(RTTNews) - American Electric Power Co., Inc. (AEP: News ) said Thursday that its subsidiary Southwestern Electric Power Company or SWEPCO has signed a letter of intent to purchase the transmission and distribution or T&D assets of Valley Electric Membership Corporation.

According to the deal, pending due diligence the subsidiary will buy the assets for $94 million and assume certain other liabilities. The company will also provide payment for Valley Electric patronage capital, which is currently estimated at about $30 million, on closing on the transaction.

Board members of Valley Electric, one of eleven rural electric cooperatives in Louisiana, have unanimously approved a voluntary dissolution of Valley Electric.

A purchase agreement is expected by the end of the year, and cooperative membership vote to dissolve is expected in January or February, the company said.

On completion of the deal, the company projects that the cooperative's customers will save a projected average of 20% annually as a result of Southwestern Electric's lower retail rates which are currently 25% below the Louisiana average and 37% below the national average, based on average monthly residential use of 1,000 kilowatt-hours.

Paul Chodak, Southwestern Electric's President and Chief Operating Officer said, "Adding Valley's service area will double the size of SWEPCO's geographic footprint in Louisiana and bring economic growth opportunities along the I-49 and Toledo Bend corridors."

Southwestern Electric is already interconnected at transmission voltage with Valley Electric. Southwestern Electric expects to take responsibility for providing service to the customers and facilities by mid-year 2010, subject to all regulatory approvals.
Valley Electric serves 30,000 member customers and 41,000 meters in eight parishes south of Shreveport, including more than 7,000 miles of distribution lines, 90 miles of transmission lines, 29 substations and three service centers, American Electric Power said.

"This deal meets all the requirements of the VEMCO's Board strategic alliance policy to offer significantly lower rates to our members, preserve VEMCO employee jobs at the same or better wages, and gain more resources for better service," said Johnny Possoit, Valley Electric Board Chairman.

According to the agreement, the 101 employees of Valley Electric will be transferred to Southwestern Electric.

American Electric owns about 38,000 megawatts of generating capacity and also owns electricity transmission system which has nearly 39,000-mile network that includes more 765 kilo-volt extra-high voltage transmission lines than all other U.S. transmission systems combined.

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