Exhibit 99.1
AEP REPORTS 2006 SECOND-QUARTER EARNINGS AND INCREASES ONGOING GUIDANCE
- 2006 second-quarter earnings: GAAP $0.44 per share, ongoing $0.44 per
share
- AEP increases 2006 ongoing earnings guidance range to between $2.65 and
$2.80 per share from the previous range of between $2.50 and $2.70 per
share
COLUMBUS, Ohio, July 27 /PRNewswire-FirstCall/ --
AMERICAN ELECTRIC POWER
Preliminary, unaudited results
2nd quarter ended June 30 6 months ended June 30
------------------------------ ------------------------------
2005 2006 Variance 2005 2006 Variance
-------- -------- -------- -------- -------- --------
Revenue ($ in billions) 2.8 2.9 0.1 5.9 6.0 0.1
Earnings ($ in millions):
GAAP 221 175 (46) 576 556 (20)
Ongoing 237 172 (65) 578 550 (28)
EPS ($):
GAAP 0.58 0.44 (0.14) 1.48 1.41 (0.07)
Ongoing 0.62 0.44 (0.18) 1.49 1.40 (0.09)
EPS based on 384mm shares in Q2 2005, 394mm in Q2 2006, 389mm in 6 mo.
2005 and 394mm in 6 mo. 2006
American Electric Power (NYSE: AEP) today reported 2006 second-quarter
earnings, prepared in accordance with Generally Accepted Accounting Principles
(GAAP), of $175 million, or $0.44 per share, compared with $221 million, or
$0.58 per share, for second-quarter 2005.
Ongoing earnings (earnings excluding special items) for second-quarter 2006
were $172 million, or $0.44 per share, compared with $237 million, or $0.62 per
share, for second-quarter 2005.
GAAP earnings were greater than ongoing earnings by $3 million for the
quarter, primarily because of an adjustment on the sale of a discontinued asset.
A full reconciliation of GAAP earnings to ongoing earnings for the quarter and
year to date is included in tables at the end of this news release.
"There are a number of positive factors that contributed to our performance
in the quarter and support raising guidance for 2006," said Michael G. Morris,
AEP's chairman, president and chief executive officer. "We're seeing increased
revenue flowing through from the recently approved rate increases for several of
our utilities in the East. We're benefiting from our success in gaining new
power supply contracts with municipal and cooperative customers. And MEMCO, our
barge subsidiary, is showing continued outstanding results.
"With the recent spate of extremely hot weather across the nation, it may be
difficult to remember that April and May, the first two months of the second
quarter, were unseasonably mild across our eastern states, where more than 60
percent of our customers live and work," Morris said. "We were still able to
record solid results for the quarter."
Events impacting quarter-to-quarter comparisons were reduced off-system
sales opportunities caused by AEP's May 2005 sale of its 630-megawatt interest
in the South Texas Project (STP), a Texas nuclear plant that provided revenue in
the 2005 quarter; unplanned outages at a number of plants to address a safety
concern; the cessation of the Seams Elimination Charge Adjustment, or SECA,
rates that contributed to earnings in 2005; and the recording of a provision for
a potential refund related to those rates.
EARNINGS GUIDANCE
AEP increased its ongoing earnings guidance range for 2006 to between $2.65
and $2.80 per share from the previous ongoing earnings guidance range of between
$2.50 and $2.70 per share.
"We've had a number of earnings positives and earnings negatives from our
utility operations in the first six months," Morris said. "For instance, mild
weather has softened earnings from retail sales, but better-than-anticipated
off-system sales from our remaining generating fleet are ahead of the
projections we made for the year.
"And MEMCO is having an exceptional year," Morris said. "We expected MEMCO's
earnings contribution to be solid, but results so far have been well ahead of
our most optimistic projections. MEMCO is positioned to continue to benefit from
a strong freight market, as both unit prices and volumes are up substantially.
"These factors, when added to the revenue effects of a hotter-than-normal
July through much of our service area, have caused us to increase our ongoing
earnings guidance range," Morris said.
In providing ongoing earnings guidance, there could be differences between
ongoing earnings and GAAP earnings for matters such as, but not limited to,
divestitures or changes in accounting principles. AEP management is not able to
estimate the impact, if any, on GAAP earnings of these items. Therefore, AEP is
not able to provide a corresponding GAAP equivalent for earnings guidance.
SUMMARY ONGOING RESULTS BY SEGMENT
$ in millions except EPS
Q2 05 Q2 06 Variance 6 mo. 05 6 mo. 06 Variance
-------- -------- -------- -------- -------- --------
Utility Operations 262 160 (102) 605 525 (80)
Ongoing EPS 0.68 0.41 (0.27) 1.56 1.33 (0.23)
Investments 1 15 14 13 30 17
Ongoing EPS 0.01 0.04 0.03 0.03 0.08 0.05
Parent Company (26) (3) 23 (40) (5) 35
Ongoing EPS (0.07) (0.01) 0.06 (0.10) (0.01) 0.09
Ongoing Earnings 237 172 (65) 578 550 (28)
Ongoing EPS 0.62 0.44 (0.18) 1.49 1.40 (0.09)
EPS based on 384mm shares in Q2 2005, 394mm in Q2 2006, 389mm in 6 mo.
2005 and 394mm in 6 mo. 2006
Ongoing earnings from Utility Operations decreased by $102 million during
the second quarter of 2006 compared with the same period in 2005. Higher gross
margins from retail sales, primarily from AEP's regulated integrated utilities
in the west, and the benefit of increased rates were more than offset by lost
transmission revenue and the sale of AEP's STP interest in 2005. Higher expenses
were also recorded in the recently completed quarter than in the same period in
2005.
AEP's MEMCO barge operations continue to benefit from favorable freight
rates included in its 2006 contracts. MEMCO's strong performance was the primary
factor in the $14 million improvement in Investments in the quarter when
compared to the same period in 2005.
Parent Company is favorable by $23 million in second-quarter 2006 when
compared to the same period in 2005, primarily because of costs incurred in the
prior year associated with the April 2005 $550 million bond buyback.
ONGOING RESULTS FROM UTILITY OPERATIONS
$ in millions except EPS
Q2 05 Q2 06 Variance 6 mo. 05 6 mo. 06 Variance
-------- -------- -------- -------- -------- --------
East Regulated Integrated
Utilities 465 471 6 989 1,035 46
Ohio Companies 485 487 2 953 1,004 51
West Regulated Integrated
Utilities 232 272 40 410 467 57
Texas Wires 113 121 8 213 227 14
Off-System Sales 201 152 (49) 448 375 (73)
Transmission Revenue - 3rd
Party 104 49 (55) 205 151 (54)
Other Operating Revenue 114 121 7 257 256 (1)
Utility Gross Margin 1,714 1,673 (41) 3,475 3,515 40
Operations & Maintenance (745) (801) (56) (1,478) (1,528) (50)
Depreciation & Amortization (317) (339) (22) (635) (672) (37)
Taxes Other Than Income Taxes (170) (186) (16) (356) (373) (17)
Interest Expense & Preferred
Dividend (156) (160) (4) (300) (314) (14)
Other Income & Deductions 49 43 (6) 178 153 (25)
Income Taxes (113) (70) 43 (279) (256) 23
Utility Operations
Ongoing Earnings 262 160 (102) 605 525 (80)
Ongoing EPS 0.68 0.41 (0.27) 1.56 1.33 (0.23)
EPS based on 384mm shares in Q2 2005, 394mm in Q2 2006, 389mm in 6 mo.
2005 and 394mm in 6 mo. 2006
Retail Sales - Results for second-quarter 2006 were higher than those in the
same period in 2005, reflecting increased sales from the West Regulated
Integrated Utilities and changes in the System Integration Agreement approved by
the Federal Energy Regulatory Commission (FERC); the positive impact of the Ohio
Companies' rate stabilization plan approved last year by the Public Utilities
Commission of Ohio; the purchase of approximately 29,000 Ohio customers and
related transmission and distribution assets from Monongahela Power, a
subsidiary of Allegheny Energy, at the end of 2005; and implementation of a
recently approved rate plan for Kentucky Power in the East Regulated Integrated
Utilities. The West Regulated Integrated Utilities also benefited from increased
sales to municipal and cooperative customers as a result of new power supply
contracts and from favorable weather. Cooling degree-days in the West were 25
percent above normal in the quarter and 20 percent above the same period last
year. The revised rate plans for the Ohio Companies and Kentucky Power and the
acquisition in Ohio brought improved results from the Ohio Companies and East
Regulated Integrated Utilities despite higher fuel costs and mild weather.
Cooling degree-days in the East were 18 percent below normal for the quarter and
21 percent below last year.
Off-System Sales - Gross margins from Off-System Sales for second-quarter
2006 were $49 million lower than in the same period in 2005 because of the sale
of AEP's STP interests and an unplanned outage at the Oklaunion generating plant
as well as lower margins from optimization activities. Stronger prices on
physical sales in the East partially offset the impact of this reduced
generating capacity.
Transmission Revenues - The $55 million decrease in Transmission Revenues
for second-quarter 2006, when compared to the same period in 2005, is the result
of the cessation of SECA rates and a provision recorded in second- quarter 2006
related to potential SECA refunds pending settlement negotiations with various
intervenors. The SECA rates, which ended on April 1, 2006, in various AEP
jurisdictions in the East, were put into place in December 2004 by FERC to
offset the loss of through-and-out rates brought by a change in the commission's
authorized tariffs.
Operations & Maintenance Expense - O&M expenses in second-quarter 2006 were
$56 million higher than in the prior period, primarily because of increased
expenses for plant outages, transmission and distribution, and property
insurance. The plant outages expense includes an increase in planned outages
when compared to the same period last year, as well as an increase in unplanned
outages as detailed earlier in the news release. The increase in transmission
expense is primarily because of amortization of fees for regional transmission
organizations. The distribution increase reflects higher tree trimming and storm
restoration costs as compared to 2005.
Depreciation & Amortization - The increase in Depreciation & Amortization in
the second quarter of 2006, when compared to the prior period, is primarily
attributed to an increase in amortization expense at the Ohio Companies.
Taxes, Other Than Income Taxes - The increase in second-quarter 2006, when
compared with the same period in 2005, is primarily because of higher property
taxes from increases in tax rates and property values.
Interest Expense & Preferred Dividends - The increase in Interest Expense
from the prior period is because of higher interest rates and new debt
issuances.
Other Income & Deductions - The decrease is because of lower interest income
and lower carrying costs for the Ohio Companies in second-quarter 2006 as
compared to the same period in 2005.
WEBCAST
American Electric Power's quarterly conference call with financial analysts
will be broadcast live over the Internet at 10 a.m. EDT today at
http://www.aep.com/go/webcasts. The webcast will include audio of the conference
call as well as 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 use by those
unable to listen during the live webcast.
Minimum requirements to listen to broadcast: The Windows Media Player
software, free from http://windowsmedia.com/download, and at least a 56Kbps
connection to the Internet.
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 36,000 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 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). American Electric Power, based in Columbus,
Ohio, is celebrating its 100th anniversary in 2006.
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 ongoing 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 ongoing earnings as the
primary performance measurement when communicating with analysts and investors
regarding its earnings outlook and results. The company also uses ongoing
earnings data internally to measure performance against budget and to report to
AEP's board of directors.
This report made by AEP and certain of its 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: electric load and customer growth; weather conditions, including storms;
available sources and costs of, and transportation for, fuels and the
creditworthiness of fuel suppliers and transporters; availability of generating
capacity and the performance of AEP's generating plants; the ability to recover
regulatory assets and stranded costs in connection with deregulation; the
ability to recover increases in fuel and other energy costs through regulated or
competitive electric rates; new legislation, litigation and government
regulation including requirements for reduced emissions of sulfur, nitrogen,
mercury, carbon and other substances; timing and resolution of pending and
future rate cases, negotiations and other regulatory decisions (including rate
or other recovery for new investments, transmission service and environmental
compliance);resolution of litigation (including pending Clean Air Act
enforcement actions and disputes arising from the bankruptcy of Enron Corp.);
AEP's ability to constrain its operation and maintenance costs; AEP's ability to
sell assets at acceptable prices and on other acceptable terms, including rights
to share in earnings derived from the assets subsequent to their sale; the
economic climate and growth in AEP's service territory and changes in market
demand and demographic patterns; inflationary and interest rate trends; 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; changes in
the financial markets, particularly those affecting the availability of capital
and AEP's ability to refinance existing debt at attractive rates; actions of
rating agencies, including changes in the ratings of debt; volatility and
changes in markets for electricity, natural gas, and other energy-related
commodities; changes in utility regulation, including membership in regional
transmission structures; accounting pronouncements periodically issued by
accounting standard-setting bodies; the performance of AEP's pension and other
postretirement benefit plans; prices for power that AEP generates and sells at
wholesale; changes in technology, particularly with respect to new, developing
or alternative sources of generation, and other risks and unforeseen events,
including wars, the effects of terrorism (including increased security costs),
embargoes and other catastrophic events.
American Electric Power
Financial Results for 2nd Quarter 2006 Actual vs 2nd Quarter 2005 Actual
2005 Actual 2006 Actual
-------------------- --------------------
($ millions) EPS ($ millions) EPS
------------ ------- ------------ -------
UTILITY OPERATIONS:
Gross Margin:
1 East Regulated Integrated
Utilities 465 471
2 Ohio Companies 485 487
3 West Regulated Integrated
Utilities 232 272
4 Texas Wires 113 121
5 Off-System Sales 201 152
6 Transmission Revenue - 3rd
Party 104 49
7 Other Operating Revenue 114 121
8 Utility Gross Margin 1,714 1,673
9 Operations & Maintenance (745) (801)
10 Depreciation & Amortization (317) (339)
11 Taxes Other than Income Taxes (170) (186)
12 Interest Exp & Preferred
Dividend (156) (160)
13 Other Income & Deductions 49 43
14 Income Taxes (113) (70)
15 Utility Operations Ongoing
Earnings 262 0.68 160 0.41
INVESTMENTS:
16 AEPES (1) 2
17 Other 2 13
18 Investments Ongoing Earnings 1 0.01 15 0.04
19 Parent Company Ongoing Earnings (26) (0.07) (3) (0.01)
20 ONGOING EARNINGS 237 0.62 172 0.44
Note: For analysis purposes, certain financial statement amounts have been
reclassified for this effect on earnings presentation.
American Electric Power
Financial Results for the 2nd Quarter 2006
Reconciliation of Ongoing to Reported Earnings
2006
----------------------------------------------------
Utility Invest. Parent Total EPS
-------- -------- -------- -------- --------
($ millions)
Ongoing Earnings 160 15 (3) 172 $ 0.44
Dispositions:
Gain on Sale of UK
Generation True-up Adj - 3 - 3 $ -
Total Special Items - 3 - 3 $ -
Reported Earnings 160 18 (3) 175 $ 0.44
Financial Results for the 2nd Quarter 2005
Reconciliation of Ongoing to Reported Earnings
2005
----------------------------------------------------
Utility Invest. Parent Total EPS
-------- -------- -------- -------- --------
($ millions)
Ongoing Earnings 262 1 (26) 237 $ 0.62
Other:
Severance (15) (1) - (16) $ (0.04)
Total Special Items (15) (1) - (16) $ (0.04)
Reported Earnings 247 - (26) 221 $ 0.58
American Electric Power
Summary of Selected Sales Data
For Domestic Operations
(Data based on preliminary, unaudited results)
3 Months Ended June 30,
------------------------------
2005 2006 Change
-------- -------- --------
ENERGY & DELIVERY SUMMARY
Retail - Domestic Electric
(in millions of kWh):
Residential 9,956 9,590 -3.7%
Commercial 9,573 9,440 -1.4%
Industrial 13,480 13,716 1.8%
Miscellaneous 638 625 -2.0%
Total Domestic Retail (Exclds AEP
C&I, ME SWEPCo, & Tx POLR) (a) 33,647 33,371 -0.8%
AEP C&I, Mutual Energy SWEPCo, &
Tx POLR 162 138 -14.8%
Total Domestic Retail 33,809 33,509 -0.9%
Wholesale - Domestic Electric
(in millions of kWh): (b) 11,745 10,822 -7.9%
Texas Wires Delivery
(in millions of kWh): 6,736 6,915 2.7%
EAST REGION WEATHER SUMMARY
(in degree days):
Actual - Heating (c) 165 107 -35.1%
- Cooling (d) 288 228 -20.8%
Normal - Heating (c) 175 -38.8% *
- Cooling (d) 279 -18.4% *
PSO/SWEPCo WEATHER SUMMARY (in degree days):
Actual - Heating (c) 26 5 -81.0%
- Cooling (d) 681 815 19.6%
Normal - Heating (c) 33 -84.8% *
- Cooling (d) 652 24.9% *
* 2006 Actual vs. Normal
(a) The energy summary represents load supplied by AEP. The AEP C&I load has
been segregated to clarify the year-to-year comparison. Delivery of energy
by Texas Wires supplied by others is not included.
(b) Includes Off-System Sales, Texas Supply, Municipalities and Cooperatives,
Unit Power, and Other Wholesale Customers.
(c) Heating Degree Days temperature base is 55 degrees
(d) Cooling Degree Days temperature base is 65 degrees
American Electric Power
Financial Results for YTD June 2006 Actual vs YTD June 2005 Actual
2005 Actual 2006 Actual
------------------------ -------------------------
($ millions) EPS ($ millions) EPS
------------ --------- ------------ ----------
UTILITY OPERATIONS:
Gross Margin:
1 East Regulated Integrated
Utilities 989 1,035
2 Ohio Companies 953 1,004
3 West Regulated Integrated
Utilities 410 467
4 Texas Wires 213 227
5 Off-System Sales 448 375
6 Transmission Revenue - 3rd
Party 205 151
7 Other Operating Revenue 257 256
8 Utility Gross Margin 3,475 3,515
9 Operations & Maintenance (1,478) (1,528)
10 Depreciation & Amortization (635) (672)
11 Taxes Other than Income Taxes (356) (373)
12 Interest Exp & Preferred
Dividend (300) (314)
13 Other Income & Deductions 178 153
14 Income Taxes (279) (256)
15 Utility Operations Ongoing
Earnings 605 1.56 525 1.33
INVESTMENTS:
16 AEPES 9 1
17 Other 4 29
18 Investments Ongoing Earnings 13 0.03 30 0.08
19 Parent Company Ongoing Earnings (40) (0.10) (5) (0.01)
20 ONGOING EARNINGS 578 1.49 550 1.40
Note: For analysis purposes, certain financial statement amounts have been
reclassified for this effect on earnings presentation.
American Electric Power
Financial Results for Year-to-Date June 2006
Reconciliation of Ongoing to Reported Earnings
2006
----------------------------------------------------
Utility Invest. Parent Total EPS
-------- -------- -------- -------- --------
($ millions)
Ongoing Earnings 525 30 (5) 550 $ 1.40
Dispositions:
Gain on Sale of UK
Generation True-up Adj - 6 - 6 $ 0.01
Total Special Items - 6 - 6 $ 0.01
Reported Earnings 525 36 (5) 556 $ 1.41
Financial Results for Year-to-Date June 2005
Reconciliation of Ongoing to Reported Earnings
2005
----------------------------------------------------
Utility Invest. Parent Total EPS
-------- -------- -------- -------- --------
($ millions)
Ongoing Earnings 605 13 (40) 578 $ 1.49
Dispositions:
Gain on Sale of UK
Generation True-up Adj - (4) - (4) $ (0.01)
CSW Int'l - SEEBOARD
True-up Adj - 8 - 8 $ 0.02
Centrica Sharing from 2003 27 - - 27 $ 0.07
Other:
AEPTCC Stranded Costs (17) - - (17) $ (0.05)
Severance (15) (1) - (16) $ (0.04)
Total Special Items (5) 3 - (2) $ (0.01)
Reported Earnings 600 16 (40) 576 $ 1.48
American Electric Power
Summary of Selected Sales Data
For Domestic Operations
(Data based on preliminary, unaudited results)
6 Months Ended June 30,
------------------------------
2005 2006 Change
-------- -------- --------
ENERGY & DELIVERY SUMMARY
Retail - Domestic Electric
(in millions of kWh):
Residential 23,180 22,528 -2.8%
Commercial 18,305 18,349 0.2%
Industrial 26,253 26,937 2.6%
Miscellaneous 1,284 1,214 -5.5%
Total Domestic Retail (Exclds AEP
C&I, ME SWEPCo, & Tx POLR) (a) 69,022 69,028 0.0%
AEP C&I, Mutual Energy SWEPCo, &
Tx POLR 390 206 -47.2%
Total Domestic Retail 69,412 69,234 -0.3%
Wholesale - Domestic Electric
(in millions of kWh): (b) 24,381 21,667 -11.1%
Texas Wires Delivery
(in millions of kWh): 12,254 12,461 1.7%
EAST REGION WEATHER SUMMARY
(in degree days):
Actual - Heating (c) 1,939 1,563 -19.4%
- Cooling (d) 288 229 -20.4%
Normal - Heating (c) 1,992 -21.6% *
- Cooling (d) 282 -18.8% *
PSO/SWEPCo WEATHER SUMMARY (in degree days):
Actual - Heating (c) 795 663 -16.6%
- Cooling (d) 701 858 22.3%
Normal - Heating (c) 1,005 -34.0% *
- Cooling (d) 669 28.2% *
* 2006 Actual vs. Normal
(a) The energy summary represents load supplied by AEP. The AEP C&I load has
been segregated to clarify the year-to-year comparison. Delivery of energy
by Texas Wires supplied by others is not included.
(b) Includes Off-System Sales, Texas Supply, Municipalities and Cooperatives,
Unit Power, and Other Wholesale Customers.
(c) Heating Degree Days temperature base is 55 degrees
(d) Cooling Degree Days temperature base is 65 degrees
SOURCE American Electric Power
-0- 07/27/2006
/CONTACT: MEDIA, Pat D. Hemlepp, Director, Corporate Media Relations,
+1-614-716-1620, or ANALYSTS, Julie Sloat, Vice President, Investor Relations,
+1-614-716-2885, both of AEP/
/Company News On-Call: http://www.prnewswire.com/comp/042050.html/
/Web site: http://www.aep.com
http://www.aep.com/go/webcasts /