UPDATE: American Electric Cuts 2012 Profit View, Ohio Costs Weigh
February 10 2012 - 11:37AM
Dow Jones News
American Electric Power Inc. (AEP) cut its profit target for
2012, as expected costs at the company's Ohio operations weigh on
the bottom line.
The company, which is one of the largest U.S. electric
utilities, said it expects a profit of $3.05 to $3.25 a share for
2012, down from the company's previous forecast of $3.25 a share
made in late 2010. That compares to net 2011 earnings of $4.02 a
share and adjusted 2011 earnings of $3.12 a share that the company
reported last month.
Shares of AEP were recently trading 6 cents higher at
$39.42.
AEP, based in Columbus, Ohio, predicted that its Ohio operations
would cost the company roughly 32 cents a share in 2012, on charges
associated with customers switching to other utilities and with
AEP's requirement to serve as Ohio's utility "of last resort" as
that state deregulates its electricity market.
AEP plans to separate its Ohio businesses from the rest of the
company. State regulators approved the company's corporate
separation plans in January.
AEP Chief Executive Nick Akins said the company plans to file a
request Friday with federal regulators for approval to separate its
Ohio operations, which, he said, will be a key move for the
company.
"This was a critical step for us, to get the corporate
separation approved," Akins said during a meeting with analysts in
New York that was webcast. "It's a precursor of every other step
we're taking."
AEP, which operates utilities in 11 states and serves about 5
million customers, said higher revenue through rate changes would
add 43 cents a share this year, offsetting some of its Ohio costs
and higher tax expenses.
Akins said AEP expects 4% to 6% earnings growth over the next
few years and plans to spend $3.1 billion in 2012, with most of
that amount to be spent by its regulated utilities. AEP's regulated
utilities are authorized to earn returns on capital investments at
rates that range from 7.5% to 14.3%, according to the company.
AEP plans to spend about $500 million this year to install
pollution-control equipment to comply with government limits on
sulfur dioxide, nitrogen oxide and other pollutants from power
plants.
The company plans to spend $5 billion to $6 billion from 2012 to
2020 to comply with new federal limits on emissions of mercury and
other heavy metals and other air and water pollutants. AEP plans to
shut down about 2,600 megawatts of aging coal-fired power plants as
part of that plan. The company completed construction this month of
a new 580-megawatt gas-fired power plant and plans to build
additional plants to replace older plants that will be shut
down.
AEP has asked the U.S. Environmental Protection Agency, which
has set new pollution limits, for more time to comply with the
rules. The company said it needed more time to build new plants
that will replace older plants slated to be shut down.
AEP said Friday that while industrial demand for electricity has
been growing, commercial demand dropped in 2011 and residential
demand was relatively flat as the economic outlook in the 11 states
where it operates remains modest, with slight year-over-year growth
expected this year, driven by industrial demand.
The utility last month reported its fourth-quarter earnings rose
75% on stronger wholesale volume, though retail volume shrank.
-By Cassandra Sweet, Dow Jones Newswires; 415-269-4446;
cassandra.sweet@dowjones.com
--Mia Lamar contributed to this article.
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