COLUMBUS, Ohio, July 18, 2002 – American Electric Power (AEP) said recently it had a very disappointing June that reduced second-quarter ongoing earnings below expectations and will make it difficult to meet earnings targets for the year.
The company expects to reduce its 2002 ongoing earnings guidance in the range of 10 percent.
“Our business in Texas had a surprising negative turnaround in June because of mild weather and lower utilization of our generation in the state,” said E. Linn Draper Jr., AEP’s chairman, president and chief executive officer. “The lower utilization of our plants combined with high natural gas prices in June to squeeze margins.
“The turmoil in the wholesale market also has intensified in the past few weeks,” Draper said. “While cautious all along, we had anticipated – until very recently – a return to more stability that would provide an opportunity for business recovery. That assumption is no longer sustainable in the short term.”
Other contributing factors include the continued weakening of wholesale power prices in the United Kingdom and the inability to realize significant benefits in the UK balancing market in the late second quarter. AEP expects continued weakness in UK wholesale power prices through the third quarter with some recovery during the winter heating season.
“These factors cause us to reduce our ongoing earnings guidance for 2002 in the range of 10 percent,” Draper said. Previous ongoing earnings guidance for 2002 was $3.60 to $3.75 per share.
The company expects second-quarter ongoing earnings to miss the current $0.77 consensus Wall Street estimate by $0.20 to $0.25. Ongoing earnings do not include the previously announced one-time loss related to the sale of AEP’s SEEBOARD retail electricity and gas supply and electricity distribution subsidiary in the United Kingdom, or any potential one-time losses associated with the planned sale of AEP’s CitiPower retail electricity and gas supply and electricity distribution subsidiary in Australia.
The disappointing earnings performance has not changed AEP’s commitment to its dividend.
“We recognize the importance of our dividend to investors,” Draper said. “Management intends to continue to recommend to the board that we maintain the dividend at the current $0.60 per quarter.”
American Electric Power is a multinational energy company with a balanced portfolio of energy assets. AEP, the United States’ largest electricity generator, owns and operates more than 42,000 megawatts of generating capacity in the U.S. and select international markets.
AEP is a wholesale energy marketer, ranking among North America’s top providers of wholesale power and natural gas with a growing wholesale presence in European markets. In addition to electricity generation, AEP owns and operates natural gas pipeline systems, natural gas storage, coal mines, and the fourth-largest inland barge company in the U.S. AEP is also one of the largest electric utilities in the United States, with almost 5 million customers linked to AEP’s wires. The company is based in Columbus, Ohio.