AEP Reports 1997 Earnings Up 5.6 Percent Before One-Time Charge, Down 13.0 Percent After Charge

Jan. 28, 1998•News Release

COLUMBUS, Ohio, Jan. 28, 1998 -- American Electric Power Co. (NYSE: AEP) today reported that, before an extraordinary item, net income for the year ended Dec. 31, 1997, increased 5.6 percent to $620.4 million, or $3.28 a share, from $587.4 million, or $3.14 a share, in 1996. Operating revenues increased 5.3 percent to $6.16 billion from $5.85 billion.

The third quarter extraordinary item was the United Kingdom's one-time windfall tax on privatized utilities, which reduced AEP's share of Yorkshire Electricity Group's earnings for the year by $109.4 million. The windfall tax was based on a retroactive revaluation of the original privatization price. After the windfall tax, earnings for the year decreased 13.0 percent to $511.0 million, or $2.70 a share.

For the fourth quarter, net income decreased 4.8 percent to $126.1 million, or 66 cents a share, compared with $132.4 million, or 71 cents a share, for the same period a year earlier. Operating revenues increased 17.8 percent to $1.70 billion from $1.45 billion.

"Our 1997 earnings improved in spite of mild temperatures in the first and second quarters that reduced residential energy usage for the year," said E. Linn Draper Jr., AEP chairman, president and chief executive officer. The improvement is mainly attributable to earnings from AEP's April 1997 investment in Yorkshire Electricity.

"AEP's share of Yorkshire Electricity's earnings increased non-operating income by $50 million, including $26 million of third quarter income tax benefits related to a U.K. corporate income tax rate reduction and U.S. tax credits," Draper said.

Total operating revenues for the year rose despite the decline in residential sales. "Wholesale energy sales for the year were up 38 percent as a result of new power marketing transactions and coal conversion services," Draper said. "Also contributing to the increased revenues and earnings were increased transmission service sales."

Fourth quarter net income declined as a result of increased operation and maintenance costs and reduced margins on wholesale sales. "Wholesale energy sales were up 80 percent, but increased competitive pressures in the wholesale energy market and the temporary unavailability of nuclear generating capacity led to a decline in fourth quarter earnings," Draper said

AEP, a global energy company, is one of the United States' largest investor-owned utilities, providing energy to 2.9 million customers in Ohio, Indiana, Michigan, West Virginia, Virginia, Tennessee and Kentucky. AEP has holdings in the United States, the United Kingdom and China. Wholly owned subsidiaries provide power engineering, consulting and management services around the world. The company is based in Columbus, Ohio.

	3 Months Ended Dec. 31,
	1997	1996	Change	Percent
	(in millions, except per share amounts)

OPERATING REVENUES	$1,703.1	$1,446.1	$ 257.0	17.8%

OPERATING EXPENSES:
Fuel	434.6	408.2	26.4	6.5%
Purchased Power	259.3	16.2	243.1	N.M.
Other Operation and Maintenance	457.9	435.3	22.6	5.2%
Depreciation and Amortization	143.2	150.5	(7.3)	(4.9)%
Taxes Other Than Federal Income Taxes	117.9	121.8	(3.9)	(3.2)%
Federal Income Taxes	74.1	78.6	(4.5)	(5.7)%

TOTAL OPERATING EXPENSES	1,487.0	1,210.6	276.4	22.8%

OPERATING INCOME	216.1	235.5	(19.4)	(8.2)%

Nonoperating Income	16.5 (a)	(1.4)	17.9	N.M.
Interest Charges & Preferred Stock Dividends	107.7	101.7	6.0	5.9%

INCOME BEFORE EXTRAORDINARY ITEM	124.9	132.4	(7.5)	(5.7)%

Extraordinary Item - U.K. Windfall Tax	1.2	0.0	1.2	N.M.

NET INCOME	$126.1	$132.4	$ (6.3)	(4.8)%

Average Shares Outstanding	189.7	187.9	1.8	1.0%

EARNINGS PER SHARE	$0.66	$0.71	$(0.05)	(7.0)%

Cash Dividends Paid Per Share	$0.60	$0.60	$0.00	0.0%


ENERGY SALES (in millions of kilowatthours):
Retail:
Residential	7,951	7,657	294	3.8%
Commercial	5,634	5,434	200	3.7%
Industrial	11,983	11,420	563	4.9%
Miscellaneous	332	328	4	1.2%
Total Retail	25,900	24,839	1,061	4.3%
Wholesale (Sales for Resale)	16,304	9,076	7,228	79.6%

TOTAL ENERGY SALES	42,204	33,915	8,289	24.4%


(a) Includes the Company's share of Yorkshire Electricity's earnings. N.M. = Not Meaningful

	12 Months Ended Dec. 31,
	1997	1996	Change	Percent
	(in millions, except per share amounts)

OPERATING REVENUES	$6,161.4	$5,849.2	$312.2	5.3%

OPERATING EXPENSES:
Fuel	1,627.1	1,600.6	26.5	1.7%
Purchased Power	416.3	86.1	330.2	383.5%
Other Operation and Maintenance	1,710.6	1,712.9	(2.3)	(0.1)%
Depreciation and Amortization	591.1	600.8	(9.7)	(1.6)%
Taxes Other Than Federal Income Taxes	490.6	498.6	(8.0)	(1.6)%
Federal Income Taxes	341.2	342.2	(1.0)	(0.3)%

TOTAL OPERATING EXPENSES	5,176.9	4,841.2	335.7	6.9%

OPERATING INCOME	984.5	1,008.0	(23.5)	(2.3)%

Nonoperating Income	59.5 (a)	2.2	57.3	N.M.
Interest Charges & Preferred Stock Dividends	423.6	422.8	0.8	0.2%

INCOME BEFORE EXTRAORDINARY ITEM	620.4	587.4	33.0	5.6%

Extraordinary Loss - U.K. Windfall Tax	(109.4)	0.0	(109.4)	N.M.

NET INCOME	$511.0	$587.4	$(76.4)	(13.0)%

Average Shares Outstanding	189.0	187.3	1.7	0.9%

EARNINGS PER SHARE:
Income Before Extraordinary Item	$3.28	$3.14	$0.14	4.5%
Extraordinary Loss - U.K. Windfall Tax	(0.58)	0.00	(0.58)	N.M.
Net Income	$2.70	$3.14	$(0.44)	(14.0)%

Cash Dividends Paid Per Share	$2.40	$2.40	$0.00	0.0%


ENERGY SALES (in millions of kilowatthours):
Retail:
Residential	30,283	30,853	(570)	(1.8)%
Commercial	22,720	22,558	162	0.7%
Industrial	46,282	45,395	887	2.0%
Miscellaneous	1,265	1,264	1	0.1%
Total Retail	100,550	100,070	480	0.5%
Wholesale (Sales for Resale)	44,873	32,503	12,370	38.1%

TOTAL ENERGY SALES	145,423	132,573	12,850	9.7%


(a) Includes the Company's share of Yorkshire Electricity's earnings. N.M. = Not Meaningful

For More Information, Contact: Media: Pat D. Hemlepp Manager, Media Relations 614/223-1620 Analysts: John S. Bilacic Manager, Investor Relations 614/223-2847

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