Utility company American Electric Power Inc. (AEP) is busy increasing its wind power deliveries in Ind., Michi. and Okla. regions to meet the surging demand for renewable energy.
Recently, Indiana Michigan Power Company (I&M), a fully owned subsidiary of American Electric Power, signed a 20-year power purchase agreement (PPA) with EDP Renewables North America LLC to buy renewable energy from the 200 MW Headwaters wind farm.
Located in Ind., the Headwaters wind farm project is scheduled to be installed by the end of 2014. The project will be connected to the AEP transmission system to deliver power to both Mich. and Ind. customers. I&M will have a total power generation capacity of 450 megawatt (MW).
The Production Tax Credits (:PTC) extension in Jan 2013 ensures significant wind capacity additions over the next three years, thereby leading to higher generation from wind. This favorable environment facilitates long-term PPAs in the U.S., thereby creating growth opportunities for companies like EDP Renewables.
Again, American Electric Power’s Okla. unit – Public Service Company of Oklahoma – recently issued a request for proposals for up to 200 MW of long-term purchase deals for wind energy.
The proposals call for wind projects that are in advanced stages of development and capable of qualifying for the federal government's PTC. Power delivery under the deals should start by Jan 1, 2016, subject to approvals by Oklahoma Corporation Commission. Any purchase made herein will replace a PPA that is expiring at the end of 2015.
American Electric Power Company Inc. is one of the largest investor-owned utility holding companies in the country, catering to over 5 million customers across 11 states. However, uncertainty surrounding its predominantly fossil fuel based generation assets continues to weigh on the valuation of the stock. Hence, the company is buying more renewables as federal regulators have given a directive on emissions from coal-fired power plants. The company’s Indiana Michigan unit operates over 5,700 MW of coal and nuclear generation to supply electricity to more than 582,000 customers.
Stipulating installation of renewable sources of electricity generation as mandated by Renewable Energy Standards has benefited the wind sector over the last few years with the PTC acting as a catalyst. As per the Energy Information Administration or EIA, renewable generating capacity will account for nearly one-fifth of the total capacity in 2040. Of this, solar generation will be the primary contributor to renewable capacity growth, with wind capacity occupying the second spot.
The company presently retains a Zacks Rank #3 (Hold). However, other stocks to consider are Companhia Paranaense de Energia (ELP), CPFL Energia S.A. (CPL) and ALLETE, Inc. (ALE). While Companhia Paranaense and CPFL Energia carry a Zacks Rank #1 (Strong Buy), ALLETE holds a Zacks Rank #2 (Buy).
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