Strategic investments and favorable weather patterns helped Indiana Michigan Power Company’s parent corporation American Electric Power to report strong third-quarter earnings and a board of directors vote to increase the utilities stock dividend going forward.
AEP this morning has reported third-quarter 2019 earnings, prepared in accordance with Generally Accepted Accounting Principles (GAAP), of $734 million or $1.49 per share, as compared with GAAP earnings of $578 million or $1.17 per share in the same third-quarter a year ago in 2018.
Operating earnings for third-quarter 2019 were $722 million or $1.46 per share, compared with operating earnings of $619 million or $1.26 per share in third-quarter 2018. Operating earnings is a non-GAAP measure representing GAAP earnings excluding special items. The difference between 2019 GAAP earnings and operating earnings for the quarter was primarily driven by the mark-to-market impact of economic hedging activities.
Nicholas Akins, AEP’s Chairman, President & CEO says, “We’ve increased and narrowed our 2019 earnings guidance range based on our strong performance this year. That performance has been driven by strategic investments in our regulated businesses to enhance service for our customers, as well as by favorable weather.”
Akins went on to note the board decision on dividends, telling us, “AEP’s Board of Directors also voted earlier this week to boost our quarterly dividend by 3-cents to 70-cents per share, an increase of 4.5-percent. Over the last two years, we’ve grown our dividend by an average of 6.3-percent, in line with our 5-to-7-percent earnings growth range and well within our targeted 60-to-70-percent payout ratio.
Talking further about corporate advancements, Akins say, “Additionally, we are seeing the benefits of our recent investments in contracted renewable generation. The wind facilities that we added to our generation fleet earlier this year and the re-powering of our Trent Mesa and Desert Sky wind projects in Texas already are contributing positively to the earnings of our generation business.”
Looking at climate, Akins says, “Weather-normalized retail sales were relatively flat for the quarter, which is an improvement from the second quarter this year. Both residential and commercial sales increased in the third quarter, reflecting higher employment and wages. Although lower than the same period last year, our industrial sales have benefited this quarter from the continued growth in the oil and gas sectors.”
AEP management increased and narrowed its 2019 operating earnings guidance range to $4.14 to $4.24 per share from their previous range of $4.00 to $4.20 per share. Operating earnings could differ from GAAP earnings for matters such as impairments, acquisitions, divestitures or changes in accounting principles. AEP management is not able to forecast if any of those 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 their earnings guidance.
Reflecting special items recorded through the third quarter, the estimated earnings per share on a GAAP basis would be $4.07 to $4.17.
AEP is the corporate parent of the region utility, Indiana Michigan Power which services clients all across Michigan’s Great Southwest and Northern Indiana and operates the Cook Nuclear Power Plant at Bridgman.
