our ability to invest may be hampered by new regulations, our intent is to operate a modern grid that is reliable and adaptable with new and emerging technologies. In addition, our communities will be vibrant, desirable places to live, work and operate a business; our shareholders will consider us a solid investment; we will provide secure, reliable and affordable electricity; we will be leaders in environmental stewardship; our stakeholders will want to stay engaged with us; and our philanthropic investments will lift people up and offer new opportunities. We have laid the foundation for the future and now we’re building the infrastructure.

Successful execution of our strategic goals will achieve our objective of 4 percent to 6 percent earnings growth. These strategic goals are the foundation of our growth strategy.

  • Optimize regulated utility returns: AEP’s financial objectives are to earn fair returns by prudently investing capital for our customers and maintaining our investment-grade credit ratings.
  • Grow our transmission business: AEP Transmission’s growth strategy is focused on building and maintaining a diversified portfolio of transmission projects. For the year ending Dec. 31, 2014, AEP Transmission Holding Company projects it will contribute an estimated $0.29 per share to earnings. Our portfolio consists of:
    • AEP Transmission Company – A company for wholly owned transmission companies, or transcos, which have been approved by or have filed for approval from state commissions, or are operating where state approval was not necessary. The transcos develop, own and operate transmission assets that are physically connected to AEP’s existing system. They are regulated by the Federal Energy Regulatory Commission (FERC) and can raise capital and build new transmission without affecting the balance sheet or credit ratings of the operating companies.
    • Joint ventures – Joint ventures have been developed with other electric utility companies for the purpose of developing, building, owning and operating transmission assets.
    • Transource Energy – A competitive business started in 2012, Transource focuses on developing projects within and beyond the AEP service territory.
  • Transform our generation business: External factors continue to call for significant changes in our generating fleet. We will do this by:
    • Diversifying our fuel mix.
    • Retiring approximately 6,600 megawatts (MW) of coal-fueled generation by the end of 2016 and refueling or retrofitting with environmental controls more than 7,200 MW of regulated and competitive coal-fueled generation. This will affect our regulated and competitive generation businesses between now and 2020.
    • Improving the operational performance of our generation fleet.
  • Maximize our competitive business platform: AEP’s expanded Generation and Marketing business segment objectives are:
    • Integrating competitive generation with our retail and wholesale businesses.
    • Investing capital conservatively.
    • Mitigating risk and volatility through hedging activity.
    • Adjusting the cost profile to a competitive generation business model rather than a regulated utility model.
  • Improve the health of our organizational culture: Culture is a business imperative and the linchpin of a successful strategy, yet it is abstract and subjective. It’s our job to reach out to our employees, communicate the strategy and vision, and focus on how each business unit can contribute to AEP’s overall strategy and vision so all employees know exactly what their roles are.

We delivered on all of these strategic objectives in 2013. Read more about our performance.

Our Strategy for Growth

AEP's strategy for growth is to invest capital in our regulated companies. Our investments in transmission and distribution improve reliability for customers and operational efficiencies of the grid, and provide a pathway to market for renewable energy.

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