AEP Reports 2012 Third-Quarter Earnings

                   AEP Reports 2012 Third-Quarter Earnings

PR Newswire

COLUMBUS, Ohio, Oct. 24, 2012

COLUMBUS, Ohio, Oct. 24, 2012 /PRNewswire/ --

  oThird-quarter earnings $1.00 per share GAAP and $1.02 per share operating
  oContinued discipline around controlling costs
  oReceipt of Ohio orders provides additional clarity

AMERICAN ELECTRIC POWER
Preliminary, unaudited results

                                                  

                      Third quarter ended Sept. 30 Year-to-date ended Sept. 30
                      2012      2011    Variance   2012     2011    Variance
Revenue ($ in         4.2       4.3     (0.1)      11.3     11.7    (0.4)
billions)
Earnings ($ in millions):
      GAAP            487       928     (441)      1,238    1,633   (395)
      Operating       496       566     (70)       1,255    1,310   (55)
EPS ($):
      GAAP            1.00      1.92    (0.92)     2.55     3.39    (0.84)
      Operating       1.02      1.17    (0.15)     2.59     2.72    (0.13)


EPS based on 485mm shares Q3 2012, 482mm in Q3 2011, 484mm in YTD 2012 and
482mm in YTD 2011



American Electric Power (NYSE: AEP) today reported 2012 third-quarter
earnings, prepared in accordance with Generally Accepted Accounting Principles
(GAAP), of $487 million or $1.00 per share, compared with $928 million or
$1.92 per share for third-quarter 2011.

Operating earnings (excluding special items) for third-quarter 2012 were $496
million or $1.02 per share, $9 million or $0.02 per share higher than GAAP
earnings, because of a pretax $13 million adjustment associated with the
Southwestern Electric Power Co. Texas jurisdictional cost cap on the
construction of the John W. Turk Jr. coal-fueled power plant in Arkansas.
Year-to-date operating earnings for the nine months ending Sept. 30 were
$1.255 billion or $2.59 per share, $17 million or $0.04 per share higher than
GAAP earnings as a result of the Turk Plant cost-cap adjustment and an $8
million or $0.02-per-share severance provision related to the first phase of
AEP's cost restructuring efforts. GAAP earnings in third-quarter 2011 were
substantially higher than operating earnings as a result of a favorable Texas
Supreme Court decision on stranded costs.

A full reconciliation of 2012 and 2011 GAAP earnings with operating earnings
for the quarter and year to date is included in tables at the end of this news
release.

"Continued discipline around controlling costs and positive rate changes
across multiple jurisdictions partially offset a number of negative impacts on
our financial performance in the third quarter. Customer switching in Ohio and
the restoration costs associated with the June 29 derecho, which left an
unprecedented 1.4 million of our customers in five states without power, hurt
our performance. The drought and associated low-water conditions also hampered
our river transportation business," said Nicholas K. Akins, president and
chief executive officer.

"We are meeting our investment commitments in the transmission segment of our
business, primarily through Electric Transmission Texas and our state
transmission companies, and we are beginning to see earnings improvement each
quarter from transmission. Our transmission business remains a key component
of our strategy for future earnings growth," Akins said. "On the generation
side of our business, our Turk Plant, the first ultra-supercritical coal plant
in the nation, is nearly complete and we expect to start generating
electricity from the plant before the end of the year. This facility
demonstrates once again our ability to persevere and execute successfully on
our plans, despite significant challenges. I commend our employees and the
business and community partners who helped make Turk happen. I know that
region will benefit from the jobs and economic support that this plant
provides."

EARNINGS GUIDANCE

"Our earnings guidance for 2012 remains suspended because of the ongoing Ohio
regulatory proceedings. We have received orders from the Public Utilities
Commission of Ohio regarding capacity charges, the Electric Security Plan and
our corporate separation plan. These decisions have provided clarity for our
transition to full competition in Ohio, but some of these orders still are
subject to rehearing at the commission," Akins said.

"Despite some bright spots in the economy, particularly related to shale gas
development, the recovery is tenuous, and overall load growth in the regions
where we operate is expected to remain essentially flat. Our employees have
continued to demonstrate their ability to help us control costs and support
our earnings performance," Akins said. "We've been taking a hard look at all
aspects of our company over the last few months to ensure that our cost
profile is properly aligned to support our future plans. That study will
continue into the fourth quarter, and we are confident that we will identify
opportunities for sustainable cost-structure realignment and savings. We plan
to discuss the results of this effort in more detail in early 2013."

SUMMARY OF RESULTS BY SEGMENT
$ in millions

GAAP Earnings          3Q 12   3Q 11   Variance   YTD 12   YTD 11   Variance
 Utility Operations  470     904     (434)      1,217    1,625    (408)
 Transmission        14      9       5          31       19       12
Operations
 AEP River           (1)     17      (18)       11       23       (12)
Operations
 Generation and      10      8       2          4        20       (16)
Marketing
 All Other           (6)     (10)    4          (25)     (54)     29
 Total GAAP     487     928     (441)      1,238    1,633    (395)
Earnings
Operating Earnings     3Q 12   3Q 11   Variance   YTD 12   YTD 11   Variance
 Utility Operations  479     542     (63)       1,234    1,280    (46)
 Transmission        14      9       5          31       19       12
Operations
 AEP River           (1)     17      (18)       11       23       (12)
Operations
 Generation and      10      8       2          4        20       (16)
Marketing
 All Other           (6)     (10)    4          (25)     (32)     7
 Total          496     566     (70)       1,255    1,310    (55)
Operating Earnings


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

Operating earnings from Utility Operations during third-quarter 2012 were $63
million lower than in third-quarter 2011. This reflects lost earnings due to
customer switching in Ohio, higher storm restoration costs and cooler
temperatures in relation to last year, offset by the positive impact of
successful rate proceedings and lower spending as a result of our
cost-containment efforts. The difference between GAAP and operating earnings
in third-quarter 2012 relates to the Turk Plant cost-cap adjustment discussed
above.

Operating earnings from AEP River Operations during third-quarter 2012 were
$18 million lower than in third-quarter 2011 primarily due to the 2012
drought, which significantly impacted river conditions.

OPERATING MARGIN FROM UTILITY OPERATIONS
$ in millions

                                   3Q 12 3Q 11 Variance YTD 12 YTD 11 Variance
East Regulated Integrated          766   727   39       2,240  2,132  108
Utilities
Ohio Power Company                 666   727   (61)     1,852  2,099  (247)
West Regulated Integrated          450   460   (10)     1,105  1,110  (5)
Utilities
Texas Wires                        183   189   (6)      493    502    (9)
Off-System Sales                   91    111   (20)     274    293    (19)
Transmission Revenue - 3rd Party   129   109   20       366    311    55
Other Operating Revenue            153   142   11       386    403    (17)
 Utility Margin                2,438 2,465 (27)     6,716  6,850  (134)

Margin represents total revenues less the related direct cost of fuel,
including consumption of chemicals and emissionsallowances and purchased
power.

Retail Sales – Retail margins for the third quarter were $38 million less than
in the same period in 2011, primarily because of lost margins from customer
switching in Ohio and cooler temperatures in relation to 2011, offset by the
favorable impact of rate decisions. Retail Sales includes the East Regulated
Integrated Utilities, Ohio Power Company, West Regulated Integrated Utilities
and Texas Wires.

Off-System Sales – Margins from Off-System Sales were $20 million lower for
third- quarter 2012 compared with the same period in 2011 because of lower
demand and lower power prices.

Transmission Revenue – 3^rd Party – Transmission Revenue for third-quarter
2012 was $20 million higher than for the same period in 2011, primarily as a
result of increased revenues in ERCOT and PJM, including revenues associated
with customer switching.

Other Operating Revenue – Other Operating Revenue for third-quarter 2012 was
comparable with the same period last year.

SELECT OTHER OPERATING EXPENSES - UTILITY OPERATIONS

The following Utility Operations expense categories had significant
fluctuations in 2012 compared with 2011 (dollars in millions):

                                 3Q 12 3Q 11 Variance YTD 12 YTD 11 Variance
Maintenance and Other Operations 860   876   (16)     2,373  2,564  (191)
Depreciation and Amortization    458   435   23       1,318  1,226  92
Other Income & Deductions        34    99    (65)     108    188    (80)

Operations and maintenance expense decreased $16 million in third-quarter
2012, when compared with the prior year, primarily as a result of controlled
spending measures instituted in 2012, partially offset by higher storm
restoration costs.

Depreciation and Amortization expense increased $23 million in third-quarter
2012, when compared with the prior year, because of higher depreciation
related to shortened plant lives for certain generating plants and higher
amortization expense associated with regulatory assets.

Other Income & Deductions were $65 million lower in third-quarter 2012, when
compared with the prior year, due to carrying cost income associated with the
Texas capacity auction true-up that was recognized in July 2011 when the
Supreme Court of Texas overturned a 2006 Texas Commission order. The capacity
auction true-up amount, including accrued interest, was securitized in
first-quarter 2012.

WEBCAST

American Electric Power's quarterly conference call with financial analysts
will be broadcast live over the Internet at 9 a.m. EDT today at
http://www.aep.com/go/webcasts. The webcast will include audio of the
conference call and visuals of charts and graphics referred to by AEP
management during the call. The charts and graphics will be available for
download at http://www.aep.com/go/webcasts.

The call will be archived on http://www.aep.com/go/webcasts for those unable
to listen during the live webcast. Archived calls also are available as
podcasts.

---

American Electric Power is one of the largest electric utilities in the United
States, delivering electricity to more than 5 million customers in 11 states.
AEP ranks among the nation's largest generators of electricity, owning nearly
38,000 megawatts of generating capacity in the U.S. AEP also owns the nation's
largest electricity transmission system, a nearly 39,000-mile network that
includes more 765-kilovolt extra-high voltage transmission lines than all
other U.S. transmission systems combined. AEP's transmission system directly
or indirectly serves about 10 percent of the electricity demand in the Eastern
Interconnection, the interconnected transmission system that covers 38 eastern
and central U.S. states and eastern Canada, and approximately 11 percent of
the electricity demand in ERCOT, the transmission system that covers much of
Texas. AEP's utility units operate as 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 and east Texas).
AEP's headquarters are in Columbus, Ohio.

---

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. AEP's management believes that the
company's operating earnings, or GAAP earnings adjusted for certain items as
described in the news release and charts, provide a more meaningful
representation of the company's performance. AEP uses operating earnings as
the primary performance measurement when communicating with analysts and
investors regarding its earnings outlook and results. The company also uses
operating earnings data internally to measure performance against budget and
to report to AEP's board of directors.

---

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: the economic climate and growth
in, or contraction within, AEP's service territory and changes in market
demand and demographic patterns; inflationary or deflationary interest rate
trends; volatility in the financial markets, particularly developments
affecting the availability of capital on reasonable terms and developments
impairing AEP's ability to finance new capital projects and refinance existing
debt at attractive rates; 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, customer growth and the impact of retail competition,
particularly in Ohio; weather conditions, including recent storms in our
eastern service territory, and AEP's ability to recover significant storm
restoration costs through applicable rate mechanisms; available sources and
costs of, and transportation for, fuels and the creditworthiness and
performance of fuel suppliers and transporters; availability of necessary
generating capacity and the performance of AEP's generating plants; AEP's
ability to resolve I&M's Donald C. Cook Nuclear Plant Unit 1 restoration and
outage-related issues through warranty, insurance and the regulatory process;
AEP's ability to recover regulatory assets and stranded costs in connection
with deregulation; AEP's ability to recover increases in fuel and other energy
costs through regulated or competitive electric rates; AEP's ability to build
or acquire generating capacity, and 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
(including the costs of projects that are cancelled) through applicable rate
cases or competitive rates; 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 or
additional regulation of fly ash and similar combustion products that could
impact the continued operation and cost recovery of AEP's plants and related
assets; a reduction in the federal statutory tax rate that could result in an
accelerated return of deferred federal income taxes to customers; 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;
AEP's ability to develop and execute a strategy based on a view regarding
prices of electricity, natural gas and other energy-related commodities;
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;
volatility and changes in markets for electricity, natural gas and other
energy-related commodities; changes in utility regulation, including the
implementation of Electric Security Plans and the transition to market and
expected legal separation for generation in Ohio and the allocation of costs
within regional transmission organizations, including PJM and SPP; accounting
pronouncements periodically issued by accounting standard-setting bodies; the
impact of volatility in the capital markets on the value of the investments
held by AEP's pension, other postretirement benefit plans, captive insurance
entity and nuclear decommissioning trust and the impact on future funding
requirements; prices and demand for power that AEP generates and sells at
wholesale; changes in technology, particularly with respect to new, developing
or alternative sources of generation; AEP's ability to recover through rates
or market prices any remaining unrecovered investment in generating units that
may be retired before the end of their previously projected useful lives;
AEP's ability to successfully manage negotiations with stakeholders and obtain
regulatory approval to terminate or amend the Interconnection Agreement;
evolving public perception of the risks associated with fuels used before,
during and after the generation of electricity, including nuclear fuel; and
other risks and unforeseen events, including wars, the effects of terrorism
(including increased security costs), embargoes, cyber security threats and
other catastrophic events.

American Electric Power
Financial Results for the 3rd Quarter 2012
Reconciliation of GAAP to Operating Earnings
                2012
                                       AEP River   Generation  Parent
                Utility  Transmission  Operations  and         & All   Total  EPS
                                                   Marketing   Other
                ($ millions)
GAAP Earnings   470      14            (1)         10          (6)     487    $   
                                                                              1.00
Special Items
  Turk       a 9        -             -           -           -       9      $   
  Plant                                                                      0.02
  Total                                                                       $   
  Special       9        -             -           -           -       9      0.02
  Items
  Operating     479      14            (1)         10          (6)     496    $   
  Earnings                                                                    1.02
Financial Results for the 3rd Quarter 2011
Reconciliation of GAAP to Operating Earnings
                2011
                                       AEP River   Generation  Parent
                Utility  Transmission  Operations  and         & All   Total  EPS
                                                   Marketing   Other
                ($ millions)
GAAP Earnings   904      9             17          8           (10)    928    $   
                                                                              1.92
Special Items
  Carbon                                                                     $   
  Capture &   b 5        -             -           -           -       5      0.01
  Storage
  Sporn Unit                                                                 $   
  5           a 31       -             -           -           -       31     0.06
  Retirement
  Muskingum
  River Unit
  5 -         a 27       -             -           -           -       27     $   
  Suspended                                                                   0.06
  Scrubber
  Project
  Texas
  Capacity    c (425)    -             -           -           -       (425)  $  
  Auction                                                                     (0.88)
  True-up
  Total                                                                       $  
  Special       (362)    -             -           -           -       (362)  (0.75)
  Items
  Operating     542      9             17          8           (10)    566    $   
  Earnings                                                                    1.17
a Reflected in Impairments and Income Taxes
b Reflected in Maintenance and Income Taxes
c Reflected in Interest Income, Extraordinary Loss and Income Taxes



American Electric Power
Summary of Selected Sales Data
(Data based on preliminary, unaudited results)
                                          Three Months Ending September 30,
ENERGY & DELIVERY SUMMARY                 2012           2011        Change
Retail Electric (in millions of kWh):
 Residential                            17,664         18,238      (3.1%)
 Commercial                             14,091         14,274      (1.3%)
 Industrial                             14,729         15,206      (3.1%)
 Miscellaneous                          824            854         (3.5%)
 Total Retail (a)                       47,308         48,572      (2.6%)
Wholesale Electric (in millions of        12,876         13,164      (2.2%)
kWh): (b)
Total KWHs                                60,184         61,736      (2.5%)
(a) Represents energy delivered to
distribution customers
(b) Includes Off-System Sales, Municipalities and Cooperatives, Unit Power,
and
 Other Wholesale Customers.

American Electric Power
Financial Results for Year-to-Date 2012
Reconciliation of GAAP to Operating Earnings
                   2012
                                          AEP River   Generation  Parent
                   Utility  Transmission  Operations  and         & All   Total  EPS
                                                      Marketing   Other
                   ($ millions)
GAAP Earnings      1,217    31            11          4           (25)    1,238  $   
                                                                                 2.55
Special Items
  Restructuring a 8        -             -           -           -       8      0.02
  Program
  Turk Plant    c 9        -             -           -           -       9      0.02
  Impairment
  Total Special    17       -             -           -           -       17     $   
  Items                                                                          0.04
  Operating        1,234    31            11          4           (25)    1,255  $   
  Earnings                                                                       2.59
Financial Results for Year-to-Date 2011
Reconciliation of GAAP to Operating Earnings
                   2011
                                          AEP River   Generation  Parent
                   Utility  Transmission  Operations  and         & All   Total  EPS
                                                      Marketing   Other
                   ($ millions)
GAAP Earnings      1,625    19            23          20          (54)    1,633  $   
                                                                                 3.39
Special Items
  Restructuring a (9)      -             -           -           -       (9)    (0.02)
  Program
  Carbon
  Capture &      a 31       -             -           -           -       31     0.07
  Storage
  Litigation
  Settlement -   b -        -             -           -           22      22     0.05
  Enron
  Bankruptcy
  Sporn Unit 5  c 31       -             -           -           -       31     0.06
  Retirement
  Muskingum
  River Unit 5 -
  Suspended      c 27       -             -           -           -       27     0.05
  Scrubber
  Project
  Texas
  Capacity       d (425)    -             -           -           -       (425)  (0.88)
  Auction
  True-up
  Total Special    (345)    -             -           -           22      (323)  $  
  Items                                                                          (0.67)
  Operating        1,280    19            23          20          (32)    1,310  $   
  Earnings                                                                       2.72
a Reflected in Maintenance and Other Operation, and
  Income Taxes
b Reflected in Loss(Gain) of Sale of Property, and Income Taxes
c Reflected in Impairments and Income Taxes
d Reflected in Interest Income, Extraordinary Loss and Income
  Taxes



American Electric Power
Summary of Selected Sales Data
(Data based on preliminary, unaudited results)
                                             Nine Months Ending September 30,
ENERGY & DELIVERY SUMMARY                    2012           2011       Change
Retail Electric (in millions of kWh):
 Residential                               45,617         48,690     (6.3%)
 Commercial                                38,444         38,833     (1.0%)
 Industrial                                44,798         44,688     0.2%
 Miscellaneous                             2,325          2,354      (1.2%)
 Total Retail (a)                          131,184        134,565    (2.5%)
Wholesale Electric (in millions of kWh):     30,408         32,532     (6.5%)
(b)
Total KWHs                                   161,592        167,097    (3.3%)
(a) Represents energy delivered to
distribution customers
(b) Includes Off-System Sales, Municipalities and Cooperatives, Unit
Power, and
 Other Wholesale Customers.

SOURCE American Electric Power

Website: http://www.aep.com
Contact: Melissa McHenry, Senior Manager, Corporate Media Relations,
+1-614-716-1120; or ANALYSTS CONTACT: Bette Jo Rozsa, Managing Director,
Investor Relations, +1-614-716-2840
 
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