AMERICAN ELECTRIC POWER CO

Chip AllenLead Harrison Pollan, Geoffrey Choi, Fion HeAssociates

MARKET OVERVIEW
Our total outlook is bearish

Situation in Greece
Italy is worsening Bond yields at 6.29% on 5yr, highest since 1997. Berlusconi stepping down.

Defensive positions are the best bet right now.

BACKGROUND ON AEP
Founded in 1906

Headquartered in Columbus, OH.

Divided into seven districts AEP Ohio AEP Texas

Appalachian Power (TN, VA and WV)

Indiana Michigan Power Kentucky Power PSO (Oklahoma) SWEPCO (Arkansas, Louisiana and Texas)

BREAKDOWN OF EARNINGS

INFRASTRUCTURE
Capable of generating 38,000 Megawatts.

39,000 mile electricity transmission system.

Largest in USA. More than all other transmission systems combined from competitors. 215,000 miles of distribution lines.

Accounts for 10% of demand in 38 eastern and central states, as well as eastern Canada.
Also accounts for 11% of demand in ERCOT, the transmission system serving the majority of Texas.

COMPARATIVE ANALYSIS
Company
P/E EPS Dividend % Beta ROE ROI P/B Mark Cap PEG

AEP
11.98 3.26 4.81% .52 11.09% 3.48% 1.28 18.87B 2.81

DUK
15.09 1.38 4.80% .38 8.22% 3.38% 1.22 27.73B 3.84

FE
18.63 2.40 4.92% .47 8.54% 2.53% 1.43 18.70B 6.78

SO
17.92 2.43 4.34% .29 12.36% 4.30% 2.01 37.54B 3.07

Utilities
15.56 1.3 4.01% .48 9.64% 1.86 -

TECHNICAL ANALYSIS

ANALYST INSIGHT
Since April 2009

17 out of 20 Analyst Ratings have been either Buy or Overweight.

Upgraded three times from Hold to Buy or Neutral to Overweight. Downgraded three times from Buy to Hold or Outperform to Perform. Has not been rated Underperform, Sell, or Underweight since April 2009

OTHER FACTORS
66% of the power generated comes from Coal.

Higher prices will lead to decreasing profit margins.

813,000 tons of air pollutants will be cut under new EPA guidelines. 6% of power generated comes from Nuclear power plants. Working with Ford on new Hybrid Technology to make owning a Hybrid more practical.

Want to harness wind from Mid-West into another power source for the east.