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

AEP 4Q earnings jump 36 percent

COLUMBUS, Ohio — American Electric Power Co. Inc. said Thursday that fourth-quarter earnings climbed 36 percent as cost-cutting and rate increases helped offset weak demand for electricity caused by the recession.

AEP also said that industrial demand for electricity has stabilized and demand from commercial and residential customers was not as weak as expected.

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 recession has cut deeply into the demand for electricity, especially among industrial customers. AEP and other utilities saw quarterly declines of industrial sales of up to 20 percent in 2009 as steel companies, car makers and other companies scaled back.

AEP, one of the nation’s largest power companies with 5.2 million customers in 11 states, said retail electric sales were off 5 percent in the fourth quarter and demand from industrial customers declined by 11 percent. Still, that’s an improvement from previous quarters. Sales in wholesales market improved in the quarter from a year ago.

For the year, sales were off 6 percent and sales into wholesale markets fell 31 percent for the year

“Industrial sales in the fourth quarter were consistent with what we saw in the third quarter and actually showed a slight uptick in December, although one month definitely doesn’t represent a trend,” Mike Morris, AEP’s chairman, president and CEO said in a statement. “Residential and commercial sales — an area of significant year-to-year growth before the recession — have stalled but haven’t declined as much as expected. These factors have us cautiously optimistic for improvement in the months ahead.”

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

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.