AEP fourth quarter earnings up 36 percent as industrial demand for electricity stabilizes

AEP sees power demand picking up in 2010

COLUMBUS, Ohio — After watching the recession stifle demand for electricity, American Electric Power Co. Inc. said it sees a modest turnaround coming in 2010.

AEP, based in Columbus, Ohio, on Thursday reported fourth-quarter earnings climbed 57 percent with the help of cost-cutting and rate increases.

Demand for power improved in 2009, the company said, but still remained weak for the year. Sales dropped by 6 percent, including a decline of nearly 16 percent for industrial customers. This year AEP expects overall consumption to grow by 1.6 percent, and by 5 percent among industrial customers.

“We’re comfortable when we read about steel demand growing across the world, it’s clear that the China steel manufacturing base isn’t large enough to handle the demand that they need,” said CEO Mike Morris. “As you know, many of our customers are principal exporters in the metal business in particular, and we think that that all bodes well for us.”

Morris said better earnings at companies like Ford Motor, which reported it’s first profit in five years Thursday, also are good signs for AEP.

“The raw materials that go into the car production are always inside our service territory one way, shape or form,” he said.

AEP made $238 million, or 50 cents per share, for the quarter ended Dec. 31 compared with $152 million, or 38 cents per share, in the year ago quarter. Not counting one-time charges in the year-ago quarter, profit for the two quarters was flat.

Revenue rose slightly to $3.3 billion in the quarter $3.2 billion in the year-ago quarter.

The company said rate increases in Virginia, Indiana and Oklahoma helped to offset lower sales to industrial customers during the quarter.

“Overall, this is a decent end to a pretty challenging year for the company,” said analyst Paul Franzen of Edward Jones. “You’re showing improvement with lower decline,” he said. “Things are starting to stabilize and get better.”

For the year, AEP’s earnings were flat at $1.4 billion. The company made $2.96 per share in 2009, down from $3.43 per share in 2008. Discounting charges, the company said it made $2.97 per share in 2009, down from $3.24 per share in 2008.

The company had more shares outstanding in 2009, which lowered its earnings per share for the year.

Revenue for 2009 totaled $13.5 billion, down from $14.4 billion in 2008.

The company reaffirmed its earnings guidance of $2.80 to $3.20 per share for 2010. Analysts surveyed by Thomson Reuters expect profit of $3.06 per share.

AEP is one of the nation’s largest power generators, with 5.2 million customers in 11 states.

AEP shares fell 47 cents, or 1.3 percent to close Thursday at $35.06.

(This version CORRECTS rise in earnings to 57 percent)