COLUMBUS, Ohio, Nov. 9, 2008 – American Electric Power (NYSE: AEP) is refining its ongoing earnings guidance range for 2009, citing the potential earnings impact of a variety of regulatory and economic factors.
The company anticipates that 2009 ongoing earnings will be between $3.00 and $3.40 per share. Ongoing earnings guidance for 2008 is unchanged, remaining at $3.15 to $3.25 per share. Ongoing earnings represent earnings from continuing operations, which exclude special or one-time items included in the earnings prepared in accordance with Generally Accepted Accounting Principles. AEP management will discuss 2009 ongoing earnings guidance in meetings with investors at the EEI Financial Conference that begins today in Phoenix.
“We have established a relatively wide range for our 2009 guidance to cover various potential regulatory outcomes as well as the decision on our Electric Security Plan in Ohio,” said Michael G. Morris, AEP chairman, president and chief executive officer. “We expect the decision from the Public Utilities Commission of Ohio after the first of the year. We also have lowered our earnings expectations for 2009 to reflect current economic realities.
“It’s anticipated that the economy will remain soft in 2009, and we expect that our sales for 2009 will be about the same as 2008 – although the geographic diversity of our 11-state service area helps to mitigate the effect of the economic slowdown,” Morris said. “We’re uncertain when the economy will return to the more robust growth we have seen in recent years. Because of that uncertainty, we are managing our cash flow, have tightened controls on spending, and – as we announced in late October – have reduced our capital expenditures budget for 2009 by $750 million, a reduction of more than 20 percent. The reduction in capital expenditures will have an impact on our earnings growth, so we are revising our long-term growth rate to between 4 percent and 6 percent annually.”
In October 2007, AEP established a 2009 ongoing earnings guidance range of between $3.20 and $3.50 per share and projected long-term growth of between 5 percent and 9 percent annually.
“Once the economy rebounds and earnings from our transmission investments grow, we should move back into that 5 percent to 9 percent range,” Morris said. “Our focus, as always, is on ensuring we have sufficient reliable energy production and delivery infrastructure to meet our customers’ needs, both today and in the future. We will continue to invest in those areas and to manage our commodity costs. But it’s also important that we improve the systems for cost recovery provided by utility regulations in our states. That’s a discussion that we will be having with our regulators.”
American Electric Power is one of the largest electric utilities in the United States, delivering electricity to more than 5 million customers in 11 states. AEP ranks among the nation’s largest generators of electricity, owning nearly 38,000 megawatts of generating capacity in the U.S. AEP also owns the nation’s largest electricity transmission system, a nearly 39,000-mile network that includes more 765-kilovolt extra-high voltage transmission lines than all other U.S. transmission systems combined. AEP’s transmission system directly or indirectly serves about 10 percent of the electricity demand in the Eastern Interconnection, the interconnected transmission system that covers 38 eastern and central U.S. states and eastern Canada, and approximately 11 percent of the electricity demand in ERCOT, the transmission system that covers much of Texas. 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: electric load and customer growth; weather conditions, including storms; available sources and costs of, and transportation for, fuels and the creditworthiness and performance of fuel suppliers and transporters; availability of generating capacity and the performance of AEP’s generating plants; AEP’s ability to recover regulatory assets and stranded costs in connection with deregulation; AEP’s ability to recover increases in fuel and other energy costs through regulated or competitive electric rates; AEP’s ability to build or acquire generating capacity (including the ability to obtain any necessary regulatory approvals and permits) when needed at acceptable prices and terms and to recover those costs (including the costs of projects that are canceled) through applicable rate cases or competitive rates; new legislation, litigation and government regulation, including requirements for reduced emissions of sulfur, nitrogen, mercury, carbon, soot or particulate matter and other substances; 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 (including disputes arising from the bankruptcy of Enron Corp. and related matters); AEP’s ability to constrain operation and maintenance costs; the economic climate and growth or contraction in AEP’s service territory and changes in market demand and demographic patterns; inflationary and interest rate trends; volatility in the financial markets, particularly developments affecting the availability of capital on reasonable terms and developments impacting AEP’s ability to refinance existing debt at attractive rates; 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 of the counterparties with whom AEP has contractual arrangements, including participants in the energy trading markets; actions of rating agencies, including changes in the ratings of debt; volatility and changes in markets for electricity, natural gas, coal, nuclear fuel and other energy-related commodities; changes in utility regulation, including the implementation of the recently passed utility law in Ohio and the allocation of costs within regional transmission organizations; accounting pronouncements periodically issued by accounting standard-setting bodies; the impact of volatility in the capital markets on the value of the investments held by AEP’s pension, other postretirement benefit plans and nuclear decommissioning trust and the impact on future funding requirements; prices for power that AEP generates and sells at wholesale; changes in technology, particularly with respect to new, developing or alternative sources of generation; and other risks and unforeseen events, including wars, the effects of terrorism (including increased security costs), embargoes and other catastrophic events.