- 2005 second-quarter earnings: GAAP $0.58 per share, ongoing $0.61 per
share
- Key factors in performance: increased retail sales, higher margins on
off-system sales, lower O&M expenses
- Company reaffirms 2005 ongoing earnings guidance range of $2.30 to
$2.50
COLUMBUS, Ohio, July 29 /PRNewswire-FirstCall/ --
AMERICAN ELECTRIC POWER
Preliminary, unaudited results
Second quarter ended June 30 Six-months ended June 30
2004 2005 Variance 2004 2005 Variance
Revenue
($ in billions) 3.4 2.8 (0.6) 6.8 5.8 (1.0)
Earnings
($ in millions):
GAAP 100 221 121 382 576 194
Ongoing 150 234 84 439 578 139
EPS ($):
GAAP 0.25 0.58 0.33 0.96 1.48 0.52
Ongoing 0.38 0.61 0.23 1.11 1.49 0.38
EPS based on 396mm shares Q2 2004, 384mm in Q2 2005, 396mm in 6 mo. 2004
and 389mm in 6 mo. 2005
American Electric Power (NYSE: AEP) today reported 2005 second-quarter
earnings, prepared in accordance with Generally Accepted Accounting Principles
(GAAP), of $221 million, or $0.58 per share, compared with $100 million, or
$0.25 per share, for the second quarter of 2004.
Ongoing earnings (earnings excluding special items) for the second quarter
of 2005 were $234 million, or $0.61 per share, compared with $150 million, or
$0.38 per share, for second-quarter 2004.
AEP's increase in second-quarter GAAP and ongoing earnings, when compared
to the same period last year, primarily reflects increased retail sales in the
2005 period by AEP's utilities, higher margins on off-system sales and lower
operations and maintenance expenses.
AEP's 2005 second-quarter GAAP earnings were lower than ongoing earnings
by $13 million, or $0.03 per share. Excluded from ongoing earnings were
severance expenses resulting from a company-wide budgeting and staffing
review, which began earlier this year. A full reconciliation of GAAP earnings
to ongoing earnings is included in tables at the end of this news release.
"We continue to see growth in load and growth in our number of customers,"
said Michael G. Morris, AEP's chairman, president and chief executive officer.
"This growth indicates continued, steady economic improvement in the
communities we serve, which we view as positive news for our core utility
business.
"Wholesale markets are an important part of our strategy," Morris said,
"and our continued success in wholesale markets, evidenced by the improved
margins for off-system sales in the quarter, is important for a number of
reasons. Selling excess power from our plants into the wholesale marketplace
improves our profitability, which pleases our shareholders. It also enables
us to keep costs to our regulated customers low, which pleases our customers
and our state regulators."
EARNINGS GUIDANCE
AEP reaffirmed its previous ongoing earnings guidance range for 2005 of
between $2.30 and $2.50 per share.
"Our earnings have been very strong this year, in part because of the
performance of our utility operations and our strategic decision to divest
assets that did not align with our core utility business," Morris said. "But
we feel it is prudent for us to be conservative on guidance at this time.
"The third quarter, which includes summer air-conditioning load, is always
important to our earnings," Morris said. "Mild weather in the third quarter
can quickly offset the year-to-date improvements. We also see the potential
for continued pressure on fuel prices because of transportation issues for
western coal. Lower O&M expenses helped our earnings in the first six months,
but we know a portion of the variance is from timing differences in plant and
distribution maintenance projects now planned for later in the year."
In providing ongoing earnings guidance, there could be differences between
2005 ongoing earnings and 2005 GAAP earnings for matters such as, but not
limited to, divestitures or changes in accounting principles. AEP management
is not able to estimate the impact, if any, on GAAP earnings of these items.
Therefore, AEP is not able to provide a corresponding GAAP equivalent for 2005
earnings guidance.
SUMMARY ONGOING RESULTS BY SEGMENT
$ in millions except EPS
6 mo. 6 mo.
Q2 04 Q2 05 Variance 04 05 Variance
Utility Operations 184 262 78 488 605 117
Ongoing EPS 0.46 0.68 0.22 1.23 1.56 0.33
Investments (9) (2) 7 (15) 13 28
Ongoing EPS (0.02) 0.00 0.02 (0.04) 0.03 0.07
Parent Company (25) (26) (1) (34) (40) (6)
Ongoing EPS (0.06) (0.07) (0.01) (0.08) (0.10) (0.02)
Ongoing
Earnings 150 234 84 439 578 139
Ongoing EPS 0.38 0.61 0.23 1.11 1.49 0.38
EPS based on 396mm shares Q2 2004, 384mm in Q2 2005, 396mm
in 6 mo. 2004 and 389mm in 6 mo. 2005
Ongoing earnings from Utility Operations for the second quarter increased
by $78 million from the same quarter in 2004, primarily because of higher
retail sales attributed to customer growth and increased usage in the
residential and commercial classes. Warmer weather in the latter part of the
second quarter, when compared to the prior period, increased electricity
demand. Higher margins on off-system sales, lower O&M expenses and the
favorable impact of accrued carrying costs for the Ohio and Texas utilities
also contributed to the favorable period-to-period variance.
Investments, which includes AEP's gas segment and other investments,
benefited from stronger freight rates for MEMCO barge operations and AEP's
strategic divestiture of investment assets.
The increase in the Parent Company loss from the prior period is primarily
because of lower interest income from Investments, reflecting the strategic
divestiture of assets included in Investments and the associated reduction in
parent company loans to those operations.
ONGOING RESULTS FROM UTILITY OPERATIONS
$ in millions except EPS
6 mo. 6 mo.
Q2 04 Q2 05 Variance 04 05 Variance
Regulated Integrated
Utilities 750 706 (44) 1,500 1,412 (88)
Ohio Companies 469 511 42 981 1,000 19
Texas Wires 106 113 7 206 214 8
Texas Supply/REP 84 48 (36) 183 127 (56)
Off-System Sales 112 150 38 281 315 34
Other Wholesale Transactions 9 5 (4) 13 8 (5)
Transmission Revenue -
3rd Party 119 98 (21) 243 192 (51)
Other Operating Revenue 76 81 5 141 153 12
Total Gross Margin 1,725 1,712 (13) 3,548 3,421 (127)
Operations & Maintenance (818) (750) 68 (1,524)(1,435) 89
Depreciation & Amortization (308) (317) (9) (618) (635) (17)
Taxes Other Than Income Taxes (176) (170) 6 (358) (356) 2
Interest Expense & Preferred
Dividend (161) (156) 5 (326) (300) 26
Other Income & Deductions 16 56 40 25 189 164
Income Taxes (94) (113) (19) (259) (279) (20)
Total Utility Operations 184 262 78 488 605 117
Ongoing EPS 0.46 0.68 0.22 1.23 1.56 0.33
EPS based on 396mm shares Q2 2004, 384mm in Q2 2005, 396mm in
6 mo. 2004 and 389mm in 6 mo. 2005
AEP's Regulated Integrated Utilities, Ohio Companies and Texas Wires
benefited from the growth in the number of retail customers and in load in the
second quarter, as well as from warmer weather. Cooling degree-days in the
second quarter were 3 percent higher than normal in AEP's eastern service
territory and 6 percent higher in the west. Compared to the same period last
year, cooling degree-days were 8 percent lower in the east and 3 percent
higher in the west. The increase in gross margin from these positive
developments was partially offset by fuel costs that increased by $44 million
in the quarter when compared to the same period in 2004.
"There's some good news behind a portion of the increased fuel costs,"
Morris said. "Our electricity sales to retail customers and into the
wholesale market are greater than we had projected, which requires more fuel
for generation than we have available under long-term contract. We are
purchasing additional fuel, usually at higher spot-market prices, to
supplement what we are receiving under contract, but these additional costs
are more than offset by additional revenues.
"We also have some existing fuel-supply contracts where we pay a higher
price if a lower-sulfur coal is delivered," Morris said. "This decreases our
use of emissions credits for sulfur dioxide, offsetting the higher price for
the coal.
"But our fuel prices are higher than we had projected, even after removing
the various offsetting factors," Morris said. "Part of this can be attributed
to transportation disruptions caused by river conditions earlier this year and
to the more recent rail transportation issues. We are closely monitoring our
fuel prices and will adjust our projections as necessary."
The $36 million decrease in Texas Supply gross margin is primarily
attributed to the July 2004 divestiture of AEP's Texas Central Co. generation
assets and the May 2005 sale of AEP's share of the South Texas Project nuclear
plant to comply with Texas stranded cost recovery regulations. Because of the
divestitures, AEP's Texas generating capacity was reduced by 4,443 megawatts
when compared with the same period in 2004.
Higher prices increased the gross margin from Off-System Sales by $38
million in the second quarter of 2005 when compared to the prior period.
Transmission Revenue decreased $21 million in the quarter from the same
period last year because of the loss of through-and-out rates as a result of a
change in Federal Energy Regulatory Commission (FERC) tariffs in fourth-
quarter 2004. Higher transmission revenue in the East Central Area
Reliability (ECAR) region because of the addition of Seams Elimination Charge
Adjustment (SECA) rates partially offset the change in FERC tariffs.
Operations and Maintenance expenses for the quarter were $68 million less
than for the same period in 2004, primarily because of the timing of
maintenance projects, a decrease in storm damage, reduced outage maintenance
and the divestiture of the Texas plants. Reduced labor and outside services
expenses, partially because of the company's continued efforts to control
spending, also contributed to the improvement in O&M.
AEP's refinancing of higher coupon debt during 2004 and lower outstanding
balances than in the prior period led to a reduction of Interest Expense in
second-quarter 2005. The lower Interest Expense and lower Taxes Other Than
Income Taxes were somewhat offset by higher Depreciation and Amortization.
The increase in Other Income & Deductions includes the accrual of carrying
costs for the Ohio Companies' environmental investments and regional
transmission organization expenses incurred in 2004 and 2005, and the accrual
of carrying costs on AEP's stranded costs in Texas.
WEBCAST
American Electric Power's quarterly conference call with financial
analysts will be broadcast live over the Internet at 9 a.m. EDT today at
http://www.aep.com/go/webcasts . The webcast will include audio of the
conference call as well as visuals of charts and graphics referred to by AEP
management during the call. The charts and graphics are also available for
download at http://www.aep.com/go/webcasts .
The call will be archived on http://www.aep.com/go/webcasts for use by
those unable to listen during the live webcast.
Minimum requirements to listen to broadcast: The Windows Media Player
software, free from http://windowsmedia.com/download, and at least a 56Kbps
connection to the Internet.
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.
AEP's earnings are prepared in accordance with accounting principles
generally accepted in the United States and represent the company's earnings
as reported to the Securities and Exchange Commission. AEP's management
believes that the company's ongoing earnings, or GAAP earnings adjusted for
certain items as described in the news release and charts, provide a more
meaningful representation of the company's performance. AEP uses ongoing
earnings as the primary performance measurement when communicating with
analysts and investors regarding its earnings outlook and results. The
company also uses ongoing earnings data internally to measure performance
against budget and to report to AEP's board of directors.
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, including storms; available sources and costs of, and
transportation for, fuels and the creditworthiness of fuel suppliers and
transporters; 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; the ability to recover increases in fuel and
other energy costs through regulated or competitive electric rates; new
legislation, litigation and government regulation including requirements for
reduced emissions of sulfur, nitrogen, mercury, carbon and other substances;
timing and resolution of pending and future rate cases, negotiations and other
regulatory decisions (including rate or other recovery for new investments,
transmission service and environmental compliance);resolution of litigation
(including pending Clean Air Act enforcement actions and disputes arising from
the bankruptcy of Enron Corp.); AEP's ability to constrain its operation and
maintenance costs; AEP's ability to sell assets at acceptable prices and on
other acceptable terms, including rights to share in earnings derived from the
assets subsequent to their sale; 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; volatility and changes in markets for electricity, natural
gas, and other energy-related commodities; changes in utility regulation,
including membership and integration into regional transmission structures;
accounting pronouncements periodically issued by accounting standard-setting
bodies; the performance of AEP's pension and other postretirement benefit
plans; 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.
American Electric Power
Financial Results for 2nd Quarter 2005 Actual vs 2nd Quarter 2004 Actual
2004 Actual 2005 Actual
($ millions) EPS ($ millions) EPS
UTILITY OPERATIONS:
Gross Margin:
1 Regulated Integrated Utilities 750 706
2 Ohio Cos. 469 511
3 Texas Wires 106 113
4 Texas Supply / REP 84 48
5 Off-System Sales 112 150
6 Other Wholesale Transactions 9 5
7 Transmission Revenue - 3rd
Party 119 98
8 Other Operating Revenue 76 81
9 Total Gross Margin 1,725 1,712
10 Operations & Maintenance (818) (750)
11 Depreciation & Amortization (308) (317)
12 Taxes Other than Income Taxes (176) (170)
13 Interest Exp & Preferred
Dividend (161) (156)
14 Other Income & Deductions 16 56
15 Income Taxes (94) (113)
16 Net Earnings Utility
Operations 184 0.46 262 0.68
INVESTMENTS:
17 AEPES (3) (1)
18 Other (6) (1)
19 Total Investments (9) (0.02) (2) (0.00)
20 Parent Company (25) (0.06) (26) (0.07)
21 ON-GOING EARNINGS 150 0.38 234 0.61
Note: For analysis purposes, certain financial statement amounts have
been reclassified for this effect on earnings presentation.
American Electric Power
Financial Results for 2nd Quarter 2005 Actual
Reconciliation of On-going and Reported Earnings
2005 Actual
Utility Invest. Parent Total EPS
($ millions)
On-going Earnings 262 (2) (26) 234 0.61
Dispositions:
CSW Intl - tax reserve
adjustment - 3 - 3 0.01
Severance (15) (1) - (16) (0.04)
Total Special Items (15) 2 - (13) (0.03)
Reported Earnings 247 - (26) 221 0.58
Financial Results for 2nd Quarter 2004 Actual
Reconciliation of On-going and Reported Earnings
2004 Actual
Utility Invest. Parent Total EPS
($ millions)
On-going Earnings 184 (9) (25) 150 0.38
Discontinued Operations:
UK Discontinued Operations - (52) - (52) (0.13)
LIG Discontinued Operations - 2 - 2 -
Total Special Items - (50) - (50) (0.13)
Reported Earnings 184 (59) (25) 100 0.25
American Electric Power
Summary of Selected Sales Data
For Domestic Operations
(Data based on preliminary, unaudited results)
3 Months Ended June 30,
2004 2005 Change
ENERGY & DELIVERY SUMMARY
Retail - Domestic Electric (in
millions of kWh):
Residential 9,740 9,956 2.2%
Commercial 9,390 9,573 1.9%
Industrial 12,902 13,480 4.5%
Miscellaneous 806 639 -20.7%
Total Domestic Retail (Exclds AEP
C&I, ME SWEPCo, & Tx POLR) (a) 32,838 33,648 2.5%
AEP C&I, Mutual Energy SWEPCo, &
Tx POLR 298 161 -46.0%
Total Domestic Retail 33,136 33,809 2.0%
Wholesale - Domestic Electric (in
millions of kWh): (b) 13,644 12,138 -11.0%
Texas Wires Delivery (in millions of
kWh): 6,250 6,736 7.8%
EAST REGION WEATHER SUMMARY (in degree
days):
Actual - Heating (c) 168 165 -1.8%
- Cooling (d) 313 287 -8.3%
Normal - Heating (c) 176 -6.3% *
- Cooling (d) 278 3.2% *
PSO/SWEPCo WEATHER SUMMARY (in degree
days):
Actual - Heating (c) 30 26 -13.3%
- Cooling (d) 659 681 3.3%
Normal - Heating (c) 33 -21.2% *
- Cooling (d) 645 5.6% *
* 2005 Actual vs. Normal
(a) The energy summary represents load supplied by AEP. The AEP C&I
load has been segregated to clarify the year-to-year comparison.
Delivery of energy by Texas Wires supplied by others is not
included.
(b) Includes Off-System Sales, Texas Supply, Municipalities and
Cooperatives, Unit Power, and Other Wholesale Customers.
(c) Heating Degree Days temperature base is 55 degrees
(d) Cooling Degree Days temperature base is 65 degrees
American Electric Power
Financial Results for YTD June 2005 Actual vs YTD June 2004 Actual
2004 Actual 2005 Actual
($ millions) EPS ($ millions) EPS
UTILITY OPERATIONS:
Gross Margin:
1 Regulated Integrated Utilities 1,500 1,412
2 Ohio Cos. 981 1,000
3 Texas Wires 206 214
4 Texas Supply / REP 183 127
5 Off-System Sales 281 315
6 Other Wholesale Transactions 13 8
7 Transmission Revenue - 3rd
Party 243 192
8 Other Operating Revenue 141 153
9 Total Gross Margin 3,548 3,421
10 Operations & Maintenance (1,524) (1,435)
11 Depreciation & Amortization (618) (635)
12 Taxes Other than Income Taxes (358) (356)
13 Interest Exp & Preferred
Dividend (326) (300)
14 Other Income & Deductions 25 189
15 Income Taxes (259) (279)
16 Net Earnings Utility
Operations 488 1.23 605 1.56
INVESTMENTS:
17 AEPES (13) 9 18
Other (2) 4
19 Total Investments (15) (0.04) 13 0.03
20 Parent Company (34) (0.08) (40) (0.10)
21 ON-GOING EARNINGS 439 1.11 578 1.49
Note: For analysis purposes, certain financial statement amounts have
been reclassified for this effect on earnings presentation.
American Electric Power
Financial Results for YTD June 2005 Actual
Reconciliation of On-going and Reported Earnings
2005 Actual
Utility Invest. Parent Total EPS
($ millions)
On-going Earnings 605 13 (40) 578 1.49
Dispositions:
Gain on Sale of UK
Generation True-up
Adjustments - (5) - (5) (0.01)
CSW Intl - SEEBOARD Capital
Gain Tax Adjustment - 6 - 6 0.01
CSW Intl - tax reserve
adjustment - 3 - 3 -
Centrica Sharing from 2003 27 - - 27 0.07
AEPTCC Stranded Cost (17) - - (17) (0.04)
Severance (15) (1) - (16) (0.04)
Total Special Items (5) 3 - (2) (0.01)
Reported Earnings 600 16 (40) 576 1.48
Financial Results for YTD June 2004 Actual
Reconciliation of On-going and Reported Earnings
2004 Actual
Utility Invest. Parent Total EPS
($ millions)
On-going Earnings 488 (15) (34) 439 1.11
Dispositions:
Gain from sale of Nanyang
General Light Electric Co. - 6 - 6 0.01
Discontinued Operations:
UK Discontinued Operations - (64) - (64) (0.16)
LIG Discontinued Operations - 1 - 1 -
Total Special Items - (57) - (57) (0.15)
Reported Earnings 488 (72) (34) 382 0.96
American Electric Power
Summary of Selected Sales Data
For Domestic Operations
(Data based on preliminary, unaudited results)
6 Months Ended June 30,
2004 2005 Change
ENERGY & DELIVERY SUMMARY
Retail - Domestic Electric (in
millions of kWh):
Residential 23,167 23,180 0.1%
Commercial 18,169 18,305 0.7%
Industrial 25,175 26,253 4.3%
Miscellaneous 1,549 1,284 -17.1%
Total Domestic Retail (Exclds AEP
C&I, ME SWEPCo, & Tx POLR) (a) 68,060 69,022 1.4%
AEP C&I, Mutual Energy SWEPCo, &
Tx POLR 522 389 -25.5%
Total Domestic Retail 68,582 69,411 1.2%
Wholesale - Domestic Electric (in
millions of kWh): (b) 27,495 24,773 -9.9%
Texas Wires Delivery (in millions of
kWh): 11,740 12,254 4.4%
EAST REGION WEATHER SUMMARY (in
degree days):
Actual - Heating (c) 2,032 1,939 -4.6%
- Cooling (d) 316 287 -9.2%
Normal - Heating (c) 1,988 -2.5% *
- Cooling (d) 281 2.1% *
PSO/SWEPCo WEATHER SUMMARY (in degree
days):
Actual - Heating (c) 913 795 -12.9%
- Cooling (d) 689 701 1.7%
Normal - Heating (c) 1,006 -21.0% *
- Cooling (d) 662 5.9% *
* 2005 Actual vs. Normal
(a) The energy summary represents load supplied by AEP. The AEP C&I
load has been segregated to clarify the year-to-year comparison.
Delivery of energy by Texas Wires supplied by others is not
included.
(b) Includes Off-System Sales, Texas Supply, Municipalities and
Cooperatives, Unit Power, and Other Wholesale Customers.
(c) Heating Degree Days temperature base is 55 degrees
(d) Cooling Degree Days temperature base is 65 degrees
SOURCE American Electric Power
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Related links:
http://www.aep.com
http://www.aep.com/go/webcasts
Company News On-Call:
http://www.prnewswire.com/comp/042050.html
CONTACT:
Media, Pat Hemlepp, Director, Corporate Media
Relations, +1-614-716-1620, or Analysts, Julie Sloat, Vice
President, Investor Relations, +1-614-716-2885, both of American
Electric Power
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