8-K 1 tcc8k92.txt TCC 8-K RE STP SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of report (Date of earliest event reported) September 7, 2004 ------------------------------ AEP TEXAS CENTRAL COMPANY -------------------------------------------------------------------------------- (Exact Name of Registrant as Specified in Its Charter) Texas -------------------------------------------------------------------------------- (State or Other Jurisdiction of Incorporation) 1-346 74-0550600 -------------------------------------------------------------------------------- (Commission File Number) (IRS Employer Identification No.) 1 Riverside Plaza, Columbus, OH 43215 -------------------------------------------------------------------------------- (Address of Principal Executive Offices) (Zip Code) 614-716-1000 -------------------------------------------------------------------------------- (Registrant's Telephone Number, Including Area Code) -------------------------------------------------------------------------------- (Former Name or Former Address, if Changed Since Last Report) Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below): [ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) [ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) [ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) [ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) Item 1.01. Entry into a Material Definitive Agreement On September 7, 2004, AEP Texas Central Company issued a press release announcing that it had signed an agreement for the sale of its interest in the South Texas Project (STP) nuclear plant to certain STP co-owners. As a result of this agreement, the Company will terminate an earlier agreement to sell its STP interest to another party. The full text of the press release is attached hereto as Exhibit 99.1. Item 9.01. Financial Statements and Exhibits (c) Exhibits Exhibit 99.1 AEP System Supplemental Retirement Savings Plan, Amended and Restated as of September 7, 2004 (Non-Qualified) SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. AMERICAN ELECTRIC POWER COMPANY, INC. By: /s/ Thomas G. Berkemeyer Name: Thomas G. Berkemeyer Title: Assistant Secretary September 7, 2004 EXHIBIT INDEX Exhibit No. Description 99.1 AEP System Supplemental Retirement Savings Plan Amended and Restated as of September 7, 2004 (Non-Qualified) MEDIA CONTACT: ANALYSTS CONTACT: Pat D. Hemlepp Julie Sloat Director, Corporate Media Relations Vice President, Investor Relations 614/716-1620 614/716-2885 FOR IMMEDIATE RELEASE AEP TO SELL TCC SHARE OF SOUTH TEXAS PROJECT TO CO-OWNERS Texas Genco and City Public Service Board of San Antonio Exercise Rights of First Refusal COLUMBUS, Ohio, Sept. 7, 2004 - American Electric Power (NYSE: AEP) subsidiary AEP Texas Central Company (formerly known as Central Power and Light) has signed an agreement to sell its 25.2 percent share of the South Texas Project (STP) nuclear plant to STP co-owners Texas Genco Holdings, Inc. (NYSE: TGN) and City Public Service Board of San Antonio (CPS) after the co-owners exercised their rights of first refusal for the AEP Texas Central Company (TCC) share of STP. Texas Genco Holdings will purchase 13.2 percent of STP for approximately $174 million. CPS will purchase 12 percent of STP for approximately $158 million. When the transactions are complete, Texas Genco Holdings will own 44 percent of STP, and CPS will own 40 percent of STP. The City of Austin elected not to exercise its right of first refusal for the TCC share of the plant and will continue to own 16 percent of STP. STP is operated by STP Nuclear Operating Company. AEP will use the proceeds from the sale to reduce debt. AEP had announced a purchase agreement with Cameco Corp. for the TCC share of STP March 1. The terms and conditions of the new purchase agreements signed with Texas Genco Holdings and CPS will remain essentially the same as the agreement signed with Cameco. AEP will pay a $7 million break-up fee to Cameco upon termination of the Cameco purchase and sale agreement due to the right-of-first-refusal exercise. The sale of STP to the co-owners is subject to regulatory approvals including federal clearance pursuant to the Hart-Scott-Rodino Antitrust Improvements Act of 1976 and approvals from the Nuclear Regulatory Commission, Federal Energy Regulatory Commission, and Securities and Exchange Commission. AEP hopes to close the transaction in late 2004 or early 2005. "We are pleased to have reached an agreement with the co-owners of STP and will be working diligently to complete the approval process as soon as possible. We also continue to prepare to file for stranded cost recovery as soon as we close the TCC sale transactions," said Charles Patton, AEP Texas president and chief operating officer. STP is a 2,500-megawatt nuclear plant located in Matagorda County, Texas, approximately 90 miles southwest of Houston. TCC's 25.2 percent share of the plant is approximately 630 megawatts. AEP announced plans in December 2002 to sell all 4,497 MW of the generation assets owned by TCC to determine their market value for calculating stranded costs (the amount that the book value exceeds the market value of the assets) under Texas restructuring legislation. AEP completed sale of 3,813 MW of these generating assets, including eight natural gas plants, one coal-fired plant and one hydro plant, to a joint venture of Sempra Energy Partners and Carlyle/Riverstone Global Energy and Power Fund July 1. AEP continues to work toward completing the sale of TCC's 7.8 percent share of Oklaunion Plant. American Electric Power owns more than 36,000 megawatts of generating capacity in the United States and is the nation's largest electricity generator. AEP is also one of the largest electric utilities in the United States, with more than 5 million customers linked to AEP's 11-state electricity transmission and distribution grid. The company is based in Columbus, Ohio. --- This report made by AEP and certain of its subsidiaries contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934. Although AEP and each of its registrant subsidiaries believe that their expectations are based on reasonable assumptions, any such statements may be influenced by factors that could cause actual outcomes and results to be materially different from those projected. Among the factors that could cause actual results to differ materially from those in the forward-looking statements are: electric load and customer growth; weather conditions; available sources and costs of fuels; availability of generating capacity and the performance of AEP's generating plants; the ability to recover regulatory assets and stranded costs in connection with deregulation; new legislation and government regulation including requirements for reduced emissions of sulfur, nitrogen, mercury, carbon and other substances; resolution of pending and future rate cases, negotiations and other regulatory decisions (including rate or other recovery for environmental compliance); oversight and/or investigation of the energy sector or its participants; resolution of litigation (including pending Clean Air Act enforcement actions and disputes arising from the bankruptcy of Enron Corp.); AEP's ability to reduce its operation and maintenance costs; the success of disposing of investments that no longer match AEP's business model; AEP's ability to sell assets at acceptable prices and on other acceptable terms; international and country-specific developments affecting foreign investments including the disposition of any foreign investments; the economic climate and growth in AEP's service territory and changes in market demand and demographic patterns; inflationary trends; AEP's ability to develop and execute a strategy based on a view regarding prices of electricity, natural gas, and other energy-related commodities; changes in the creditworthiness and number of participants in the energy trading market; changes in the financial markets, particularly those affecting the availability of capital and AEP's ability to refinance existing debt at attractive rates; actions of rating agencies, including changes in the ratings of debt and preferred stock; volatility and changes in markets for electricity, natural gas, and other energy-related commodities; changes in utility regulation, including the establishment of a regional transmission structure; accounting pronouncements periodically issued by accounting standard-setting bodies; the performance of AEP's pension plan; prices for power that AEP generates and sells at wholesale; changes in technology and other risks and unforeseen events, including wars, the effects of terrorism (including increased security costs), embargoes and other catastrophic events.

Commission Registrant, State of Incorporation I.R. S. Employer File Number Address, and Telephone Number Identification No. ----------- ----------------------------- ------------------ 0-18135 AEP GENERATING COMPANY (An Ohio Corporation) 31-1033833 1-3457 APPALACHIAN POWER COMPANY (A Virginia Corporation) 54-0124790 0-346 CENTRAL POWER AND LIGHT COMPANY (A Texas Corporation) 74-0550600 1-2680 COLUMBUS SOUTHERN POWER COMPANY (An Ohio Corporation) 31-4154203 1-3570 INDIANA MICHIGAN POWER COMPANY (An Indiana Corporation) 35-0410455 1-6858 KENTUCKY POWER COMPANY (A Kentucky Corporation) 61-0247775 1-6543 OHIO POWER COMPANY (An Ohio Corporation) 31-4271000 0-343 PUBLIC SERVICE COMPANY OF OKLAHOMA 73-0410895 (An Oklahoma Corporation) 1-3146 SOUTHWESTERN ELECTRIC POWER COMPANY 72-0323455 (A Delaware Corporation) 0-340 WEST TEXAS UTILITIES COMPANY (A Texas Corporation) 75-0646790 1 Riverside Plaza, Columbus, Ohio 43215-2373 Telephone (614) 223-1000

Contents Page Glossary of Terms A-1 Forward Looking Information A-4 AEP Generating Company Selected Financial Data B-1 Management's Narrative Analysis of Results of Operations B-2 Statements of Income and Statements of Retained Earnings B-3 Balance Sheets B-4 Statements of Cash Flows B-6 Statements of Capitalization B-7 Index to Notes to Financial Statements B-8 Independent Auditors' Report B-9 Appalachian Power Company and Subsidiaries Selected Consolidated Financial Data C-1 Management's Discussion and Analysis of Results of Operations C-2 Consolidated Statements of Income and Consolidated Statements of C-7 Comprehensive Income Consolidated Balance Sheets C-8 Consolidated Statements of Cash Flows C-10 Consolidated Statements of Retained Earnings C-11 Consolidated Statements of Capitalization C-12 Schedule of Long-term Debt C-13 Index to Notes to Consolidated Financial Statements C-14 Independent Auditors' Report C-15 Central Power and Light Company and Subsidiaries Selected Consolidated Financial Data D-1 Management's Discussion and Analysis of Results of Operations D-2 Consolidated Statements of Income D-6 Consolidated Balance Sheets D-7 Consolidated Statements of Cash Flows D-9 Consolidated Statements of Retained Earnings D-10 Consolidated Statements of Capitalization D-11 Schedule of Long-term Debt D-12 Index to Notes to Consolidated Financial Statements D-13 Independent Auditors' Report D-14

Columbus Southern Power Company and Subsidiaries Selected Consolidated Financial Data E-1 Management's Narrative and Analysis of Results of Operations E-2 Consolidated Statements of Income and Consolidated Statements of Retained Earnings E-6 Consolidated Balance Sheets E-7 Consolidated Statements of Cash Flows E-9 Consolidated Statements of Capitalization E-10 Schedule of Long-term Debt E-11 Index to Notes to Consolidated Financial Statements E-12 Independent Auditors' Report E-13 Indiana Michigan Power Company and Subsidiaries Selected Consolidated Financial Data F-1 Management's Discussion and Analysis of Results of Operations F-2 Consolidated Statements of Income and Consolidated Statements of F-7 Comprehensive Income Consolidated Balance Sheets F-8 Consolidated Statements of Cash Flows F-10 Consolidated Statements of Retained Earnings F-11 Consolidated Statements of Capitalization F-12 Schedule of Long-term Debt F-13 Index to Notes to Consolidated Financial Statements F-15 Independent Auditors' Report F-16 Kentucky Power Company Selected Financial Data G-1 Management's Narrative Analysis of Results of Operations G-2 Statements of Income, Statements of Comprehensive Income G-6 and Statements of Retained Earnings Balance Sheets G-7 Statements of Cash Flows G-9 Statements of Capitalization G-10 Schedule of Long-term Debt G-11 Index to Notes to Financial Statements G-12 Independent Auditors' Report G-13 Ohio Power Company and Subsidiaries Selected Consolidated Financial Data H-1 Management's Discussion and Analysis of Results of Operations H-2 Consolidated Statements of Income and Consolidated Statements of H-7 Comprehensive Income Consolidated Balance Sheets H-8 Consolidated Statements of Cash Flows H-10 Consolidated Statements of Retained Earnings H-11 Consolidated Statements of Capitalization H-12 Schedule of Long-term Debt H-13 Index to Notes to Consolidated Financial Statements H-15 Independent Auditors' Report H-16

Public Service Company of Oklahoma and Subsidiaries Selected Consolidated Financial Data I-1 Management's Narrative Analysis of Results of Operations I-2 Consolidated Statements of Income and Consolidated Statements of Retained Earnings I-5 Consolidated Balance Sheets I-6 Consolidated Statements of Cash Flows I-8 Consolidated Statements of Capitalization I-9 Schedule of Long-term Debt I-10 Index to Notes to Consolidated Financial Statements I-11 Independent Auditors' Report I-12 Southwestern Electric Power Company and Subsidiaries Selected Consolidated Financial Data J-1 Management's Discussion and Analysis of Results of Operations J-2 Consolidated Statements of Income and Consolidated Statements of Retained Earnings J-6 Consolidated Balance Sheets J-7 Consolidated Statements of Cash Flows J-9 Consolidated Statements of Capitalization J-10 Schedule of Long-term Debt J-11 Index to Notes to Consolidated Financial Statements J-12 Independent Auditors' Report J-13

West Texas Utilities Company Selected Financial Data K-1 Management's Narrative Analysis of Results of Operations K-2 Statements of Income and Statements of Retained Earnings K-6 Balance Sheets K-7 Statements of Cash Flows K-9 Statements of Capitalization K-10 Schedule of Long-term Debt K-11 Index to Notes to Consolidated Financial Statements K-12 Independent Auditors' Report K-13 Notes to Financial Statements L-1 Management's Discussion and Analysis of Financial Condition, Contingencies and Other Matters M-1

GLOSSARY OF TERMS When the following terms and abbreviations appear in the text of this report, they have the meanings indicated below. Term Meaning 2004 True-up Proceeding............ A filing to be made after January 10, 2004 under the Texas Legislation to finalize the amount of stranded costs and the recovery of such costs. AEGCo.............................. AEP Generating Company, an electric utility subsidiary of AEP. AEP................................ American Electric Power Company, Inc. The parent company of AEGCo,APCo, CSPCo, CPL, I&MCo, KPCo, OPCo, PSO, SWEPCo and WTU AEP Credit,Inc..................... AEP Credit, Inc., a subsidiary of AEP which factors accounts receivable and accrued utility revenues for affiliated and unaffiliated domestic electric utility companies. AEP East electric operating companies.......................... APCo, CSPCo, I&M, KPCo and OPCo. AEPR............................... AEP Resources, Inc. AEP System or the System........... The American Electric Power System, an integrated electric utility system, owned and operated by AEP's electric utility subsidiaries. AEPSC.............................. American Electric Power Service Corporation, a service subsidiary providing management and professional services to AEP and its subsidiaries. AEP Power Pool..................... AEP System Power Pool. Members are APCo, CSPCo, I&M, KPCo and OPCo. The Pool shares the generation, cost of generation and resultant wholesale system sales of the member companies. AEP West electric operating companies.......................... CPL, PSO, SWEPCo and WTU. AFUDC.............................. Allowance for funds used during construction, a noncash nonoperating income item that is capitalized and recovered through depreciation over the service life of domestic regulated electric utility plant. Alliance RTO....................... Alliance Regional Transmission Organization, an ISO formed by AEP and four unaffiliated utilities. Amos Plant......................... John E. Amos Plant, a 2,900 MW generation station jointly owned and operated by APCo and OPCo. APCo............................... Appalachian Power Company, an AEP electric utility subsidiary. Arkansas Commission................ Arkansas Public Service Commission. CLECO.............................. Central Louisiana Electric Company, Inc., an unaffiliated corporation. COLI............................... Corporate owned life insurance program. Cook Plant......................... The Donald C. Cook Nuclear Plant, a two-unit, 2,110 MW nuclear plant owned by I&M. CPL................................ Central Power and Light Company, an AEP electric utility subsidiary. CSPCo.............................. Columbus Southern Power Company, an AEP electric utility subsidiary. CSW............................... Central and South West Corporation, a subsidiary of AEP. CSW Energy......................... CSW Energy, Inc., an AEP subsidiary which invests in energy projects and builds power plants. CSW International.................. CSW International, Inc., an AEP subsidiary which invests in energy projects and entities outside the United States. D.C. Circuit Court.................The United States Court of Appeals for the District of Columbia Circuit. DHMV............................... Dolet Hills Mining Venture. DOE................................ United States Department of Energy. ECOM............................... Excess Cost Over Market. ENEC............................... Expanded Net Energy Costs. EITF............................... The Financial Accounting Standards Board's Emerging Issues Task Force. ERCOT.............................. The Electric Reliability Council of Texas. FASB............................... Financial Accounting Standards Board. Federal EPA........................ United States Environmental Protection Agency. FERC............................... Federal Energy Regulatory Commission. FMB ............................... First Mortgage Bond. GAAP............................... Generally Accepted Accounting Principles. I&M................................ Indiana Michigan Power Company, an AEP electric utility subsidiary.

IPC................................ Installment Purchase Contract. IRS................................ Internal Revenue Service. IURC............................... Indiana Utility Regulatory Commission. ISO................................ Independent system operator. Joint Stipulation.................. Joint Stipulation and Agreement for Settlement of APCo's WV rate proceeding. KPCo............................... Kentucky Power Company, an AEP electric utility subsidiary. KPSC............................... Kentucky Public Service Commission. KWH................................ Kilowatthour. Michigan Legislation............... The Customer Choice and Electricity Reliability Act, a Michigan law which provides for customer choice of electricity supplier. Midwest ISO........................ An independent operator of transmission assets in the Midwest. MLR................................ Member load ratio, the method used to allocate AEP Power Pool transactions to its members. Money Pool......................... AEP System's Money Pool. MPSC............................... Michigan Public Service Commission. MTN................................ Medium Term Notes. MW................................. Megawatt. MWH................................ Megawatthour. NEIL............................... Nuclear Electric Insurance Limited. Nox................................ Nitrogen oxide. NOx Rule........................... A final rules issued by Federal EPA which requires NOx reductions in 22 eastern states including seven of the states in which AEP companies operates. NP................................. Notes Payable. NRC................................ Nuclear Regulatory Commission. Ohio Act........................... The Ohio Electric Restructuring Act of 1999. Ohio EPA........................... Ohio Environmental Protection Agency. OPCo............................... Ohio Power Company, an AEP electric utility subsidiary. OVEC............................... Ohio Valley Electric Corporation, an electric utility company in which AEP and CSPCo own a 44.2% equity interest. PCBs............................... Polychlorinated Biphenyls. PJM................................ Pennsylvania - New Jersey - Maryland regional transmission organization. PRP................................ Potentially Responsible Party. PSO................................ Public Service Company of Oklahoma, an AEP electric utility subsidiary. PUCO............................... The Public Utilities Commission of Ohio. PUCT............................... The Public Utility Commission of Texas. PUHCA.............................. Public Utility Holding Company Act of 1935, as amended. PURPA.............................. The Public Utility Regulatory Policies Act of 1978. RCRA............................... Resource Conservation and Recovery Act of 1976, as amended. Registrant Subsidiaries............ AEP subsidiaries who are SEC registrants; AEGCo, APCo, CPL, CSPCo, I&M, KPCo, OPCo, PSO, SWEPCo and WTU. Rockport Plant..................... A generating plant, consisting of two 1,300 MW coal-fired generating units near Rockport, Indiana owned by AEGCo and I&M. RTO................................ Regional Transmission Organization. SEC................................ Securities and Exchange Commission. SFAS............................... Statement of Financial Accounting Standards issued by the Financial Accounting Standards Board. SFAS 71............................ Statement of Financial Accounting Standards No. 71, Accounting for the Effects of Certain Types of Regulation.

SFAS 101........................... Statement of Financial Accounting Standards No. 101, Accounting for the Discontinuance of Application of Statement 71. SFAS 121........................... Statement of Financial Accounting Standards No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of. SFAS 133........................... Statement of Financial Accounting Standards No. 133, Accounting for Derivative Instruments and Hedging Activities. SNF................................ Spent Nuclear Fuel. SPP................................ Southwest Power Pool. STP................................ South Texas Project Nuclear Generating Plant, owned 25.2% by Central Power and Light Company, an AEP electric utility subsidiary . STPNOC............................. STP Nuclear Operating Company, a non-profit Texas corporation which operates STP on behalf of its joint owners including CPL. Superfund.......................... The Comprehensive Environmental, Response, Compensation and Liability Act. SWEPCo............................. Southwestern Electric Power Company, an AEP electric utility subsidiary. Texas Appeals Court............... The Third District of Texas Court of Appeals. Texas Legislation.................. Legislation enacted in 1999 to restructure the electric utility industry in Texas. Travis District Court.............. State District Court of Travis County, Texas. TVA ............................... Tennessee Valley Authority. UN................................. Unsecured Note. VaR................................ Value at Risk, a method to quantify risk exposure. Virginia SCC....................... Virginia State Corporation Commission. WV................................. West Virginia. WVPSC.............................. Public Service Commission of West Virginia. WPCo............................... Wheeling Power Company, an AEP electric distribution subsidiary. WTU................................ West Texas Utilities Company, an AEP electric utility subsidiary. Zimmer Plant....................... William H. Zimmer Generating Station, a 1,300 MW coal-fired unit owned 25.4% by Columbus Southern Power Company, an AEP subsidiary.

AEP GENERATING COMPANY Selected Financial Data Year Ended December 31, 2001 2000 1999 1998 1997 ---- ---- ---- ---- ---- (in thousands) INCOME STATEMENTS DATA: Operating Revenues $227,548 $228,516 $217,189 $224,146 $227,868 Operating Expenses 220,571 220,092 211,849 215,415 218,828 ------- - ------- - ------- - ------- - ------- Operating Income 6,977 8,424 5,340 8,731 9,040 Nonoperating Income 3,484 3,429 3,659 3,364 3,603 Interest Charges 2,586 3,869 2,804 3,149 3,857 ----- --- ----- --- ----- --- ----- --- ----- Net Income $7,875 $7,984 $6,195 $8,946 $8,786 ====== ====== ====== ====== ======

December 31, 2001 2000 1999 1998 1997 ---- ---- ---- ---- ---- (in thousands) BALANCE SHEETS DATA: Electric Utility Plant $648,254 $642,302 $640,093 $636,460 $633,450 Accumulated Depreciation 337,151 315,566 295,065 277,855 257,191 ------- - ------- - ------- - ------- - ------- Net Electric Utility Plant $311,103 $326,736 $345,028 $358,605 $376,259 ======== ======== ======== ======== ======== Total Assets $361,341 $374,602 $398,640 $403,892 $419,058 ======== ======== ======== ======== ======== Common Stock and Paid-in Capital $ 24,434 $ 24,434 $ 30,235 $ 36,235 $ 40,235 Retained Earnings 13,761 9,722 3,673 2,770 2,528 ------ --- ----- --- ----- --- ----- --- ----- Total Common Shareholder's Equity $ 38,195 $ 34,156 $ 33,908 $ 39,005 $ 42,763 ======== ======== ======== ======== ======== Long-term Debt (a) $ 44,793 $ 44,808 $ 44,800 $ 44,792 $ 69,570 ======== ======== ======== ======== ======== Total Capitalization And Liabilities $361,341 $374,602 $398,640 $403,892 $419,058 ======== ======== ======== ======== ========

AEP GENERATING COMPANY Statements of Income Year Ended December 31, ----------------------- 2001 2000 1999 ---- ---- ---- (in thousands) OPERATING REVENUES: Sales to AEP Affiliates $227,338 $227,983 $152,559 Other 210 533 64,630 --- ----- --- -- ------ TOTAL OPERATING REVENUES 227,548 228,516 217,189 ------- - ------- - ------- OPERATING EXPENSES: Fuel 102,828 102,978 94,481 Rent - Rockport Plant Unit 2 68,283 68,283 68,283 Other Operation 11,025 10,295 10,451 Maintenance 8,853 9,616 10,492 Depreciation 22,423 22,162 21,845 Taxes Other Than Income Taxes 4,257 3,854 3,866 Income Taxes 2,902 2,904 2,431 ----- --- ----- --- ----- TOTAL OPERATING EXPENSES 220,571 220,092 211,849 ------- - ------- - ------- OPERATING INCOME 6,977 8,424 5,340 NONOPERATING INCOME 30 6 92 NONOPERATING EXPENSES 16 17 27 NONOPERATING INCOME TAX CREDITS 3,470 3,440 3,594 INTEREST CHARGES 2,586 3,869 2,804 ----- --- ----- --- ----- NET INCOME $7,875 $7,984 $6,195 ====== ====== ======

Statements of Retained Earnings Year Ended December 31, ----------------------- 2001 2000 1999 ---- ---- ---- (in thousands) RETAINED EARNINGS JANUARY 1 $ 9,722 $3,673 $2,770 NET INCOME 7,875 7,984 6,195 CASH DIVIDENDS DECLARED 3,836 1,935 5,292 ----- - ----- - ----- RETAINED EARNINGS DECEMBER 31 $13,761 $9,722 $3,673 ======= ====== ======

AEP GENERATING COMPANY Balance Sheets December 31, 2001 2000 ---- ---- (in thousands) ASSETS ELECTRIC UTILITY PLANT: Production $638,297 $635,215 General 3,012 2,795 Construction Work in Progress 6,945 4,292 ----- --- ----- Total Electric Utility Plant 648,254 642,302 Accumulated Depreciation 337,151 315,566 ------- - ------- NET ELECTRIC UTILITY PLANT 311,103 326,736 ------- - ------- OTHER PROPERTY AND INVESTMENTS 119 6 --- ------- - CURRENT ASSETS: Cash and Cash Equivalents 983 2,757 Accounts Receivable: Affiliated Companies 22,344 21,374 Miscellaneous 147 2,341 Fuel - at average cost 15,243 11,006 Materials and Supplies - at average cost 4,480 3,979 Prepayments 244 145 --- ----- --- TOTAL CURRENT ASSETS 43,441 41,602 ------ -- ------ REGULATORY ASSETS 5,207 5,504 ----- --- ----- DEFERRED CHARGES 1,471 754 ----- ----- --- TOTAL $361,341 $374,602 ======== ========

AEP GENERATING COMPANY December 31, 2001 2000 ---- ---- (in thousands) CAPITALIZATION AND LIABILITIES CAPITALIZATION: Common Stock - Par Value $1,000: Authorized and Outstanding - 1,000 Shares $1,000 $1,000 Paid-in Capital 23,434 23,434 Retained Earnings 13,761 9,722 ------ --- ----- Total Common Shareholder's Equity 38,195 34,156 Long-term Debt 44,793 - ------ ---- ---- TOTAL CAPITALIZATION 82,988 34,156 ------ -- ------ OTHER NONCURRENT LIABILITIES 76 358 - -- ----- --- CURRENT LIABILITIES: Long-term Debt Due Within One Year - 44,808 Advances from Affiliates 32,049 28,068 Accounts Payable: General 7,582 6,109 Affiliated Companies 1,654 7,724 Taxes Accrued 4,777 4,993 Rent Accrued - Rockport Plant Unit 2 4,963 4,963 Other 3,481 4,443 ----- --- ----- Total CURRENT LIABILITIES 54,506 101,108 ------ - ------- DEFERRED GAIN ON SALE AND LEASEBACK - ROCKPORT PLANT UNIT 2 116,617 122,188 ------- - ------- REGULATORY LIABILITIES: Deferred Investment Tax Credits 56,304 59,718 Amounts Due to Customers for Income Taxes 22,725 23,996 ------ -- ------ Total REGULATORY LIABILITIES 79,029 83,714 ------ -- ------ DEFERRED INCOME TAXES 27,975 32,928 ------ -- ------ DEFERRED CREDITS 150 150 --- ----- --- CONTINGENCIES (Note 8) TOTAL $361,341 $374,602 ======== ========

AEP GENERATING COMPANY Statements of Cash Flows Year Ended December 31, ----------------------- 2001 2000 1999 ---- ---- ---- (in thousands) OPERATING ACTIVITIES: Net Income $7,875 $7,984 $6,195 Adjustments for Noncash Items: Depreciation 22,423 22,162 21,845 Deferred Federal Income Taxes (6,224) (5,842) (5,282) Deferred Investment Tax Credits (3,414) (3,396) (3,448) Amortization of Deferred Gain on Sale and Leaseback - Rockport Plant Unit 2 (5,571) (5,571) (5,571) Change in Certain Current Assets and Liabilities: Accounts Receivable 1,224 1,392 (2,213) Fuel, Materials and Supplies (4,738) 6,486 (6,263) Accounts Payable (4,597) (13,157) 14,394 Taxes Accrued (216) 708 1,058 Other Assets (569) 1,636 (6) Other Liabilities (1,244) (404) (1,564) ------ ---- ---- -- ------ Net Cash Flows From Operating Activities 4,949 11,998 19,145 ----- -- ------ -- ------ INVESTING ACTIVITIES: Construction Expenditures (6,868) (5,190) (8,349) Proceeds From Sales of Property - - 331 ---- ---- ---- ----- --- Net Cash Flows Used For Investing Activities (6,868) (5,190) (8,018) ------ -- ------ -- ------ FINANCING ACTIVITIES: Return of Capital to Parent Company - (5,801) (6,000) Change in Short-term Debt (net) - (24,700) 250 Change in Advances From Affiliates (net) 3,981 28,068 - Dividends Paid (3,836) (1,935) (5,292) ------ -- ------ -- ------ Net Cash Flows From (Used For) Financing Activities 145 (4,368) (11,042) --- -- ------ - ------- Net Increase (Decrease) in Cash and Cash Equivalents (1,774) 2,440 85 Cash and Cash Equivalents January 1 2,757 317 232 ----- ----- --- ----- --- Cash and Cash Equivalents December 31 $ 983 $2,757 $ 317 =====- ====== =====

AEP GENERATING COMPANY Statements of Capitalization December 31, 2001 2000 ---- ---- (in thousands) COMMON STOCK EQUITY (a) $38,195 $ 34,156 ------- -------- LONG-TERM DEBT Installment Purchase Contracts - City of Rockport (b) Series Due Date 1995 A, 2025 (c) 22,500 22,500 1995 B, 2025 (c) 22,500 22,500 Unamortized Discount (207) (192) Amount Due Within One Year - (44,808) ---- - ------- Long-term Debt Excluding Amount Due Within One Year 44,793 - ------ ---- ---- TOTAL CAPITALIZATION $82,988 $ 34,156 ======= ========

APPALACHIAN POWER COMPANY AND SUBSIDIARIES Selected Consolidated Financial Data Year Ended December 31, 2001 2000 1999 1998 1997 ---- ---- ---- ---- ---- (in thousands) INCOME STATEMENTS DATA: Operating Revenues $1,784,259 $1,759,253 $1,586,050 $1,672,244 $1,628,515 Operating Expenses 1,509,273 1,558,099 1,344,814 1,443,701 1,388,521 --------- - --------- - --------- - --------- - --------- Operating Income 274,986 201,154 241,236 228,543 239,994 Nonoperating Income (Loss) 6,868 11,752 8,096 (8,301) (222) Interest Charges 120,036 148,000 128,840 126,912 119,258 ------- --- ------- --- ------- ---- ------- --- ------- Income Before Extraordinary Item 161,818 64,906 120,492 93,330 120,514 Extraordinary Gain - 8,938 - - - - ---- ----- ----- ------ ---- -- --------- ------ ---- Net Income 161,818 73,844 120,492 93,330 120,514 Preferred Stock Dividend Requirements 2,011 2,504 2,706 2,497 7,006 ----- ----- ----- ----- ----- ------ ----- ----- ----- Earnings Applicable to Common Stock $159,807 $ 71,340 $117,786 $ 90,833 $113,508 ======== ======== ======== ======== ========

December 31, 2001 2000 1999 1998 1997 ---- ---- ---- ---- ---- (in thousands) BALANCE SHEETS DATA: Electric Utility Plant $5,664,657 $5,418,278 $5,262,951 $5,087,359 $4,901,046 Accumulated Depreciation and Amortization 2,296,481 2,188,796 2,079,490 1,984,856 1,869,057 --------- - --------- - --------- - --------- - --------- Net Electric Utility Plant $3,368,176 $3,229,482 $3,183,461 $3,102,503 $3,031,989 ========== ========== ========== ========== ========== Total Assets $5,107,938 $6,633,724 $4,354,400 $4,047,038 $3,883,430 ========== ========== ========== ========== ========== Common Stock and Paid-in Capital $976,244 $975,676 $974,717 $924,091 $873,506 Accumulated Other Comprehensive Income (Loss) (340) - - - - Retained Earnings 150,797 120,584 175,854 179,461 207,544 ------- --- ------- --- ------- --- ------- --- ------- Total Common Shareholder's Equity $1,126,701 $1,096,260 $1,150,571 $1,103,552 $1,081,050 ========== ========== ========== ========== ========== Cumulative Preferred Stock: Not Subject to Mandatory Redemption $ 17,790 $ 17,790 $ 18,491 $ 19,359 $ 19,747 Subject to Mandatory Redemption 10,860 10,860 20,310 22,310 22,310 ------ ---- ------ ---- ------ ---- ------ ---- ------ Total Cumulative Preferred Stock $ 28,650 $ 28,650 $ 38,801 $ 41,669 $ 42,057 ======== ======== ======== ======== ======== Long-term Debt (a) $1,556,559 $1,605,818 $1,665,307 $1,552,455 $1,494,535 ========== ========== ========== ========== ========== Obligations Under Capital Leases (a) $ 46,285 $ 63,160 $ 64,645 $ 65,175 $ 60,110 ======== ======== ======== ======== ======== Total Capitalization And Liabilities $5,107,938 $6,633,724 $4,354,400 $4,047,038 $3,883,430 ========== ========== ========== ========== ==========

APPALACHIAN POWER COMPANY AND SUBSIDIARIES Consolidated Statements of Income Year Ended December 31, ----------------------- 2001 2000 1999 ---- ---- ---- (in thousands) OPERATING REVENUES: Electricity Marketing and Trading $1,017,938 $1,029,657 $920,158 Energy Delivery 595,036 574,918 565,660 Sales to AEP Affiliates 171,285 154,678 100,232 ------- --- ------- --- ------- Total Operating Revenues 1,784,259 1,759,253 1,586,050 --------- - --------- - --------- OPERATING EXPENSES: Fuel 351,557 369,161 444,711 Purchased Power: Electricity Marketing 42,092 24,720 59,979 AEP Affiliates 346,878 355,774 130,991 Other Operation 260,518 279,114 247,859 Maintenance 132,373 124,493 123,834 Depreciation and Amortization 180,393 163,089 148,874 Taxes Other Than Income Taxes 99,878 111,692 112,722 Income Taxes 95,584 130,056 75,844 ------ --- ------- ---- ------ Total Operating Expenses 1,509,273 1,558,099 1,344,814 --------- - --------- - --------- OPERATING INCOME 274,986 201,154 241,236 NONOPERATING INCOME 49,507 31,204 21,042 NONOPERATING EXPENSES 41,500 16,329 12,755 NONOPERATING INCOME TAX EXPENSE 1,139 3,123 191 INTEREST CHARGES 120,036 148,000 128,840 ------- --- ------- --- ------- INCOME BEFORE EXTRAORDINARY ITEM 161,818 64,906 120,492 EXTRAORDINARY GAIN - DISCONTINUANCE OF REGULATORY ACCOUNTING FOR GENERATION (Inclusive of Tax Benefit of $7,872,000) - 8,938 - ---- ----- ----- ------ ---- NET INCOME 161,818 73,844 120,492 PREFERRED STOCK DIVIDEND REQUIREMENTS 2,011 2,504 2,706 ----- ----- ----- ----- ----- EARNINGS APPLICABLE TO COMMON STOCK $159,807 $ 71,340 $117,786 ======== ======== ========

Consolidated Statements of Comprehensive Income Year Ended December 31, ----------------------- 2001 2000 1999 ---- ---- ---- (in thousands) NET INCOME $161,818 $73,844 $120,492 OTHER COMPREHENSIVE INCOME (LOSS) Foreign Currency Exchange Rate Hedge (340) - - ---- --- ---- ---- ---- COMPREHENSIVE INCOME $161,478 $73,844 $120,492 ======== ======= ========

APPALACHIAN POWER COMPANY AND SUBSIDIARIES Consolidated Balance Sheets December 31, 2001 2000 (in thousands) ASSETS ELECTRIC UTILITY PLANT: Production $2,093,532 $2,058,952 Transmission 1,222,226 1,177,079 Distribution 1,887,020 1,816,925 General 257,957 254,371 Construction Work in Progress 203,922 110,951 ------- --- ------- Total Electric Utility Plant 5,664,657 5,418,278 Accumulated Depreciation and Amortization 2,296,481 2,188,796 --------- - --------- NET ELECTRIC UTILITY PLANT 3,368,176 3,229,482 --------- - --------- OTHER PROPERTY AND INVESTMENTS 53,736 56,967 ------ ---- ------ LONG-TERM ENERGY TRADING CONTRACTS 316,249 322,038 ------- --- ------- CURRENT ASSETS: Cash and Cash Equivalents 13,663 5,847 Advances to Affiliates - 8,387 Accounts Receivable: Customers 113,371 243,298 Affiliated Companies 63,368 63,919 Miscellaneous 11,847 16,179 Allowance for Uncollectible Accounts (1,877) (2,588) Fuel - at average cost 56,699 39,076 Materials and Supplies - at average cost 59,849 57,515 Accrued Utility Revenues 30,907 66,499 Energy Trading Contracts 566,284 2,024,222 Prepayments 16,018 6,307 ------ ----- ----- TOTAL CURRENT ASSETS 930,129 2,528,661 ------- - --------- REGULATORY ASSETS 397,383 447,750 ------- --- ------- DEFERRED CHARGES 42,265 48,826 ------ ---- ------ TOTAL $5,107,938 $6,633,724 ========== ==========

APPALACHIAN POWER COMPANY AND SUBSIDIARIES December 31, 2001 2000 ---- ---- (in thousands) CAPITALIZATION AND LIABILITIES CAPITALIZATION: Common Stock - No Par Value: Authorized - 30,000,000 Shares Outstanding - 13,499,500 Shares $260,458 $260,458 Paid-in Capital 715,786 715,218 Accumulated Other Comprehensive Income (Loss) (340) - Retained Earnings 150,797 120,584 ------- --- ------- Total Common Shareholder's Equity 1,126,701 1,096,260 Cumulative Preferred Stock: Not Subject to Mandatory Redemption 17,790 17,790 Subject to Mandatory Redemption 10,860 10,860 Long-term Debt 1,476,552 1,430,812 --------- - --------- TOTAL CAPITALIZATION 2,631,903 2,555,722 --------- - --------- OTHER NONCURRENT LIABILITIES 84,104 105,883 ------ --- ------- CURRENT LIABILITIES: Long-term Debt Due Within One Year 80,007 175,006 Short-term Debt - 191,495 Advances From Affiliates 291,817 - Accounts Payable - General 131,387 153,422 Accounts Payable - Affiliated Companies 84,518 107,556 Taxes Accrued 55,583 63,258 Customer Deposits 13,177 12,612 Interest Accrued 21,770 21,555 Energy Trading Contracts 549,703 2,080,025 Other 75,299 85,378 ------ ---- ------ Total CURRENT LIABILITIES 1,303,261 2,890,307 --------- - --------- DEFERRED INCOME TAXES 703,575 682,474 ------- --- ------- DEFERRED INVESTMENT TAX CREDITS 38,328 43,093 ------ ---- ------ LONG-TERM ENERGY TRADING CONTRACTS 257,129 258,788 ------- --- ------- REGULATORY LIABILITIES AND DEFERRED CREDITS 89,638 97,457 ------ ---- ------ COMMITMENTS AND CONTINGENCIES (Note 8) TOTAL $5,107,938 $6,633,724 ========== ==========

APPALACHIAN POWER COMPANY AND SUBSIDIARIES Consolidated Statements of Cash Flows Year Ended December 31, ----------------------- 2001 2000 1999 ---- ---- ---- (in thousands) OPERATING ACTIVITIES: Net Income $ 161,818 $73,844 $ 120,492 Adjustments for Noncash Items: Depreciation and Amortization 180,505 163,202 149,791 Deferred Federal Income Taxes 42,498 8,602 13,033 Deferred Investment Tax Credits (4,765) (4,915) (4,972) Deferred Power Supply Costs (net) 1,411 (84,408) 35,955 Mark-to-Market of Energy Trading Contracts (68,254) (1,843) (8,939) Provision for Rate Refunds - (4,818) 4,818 Extraordinary Gain - (8,938) - Change in Certain Current Assets and Liabilities: Accounts Receivable (net) 134,099 (166,911) 10,989 Fuel, Materials and Supplies (19,957) 18,487 (4,812) Accrued Utility Revenues 35,592 (13,081) (7,433) Accounts Payable (45,073) 159,369 (9,273) Taxes Accrued (7,675) 14,220 13,319 Revenue Refunds Accrued - 181 (95,267) Incentive Plan Accrued (2,451) 10,662 1,507 Disputed Tax and Interest Related to COLI - 72,440 (4,124) Change in Operating Reserves (5,358) (19,770) 7,451 Rate Stabilization Deferral - 75,601 - Change in Other Assets 19,418 (13,021) (8,669) Change in Other Liabilities (27,954) 9,817 (22,455) ------- ---- ----- -- ------- Net Cash Flows From Operating Activities 393,854 288,720 191,411 ------- -- ------- -- ------- INVESTING ACTIVITIES: Construction Expenditures (306,046) (199,285) (211,416) Proceeds From Sales of Property and Other 1,182 159 19,296 Net Cost of Removal and Other (8,434) (7,500) (24,373) ------ --- ------ -- ------- Net Cash Flows Used For Investing Activities (313,298) (206,626) (216,493) -------- - -------- - -------- FINANCING ACTIVITIES: Capital Contributions from Parent Company - - 50,000 Issuance of Long-term Debt 124,588 74,788 227,236 Retirement of Cumulative Preferred Stock - (9,924) (2,675) Retirement of Long-term Debt (175,000) (136,166) (116,688) Change in Short-term Debt (net) (191,495) 68,015 47,080 Change in Advances From Affiliates 300,204 (8,387) - Dividends Paid on Common Stock (129,594) (126,612) (121,392) Dividends Paid on Cumulative Preferred Stock (1,443) (1,938) (2,257) ------ --- ------ --- ------ Net Cash Flows From (Used For) Financing Activities (72,740) (140,224) 81,304 ------- - -------- --- ------ Net Increase (Decrease) in Cash and Cash Equivalents 7,816 (58,130) 56,222 Cash and Cash Equivalents January 1 5,847 63,977 7,755 ----- --- ------ ---- ----- Cash and Cash Equivalents December 31 $13,663 $ 5,847 $63,977 ======= ======= =======

APPALACHIAN POWER COMPANY AND SUBSIDIARIES Consolidated Statements of Retained Earnings Year Ended December 31, ----------------------- 2001 2000 1999 ---- ---- ---- (in thousands) Retained Earnings January 1 $120,584 $175,854 $179,461 Net Income 161,818 73,844 120,492 ------- -- ------ - ------- 282,402 249,698 299,953 ------- - ------- - ------- Deductions: Cash Dividends Declared: Common Stock 129,594 126,612 121,392 Cumulative Preferred Stock: 4-1/2% Series 801 811 850 5.90% Series 278 307 425 5.92% Series 364 364 364 6.85% Series - 289 579 ---- ----- --- ----- --- Total Cash Dividends Declared 131,037 128,383 123,610 Capital Stock Expense 568 731 489 --- ----- --- ----- --- Total Deductions 131,605 129,114 124,099 ------- - ------- - ------- Retained Earnings December 31 $150,797 $120,584 $175,854 ======== ======== ========

APPALACHIAN POWER COMPANY AND SUBSIDIARIES Consolidated Statements of Capitalization December 31, 2001 2000 (in thousands) COMMON SHAREHOLDER'S EQUITY $1,126,701 $1,096,260 ---------- ---------- PREFERRED STOCK: No par value - authorized shares 8,000,000 Call Price Shares December 31, Number of Shares Redeemed Outstanding Series(a) 2001 (b) Year Ended December 31, December 31, 2001 ------ ------------ ---------------------------- ----------------- 2001 2000 1999 ---- ---- ---- Not Subject to Mandatory Redemption: 4-1/2% $110 - 7,011 8,671 177,905 17,790 17,790 ---------- ---------- Subject to Mandatory Redemption: 5.90% (c) (d) - 10,000 20,000 47,100 4,710 4,710 5.92% (c) (d) - - - 61,500 6,150 6,150 ---------- ---------- 10,860 10,860 ---------- ---------- LONG-TERM DEBT (See Schedule of Long-term Debt): First Mortgage Bonds 639,365 739,015 Installment Purchase Contracts 234,904 234,782 Senior Unsecured Notes 518,247 468,113 Junior Debentures 161,507 161,367 Other Long-term Debt 2,536 2,541 Less Portion Due Within One Year (80,007) (175,006) ---------- ---------- Long-term Debt Excluding Portion Due Within One Year 1,476,552 1,430,812 ---------- ---------- TOTAL CAPITALIZATION $2,631,903 $2,555,722 ========== ==========

CENTRAL POWER AND LIGHT COMPANY AND SUBSIDIARIES Selected Consolidated Financial Data Year Ended December 31, 2001 2000 1999 1998 1997 ---- ---- ---- ---- ---- (in thousands) INCOME STATEMENTS DATA: Operating Revenues $1,738,837 $1,770,402 $1,482,475 $1,406,117 $1,376,282 Operating Expenses 1,443,106 1,463,304 1,188,490 1,123,330 1,124,963 --------- - --------- - --------- - --------- - --------- Operating Income 295,731 307,098 293,985 282,787 251,319 Nonoperating Income (Loss) 5,324 7,235 8,113 760 8,277 Interest Charges 116,268 124,766 114,380 122,036 131,173 ------- --- ------- --- ------- --- ------- --- ------- Income Before Extraordinary Item 184,787 189,567 187,718 161,511 128,423 Extraordinary Loss (2,509) - (5,517) - - ------ ------ ---- ---- ------ ------ ---- ------ ---- Net Income 182,278 189,567 182,201 161,511 128,423 Preferred Stock Dividend Requirements 242 241 6,931 6,901 9,523 Gain (Loss) on Reacquired Preferred Stock - - (2,763) - 2,402 ---- ------ ---- ---- ------ ------ ---- ----- ----- Earnings Applicable To Common Stock $182,036 $189,326 $172,507 $154,610 $121,302 ======== ======== ======== ======== ========

Year Ended December 31, 2001 2000 1999 1998 1997 ---- ---- ---- ---- ---- (in thousands) BALANCE SHEETS DATA: Electric Utility Plant $5,769,707 $5,592,444 $5,511,894 $5,336,191 $5,215,749 Accumulated Depreciation And Amortization 2,446,027 2,297,189 2,247,225 2,072,686 1,891,406 --------- - --------- - --------- - --------- - --------- Net Electric Utility Plant $3,323,680 $3,295,255 $3,264,669 $3,263,505 $3,324,343 ========== ========== ========== ========== ========== Total Assets $5,115,986 $5,467,684 $4,847,850 $4,735,476 $4,897,380 ========== ========== ========== ========== ========== Common Stock and Paid-in Capital $573,888 $573,888 $573,888 $573,888 $573,888 Retained Earnings 826,197 792,219 758,894 734,387 828,777 ------- --- ------- --- ------- --- ------- --- ------- Total Common Shareholder's Equity $1,400,085 $1,366,107 $1,332,782 $1,308,275 $1,402,665 ========== ========== ========== ========== ========== Preferred Stock $ 5,967 $ 5,967 $ 5,967 $163,204 $163,204 ======= ======= ======= ======== ======== CPL - Obligated, Mandatorily Redeemable Preferred Securities of Subsidiary Trust Holding Solely Junior Subordinated Dentures of CPL $136,250 $148,500 $150,000 $150,000 $150,000 ======== ======== ======== ======== ======== Long-term Debt (a) $1,253,768 $1,454,559 $1,454,541 $1,350,706 $1,414,335 ========== ========== ========== ========== ========== Total Capitalization And Liabilities $5,115,986 $5,467,684 $4,847,850 $4,735,476 $4,897,380 ========== ========== ========== ========== ==========

CENTRAL POWER AND LIGHT COMPANY AND SUBSIDIARIES Consolidated Statements of Income Year Ended December 31, ----------------------- 2001 2000 1999 ---- ---- ---- (in thousands) OPERATING REVENUES: Electricity Marketing and Trading $1,223,893 $1,253,836 $1,005,037 Energy Delivery 473,182 478,814 449,667 Sales to AEP Affiliates 41,762 37,752 27,771 ------ ---- ------ ---- ------ TOTAL REVENUES 1,738,837 1,770,402 1,482,475 OPERATING EXPENSES: Fuel 492,057 550,903 403,989 Purchased Power: Electricity Marketing 127,816 144,021 51,482 AEP Affiliates 58,641 32,591 16,673 Other Operation 321,227 319,539 291,131 Maintenance 71,212 60,528 70,165 Depreciation and Amortization 168,341 178,786 177,702 Taxes Other Than Income Taxes 90,916 76,477 73,823 Income Taxes 112,896 100,459 103,525 ------- --- ------- --- ------- Total Operating Expenses 1,443,106 1,463,304 1,188,490 --------- - --------- - --------- OPERATING INCOME 295,731 307,098 293,985 NONOPERATING INCOME 22,552 5,830 6,420 NONOPERATING EXPENSES 17,626 3,668 3,593 NONOPERATING INCOME TAX EXPENSE (CREDIT) (398) (5,073) (5,286) INTEREST CHARGES 116,268 124,766 114,380 ------- --- ------- --- ------- INCOME BEFORE EXTRAORDINARY ITEM 184,787 189,567 187,718 EXTRAORDINARY LOSS ON REACQUIRED DEBT (Inclusive of Tax $1,351,000 and $2,971,000 for 2001 and 1999, respectively) (2,509) - (5,517) ------ ------ ---- ---- ------ NET INCOME 182,278 189,567 182,201 PREFERRED STOCK DIVIDEND REQUIREMENTS 242 241 6,931 LOSS ON REACQUIRED PREFERRED STOCK - - (2,763) ---- ------ ---- ---- ------ EARNINGS APPLICABLE TO COMMON STOCK $182,036 $189,326 $172,507 ======== ======== ========

CENTRAL POWER AND LIGHT COMPANY AND SUBSIDIARIES Consolidated Balance Sheets December 31, 2001 2000 ---- ---- (in thousands) ASSETS ELECTRIC UTILITY PLANT: Production $3,169,421 $3,175,867 Transmission 663,655 581,931 Distribution 1,279,037 1,221,750 General 241,137 237,764 Construction Work in Progress 169,075 138,273 Nuclear Fuel 247,382 236,859 ------- --- ------- Total Electric Utility Plant 5,769,707 5,592,444 Accumulated Depreciation and Amortization 2,446,027 2,297,189 --------- - --------- NET ELECTRIC UTILITY PLANT 3,323,680 3,295,255 --------- - --------- OTHER PROPERTY AND INVESTMENTS 47,950 44,225 ------ ---- ------ LONG-TERM ENERGY TRADING CONTRACTS 72,502 65,786 ------ ---- ------ CURRENT ASSETS: Cash and Cash Equivalents 10,909 14,253 Accounts Receivable: General 38,459 67,787 Affiliated Companies 6,249 31,272 Allowance for Uncollectible Accounts (186) (1,675) Fuel Inventory - at LIFO cost 38,690 22,842 Materials and Supplies - at average cost 55,475 53,108 Under-recovered Fuel Costs - 127,295 Energy Trading Contracts 212,979 476,839 Prepayments 2,742 3,014 ----- ----- ----- TOTAL CURRENT ASSETS 365,317 794,735 ------- --- ------- REGULATORY ASSETS 226,806 202,440 ------- --- ------- REGULATORY ASSETS DESIGNATED FOR SECURITIZATION 959,294 953,249 ------- --- ------- NUCLEAR DECOMMISSIONING TRUST FUND 98,600 93,592 ------ ---- ------ DEFERRED CHARGES 21,837 18,402 ------ ---- ------ TOTAL $5,115,986 $5,467,684 ========== ==========

CENTRAL POWER AND LIGHT COMPANY AND SUBSIDIARIES December 31, 2001 2000 ---- ---- (in thousands) CAPITALIZATION AND LIABILITIES CAPITALIZATION: Common Stock - $25 Par Value: Authorized - 12,000,000 Shares Outstanding - 6,755,535 Shares $168,888 $168,888 Paid-in Capital 405,000 405,000 Retained Earnings 826,197 792,219 ------- --- ------- Total Common Shareholder's Equity 1,400,085 1,366,107 Preferred Stock 5,967 5,967 CPL - Obligated, Mandatorily Redeemable Preferred Securities of Subsidiary Trust Holding Solely Junior Subordinated Debentures of CPL 136,250 148,500 Long-term Debt 988,768 1,254,559 ------- - --------- TOTAL CAPITALIZATION 2,531,070 2,775,133 --------- - --------- CURRENT LIABILITIES: Long-term Debt Due Within One Year 265,000 200,000 Advances from Affiliates 354,277 269,712 Accounts Payable - General 65,307 128,957 Accounts Payable - Affiliated Companies 49,301 40,962 Over-Recovered Fuel 57,762 - Taxes Accrued 83,512 55,526 Interest Accrued 18,524 26,217 Energy Trading Contracts 219,486 485,521 Other 49,512 40,630 ------ ---- ------ Total CURRENT LIABILITIES 1,162,681 1,247,525 --------- - --------- DEFERRED INCOME TAXES 1,163,795 1,242,797 --------- - --------- DEFERRED INVESTMENT TAX CREDITS 122,892 128,100 ------- --- ------- LONG-TERM ENERGY TRADING CONTRACTS 62,138 65,295 ------ ---- ------ DEFERRED CREDITS 73,410 8,834 ------ ----- ----- COMMITMENTS AND CONTINGENCIES (Note 8) TOTAL $5,115,986 $5,467,684 ========== ==========

CENTRAL POWER AND LIGHT COMPANY AND SUBSIDIARIES Consolidated Statements of Cash Flows Year Ended December 31, ----------------------- 2001 2000 1999 ---- ---- ---- (in thousands) OPERATING ACTIVITIES: Net Income $ 182,278 $ 189,567 $ 182,201 Adjustments for Noncash Items: Depreciation and Amortization 168,341 178,786 177,702 Extraordinary Loss on Reacquired Debt 2,509 - 5,517 Deferred Income Taxes (72,568) 16,263 19,938 Deferred Investment Tax Credits (5,208) (5,207) (5,207) Mark-to-Market of Energy Trading Contracts (12,048) 8,191 - Change in Certain Current Assets and Liabilities: Accounts Receivable (net) 52,862 (32,902) (13,426) Fuel, Materials and Supplies (18,215) 8,680 (4,476) Interest Accrued (7,693) 11,494 (12,313) Fuel Recovery 185,057 (96,872) (40,046) Accounts Payable (55,311) 45,873 (3,061) Taxes Accrued 27,986 14,405 (5,734) Transmission Coordination Agreement Settlement - 15,519 (15,519) Change in Other Assets 10,756 599 19,974 Change in Other Liabilities 11,174 12,233 (554) ------ --- ------ ------ ----- Net Cash Flows From Operating Activities 469,920 366,629 304,996 ------- -- ------- -- ------- INVESTING ACTIVITIES: Construction Expenditures (193,732) (199,484) (210,823) Proceeds From Sales of Property and Other (354) - 15,063 ---- ----- ---- --- ------ Net Cash Flows Used For Investing Activities (194,086) (199,484) (195,760) -------- - -------- - -------- FINANCING ACTIVITIES: Issuance of Long-term Debt 260,162 149,248 358,887 Retirement of Preferred Stock - - (160,001) Retirement of Long-term Debt (475,606) (151,440) (261,700) Change in Advances from Affiliates (net) 84,565 (52,446) 161,860 Special Deposit for Reacquisition of Long-term Debt - 50,000 (50,000) Dividends Paid on Common Stock (148,057) (156,000) (148,000) Dividends Paid on Cumulative Preferred Stock (242) (249) (7,835) ---- ----- ---- --- ------ Net Cash Flows Used For Financing Activities (279,178) (160,887) (106,789) -------- - -------- - -------- Net Increased (Decrease) in Cash and Cash Equivalents (3,344) 6,258 2,447 Cash and Cash Equivalents January 1 14,253 7,995 5,548 ------ ---- ----- ---- ----- Cash and Cash Equivalents December 31 $10,909 $14,253 $ 7,995 ======= ======= =======

CENTRAL POWER AND LIGHT COMPANY AND SUBSIDIARIES Consolidated Statements of Retained Earnings Year Ended December 31, ----------------------- 2001 2000 1999 ---- ---- ---- (in thousands) BEGINNING OF PERIOD $792,219 $758,894 $734,387 NET INCOME 182,278 189,567 182,201 DEDUCTIONS: Cash Dividends Declared: Common Stock 148,057 156,000 148,000 Preferred Stock 242 241 6,931 Other 1 1 - LOSS ON REACQUIRED PREFERRED STOCK - - (2,763) ---- ---- ---- -- ------ BALANCE AT END OF PERIOD $826,197 $792,219 $758,894 ======== ======== ========

CENTRAL POWER AND LIGHT COMPANY AND SUBSIDIARIES Consolidated Statements of Capitalization December 31, 2001 2000 (in thousands) COMMON SHAREHOLDERS' EQUITY $1,400,085 $1,366,107 ---------- ---------- PREFERRED STOCK - authorized shares 3,035,000 $100 par value Call Price Shares December 31, Number of Shares Redeemed Outstanding Series 2001 Year Ended December 31, December 31, 2001 ------ ------------ ---------------------------- ----------------- 2001 2000 1999 ---- ---- ---- Not Subject to Mandatory Redemption: 4.00% $105.75 - - - 42,038 4,204 4,204 4.20% 103.75 - - - 17,476 1,748 1,748 Premium 15 15 ---------- ---------- Total Preferred Stock 5,967 5,967 ---------- ---------- TRUST PREFERRED SECURITIES: CPL-obligated, mandatorily redeemable preferred securities of subsidiary trust holding solely Junior Subordinated Debentures of CPL, 8.00%, due April 30, 2037 136,250 148,500 ---------- ---------- LONG-TERM (See Schedule of Long-term Debt): First Mortgage Bonds 614,200 615,000 Installment Purchase Contracts 489,568 489,559 Senior Unsecured Notes 150,000 350,000 Less Portion Due Within One year (265,000) (200,000) ---------- ---------- Long-term Debt Excluding Portion Due Within One Year 988,768 1,254,559 ---------- ---------- TOTAL CAPITALIZATION $2,531,070 $2,775,133 ========== ==========

COLUMBUS SOUTHERN POWER COMPANY AND SUBSIDIARIES Selected Consolidated Financial Data Year Ended December 31, 2001 2000 1999 1998 1997 ---- ---- ---- ---- ---- (in thousands) INCOME STATEMENTS DATA: Operating Revenues $1,350,319 $1,304,409 $1,190,997 $1,187,745 $1,094,851 Operating Expenses 1,098,142 1,108,532 968,207 975,534 899,724 --------- - --------- --- ------- --- ------- --- ------- Operating Income 252,177 195,877 222,790 212,211 195,127 Nonoperating Income (Loss) 7,738 5,153 2,709 (1,343) 3,137 Interest Charges 68,015 80,828 75,229 77,824 78,885 ------ --- ------ ---- ------ ---- ------ ---- ------ Income Before Extraordinary Item 191,900 120,202 150,270 133,044 119,379 Extraordinary Loss (30,024) (25,236) - - - ------- -- ------- ------ ---- ------ ---- ------ ---- Net Income 161,876 94,966 150,270 133,044 119,379 Preferred Stock Dividend Requirements 1,095 1,783 2,131 2,131 2,442 ----- ---- ----- ----- ----- ----- ----- ----- ----- Earnings Applicable to Common Stock $160,781 $93,183 $148,139 $130,913 $116,937 ======== ======= ======== ======== ========

Year Ended December 31, 2001 2000 1999 1998 1997 ---- ---- ---- ---- ---- (in thousands) BALANCE SHEETS DATA: Electric Utility Plant $3,354,320 $3,266,794 $3,151,619 $3,053,565 $2,976,110 Accumulated Depreciation 1,377,032 1,299,697 1,210,994 1,134,348 1,074,588 --------- - --------- - --------- - --------- - --------- Net Electric Utility Plant $1,977,288 $1,967,097 $1,940,625 $1,919,217 $1,901,522 ========== ========== ========== ========== ========== Total Assets $3,105,868 $3,888,302 $2,809,990 $2,681,690 $2,613,860 ========== ========== ========== ========== ========== Common Stock and Paid-in Capital $615,395 $614,380 $613,899 $613,518 $613,138 Retained Earnings 176,103 99,069 246,584 186,441 138,172 ------- ---- ------ --- ------- --- ------- --- ------- Total Common Shareholder's Equity $791,498 $713,449 $860,483 $799,959 $751,310 ======== ======== ======== ======== ======== Cumulative Preferred Stock - Subject to Mandatory Redemption (a) $ 10,000 $ 15,000 $ 25,000 $ 25,000 $ 25,000 ======== ======== ======== ======== ======== Long-term Debt (a) $791,848 $899,615 $924,545 $959,786 $969,600 ======== ======== ======== ======== ======== Obligations Under Capital Leases (a) $ 34,887 $ 42,932 $ 40,270 $ 42,362 $ 38,587 ======== ======== ======== ======== ======== Total Capitalization and Liabilities $3,105,868 $3,888,302 $2,809,990 $2,681,690 $2,613,860 ========== ========== ========== ========== ==========

COLUMBUS SOUTHERN POWER COMPANY AND SUBSIDIARIES Consolidated Statements of Income Year Ended December 31, ----------------------- 2001 2000 1999 ---- ---- ---- (in thousands) OPERATING REVENUES: Electricity Marketing and Trading $799,589 $856,998 $781,999 Energy Delivery 483,219 398,046 389,280 Sales to AEP Affiliates 67,511 49,365 19,718 ------ ---------- ---------- Total Operating Revenues 1,350,319 1,304,409 1,190,997 --------- - --------- - --------- OPERATING EXPENSES: Fuel 175,153 189,155 185,511 Purchased Power: Electricity Marketing 10,957 9,879 27,951 AEP Affiliates 292,199 287,750 199,574 Other Operation 219,497 219,840 189,549 Maintenance 62,454 69,676 65,229 Depreciation and Amortization 127,364 99,640 94,532 Taxes Other Than Income Taxes 111,481 123,223 120,146 Income Taxes 99,037 109,369 85,715 ------ --- ------- ---- ------ TOTAL OPERATING EXPENSES 1,098,142 1,108,532 968,207 --------- - --------- --- ------- OPERATING INCOME 252,177 195,877 222,790 NONOPERATING INCOME 32,756 20,580 5,779 NONOPERATING EXPENSES 21,095 8,070 6,010 NONOPERATING INCOME TAX EXPENSE (CREDIT) 3,923 7,357 (2,940) INTEREST CHARGES 68,015 80,828 75,229 ------ ---- ------ ---- ------ INCOME BEFORE EXTRAORDINARY ITEM 191,900 120,202 150,270 EXTRAORDINARY LOSS - DISCONTINUANCE OF REGULATORY ACCOUNTING FOR GENERATION - Net of tax (Note 2) (30,024) (25,236) - ------- --- ------- ------ ---- NET INCOME 161,876 94,966 150,270 PREFERRED STOCK DIVIDEND REQUIREMENTS 1,095 1,783 2,131 ----- ----- ----- ----- ----- EARNINGS APPLICABLE TO COMMON STOCK $160,781 $ 93,183 $148,139 ======== ======== ========

Consolidated Statements of Retained Earnings Year Ended December 31, ----------------------- 2001 2000 1999 ---- ---- ---- (in thousands) Retained Earnings January 1 $ 99,069 $246,584 $186,441 Net Income 161,876 94,966 150,270 ------- -- ------ - ------- 260,945 341,550 336,711 ------- - ------- - ------- Deductions: Cash Dividends Declared: Common Stock 82,952 240,600 87,996 Cumulative Preferred Stock - 7% Series 875 1,400 1,750 --- --- ----- --- ----- Total Cash Dividends Declared 83,827 242,000 89,746 Capital Stock Expense 1,015 481 381 ----- ----- --- ----- --- Total Deductions 84,842 242,481 90,127 ------ - ------- -- ------ Retained Earnings December 31 $176,103 $ 99,069 $246,584 ======== ======== ========

COLUMBUS SOUTHERN POWER COMPANY AND SUBSIDIARIES Consolidated Balance Sheets December 31, 2001 2000 ---- ---- (in thousands) ASSETS ELECTRIC UTILITY PLANT: Production $1,574,506 $1,564,254 Transmission 401,405 360,302 Distribution 1,159,105 1,096,365 General 146,732 156,534 Construction Work in Progress 72,572 89,339 ------ ---- ------ Total Electric Utility Plant 3,354,320 3,266,794 Accumulated Depreciation 1,377,032 1,299,697 --------- - --------- NET ELECTRIC UTILITY PLANT 1,977,288 1,967,097 --------- - --------- OTHER PROPERTY AND INVESTMENTS 40,369 39,848 ------ ---- ------ LONG-TERM ENERGY TRADING CONTRACTS 193,915 171,820 ------- --- ------- CURRENT ASSETS: Cash and Cash Equivalents 12,358 11,600 Accounts Receivable: Customers 41,770 73,711 Affiliated Companies 63,470 49,591 Miscellaneous 16,968 18,807 Allowance for Uncollectible Accounts (745) (659) Fuel - at average cost 20,019 13,126 Materials and Supplies - at average cost 38,984 38,097 Accrued Utility Revenues 7,087 9,638 Energy Trading Contracts 347,198 1,079,704 Prepayments 28,733 46,735 ------ ---- ------ TOTAL CURRENT ASSETS 575,842 1,340,350 ------- - --------- REGULATORY ASSETS 262,267 291,553 ------- --- ------- DEFERRED CHARGES 56,187 77,634 ------ ---- ------ TOTAL $3,105,868 $3,888,302 ========== ==========

COLUMBUS SOUTHERN POWER COMPANY AND SUBSIDIARIES December 31, 2001 2000 ---- ---- (in thousands) CAPITALIZATION AND LIABILITIES CAPITALIZATION: Common Stock - No Par Value: Authorized - 24,000,000 Shares Outstanding - 16,410,426 Shares $ 41,026 $ 41,026 Paid-in Capital 574,369 573,354 Retained Earnings 176,103 99,069 ------- ---- ------ Total Common Shareholder's Equity 791,498 713,449 Cumulative Preferred Stock - Subject to Mandatory Redemption 10,000 15,000 Long-term Debt 571,348 899,615 ------- --- ------- TOTAL CAPITALIZATION 1,372,846 1,628,064 --------- - --------- OTHER NONCURRENT LIABILITIES 36,715 47,584 ------ ---- ------ CURRENT LIABILITIES: Long-term Debt Due Within One Year 220,500 - Advances from Affiliates 181,384 88,732 Accounts Payable - General 62,393 89,846 Accounts Payable - Affiliated Companies 83,697 72,493 Taxes Accrued 116,364 162,904 Interest Accrued 10,907 13,369 Energy Trading Contracts 334,958 1,109,682 Other 34,600 60,701 ------ ---- ------ TOTAL CURRENT LIABILITIES 1,044,803 1,597,727 --------- - --------- DEFERRED INCOME TAXES 443,722 422,759 ------- --- ------- DEFERRED INVESTMENT TAX CREDITS 37,176 41,234 ------ ---- ------ LONG-TERM ENERGY TRADING CONTRACTS 157,706 138,073 ------- --- ------- DEFERRED CREDITS 12,900 12,861 ------ ---- ------ COMMITMENTS AND CONTINGENCIES (Note 8) TOTAL $3,105,868 $3,888,302 ========== ==========

COLUMBUS SOUTHERN POWER COMPANY AND SUBSIDIARIES Consolidated Statements of Cash Flows Year Ended December 31, ----------------------- 2001 2000 1999 ---- ---- ---- (in thousands) OPERATING ACTIVITIES: Net Income $ 161,876 $ 94,966 $ 150,270 Adjustments for Noncash Items: Depreciation and Amortization 128,500 100,182 94,962 Deferred Federal Income Taxes 24,108 (4,063) 10,481 Deferred Investment Tax Credits (4,058) (3,482) (3,994) Deferred Fuel Costs (net) - 5,352 8,889 Mark to Market of Energy Trading Contracts (44,680) (3,393) (2,369) Extraordinary Loss 30,024 25,236 - Change in Certain Current Assets and Liabilities: Accounts Receivable (net) 19,987 (29,737) 5,166 Fuel, Materials and Supplies (7,780) 11,957 (7,777) Accrued Utility Revenues 2,551 38,479 (7,990) Accounts Payable (16,249) 81,284 9,292 Disputed Tax and Interest Related to COLI - 39,483 (2,240) Change in Other Assets (42,066) (121,115) (14,898) Change in Other Liabilities (18,769) 132,441 3,388 ------- --- ------- ---- ----- Net Cash Flows From Operating Activities 233,444 367,590 243,180 ------- --- ------- -- ------- INVESTING ACTIVITIES: Construction Expenditures (132,532) (127,987) (115,321) Proceeds From Sales and Leaseback Transactions and Other 10,841 1,560 1,858 ------ ----- ----- ---- ----- Net Cash Flows Used For Investing Activities (121,691) (126,427) (113,463) -------- -- -------- - -------- FINANCING ACTIVITIES: Change in Advances from Affiliates (net) 92,652 88,732 - Issuance of Affiliated Long-term Debt 200,000 - - Retirement of Preferred Stock (5,000) (10,000) - Retirement of Long-term Debt (314,733) (25,274) (35,523) Change in Short-term Debt (net) - (45,500) (7,000) Dividends Paid on Common Stock (82,952) (240,600) (87,996) Dividends Paid on Cumulative Preferred Stock (962) (1,575) (1,750) ---- ---- ------ --- ------ Net Cash Flows Used For Financing Activities (110,995) (234,217) (132,269) -------- -- -------- - -------- Net Increase (Decrease) in Cash and Cash Equivalents 758 6,946 (2,552) Cash and Cash Equivalents January 1 11,600 4,654 7,206 ------ ----- ----- ---- ----- Cash and Cash Equivalents December 31 $12,358 $ 11,600 $ 4,654 ======= ======== =======

COLUMBUS SOUTHERN POWER COMPANY AND SUBSIDIARIES Consolidated Statements of Capitalization December 31, 2001 2000 (in thousands) COMMON SHAREHOLDER'S EQUITY $ 791,498 $ 713,449 ---------- ---------- PREFERRED STOCK: $100 par value - authorized shares 2,500,000 $25 par value - authorized shares 7,000,000 Call Price Shares December 31, Number of Shares Redeemed Outstanding Series 2001 Year Ended December 31, December 31, 2001 ------ ------------ ---------------------------- ----------------- 2001 2000 1999 ---- ---- ---- Subject to Mandatory Redemption: 7.00% (a) 50,000 100,000 - 100,000 10,000 15,000 ---------- ---------- LONG-TERM DEBT (See Schedule of Long-term Debt): Notes - Affiliated 200,000 First Mortgage Bonds 243,197 537,119 Installment Purchase Contracts 91,220 91,166 Senior Unsecured Notes 147,458 159,318 Junior Debentures 109,973 112,012 Less Portion Due Within One Years (220,500) - ---------- ---------- Total Long-term Debt Excluding Portion Due Within One Year 571,348 899,615 ---------- ---------- TOTAL CAPITALIZATION $1,372,846 $1,628,064 ========== ==========

INDIANA MICHIGAN POWER COMPANY AND SUBSIDIARIES Selected Consolidated Financial Data Year Ended December 31, 2001 2000 1999 1998 1997 ---- ---- ---- ---- ---- (in thousands) INCOME STATEMENTS DATA: Operating Revenues $1,526,997 $1,488,209 $1,351,666 $1,405,794 $1,339,232 Operating Expenses 1,367,292 1,522,911 1,243,014 1,239,787 1,131,444 ---------- ---------- ---------- ---------- ---------- Operating Income (Loss) 159,705 (34,702) 108,652 166,007 207,788 Nonoperating Income (Loss) 9,730 9,933 4,530 (839) 4,415 Interest Charges 93,647 107,263 80,406 68,540 65,463 ---------- ---------- ---------- ---------- ---------- Net Income (Loss) 75,788 (132,032) 32,776 96,628 146,740 Preferred Stock Dividend Requirements 4,621 4,624 4,885 4,824 5,736 ---------- ---------- ---------- ---------- ---------- Earnings (Loss) Applicable to Common Stock $ 71,167 $ (136,656) $ 27,891 $ 91,804 $ 141,004 ========== ========== ========== ========== ========== December 31, 2001 2000 1999 1998 1997 ---- ---- ---- ---- ---- (in thousands) BALANCE SHEETS DATA: Electric Utility Plant $4,923,721 $4,871,473 $4,770,027 $4,631,848 $4,514,497 Accumulated Depreciation and Amortization 2,436,972 2,280,521 2,194,397 2,081,355 1,973,937 ---------- ---------- ---------- ---------- ---------- Net Electric Utility Plant $2,486,749 $2,590,952 $2,575,630 $2,550,493 $2,540,560 ========== ========== ========== ========== ========== Total Assets $4,817,008 $5,811,038 $4,576,696 $4,148,523 $3,967,798 ========== ========== ========== ========== ========== Common Stock and Paid-in Capital $ 789,800 $ 789,656 $ 789,323 $ 789,189 $ 789,056 Accumulated Other Comprehensive Income (Loss) (3,835) - - - - Retained Earnings 74,605 3,443 166,389 253,154 278,814 ---------- ---------- ---------- ---------- ---------- Total Common Shareholder's Equity $ 860,570 $ 793,099 $ 955,712 $1,042,343 $1,067,870 ========== ========== ========== ========== ========== Cumulative Preferred Stock: Not Subject to Mandatory Redemption $ 8,736 $ 8,736 $ 9,248 $ 9,273 $ 9,435 Subject to Mandatory Redemption (a) 64,945 64,945 64,945 68,445 68,445 ---------- ---------- ---------- ---------- ---------- Total Cumulative Preferred Stock $ 73,681 $ 73,681 $ 74,193 $ 77,718 $ 77,880 ========== ========== ========== ========== ========== Long-term Debt (a) $1,652,082 $1,388,939 $1,324,326 $1,175,789 $1,049,237 ========== ========== ========== ========== ========== Obligations Under Capital Leases (a) $ 61,933 $ 163,173 $ 187,965 $ 186,427 $ 195,227 ========== ========== ========== ========== ========== Total Capitalization And Liabilities $4,817,008 $5,811,038 $4,576,696 $4,148,523 $3,967,798 ========== ========== ========== ========== ========== (a) Including portion due within one year. (a)

INDIANA MICHIGAN POWER COMPANY AND SUBSIDIARIES Consolidated Statements of Income Year Ended December 31, ----------------------- 2001 2000 1999 ---- ---- ---- (in thousands) OPERATING REVENUES: Electricity Marketing and Trading $957,548 $966,882 $989,817 Energy Delivery 314,410 311,019 310,880 Sales to AEP Affiliates 255,039 210,308 50,969 ------- ------- ------ TOTAL OPERATING REVENUES 1,526,997 1,488,209 1,351,666 --------- --------- --------- OPERATING EXPENSES: Fuel 250,098 210,870 185,419 Purchased Power: Electricity Marketing 18,707 13,785 35,328 AEP Affiliates 238,237 265,475 200,372 Other Operation 449,115 596,861 460,303 Maintenance 127,263 219,854 135,331 Depreciation and Amortization 164,230 154,920 149,988 Taxes other Than Income Taxes 65,518 60,622 65,843 Income Taxes 54,124 524 10,430 ------ ------- ------ TOTAL OPERATING EXPENSES 1,367,292 1,522,911 1,243,014 --------- --------- --------- OPERATING INCOME (LOSS) 159,705 (34,702) 108,652 NONOPERATING INCOME 41,684 25,138 14,219 NONOPERATING EXPENSES 26,911 11,016 8,383 NONOPERATING INCOME TAXES 5,043 4,189 1,306 INTEREST CHARGES 93,647 107,263 80,406 ------ ------- ------ NET INCOME (LOSS) 75,788 (132,032) 32,776 PREFERRED STOCK DIVIDEND REQUIREMENTS 4,621 4,624 4,885 ----- ----- ----- EARNINGS (LOSS) APPLICABLE TO COMMON STOCK $ 71,167 $ (136,656) $ 27,891 ======== ========== ======== Consolidated Statements of Comprehensive Income Year Ended December 31, ----------------------- 2001 2000 1999 ---- ---- ---- (in thousands) NET INCOME (LOSS) $75,788 $(132,032) $32,776 OTHER COMPREHENSIVE INCOME (LOSS) Cash Flows Interest Rate Hedge (3,835) - - ------ ---- ---- COMPREHENSIVE INCOME (LOSS) $71,953 $(132,032) $32,776 ======= ========= ======= See Notes to Financial Statements beginning on page L-1.

INDIANA MICHIGAN POWER COMPANY AND SUBSIDIARIES Consolidated Balance Sheets December 31, 2001 2000 (in thousands) ASSETS ELECTRIC UTILITY PLANT: Production $2,758,160 $2,708,436 Transmission 957,336 945,709 Distribution 900,921 863,736 General (including nuclear fuel) 233,005 257,152 Construction Work in Progress 74,299 96,440 ------ ------ Total Electric Utility Plant 4,923,721 4,871,473 Accumulated Depreciation and Amortization 2,436,972 2,280,521 --------- --------- NET ELECTRIC UTILITY PLANT 2,486,749 2,590,952 --------- --------- NUCLEAR DECOMMISSIONING AND SPENT NUCLEAR FUEL DISPOSAL TRUST FUNDS 834,109 778,720 ------- ------- LONG-TERM ENERGY TRADING CONTRACTS 215,544 194,554 ------- ------- OTHER PROPERTY AND INVESTMENTS 127,977 131,417 ------- ------- CURRENT ASSETS: Cash and Cash Equivalents 16,804 14,835 Advances to Affiliates 46,309 - Accounts Receivable: Customers 60,864 106,832 Affiliated Companies 31,908 48,706 Miscellaneous 25,398 27,491 Allowance for Uncollectible Accounts (741) (759) Fuel - at average cost 28,989 16,532 Materials and Supplies - at average cost 91,440 84,471 Energy Trading Contracts 399,195 1,222,925 Accrued Utility Revenues 2,072 - Prepayments 6,497 6,066 ----- ----- TOTAL CURRENT ASSETS 708,735 1,527,099 ------- --------- REGULATORY ASSETS 408,927 552,140 ------- ------- DEFERRED CHARGES 34,967 36,156 ------ ------ TOTAL $4,817,008 $5,811,038 ========== ========== See Notes to Financial Statements beginning on page L-1.

INDIANA MICHIGAN POWER COMPANY AND SUBSIDIARIES December 31, 2001 2000 ---- ---- (in thousands) CAPITALIZATION AND LIABILITIES CAPITALIZATION: Common Stock - No Par Value: Authorized - 2,500,000 Shares Outstanding - 1,400,000 Shares $ 56,584 $ 56,584 Paid-in Capital 733,216 733,072 Accumulated Other Comprehensive Income (Loss) (3,835) - Retained Earnings 74,605 3,443 ------ ----- Total Common Shareholder's Equity 860,570 793,099 Cumulative Preferred Stock: Not Subject to Mandatory Redemption 8,736 8,736 Subject to Mandatory Redemption 64,945 64,945 Long-term Debt 1,312,082 1,298,939 --------- --------- TOTAL CAPITALIZATION 2,246,333 2,165,719 --------- --------- OTHER NONCURRENT LIABILITIES: Nuclear Decommissioning 600,244 560,628 Other 87,025 108,600 ------ ------- TOTAL OTHER NONCURRENT LIABILITIES 687,269 669,228 ------- ------- CURRENT LIABILITIES: Long-term Debt Due Within One Year 340,000 90,000 Advances from Affiliates - 253,582 Accounts Payable - General 90,817 119,472 Accounts Payable - Affiliated Companies 43,956 75,486 Taxes Accrued 69,761 68,416 Interest Accrued 20,691 21,639 Obligations Under Capital Leases 10,840 100,848 Energy Trading and Derivative Contracts 383,714 1,267,981 Other 72,435 97,070 ------ ------ TOTAL CURRENT LIABILITIES 1,032,214 2,094,494 --------- --------- DEFERRED INCOME TAXES 400,531 487,945 ------- ------- DEFERRED INVESTMENT TAX CREDITS 105,449 113,773 ------- ------- DEFERRED GAIN ON SALE AND LEASEBACK - ROCKPORT PLANT UNIT 2 77,592 81,299 ------ ------ LONG-TERM ENERGY TRADING CONTRACTS 175,581 156,343 ------- ------- DEFERRED CREDITS 92,039 42,237 ------ ------ COMMITMENTS AND CONTINGENCIES (Note 8) TOTAL $4,817,008 $5,811,038 ========== ========== See Notes to Financial Statements beginning on page L-1.

INDIANA MICHIGAN POWER COMPANY AND SUBSIDIARIES Consolidated Statements of Cash Flows Year Ended December 31, 2001 2000 1999 ---- ---- ---- (in thousands) OPERATING ACTIVITIES: Net Income (Loss) $75,788 $(132,032) $32,776 Adjustments for Noncash Items: Depreciation and Amortization 166,360 163,391 153,921 Amortization of Incremental Nuclear Refueling Outage Expenses (net) 418 5,737 8,480 Amortization (Deferral) of Nuclear Outage Costs (net) 40,000 40,000 (160,000) Deferred Federal Income Taxes (29,205) (125,179) 85,727 Deferred Investment Tax Credits (8,324) (7,854) (8,152) Mark-to-Market of Energy Trading Contracts (19,502) (10,859) (2,602) Unrecovered Fuel and Purchased Power Costs 37,501 37,501 (84,696) Changes in Certain Current Assets And Liabilities: Accounts Receivable (net) 64,841 (25,305) (19,178) Fuel, Materials and Supplies (19,426) 10,743 (12,880) Accrued Utility Revenues (2,072) 44,428 (7,151) Accounts Payable (60,185) 85,056 19,068 Taxes Accrued 1,345 19,446 13,809 Disputed Tax and Interest Related to COLI - 56,856 (3,228) Change in Other Assets (5,871) (68,160) (48,879) Change in Other Liabilities (5,461) 37,668 63,763 ------ ------ ------ Net Cash Flows From Operating Activities 236,207 131,437 30,778 ------- ------- ------ INVESTING ACTIVITIES: Construction Expenditures (91,052) (171,071) (165,331) Buyout of Nuclear Fuel Leases (92,616) - - Other 1,074 587 2,501 ----- --- ----- Net Cash Flows Used For Investing Activities (182,594) (170,484) (162,830) -------- -------- -------- FINANCING ACTIVITIES: Issuance of Long-term Debt 297,656 199,220 247,989 Retirement of Cumulative Preferred Stock - (314) (3,597) Retirement of Long-term Debt (44,922) (148,000) (109,500) Change in Advances from Affiliates (net) (299,891) 253,582 - Change in Short-term Debt (net) - (224,262) 115,562 Dividends Paid on Common Stock - (26,290) (114,656) Dividends Paid on Cumulative Preferred Stock (4,487) (3,368) (5,856) ------ ------ ------ Net Cash Flows From (Used For) Financing Activities (51,644) 50,568 129,942 ------- ------ ------- Net Increase (Decrease) in Cash and Cash Equivalents 1,969 11,521 (2,110) Cash and Cash Equivalents January 1 14,835 3,314 5,424 ------ ----- ----- Cash and Cash Equivalents December 31 $16,804 $ 14,835 $ 3,314 ======= ======== ======= Supplemental Disclosure: Cash paid (received) for interest net of capitalized amounts was $92,140,000,$82,511,000 and $78,703,000 and for income taxes was $100,470,000, $73,254,000 and $(71,395,000) in 2001, 2000 and 1999, respectively. Noncash acquisitions under capital leases were $1,023,000, $22,218,000 and $10,852,000 in 2001, 2000 and 1999, respectively. See Notes to Financial Statements beginning on page L-1.

INDIANA MICHIGAN POWER COMPANY AND SUBSIDIARIES Consolidated Statements of Retained Earnings Year Ended December 31, 2001 2000 1999 ---- ---- ---- (in thousands) Retained Earnings January 1 $3,443 $ 166,389 $253,154 Net Income (Loss) 75,788 (132,032) 32,776 ------ -------- ------ 79,231 34,357 285,930 ------ ------ ------- Deductions: Cash Dividends Declared: Common Stock - 26,290 114,656 Cumulative Preferred Stock: 4-1/8% Series 229 230 244 4.56% Series 66 66 66 4.12% Series 72 74 78 5.90% Series 897 897 963 6-1/4% Series 1,203 1,203 1,250 6.30% Series 834 834 834 6-7/8% Series 1,186 1,186 1,238 ----- ----- ----- Total Cash Dividends Declared 4,487 30,780 119,329 Capital Stock Expense 139 134 212 --- --- --- Total Deductions 4,626 30,914 119,541 ----- ------ ------- Retained Earnings December 31 $ 74,605 $ 3,443 $166,389 ======== ======= ======== See Notes to Financial Statements beginning on page L-1.

INDIANA MICHIGAN POWER COMPANY AND SUBSIDIARIES Consolidated Statements of Capitalization December 31, 2001 2000 (in thousands) COMMON SHAREHOLDER'S EQUITY $ 860,570 $ 793,099 ---------- ---------- PREFERRED STOCK: $100 Par Value - Authorized 2,250,000 shares $25 Par Value - Authorized 11,200,000 shares Call Price Shares December 31, Number of Shares Redeemed Outstanding Series 2001 Year Ended December 31, December 31, 2001 ------ ------------ ------------------------ ----------------- 2001 2000 1999 ---- ---- ---- Not Subject to Mandatory Redemption: 4-1/8% 106.125 - 3,750 97 55,389 5,539 5,539 4.56% 102 - - 150 14,412 1,441 1,441 4.12% 102.728 - 1,375 - 17,556 1,756 1,756 ---------- ---------- 8,736 8,736 ---------- ---------- Subject to Mandatory Redemption: 5.90% (a,b) - - 15,000 152,000 15,200 15,200 6-1/4% (a,b) - - 10,000 192,500 19,250 19,250 6.30% (a,b) - - - 132,450 13,245 13,245 6-7/8% (a,c) - - 10,000 172,500 17,250 17,250 ---------- ---------- 64,945 64,945 ---------- ---------- LONG-TERM DEBT (See Schedule of Long-term Debt): First Mortgage Bonds 264,141 308,976 Installment Purchase Contracts 310,239 309,717 Senior Unsecured Notes 696,144 397,435 Other Long-term Debt 219,947 211,307 Junior Debentures 161,611 161,504 Less Portion Due Within One Year (340,000) (90,000) ---------- ---------- Long-term Debt Excluding Portion Due Within One Year 1,312,082 1,298,939 ---------- ---------- TOTAL CAPITALIZATION $2,246,333 $2,165,719 ========== ========== (a) Not callable until after 2002. There are no aggregate sinking fund provisions through 2002. Sinking fund provisions require the redemption of 15,000 shares in 2003 and 67,500 shares each year in 2004, 2005 and 2006. The sinking fund provisions of each series subject to mandatory redemption have been met by purchase of shares in advance of the due date. (b) Commencing in 2004 and continuing through 2008 the Company may redeem, at $100 per share, 20,000 shares of the 5.90% series, 15,000 shares of the 6-1/4% series and 17,500 shares of the 6.30% series outstanding under sinking fund provisions at its option and all remaining outstanding shares must be redeemed not later than 2009. Shares previously redeemed may be applied to meet the sinking fund requirement. (c) Commencing in 2003 and continuing through the year 2007, a sinking fund will require the redemption of 15,000 shares each year and the redemption of the remaining shares outstanding on April 1, 2008, in each case at $100 per share. Shares previously redeemed may be applied to meet the sinking fund requirement. See Notes to Financial Statements beginning on page L-1.

KENTUCKY POWER COMPANY Selected Financial Data Year Ended December 31, 2001 2000 1999 1998 1997 ---- ---- ---- ---- ---- (in thousands) INCOME STATEMENTS DATA: Operating Revenues $379,025 $389,875 $358,757 $362,999 $340,635 Operating Expenses 331,347 340,137 304,082 311,106 293,779 ------- ------- ------- ------- ------- Operating Income 47,678 49,738 54,675 51,893 46,856 Nonoperating Income (Loss) 1,248 2,070 (327) (1,726) (464) Interest Charges 27,361 31,045 28,918 28,491 25,646 ------ ------ ------ ------ ------ Net Income $ 21,565 $ 20,763 $ 25,430 $ 21,676 $ 20,746 ======== ======== ======== ======== ======== Year Ended December 31, 2001 2000 1999 1998 1997 ---- ---- ---- ---- ---- (in thousands) BALANCE SHEETS DATA: Electric Utility Plant $1,128,415 $1,103,064 $1,079,048 $1,043,711 $1,006,955 Accumulated Depreciation and Amortization 384,104 360,648 340,008 315,546 296,318 ------- ------- ------- ------- ------- Net Electric Utility Plant $744,311 $742,416 $739,040 $728,165 $710,637 ======== ======== ======== ======== ======== Total Assets $1,153,243 $1,509,064 $986,638 $921,847 $886,671 ========== ========== ======== ======== ======== Common Stock and Paid-in Capital $209,200 $209,200 $209,200 $199,200 $179,200 Accumulated Other Comprehensive Income (Loss) (1,903) Retained Earnings 48,833 57,513 67,110 71,452 78,076 ------ ------ ------ ------ ------ Total Common Shareholder's Equity $256,130 $266,713 $276,310 $270,652 $257,276 ======== ======== ======== ======== ======== Long-term Debt (a) $346,093 $330,880 $365,782 $368,838 $341,051 ======== ======== ======== ======== ======== Obligations Under Capital Leases(a) $ 9,583 $ 14,184 $ 15,141 $ 18,977 $ 18,725 ======= ======== ======== ======== ======== Total Capitalization and Liabilities $1,153,243 $1,509,064 $986,638 $921,847 $886,671 ========== ========== ======== ======== ======== (a) Including portion due within one year.

KENTUCKY POWER COMPANY Statements of Income Year Ended December 31, ----------------------- 2001 2000 1999 ---- ---- ---- (in thousands) OPERATING REVENUES: Electricity Marketing and Trading $205,476 $226,708 $185,342 Energy Delivery 131,183 121,346 129,113 Sales to AEP Affiliates 42,366 41,821 44,302 ------ ------ ------ TOTAL REVENUES 379,025 389,875 358,757 ------- ------- ------- OPERATING EXPENSES: Fuel 70,635 74,638 84,369 Purchased Power: Electricity Marketing 86 1,940 8,951 AEP Affiliates 130,204 127,707 84,000 Other Operation 58,275 52,495 52,055 Maintenance 22,444 25,866 21,452 Depreciation and Amortization 32,491 31,028 29,221 Taxes Other Than Income Taxes 7,854 7,251 8,091 Income Taxes 9,358 19,212 15,943 ----- ------ ------ TOTAL OPERATING EXPENSES 331,347 340,137 304,082 ------- ------- ------- OPERATING INCOME 47,678 49,738 54,675 NONOPERATING INCOME 10,881 6,139 1,144 NONOPERATING EXPENSES 8,949 2,940 1,637 NONOPERATING INCOME TAX EXPENSE (CREDIT) 684 1,129 (166) INTEREST CHARGES 27,361 31,045 28,918 ------ ------ ------ NET INCOME $ 21,565 $ 20,763 $ 25,430 ======== ======== ======== Statements of Comprehensive Income Year Ended December 31, ----------------------- 2001 2000 1999 ---- ---- ---- (in thousands) NET INCOME $21,565 $20,763 $25,430 OTHER COMPREHENSIVE INCOME (LOSS) Cash Flow Interest Rate Hedge (1,903) - - ------ ---- ---- COMPREHENSIVE INCOME $19,662 $20,763 $25,430 ======= ======= ======= Statements of Retained Earnings Year Ended December 31, ----------------------- 2001 2000 1999 ---- ---- ---- (in thousands) RETAINED EARNINGS JANUARY 1 $57,513 $67,110 $71,452 NET INCOME 21,565 20,763 25,430 CASH DIVIDENDS DECLARED 30,245 30,360 29,772 ------ ------ ------ RETAINED EARNINGS DECEMBER 31 $48,833 $57,513 $67,110 ======= ======= ======= See Notes to Financial Statements Beginning on Page L-1.

KENTUCKY POWER COMPANY Balance Sheets December 31, 2001 2000 ---- ---- (in thousands) ASSETS ELECTRIC UTILITY PLANT: Production $271,070 $271,107 Transmission 374,116 360,563 Distribution 402,537 387,499 General 65,059 67,476 Construction Work in Progress 15,633 16,419 ------ ------ Total Electric Utility Plant 1,128,415 1,103,064 Accumulated Depreciation and Amortization 384,104 360,648 ------- ------- NET ELECTRIC UTILITY PLANT 744,311 742,416 ------- --- ------- OTHER PROPERTY AND INVESTMENTS 6,492 6,559 ----- ----- ----- LONG-TERM ENERGY TRADING CONTRACTS 77,972 76,503 ------ ---- ------ CURRENT ASSETS: Cash and Cash Equivalents 1,947 2,270 Accounts Receivable: Customers 20,036 34,555 Affiliated Companies 16,012 22,119 Miscellaneous 3,333 6,419 Allowance for Uncollectible Accounts (264) (282) Fuel - at average cost 12,060 4,760 Materials and Supplies - at average cost 15,766 15,408 Accrued Utility Revenues 5,395 6,500 Energy Trading Contracts 139,605 480,739 Prepayments 1,314 766 ---------- ------- --- TOTAL CURRENT ASSETS 215,204 573,254 ------- --- ------- REGULATORY ASSETS 97,692 98,515 ------ ---- ------ DEFERRED CHARGES 11 572 11,817 ------ ---- ------ TOTAL $1,153,243 $1,509,064 ========== ========== See Notes to Financial Statements beginning on page L-1.

KENTUCKY POWER COMPANY December 31, 2001 2000 (in thousands) CAPITALIZATION AND LIABILITIES CAPITALIZATION: Common Stock - Par Value $50: Authorized - 2,000,000 Shares Outstanding - 1,009,000 Shares $ 50,450 $ 50,450 Paid-in Capital 158,750 158,750 Accumulated Other Comprehensive Income (Loss) (1,903) - Retained Earnings 48,833 57,513 ---- ------ ---- ------ Total Common Shareholder's Equity 256,130 266,713 Long-term Debt 251,093 270,880 ---------- --- ------- TOTAL CAPITALIZATION 507,223 537,593 --- ------- --- ------- OTHER NONCURRENT LIABILITIES 11,929 18,348 ---- ------ ---- ------ CURRENT LIABILITIES: Long-term Debt Due Within One Year 95,000 60,000 Advances from Affiliates 66,200 47,636 Accounts Payable - General 24,050 32,043 Accounts Payable - Affiliated Companies 22,557 37,506 Customer Deposits 4,461 4,389 Taxes Accrued 10,305 11,885 Interest Accrued 5,269 5,610 Energy Trading and Derivative Contracts 144,364 494,086 Other 12,296 14,517 ---- ------ ---- ------ Total CURRENT LIABILITIES 384,502 707,672 --- ------- --- ------- DEFERRED INCOME TAXES 168,304 165,935 --- ------- --- ------- DEFERRED INVESTMENT TAX CREDITS 10,405 11,656 ---- ------ ---- ------ LONG-TERM ENERGY TRADING CONTRACTS 63,412 61,478 ---- ------ ---- ------ DEFERRED CREDITS 7,468 6,382 ----- ----- ----- ----- COMMITMENTS AND CONTINGENCIES (Note 8) TOTAL $1,153,243 $1,509,064 ========== ========== See Notes to Financial Statements beginning on page L-1.

KENTUCKY POWER COMPANY Statements of Cash Flows Year Ended December 31, ----------------------- 2001 2000 1999 ---- ---- ---- (in thousands) OPERATING ACTIVITIES: Net Income $ 21,565 $20,763 $25,430 Adjustments for Noncash Items: Depreciation and Amortization 32,491 31,034 29,228 Deferred Income Taxes 6,293 3,765 2,596 Deferred Investment Tax Credits (1,251) (1,252) (1,292) Deferred Fuel Costs (net) (4,707) 2,948 828 Mark-to-Market of Energy Trading Contracts (1,454) (4,376) (863) Change in Certain Current Assets and Liabilities: Accounts Receivable (net) 23,694 (20,930) (6,618) Fuel, Materials and Supplies (7,658) 8,386 (7,014) Accrued Utility Revenues 1,105 7,237 (177) Accounts Payable (22,942) 39,883 4,935 Taxes Accrued (1,580) 2,025 2,604 Disputed Tax and Interest Related to COLI - 5,943 (567) Change in Other Assets (2,762) 62,653 11,547 Change in Other Liabilities (9,446) (62,702) (13,837) ------ -- ------- -- ------- Net Cash Flows From Operating Activities 33,348 95,377 46,800 ------ --- ------ --- ------ INVESTING ACTIVITIES: Construction Expenditures (37,206) (36,209) (44,339) Proceeds From Sales of Property 216 266 168 --- ------ --- ------ --- Net Cash Flows Used For Investing Activities (36,990) (35,943) (44,171) ------- -- ------- -- ------- FINANCING ACTIVITIES: Capital Contributions from Parent Company - - 10,000 Issuance of Long-term Debt 75,000 69,685 79,740 Retirement of Long-term Debt (60,000) (105,000) (83,307) Change in Short-term Debt (net) - (39,665) 19,315 Change in Advances From Affiliates (net) 18,564 47,636 - Dividends Paid (30,245) (30,360) (29,772) ------- -- ------- -- ------- Net Cash Flows From (Used For) Financing Activities 3,319 (57,704) (4,024) ----- -- ------- --- ------ Net Increase (Decrease) in Cash and Cash Equivalents (323) 1,730 (1,395) Cash and Cash Equivalents January 1 2,270 540 1,935 ----- ------ --- ---- ----- Cash and Cash Equivalents December 31 $1,947 $ 2,270 $ 540 ====== ======= ===== Supplemental Disclosure: Cash paid for interest net of capitalized amounts was $27,090,000, $28,619,000 and $29,845,000 and for income taxes was $7,549,000, $7,923,000 and $12,050,000 in 2001, 2000 and 1999, respectively. Noncash acquisitions under capital leases were $817,000, $2,817,000 and $2,219,000 in 2001, 2000 and 1999, respectively. See Notes to Financial Statements beginning on page L-1.

KENTUCKY POWER COMPANY Statements of Capitalization December 31, 2001 2000 (in thousands) COMMON SHAREHOLDER'S EQUITY $256,130 $266,713 -------- -------- LONG-TERM DEBT (See Schedule of Long-term Debt): First Mortgage Bonds 59,383 119,341 Senior Unsecured Notes 147,625 147,490 Notes Payable 100,000 25,000 Junior Debentures 39,085 39,049 Less Portion Due Within One Year (95,000) (60,000) ------- - ------- Long-term Debt Excluding Portion Due Within One Year 251,093 270,880 ------- - ------- TOTAL CAPITALIZATION $507,223 $537,593 ======== ======== See Notes to Financial Statements beginning on page L-1.

OHIO POWER COMPANY AND SUBSIDIARIES Selected Consolidated Financial Data Year Ended December 31, 2001 2000 1999 1998 1997 ---- ---- ---- ---- ---- (in thousands) INCOME STATEMENTS DATA: Operating Revenues $2,098,105 $2,140,331 $1,978,826 $2,105,547 $1,892,110 Operating Expenses 1,857,395 1,913,504 1,689,997 1,816,175 1,615,717 --------- - --------- - --------- - --------- - --------- Operating Income 240,710 226,827 288,829 289,372 276,393 Nonoperating Income (Loss) 18,686 (5,004) 7,000 588 14,822 Interest Charges 93,603 119,210 83,672 80,035 82,526 ------ --- ------- ---- ------ ---- ------ ---- ------ Income Before Extraordinary Item 165,793 102,613 212,157 209,925 208,689 Extraordinary Loss (18,348) (18,876) - - - ------- --- ------- ------ ---- ------ ---- ------ ---- Net Income 147,445 83,737 212,157 209,925 208,689 Preferred Stock Dividend Requirements 1,258 1,266 1,417 1,474 2,647 - ----- ----- ----- ----- ----- ----- ----- ----- ----- Earnings Applicable To Common Stock $146,187 $ 82,471 $210,740 $208,451 $206,042 ======== ======== ======== ======== ======== Year Ended December 31, 2001 2000 1999 1998 1997 ---- ---- ---- ---- ---- (in thousands) BALANCE SHEETS DATA: Electric Utility Plant $5,390,576 $5,577,631 $5,400,917 $5,257,841 $5,155,797 Accumulated Depreciation 2,452,571 2,764,130 2,621,711 2,461,376 2,349,995 --------- - --------- - --------- - --------- - --------- Net Electric Utility Plant $2,938,005 $2,813,501 $2,779,206 $2,796,465 $2,805,802 ========== ========== ========== ========== ========== Total Assets $4,916,067 $6,242,557 $4,677,209 $4,344,680 $4,163,202 ========== ========== ========== ========== ========== Common Stock and Paid-in Capital $783,684 $783,684 $783,577 $783,536 $783,497 Accumulated Other Comprehensive Income (Loss) (196) Retained Earnings 401,297 398,086 587,424 587,500 590,151 ------- --- ------- --- ------- --- ------- --- ------- Total Common Shareholder's Equity $1,184,785 $1,181,770 $1,371,001 $1,371,036 $1,373,648 ========== ========== ========== ========== ========== Cumulative Preferred Stock: Not Subject to Mandatory Redemption $ 16,648 $ 16,648 $ 16,937 $ 17,370 $ 17,542 Subject to Mandatory Redemption (a) 8,850 8,850 8,850 11,850 11,850 ----- ----- ----- ----- ----- ---- ------- ---- ------ Total Cumulative Preferred Stock $ 25,498 $ 25,498 $ 25,787 $ 29,220 $ 29,392 ======== ======== ======== ======== ======== Long-term Debt (a) $1,203,841 $1,195,493 $1,151,511 $1,084,928 $1,095,226 ========== ========== ========== ========== ========== Obligations Under Capital Leases (a) $ 80,666 $116,581 $136,543 $142,635 $157,487 ======== ======== ======== ======== ======== Total Capitalization and Liabilities $4,916,067 $6,242,557 $4,677,209 $4,344,680 $4,163,202 ========== ========== ========== ========== ========== (a) Including portion due within one year.

OHIO POWER COMPANY AND SUBSIDIARIES Consolidated Statements of Income Year Ended December 31, --- ----------------------- 2001 2000 1999 ---- ---- ---- (in thousands) OPERATING REVENUES: Electricity Marketing and Trading $1,034,026 $1,090,297 $1,129,152 Energy Delivery 552,713 467,587 460,182 Sales to AEP Affiliates 511,366 582,447 389,492 ------- --- ------- --- ------- TOTAL OPERATING REVENUES 2,098,105 2,140,331 1,978,826 --------- - --------- - --------- OPERATING EXPENSES: Fuel 686,568 771,969 687,672 Purchased Power: Electricity Marketing 63,441 48,657 83,479 AEP Affiliates 62,585 50,741 20,864 Other Operation 400,790 404,410 325,495 Maintenance 142,878 124,735 121,299 Depreciation and Amortization 239,982 155,944 149,055 Taxes Other Than Income Taxes 159,778 169,527 164,213 Income Taxes 101,373 187,521 137,920 ------- --- ------- --- ------- TOTAL OPERATING EXPENSES 1,857,395 1,913,504 1,689,997 --------- - --------- - --------- OPERATING INCOME 240,710 226,827 288,829 NONOPERATING INCOME 53,378 37,454 14,316 NONOPERATING EXPENSES 37,072 24,300 12,744 NONOPERATING INCOME TAX EXPENSE (CREDIT) (2,380) 18,158 (5,428) INTEREST CHARGES 93,603 119,210 83,672 ------ --- ------- ---- ------ INCOME BEFORE EXTRAORDINARY ITEM 165,793 102,613 212,157 EXTRAORDINARY LOSS - DISCONTINUANCE OF REGULATORY ACCOUNTING FOR GENERATION - Net of tax (See Note 2) (18,348) (18,876) - ------- --- ------- ------ ---- NET INCOME 147,445 83,737 212,157 PREFERRED STOCK DIVIDEND REQUIREMENTS 1,258 1,266 1,417 ----- ----- ----- ----- ----- EARNINGS APPLICABLE TO COMMON STOCK $146,187 $ 82,471 $210,740 ======== ======== ======== Consolidated Statements of Comprehensive Income Year Ended December 31, ----------------------- 2001 2000 1999 ---- ---- ---- NET INCOME $147,445 $83,737 $212,157 OTHER COMPREHENSIVE INCOME (LOSS) Foreign Currency Exchange Rate Hedge (196) - - ---- ---- ---- COMPREHENSIVE INCOME $147,249 $83,737 $212,157 ======== ======= ======== The common stock of the Company is wholly owned by AEP. See Notes to Financial Statements beginning on page L-1.

OHIO POWER COMPANY AND SUBSIDIARIES Consolidated Balance Sheets December 31, 2001 2000 ---- ---- (in thousands) ASSETS ELECTRIC UTILITY PLANT: Production $3,007,866 $2,764,155 Transmission 891,283 870,033 Distribution 1,081,122 1,040,940 General (including mining assets at December 31, 2000) 245,232 707,417 Construction Work in Progress 165,073 195,086 --- ------- --- ------- Total Electric Utility Plant 5,390,576 5,577,631 Accumulated Depreciation and Amortization 2,452,571 2,764,130 - --------- - --------- NET ELECTRIC UTILITY PLANT 2,938,005 2,813,501 - --------- - --------- OTHER PROPERTY AND INVESTMENTS 62,303 109,124 ---- ------ --- ------- LONG-TERM ENERGY TRADING CONTRACTS 263,734 255,938 --- ------- --- ------- CURRENT ASSETS: Cash and Cash Equivalents 8,848 31,393 Advances to Affiliates - 92,486 Accounts Receivable: Customers 84,694 139,732 Affiliated Companies 148,563 126,203 Miscellaneous 20,409 39,046 Allowance for Uncollectible Accounts (1,379) (1,054) Fuel - at average cost 84,724 82,291 Materials and Supplies - at average cost 88,768 96,053 Accrued Utility Revenues - 264 Energy Trading Contracts 472,246 1,608,298 Prepayments and Other 20,865 32,882 ---- ------ ---- ------ TOTAL CURRENT ASSETS 927,738 2,247,594 --- ------- - --------- REGULATORY ASSETS 644,625 714,710 --- ------- --- ------- DEFERRED CHARGES 79,662 101,690 ---- ------ --- ------- TOTAL $4,916,067 $6,242,557 ========== ========== See Notes to Financial Statements beginning on page L-1.

OHIO POWER COMPANY AND SUBSIDIARIES December 31, 2001 2000 ---- ---- (in thousands) CAPITALIZATION AND LIABILITIES CAPITALIZATION: Common Stock - No Par Value: Authorized - 40,000,000 Shares Outstanding - 27,952,473 Shares $321,201 $321,201 Paid-in Capital 462,483 462,483 Accumulated Other Comprehensive Income (Loss) (196) - Retained Earnings 401,297 398,086 --- ------- --- ------- Total Common Shareholder's Equity 1,184,785 1,181,770 Cumulative Preferred Stock: Not Subject to Mandatory Redemption 16,648 16,648 Subject to Mandatory Redemption 8,850 8,850 Long-term Debt 1,203,841 1,077,987 - --------- - --------- TOTAL CAPITALIZATION 2,414,124 2,285,255 - --------- - --------- OTHER NONCURRENT LIABILITIES 130,386 542,017 --- ------- --- ------- CURRENT LIABILITIES: Long-term Debt Due Within One Year - 117,506 Advances From Affiliates 300,213 - Accounts Payable - General 134,418 179,691 Accounts Payable - Affiliated Companies 176,520 121,360 Customer Deposits 5,452 39,736 Taxes Accrued 126,770 223,101 Interest Accrued 17,679 20,458 Obligations Under Capital Leases 16,405 32,716 Energy Trading Contracts 456,047 1,652,953 Other 87,070 151,934 ---- ------ --- ------- Total CURRENT LIABILITIES 1,320,574 2,539,455 - --------- - --------- DEFERRED INCOME TAXES 797,889 621,941 --- ------- --- ------- DEFERRED INVESTMENT TAX CREDITS 21,925 25,214 ---- ------ ---- ------ LONG-TERM ENERGY TRADING CONTRACTS 214,487 205,670 --- ------- --- ------- DEFERRED CREDITS 16,682 23,005 ---- ------ ---- ------ COMMITMENTS AND CONTINGENCIES (Note 8) TOTAL $4,916,067 $6,242,557 ========== ========== See Notes to Financial Statements beginning on page L-1.

OHIO POWER COMPANY AND SUBSIDIARIES Consolidated Statements of Cash Flows Year Ended December 31, ----- ----------------------- 2001 2000 1999 ---- ---- ---- (in thousands) OPERATING ACTIVITIES: Net Income $ 147,445 $83,737 $ 212,157 Adjustments for Noncash Items: Depreciation, Depletion and Amortization 252,123 200,350 193,780 Deferred Income Taxes 215,833 (65,956) 3,666 Deferred Investment Tax Credits (3,289) (3,399) (3,458) Deferred Fuel Costs (net) - (56,869) (76,978) Extraordinary Loss 18,348 18,876 - Mark to Market of Energy Trading Contracts (59,833) (5,614) (4,234) Change in Certain Current Assets and Liabilities: Accounts Receivable (net) 51,640 51,430 (49,309) Fuel, Materials and Supplies 4,852 46,645 (60,500) Accrued Utility Revenues 264 45,311 (2,074) Accounts Payable 9,887 56,069 9,195 Disputed Tax and Interest Related to COLI - 110,494 (6,272) Accumulated Provisions - Noncurrent (392,026) 145,573 66,573 Taxes Accrued (96,331) 60,919 (776) Customer Deposits (34,284) 31,540 (3,763) Change in Other Assets 79,831 (439,448) (67,515) Change in Other Liabilities (107,704) 359,640 127,288 -------- ------- ------- Net Cash Flows From Operating Activities 86,756 639,298 337,780 ------ ------- ------- INVESTING ACTIVITIES: Construction Expenditures (344,571) (254,016) (193,870) Proceeds From Sales of Property and Other 16,778 6,354 5,900 Investment in Coal Companies (32,115) - - ------- ---- ---- Net Cash Flows Used For Investing Activities (359,908) (247,662) (187,970) -------- -------- -------- FINANCING ACTIVITIES: Issuance of Long-term Debt 300,000 74,748 222,308 Change in Advances From Affiliates (net) 392,699 (92,486) - Retirement of Cumulative Preferred Stock - (182) (3,392) Retirement of Long-term Debt (297,858) (30,663) (158,638) Change in Short-term Debt (net) - (194,918) 71,913 Dividends Paid on Common Stock (142,976) (271,813) (210,813) Dividends Paid on Cumulative Preferred Stock (1,258) (1,262) (1,420) ------ ------ ------ Net Cash Flows Used For Financing Activities 250,607 (516,576) (80,042) ------- -------- ------- Net Increase (Decrease) in Cash and Cash Equivalents (22,545) (124,940) 69,768 Cash and Cash Equivalents January 1 31,393 156,333 86,565 ------ ------- ------ Cash and Cash Equivalents December 31 $ 8,848 $31,393 $ 156,333 ======= ======= ========= Supplemental Disclosure: Cash paid (received) for interest net of capitalized amounts was $94,747,000, $87,120,000 and $78,739,000 and for income taxes was $(22,417,000), $142,710,000 and $94,606,000 in 2001, 2000 and 1999, respectively. Noncash acquisitions under capital leases were $2,380,000, $17,005,000 and $28,561,000 in 2001, 2000 and 1999, respectively. See Notes to Financial Statements beginning on page L-1.

OHIO POWER COMPANY AND SUBSIDIARIES Consolidated Statement of Retained Earnings Year Ended December 31, ----------------------- 2001 2000 1999 ---- ---- ---- (in thousands) Retained Earnings January 1 $398,086 $587,424 $587,500 Net Income 147,445 83,737 212,157 ------- ------ ------- 545,531 671,161 799,657 ------- ------- ------- Deductions: Cash Dividends Declared: Common Stock 142,976 271,813 210,813 Cumulative Preferred Stock: 4.08% Series 58 59 61 4.20% Series 96 96 97 4.40% Series 139 139 142 4-1/2% Series 439 442 460 5.90% Series 428 428 472 6.02% Series 66 66 156 6.35% Series 32 32 32 -- -- -- Total Dividends 144,234 273,075 212,233 ------- ------- ------- Retained Earnings December 31 $401,297 $398,086 $587,424 ======== ======== ======== See Notes to Financial Statements beginning on page L-1.

OHIO POWER COMPANY AND SUBSIDIARIES Consolidated Statements of Capitalization December 31, 2001 2000 (in thousands) COMMON SHAREHOLDER'S EQUITY $1,184,785 $1,181,770 ---------- ---------- PREFERRED STOCK: $100 par value - authorized shares 3,762,403 $25 par value - authorized shares 4,000,000 Call Price Shares December 31, Par Number of Shares Redeemed Outstanding Series(a) 2001 Value Year Ended December 31, December 31, 2001 ------ ------------ ----- --------------------------- ----------------- 2001 2000 1999 ---- ---- ---- Not Subject to Mandatory Redemption: 4.08% $103 $100 - - 373 14,595 1,460 1,460 4.20% 103.20 100 - 276 - 22,824 2,282 2,282 4.40% 104 100 - 432 330 31,512 3,151 3,151 4-1/2% 110 100 - 2,181 3,631 97,546 9,755 9,755 ------ ------ 16,648 16,648 ------ ------ Subject to Mandatory Redemption: 5.90% (b) - $100 - - 10,000 72,500 7,250 7,250 6.02% (c) - 100 - - 20,000 11,000 1,100 1,100 6.35% (c) - 100 - - - 5,000 500 500 ------ ------ 8,850 8,850 ------ ------ LONG-TERM DEBT (See Schedule of Long-term Debt): First Mortgage Bonds 141,544 316,294 Installment Purchase Contracts 233,235 233,130 Senior Unsecured Notes 396,962 471,583 Notes Payable to Affiliated Company 300,000 - Notes Payable - 30,000 Junior Debentures 132,100 131,980 Other Long-term Debt - 12,506 Less Portion Due Within One Year - (117,506) ---------- ---------- Long-term Debt Excluding Portion Due Within One Year 1,203,841 1,077,987 ---------- ---------- TOTAL CAPITALIZATION $2,414,124 $2,285,255 ========== ========== (a) The series subject to mandatory redemption are not callable until after 2002. The sinking fund provisions of each series subject to mandatory redemption have been met by purchase of shares in advance of the due date. (b) Commencing in 2004 and continuing through the year 2008, a sinking fund for the 5.90% cumulative preferred stock will require the redemption of 22,500 shares each year and the redemption of the remaining shares outstanding on January 1, 2009, in each case at $100 per share. Shares previously redeemed may be applied to meet sinking fund requirements. (c) Commencing in 2003 and continuing through 2007 cumulative preferred stock sinking funds will require the redemption of 20,000 shares each year of the 6.02% series and 15,000 shares each year of the 6.35% series, in each case at $100 per share. All remaining outstanding shares must be redeemed in 2008. Shares previously redeemed may be applied to meet the sinking fund requirements. See Notes to Financial Statements beginning on page L-1.

PUBLIC SERVICE COMPANY OF OKLAHOMA AND SUBSIDIARIES Selected Consolidated Financial Data Year Ended December 31, 2001 2000 1999 1998 1997 ---- ---- ---- ---- ---- (in thousands) INCOME STATEMENTS DATA: Operating Revenues $957,000 $956,398 $749,390 $780,159 $712,690 Operating Expenses 860,012 859,729 650,677 665,085 630,666 ------- ------- ------- ------- ------- Operating Income 96,988 96,669 98,713 115,074 82,024 Nonoperating Income (Loss) 20 8,974 946 (91) 1,649 Interest Charges 39,249 38,980 38,151 38,074 37,218 ------ ------ ------ ------ ------ Net Income 57,759 66,663 61,508 76,909 46,455 Preferred Stock Dividend Requirements 213 212 212 213 364 Gain On Reacquired Preferred Stock - - - - 4,211 ---- ---- ---- ---- ----- Earnings Applicable to Common Stock $ 57,546 $ 66,451 $ 61,296 $ 76,696 $ 50,302 ======== ======== ======== ======== ======== December 31, 2001 2000 1999 1998 1997 ---- ---- ---- ---- ---- (in thousands) BALANCE SHEETS DATA: Electric Utility Plant $2,695,099 $2,604,670 $2,459,705 $2,391,722 $2,339,908 Accumulated Depreciation and Amortization 1,184,443 1,150,253 1,114,255 1,082,081 1,031,322 --------- --------- --------- --------- --------- Net Electric Utility Plant $1,510,656 $1,454,417 $1,345,450 $1,309,641 $1,308,586 ========== ========== ========== ========== ========== Total Assets $1,917,897 $2,138,333 $1,524,726 $1,470,939 $1,464,562 ========== ========== ========== ========== ========== Common Stock and Paid-in Capital $337,230 $337,230 $337,230 $337,230 $337,230 Retained Earnings 142,994 137,688 139,237 142,941 135,245 ------- ------- ------- ------- ------- Total Common Shareholder's Equity $480,224 $474,918 $476,467 $480,171 $472,475 ======== ======== ======== ======== ======== Cumulative Preferred Stock: Not Subject to Mandatory Redemption $ 5,283 $ 5,283 $ 5,286 $ 5,287 $ 5,287 ======= ======= ======= ======= ======= Preferred Securities of Subsidiary Trust $ 75,000 $ 75,000 $ 75,000 $ 75,000 $ 75,000 ======== ======== ======== ======== ======== Long-term Debt (a) $451,129 $470,822 $384,516 $384,064 $438,703 ======== ======== ======== ======== ======== Total Capitalization and Liabilities $1,917,897 $2,138,333 $1,524,726 $1,470,939 $1,464,562 ========== ========== ========== ========== ========== (a) Including portion due within one year.

PUBLIC SERVICE COMPANY OF OKLAHOMA AND SUBSIDIARIES Consolidated Statements of Income Year Ended December 31, ----------------------- 2001 2000 1999 ---- ---- ---- (in thousands) OPERATING REVENUES: Electricity Marketing and Trading $658,352 $696,626 $479,346 Energy Delivery 261,877 245,124 256,327 Sales to AEP Affiliates 36,771 14,648 13,717 ------ ------ ------ TOTAL OPERATING REVENUES 957,000 956,398 749,390 ------- ------- ------- OPERATING EXPENSES: Fuel 461,470 402,933 269,316 Purchased Power: Electricity Marketing 24,187 88,088 40,274 AEP Affiliates 43,758 60,788 34,619 Other Operation 137,678 121,697 121,896 Maintenance 46,188 45,858 45,809 Depreciation and Amortization 80,245 76,418 74,736 Taxes Other Than Income Taxes 31,973 28,688 30,520 Income Taxes 34,513 35,259 33,507 ------ ------ ------ TOTAL OPERATING EXPENSES 860,012 859,729 650,677 ------- ------- ------- OPERATING INCOME 96,988 96,669 98,713 NONOPERATING INCOME 2,112 8,807 2,580 NONOPERATING EXPENSES 1,740 1,139 3,849 NONOPERATING INCOME TAX EXPENSE (CREDIT) 352 (1,306) (2,215) INTEREST CHARGES 39,249 38,980 38,151 ------ ------ ------ NET INCOME 57,759 66,663 61,508 PREFERRED STOCK DIVIDEND REQUIREMENTS 213 212 212 --- --- --- EARNINGS APPLICABLE TO COMMON STOCK $ 57,546 $ 66,451 $ 61,296 ======== ======== ======== Consolidated Statements of Retained Earnings Year Ended December 31, ----------------------- 2001 2000 1999 ---- ---- ---- (in thousands) BEGINNING OF PERIOD $137,688 $139,237 $142,941 NET INCOME 57,759 66,663 61,508 DEDUCTIONS: Cash Dividends Declared: Common Stock 52,240 68,000 65,000 Preferred Stock 213 212 212 --- --- --- BALANCE AT END OF PERIOD $142,994 $137,688 $139,237 ======== ======== ======== See Notes to Financial Statements beginning on page L-1.

PUBLIC SERVICE COMPANY OF OKLAHOMA AND SUBSIDIARIES Consolidated Balance Sheets December 31, 2001 2000 ---- ---- (in thousands) ASSETS ELECTRIC UTILITY PLANT: Production $1,034,711 $914,096 Transmission 427,110 396,695 Distribution 972,806 938,053 General 203,572 206,731 Construction Work in Progress 56,900 149,095 ------ ------- Total Electric Utility Plant 2,695,099 2,604,670 Accumulated Depreciation and Amortization 1,184,443 1,150,253 --------- --------- NET ELECTRIC UTILITY PLANT 1,510,656 1,454,417 --------- --------- OTHER PROPERTY AND INVESTMENTS 41,020 38,211 ------ ------ LONG-TERM ENERGY TRADING CONTRACTS 55,215 52,275 ------ ------ CURRENT ASSETS: Cash and Cash Equivalents 5,795 11,301 Accounts Receivable: Customers 31,144 60,424 Affiliated Companies 10,905 3,453 Allowance for Uncollectible Accounts (44) (467) Fuel - at LIFO cost 21,559 28,113 Materials and Supplies - at average cost 36,785 29,642 Under-recovered Fuel Costs - 43,267 Energy Trading Contracts 162,200 378,911 Prepayments 2,368 1,559 ----- ----- TOTAL CURRENT ASSETS 270,712 556,203 ------- ------- REGULATORY ASSETS 35,004 29,338 ------ ------ DEFERRED CHARGES 5,290 7,889 ----- ----- TOTAL $1,917,897 $2,138,333 ========== ========== See Notes to Financial Statements beginning on page L-1.

PUBLIC SERVICE COMPANY OF OKLAHOMA AND SUBSIDIARIES December 31, 2001 2000 ---- ---- (in thousands) CAPITALIZATION AND LIABILITIES CAPITALIZATION: Common Stock - $15 Par Value: Authorized Shares: 11,000,000 Issued Shares: 10,482,000 Outstanding Shares: 9,013,000 $157,230 $157,230 Paid-in Capital 180,000 180,000 Retained Earnings 142,994 137,688 ------- ------- Total Common Shareholder's Equity 480,224 474,918 ------- ------- Cumulative Preferred Stock Not Subject To Mandatory Redemption 5,283 5,283 PSO-Obligated, Mandatorily Redeemable Preferred Securities of Subsidiary Trust Holding Solely Junior Subordinated Debentures of PSO 75,000 75,000 Long-term Debt 345,129 450,822 ------- ------- TOTAL CAPITALIZATION 905,636 1,006,023 ------- --------- CURRENT LIABILITIES: Long-term Debt Due Within One Year 106,000 20,000 Advances from Affiliates 123,087 81,120 Accounts Payable - General 72,759 104,379 Accounts Payable - Affiliated Companies 40,857 64,556 Customer Deposits 21,041 19,294 Over-Recovered Fuel 8,720 - Taxes Accrued 18,150 1,659 Interest Accrued 7,298 8,336 Energy Trading Contracts 167,658 385,809 Other 12,296 12,137 ------ ------ TOTAL CURRENT LIABILITIES 577,866 697,290 ------- ------- DEFERRED INCOME TAXES 296,877 312,060 ------- ------- DEFERRED INVESTMENT TAX CREDITS 33,992 35,783 ------ ------ REGULATORY LIABILITIES AND DEFERRED CREDITS 56,203 35,292 ------ ------ LONG-TERM ENERGY TRADING CONTRACTS 47,323 51,885 ------ ------ COMMITMENTS AND CONTINGENCIES (Note 8) TOTAL $1,917,897 $2,138,333 ========== ========== See Notes to Financial Statements beginning on page L-1.

PUBLIC SERVICE COMPANY OF OKLAHOMA AND SUBSIDIARIES Consolidated Statements of Cash Flows Year Ended December 31, ----------------------- 2001 2000 1999 ---- ---- ---- (in thousands) OPERATING ACTIVITIES: Net Income $57,759 $66,663 $61,508 Adjustments for Noncash Items: Depreciation and Amortization 80,245 76,418 74,736 Deferred Income Taxes (17,751) 25,453 14,521 Deferred Investment Tax Credits (1,791) (1,791) (1,791) Changes in Certain Assets and Liabilities: Accounts Receivable (net) 21,405 (28,826) (1,668) Fuel, Materials and Supplies (589) 677 (8,985) Other Property and Investments (2,809) 7,994 (2,108) Accounts Payable (55,319) 89,330 (8,000) Taxes Accrued 16,491 (16,821) (4,615) Fuel Recovery 51,987 (36,798) (21,709) Transmission Coordination Agreement Settlement - (15,063) 15,063 Changes in Other Assets (9,150) 4,452 10,227 Changes in Other Liabilities 9,381 (6,073) (15,736) ----- ------ ------- Net Cash Flows From Operating Activities 149,859 165,615 111,443 ------- ------- ------- INVESTING ACTIVITIES: Construction Expenditures (124,520) (176,851) (103,122) Other Items (359) - (8,659) ---- ---- ------ Net Cash Flows Used For Investing Activities (124,879) (176,851) (111,781) -------- -------- -------- FINANCING ACTIVITIES: Issuance of Long-term Debt - 105,625 33,232 Retirement of Long-term Debt (20,000) (20,000) (33,700) Change in Advances From Affiliates (net) 41,967 1,951 63,277 Dividends Paid on Common Stock (52,240) (68,000) (65,000) Dividends Paid on Cumulative Preferred Stock (213) (212) (212) ---- ---- ---- Net Cash Flows (used For) From Financing Activities (30,486) 19,364 (2,403) ------- ------ ------ Net Increase (Decrease) in Cash and Cash Equivalents (5,506) 8,128 (2,741) Cash and Cash Equivalents January 1 11,301 3,173 5,914 ------ ----- ----- Cash and Cash Equivalents December 31 $ 5,795 $11,301 $ 3,173 ======= ======= ======= Supplemental Disclosure: Cash paid for interest net of capitalized amounts was $38,250,000, $33,732,000 and $37,081,000 and for income taxes was $38,653,000, $25,786,000 and $23,871,000 in 2001, 2000 and 1999, respectively. See Notes to Financial Statements beginning on page L-1.

PUBLIC SERVICE COMPANY OF OKLAHOMA AND SUBSIDIARIES Consolidated Statements of Capitalization December 31, 2001 2000 (in thousands) COMMON SHAREHOLDER'S EQUITY $ 480,224 $ 474,918 ---------- ---------- PREFERRED STOCK: Cumulative $100 par value - authorized shares 700,000, redeemable at the option of PSO upon 30 days notice. Call Price Shares December 31, Number of Shares Redeemed Outstanding Series 2001 Year Ended December 31, December 31, 2001 ------ ------------ ---------------------------- ----------------- 2001 2000 1999 ---- ---- ---- Not Subject to Mandatory Redemption: 4.00% $105.75 - 25 9 44,606 4,460 4,460 4.24% 103.19 - - - 8,069 807 807 Premium 16 16 ---------- ---------- 5,283 5,283 ---------- ---------- TRUST PREFERRED SECURITIES PSO-obligated, mandatorily redeemable preferred securities of subsidiary trust holding solely Junior Subordinated Debentures of PSO, 8.00%, due April 30, 2037 75,000 75,000 ---------- ---------- LONG-TERM DEBT (See Schedule of Long-term Debt): First Mortgage Bonds 297,772 317,465 Installment Purchase Contracts 47,357 47,357 Senior Unsecured Notes 106,000 106,000 Less Portion Due Within One Year (106,000) (20,000) ---------- ---------- Long-term Debt Excluding Portion Due Within One Year 345,129 450,822 ---------- ---------- TOTAL CAPITALIZATION $ 905,636 $1,006,023 ========== ========== See Notes to Financial Statements beginning on page L-1.

SOUTHWESTERN ELECTRIC POWER COMPANY AND SUBSIDIARIES Selected Consolidated Financial Data Year Ended December 31, 2001 2000 1999 1998 1997 ---- ---- ---- ---- ---- (in thousands) INCOME STATEMENTS DATA: Operating Revenues $1,101,326 $1,118,274 $971,527 $952,952 $939,869 Operating Expenses 955,119 989,996 824,465 802,274 800,396 ------- ------- ------- ------- ------- Operating Income 146,207 128,278 147,062 150,678 139,473 Nonoperating Income (Loss) 741 3,851 (1,965) 2,451 4,029 Interest Charges 57,581 59,457 58,892 55,135 50,536 ------ ------ ------ ------ ------ Income Before Extraordinary Item 89,367 72,672 86,205 97,994 92,966 Extraordinary Loss - - (3,011) - - ---- ---- ------ ---- ---- Net Income 89,367 72,672 83,194 97,994 92,966 Preferred Stock Dividend Requirements 229 229 229 705 2,467 Gain (Loss) on Reacquired Preferred Stock - - - (856) 1,819 ---- ---- ---- ---- ----- Earnings Applicable to Common Stock $ 89,138 $ 72,443 $ 82,965 $ 96,433 $ 92,318 ======== ======== ======== ======== ======== December 31, 2001 2000 1999 1998 1997 ---- ---- ---- ---- ---- (in thousands) BALANCE SHEETS DATA: Electric Utility Plant $3,460,764 $3,319,024 $3,231,431 $3,157,911 $3,081,443 Accumulated Depreciation and Amortization 1,550,618 1,457,005 1,384,242 1,317,057 1,225,865 --------- --------- --------- --------- --------- Net Electric Utility Plant $1,910,146 $1,862,019 $1,847,189 $1,840,854 $1,855,578 ========== ========== ========== ========== ========== Total Assets $2,496,600 $2,657,956 $2,106,215 $2,081,454 $2,134,618 ========== ========== ========== ========== ========== Common Stock and Paid-in Capital $380,660 $380,660 $380,660 $380,660 $380,660 Retained Earnings 308,915 293,989 283,546 296,581 320,148 ------- ------- ------- ------- ------- Total Common Shareholder's Equity $689,575 $674,649 $664,206 $677,241 $700,808 ======== ======== ======== ======== ======== Preferred Stock $ 4,704 $ 4,704 $ 4,706 $ 4,707 $ 30,639 ======= ======= ======= ======= ======== Trust Preferred Securities $110,000 $110,000 $110,000 $110,000 $110,000 ======== ======== ======== ======== ======== Long-term Debt (a) $645,283 $645,963 $541,568 $587,673 $589,980 ======== ======== ======== ======== ======== Total Capitalization and Liabilities $2,496,600 $2,657,956 $2,106,215 $2,081,454 $2,134,618 ========== ========== ========== ========== ========== (a) Including portion due within one year.

SOUTHWESTERN ELECTRIC POWER COMPANY AND SUBSIDIARIES Consolidated Statements of Income Year Ended December 31, ----------------------- 2001 2000 1999 ---- ---- ---- (in thousands) OPERATING REVENUES: Electricity Marketing and Trading $689,085 $710,200 $618,040 Energy Delivery 333,004 344,950 299,369 Sales to AEP Affiliates 79,237 63,124 54,118 ------ ------ ------ TOTAL OPERATING REVENUES 1,101,326 1,118,274 971,527 --------- --------- ------- OPERATING EXPENSES: Fuel 457,613 498,805 379,597 Purchased Power: Electricity Marketing 18,164 58,518 29,820 AEP Affiliates 15,858 13,338 7,551 Other Operation 171,314 159,459 142,385 Maintenance 74,677 75,123 64,241 Depreciation and Amortization 119,543 104,679 108,831 Taxes Other Than Income Taxes 55,834 53,830 53,783 Income Taxes 42,116 26,244 38,257 ------ ------ ------ TOTAL OPERATING EXPENSES 955,119 989,996 824,465 ------- ------- ------- OPERATING INCOME 146,207 128,278 147,062 NONOPERATING INCOME 4,512 5,487 2,550 NONOPERATING EXPENSES 3,229 3,112 9,341 NONOPERATING INCOME TAX EXPENSE (CREDIT) 542 (1,476) (4,826) INTEREST CHARGES 57,581 59,457 58,892 ------ ------ ------ INCOME BEFORE EXTRAORDINARY ITEM 89,367 72,672 86,205 EXTRAORDINARY LOSS (net of tax of $1,621,000) - - (3,011) ---- ---- ------ NET INCOME 89,367 72,672 83,194 PREFERRED STOCK DIVIDEND REQUIREMENTS 229 229 229 --- --- --- EARNINGS APPLICABLE TO COMMON STOCK $ 89,138 $ 72,443 $ 82,965 ======== ======== ======== Consolidated Statements of Retained Earnings BALANCE AT BEGINNING OF PERIOD $293,989 $283,546 $296,581 NET INCOME 89,367 72,672 83,194 DEDUCTIONS: Cash Dividends Declared: Common Stock 74,212 62,000 96,000 Preferred Stock 229 229 229 --- --- --- BALANCE AT END OF PERIOD $308,915 $293,989 $283,546 ======== ======== ======== See Notes to Financial Statements beginning on page L-1.

SOUTHWESTERN ELECTRIC POWER COMPANY AND SUBSIDIARIES Consolidated Balance Sheets December 31, 2001 2000 (in thousands) ASSETS ELECTRIC UTILITY PLANT: Production $1,429,356 $1,414,527 Transmission 538,749 519,317 Distribution 1,042,523 1,001,237 General 376,016 325,948 Construction Work in Progress 74,120 57,995 ------ ------ Total Electric Utility Plant 3,460,764 3,319,024 Accumulated Depreciation and Amortization 1,550,618 1,457,005 --------- --------- NET ELECTRIC UTILITY PLANT 1,910,146 1,862,019 --------- --------- OTHER PROPERTY AND INVESTMENTS 43,000 39,627 ------ ------ LONG-TERM ENERGY TRADING CONTRACTS 63,372 62,605 ------ ------ CURRENT ASSETS: Cash and Cash Equivalents 5,415 1,907 Accounts Receivable: Customers 42,326 42,310 Affiliated Companies 20,573 11,419 Allowance for Uncollectible Accounts (89) (911) Fuel Inventory - at average cost 52,212 40,024 Materials and Supplies - at average cost 32,527 25,137 Under-recovered Fuel Costs 2,501 35,469 Energy Trading Contracts 186,159 453,781 Prepayments 18,716 16,780 ------ ------ TOTAL CURRENT ASSETS 360,340 625,916 ------- ------- REGULATORY ASSETS 51,989 57,082 ------ ------ DEFERRED CHARGES 67,753 10,707 ------ ------ TOTAL $2,496,600 $2,657,956 ========== ========== See Notes to Financial Statements beginning on page L-1.

SOUTHWESTERN ELECTRIC POWER COMPANY AND SUBSIDIARIES December 31, 2001 2000 ---- ---- (in thousands) CAPITALIZATION AND LIABILITIES CAPITALIZATION: Common Stock - $18 Par Value: Authorized - 7,600,000 Shares Outstanding - 7,536,640 Shares $135,660 $135,660 Paid-in Capital 245,000 245,000 Retained Earnings 308,915 293,989 ------- --- ------- Total Common Shareholder's Equity 689,575 674,649 Preferred Stock 4,704 4,704 SWEPCO-Obligated, Mandatorily Redeemable Preferred Securities of Subsidiary Trust Holding Solely Junior Subordinated Debentures of SWEPCO 110,000 110,000 Long-term Debt 494,688 645,368 ------- ------- TOTAL CAPITALIZATION 1,298,967 1,434,721 --------- --------- OTHER NONCURRENT LIABILITIES 34,997 11,290 ------ ------ CURRENT LIABILITIES: Long-term Debt Due Within One Year 150,595 595 Advances from Affiliates 123,609 16,823 Accounts Payable - General 71,810 107,747 Accounts Payable - Affiliated Companies 37,469 36,021 Customer Deposits 19,880 16,433 Taxes Accrued 36,522 11,224 Interest Accrued 13,631 13,198 Energy Trading Contracts 192,318 462,043 Other 26,166 15,064 ------ ------ TOTAL CURRENT LIABILITIES 672,000 679,148 ------- ------- DEFERRED INCOME TAXES 369,781 399,204 ------- ------- DEFERRED INVESTMENT TAX CREDITS 48,714 53,167 ------ ------ REGULATORY LIABILITIES AND DEFERRED CREDITS 17,828 18,288 ------ ------ LONG-TERM ENERGY TRADING CONTRACTS 54,313 62,138 ------ ------ COMMITMENTS AND CONTINGENCIES (Note 8) TOTAL $2,496,600 $2,657,956 ========== ========== See Notes to Financial Statements beginning on page L-1.

SOUTHWESTERN ELECTRIC POWER COMPANY AND SUBSIDIARIES Consolidated Statements of Cash Flows Year Ended December 31, ----------------------- 2001 2000 1999 ---- ---- ---- (in thousands) OPERATING ACTIVITIES: Net Income $89,367 $72,672 $83,194 Adjustments for Noncash Items: Depreciation and Amortization 119,543 104,679 108,831 Deferred Income Taxes (31,396) 14,653 (17,347) Deferred Investment Tax Credits (4,453) (4,482) (4,565) Mark-to-Market of Energy Trading Contracts (3,472) 4,677 - Changes in Certain Assets and Liabilities: Accounts Receivable (net) (9,992) (1,254) (11,134) Fuel, Materials and Supplies (19,578) 22,103 (21,891) Accounts Payable (34,489) 43,962 (12,953) Taxes Accrued 25,298 (13,150) 1,185 Transmission Coordination Agreement Settlement - (24,406) 24,406 Fuel Recovery 32,968 (38,357) (2,490) Change in Other Assets 856 57,418 24,500 Change in Other Liabilities 4,958 (36,887) (15,769) ----- ------- ------- Net Cash Flows From Operating Activities 169,610 201,628 155,967 ------- ------- ------- INVESTING ACTIVITIES: Construction Expenditures (111,725) (120,671) (111,019) Purchase of Dolet Hills Mining Operations (85,716) - - Other (411) 446 (4,167) ---- ---- ------ Net Cash Flows Used For Investing Activities (197,852) (120,225) (115,186) -------- -------- -------- FINANCING ACTIVITIES: Issuance of Long-term Debt - 149,360 - Redemption of Preferred Stock - (1) (1) Retirement of Long-term Debt (595) (45,595) (46,144) Change in Advances From Affiliates (net) 106,786 (124,074) 100,192 Dividends Paid on Common Stock (74,212) (62,000) (96,000) Dividends Paid on Cumulative Preferred Stock (229) (229) (229) ---- ---- ---- Net Cash Flows From (Used For) Financing Activities 31,750 (82,539) (42,182) ------ ------- ------- Net Increase (Decrease) in Cash and Cash Equivalents 3,508 (1,136) (1,401) Cash and Cash Equivalents January 1 1,907 3,043 4,444 ----- ----- ----- Cash and Cash Equivalents December 31 $ 5,415 $ 1,907 $ 3,043 ======= ======= ======= Supplemental Disclosure: Cash paid for interest net of capitalized amounts was $51,126,000, $51,111,000 and $55,254,000 and for income taxes was $49,901,000, $27,994,000 and $55,677,000 in 2001, 2000, and 1999, respectively. See Notes to Financial Statements beginning on page L-1.

SOUTHWESTERN ELECTRIC POWER COMPANY AND SUBSIDIARIES Consolidated Statements of Capitalization December 31, 2001 2000 (in thousands) COMMON SHAREHOLDER'S EQUITY $ 689,575 $ 674,649 ---------- ---------- PREFERRED STOCK: $100 par value - authorized shares 1,860,000 Call Price Shares December 31, Number of Shares Redeemed Outstanding Series 2001 Year Ended December 31, December 31, 2001 ------ ------------ ---------------------------- ----------------- 2001 2000 1999 ---- ---- ---- Not Subject to Mandatory Redemption: 4.28% $103.90 - - - 7,386 739 739 4.65% $102.75 - - 1 1,907 190 190 5.00% $109 - 12 2 37,715 3,771 3,771 Premium 4 4 ---------- ---------- 4,704 4,704 ---------- ---------- TRUST PREFERRED SECURITIES SWEPCo-obligated, mandatorily redeemable preferred securities of subsidiary trust holding solely Junior Subordinated Debentures of SWEPCo, 7.875%, due April 30, 2037 110,000 110,000 ---------- ---------- LONG-TERM DEBT (See Schedule of Long-term Debt): First Mortgage Bonds 315,449 315,477 Installment Purchase Contracts 179,834 180,486 Senior Unsecured Notes 150,000 150,000 Less Portion Due Within One Year (150,595) (595) ---------- ---------- Long-term Debt Excluding Portion Due Within One Year 494,688 645,368 ---------- ---------- TOTAL CAPITALIZATION $1,298,967 $1,434,721 ========== ========== See Notes to Financial Statements beginning on page L-1.

WEST TEXAS UTILITIES COMPANY Selected Financial Data Year Ended December 31, 2001 2000 1999 1998 1997 ---- ---- ---- ---- ---- (in thousands) INCOME STATEMENTS DATA: Operating Revenues $556,458 $571,064 $445,709 $424,953 $397,779 Operating Expenses 523,068 518,723 391,910 365,677 353,195 ------- ------- ------- ------- ------- Operating Income 33,390 52,341 53,799 59,276 44,584 Nonoperating Income (Loss) 2,195 (1,675) 2,488 2,712 1,463 Interest Charges 23,275 23,216 24,420 24,263 24,570 ------ ------ ------ ------ ------ Income Before Extraordinary Item 12,310 27,450 31,867 37,725 21,477 Extraordinary Loss - - (5,461) - - ---- --- ------ ---- ---- Net Income 12,310 27,450 26,406 37,725 21,477 Preferred Stock Dividend Requirements 104 104 104 104 144 --- --- --- --- --- Gain on Reacquired Preferred Stock - - - - 1,085 ---- ---- ---- ---- ----- Earnings Applicable to Common Stock $ 12,206 $ 27,346 $ 26,302 $ 37,621 $ 22,418 ======== ======== ======== ======== ======== December 31, 2001 2000 1999 1998 1997 ---- ---- ---- ---- ---- (in thousands) BALANCE SHEETS DATA: Electric Utility Plant $1,260,872 $1,229,339 $1,182,544 $1,146,582 $1,108,845 Accumulated Depreciation and Amortization 546,162 515,041 495,847 473,503 441,281 ------- ------- ------- ------- ------- Net Electric Utility Plant $714,710 $714,298 $686,697 $673,079 $667,564 ======== ======== ======== ======== ======== Total Assets $923,420 $1,087,411 $861,205 $819,446 $826,858 ======== ========== ======== ======== ======== Common Stock and Paid-in Capital $139,450 $139,450 $139,450 $139,450 $139,450 Retained Earnings 105,970 122,588 113,242 114,940 117,319 ------- ------- ------- ------- ------- Total Common Shareholder's Equity $245,420 $262,038 $252,692 $254,390 $256,769 ======== ======== ======== ======== ======== Cumulative Preferred Stock: Not Subject to Mandatory Redemption $ 2,482 $ 2,482 $ 2,482 $ 2,482 $ 2,483 ======= ======= ======= ======= ======= Long-term Debt (a) $255,967 $255,843 $303,686 $303,518 $303,351 ======== ======== ======== ======== ======== Total Capitalization And Liabilities $923,420 $1,087,411 $861,205 $819,446 $826,858 ======== ========== ======== ======== ======== (a) Including portion due within one year.

WEST TEXAS UTILITIES COMPANY Statements of Income Year Ended December 31, ----------------------- 2001 2000 1999 ---- ---- ---- (in thousands) OPERATING REVENUES Electricity Marketing and Trading $ 368,741 $ 376,206 $256,033 Energy Delivery 169,036 176,204 174,909 Sales to AEP Affiliates 18,681 18,654 14,767 ---------- ---------- ------ Total Operating Revenues 556,458 571,064 445,709 ------- ------- ------- OPERATING EXPENSES: Fuel 177,140 183,154 123,348 Purchased Power: Electricity Marketing 70,395 68,080 34,941 AEP Affiliates 56,656 57,773 26,591 Other Operation 111,248 93,078 94,290 Maintenance 22,343 21,241 19,604 Depreciation and Amortization 50,705 55,172 50,789 Taxes Other Than Income Taxes 28,319 25,321 28,268 Income Taxes 6,262 14,904 14,079 ----- ------ ------ TOTAL OPERATING EXPENSES 523,068 518,723 391,910 ------- ------- ------- OPERATING INCOME 33,390 52,341 53,799 NONOPERATING INCOME 12,199 9,530 14,515 NONOPERATING EXPENSES 10,695 12,664 11,169 NONOPERATING INCOME TAX EXPENSE (CREDIT) (691) (1,459) 858 INTEREST CHARGES 23,275 23,216 24,420 ------ ------ ------ INCOME BEFORE EXTRAORDINARY ITEMS 12,310 27,450 31,867 EXTRAORDINARY LOSS (net of tax of $2,941,000) - - (5,461) ---- ---- ------ NET INCOME 12,310 27,450 26,406 PREFERRED STOCK DIVIDEND REQUIREMENTS 104 104 104 --- --- --- EARNINGS APPLICABLE TO COMMON STOCK $ 12,206 $ 27,346 $ 26,302 ======== ======== ======== Statements of Retained Earnings BEGINNING OF PERIOD $122,588 $113,242 $114,940 NET INCOME 12,310 27,450 26,406 DEDUCTIONS: Cash Dividends Declared: Common Stock 28,824 18,000 28,000 Preferred Stock 104 104 104 --- --- --- BALANCE AT END OF PERIOD $105,970 $122,588 $113,242 ======== ======== ======== See Notes to Financial Statements beginning on page L-1.

WEST TEXAS UTILITIES COMPANY Balance Sheets December 31, 2001 2000 ---- ---- (in thousands) ASSETS ELECTRIC UTILITY PLANT: Production $443,508 $431,793 Transmission 250,023 235,303 Distribution 431,969 416,587 General 112,797 110,832 Construction Work in Progress 22,575 34,824 ------ ------ Total Electric Utility Plant 1,260,872 1,229,339 Accumulated Depreciation and Amortization 546,162 515,041 ------- ------- NET ELECTRIC UTILITY PLANT 714,710 714,298 ------- ------- OTHER PROPERTY AND INVESTMENTS 24,933 23,154 ------ ------ LONG-TERM ENERGY TRADING CONTRACTS 21,532 20,804 ------ ------ CURRENT ASSETS: Cash and Cash Equivalents 2,454 6,941 Accounts Receivable: Customers 18,720 36,217 Affiliated Companies 8,656 16,095 Allowance for Uncollectible Accounts (196) (288) Fuel - at average cost 8,307 12,174 Materials and Supplies - at average cost 11,190 10,510 Under-recovered Fuel Costs 32,791 68,107 Energy Trading Contracts 63,252 150,793 Prepayments 966 851 --- --- TOTAL CURRENT ASSETS 146,140 301,400 ------- ------- REGULATORY ASSETS 13,659 24,808 ------ ------ DEFERRED CHARGES 2,446 2,947 ----- ----- TOTAL $923,420 $1,087,411 ======== ========== See Notes to Financial Statements beginning on page L-1.

WEST TEXAS UTILITIES COMPANY December 31, 2001 2000 ---- ---- (in thousands) CAPITALIZATION AND LIABILITIES CAPITALIZATION: Common Stock - $25 Par Value: Authorized - 7,800,000 Shares Outstanding - 5,488,560 Shares $137,214 $137,214 Paid-in Capital 2,236 2,236 Retained Earnings 105,970 122,588 ------- ------- Total Common Shareholder's Equity 245,420 262,038 Cumulative Preferred Stock Not Subject to Mandatory Redemption 2,482 2,482 Long-term Debt 220,967 255,843 ------- ------- TOTAL CAPITALIZATION 468,869 520,363 ------- ------- CURRENT LIABILITIES: Long-term Debt Due Within One Year 35,000 - Advances from Affiliates 50,448 58,578 Accounts Payable - General 33,782 45,562 Accounts Payable - Affiliated Companies 11,388 42,212 Customer Deposits 4,191 2,659 Taxes Accrued 17,358 18,901 Interest Accrued 1,244 3,717 Energy Trading Contracts 65,414 153,539 Other 12,001 7,906 ------ ----- TOTAL CURRENT LIABILITIES 230,826 333,074 ------- ------- DEFERRED INCOME TAXES 145,049 157,038 ------- ------- DEFERRED INVESTMENT TAX CREDITS 22,781 24,052 ------ ------ LONG-TERM ENERGY TRADING CONTRACTS 18,455 20,648 ------ ------ REGULATORY LIABILITIES AND DEFERRED CREDITS 37,440 32,236 ------ ------ COMMITMENTS AND CONTINGENCIES (Note 8) TOTAL $923,420 $1,087,411 ======== ========== See Notes to Financial Statements beginning on page L-1.

WEST TEXAS UTILITIES COMPANY Statements of Cash Flows Year Ended December 31, ----------------------- 2001 2000 1999 ---- ---- ---- (in thousands) OPERATING ACTIVITIES: Net Income $ 12,310 $27,450 $26,406 Adjustments for Noncash Items: Depreciation and Amortization 50,705 55,172 50,789 Deferred Federal Income Taxes (11,891) 8,164 12,026 Deferred Investment Tax Credits (1,271) (1,271) (1,275) Extraordinary Loss - Discontinuance of SFAS 71 - - 5,461 Mark-to-Market of Energy Trading Contracts (1,818) 1,871 - CHANGES IN CERTAIN ASSETS AND LIABILITIES: Accounts Receivable (net) 24,844 (1,445) (18,890) Fuel, Materials and Supplies 3,187 8,478 (3,785) Accounts Payable (42,604) 28,393 7,229 Taxes Accrued (1,543) 6,443 2,427 Fuel Recovery 35,316 (53,841) (10,101) Transmission Coordination Agreement Settlement - 15,465 (15,465) Change in Other Assets (1,519) 3,361 5,615 Change in Other Liabilities 6,644 (3,962) 2,205 ----- ------ ----- Net Cash Flows From Operating Activities 72,360 94,278 62,642 ------ ------ ------ INVESTING ACTIVITIES: Construction Expenditures (39,662) (64,477) (49,443) Other (127) - (3,832) ---- ---- ------ Net Cash Used For Investing Activities (39,789) (64,477) (53,275) ------- ------- ------- FINANCING ACTIVITIES: Retirement of Long-term Debt - (48,000) - Change in Advances From Affiliates (net) (8,130) 37,170 16,835 Dividends Paid on Common Stock (28,824) (18,000) (28,000) Dividends Paid on Cumulative Preferred Stock (104) (104) (105) ---- ---- ---- Net Cash Used For Financing Activities (37,058) (28,934) (11,270) ------- ------- ------- Net Increase (Decrease) in Cash and Cash Equivalents (4,487) 867 (1,903) Cash and Cash Equivalents at Beginning of Period 6,941 6,074 7,977 ----- ----- ----- Cash and Cash Equivalents at End of Period $2,454 $ 6,941 $ 6,074 ====== ======= ======= Supplemental Disclosure: Cash paid (received) for interest net of capitalized amounts was $19,279,000, $19,088,000 and $17,577,000 and for income taxes was $21,997,000, $(906,000) and $3,309,000 in 2001, 2000 and 1999, respectively. See Notes to Financial Statements beginning on page L-1.

WEST TEXAS UTILITIES COMPANY Statements of Capitalization December 31, 2001 2000 (in thousands) COMMON SHAREHOLDER'S EQUITY $245,420 $262,038 -------- -------- PREFERRED STOCK: $100 par value - authorized shares 810,000 Call Price Shares December 31, Number of Shares Redeemed Outstanding Series 2001 Year Ended December 31, December 31, 2001 ------ ------------ ---------------------------- ----------------- 2001 2000 1999 ---- ---- ---- Not Subject to Mandatory Redemption: 4.40% $107 - 1 2 23,672 2,367 2,367 Premium 115 115 -------- -------- 2,482 2,482 -------- -------- LONG-TERM DEBT (See Schedule of Long-term Debt): First Mortgage Bonds 211,657 211,533 Installment Purchase Contracts 44,310 44,310 Less Portion Due Within One Year (35,000) - -------- -------- Long-term Debt Excluding Portion Due Within One Year 220,967 255,843 -------- -------- TOTAL CAPITALIZATION $468,869 $520,363 ======== ======== See Notes to Financial Statements beginning on page L-1.

The following table provides the annual composite depreciation rates generally used by the AEP registrant subsidiaries for the years 2001, 2000 and 1999 which were as follows: Nuclear Steam Hydro Transmission Distribution General ------- ----- ----- ------------ ------------ ------- AEGCo - % 3.5% - % - % - % 2.8% APCo - 3.4 2.9 2.2 3.3 3.1 CPL 2.5 2.5 1.9 2.3 3.5 4.0 CSPCo - 3.2 - 2.3 3.6 3.2 I&M 3.4 4.5 3.4 1.9 4.2 3.8 KPCo - 3.8 - 1.7 3.5 2.5 OPCo - 3.4 2.7 2.3 4.0 2.7 PSO - 2.7 - 2.3 3.4 6.0 SWEPCo - 3.4 - 2.7 3.6 4.5 WTU - 2.8 - 3.1 3.3 6.6

The recognized regulatory assets and liabilities for the registrant subsidiaries are of two types: those earning a return and those not earning a return. Items not earning a return have their recovery period end date indicated. Regulatory assets and liabilities are comprised of the following items: AEGCo APCo ----------------------------- ---------------------------- Recovery Recovery 2001 2000 Period 2001 2000 Period ---- ---- -------- ---- ---- -------- (in thousands) Regulatory Assets: Amounts Due From Customers For Future Income Taxes $(22,725) $(23,996) Note 1 $189,794 $217,540 Note 1 Transition - Regulatory Assets Virginia 46,981 55,523 Jun. 2007 Transition - Regulatory Assets West Virginia 127,998 135,946 Jun. 2011 Deferred Fuel Costs 11,732 14,669 Unamortized Loss on Reacquired Debt 5,207 5,504 Note 2 10,421 11,676 Note 2 Deferred Storm Damage 6 1,244 Apr. 2002 Other 71,890 11,152 Note 3 --------- -------- -------- -------- Total Regulatory Assets $(17,518) $(18,492) $458,822 $447,750 ========= ========= ======== ======== Regulatory Liabilities: Deferred Investment Tax Credits $56,304 $59,718 $ 38,328 $ 43,093 WV Rate Stabilization 75,601 75,601 Other 61,552 2,614 ------- ------- -------- -------- Total Regulatory Liabilities $56,304 $59,718 $175,481 $121,308 ======= ======= ======== ======== Note 1: This amount fluctuates from month to month and has no fixed recovery period. Note 2: Unamortized loss on reacquired debt varies in its recovery period for each registrant and ranges from one to thirty-seven years recovery period across all registrants. Note 3: Other may include items not earning a return and would have various recovery periods. CPL CSPCo ----------------------------- ---------------------------- Recovery Recovery 2001 2000 Period 2001 2000 Period ---- ---- -------- ---- ---- -------- (in thousands) Regulatory Assets: Amounts Due From Customers For Future Income Taxes $200,496 $ 206,930 Note 1 $ 28,361 $ 31,853 Note 1 Transition - Regulatory Assets 223,830 247,852 Dec. 2008 Excess Earnings (62,852) (39,700) Regulatory Assets - Designated For Securitization 959,294 953,249 Deferred Fuel Costs (57,762) 127,295 - - Unamortized Loss on Reacquired Debt 11,180 12,773 Note 2 7,010 8,340 Note 2 DOE Decontamination and Decommissioning Assessment 3,170 3,622 Dec. 2004 Other 11,961 18,815 Note 3 3,066 3,508 Note 3 ---------- ---------- -------- -------- Total Regulatory Assets $1,065,487 $1,282,984 $262,267 $291,553 ========== ========== ======== ======== Regulatory Liabilities: Deferred Investment Tax Credits $122,893 $128,100 $37,176 $41,234 Other 31 11,510 -------- -------- ------- ------- Total Regulatory Liabilities $122,893 $128,100 $37,207 $52,744 ======== ======== ======= ======= Note 1: This amount fluctuates from month to month and has no fixed recovery period. Note 2: Unamortized loss on reacquired debt varies in its recovery period for each registrant and ranges from one to thirty-seven years recovery period across all registrants. Note 3: Other may include items not earning a return and would have various recovery periods.

I&M KPCo ----------------------------- ---------------------------- Recovery Recovery 2001 2000 Period 2001 2000 Period ---- ---- -------- ---- ---- -------- (in thousands) Regulatory Assets: Amounts Due From Customers For Future Income Taxes $171,605 $229,466 Note 1 $83,027 $85,926 Note 1 Deferred Fuel Costs 75,002 112,503 Dec. 2003 1,542 - Feb. 2002 Unamortized Loss on Reacquired Debt 16,255 17,740 Note 2 51 459 Note 2 Cook Plant Restart Costs 80,000 120,000 Dec. 2003 DOE Decontamination and Decommissioning Assessment 27,784 31,744 Dec. 2008 Other 38,281 40,687 Note 3 13,073 12,130 Note 3 --------- -------- ------- ------- Total Regulatory Assets $408,927 $552,140 $97,693 $98,515 ========= ========= ======= ======= Regulatory Liabilities: Deferred Investment Tax Credits $105,449 $113,773 $10,405 $11,656 Other 52,479 9,930 6,551 3,172 -------- -------- ------- ------- Total Regulatory Liabilities $157,928 $123,703 $16,956 $14,828 ======== ======== ======= ======= Note 1: This amount fluctuates from month to month and has no fixed recovery period. Note 2: Unamortized loss on reacquired debt varies in its recovery period for each registrant and ranges from one to thirty-seven years recovery period across all registrants. Note 3: Other may include items not earning a return and would have various recovery periods. OPCo PSO ----------------------------- ---------------------------- Recovery Recovery 2001 2000 Period 2001 2000 Period ---- ---- -------- ---- ---- -------- (in thousands) Regulatory Assets: Amounts Due From Customers For Future Income Taxes $186,740 $180,602 Note 1 $(26,085) $(28,652) Note 1 Transition - Regulatory Assets 442,707 517,851 Dec. 2007 Deferred Fuel Costs 11,732 43,267 Unamortized Loss on Reacquired Debt 5,502 6,106 Note 2 12,321 13,600 Note 2 Other 9,676 10,151 Note 3 11,707 15,738 Note 3 --------- -------- -------- --------- Total Regulatory Assets $644,625 $714,710 $ 9,675 $ 43,953 ========= ======== ======== ========= Regulatory Liabilities: Deferred Investment Tax Credits $21,925 $25,214 $33,992 $35,783 Other 1,237 10,994 31,858 2,015 ------- ------- ------- ------- Total Regulatory Liabilities $23,162 $36,208 $65,850 $37,798 ======= ======= ======= ======= Note 1: This amount fluctuates from month to month and has no fixed recovery period. Note 2: Unamortized loss on reacquired debt varies in its recovery period for each registrant and ranges from one to thirty-seven years recovery period across all registrants. Note 3: Other may include items not earning a return and would have various recovery periods. SWEPCo WTU ----------------------------- ---------------------------- Recovery Recovery 2001 2000 Period 2001 2000 Period ---- ---- -------- ---- ---- -------- (in thousands) Regulatory Assets: Amounts Due From Customers For Future Income Taxes $16,553 $14,558 Note 1 $(13,591) $(13,493) Note 1 Deferred Fuel Costs 7,384 35,469 36,872 67,655 Unamortized Loss on Reacquired Debt 19,726 22,626 Note 2 8,198 11,204 Note 2 Other 15,711 19,898 Note 3 5,460 13,604 Note 3 ------- ------- -------- -------- Total Regulatory Assets $59,374 $92,551 $ 36,939 $ 78,970 ======= ======== ======== ======== Regulatory Liabilities: Deferred Investment Tax Credits $48,714 $53,167 $22,781 $24,052 Excess Earnings 500 17,300 15,100 Other 15,454 8,140 5,700 - ------- ------- ------- ------- Total Regulatory Liabilities $64,168 $61,807 $45,781 $39,152 ======= ======= ======= ======= Note 1: This amount fluctuates from month to month and has no fixed recovery period. Note 2: Unamortized loss on reacquired debt varies in its recovery period for each registrant and ranges from one to thirty-seven years recovery period across all registrants. Note 3: Other may include items not earning a return and would have various recovery periods.

Both of the AEP System's nonqualified pension plans had accumulated benefit obligations in excess of plan assets of $40 million and $26 million at December 31, 2001 and $41 million and $26 million at December 31, 2000. There are no plan assets in the nonqualified plans. The AEP System's OPEB plans had accumulated benefit obligations in excess of plan assets of $944 million and $964 million at December 31, 2001 and 2000, respectively. The following table provides the net periodic benefit cost (credit) for the plans by the following AEP registrant subsidiaries for fiscal years 2001, 2000 and 1999: US US Pension OPEB Plans Plans 2001 2000 1999 2001 2000 1999 ---- ---- ---- ---- ---- ---- (in thousands) APCo $(13,645) $(14,047) $(3,925) $22,810 $ 22,139 $19,431 CPL (3,411) (2,986) (4,270) 8,214 6,656 7,595 CSPCo (10,624) (10,905) (4,893) 10,328 9,643 8,623 I&M (7,805) (8,565) (1,259) 15,077 14,155 13,664 KPCo (1,922) (2,075) (393) 2,438 2,364 2,652 OPCo (14,879) (15,041) (4,979) 34,444 116,205 52,518 PSO (2,480) (2,196) (3,129) 6,187 4,277 5,516 SWEPCo (3,051) (2,606) (3,734) 6,399 4,152 4,913 WTU (1,664) (1,585) (2,221) 3,729 2,929 3,377 The weighted-average assumptions as of December 31, used in the measurement of the Company's benefit obligations are shown in the following tables: U.S. Pension Plans U.S. OPEB Plans ------------------------ ------------------- 2001 2000 1999 2001 2000 1999 ---- ---- ---- ---- ---- ---- % % % % % % Discount rate 7.25 7.50 8.00 7.25 7.50 8.00 Expected return on plan assets 9.00 9.00 9.00 8.75 8.75 8.75 Rate of compensation increase 3.7 3.2 3.8 N/A N/A N/A

Twelve Months Ended Twelve Months Ended December 31, 2001 December 31, 2000 ----------------- ----------------- Revenues Revenues From From External Segment External Segment Customers EBIT Total Assets Customers EBIT Total Assets --------- ---- --------- ---- (in thousands) (in thousands) Wholesale Segment APCo $1,189,223 $164,844 $2,855,337 $1,184,335 $ 154,525 $3,708,252 CPL 1,265,655 303,926 2,977,504 1,291,588 273,650 3,182,192 CSPCo 867,100 232,372 1,987,756 906,363 235,860 2,488,513 I&M 1,212,587 117,396 3,318,919 1,177,190 (146,297) 4,003,805 KPCo 247,842 4,935 585,847 268,529 22,379 766,605 OPCo 1,545,392 240,128 3,156,115 1,672,744 289,084 4,007,722 PSO 695,123 52,086 907,165 711,274 54,072 1,011,432 SWEPCo 768,322 82,409 1,223,334 773,324 27,055 1,302,398 WTU 387,422 7,930 396,147 394,860 13,910 466,499 Energy Delivery Segment APCo $595,036 $213,733 $2,252,601 $574,918 $191,560 $2,925,472 CPL 473,182 109,587 2,138,482 478,814 136,069 2,285,492 CSPCo 483,219 130,503 1,118,112 398,046 81,896 1,399,789 I&M 314,410 111,206 1,498,089 311,019 126,241 1,807,233 KPCo 131,183 54,033 567,396 121,346 49,770 742,459 OPCo 552,713 118,261 1,759,952 467,587 138,418 2,234,835 PSO 261,877 79,787 1,010,732 245,124 85,524 1,126,901 SWEPCo 333,004 107,197 1,273,266 344,950 129,842 1,355,558 WTU 169,036 33,226 527,273 176,204 50,201 620,912 Registrant Subsidiaries Company Total APCo $1,784,259 $378,577 $5,107,938 $1,759,253 $346,085 $6,633,724 CPL 1,738,837 413,513 5,115,986 1,770,402 409,719 5,467,684 CSPCo 1,350,319 362,875 3,105,868 1,304,409 317,756 3,888,302 I&M 1,526,997 228,602 4,817,008 1,488,209 (20,056) 5,811,038 KPCo 379,025 58,968 1,153,243 389,875 72,149 1,509,064 OPCo 2,098,105 358,389 4,916,067 2,140,331 427,502 6,242,557 PSO 957,000 131,873 1,917,897 956,398 139,596 2,138,333 SWEPCo 1,101,326 189,606 2,496,600 1,118,274 156,897 2,657,956 WTU 556,458 41,156 923,420 571,064 64,111 1,087,411

Twelve Months Ended December 31, 1999 Revenues From External Customers Segment EBIT Total Assets (in thousands) Wholesale Segment APCo $1,020,390 $116,907 $2,434,110 CPL 1,032,808 267,165 2,821,449 CSPCo 801,717 214,312 1,798,394 I&M 1,040,786 (18,055) 3,153,344 KPCo 229,644 18,569 501,212 OPCo 1,518,644 278,415 3,002,768 PSO 493,063 56,521 721,195 SWEPCo 672,158 95,385 1,032,045 WTU 270,800 25,008 369,457 Energy Delivery Segment APCo $565,660 $208,460 $1,920,290 CPL 449,667 133,172 2,026,401 CSPCo 389,280 93,962 1,011,596 I&M 310,880 142,973 1,423,352 KPCo 129,113 51,556 485,426 OPCo 460,182 149,906 1,674,441 PSO 256,327 74,430 803,531 SWEPCo 299,369 83,143 1,074,170 WTU 174,909 46,216 491,748 Registrant Subsidiaries Company Total APCo $1,586,050 $325,367 $4,354,400 CPL 1,482,475 400,337 4,847,850 CSPCo 1,190,997 308,274 2,809,990 I&M 1,351,666 124,918 4,576,696 KPCo 358,757 70,125 986,638 OPCo 1,978,826 428,321 4,677,209 PSO 749,390 130,951 1,524,726 SWEPCo 971,527 178,528 2,106,215 WTU 445,709 71,224 861,205

2001 2000 Book Value Fair Value Book Value Fair Value ---------- ---------- ---------- ---------- (in thousands) (in thousands) AEGCo Long-term Debt $45,000 $45,268 $45,000 $45,000 APCo Long-term Debt $1,556,559 $1,439,531 $1,605,818 $1,601,313 Preferred Stock 10,860 10,860 10,860 10,725 CPL Long-term Debt $1,253,768 $1,278,644 $1,454,559 $1,463,690 Trust Preferred Securities 136,250 135,760 148,500 147,431 CSPCo Long-term Debt $791,848 $802,194 $899,615 $908,620 Preferred Stock 10,000 10,100 15,000 14,892 I&M Long-term Debt $1,652,082 $1,672,392 $1,388,939 $1,377,230 Preferred Stock 64,945 62,795 64,945 63,941 KPCo Long-term Debt $346,093 $350,233 $330,880 $335,408 OPCo Long-term Debt $1,203,841 $1,227,880 $1,195,493 $1,176,367 Preferred Stock 8,850 8,837 8,850 8,780 PSO Long-term Debt $451,129 $462,903 $470,822 $476,964 Trust Preferred Securities 75,000 74,730 75,000 72,180 SWEPCo Long-term Debt $645,283 $656,998 $645,963 $651,586 Trust Preferred Securities 110,000 109,780 110,000 106,700 WTU Long-term Debt $255,967 $266,846 $255,843 $261,315

13. Income Taxes: The details of the registrant subsidiaries' income taxes as reported are as follows: AEGCo APCo CPL CSPCo I&M Year Ended December 31, 2001 (in thousands) Charged (Credited) to Operating Expenses (net): Current $ 9,126 $ 71,623 $190,671 $ 88,013 $ 107,286 Deferred (6,224) 27,198 (72,568) 14,923 (45,785) Deferred Investment Tax Credits - (3,237) (5,207) (3,899) (7,377) ------- -------- -------- -------- --------- Total 2,902 95,584 112,896 99,037 54,124 ------- -------- -------- -------- --------- Charged (Credited) to Nonoperating Income (net): Current (56) (19,165) (398) (13,803) (10,590) Deferred - 21,832 - 17,885 16,580 Deferred Investment Tax Credits (3,414) (1,528) - (159) (947) ------- -------- -------- -------- --------- Total (3,470) 1,139 (398) 3,923 5,043 ------- -------- -------- -------- --------- Total Income Tax as Reported $ (568) $ 96,723 $112,498 $102,960 $ 59,167 ======= ======== ======== ======== ========= KPCo OPCo PSO SWEPCo WTU Year Ended December 31, 2001 (in thousands) Charged (Credited) to Operating Expenses (net): Current $ 7,726 $(62,298) $ 53,030 $ 77,965 $ 19,424 Deferred 2,812 166,166 (16,726) (31,396) (11,891) Deferred Investment Tax Credits (1,180) (2,495) (1,791) (4,453) (1,271) ------- -------- -------- -------- -------- Total 9,358 101,373 34,513 42,116 6,262 ------- -------- -------- -------- ------- Charged (Credited) to Nonoperating Income (net): Current (2,725) (21,600) 352 542 (691) Deferred 3,481 20,014 - - - Deferred Investment Tax Credits (72) (794) - - - ------- -------- -------- -------- ------- Total 684 (2,380) 352 542 (691) ------- -------- -------- -------- ------- Total Income Tax as Reported $10,042 $ 98,993 $ 34,865 $ 42,658 $ 5,571 ======= ======== ======== ======== ======= AEGCo APCo CPL CSPCo I&M Year Ended December 31, 2000 (in thousands) Charged (Credited) to Operating Expenses (net): Current $ 8,746 $129,165 $ 89,403 $120,494 $ 134,796 Deferred (5,842) 3,838 16,263 (7,746) (126,748) Deferred Investment Tax Credits - (2,947) (5,207) (3,379) (7,524) ------- -------- -------- -------- --------- Total 2,904 130,056 100,459 109,369 524 ------- -------- -------- -------- --------- Charged (Credited) to Nonoperating Income (net): Current (44) 327 (5,073) 3,777 2,950 Deferred - 4,764 - 3,683 1,569 Deferred Investment Tax Credits (3,396) (1,968) - (103) (330) ------- -------- ------- -------- --------- Total (3,440) 3,123 (5,073) 7,357 4,189 ------- -------- ------- -------- --------- Total Income Tax as Reported $ (536) $133,179 $95,386 $116,726 $ 4,713 ======= ======== ======= ======== =========

KPCo OPCo PSO SWEPCo WTU Year Ended December 31, 2000 (in thousands) Charged (Credited) to Operating Expenses (net): Current $17,878 $259,608 $11,597 $16,073 $ 6,774 Deferred 2,521 (70,263) 25,453 14,653 9,401 Deferred Investment Tax Credits (1,187) (1,824) (1,791) (4,482) (1,271) ------- -------- ------- ------- ------- Total 19,212 187,521 35,259 26,244 14,904 ------- -------- ------- ------- ------- Charged (Credited) to Nonoperating Income (net): Current (50) 15,426 (1,306) (1,476) (222) Deferred 1,244 4,307 - - (1,237) Deferred Investment Tax Credits (65) (1,575) - - - ------- ------- ------- ------- -------- Total 1,129 18,158 (1,306) (1,476) (1,459) ------- ------- ------- ------- ------- Total Income Tax as Reported $20,341 $205,679 $33,953 $24,768 $13,445 ======= ======== ======= ======= ======= AEGCo APCo CPL CSPCo I&M Year Ended December 31, 1999 (in thousands) Charged (Credited) to Operating Expenses (net): Current $ 7,713 $69,522 $ 89,112 $79,410 $(67,368) Deferred (5,282) 8,981 19,620 9,737 85,345 Deferred Investment Tax Credits - (2,659) (5,207) (3,432) (7,547) ------- ------- -------- ------- -------- Total 2,431 75,844 103,525 85,715 10,430 ------- ------- -------- ------- -------- Charged (Credited) to Nonoperating Income (net): Current (146) (1,548) (5,604) (3,122) 1,529 Deferred - 4,052 318 744 382 Deferred Investment Tax Credits (3,448) (2,313) - (562) (605) ------- ------- -------- ------- -------- Total (3,594) 191 (5,286) (2,940) 1,306 ------- ------- -------- ------- -------- Total Income Taxes as Reported $(1,163) $76,035 $ 98,239 $82,775 $ 11,736 ======= ======= ======== ======= ======== KPCo OPCo PSO SWEPCo WTU Year Ended December 31, 1999 (in thousands) Charged (Credited) to Operating Expenses (net): Current $14,897 $135,540 $20,777 $ 60,169 $ 3,328 Deferred 2,239 4,205 14,521 (17,347) 12,026 Deferred Investment Tax Credits (1,193) (1,825) (1,791) (4,565) (1,275) ------- -------- ------- -------- ------- Total 15,943 137,920 33,507 38,257 14,079 ------- -------- ------- -------- ------- Charged (Credited) to Nonoperating Income (net): Current (424) (3,256) (2,215) (4,826) 858 Deferred 357 (539) - - - Deferred Investment Tax Credits (99) (1,633) - - - ------- -------- ------- -------- ------- Total (166) (5,428) (2,215) (4,826) 858 ------- -------- ------- -------- ------- Total Income Taxes as Reported $15,777 $132,492 $31,292 $ 33,431 $14,937 ======= ======== ======= ======== =======

Shown below is a reconciliation for each AEP registrant subsidiary of the difference between the amount of federal income taxes computed by multiplying book income before federal income taxes by the statutory rate, and the amount of income taxes reported. AEGCo APCo CPL CSPCo I&M Year Ended December 31, 2001 (in thousands) Net Income (Loss) $7,875 $161,818 $182,278 $161,876 $ 75,788 Extraordinary (Gains) Loss - - 2,509 30,024 - Income Tax Benefit - - - - - Income Taxes (568) 96,723 112,498 102,960 59,167 ------ -------- -------- -------- -------- Pre-Tax Income (Loss) $7,307 $258,541 $297,285 $294,860 $134,955 ====== ======== ======== ======== ======== Income Tax on Pre-Tax Income (Loss) at Statutory Rate (35%) $ 2,557 $ 90,490 $104,050 $103,201 $ 47,234 Increase (Decrease) in Income Tax Resulting from the Following Items: Depreciation 230 2,977 8,477 2,757 21,224 Corporate Owned Life Insurance - 450 - 544 (148) Nuclear Fuel Disposal Costs - - - - (3,292) Allowance for Funds Used During Construction (1,078) - - - (1,606) Rockport Plant Unit 2 Investment Tax Credit 374 - - - - Removal Costs - - - - - Investment Tax Credits (net) (3,414) (4,765) (5,207) (4,058) (8,324) State Income Taxes 1,050 9,613 9,652 5,727 6,137 Other (287) (2,042) (4,474) (5,211) (2,058) ------- -------- -------- -------- -------- Total Income Taxes as Reported $ (568) $ 96,723 $112,498 $102,960 $ 59,167 ======= ======== ======== ======== ======== Effective Income Tax Rate N.M. 37.4% 37.9% 34.9% 43.8% ==== ==== ==== ==== ==== KPCo OPCo PSO SWEPCo WTU Year Ended December 31, 2001 (in thousands) Net Income $21,565 $147,445 $ 57,759 $ 89,367 $12,310 Extraordinary Loss - 18,348 - - - Income Tax Benefit - - - - - Income Taxes 10,042 98,993 34,865 42,658 5,571 ------- -------- -------- -------- ------- Pre-Tax Income $31,607 $264,786 $ 92,624 $132,025 $17,881 ======= ======== ======== ======== ======= Income Tax on Pre-Tax Income at Statutory Rate (35%) $11,062 $ 92,675 $32,418 $ 46,209 $ 6,259 Increase (Decrease) in Income Tax Resulting from the Following Items: Depreciation 1,581 7,972 - - 1,463 Corporate Owned Life Insurance 334 1,852 - - - Nuclear Fuel Disposal Costs - - - - - Allowance for Funds Used During Construction - - - - - Rockport Plant Unit 2 Investment Tax Credit - - - - - Removal Costs (420) - - - - Investment Tax Credits (net) (1,252) (3,289) (1,791) (4,453) (1,271) State Income Taxes 318 9,752 5,137 5,451 1,283 Other (1,581) (9,969) (899) (4,549) (2,163) ------- -------- ------- -------- ------- Total Income Taxes as Reported $10,042 $ 98,993 $34,865 $ 42,658 $ 5,571 ======= ======== ======= ======== ======= Effective Income Tax Rate 31.8% 37.4% 37.6% 32.3% 31.2% ==== ==== ==== ==== ==== AEGCo APCo CPL CSPCo I&M Year Ended December 31, 2000 (in thousands) Net Income (Loss) $7,984 $ 73,844 $189,567 $ 94,966 $(132,032) Extraordinary (Gains) Loss (1,066) 39,384 Income Tax Benefit - (7,872) - (14,148) - Income Taxes (536) 133,179 95,386 116,726 4,713 ------ -------- -------- -------- --------- Pre-Tax Income (Loss) $7,448 $198,085 $284,953 $236,928 $(127,319) ====== ======== ======== ======== ========= Income Tax on Pre-Tax Income (Loss) at Statutory Rate (35%) $ 2,607 $ 69,330 $99,733 $ 82,925 $(44,561) Increase (Decrease) in Income Tax Resulting from the Following Items: Depreciation 452 7,606 7,556 10,529 20,378 Corporate Owned Life Insurance - 54,824 - 29,259 42,587 Nuclear Fuel Disposal Costs - - - - (3,957) Allowance for Funds Used During Construction (1,070) - - - (2,211) Rockport Plant Unit 2 Investment Tax Credit 374 - - - - Removal Costs - (1,197) - - - Investment Tax Credits (net) (3,396) (4,915) (5,207) (3,482) (7,854) State Income Taxes 784 9,950 2,296 89 6,004 Other (287) (2,419) (8,992) (2,594) (5,673) ------- -------- ------- -------- -------- Total Income Taxes as Reported $ (536) $133,179 $95,386 $116,726 $ 4,713 ======= ======== ======= ======== ======== Effective Income Tax Rate N.M. 67.2% 33.5% 49.3% N.M. ==== ==== ==== ==== ==== KPCo OPCo PSO SWEPCo WTU Year Ended December 31, 2000 (in thousands) Net Income $20,763 $ 83,737 $ 66,663 $72,672 $27,450 Extraordinary Loss 40,157 Income Tax Benefit - (21,281) - - - Income Taxes 20,342 205,679 33,953 24,768 13,445 ------- -------- -------- ------- ------- Pre-Tax Income $41,105 $308,292 $100,616 $97,440 $40,895 ======= ======== ======== ======= ======= Income Tax on Pre-Tax Income at Statutory Rate (35%) $14,387 $107,903 $35,216 $ 34,104 $14,313 Increase (Decrease) in Income Tax Resulting from the Following Items: Depreciation 1,827 27,577 - - 1,204 Corporate Owned Life Insurance 5,149 84,453 - - - Nuclear Fuel Disposal Costs - - - - - Allowance for Funds Used During Construction - - - - - Rockport Plant Unit 2 Investment Tax Credit - - - - - Removal Costs (420) - - - - Investment Tax Credits (net) (1,252) (3,398) (1,791) (4,482) (1,271) State Income Taxes 1,597 (1,988) 3,037 1,650 - Other (946) (8,868) (2,509) (6,504) (801) ------- -------- ------- -------- ------- Total Income Taxes as Reported $20,342 $205,679 $33,953 $ 24,768 $13,445 ======= ======== ======= ======== ======= Effective Income Tax Rate 49.5% 66.8% 33.8% 25.4% 32.9% ==== ==== ==== ==== ====

AEGCo APCo CPL CSPCo I&M Year Ended December 31, 1999 (in thousands) Net Income $ 6,195 $120,492 $182,201 $150,270 $32,776 Extraordinary Loss 8,488 Income Tax Benefit - - (2,971) - - Income Taxes (1,163) 76,035 98,239 82,775 11,736 ------- -------- -------- -------- ------- Pre-Tax Income $ 5,032 $196,527 $285,957 $233,045 $44,512 ======= ======== ======== ======== ======= Income Tax on Pre-Tax Income at Statutory Rate (35%) $ 1,762 $ 68,785 $100,085 $ 81,566 $15,580 Increase (Decrease) in Income Tax Resulting from the Following Items: Depreciation 446 12,593 7,981 8,846 19,966 Corporate Owned Life Insurance - - - - 594 Nuclear Fuel Disposal Costs - - - - (3,347) Allowance for Funds Used During Construction (1,069) - - - (2,174) Rockport Plant Unit 2 Investment Tax Credit 374 - - - - Removal Costs - (3,220) - - - Investment Tax Credits (net) (3,448) (4,972) (5,207) (3,994) (8,152) State Income Taxes 467 3,305 6,965 58 (4,635) Other 305 (456) (11,585) (3,701) (6,096) ------- -------- -------- -------- ------- Total Income Taxes as Reported $(1,163) $ 76,035 $ 98,239 $ 82,775 $11,736 ======= ======== ======== ======== ======= Effective Income Tax Rate N.M. 38.7% 34.4% 35.6% 26.4% ==== ==== ==== ==== ==== KPCo OPCo PSO SWEPCo WTU Year Ended December 31, 1999 (in thousands) Net Income $25,430 $212,157 $61,508 $83,194 $26,406 Extraordinary Loss 4,632 8,402 Income Tax Benefit - - - (1,621) (2,941) Income Taxes 15,777 132,492 31,292 33,431 14,937 ------- -------- ------- -------- ------- Pre-Tax Income $41,207 $344,649 $92,800 $119,636 $46,804 ======= ======== ======= ======== ======= Income Tax on Pre-Tax Income at Statutory Rate (35%) $14,423 $120,628 $ 32,480 $ 41,873 $16,382 Increase (Decrease) in Income Tax Resulting from the Following Items: Depreciation 1,843 17,517 - - 1,120 Corporate Owned Life Insurance - 198 - - - Removal Costs (420) - - - - Investment Tax Credits (net) (1,292) (3,458) (1,791) (4,565) (1,275) State Income Taxes 1,809 1,090 3,054 2,924 - Other (586) (3,483) (2,451) (6,801) (1,290) ------- -------- -------- -------- ------- Total Income Taxes as Reported $15,777 $132,492 $ 31,292 $ 33,431 $14,937 ======= ======== ======== ======== ======= Effective Income Tax Rate 38.3% 38.5% 33.8% 28.0% 32.0% ==== ==== ==== ==== ==== The following tables show the elements of the net deferred tax liability and the significant temporary differences for each AEP registrant subsidiary: AEGCo APCo CPL CSPCo I&M December 31, 2001 (in thousands) Deferred Tax Assets $ 75,856 $ 162,334 $ 130,863 $ 74,767 $ 332,225 Deferred Tax Liabilities (103,831) (865,909) (1,294,658) (518,489) (732,756) --------- --------- ----------- --------- --------- Net Deferred Tax Liabilities $ (27,975) $(703,575) $(1,163,795) $(443,722) $(400,531) ========= ========= =========== ========= ========= Property Related Temporary Differences $ (70,581) $(530,298) $ (808,922) $(323,139) $(306,151) Amounts Due From Customers For Future Federal Income Taxes 9,292 (55,206) (70,174) (9,839) (46,756) Deferred State Income Taxes (3,822) (56,747) - (8,968) (38,015) Translation Regulatory Assets - (34,783) - (78,298) - Net Deferred Gain on Sale and Leaseback-Rockport Plant Unit 2 40,816 - - - 27,157 Accrued Nuclear Decommissioning Expense - - - - 43,707 Deferred Fuel and Purchased Power - - - - (26,270) Deferred Cook Plant Restart Costs - - - - (28,000) Nuclear Fuel - - - - (16,062) Regulatory Assets Designated for Securitization - - (332,198) - - All Other (net) (3,680) (26,541) 47,499 (23,478) (10,141) --------- --------- ----------- --------- --------- Net Deferred Tax Liabilities $ (27,975) $(703,575) $(1,163,795) $(443,722) $(400,531) ========= ========= =========== ========= =========

KPCo OPCo PSO SWEPCo WTU December 31, 2001 (in thousands) Deferred Tax Assets $ 30,927 $ 135,938 $ 59,421 $ 56,189 $ 22,888 Deferred Tax Liabilities (199,231) (933,827) (356,298) (425,970) (167,937) --------- --------- --------- --------- --------- Net Deferred Tax Liabilities $(168,304) $(797,889) $(296,877) $(369,781) $(145,049) ========= ========= ========= ========= ========= Property Related Temporary Differences $(118,147) $(595,974) $(320,900) $(362,884) $(149,309) Amounts Due From Customers For Future Federal Income Taxes (20,215) (61,130) 10,199 (6,441) 4,757 Deferred State Income Taxes (25,267) (18,440) - - - Translation Regulatory Assets - (154,947) - - - Deferred Fuel and Purchased Power - 20,323 - - - Provision for Mine Shutdown Costs - 18,365 - - - All Other (net) (4,675) (6,086) 13,824 (456) (497) --------- --------- --------- --------- --------- Net Deferred Tax Liabilities $(168,304) $(797,889) $(296,877) $(369,781) $(145,049) ========= ========= ========= ========= ========= AEGCo APCo CPL CSPCo I&M December 31, 2000 (in thousands) Deferred Tax Assets $ 81,480 $ 178,487 $ 67,184 $ 88,198 $ 342,900 Deferred Tax Liabilities (114,408) (860,961) (1,309,981) (510,957) (830,845) --------- --------- ----------- --------- --------- Net Deferred Tax Liabilities $ (32,928) $(682,474) $(1,242,797) $(422,759) $(487,945) ========= ========= =========== ========= ========= Property Related Temporary Differences $ (78,113) $(510,950) $ (773,454) $(343,045) $(324,198) Amounts Due From Customers For Future Federal Income Taxes 10,317 (55,085) (72,426) (11,142) (55,218) Deferred State Income Taxes (5,478) (86,351) - - (69,982) Translation Regulatory Asset - (40,554) - (68,817) - Net Deferred Gain on Sale and Leaseback-Rockport Plant Unit 2 42,766 - - - 28,454 Accrued Nuclear Decommissioning Expense - - - - 34,702 Deferred Fuel and Purchased Power - - - - (39,395) Deferred Cook Plant Restart Costs - - - - (42,000) Nuclear Fuel - - - - (28,319) Regulatory Assets Designated for Securitization - - (332,198) - - All Other (net) (2,420) 10,466 (64,719) 245 8,011 --------- --------- ----------- --------- --------- Net Deferred Tax Liabilities $ (32,928) $(682,474) $(1,242,797) $(422,759) $(487,945) ========= ========= =========== ========= ========= KPCo OPCo PSO SWEPCo WTU December 31, 2000 (in thousands) Deferred Tax Assets $ 32,807 $ 330,878 $ 60,010 $ 47,615 $ 16,604 Deferred Tax Liabilities (198,742) (952,819) (372,070) (446,819) (173,642) --------- --------- --------- --------- --------- Net Deferred Tax Liabilities $(165,935) $(621,941) $(312,060) $(399,204) $(157,038) ========= ========= ========= ========= ========= Property Related Temporary Differences $(116,109) $(586,039) $(313,248) $(375,427) $(150,264) Amounts Due From Customers For Future Federal Income Taxes (19,680) (57,759) 11,082 (6,015) 4,723 Deferred State Income Taxes (29,695) (14,282) (36,487) - - Translation Regulatory Asset - (53,149) - - - Deferred Fuel and Purchased Power - (116,224) - - - Provision for Mine Shutdown Costs - 63,995 - - - Postretirement Benefits - 93,306 - - - All Other (net) (451) 48,211 26,593 (17,762) (11,497) --------- --------- --------- --------- --------- Net Deferred Tax Liabilities $(165,935) $(621,941) $(312,060) $(399,204) $(157,038) ========= ========= ========= ========= =========

14. Supplementary Information: The amounts of power purchased by the registrant subsidiaries from Ohio Valley Electric Corporation, which is 44.2% owned by the AEP System, for the years ended December 31, 2001, 2000, and 1999 were: APCo CSPCo I&M OPCo ---- ----- --- ---- (in thousands) Year Ended December 31, 2001 $45,542 $12,626 $20,723 $47,757 Year Ended December 31, 2000 30,998 8,706 15,204 31,134 Year Ended December 31, 1999 21,774 6,006 10,227 25,623

AEGCo APCo CPL CSPCo I&M KPCo Year Ended December 31, 2001 (in thousands) Lease Payments on Operating Leases $76,262 $ 6,142 $5,948 $ 7,063 $104,574 $1,191 Amortization of Capital Leases 281 12,099 - 7,206 17,933 2,740 Interest on Capital Leases 55 3,789 - 2,396 4,424 808 ------- ------- ------ ------- -------- ------ Total Lease Rental Costs $76,598 $22,030 $5,948 $16,665 $126,931 $4,739 ======= ======= ====== ======= ======== ======

OPCo PSO SWEPCo WTU Year Ended December 31, 2001 (in thousands) Lease Payments on Operating Leases $63,913 $4,010 $2,277 $1,534 Amortization of Capital Leases 14,443 - - - Interest on Capital Leases 5,818 - - - ------- ------ ------ ------ Total Lease Rental Costs $84,174 $4,010 $2,277 $1,534 ======= ====== ====== ======

AEGCo APCo CPL CSPCo I&M KPCo Year Ended December 31, 2000 (in thousands) Lease Payments on Operating Leases $73,858 $ 7,128 $ - $ 7,683 $ 81,446 $1,978 Amortization of Capital Leases 281 13,900 - 7,776 26,341 3,931 Interest on Capital Leases 55 3,930 - 2,690 10,908 1,054 ------- ------- ------- ------- -------- ------ Total Lease Rental Costs $74,194 $24,958 $ - $18,149 $118,695 $6,963 ======= ======= ======= ======= ======== ======

OPCo PSO SWEPCo WTU Year Ended December 31, 2000 (in thousands) Lease Payments on Operating Leases $51,981 $ - $ - $ - Amortization of Capital Leases 37,280 - - - Interest on Capital Leases 9,584 - - - ------- ------ ------ ------ Total Lease Rental Costs $98,845 $ - $ - $ - ======= ====== ====== ======

AEGCo APCo CPL CSPCo I&M KPCo Year Ended December 31, 1999 (in thousands) Lease Payments on Operating Leases $74,269 $ 5,647 $ - $ 5,687 $ 81,611 $ 199 Amortization of Capital Leases 364 13,749 - 7,427 11,320 4,299 Interest on Capital Leases 64 4,267 - 2,720 9,338 1,162 ------- ------- ------ ------- -------- ------ Total Lease Rental Costs $74,697 $23,663 $ - $15,834 $102,269 $5,660 ======= ======= ====== ======= ======== ======

OPCo PSO SWEPCo WTU Year Ended December 31, 1999 (in thousands) Lease Payments on Operating Leases $ 60,026 $ - $ - $ - Amortization of Capital Leases 35,622 - - - Interest on Capital Leases 9,552 - - - -------- ------ ------ ------ Total Lease Rental Costs $105,200 $ - $ - $ - ======== ====== ====== ======

Property, plant and equipment under capital leases and related obligations recorded on the Consolidated Balance Sheets are as follows: AEGCo APCo CSPCo I&M KPCo OPCo Year Ended December 31, 2001 (in thousands) Property, Plant and Equipment Under Capital Leases Production $1,983 $ 2,712 $ 6,380 $ 4,826 $ 1,138 $ 22,477 Distribution 14,593 Other: Mining Assets and Other 129 82,292 $54,999 86,267 17,658 114,944 ------ ------- ------- -------- ------- -------- Total Property, Plant and Equipment 2,112 85,004 61,379 105,686 18,796 137,421 Accumulated Amortization 1,801 38,745 26,044 43,768 9,213 57,429 ------ ------- ------- -------- ------- -------- Net Property, Plant and Equipment Under Capital Leases $ 311 $46,259 $35,335 $ 61,918 $ 9,583 $ 79,992 ====== ======= ======= ======== ======= ======== Obligations Under Capital Leases: Noncurrent Liability $ 76 $33,928 $27,052 $ 51,093 $ 6,742 $ 64,261 Liability Due Within One Year 235 12,357 7,835 10,840 2,841 16,405 ------ ------- ------- -------- ------- -------- Total Obligations Under Capital Leases $ 311 $46,285 $34,887 $ 61,933 $ 9,583 $ 80,666 ====== ======= ======= ======== ======= ========

AEGCo APCo CSPCo I&M KPCo OPCo Year Ended December 31, 2000 (in thousands) Property, Plant and Equipment Under Capital Leases Production $2,017 $ 6,276 $ 2 $ 7,023 $ 1,730 $ 24,709 Distribution 14,595 Other: Nuclear Fuel (net of amortization) 89,872 Mining Assets and Other 177 93,437 68,352 97,383 22,072 200,308 ------ ------- ------- -------- ------- -------- Total Property, Plant and Equipment 2,194 99,713 68,354 208,873 23,802 225,017 Accumulated Amortization 1,603 36,553 25,422 45,700 9,618 108,436 ------ ------- ------- -------- ------- -------- Net Property, Plant and Equipment Under Capital Leases $ 591 $63,160 $42,932 $163,173 $14,184 $116,581 ====== ======= ======= ======== ======= ======== Obligations Under Capital Leases: Noncurrent Liability $ 358 $50,350 $35,199 $ 62,325 $11,091 $ 83,866 Liability Due Within One Year 233 12,810 7,733 100,848 3,093 32,715 ------ ------- ------- -------- ------- -------- Total Obligations Under Capital Leases $ 591 $63,160 $42,932 $163,173 $14,184 $116,581 ====== ======= ======= ======== ======= ========

Future minimum lease payments consisted of the following at December 31, 2001: AEGCo APCo CSPCo I&M KPCo OPCo Capital (in thousands) ------- 2002 $217 $13,718 $ 8,932 $11,759 $ 3,093 $ 18,516 2003 132 11,625 7,284 10,028 2,441 17,521 2004 20 9,371 6,111 7,947 1,824 14,701 2005 6 6,440 5,248 6,282 1,449 11,520 2006 1 4,690 3,903 5,335 891 10,305 Later Years - 7,613 11,400 17,882 1,548 28,948 ---- ------- ------- ------- ------- -------- Total Future Minimum Lease Payments 376 53,457 42,878 59,233 11,246 101,511 Less Estimated Interest Element 65 7,172 7,991 (2,700) 1,663 20,845 ---- ------- ------- ------- ------- -------- Estimated Present Value of Future Minimum Lease Payments $311 $46,285 $34,887 $61,933 $ 9,583 $ 80,666 ==== ======= ======= ======= ======= ======== AEGCo APCo CPL CSPCo I&M KPCo (in thousands) Noncancellable Operating Leases 2002 $ 73,854 $ 3,193 $ 5,948 $ 2,104 $ 82,627 $ 717 2003 73,854 3,108 5,948 1,991 79,923 691 2004 73,854 2,402 5,948 1,623 77,104 571 2005 73,854 2,155 5,948 1,308 75,736 544 2006 73,854 1,887 5,948 1,279 75,595 398 Later Years 1,181,664 4,563 - 3,198 1,186,678 1,842 ---------- ------- ------- ------- ---------- ------ Total Future Minimum Lease Payments $1,550,934 $17,308 $29,740 $11,503 $1,577,663 $4,763 ========== ======= ======= ======= ========== ======

OPCo PSO SWEPCo WTU (in thousands) Noncancellable Operating Leases 2002 $ 62,945 $4,010 $ 2,277 $1,534 2003 62,914 4,010 2,277 1,534 2004 63,323 4,010 2,277 1,534 2005 62,836 4,010 2,277 1,534 2006 63,242 4,010 2,277 1,534 Later Years 244,069 - - - -------- ------ ------- ------ Total Future Minimum Lease Payments $559,329 $20,050 $11,385 $7,670 ======== ======= ======= ======

17. Unaudited Quarterly Financial Information: The unaudited quarterly financial information for each registrant subsidiary follows: Quarterly Periods Ended AEGCo APCo CPL CSPCo I&M ----------------- ----- ---- --- ----- --- (in thousands) 2001 March 31 Operating Revenues $60,507 $501,204 $432,910 $327,437 $387,813 Operating Income 1,807 88,152 64,152 51,932 52,698 Income (Loss) Before Extraordinary Items 1,980 61,787 35,031 37,671 32,363 Net Income (Loss) 1,980 61,787 35,031 37,671 32,363 June 30 Operating Revenues $52,217 $430,412 $470,420 $333,995 $382,234 Operating Income 1,882 59,362 82,351 62,894 47,340 Income (Loss) Before Extraordinary Items 2,063 36,419 52,518 47,418 27,374 Net Income (Loss) 2,063 36,419 52,518 21,011 27,374 September 30 Operating Revenues $57,417 $434,450 $527,117 $375,691 $398,457 Operating Income 1,615 60,381 112,598 76,920 44,509 Income Before Extraordinary Items 2,051 30,317 83,702 65,318 25,064 Net Income 2,051 30,317 83,702 65,318 25,064 December 31 Operating Revenues $57,407 $418,193 $308,390 $313,196 $358,493 Operating Income 1,673 67,091 36,630 60,431 15,158 Income (Loss) Before Extraordinary Items 1,781 33,295 13,536 41,493 (9,013) Net Income (Loss) 1,781 33,295 11,027 37,876 (9,013) Quarterly Periods Ended KPCo OPCo PSO SWEPCo WTU ----------------- ---- ---- --- ------ --- (in thousands) 2001 March 31 Operating Revenues $100,681 $552,503 $255,080 $267,117 $141,649 Operating Income 12,604 64,756 8,340 33,986 5,392 Income Before Extraordinary Items 7,075 53,397 (1,560) 19,869 891 Net Income 7,075 53,397 (1,560) 19,869 891 June 30 Operating Revenues $89,541 $512,196 $265,360 $271,748 $139,228 Operating Income 8,364 47,067 21,942 32,649 12,428 Income Before Extraordinary Items 2,742 32,094 11,921 17,784 6,133 Net Income 2,742 10,579 11,921 17,784 6,133 September 30 Operating Revenues $96,197 $535,535 $325,373 $331,441 $181,433 Operating Income 12,587 69,668 59,914 60,194 17,745 Income Before Extraordinary Items 5,312 51,378 51,069 46,357 14,067 Net Income 5,312 51,378 51,069 46,357 14,067 December 31 Operating Revenues $92,606 $497,871 $141,187 $231,020 $94,148 Operating Income 14,123 59,219 6,793 19,378 (2,175) Income (Loss) Before Extraordinary Items 6,436 28,924 (3,670) 5,357 (8,781) Net Income (Loss) 6,436 32,091 (3,670) 5,357 (8,781) Quarterly Periods Ended AEGCo APCo CPL CSPCo I&M ----------------- ----- ---- --- ----- --- (in thousands) 2000 March 31 Operating Revenues $56,866 $442,646 $316,328 $290,587 $335,594 Operating Income 2,395 78,246 38,650 44,124 (15,251) Income Before Extraordinary Items 2,445 47,664 8,139 27,471 (36,553) Net Income 2,445 47,664 8,139 27,471 (36,553) June 30 Operating Revenues $56,928 $401,830 $437,911 $315,853 $345,073 Operating Income 1,746 58,208 95,717 50,798 (18,599) Income Before Extraordinary Items 1,653 30,240 67,553 35,335 (39,181) Net Income 1,653 39,178 67,553 35,335 (39,181) September 30 Operating Revenues $55,658 $448,563 $600,732 $375,112 $408,637 Operating Income 2,209 65,750 120,653 83,562 36,056 Income Before Extraordinary Items 1,972 36,112 89,974 65,542 15,190 Net Income 1,972 36,112 89,974 40,306 15,190 December 31 Operating Revenues $59,064 $466,214 $415,431 $322,857 $398,905 Operating Income 2,074 (1,050) 52,078 17,393 (36,908) Income (Loss) Before Extraordinary Items 1,914 (49,110) 23,901 (8,146) (71,488) Net Income (Loss) 1,914 (49,110) 23,901 (8,146) (71,488) Quarterly Periods Ended KPCo OPCo PSO SWEPCo WTU ----------------- ---- ---- --- ------ --- (in thousands) 2000 March 31 Operating Revenues $94,135 $533,834 $161,329 $207,756 $ 93,335 Operating Income 15,557 65,113 10,860 22,731 9,781 Income Before Extraordinary Items 8,052 46,216 1,165 7,663 3,833 Net Income 8,052 46,216 1,165 7,663 3,833 June 30 Operating Revenues $92,104 $515,445 $209,172 $272,409 $130,742 Operating Income 9,456 79,968 24,502 33,296 16,938 Income Before Extraordinary Items 2,449 58,233 14,700 18,786 8,070 Net Income 2,449 58,233 14,700 18,786 8,070 September 30 Operating Revenues $102,798 $558,737 $355,992 $374,654 $200,124 Operating Income 13,790 96,652 56,437 61,312 16,565 Income Before Extraordinary Items 6,761 77,061 54,329 47,537 10,670 Net Income 6,761 58,185 54,329 47,537 10,670 December 31 Operating Revenues $100,838 $532,315 $229,905 $263,455 $146,863 Operating Income 10,935 (14,906) 4,870 10,939 9,057 Income (Loss) Before Extraordinary Items 3,501 (78,897) (3,531) (1,314) 4,877 Net Income (Loss) 3,501 (78,897) (3,531) (1,314) 4,877 I&M's fourth quarter 2001 earnings were also favorably impacted by the return to service in December 2000 of Unit 1 of the Cook Plant after an extended outage.

18. Trust Preferred Securities: The following Trust Preferred Securities issued by the wholly-owned statutory business trusts of CPL, PSO and SWEPCo were outstanding at December 31, 2001 and December 31, 2000. They are classified on the balance sheets as Certain Subsidiaries Obligated, Mandatorily Redeemable Preferred Securities of Subsidiary Trusts Holding Solely Junior Subordinated Debentures of Such Subsidiaries. The Junior Subordinated Debentures mature on April 30, 2037. CPL reacquired 490,000 and 60,000 trust preferred units during 2001 and 2000, respectively. Units issued/ Outstanding Description of At 12/31/01 Underlying Business Trust Security Amount at December 31, Debentures of Registrant -------------- -------- ---------------------- ------------------------ 2001 2000 (in millions) CPL Capital I 8.00%, Series A 5,450,000 $136 $149 CPL, $141 million, 8.00%, Series A PSO Capital I 8.00%, Series A 3,000,000 75 75 PSO, $77 million, 8.00%, Series A SWEPCo Capital I 7.875%, Series A 4,400,000 110 110 SWEPCO, $113 million, ---------- - --- - --- 12,850,000 $321 $334 7.875%, Series A ========== ==== ====

19. Jointly Owned Electric Utility Plant: CPL, CSPCo, PSO, SWEPCo and WTU have generating units that are jointly owned with unaffiliated companies. Each of the participating companies is obligated to pay its share of the costs of any such jointly owned facilities in the same proportion as its ownership interest. Each AEP registrant subsidiary's proportionate share of the operating costs associated with such facilities is included in its statements of income and the investments are reflected in its balance sheets under utility plant as follows: Company's Share December 31, 2001 2000 -------------------------- --------------------------- Percent Utility Construction Utility Construction of Plant Work Plant Work Ownership in Service in Progress in Service in Progress --------- ------------ ------------- ------------ ------------ (in thousands) (in thousands) CPL: Oklaunion Generating Station (Unit No. 1) 7.8 $ 37,728 $ 318 $ 37,236 $ 395 South Texas Project Generating Station (Units No. 1 and 2) 25.2 2,360,452 41,571 2,373,575 19,292 ---------- ------- ---------- ------- $2,398,180 $41,889 $2,410,811 $19,687 ========== ======= ========== ======== CSP: W.C. Beckjord Generating Station (Unit No. 6) 12.5 $ 14,292 $ 884 $ 14,108 $ 178 Conesville Generating Station (Unit No. 4) 43.5 81,697 494 80,103 261 J.M. Stuart Generating Station 26.0 193,760 27,758 191,875 10,086 Wm. H. Zimmer Generating Station 25.4 704,951 2,634 706,549 5,265 Transmission (a) 61,476 91 61,820 451 ---------- ------- ---------- ------- $1,056,176 $31,861 $1,054,455 $16,241 ========== ======= ========== ======= PSO: Oklaunion Generating Station (Unit No. 1) 15.6 $ 82,646 $ 634 $ 81,185 $ 817 ========== ======= ========== ======== SWEPCo: Dolet Hills Generating Station (Unit No. 1) 40.2 $ 234,747 $ 675 $ 231,442 $ 1,984 Flint Creek Generating Station (Unit No. 1) 50.0 83,953 213 82,899 852 Pirkey Generating Station (Unit No. 1) 85.9 439,430 10,577 437,069 435 ---------- ------- ---------- ------- $ 758,130 $11,465 $ 751,410 $ 3,271 ========== ======= ========== ======== WTU: Oklaunion Generating Station (Unit No. 1) 54.7 $ 279,419 $ 1,651 $ 277,624 $ 3,295 ========== ======= ========== ======= (a) Varying percentages of ownership.

The following table shows the revenues derived from sales to the Pools and direct sales to affiliates for years ended December 31, 2001, 2000 and 1999: APCo CSPCo I&M KPCo OPCo AEGCo Related Party Revenues (in thousands) 2001 Sales to East System Pool $ 91,977 $44,185 $239,277 $34,735 $431,637 $ - Sales to West System Pool 24,892 13,971 15,596 6,117 19,797 - Direct Sales To East Affiliates 54,777 - - - 55,450 227,338 Direct Sales To West Affiliates (3,133) (1,705) (1,905) (744) (2,590) - Other 2,772 11,060 2,071 2,258 7,072 - -------- ------- -------- ------- -------- -------- Total Revenues $171,285 $67,511 $255,039 $42,366 $511,366 $227,338 ======== ======= ======== ======= ======== ======== 2000 Sales to East System Pool $ 81,013 $36,884 $200,474 $36,554 $502,140 $ - Sales to West System Pool 7,697 4,095 4,614 1,829 6,356 - Direct Sales To East Affiliates 59,106 - - - 66,487 227,983 Direct Sales To West Affiliates 4,092 2,262 2,510 972 3,421 - Other 2,770 6,124 2,710 2,466 4,043 - -------- ------- -------- ------- -------- -------- Total Revenues $154,678 $49,365 $210,308 $41,821 $582,447 $227,983 ======== ======= ======== ======= ======== ======== 1999 Sales to East System Pool $ 41,869 $15,136 $50,624 $43,157 $337,699 $ - Direct Sales To East Affiliates 57,201 - - - 50,968 152,559 Other 1,162 4,582 345 1,145 825 - -------- ------- -------- ------- -------- -------- Total Revenues $100,232 $19,718 $50,969 $44,302 $389,492 $152,559 ======== ======= ======= ======= ======== ======== CPL PSO SWEPCo WTU Related Party Revenues (in thousands) 2001 Sales to East System Pool $ - $ 4 $ - $ - Sales to West System Pool 19,865 3,317 8,073 322 Direct Sales To East Affiliates 3,697 2,833 3,238 1,228 Direct Sales To West Affiliates 12,617 30,668 67,930 9,350 Other 5,583 (51) (3) 7,781 ------- ------- ------- ------- Total Revenues $41,762 $36,771 $79,238 $18,681 ======= ======= ======= ======= 2000 Sales to East System Pool $ - $ - $ - $ - Sales to West System Pool 23,421 7,323 5,546 194 Direct Sales To East Affiliates (3,348) (1,990) (3,008) (1,116) Direct Sales To West Affiliates 12,516 21,995 62,178 7,645 Other 5,163 (12,680) (1,592) 11,931 ------- ------- ------- ------- Total Revenues $37,752 $14,648 $63,124 $18,654 ======= ======= ======= ======= 1999 Sales to West System Pool $ 6,124 $ 3,097 $ 4,527 $ 401 Direct Sales To West Affiliates 7,470 7,968 49,542 2,576 Other 14,177 2,652 48 11,790 ------- ------- ------- ------- Total Revenues $27,771 $13,717 $54,117 $14,767 ======= ======= ======= ======= The following table shows the purchased power expense incurred from purchases from the Pools and affiliates for the years ended December 31, 2001, 2000, and 1999: APCo CSPCo I&M KPCo OPCo Related Party Purchases (in thousands) 2001 Purchases from East System Pool $346,582 $292,034 $ 79,030 $ 61,816 $62,350 Purchases from West System Pool 296 165 185 72 235 Direct Purchases from East Affiliates - - 159,022 68,316 - Direct Purchases from West Affiliates - - - - - -------- -------- -------- -------- ------- Total Purchases $346,878 $292,199 $238,237 $130,204 $62,585 ======== ======== ======== ======== ======= 2000 Purchases from East System Pool $355,305 $287,482 $106,644 $ 58,150 $50,339 Purchases from West System Pool 455 260 285 108 390 Direct Purchases from East Affiliates - - 158,537 69,446 - Direct Purchases from West Affiliates 14 8 9 3 12 -------- -------- -------- -------- ------- Total Purchases $355,774 $287,750 $265,475 $127,707 $50,741 ======== ======== ======== ======== ======= 1999 Purchases from East System Pool $130,991 $199,574 $112,350 $19,502 $ 20,864 Direct Purchases from East Affiliates - - 88,022 64,498 - -------- -------- -------- ------- --------- Total Purchases $130,991 $199,574 $200,372 $84,000 $ 20,864 ======== ======== ======== ======= ========

CPL PSO SWEPCo WTU Related Party Purchases (in thousands) 2001 Purchases from East System Pool $ - $ 1,327 $ - $ 4 Purchases from West System Pool 415 5,877 3,810 11,689 Direct Purchases from East Affiliates 12,657 37,445 27,744 4,614 Direct Purchases from West Affiliates 45,569 34,603 9,696 40,349 ------- ------- ------- ------- Total Purchases $58,641 $79,252 $41,250 $56,656 ======= ======= ======= ======= 2000 Purchases from East System Pool $ - $20,100 $ - $ - Purchases from West System Pool 1,696 5,386 4,379 18,444 Direct Purchases from East Affiliates 251 2,117 695 71 Direct Purchases from West Affiliates 30,644 33,185 8,264 39,258 ------- ------- ------- ------- Total Purchases $32,591 $60,788 $13,338 $57,773 ======= ======= ======= ======= 1999 Purchases from West System Pool $ 895 $ 6,992 $1,295 $ 7,266 Direct Purchases from West Affiliates 15,778 27,627 6,256 19,325 ------- ------- ------ ------- Total Purchases $16,673 $34,619 $7,551 $26,591 ======= ======= ====== ======= The above summarized related party revenues and expenses are presented as operating revenues affiliated and purchased power affiliated on the income statement of each AEP Power Pool member.

Energy Trading Contracts (in thousand) APCo CPL CSPCo Net Fair Value of Energy Trading Contracts at December 31, 2000 $ 7,447 $(8,191) $ 3,769 Loss/(Gain) from Contracts Realized/settled during period (a) (12,478) 4,221 (11,522) Fair Value of new open Contracts when entered into during period (b) 13,441 9,635 8,245 Adjustments for Contracts Entered into and settled during period 40,755 2,602 24,998 Net option premium payments 1,072 - 658 Change in fair value due to Valuation Methodology changes (c) (220) (158) (135) Changes in market value of Contracts (d) 25,684 (4,252) 22,436 -------- ------- -------- Net Fair Value of Energy Trading Contracts at December 31, 2001 (e) $ 75,701 $ 3,857 $ 48,449 ======== ======= ======== Energy Trading Contracts (in thousands) I&M KPCo OPCo Net Fair Value of Energy Trading Contracts at December 31, 2000 $ (6,845) $ 1,678 $ 5,613 Loss/(Gain) from Contracts Realized/settled during period (a) (10,982) (3,298) (10,861) Fair Value of new open Contracts when entered into During period (b) 8,921 3,315 11,213 Adjustments for Contracts Entered into and settled During period 27,049 10,051 34,001 Net option premium payments 712 264 894 Change in fair value due to Valuation Methodology changes (c) (146) (54) (183) Changes in market value of Contracts (d) 42,636 773 24,769 ------- ------- -------- Net Fair Value of Energy Trading Contracts at December 31, 2001 (e) $ 61,345 $12,729 $ 65,446 ======== ======= ======== Energy Trading Contracts (in thousands) PSO SWEPCo WTU Net Fair Value of Energy Trading Contracts at December 31, 2000 $(6,508) $(7,795) $(2,590) Loss/(Gain) from Contracts Realized/settled during period (a) 2,483 2,938 5,881 Fair Value of new open Contracts when entered into During period (b) 7,338 8,422 2,861 Adjustments for Contracts Entered into and settled during period 1,981 2,274 773 Net option premium payments - - - Change in fair value due to Valuation Methodology changes (c) (120) (138) (46) Changes in market value of Contracts (d) (2,740) (2,801) (5,964) ------- ------- ------- Net Fair Value of Energy Trading Contracts at December 31, 2001 (e) $ 2,434 $ 2,900 $ 915 ======= ======= ======= (a) Loss/(Gains) from Contracts Realized/Settled During the Period" include realized gains from energy trading contracts that settled during 2001 that were entered into prior to 2001, as well as during 2001. "Adjustment for Contracts Entered into and Settled During the Period" discloses the realized gains from settled energy trading contracts that were both entered into and closed within 2001 that are included in the total gains, but not included in the ending balance of open contracts. (b) The "Fair Value of New Open Contracts When Entered Into during period" represents the fair value of long-term contracts entered into with customers during 2001. The fair value is calculated as of the execution of the contract. Most of the fair value comes from longer term fixed price contracts with customers that seek to limit their risk against fluctuating energy prices. The contract prices are valued against market curves representative of the delivery location. (c) The Company changed its methodology for calculating and reporting load based transactions. The previous methodology estimated a baseload volume based on historical takes and sold a call option for potential load increases from the baseload. The current methodology uses a modified version of a straddle load follow model to estimate the baseload volume and call option volume. This methodogy change more accurately estimates the load volume forecast. (d) "Changes in market Value of Contracts" represents the fair value change in the trading portfolio due to market fluctuations during the current period. Market fluctuations are attributable to various factors such as supply/demand, weather, storage, etc. (e) The net change in the fair value of energy trading contracts for 2001 represents the balance sheet change. The net mark-to-market gain on energy trading contracts represents the impact on earnings. The difference is related primarily to regulatory deferrals of certain mark-to-market gains that were recorded as regulatory liabilities and not reflected in the income statement for those companies that operate in regulated jurisdictions, and deferrals of option premiums included in the above analysis, which do not have a mark-to-market income statement impact.

Energy Trading Contract Maturities Fair Value of Contracts at December 31,2001 Maturities (in thousands) Less than In Excess Total Fair Source of Fair Value 1 year 1-3 years 4-5 years Of 5 years Value -------------------- ------ --------- --------- ---------- ----- APCo Other External Sources 13,366 9,588 - - 22,954 Models/Other Valuation 3,215 34,318 8,413 6,801 52,747 ------ ------ ----- ----- ------ Total 16,581 43,906 8,413 6,801 75,701 ====== ====== ===== ===== ====== CPL Other External Sources (5,245) 1,681 - - (3,564) Models/Other Valuation (1,262) 6,016 1,475 1,192 7,421 ------- ----- ----- ----- ------ Total (6,507) 7,697 1,475 1,192 3,857 ======= ===== ===== ===== ====== CSP Other External Sources 9,867 5,872 - - 15,739 Models/Other Valuation 2,373 21,018 5,153 4,166 32,710 ------ ------ ----- ----- ------ Total 12,240 26,890 5,153 4,166 48,449 ====== ====== ===== ===== ====== KEPCo Other External Sources (1,475) 2,361 - - 886 Models/Other Valuation (355) 8,451 2,072 1,675 11,843 ------- ------ ----- ----- ------ Total (1,830) 10,812 2,072 1,675 12,729 ======= ====== ===== ===== ====== I&M Other External Sources 17,237 6,481 - - 23,718 Models/Other Valuation 4,146 23,197 5,687 4,597 37,627 ------ ------ ----- ----- ------ Total 21,383 29,678 5,687 4,597 61,345 ====== ====== ===== ===== ====== OPCo Other External Sources 13,058 7,987 - - 21,045 Models/Other Valuation 3,141 28,587 7,008 5,665 44,401 ------ ------ ----- ----- ------ Total 16,199 36,574 7,008 5,665 65,446 ====== ====== ===== ===== ====== PSO Other External Sources (4,400) 1,280 - - (3,120) Models/Other Valuation (1,058) 4,581 1,123 908 5,554 ------- ----- ----- --- ------ Total (5,458) 5,861 1,123 908 2,434 ======= ===== ===== === ====== SWEPCo Other External Sources (4,965) 1,469 - - (3,496) Models/Other Valuation (1,194) 5,259 1,289 1,042 6,396 ------- ----- ----- ----- ------ Total (6,159) 6,728 1,289 1,042 2,900 ======= ===== ===== ===== ====== WTU Other External Sources (1,743) 499 - - (1,244) Models/Other Valuation (419) 1,786 438 354 2,159 ------- ----- --- --- ------ Total (2,162) 2,285 438 354 915 ======= ===== === === ====== "Other External Sources" represents positions in power and coal at points where over-the-counter broker quotes are available. Prices for these various commodities can generally be obtained on the over-the-counter market through 2003. Some prices from external sources are quoted as strips (one bid/ask for Nov-Mar, Apr-Oct, etc). Such transactions have also been included in this category. "Models/Other Valuation" contain the following: the value of adjustments for liquidity and counterparty credit exposure, the value of contracts not quoted by an exchange or an over-the-counter broker, the value of transactions for which an internally developed price curve was developed as a result of the long dated nature of certain transactions, and the value of certain structured transactions.

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