AEP Reports Strong Second-Quarter 2020 Earnings; Managing Performance During Economic Downturn
COLUMBUS, Ohio, Aug. 6, 2020 /PRNewswire/ --
AMERICAN ELECTRIC POWER
Preliminary, unaudited results
Second Quarter ended June 30 Year-to-date ended June 30
2020 2019 Variance 2020 2019 Variance
Revenue ($ in billions): 3.5 3.6 (0.1) 7.2 7.6 (0.4)
Earnings ($ in millions):
GAAP 520.8 461.3 59.5 1,016.0 1,034.1 (18.1)
Operating (non-GAAP) 533.5 493.6 39.9 1,037.7 1,078.4 (40.7)
EPS ($):
GAAP 1.05 0.93 0.12 2.05 2.10 (0.05)
Operating (non-GAAP) 1.08 1.00 0.08 2.10 2.19 (0.09)
EPS based on 496 million shares 2Q 2020, 494 million shares 2Q 2019, 495 million shares YTD 2020 and 493 million shares YTD 2019.
American Electric Power (NYSE: AEP) today reported second-quarter 2020 earnings, prepared in accordance with Generally Accepted Accounting Principles (GAAP), of $521 million or $1.05 per share, compared with GAAP earnings of $461 million or $0.93 per share in second-quarter 2019. Operating earnings for second-quarter 2020 were $534 million or $1.08 per share, compared with operating earnings of $494 million or $1.00 per share in second-quarter 2019. Operating earnings is a non-GAAP measure representing GAAP earnings excluding special items. The difference between 2020 GAAP earnings and operating earnings for the quarter was primarily driven by the impacts of COVID-19 and the Achieving Excellence cost savings and efficiency program.
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.
"Our employees have done an amazing job protecting themselves and our customers over the past five months as we've kept power flowing, responded to storms and adjusted to a new normal of nearly 12,000 employees working remotely. In the last few months, we've focused on outreach to our customers, providing resources and payment options to help them manage the economic impacts of the pandemic," said Nicholas K. Akins, AEP chairman, president and chief executive officer.
"While adjusting to the challenges of the pandemic, we still made significant progress on our long-term strategy to diversify our generation mix in the second quarter. We received all necessary approvals to move forward with the $2 billion North Central wind projects that will provide renewable energy for our customers in Arkansas, Louisiana and Oklahoma. Additionally, we retired the last generating unit at our coal-fueled Conesville Plant in Ohio.
"We've continued to review our load projections based on the economic impacts of the pandemic. The overall load declines we experienced in the second quarter were consistent with our expectations, and we've seen gradual improvements in load growth since May. If the ongoing impacts of the pandemic don't necessitate closing non-essential businesses again, we expect gradual economic recovery to continue throughout the second half of this year," Akins said.
"The 2020 operations and maintenance spending cuts we announced in May are on target, and we remain focused on achieving longer term efficiencies through our Achieving Excellence Program. We are reaffirming our existing 2020 operating earnings guidance range of $4.25 to $4.45 per share. We've also updated our five-year capital plan from $33 billion to $35 billion to include the North Central wind projects and are reaffirming our long-term growth rate of 5% to 7%," Akins said.
SUMMARY OF RESULTS BY SEGMENT
$ in millions
GAAP Earnings 2Q 20 2Q 19 Variance YTD 20 YTD 19 Variance
Vertically Integrated Utilities (a) 255.9 177.7 78.2 501.2 480.1 21.1
Transmission & Distribution Utilities (b) 139.5 131.4 8.1 255.7 287.9 (32.2)
AEP Transmission Holdco (c) 91.5 154.5 (63.0) 232.1 278.7 (46.6)
Generation & Marketing (d) 65.9 9.4 56.5 94.3 49.5 44.8
All Other (32.0) (11.7) (20.3) (67.3) (62.1) (5.2)
Total GAAP Earnings (Loss) 520.8 461.3 59.5 1,016.0 1,034.1 (18.1)
Operating Earnings (non-GAAP) 2Q 20 2Q 19 Variance YTD 20 YTD 19 Variance
Vertically Integrated Utilities (a) 270.4 186.9 83.5 517.6 497.7 19.9
Transmission & Distribution Utilities (b) 144.9 131.3 13.6 261.9 287.9 (26.0)
AEP Transmission Holdco (c) 93.9 154.6 (60.7) 234.5 278.8 (44.3)
Generation & Marketing (d) 55.9 27.4 28.5 90.6 70.5 20.1
All Other (31.6) (6.6) (25.0) (66.9) (56.5) (10.4)
Total Operating Earnings (non-GAAP) 533.5 493.6 39.9 1,037.7 1,078.4 (40.7)
A full reconciliation of GAAP earnings with
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
Company of Oklahoma, Southwestern
Electric Power and Wheeling
Power.
b. Includes Ohio Power and AEP Texas.
c. Includes wholly-owned
transmission-only subsidiaries
and transmission-only joint
ventures.
d. Includes AEP OnSite Partners, AEP
Renewables, competitive
generation in ERCOT and PJM as
well as marketing, risk
management and retail activities
in ERCOT, PJM and MISO.
EARNINGS GUIDANCE
AEP management reaffirmed its 2020 operating earnings guidance range to $4.25 to $4.45 per share. Operating earnings could differ from GAAP earnings for matters such as impairments, 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 $4.20 to $4.40 per share. See the table below for a full reconciliation of 2020 earnings guidance.
2020 EPS Guidance Reconciliation
Estimated EPS on a GAAP basis $4.20 to $4.40
Mark-to-market impact of commodity (0.01)
hedging activities
COVID-19 0.04
Achieving Excellence Program 0.02
Operating EPS Guidance $4.25 to $4.45
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 17,400 employees operate and maintain the nation's largest electricity transmission system and more than 221,000 miles of distribution lines to efficiently deliver safe, reliable power to nearly 5.5 million regulated customers in 11 states. AEP also is one of the nation's largest electricity producers with approximately 30,000 megawatts of diverse generating capacity, including more than 5,200 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.
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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; the impact of pandemics,
including COVID-19, and any associated
disruption of AEP's business operations
due to impacts on economic or market
conditions, electricity usage, employees,
customers, service providers, vendors and
suppliers; 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;
decreased demand for electricity; 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; the availability of fuel and
necessary generation capacity and the
performance of AEP's generation plants;
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
coal ash and 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 generation units that may
be retired before the end of their
previously projected useful lives;
volatility and changes in markets for
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 standards
periodically issued by accounting
standard-setting bodies; 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; and the ability to attract and
retain the requisite work force and key
personnel.
American Electric Power
Financial Results for the Second Quarter of 2020
Reconciliation of GAAP to Operating Earnings (non-GAAP)
2020
Vertically Transmission AEP Generation Corporate Total
EPS
Integrated &
Distribution Transmission & and Other
Utilities Utilities Holdco Marketing
($ millions)
GAAP Earnings (Loss) 255.9 139.5 91.5 65.9 (32.0) 520.8 $
1.05
Special Items
Mark-to-Market Impact of (a) (10.4) (10.4) (0.02)
Commodity Hedging
Activities
COVID-19 (b) 8.8 3.1 0.5 0.1 12.5 0.03
Achieving Excellence Program (c) 5.7 2.3 1.9 0.3 0.4 10.6 0.02
Total Special Items 14.5 5.4 2.4 (10.0) 0.4 12.7 $
0.03
Operating Earnings (Loss) 270.4 144.9 93.9 55.9 (31.6) 533.5 $
1.08
(non-GAAP)
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 (c) 9.2 (0.1) 0.1 (0.1) 9.1 0.02
Acquisition Fees (c) 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)
(a) Reflected in Revenues and
Income Tax Expense
(b) Reflected in Fuel Expense,
Other Operation Expenses
and Income Tax Expense
(c) Reflected in Other
Operation Expenses and
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 2020 2019 Change
Vertically Integrated Utilities
Retail Electric (in millions of kWh):
Residential 6,976 6,315 10.5
%
Commercial 5,150 5,710 (9.8)
%
Industrial 7,699 8,865 (13.2)
%
Miscellaneous 511 547 (6.6)
%
Total Retail 20,336 21,437 (5.1)
%
Wholesale Electric (in millions of kWh): (a) 4,924 4,826 2.0
%
Total KWHs 25,260 26,263 (3.8)
%
Transmission & Distribution Utilities
Retail Electric (in millions of kWh):
Residential 6,299 5,799 8.6
%
Commercial 5,559 6,232 (10.8)
%
Industrial 5,148 5,864 (12.2)
%
Miscellaneous 180 196 (8.2)
%
Total Retail (b) 17,186 18,091 (5.0)
%
Wholesale Electric (in millions of kWh): (a) 455 440 3.4
%
Total KWHs 17,641 18,531 (4.8)
%
(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 2020
Reconciliation of GAAP to Operating Earnings (non-GAAP)
2020
Vertically Transmission AEP Generation Corporate Total
EPS
Integrated &
Distribution Transmission & and Other
Utilities Utilities Holdco Marketing
($ millions)
GAAP Earnings (Loss) 501.2 255.7 232.1 94.3 (67.3) 1,016.0 $
2.05
Special Items
Mark-to-Market Impact of (a) (4.1) (4.1) (0.01)
Commodity Hedging Activities
COVID-19 (b) 10.7 3.9 0.5 0.1 15.2 0.04
Achieving Excellence Program (c) 5.7 2.3 1.9 0.3 0.4 10.6 0.02
Total Special Items 16.4 6.2 2.4 (3.7) 0.4 21.7 $
0.05
Operating Earnings (Loss) 517.6 261.9 234.5 90.6 (66.9) 1,037.7 $
2.10
(non-GAAP)
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 (c) 17.6 0.1 (0.1) 0.5 18.1 0.04
Acquisition Fees (c) 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)
(a) Reflected in Revenues and
Income Tax Expense
(b) Reflected in Fuel Expense,
Other Operation Expenses
and Income Tax Expense
(c) Reflected in Other
Operation Expenses and
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 2020 2019 Change
Vertically Integrated Utilities
Retail Electric (in millions of kWh):
Residential 15,238 15,531 (1.9)
%
Commercial 10,516 11,343 (7.3)
%
Industrial 16,174 17,410 (7.1)
%
Miscellaneous 1,041 1,093 (4.8)
%
Total Retail 42,969 45,377 (5.3)
%
Wholesale Electric (in millions of kWh): (a) 8,542 10,630 (19.6)
%
Total KWHs 51,511 56,007 (8.0)
%
Transmission & Distribution Utilities
Retail Electric (in millions of kWh):
Residential 12,599 12,346 2.0
%
Commercial 11,432 11,850 (3.5)
%
Industrial 11,056 11,635 (5.0)
%
Miscellaneous 362 372 (2.7)
%
Total Retail (b) 35,449 36,203 (2.1)
%
Wholesale Electric (in millions of kWh): (a) 845 1,078 (21.6)
%
Total KWHs 36,294 37,281 (2.6)
%
(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
