AEP plans buybacks, debt reduction

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American Electric Power Co. Inc. said it planned to buy back about $500 million in stock and to reduce debt by $800 million, funded in part by proceeds from the sale of its controlling stake in Houston Pipe Line Co.

The company, one of the nation's largest power producers, said the moves would add to earnings, but would be offset in 2005 by the loss of profit from Houston Pipe Line. Therefore, AEP said it still expects 2005 earnings in the range of $2.30-$2.50, generally in line with analysts' estimates.

The company said it will use cash available from completed asset sales to fund the repurchase plan, which will run through 2006.

AEP ended 2004 with $420 million in cash, and closed the sale of Houston Pipe Line Co. in January for about $1 billion.

AEP Chief Executive Michael Morris said the moves would not effect the company's acquisition plans going forward.

"If an appropriate merger opportunity came along, we would find a way to finance it," Morris said at the company's annual analyst and investor meeting in New York. "I think shareholders and rating agencies are very sophisticated and understand the impact of those kinds of activities."

Morris said the company would still be interested in buying DPL Inc (DPL.N: Quote, Profile, Research) and E. ON AG's Louisville Gas & Electric if either company came up for sale, but said AEP has not been in contact with any utilities about a deal.

He said the company might also buy distressed gas generation assets in order to fulfill capacity requirements of the PJM electricity grid.

Chief Financial Officer Susan Tomasky said the debt reductions will consist of $250 million in reductions at the utility level and $550 million of the company's parent bond which matures in 2006.

Shares of AEP rose 35 cents, or 1.1 percent, to $34.07 on the New York Stock Exchange on March 2.

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