AEP Reports Strong 2013 Fourth-Quarter and Year-End Earnings; Completes Ohio Corporate Separation
American Electric Power (NYSE: AEP) reported fourth-quarter 2013 earnings, prepared in accordance with Generally Accepted Accounting Principles (GAAP), of $346 million or $0.71 per share, compared with $21 million or $0.05 per share in 2012. Operating earnings (excluding special items) for fourth-quarter 2013 were $296 million or $0.60 per share, compared with fourth-quarter 2012 operating earnings of $242 million or $0.50 per share. The difference in fourth-quarter 2013 GAAP and operating earnings was primarily due to the reversal of a third-quarter Texas regulatory disallowance.
GAAP earnings for year-end 2013 were $1.480 billion or $3.04 per share, compared with $1.259 billion or $2.60 per share in 2012. Operating earnings for 2013 were $1.573 billion or $3.23 per share, compared with $1.497 billion or $3.09 per share in 2012.
For the year, operating earnings were $93 million, or $0.19 per share higher than GAAP earnings, due to the following items (net of tax): plant impairments of $124 million, or $0.25 per share; a $25 million, or $0.05 per share, regulatory disallowance resulting from a Virginia State Corporation Commission order related to the ownership transfer of Amos Plant Unit 3; a $19 million, or $0.04 per share, reversal of a storm cost deferral in Virginia; and a $5 million, or $0.01 per share, restructuring charge. These negative items were offset partially by the effects of a U.S. Supreme Court decision resulting in a favorable $80 million, or $0.16 per share, United Kingdom (U.K.) windfall profits tax credit.
A full reconciliation of 2013 and 2012 GAAP earnings with operating earnings for the quarter and year to date is included in tables at the end of this news release.
"Our solid financial performance in 2013, despite the loss of significant retail margins in Ohio, reflects our focus on our earnings growth strategy - investment in our core regulated operations, including our transmission business, and achieving cost savings through sustainable process improvements," said Nicholas K. Akins, AEP's chairman, president and chief executive officer. "We remain committed to growing earnings 4 to 6 percent off of our 2013 earnings guidance range of $3.05 to $3.25 per share."
"AEP shareholders received a 14.2 percent total return in 2013, including dividends, which exceeded the total shareholder return of 7.8 percent for the S&P 500 Electric Utilities Index. We increased our annual dividend by 6.4 percent, and our debt to total capitalization improved to 54.3 percent, the lowest ratio in 15 years. Additionally, our qualified pension plan funding reached 99 percent.
"We benefited from successful regulatory proceedings in several jurisdictions, and our transmission investments delivered earnings improvement in every quarter, with transmission nearly doubling its earnings contribution in 2013," Akins said.
"We completed corporate separation of our Ohio assets on schedule and received all necessary approvals to transfer our AEP Ohio generating assets Dec. 31, 2013, to regulated affiliates and our new competitive generation affiliate. We appreciate the constructive participation from the regulators and stakeholders who were engaged in this process.
"I'm most impressed with the diligence and performance of our employees over the last year. We completed a second consecutive year with no fatalities, and they demonstrated an incredible commitment to safety, environmental stewardship and process improvement. Their creativity and focus on doing things better have been amazing, and I'm confident that we'll identify additional sustainable savings as we expand our initiatives to more areas of the company," Akins said.
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