Jan. 23, 2001American Electric Power Co. (AEP) expects 2001 earnings to be $3.40-$3.50/share, Chairman E. Linn Draper Jr. said Tuesday, up from $2.70/share in 2000.
In 1999, the company’s earning were $2.86/share. Draper said 2000 earnings were hurt by restarts of Units 1 and 2 of the 2,110 MW Cook nuclear plant. Restart costs cut earnings by 76 cents/share. Results have been restated to reflect the June 15 merger with Central & South West Corp.
In 2001, AEP executives said the company expects growth in revenue but as part of its Ohio settlement costs, amortization cost will rise by an extra $100 million, or about equal to the impact of bringing the nuclear plant back into service.
In mid-day trading on the New York Stock Exchange, AEP shares were up 11/16 at 42 5/16 on moderate volume.
With Cook back on line and the Central & South West merger completed, Draper said, the company will focus its attention on building a robust wholesale business this year, including marketing and trading and a plan reported last year to shift generating capacity into a unregulated arm of the company.
The determination to spin off the unregulated arm or to make an initial public offering will be a function of market conditions and a favorable ruling from the IRS, Draper said, but the decision will not made before yearend.
“We reframed our strategy on the wholesale business, which includes fuel procurement, energy assets, wholesale marketing, and trading,” he said. With 38,000 MW of generation, intrastate pipelines, gas storage facilities, and technical and operational experience, the company has a “superior platform” for growth, he explained.
As part of its strategy, AEP reported earlier this month it will acquire Houston Pipe Line from Enron Corp. The Texas intrastate system includes 4,000 miles of pipe with capacity of 2.4 bcf/day. The deal also included the 118 bcf Bammel storage facility.
The company would entertain offers for its UK holdings, Seeboard and Yorkshire Electricity, executives said, to the extent someone can profit more from the business than AEP has. Without significant growth prospects, AEP is no longer as enamored of the UK business as it once was, they said.
With respect to California, despite an evident need for additional generating capacity in the state, Draper said AEP is “unwilling to place capital at risk until there is more certainty” with respect to the rules of operation.
The company is projecting capital spending will be $1.7 billion in 2001, including $500 million for environmental upgrades at its power plants. AEP reported net income of $596 million on revenue of $13.7 billion in 2000, compared to net income of $972 million on revenue of $12.4 billion in 1999.