AEP to reduce exposure to energy trading, downsize trading and marketing organization

Oct. 10, 2002 — American Electric Power (AEP) said Thursday that it plans to reduce its exposure to speculative energy trading markets and will downsize its trading and wholesale marketing operation.

“We are painfully aware that current market conditions won’t reward the scope and scale of our trading and marketing business that we’ve built over the last several years,” E. Linn Draper, AEP’s chairman, president and chief executive officer, said during a conference call with financial analysts today.

“We are therefore undertaking a significant downsizing of our trading and marketing operation so our future will be limited to risk management around our power and gas assets. That means over the coming weeks we will be reducing our exposure in speculative trading markets and restructuring our commercial organization to support our assets.

“Let me emphasize this decision doesn’t reflect a lack of confidence in the competence or integrity of our trading operations,” Draper said. “We do expect a reduction in the number of employees in that business, but I anticipate that many will remain with the company.”

Eric van der Walde, executive vice president – AEP Energy Services, said the company’s wholesale energy efforts would be focused on areas where AEP has assets.

“We will scale back our market activity so that it will be centered around our assets,” van der Walde said. “We will be in power markets in the Midwest and Texas, natural gas in the Gulf Coast region and Texas, and the power and coal markets in the United Kingdom.”

The company did not provide headcount numbers for the marketing and trading organization.

AEP created AEP Energy Services, its wholesale marketing and trading subsidiary, in 1997 and quickly built it into one of the nation’s leading wholesale marketers of power and natural gas. AEP Energy Services also operates approximately 22,000 megawatts of generation in the United States and United Kingdom, 6,400 miles of natural gas pipeline, and 128 billion cubic feet of gas storage.

American Electric Power is a multinational energy company with a balanced portfolio of energy assets. AEP, the United States’ largest electricity generator, owns and operates more than 42,000 megawatts of generating capacity in the U.S. and select international markets.

AEP is a wholesale energy marketer, ranking among North America’s top providers of wholesale power and natural gas with a growing wholesale presence in European markets. In addition to electricity generation, AEP owns and operates natural gas pipeline systems, natural gas storage, coal mines, and the fourth-largest inland barge company in the U.S. AEP is also one of the largest electric utilities in the United States, with almost 5 million customers linked to AEP’s wires. The company is based in Columbus, Ohio.

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