Electric Transmission Texas (“ETT”), a joint venture between the subsidiaries of American Electric Power Co. Inc. (AEP - Free Report) and MidAmerican Energy Holdings Company, has received approval for the construction of a 345-kV transmission line.
Electric Transmission Texas received a unanimous approval from the Public Utility Commission of Texas (“PUCT”) for a Certificate of Convenience and Necessity (“CCN”). It had filed a request for a CCN approval in Oct 2012.
The line will extend from the Laredo area into the Rio Grande Valley. The project with an estimated cost of $318 million includes construction of approximately 156 miles of 345-kV transmission lines that will connect ETT's Lobo Substation near Laredo with substations north of Edinburg.
The projects will also add two new substations along the line route. The transmission line from the Laredo to the Edinburg area will cross parts of Webb, Zapata, Jim Hogg, Brooks, Starr and Hidalgo counties. ETT plans to construct the transmission line on steel single-pole structures. This approach has been appreciated by landowners.
Besides approving the CCN application, the federal body also approved a unanimous settlement with approximately 100 landowners that fall under the route, the PUCT staff and the Texas Parks and Wildlife Department.
With the approval clinched, the joint venture plans to begin detailed engineering for the project with actual construction to begin in 2014 and completion in 2016.
Currently, there are only two 345-kV transmission lines running through the Rio Grande Valley. Both the existing lines import power from the Corpus Christi area and run parallel to the Gulf Coast, and are thereby vulnerable to hurricanes and severe weather conditions. However, work to upgrade those lines is in progress and is expected to be completed very soon.
American Electric Power is one of the largest investor-owned utility holding companies in the country, catering to over 5 million customers spread over 11 states. This provides stability to the revenue stream and insulates the company from adverse regulatory decisions and detrimental effects of lower sales in any particular service area.
Furthermore, the company’s diversified geographical presence opens it to opportunities with better returns. The selective focus on transmission expansion will allow the company to attain its 5% – 7% long-term EPS growth target, coupled with an attractive dividend yield.
Last month, American Electric Power announced that its Board of Directors has increased its quarterly dividend by 4.3%, bringing the annualized dividend to $1.96 per share from the previous payout of $1.88 per share. The company presently retains a short-term Zacks Rank #2 (Buy).
Other stocks to consider are CPFL Energia S.A. , Empresa Nacional de Electricidad S.A. and ALLETE, Inc. (ALE - Free Report) . While CPFL Energia and Empresa Nacional de Electricidad carry a Zacks Rank #1 (Strong Buy), ALLETE, Inc. holds a Zacks Rank #2 (Buy).