While certain storms have played havoc with power transmission lines and utility service in some markets, the generally favorable weather in combination with what management calls “strategic investments” have resulted in a solid third quarter report issued this morning by American Electric Power.
The utility today has reported third-quarter 2018 earnings of $578 million or $1.17 per share, compared with earnings of $545 million or $1.11 per share in third-quarter 2017. Operating earnings for third-quarter 2018 were $619 million or $1.26 per share, compared with operating earnings of $543 million or $1.10 per share in third-quarter 2017. Operating earnings is a non-GAAP measure representing GAAP earnings excluding special items. The difference between 2018 GAAP earnings and operating earnings for the quarter and year-to-date was due to an impairment related to the Racine Hydroelectric Plant; economic hedging activities; and severance charges, primarily related to previously announced plant closures.
AEP’s Chairman, President & CEO Nicholas Akins says, “We’ve increased and narrowed our 2018 operating earnings guidance range in response to our strong earnings performance in the third quarter and year-to-date. That performance has been driven by strategic investments in our core businesses to improve service to customers, combined with very favorable weather. Additionally, AEP’s Board of Directors voted earlier this week to boost our quarterly dividend by 5 cents to 67 cents per share, an increase of 8.1-percent.”
Akins adds, “The impact of weather on sales has been favorable in every quarter this year. Cooling and heating degree days combined in 2018 are the second highest we’ve seen in the last 30 years. The positive impacts of weather have allowed us to expand our discretionary spending in areas that will directly improve our service to customers.”
Looking behind the scenes, Akins says, “Strategic investments in our Transmission Holding Co. business remain on track and continue to support our earnings growth, with net plant assets growing by $1.6 billion year-over-year, an increase of 26-percent.”
Looking down the road, Akins reports, “We expect to end 2018 with positive load growth overall, but the strong economic indicators we saw earlier in 2018 are now being tempered by tightening labor markets, higher inflation and escalating trade tensions.”
Management increased and narrowed its 2018 operating earnings guidance range to $3.88 to $3.98 per share from $3.75 to $3.95 per share. Operating earnings could differ from GAAP earnings for matters such as impairments, divestitures or changes in accounting principles. AEP management is not able to forecast if any of these 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 earnings guidance.
Reflecting special items recorded through the third quarter, the estimated earnings per share on a GAAP basis would be $3.82 to $3.92 per share.
AEP is parent corporation to Indiana Michigan Power which operates the Cook Nuclear Plant at Bridgman and provides electrical power to Michigan’s Great Southwest and Northwest Indiana.
