Tuesday, December 23, 1997
WTU's parent company merging with American
Electric Power
By DOUG WILLIAMSON
Business Editor
The parent company of Abilene-based West Texas Utilities Co.
is merging with American Electric Power Co. Inc. of Columbus,
Ohio.
The $6.6 billion tax-free stock-swap transaction announced
Monday will create one of the largest electric utilities in the
United States.
Shareholders of Central and South West Corp. stock will receive
6/10ths of a share of AEP stock for each CSW share they own. That
would represent a 20-percent premium over Friday's closing price
of the two companies.
CSW shareholders will own approximately 40 percent of the new
company.
The utility will serve 4.6 million customers in the U.S. and
4 million internationally. Officials estimate annual revenues
of $11 billion and a stock market value of $28.1 billion. It will
retain the name American Electric Power.
The company anticipates a $2 billion savings in the next decade,
primarily from a reduction of staff. E. Lynn Draper, AEP's chairman,
president and CEO, said 1,300 duplicated jobs, mainly at corporate
offices, will be eliminated. The firm will cut staff through retirements,
reducing hiring and allowing attrition to take its toll, before
laying off employees, Draper said.
The combined companies now have 26,000 employees.
The impact on Abilene's WTU office has not been determined.
Teams of employees from both companies will draw up plans for
what jobs are needed.
Floyd Nickerson, president of WTU, said he, too, is not sure
of the impact at the local office.
"We have already streamlined our operations here, and
we will try to continue to be," he said.
In recent years, WTU and other CSW subsidiaries have gone through
significant consolidation, reorganization and downsizing.
Nickerson praised AEP, comparing its efforts in customer service
and community involvement to those of WTU. He noted that both
companies are among the lowest-cost electricity generators in
the nation.
"This will be good for our customers," he said.
E.R. "Dick" Brooks, CSW chairman and CEO and a former
Abilenian, said, "Abilene can anticipate a seamless change
for WTU. It will retain its name. CSW and AEP are the right fit.
We are the best fit in this industry."
Draper said the acquisition is key to positioning the utility.
"We believe that together we will be a successful competitor
- nationally and internationally - in the 21st century,"
he said
Maitland Lammert, utility industry analyst with Edward Jones
in St. Louis, said the move reflects the realities of today's
deregulated utility marketplace.
"Particularly for electric utilities who want to be in
(the) generation of power (business), they realize they have to
be low in cost and large enough to compete. Power is going to
become more of a commodity product. American Electric Power ...
is definitely committed to staying in the generation and distribution
business (on a) national and global (scale)."
Draper expects the deal to improve cash flow but said it will
dilute earnings for several years.
For customers, "we don't anticipate the merger affecting
base rates," a CSW spokesman in Dallas said. Any fuel savings
will be passed on to customers. Draper will remain as CEO of the
combined company, while Brooks will join the AEP board of directors.
AEP provides energy to customers in Ohio, Indiana, Michigan,
Kentucky, West Virginia, Virginia and Tennessee. CSW's domestic
electric utilities holdings are in Oklahoma, Texas, Arkansas and
Louisiana.
AEP has international operations in China and the United Kingdom,
and CWS works in Mexico, Brazil, Chile and the United Kingdom.
CSW stock rose 1 1/8 Monday, closing at a 52-week high of 27
1/8. AEP declined 1 1/4 to 50 3/4.
AEP will file approval plans in the next 3-5 months with the
utility regulatory agencies in Texas, Louisiana, Oklahoma and
Arkansas; along with the Securities and Exchange Commission, Federal
Energy Regulatory Commission and Nuclear Regulatory Commission,
a company spokesman said. The approvals should be received in
12-18 months, he said.
"I don't expect any difficulty in securing approval. We
are increasing competition and lowering costs. That is what lawmakers
and regulators are seeking," Draper said.
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Abilene Reporter-News / Texnews / E.W. Scripps Publications
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