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16 December 2005 - American Electric Power, through its Appalachian Power utility subsidiary, announced Thursday its purchase of the 505 MW Ceredo Generating Station in West Virginia from a subsidiary of Reliant Energy for approximately $100m.
AEP announced its intent to purchase the natural gas, simple-cycle power plant Aug. 11. The transaction has now received the necessary regulatory.
The plant, located near Ceredo, W.Va., was designed and built for Columbia Energy by AEP's Pro Serv subsidiary. It was completed and began commercial operation in 2001.
"Our forecasts indicate that the growing electricity needs of customers in our eastern seven states will soon be beyond the capabilities of our existing fleet of power plants," said Michael G. Morris, AEP's chairman, president and chief executive officer. "Our strategy for meeting the growth in demand includes two equally important facets: the construction of new plants, like the clean-coal Integrated Gasification Combined Cycle, or IGCC, generation projects we are pursuing, and the acquisition of recently completed gas-fired merchant plants when the price is right.
"The IGCC plants and our existing fleet of coal-fired plants in our eastern seven states will supply the bulk of the power used by our customers on a daily basis," Morris said. "Natural gas-fired merchant plants, like Ceredo and the 821 MW Waterford plant in Ohio that we acquired earlier this year, often have a purchase price well below the cost to build a comparable plant. Even with the forecast that natural gas prices will remain higher than in past years, these plants can provide an economical way to meet customers' needs on days of high electricity demand."
AEP plans to operate the Ceredo plant as peaking generation for use only when electricity demand is high. The plant also helps AEP maintain the 15 per cent reserve margin required by the PJM Interconnection to ensure reliability. The Ceredo Generating Station is part of the company's generation pool that provides power to AEP's utility units serving customers in Indiana, Kentucky, Michigan, Ohio, Tennessee, Virginia and West Virginia.
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