COLUMBUS, Ohio, Nov. 8, 2015 – American Electric Power (NYSE: AEP) narrowed its 2016 operating earnings (earnings excluding special items) guidance range and reaffirmed its 2015 operating earnings guidance. The company also forecast its capital expenditure budgets for 2016 through 2018. AEP management will discuss the company’s financial outlook and earnings growth strategy at the annual Edison Electric Institute Financial Conference that begins today in Hollywood, Florida.
AEP narrowed its 2016 operating earnings guidance range to $3.60 to $3.80 per share from the previous range of $3.45 to $3.85 per share. Operating earnings guidance for 2015 was increased and narrowed to $3.67 to $3.77 per share Oct. 22.
AEP plans to invest $13 billion in capital from 2016 through 2018 with 96 percent of that investment in its regulated businesses. AEP increased its 2016 capital expenditure budget to $5 billion. The company forecast its 2017 and 2018 capital investment budgets at $4 billion annually.
In providing operating earnings guidance, there could be differences between operating earnings and GAAP earnings for matters such as, but not limited to, impairments 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 earnings guidance.
“We’ve proven that our strategy of investing in our regulated businesses to benefit our customers delivers solid earnings growth and strong shareholder value. Since 2012, AEP’s earnings from our regulated businesses have increased at a compound annual growth rate of 7.5 percent,” said Nicholas K. Akins, AEP’s chairman, president and chief executive officer.
“After completing more than a decade of investments to dramatically cut emissions from our power plants, we’ve refocused our investments on other infrastructure that will support new ways of providing more reliable and cleaner electricity,” Akins said. “More than $9.3 billion of our $13 billion capital plan will be invested in our wires businesses. Transmission investment opportunities continue to grow as we rebuild and enhance aging infrastructure and create a grid that is more robust, resilient and able to support current and future generation changes. Our ability to invest in our regulated operations gives us confidence in our 4 to 6 percent earnings growth rate.”
AEP will invest at least $5.7 billion in its transmission businesses over the next three years through AEP Transmission Holding Co. and AEP’s regulated utility operating companies. AEP Transmission Holding Co. contributed 16 cents per share to earnings in 2013. Its earnings are on track to more than double to 40 cents per share this year and are expected to nearly double again to 77 cents per share in 2018.
AEP’s regulated business investment strategy supports the company’s commitment to dividend growth. AEP has set a targeted dividend payout ratio of 60 to 70 percent of operating earnings. The company increased its dividend in October by 5.7 percent on an annual basis to $2.24 per share. AEP has paid a cash dividend on its common stock every quarter since July 1910.
AEP has a strong balance sheet and a stable credit outlook. The company’s capital plan is supported by cash flows and financial discipline without an anticipated need for equity financing beyond the company's existing dividend reinvestment plan and employee purchases of stock through the 401K plans. AEP expects to control operations and maintenance expenses, net of earnings offsets, through continuation of its process improvement and cost discipline programs, which are on track to realize $205 million in earnings improvement in 2016.
American Electric Power is one of the largest electric utilities in the United States, delivering electricity to nearly 5.4 million customers through 222,000 miles of distribution lines in 11 states. AEP owns the nation’s largest electricity transmission system, a more than 40,000-mile network that includes more 765-kilovolt extra-high voltage transmission lines than all other U.S. transmission systems combined. AEP also ranks among the nation’s largest generators of electricity, owning approximately 32,000 megawatts of generating capacity in the United States. AEP’s utility units operate as AEP Ohio, AEP Texas, Appalachian Power (in Virginia and West Virginia), AEP Appalachian Power (in Tennessee), Indiana Michigan Power, Kentucky Power, Public Service Company of Oklahoma, and Southwestern Electric Power Company (in Arkansas, Louisiana and east Texas). AEP’s headquarters are in Columbus, Ohio.
This report made by American Electric Power and its Registrant 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: the economic climate, growth or contraction within and changes in market demand and demographic patterns in AEP’s service territory; inflationary or deflationary interest rate trends; volatility in the financial markets, particularly developments affecting the availability of capital on reasonable terms and developments impairing AEP’s ability to finance new capital projects and refinance existing debt at attractive rates; the availability and cost of funds to finance working capital and capital needs, particularly during periods when the time lag between incurring costs and recovery is long and the costs are material; electric load, customer growth and the impact of competition, including competition for retail customers; weather conditions, including storms and drought conditions, and AEP’s ability to recover significant storm restoration costs; the costs of, and transportation for, fuels and the creditworthiness and performance of fuel suppliers and transporters; availability of necessary generating capacity and the performance of AEP’s generating plants; AEP’s ability to recover fuel and other energy costs through regulated or competitive electric rates; AEP’s ability to build transmission lines and facilities (including the ability to obtain any necessary regulatory approvals and permits) when needed at acceptable prices and terms and to recover those costs; new legislation, litigation and government regulation, including oversight of nuclear generation, energy commodity trading and new or heightened requirements for reduced emissions of sulfur, nitrogen, mercury, carbon, soot or particulate matter and other substances, or additional regulation of fly ash and similar combustion products that could impact the continued operation, cost recovery, and/or profitability of AEP’s generation plants and related assets; evolving public perception of the risks associated with fuels used before, during and after the generation of electricity, including nuclear fuel; a reduction in the federal statutory tax rate that could result in an accelerated return of deferred federal income taxes to customers; timing and resolution of pending and future rate cases, negotiations and other regulatory decisions, including rate or other recovery of new investments in generation, distribution and transmission service and environmental compliance; resolution of litigation; AEP’s ability to constrain operation and maintenance costs; AEP’s ability to develop and execute a strategy based on a view regarding prices of electricity and other energy-related commodities; prices and demand for power that AEP generates and sells at wholesale; changes in technology, particularly with respect to new, developing, alternative or distributed sources of generation; AEP’s ability to recover through rates or market prices any remaining unrecovered investment in generating units that may be retired before the end of their previously projected useful lives; volatility and changes in markets for capacity and electricity, coal, and other energy-related commodities, particularly changes in the price of natural gas and capacity auction returns; changes in utility regulation and the allocation of costs within regional transmission organizations, including ERCOT, PJM and SPP; the transition to market for generation in Ohio, including the implementation of ESPs and AEP’s ability to recover investments in its Ohio generation assets; AEP’s ability to successfully and profitably manage its separate competitive generation assets; changes in the creditworthiness of the counterparties with whom AEP has contractual arrangements, including participants in the energy trading market; actions of rating agencies, including changes in the ratings of AEP debt; the impact of volatility in the capital markets on the value of the investments held by AEP’s pension, other postretirement benefit plans, captive insurance entity and nuclear decommissioning trust and the impact of such volatility on future funding requirements; accounting pronouncements periodically issued by accounting standard-setting bodies; and other risks and unforeseen events, including wars, the effects of terrorism (including increased security costs), embargoes, cyber security threats and other catastrophic events.