Results for the first quarter were:
| First quarter ended March 31 | |||
| 2001 | 2002 | Variance | |
| Revenue ($ in billions) | 14.2 | 13.5 | (0.7) |
| Earnings ($ in millions): | |||
| Ongoing | 226.3 | 189.4 | (36.9) |
| As reported | 266.1 | 181.4 | (84.7) |
| EPS ($): | |||
| Ongoing | 0.71 | 0.59 | (0.12) |
| As reported | 0.83 | 0.56 | (0.27) |
“We expected first quarter earnings to be lower than last year’s results, a fact that was included when we calculated our earnings projections for 2002,” said E. Linn Draper Jr., AEP’s chairman, president and chief executive officer. “Earnings from wholesale energy sales and gas trading and marketing were incredibly strong early last year in market conditions that were much more favorable than those of recent months. We didn’t anticipate a repeat of last year’s performance in current market conditions.”
Draper reaffirmed AEP’s 2002 ongoing earnings estimate of $3.60 to $3.75 per share, compared to the $3.38 per share earned in 2001.
Low energy demand in the quarter depressed wholesale prices and margins, a continuation of market conditions that developed in late 2001. The low demand was driven largely by mild weather and the slow recovery from the economic recession. Heating degree days for the first quarter were down 13.2 percent from the same quarter last year. Electricity sales to industrial customers decreased 7.1 percent from the same period last year.
“Margins increased in the first quarter for electricity sales to retail customers, reflecting the spread between capped or frozen retail rates and weak wholesale energy prices,” Draper said. “But the weak wholesale prices that benefited our retail sales resulted in lower margins and reduced earnings from wholesale energy sales. The retail margin improvement helped to offset the decline in gas marketing and trading. We are beginning to see wholesale prices improve and, depending on weather conditions in the summer and the economic recovery, see value returning to the wholesale side. This validates our balanced portfolio strategy.
“The point of profit in the industry moves up and down the energy chain, depending on market conditions,” Draper said. “At times, the profit may shift to power generation, mining, fuel transportation by pipeline or barge, power or gas marketing, or - as it did in the first quarter - sales to retail customers. We are involved in all areas of the energy chain, which helps us in market conditions that are unfavorable for less diversified competitors.”
Wholesale investments contributed $0.07 per share to first-quarter earnings. These investments primarily include assets acquired after first-quarter 2001: Houston Pipe Line, the MEMCO barge line, 4,000 megawatts of generation capacity in the United Kingdom from the Fiddler’s Ferry and Ferrybridge plants, and the AEP Coal mines.
“Acquisitions will help fuel our growth,” Draper said. “We expect to average about $1 billion a year in acquisitions for the foreseeable future, which will help us meet our earnings growth target of 6 to 8 percent per year. The acquisitions will fit our wholesale-focused strategy while maintaining our balanced portfolio approach.”
AEP’s wholesale business, which primarily consists of wholesale sales in the United States, the generation component of domestic retail sales and worldwide trading, contributed $0.41 per share in the quarter, down from $0.53 per share in first-quarter 2001. The reduction in earnings reflects weaker market conditions in the first quarter this year.
Domestic wholesale electric trading volume for the quarter was 187 million megawatt hours, a 35 percent increase from first-quarter 2001.
Domestic wholesale natural gas volume for the first quarter was 1,477 billion cubic feet, a 184 percent increase from the same period last year.
AEP’s energy delivery business, which consists of domestic electric transmission and distribution, contributed $0.48 per share in the quarter, compared with $0.52 per share in first-quarter 2001.
The reduction in year-to-year results for energy delivery is directly related to mild weather and economic conditions.
The $0.03 per share difference between ongoing and reported earnings for the quarter reflects the recognition of goodwill impairment on Gas Power Systems as a result of management’s decision to exit the business.
American Electric Power is a multinational energy company with a balanced portfolio of energy assets. AEP, the United States’ largest electricity generator, owns and operates more than 42,000 megawatts of generating capacity in the U.S. and select international markets. AEP is a leading wholesale energy marketer, ranking among North America’s top providers of wholesale power and natural gas with a growing wholesale presence in European markets. In addition to electricity generation, AEP owns and operates natural gas pipeline systems, natural gas storage, coal mines, and the fourth-largest inland barge company in the U.S. AEP is also one of the largest electric utilities in the United States, with almost 5 million customers linked to AEP’s wires. The company is based in Columbus, Ohio.
AEP´s quarterly conference call with financial analysts can be heard live on the Internet at 9:30 a.m. EDT today. The webcast is available at http://www.videonewswire.com/event.asp?id=4176 or http://www.aep.com/investors/webcasts/.
For those unable to listen during the live webcast, the call will be archived for replay on AEP´s web site, http://www.aep.com/investors/webcasts/.
- Financial Results for YTD March 2002 vs YTD March 2001: Also see the printer-friendly version (PDF: 11KB: get viewer)
- Financial Results for YTD March 2002 vs YTD March 2001 Special Items: Also see the printer-friendly version (PDF: 8KB: get viewer)
- Earnings Per Share YTD March 2002 vs. YTD March 2001: Also see the printer-friendly version (PDF: 11KB: get viewer)
- Earnings Per Share YTD March 2002 vs. YTD March 2001 Special Items: Also see the printer-friendly version (PDF: 7KB: get viewer)
- Summary of Selected Sales Data For Domestic and Trading Operations: Also see the printer-friendly version (PDF: 7KB: get viewer)
The comments set forth above include forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, including (1) statements concerning the Company´s plans, objectives, expected performance and expenditures and (2) other statements that are other than statements of historical fact. These forward-looking statements reflect assumptions, and involve a number of risks and uncertainties. Among the factors that could cause actual results to differ materially from forward-looking statements are electric load and customer growth, abnormal weather conditions, availability of generating capacity, the ability to recover net regulatory assets and other stranded costs in connection with deregulation of generation, the outcome of environmental regulation and litigation, the impact of fluctuation in commodity prices and interest rates, and other risks and unforeseen events over which the Company has no control. The reader is also directed to the Company´s periodic filings with the Securities and Exchange Commission for additional factors that may impact the Company´s results of operations and financial condition. Furthermore, historical results may not be indicative of the Company´s future performance.
Media:
Pat D. Hemlepp
Director, Corporate Media Relations
614/223-1620
Analysts:
Bette Jo Rozsa
Managing Director, Investor Relations
614/223-2840
Pat D. Hemlepp
Director, Corporate Media Relations
614/223-1620
Analysts:
Bette Jo Rozsa
Managing Director, Investor Relations
614/223-2840