AEP reports increased 2001 earnings; lowers 2002 estimates

By the OGJ Online Staff

HOUSTON, Jan. 22, 2002 -- Despite a poor 2001 fourth quarter, American Electric Power Co. Inc. reported earnings in 2001 of $970.8 million, or $3.01/share, up from $267 million, or 83¢/share for 2000. Revenue was $61.3 billion compared to $36.7 billion.

The Columbus, Ohio company lowered its projections for 2002 earnings to $3.60- $3.75/share from $3.70-$3.80/share because of the recession and dilution from new equity to be issued to boost the company's capitalization.

Before extraordinary items, AEP's fourth quarter earnings per share were 35¢, down from 62¢/share in the comparable 2000 fourth quarter. AEP blamed reduced energy demand and mild weather for the lower results. The biggest drop came from wholesale earnings that contributed 16¢/share, down from 50¢/share for the comparable quarter last year.

For the year, the wholesale group contributed $2.40/share, up from $1.93/share in 2000. The company attributed the increase to the restart of the Cook nuclear plant. AEP said that growth in 2002 will come from development of wholesale products in other areas such as a planned move into global coal markets and Nordic energy, plus earnings from an entire year of operation of the Houston Pipe Line purchased from Enron Corp. in 2001.

AEP took a 2¢/share charge resulting from Enron's Chapter 11 bankruptcy protection filing and a one time charge of 8¢/share related to indemnities and purchase price obligations for Houston Pipe Line. The company said it didn't expect any other long-term negative impact from Enron's collapse.

"Enron's bankruptcy has increased Wall Street's scrutiny of companies with energy trading groups. For AEP Enron's bankruptcy didn't have an effect on our credit rating, our access to financing, or our stability," said CEO Linn Draper.

In mid-day trading Tuesday, AEP's share price fell to $42.49 from a close of $43 Monday.

AEP executives reminded the financial community in a conference call of plans to issue $1 billion of securities in 2002. The "mix" of equity and convertible securities hasn't been determined yet, executives said.

The company's balance sheet is leveraged with only 37% equity, 14% short-term debt, and 49% long-term debt. The goal for 2002 is to reduce the short-term debt to less than 10% and increase equity to 40-45%, Draper said.

"We have had some conversations with the ratings agencies," he said. "They are looking at the need to shore up equity more quickly." That's why common shares will be issued during the course of the year and the earnings guidance was adjusted, Draper said. "Market prices are lower so we need to be more conservative," he said.

Analysts quizzed AEP officials about capital requirements for the trading organization. They wanted to know if more collateral was being required or if contracts had shorter terms compared to trades and transactions completed before the Enron collapse.

Executives said no changes in capital requirements have occurred for the trading business. They said increasing the equity of the company was more in response to "conversations" with the ratings agencies.

Analysts also asked how much of AEP's 2001 earnings came from noncash mark-to-market gains. Mark-to-market is an accounting technique that estimates and records the value of long-term contracts using current market prices. AEP executives said they didn't have that number but would provide it by the end of the week.

Sponsored by FLSmidth

Related Articles

EcoPower works its Kentucky biomass project through PJM

EcoPower is working with PJM Interconnection on a project with a queue number of Y2-086, covering a a 62.5-MW biomass-fired facility connecting to American Electric Power's (NYSE: AEP) Engle 69-kV substation via a 1.4-mile transmission line.

Fluor to retrofit AEP coal-fired power plant in Oklahoma

Fluor Corp. (NYSE: FLR) was contracted to provide emissions control retrofits at American Electric Power (AEP, NYSE: AEP)’s Northeastern power station in Oklahoma.

Follow Power Engineering on Twitter

Products Showcase

Dynamic Fluoride Ion cleaning DFIC of industrial natural gas turbines Hi-Tech Furnace Systems

Dynamic Fluoride Ion Cleaning of IGT Parts

The Dynamic Fluoride Ion Cleaning (DFIC) Process from Hi-Tech Furnace Systems is able to clean deep, narrow cracks of oxides by cycling between negative, atmospheric, and positive pressure.

Latest News

Shutterstock coal production trucks

Weekly Coal Production

The Weekly Coal Production shows how much coal is being produced across the U.S.

Federal Reserve Bank of Dallas Weekly Economic Indicators financial business

The Federal Reserve Bank of Dallas' Economic Indicators

The Federal Reserve Bank of Dallas offers a glimpse into how the markets are doing domestical...

Kvaerner awarded contract for gas-fired power plant in Delaware

Kvaerner North American Construction Inc. and its joint venture partner, Parsons Brinckerhoff...

Canadian Solar purchases two solar projects

Canadian Solar Inc. has acquired a majority interest in two utility-scale solar power project...

Operators Restart Unit 2 at PPL Susquehanna

Unit 2 at the PPL Susquehanna nuclear power plant near Berwick, Pa. resumed generating electr...

Settlement agreement limits cost recovery at Edwardsport

The Indiana Utility Regulatory Commission (IURC) on Dec. 27 modified and approved a settlemen...

Toshiba in talks to sell portion of Westinghouse nuclear unit

Toshiba Corp is in talks  to sell up to 16% of its stake in the Westinghouse Electric Co...

Utah nixes nuclear waste storage facility

Plans to park radioactive waste at a storage facility in Utah have been officially called off.

Archived Articles

2000 | 2001 | 2002 | 2003 | 2004 | 2005 | 2006 | 2007 | 2008 | 2009 | 2010 | 2011 | 2012 | 2013

Power Engineering Current Issue

Volume 118, Issue 3

Power Industry Wire News

Landmark Settlement Protects Colorado Roan Plateau

Landmark Settlement Protects Colorado Roan Plateau

BeneVir Biopharm, Inc. Announces Investment From HC2's Subsidiary Pansend, LLC

BeneVir Biopharm, Inc. Announces Investment From HC2's Subsidiary Pansend, LLC

Eos Petro Announces Extension of Tender Offer for Any and All Outstanding Shares of Dune Energy

Eos Petro Announces Extension of Tender Offer for Any and All Outstanding Shares of Dun...

Eureka Hunter Pipeline Announces Expansion of Its Senior Secured Revolving Credit Facility

Eureka Hunter Pipeline Announces Expansion of Its Senior Secured Revolving Credit Facil...

Cardinal Resources Moving Forward in West Africa

Cardinal Resources Moving Forward in West Africa

Power Engineering

Article Archives for Power Engineering Magazine

Continuing Education

Professional Development Hours

To access a course listing associated to a specific topic listed below, click on the topic of choice from the list below.

Latest Energy Jobs

View more Job Listings >>

Power Engineering Newscasts

EPA chief: carbon caps will boost economy
Australia, Russia enter nuclear power agreement with Argentina
Largest battery energy storage in North America now operational
EPA chief: carbon caps will boost economy Largest battery energy storage in North America now operational Australia, Russia enter nuclear power agreement with Argentina Texas’ Panda Temple combined cycle plant up and running
Siemens agrees to acquire Dresser-Rand
Safety concrete poured at UAE nuclear reactor power project
Foster Wheeler to upgrade natural gas-fired power plant’s emission controls
GE, TransCanada partner on natural gas turbine design
Energy storage global market to grow to $15.6B by 2024; DOE awards $2M to support taller wind turbine towers; Hinkley Point C nuclear project have financial incentives approved; N.J. company building waste-to-energy project in Ireland