Columbus (Ohio): American Electric Power said on Thursday that its fourth quarter earnings fell 34 per cent after it was ordered to refund some sales from a six-year period to a number of subsidiaries.
AEP, one of the nation's largest power generators, maintained its recently adjusted 2009 profit outlook of $3 to $3.40 a share, amid declining industrial sales and softening residential demand from the recession.
AEP said it made $152 million, or 38 cents a share, for the quarter ended December 31 compared with profit of $231 million, or 58 cents a share, in the year ago-quarter. Revenue rose to $3.5 billion in the quarter from $3.3 billion.
Discounting charges for the quarter and the year-ago quarter, AEP made $237 million, or 59 cents a share, in the quarter compared with $209 million, or 52 cents a share, a year ago.
Analysts surveyed by Thomson Reuters expected profit of 53 cents a share on revenue $3.1 billion. Such estimates typically exclude charge.
"We enter 2009 facing significantly more challenging economic conditions than in recent years, but we are confident about our ability to achieve our 2009 earnings target," AEP's chairman, president and chief executive, Michael Morris, said in a statement. "We are starting to see the impacts of the weakening economy through declining industrial sales and softening residential and commercial demand growth, and we expect that trend to continue as the impact of the economic downturn spreads more widely."
Electricity demand fell 1 per cent in the fourth quarter and it will likely fall 0.5 per cent in 2009 before rebounding in 2010, according to the Energy Information Administration.
Like other companies and utilities, AEP has been cutting capital expense budgets, drawing on credit lines and hoarding cash to make sure it has adequate amounts of money on hand. AEP has said it plans to reduce its 2009 capital expense budget by $750 million.
AEP recorded charges of $85 million in the quarter, mostly because of an order by the Federal Energy Regulatory Commission issued in November that requires AEP to issue refunds to some of its subsidiaries for sales from June 2000 to March 2006. The refunds go to AEP subsidiaries in Arkansas, Louisiana, Oklahoma and northeast Texas.
Some of the money will go back to customers. AEP is appealing the order.
For 2008, AEP made $1.4 billion, or $3.43 per share, compared with $1.1 billion, or $2.73 per share, in 2007. Discounting charges, AEP made $1.3 billion, or $3.24 a share, in 2008 compared with $1.2 billion, or $3 a share, in 2007.
Revenue rose to $14.6 billion, up from $13.4 billion in 2007.
Morris said the company benefited from new rates in five jurisdictions in 2008 and another one for Oklahoma this year. New contracts with municipal and rural electric cooperatives and the full-year benefit of serving a large aluminum producer in Ohio.
"Our solid earnings performance for 2008 reflects the significant success we've had in working with regulators to put in place new, balanced rate structures that reflect the increased costs of providing service to customers and the investments that we've made in our system," he said.
AEP serves 5 million customers in 11 states.
Shares fell 13 cents to close at $31.76 on Wednesday. Stock has ranged from $25.54 to $45.95 over the past 52-weeks.
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