AEP second-quarter earnings down; utility selling UK operations
Friday, July 30th 2004, 8:46 am
By: News On 6
COLUMBUS, Ohio (AP) _ American Electric Power said Friday that second-quarter earnings were down 43 percent because of higher operating costs and expenses related to storm damage.
The nation's largest power generator said it made $100 million, or 25 cents per share, for the quarter that ended June 30, compared with earnings of $175 million, or 44 cents per share, a year ago. Revenue fell 3 percent to $3.4 billion from $3.5 billion a year ago.
Excluding charges, AEP earned 38 cents a share. Analysts surveyed by Thomson First Call expected earnings of 44 cents a share.
AEP spokesman Pat Hemlepp said accounting rules required the utility to take a loss of 10 cents a share after Texas regulators said AEP would not be able to recover as much in fuel costs as the company had planned. The company is appealing the ruling.
Analysts would not have known AEP was recording that loss this quarter, Hemlepp said, which may explain their higher estimates.
He also noted that the company had a gain of 9 cents in the second quarter of 2003 from stranded costs related to a Texas power plant, which was not present in the current quarter. Stranded costs are the difference between what a power plant is worth in regulated energy market and what it actually would sell for at auction, he said.
``Between those two items, that's a 19-cent reduction,'' Hemlepp said.
Severe storms throughout AEP's territory also contributed to higher costs for trimming trees and repairing downed power lines and damaged equipment.
``It really hit us pretty much all over the place,'' Hemlepp said.
For the first half of the year, AEP has made $382 million, or 96 cents per share, compared with earnings of $615 million, or $1.64 per share, a year ago. Revenue dropped 7 percent to $6.7 billion from $7.2 billion a year ago.
The company also announced Friday the $456 million sale of two coal-fired power plants in the United Kingdom and several electricity, coal and freight contracts to Scottish and Southern Energy.
The deal substantially completes AEP's withdrawal from the UK market. AEP still has a 50 percent ownership in a southern England power plant, which Hemlepp said the company plans to sell later this year.
Scottish and Southern is one of Britain's largest energy suppliers, serving more than 3 million electricity customers and 1.5 million gas customers in England, Scotland and Wales.
AEP said it will use profits from the sale to pay down debt and shore up finances.
Besides Ohio, AEP has about 5 million customers in Arkansas, Indiana, Kentucky, Louisiana, Michigan, Ohio, Oklahoma, Tennessee, Texas, Virginia and West Virginia.