AEP Reports Second-Quarter 2019 Earnings, Reaffirms Full-Year Earnings Guidance

COLUMBUS, Ohio, July 25, 2019 /PRNewswire/ --

                                                                                            
            
              AMERICAN ELECTRIC POWER


                                                                                         
            
              Preliminary, unaudited results




                                                                                                         Second Quarter ended June 30                   Year-to-date ended June 30



                                                                          2019                   2018                                  Variance             2019                   2018       Variance



     
              Revenue ($ in billions):                                          3.6                    4.0                                   (0.4)                  7.6              8.1            (0.5)



     
              Earnings ($ in millions):


                          
            GAAP                                            461.3                  528.4                                  (67.1)              1,034.1            982.8             51.3


                          
            Operating (non-GAAP)                            493.6                  498.3                                   (4.7)              1,078.4            971.5            106.9





     
              EPS ($):


                          
            GAAP                                             0.93                   1.07                                  (0.14)                 2.10             2.00             0.10


                          
            Operating (non-GAAP)                             1.00                   1.01                                  (0.01)                 2.19             1.97             0.22





     EPS based on 494 million shares 2Q 2019, 493 million shares 2Q 2018, 493 million shares YTD 2019 and 492 million shares YTD 2018

American Electric Power (NYSE: AEP) today reported second-quarter 2019 earnings, prepared in accordance with Generally Accepted Accounting Principles (GAAP), of $461 million or $0.93 per share, compared with GAAP earnings of $528 million or $1.07 per share in second-quarter 2018. Operating earnings for second-quarter 2019 were $494 million or $1.00 per share, compared with operating earnings of $498 million or $1.01 per share in second-quarter 2018. Operating earnings is a non-GAAP measure representing GAAP earnings excluding special items. The difference between 2019 GAAP earnings and operating earnings for the quarter and year-to-date was driven in part by certain one-time transactional costs related to the acquisition of assets from Sempra Renewables, as well as severance and related charges.

A full reconciliation of GAAP earnings to operating earnings for the quarter and year-to-date is included in the tables at the end of this news release.

"We continue to achieve solid earnings results based on our investments to enhance the resiliency and reliability of service we provide for our customers," said Nicholas K. Akins, AEP chairman, president and chief executive officer. "Our performance in the second quarter was positive, even without the boost from weather that we had last year. Weather was back to normal this spring and has been much more moderate this year than in the first half of 2018.

"Our Transmission Holding Co. business continues to grow as we make critical investments to replace aging equipment and ensure that we maintain a robust, resilient grid. AEP Transmission Holding Co. contributed 31 cents per share for the quarter, an increase of 10 cents per share from the same period last year. Net plant for AEP Transmission Holding Co. has grown by $1.4 billion, a 19% increase, since June 2018," Akins said.

"We also are moving forward with the clean energy investments that our customers have told us they expect from their energy provider. We filed last week for regulatory approval to acquire and own 1,485 megawatts of new wind energy that will provide significant savings benefits for our customers in Arkansas, Louisiana, Oklahoma and Texas. We also recently completed the purchase of 227 MW of the Santa Rita East Wind Project near San Angelo, Texas. AEP now has nearly 5,300 MW of regulated and contracted renewable generation in its portfolio, including 2,258 MW that we own and another 3,015 MW through long-term power purchase agreements.

"Our performance so far this year is on track with our expectations, even though we are seeing lower demand across all customer classes primarily due to trade tariffs and the strong U.S. dollar. Despite these economic headwinds, we continue to grow the business and remain confident in reaffirming our 2019 operating earnings guidance of $4.00 to $4.20 per share," Akins said.

                                                                                                                                
            
      SUMMARY OF RESULTS BY SEGMENT


                                                                                                                                                                                                                   
     $ in millions





     
                GAAP Earnings                                                                               2Q 19                2Q 18                                 Variance            YTD 19    YTD 18                     Variance



     Vertically Integrated Utilities (a)                                                                      177.7                  276.8                                   (99.1)             480.1      508.0                        (27.9)



     Transmission & Distribution Utilities (b)                                                                131.4                  114.0                                     17.4              287.9      239.4                          48.5



     AEP Transmission Holdco (c)                                                                              154.5                  101.1                                     53.4              278.7      205.1                          73.6



     Generation & Marketing (d)                                                                                 9.4                   38.8                                   (29.4)              49.5       57.0                         (7.5)



     All Other                                                                                               (11.7)                 (2.3)                                   (9.4)            (62.1)    (26.7)                       (35.4)




     
                Total GAAP Earnings (Loss)                                                                  461.3                  528.4                                   (67.1)           1,034.1      982.8                          51.3





     
                Operating Earnings (non-GAAP)                                                               2Q 19      2Q 18   Variance                 YTD 19          YTD 18    Variance



     Vertically Integrated Utilities (a)                                                                      186.9                  276.8                                   (89.9)             497.7      508.0                        (10.3)



     Transmission & Distribution Utilities (b)                                                                131.3                  114.0                                     17.3              287.9      239.4                          48.5



     AEP Transmission Holdco (c)                                                                              154.6                  101.1                                     53.5              278.8      205.1                          73.7



     Generation & Marketing (d)                                                                                27.4                   26.5                                      0.9               70.5       63.5                           7.0



     All Other                                                                                                (6.6)                (20.1)                                    13.5             (56.5)    (44.5)                       (12.0)




     
                Total Operating Earnings (non-GAAP)                                                         493.6                  498.3                                    (4.7)           1,078.4      971.5                         106.9





     A full reconciliation of GAAP earnings to operating earnings is included in tables at the end of this news release.



               a.               Includes AEP Generating Co.,
                                 Appalachian Power, Indiana
                                 Michigan Power, Kentucky Power,
                                 Kingsport Power, Public Service


                                Co. of Oklahoma, Southwestern
                                 Electric Power and Wheeling Power.


               b.               Includes Ohio Power, AEP Texas.


               c.               Includes wholly-owned
                                 transmission-only subsidiaries
                                 and transmission-only joint
                                 ventures.


                               Includes AEP OnSite Partners, AEP
                                 Renewables, competitive generation
                                 in ERCOT and PJM as well as
                                 marketing, risk management and
                                 retail activities in ERCOT, PJM
               d.                and MISO.



EARNINGS GUIDANCE

AEP management reaffirmed its 2019 operating earnings guidance range of $4.00 to $4.20 per share. Operating earnings could differ from GAAP earnings for matters such as impairments, acquisitions, divestitures or changes in accounting principles. AEP management is not able to forecast if any of these items will occur or any amounts that may be reported for future periods. Therefore, AEP is not able to provide a corresponding GAAP equivalent for earnings guidance.

Reflecting special items recorded through the second quarter, the estimated earnings per share on a GAAP basis would be $3.91 to $4.11. See the table below for a full reconciliation of 2019 earnings guidance.

                  
              
      2019 EPS Guidance Reconciliation




                  Estimated EPS
                   on a GAAP
                   basis              $3.91                         to $4.11




     Mark-to-
      market impact
      of commodity
      hedging
      activities                                                 0.03


     Severance
      charges                                                    0.04


     Acquisition
      fees                                                       0.02


                  Operating EPS
                   Guidance           $4.00                         to $4.20

WEBCAST

AEP's quarterly discussion with financial analysts and investors will be broadcast live over the internet at 9 a.m. Eastern today at http://www.aep.com/webcasts. The webcast will include audio of the discussion and visuals of charts and graphics referred to by AEP management. The charts and graphics will be available for download at http://www.aep.com/webcasts.

AEP's earnings are prepared in accordance with accounting principles generally accepted in the United States and represent the company's earnings as reported to the Securities and Exchange Commission. The company's operating earnings, a non-GAAP measure representing GAAP earnings excluding special items as described in the news release and charts, provide another representation for investors to evaluate the performance of the company's ongoing business activities. AEP uses operating earnings as the primary performance measurement when communicating with analysts and investors regarding its earnings outlook and results. The company uses operating earnings data internally to measure performance against budget, to report to AEP's Board of Directors and also as an input in determining performance-based compensation under the company's employee incentive compensation plans.

American Electric Power, based in Columbus, Ohio, is focused on building a smarter energy infrastructure and delivering new technologies and custom energy solutions to our customers. AEP's approximately 18,000 employees operate and maintain the nation's largest electricity transmission system and more than 219,000 miles of distribution lines to efficiently deliver safe, reliable power to nearly 5.4 million regulated customers in 11 states. AEP also is one of the nation's largest electricity producers with approximately 32,000 megawatts of diverse generating capacity, including nearly 5,300 megawatts of renewable energy. AEP's family of companies includes utilities AEP Ohio, AEP Texas, Appalachian Power (in Virginia and West Virginia), AEP Appalachian Power (in Tennessee), Indiana Michigan Power, Kentucky Power, Public Service Company of Oklahoma, and Southwestern Electric Power Company (in Arkansas, Louisiana, east Texas and the Texas Panhandle). AEP also owns AEP Energy, AEP Energy Partners, AEP OnSite Partners, and AEP Renewables, which provide innovative competitive energy solutions nationwide. For more information, visit aep.com.

---

This report made by American Electric Power and its Registrant Subsidiaries contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934. Although AEP and each of its Registrant Subsidiaries believe that their expectations are based on reasonable assumptions, any such statements may be influenced by factors that could cause actual outcomes and results to be materially different from those projected. Among the factors that could cause actual results to differ materially from those in the forward-looking statements are: changes in economic conditions, electric market demand and demographic patterns in AEP service territories; inflationary or deflationary interest rate trends; volatility in the financial markets, particularly developments affecting the availability or cost of capital to finance new capital projects and refinance existing debt; the availability and cost of funds to finance working capital and capital needs, particularly during periods when the time lag between incurring costs and recovery is long and the costs are material; electric load and customer growth; weather conditions, including storms and drought conditions, and AEP's ability to recover significant storm restoration costs; the cost of fuel and its transportation, the creditworthiness and performance of fuel suppliers and transporters and the cost of storing and disposing of used fuel, including coal ash and spent nuclear fuel; availability of necessary generating capacity, the performance of AEP's generating plants and the availability of fuel; AEP's ability to recover fuel and other energy costs through regulated or competitive electric rates; AEP's ability to build or acquire renewable generation, transmission lines and facilities (including the ability to obtain any necessary regulatory approvals and permits) when needed at acceptable prices and terms and to recover those costs; new legislation, litigation and government regulation, including oversight of nuclear generation, energy commodity trading and new or heightened requirements for reduced emissions of sulfur, nitrogen, mercury, carbon, soot or particulate matter and other substances that could impact the continued operation, cost recovery, and/or profitability of AEP's generation plants and related assets; evolving public perception of the risks associated with fuels used before, during and after the generation of electricity, including nuclear fuel; timing and resolution of pending and future rate cases, negotiations and other regulatory decisions, including rate or other recovery of new investments in generation, distribution and transmission service and environmental compliance; resolution of litigation; AEP's ability to constrain operation and maintenance costs; prices and demand for power generated and sold at wholesale; changes in technology, particularly with respect to energy storage and new, developing, alternative or distributed sources of generation; AEP's ability to recover through rates any remaining unrecovered investment in generating units that may be retired before the end of their previously projected useful lives; volatility and changes in markets for capacity and electricity, coal, and other energy-related commodities, particularly changes in the price of natural gas; changes in utility regulation and the allocation of costs within regional transmission organizations, including ERCOT, PJM and SPP; changes in the creditworthiness of the counterparties with whom AEP has contractual arrangements, including participants in the energy trading market; actions of rating agencies, including changes in the ratings of AEP debt; the impact of volatility in the capital markets on the value of the investments held by AEP's pension, OPEB, captive insurance entity and nuclear decommissioning trust and the impact of such volatility on future funding requirements; accounting pronouncements periodically issued by accounting standard-setting bodies; and other risks and unforeseen events, including wars, the effects of terrorism (including increased security costs), embargoes, naturally occurring and human-caused fires, cyber security threats and other catastrophic events.

                                                                                                        
        
                American Electric Power




                                                                                           
              
          Financial Results for the Second Quarter of 2019


                                                                                        
              
          Reconciliation of GAAP to Operating Earnings (non-GAAP)




                                                                                                                                                                                                                                 2019


                                                                                             Vertically                    Transmission                      AEP                              Generation              Corporate                 Total                
        EPS
                                                                                       Integrated                 & Distribution             Transmission                     &                       and Other
                                                                                        Utilities                    Utilities                  Holdco                    Marketing



                                                                                                                                  
              ($ millions)





     
             GAAP Earnings (Loss)                                                             177.7                        131.4                               154.5                         9.4                              (11.7)                  461.3                            $
             0.93





     
             Special Items


                                          
     Mark-to-Market Impact of               (a)                                                                                                         12.3                                                       12.3                                       0.03

                                          
       Commodity Hedging Activities


                                          
     Severance Charges                      (b)                9.2                        (0.1)                                0.1                       (0.1)                                            9.1                             0.02


                                          
     Acquisition Fees                       (b)                                                                                                          5.8                                 5.1                    10.9                                     0.02




                                          
     Total Special Items                                       9.2                        (0.1)                                0.1                        18.0                                 5.1                    32.3                            $
             0.07






     
             Operating Earnings (Loss)                                  186.9                           131.3                          154.6                                    27.4                         (6.6)                     493.6                   $
       1.00


        (non-GAAP)




                                                                                           
              
          Financial Results for the Second Quarter of 2018


                                                                                        
              
          Reconciliation of GAAP to Operating Earnings (non-GAAP)




                                                                                                                                                                                                                                 2018


                                                                                             Vertically                    Transmission                      AEP                              Generation              Corporate                 Total                
        EPS
                                                                                       Integrated                 & Distribution             Transmission                     &                       and Other
                                                                                        Utilities                    Utilities                  Holdco                    Marketing



                                                                                                                                  
              ($ millions)





     
             GAAP Earnings (Loss)                                                             276.8                        114.0                               101.1                        38.8                               (2.3)                  528.4                            $
             1.07





     
             Special Items


                                          
     Mark-to-Market Impact of               (a)                                                                                                       (12.3)                                                    (12.3)                                   (0.02

                                          
       Commodity Hedging Activities


                                          
     Effects of Kentucky Tax Law            (c)                                                                                                                                          (17.8)                 (17.8)                                   (0.04




                                          
     Total Special Items                                                                                                                              (12.3)                             (17.8)                 (30.1)                          $
             (0.06






     
             Operating Earnings (Loss)                                        276.8                             114.0                                   101.1                        26.5                          (20.1)                     498.3                        $
         1.01


       (non-GAAP)



               (a)               Reflected in Revenues and
                                  Income Tax Expense.


               (b)               Reflected in Other
                                  Operation Expenses and
                                  Income Tax Expense.


               (c)               Reflected in Income Tax
                                  Expense.

                                                              
            
                American Electric Power


                                                           
            
                Summary of Selected Sales Data


                                                              
            
                Regulated Connected Load




                                                         
            (Data based on preliminary, unaudited results)




                                                                                                                 Three Months Ended June 30



     
               ENERGY & DELIVERY SUMMARY                                                                 2019      2018                  Change






     
               Vertically Integrated Utilities



     
               Retail Electric (in millions of kWh):



       Residential                                                                                        6,315                7,545              (16.3)
                                                                                                                                                      %



       Commercial                                                                                         5,710                6,232               (8.4)

                                                                                                                                                      %



       Industrial                                                                                         8,865                9,030               (1.8)

                                                                                                                                                      %



       Miscellaneous                                                                                        547                  587               (6.8)

                                                                                                                                                      %




          Total Retail                                                                                   21,437               23,394               (8.4)

                                                                                                                                                      %






     
                  Wholesale Electric (in millions of kWh): (a)                                          4,826                4,986               (3.2)

                                                                                                                                                      %





     
                  Total KWHs                                                                           26,263               28,380               (7.5)

                                                                                                                                                      %






     
               Transmission & Distribution Utilities



     
               Retail Electric (in millions of kWh):



       Residential                                                                                        5,799                6,409               (9.5)

                                                                                                                                                      %



       Commercial                                                                                         6,232                6,417               (2.9)

                                                                                                                                                      %



       Industrial                                                                                         5,864                6,194               (5.3)

                                                                                                                                                      %



       Miscellaneous                                                                                        196                  194                 1.0
                                                                                                                                                      %




          Total Retail (b)                                                                               18,091               19,214               (5.8)

                                                                                                                                                      %






     
                  Wholesale Electric (in millions of kWh): (a)                                            440                  534              (17.6)
                                                                                                                                                      %





     
                  Total KWHs                                                                           18,531               19,748               (6.2)

                                                                                                                                                      %




     (a) 
     Includes Off-System Sales, Municipalities and Cooperatives, Unit Power and Other Wholesale Customers.


     (b) 
     Represents energy delivered to distribution customers.

                                                                                                 
          
                American Electric Power




                                                                                            
          
             Financial Results for Year-to-Date 2019


                                                                                    
              
         Reconciliation of GAAP to Operating Earnings (non-GAAP)




                                                                                                                                                        2019


                                                           Vertically         Transmission                                AEP                           Generation        Corporate        Total 
     EPS
                                                      Integrated               &
                                                                           Distribution                           Transmission                           &             and Other
                                                      Utilities           Utilities                                Holdco                          Marketing



                                                                        
              ($ millions)





     
               GAAP Earnings (Loss)                         480.1                                   287.9                                                   278.7                49.5             (62.1)          1,034.1                   $
              2.10





     
               Special Items


        
             Mark-to-Market Impact of        (a)                                                                                                                               15.3                                15.3                               0.03

        
                Commodity Hedging Activities


        
             Severance Charges               (b)              17.6                                                                                            0.1               (0.1)               0.5              18.1          0.04


        
             Acquisition Fees                (b)                                                                                                                                5.8                5.1              10.9          0.02




        
             Total Special Items                              17.6                                                                                            0.1                21.0                5.6              44.3                   $
              0.09






     
               Operating Earnings (Loss)                    497.7                                   287.9                                                   278.8                70.5             (56.5)          1,078.4                   $
              2.19


         (non-GAAP)




                                                                                            
          
             Financial Results for Year-to-Date 2018


                                                                                    
              
         Reconciliation of GAAP to Operating Earnings (non-GAAP)




                                                                                                                                                        2018


                                                           Vertically         Transmission                                AEP                           Generation        Corporate        Total 
     EPS
                                                      Integrated               &
                                                                           Distribution                           Transmission                           &             and Other
                                                      Utilities           Utilities                                Holdco                          Marketing



                                                                        
              ($ millions)





     
               GAAP Earnings (Loss)                         508.0                                   239.4                                                   205.1                57.0             (26.7)            982.8                   $
              2.00





     
               Special Items


        
             Mark-to-Market Impact of        (a)                                                                                                                                6.5                                 6.5          0.01
            Commodity Hedging Activities


        
             Effects of Kentucky Tax Law     (c)                                                                                                                                                         (17.8)           (17.8)                (0.04)




        
             Total Special Items                                                                                                                                                6.5             (17.8)           (11.3)                $
              (0.03)






     
               Operating Earnings (Loss)                    508.0                                   239.4                                                   205.1                63.5             (44.5)            971.5                   $
              1.97


         (non-GAAP)



               (a)               Reflected in Revenues and
                                  Income Tax Expense.


               (b)               Reflected in Other
                                  Operation Expenses and
                                  Income Tax Expense.


               (c)               Reflected in Income Tax
                                  Expense.

                                                              
            
                American Electric Power


                                                           
            
                Summary of Selected Sales Data


                                                              
            
                Regulated Connected Load


                                                         
            (Data based on preliminary, unaudited results)




                                                                                                                 Six Months Ended June 30



     
               ENERGY & DELIVERY SUMMARY                                                                 2019      2018                Change






     
               Vertically Integrated Utilities



     
               Retail Electric (in millions of kWh):



       Residential                                                                                       15,531               17,117             (9.3)

                                                                                                                                                    %



       Commercial                                                                                        11,343               11,976             (5.3)

                                                                                                                                                    %



       Industrial                                                                                        17,410               17,650             (1.4)

                                                                                                                                                    %



       Miscellaneous                                                                                      1,093                1,141             (4.2)

                                                                                                                                                    %




          Total Retail                                                                                   45,377               47,884             (5.2)

                                                                                                                                                    %






     
                  Wholesale Electric (in millions of kWh): (a)                                         10,630               10,724             (0.9)

                                                                                                                                                    %





     
                  Total KWHs                                                                           56,007               58,608             (4.4)

                                                                                                                                                    %






     
               Transmission & Distribution Utilities



     
               Retail Electric (in millions of kWh):



       Residential                                                                                       12,346               13,206             (6.5)

                                                                                                                                                    %



       Commercial                                                                                        11,850               12,103             (2.1)

                                                                                                                                                    %



       Industrial                                                                                        11,635               11,868             (2.0)

                                                                                                                                                    %



       Miscellaneous                                                                                        372                  365               1.9
                                                                                                                                                    %




     
               Total Retail (b)                                                                        36,203               37,542             (3.6)

                                                                                                                                                    %






     
                  Wholesale Electric (in millions of kWh): (a)                                          1,078                1,201            (10.2)
                                                                                                                                                    %





     
                  Total KWHs                                                                           37,281               38,743             (3.8)

                                                                                                                                                    %




               (a)               Includes Off-System Sales,
                                  Municipalities and Cooperatives,
                                  Unit Power, and Other Wholesale
                                  Customers.


               (b)               Represents energy delivered to
                                  distribution customers.

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SOURCE American Electric Power