Net income for the fourth quarter of 1998 decreased 28 cents per share or 42.4 percent to $72.1 million or 38 cents per share from $126.1 million or 66 cents a share in 1997.
The favorable result for the year was due to the effect of a 1997 extraordinary loss for the United Kingdom´s one-time windfall tax on privatized utilities and certain tax benefits and adjustments related to the investment in Yorkshire Electricity Group. The windfall tax was based on a retroactive revaluation of the original privatization price. Exclusive of these items, 1998 earnings per share decreased 33 cents or 10.5 percent from $3.14 in 1997.
"Our 1998 earnings were disappointing," said E. Linn Draper Jr., AEP chairman, president and chief executive officer. "This was due to unseasonable, mild weather; an extended outage at the Cook Nuclear Plant; a write-down of Yorkshire´s investment in Ionica, a UK telecommunications company; and severance accruals for reductions in power generation and energy delivery staff. Despite the negative impact of the weather and the Cook outage on sales, we are pleased with the development of trading, marketing and critical risk management skills since we initiated our energy trading activities in mid-1997."
The extended outage of the Cook Nuclear Plant began in September 1997 when both generating units were shut down due to questions regarding the operability of certain safety systems, which arose during a Nuclear Regulatory Commission architect engineer design inspection. Efforts to restart the Cook units reduced earnings per share by 21 cents for the 12 months ended Dec. 31, 1998.
The generation and energy delivery staff reductions are being made as part of an effort to strengthen the competitive performance of the power generation and energy delivery organizations.
Fourth quarter earnings per share were also depressed primarily as a result of unseasonably mild weather, the severance accruals and the negative impact of the extended Cook plant outage. Warm temperatures during the fourth quarter of 1998 reduced energy usage by retail customers and tempered demand for wholesale energy.
AEP, a global energy company, is one of the United States´ largest investor-owned utilities, providing energy to 3 million customers in Indiana, Kentucky, Michigan, Ohio, Tennessee, Virginia and West Virginia. AEP has holdings in the United States, the United Kingdom, China and Australia. Wholly owned subsidiaries provide power engineering, energy consulting and energy management services around the world. The company is based in Columbus, Ohio. On Dec. 22, 1997, AEP announced a definitive merger agreement for a tax-free, stock-for-stock transaction with Central and South West Corp., a public utility holding company based in Dallas.
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For More Information, Contact:
Media:Deb Strohmaier
Senior Media Representative
American Electric Power
614/223-1656
Analysts:John S. Bilacic
Manager, Investor Relations
614/223-2847
Media:Deb Strohmaier
Senior Media Representative
American Electric Power
614/223-1656
Analysts:John S. Bilacic
Manager, Investor Relations
614/223-2847