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## 2004 SHAREHOLDER RETURN 

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DEAR FELLOW SHAREHOLDERS American Electric Power became a stronger, more focused company in 2004. We sold non-core assets, reduced debt and met our earnings target while the people of AEP overcame some of the worst challenges Mother Nature can offer. In addition, we restructured the company, creating seven operating units to improve customer focus and to move more decisions to the local level. We accomplished a lot, and we certainly have much more to ac- complish. But, all told, 2004 was a very exciting and good year. 

FINANCIAL RESULTS AEP’s ongoing earnings per share for 2004 totaled $2.33, within our guidance range of $2.20 to $2.40. As-reported, or GAAP, earnings (prepared according to Generally Accepted Accounting Principles) were $2.75 per share, reflecting gains from asset sales. 

Our share price advanced 12.6 percent last year – well ahead of the overall market – and total return to shareholders, including dividends, exceeded 17 percent. 

AEP’s liquidity position remained favorable in 2004. At year’s end the com- pany had more than $400 million in cash and cash equivalents on its balance sheet and access to nearly $3 billion in credit facilities. 

ASSET SALES In 2004 we substantially completed our program of selling assets that are unrelated to our core, domestic utility operations. 

Among the facilities and operations sold were 4,000 megawatts of coal-fired generation in the United Kingdom, our interest in a power plant in China, the Louisiana Intrastate Gas pipeline and storage operations, four domestic indepen- dent power plants, and AEP Coal assets in Ohio and Kentucky. 

Some divestitures were unrelated to our sale of non-core assets. We sold most of our Texas generating assets to establish our level of stranded-cost recov- ery, consistent with Texas electric restructuring law. 

The $1.4 billion in proceeds from last year’s asset sales – along with re- tained-earnings growth and pension contributions – helped us meet our goal of reducing our debt ratio to below 60 percent of capitalization. 

GETTING CLOSER TO OUR CUSTOMERS AEP reorganized its field operations into seven operating units last year to move decision-making responsibility closer to cus- tomers and other stakeholders. Already, we see positive results from this effort to strengthen our ties with the communities we serve. I’m confident the new struc- ture will allow us to meet our customers’ needs more quickly and effectively. And positive customer relationships help build positive regulatory relationships. 

Each operating unit is headed by a president and chief operating officer who has authority for energy distribution operations and for customer and regulatory relationships. Other companywide operations, such as generation, transmission, and distribution dispatch, remain centralized to retain the efficiencies that mat- ter so much to our customers and regulators. 

