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AEP to Modernize Texas Lines

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Ohio-based, public utility holding company, American Electric Power (AEP - Free Report) awarded a transmission contract to Houston-based, Quanta Services, Inc. (PWR - Free Report) to reconstruct its 345,000 volt power line of 66 miles located in the coastal city of Corpus Christi in Texas.  

The Corpus Christi portion is the first of the five stages of the energy transmission development program proposed by American Electric. The construction process is expected to be initiated in the fourth quarter 2012 and is projected to be completed by the end of first quarter 2016.

This project is part of American Electric’s recent drive to modernize its transmission business which includes a 240 mile power line stretching from Harlingen to Corpus Christi and finishing at Edinburg in South Texas. Once the entire modernization program is completed, it will contribute to transmission capacity increase of at least 40%.

We believe this infrastructure upgrade will be a major revenue driver for the company in the long run and will enable American Electric to provide uninterrupted and reliable services to its customers. This will aid in augmenting customer footprint across the company’s operational areas thereby contributing to profitability.

American Electric is known to make periodic investments in its transmission business. The company recently added another high-quality investment prospect to its portfolio. It entered into a joint venture with MidAmerican Energy Holdings Company and Westar Energy Inc. for the construction of a 345-kilovolt, 108 miles power line in south-central Kansas. The project named Prairie Wind Transmission is worth $180 million and is expected to be completed by late 2014.

Aside from developing its transmission services, American Electric is also working to improve the generation portfolio by gradually converting its coal fired units into natural gas fired ones to meet the environmental standards. American Electric has planned long term capital investment in the range of $6 billion to $7 billion to continue with its green power development initiatives.

The Zacks Consensus Estimates for the third quarter and full year 2012 currently stand at $1.04 per share and $3.05 per share, respectively. The company’s closest competitor is North Carolina-based, Duke Energy Corporation (DUK - Free Report) .

The company presently has a Zacks #2 Rank implying a short-term Buy rating. American Electric engages in the generation, transmission and distribution of electric power to retail customers. It generates electricity using coal and lignite, natural gas, nuclear energy and hydroelectric energy. With market capitalization of $21.06 billion, the company has as of now 18,000 employees.

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