Monday, electric utilities company American Electric Power Co., Inc. (AEP), lowered its earnings forecast for fiscal year 2009, citing current operating and economic factors, and dilution from its planned issuance of new equity. The company also lowered its capital spending plan for fiscal year 2010 and said it is not providing guidance for 2010 or beyond at this time.
Columbus, Ohio-based American Electric Power now expects fourth quarter earnings within a range of $2.75 - $3.05, down from the earlier estimate of $3.00-$3.40.
On average, 15 analysts polled by Thomson Reuters currently expect the company to report earnings of $3.14 per share for the full-year. Analysts' estimates typically exclude one-time items.
Michael Morris, Chairman, President and Chief Executive Officer, AEP said, "In addition to the effect of dilution from our planned stock issuance, the ongoing economic downturn is a significant factor in our revised guidance. Retail demand for electricity, primarily from our industrial customers, is down, which has a negative impact on earnings from our regulated utilities. "
American Electric Power, however, stated that recent rate increases in Ohio, Indiana, Oklahoma and Virginia would help offset some of the economic impact on its earnings. The company's cash flow for 2009 was negatively impacted by increased fuel deferrals of about $360 million for the Ohio companies and about $185 million for Appalachian Power. The cash flow impact of the deferrals is somewhat offset by $300 million in bonus depreciation included in the American Recovery and Reinvestment Act of 2009.
The company said that it was pruning its capital budget for fiscal year 2010 to $1.8 billion from the previously planned budget of $3.4 billion in order to address the revenue impact from the economic downturn.
The reductions in capital spending for 2010 covers American Electric Power's utility operating companies in generation, transmission and distribution. The 2009 capital budget, which was reduced in October to approximately $2.6 billion from more than $3.3 billion, remains unchanged. The company intends to keep operations and maintenance spending for 2009 and 2010 unchanged from the 2008 level of $3.4 billion.
American Electric said it would continue construction of the John W. Turk Jr. Power Plant, a 600-megawatt coal-fueled plant in Arkansas slated for completion in 2012; the J. Lamar Stall Unit, a 500-megawatt natural-gas fueled plant in Louisiana scheduled for completion in 2010; and the carbon capture and storage project scheduled for completion in September at the Mountaineer Plant in West Virginia.
In a separate statement, American Electric Power said it plans to offer about 50 million shares of common stock in a registered public offering. In addition, the underwriters are expected to have an over-allotment option to purchase up to 7.5 million additional shares of the company's common stock. The company intends to use net proceeds from the sale to reduce its debt.
AEP closed Monday's trading at $25.08, down $1,19 or 4.53%, on a volume of 7.26 million shares. In after hours, AEP traded at $24.04, down $1.04 or 4.15% on the NYSE.
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