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Draper, Brooks look back at AEP-CSW merger

by on June 18, 2010

Dr. E. Linn Draper, Jr. and E. Richard “Dick” Brooks were well acquainted when they began talking about the possibility of merging Central and South West with American Electric Power.

Today, more than a decade later, the two retired chairmen admit that the merger took a long time to complete and required a great deal of work, but they’re quick to point out that the results have been worth the effort.

Dr. E. Linn Draper, Jr.: "The company is a bigger, stronger company now than before the merger."

Brooks said the fact that the two men knew each other when the merger talks began was a definite plus. “We were friends, we trusted each other, and we knew that the things we said could be depended on,” he remembered.

“Linn and I went way back because he was in the Texas utility business and, before that, he had been a professor of nuclear engineering at the University of Texas,” Brooks said. He recalled that Draper had represented the utility industry, traveling around the country in what was referred to as the “Truth Squad,” rebutting the allegations of Jane Fonda and others who were opposed to nuclear energy.

When CSW was determining which companies might be interested in acquiring the Dallas-based utility, “Ten were interested and we ended up with four serious finalists,” Brooks said, “and we chose AEP because the culture between AEP and CSW was most alike.

“The culture of having a balance between shareholders and customers is No. 1,” Brooks explained. “A shareholder wants us to make profits and pay them out in dividends. A customer wants us to keep prices low, but with good service reliability, which requires a lot of those dollars to go back into the system.

“And No. 2, it’s a culture that feels like the individual employee is important and that he or she should have the authority and responsibility on a daily basis to go ahead and do the work,” Brooks said. “It’s also a culture of leading technological advancements in the utility industry.

E. R. "Dick" Brooks: "Employees on both sides did a great job making it (the merger) happen."

“Employees on both sides did a great job making it (the merger) happen,” he said. “After we got it put together, there were still growing pains. Although we had spent much time working on culture, it was still different. It was different in the way we made decisions, different in the way we went about doing things. So I’m sure it was difficult for many people.

“But now look where AEP is today,” Brooks noted. “Because of this merger, it is a stronger company. I think now it is even more capable.”

“It took lots of regulatory approvals and it was painful to get done, but well worth it,” Draper said. “The company is a bigger, stronger company now than before the merger.

“The diversity of all kinds has been helpful,” he noted. “Geographic diversity means if you have some difficulty in one part of a service area, you can likely send help from another part. The economies are different in Ohio than in Texas. That diversity makes it a very strong entity. In this case, size is increased strength.”

Do the two former chairmen see electric utility companies in the United States pursuing more mergers and acquisitions in the future?

Draper and Brooks at the time of the merger.

“I think those things go in spurts and depend a lot on geographic circumstance,” Draper commented. “Whether there will be a rash of mergers, I don’t know. I don’t think bigger is necessarily better. It can be better if the right entities come together. I think size just for its own sake is not particularly better.”

“My opinion is we will see more mergers,” Brooks concluded. “If you can help reduce costs and have a more efficiently operated company, that’s one thing. But larger is not necessarily better, so pursuing a merger just to become larger is not the answer.”

From → News From AEP

  1. ccapelan permalink

    Very interesting take on the belief the merger made AEP stronger. The ongoing O&M reductions over the past few years, and the current round of significant layoffs don’t seem to support Mr. Brook’s comments. It’s also somewhat ironic that many of the employees who were involved in gaining regulatory approval and working on merger teams are the very employees that are being laid off.

  2. markalan54 permalink

    the article did not discuss the failures with the purchasing of power plants in australia, uk and china. AEP lost a ton of money on those decisions, which the Board of Trustees fumbled also.

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