AEP earns $136 million in second quarter, down 57 percent as utility slashes jobs

Job and cost cuts sends AEP profits down 57 pct

COLUMBUS, Ohio — American Electric Power Inc. said Friday its second-quarter earnings dropped 57 percent, mainly from charges as the company slashed 11.5 percent of its work force and cut costs.

AEP recorded a one-time charge of $293 million for severance and other restructuring costs while eliminating 2,461 positions.

At least 2,000 of those jobs were eliminated through a voluntary buyout offer extended to the company’s employees in April, while layoffs accounted for the rest, AEP spokesman Pat Hemlepp said.

The company posted net income of $136 million, or 28 cents per share, for the quarter that ended June 30, down from $316 million, or 67 cents per share, in the year-ago period. Without one-time charges the company would have earned $355 million, or 74 cents per share.

AEP’s revenue rose to $3.4 billion from $3.2 billion. Analysts polled by Thomson Reuters expected the company to earn 69 cents per share on revenue of $3.48 billion. Those estimates do not typically include special charges.

Shares of AEP rose 3 cents to $36.13 in midday trading on Friday.

The company sought to cut costs in the face of sluggish demand for power. Like other utilities, AEP struggled as power demand fell during the recession, particularly in the industrial sector where some of its biggest customers shut plants and turned out the lights. In the second quarter, sales to industrial clients rose 9.4 percent from a year ago, said Michael Morris, AEP chairman and CEO.

“We have seen improvement in the industrial sector from the lows of 2009, but demand in other sectors is essentially flat,” Morris said.

Year to date, AEP reported net income of $480 million, or $1.00 per share, compared with $676 million, or $1.54 per share, during the first half of 2009. Discounting one-time items, AEP earned $720 million, or $1.50 per share, compared with $681 million, or $1.55 per share, last year.

Revenue rose to $6.9 billion compared with $6.7 billion for first half of 2008.

The company stuck with its full-year forecast for earnings of between $2.80 and $3.20 per share, because of economic uncertainties. Analysts expect $3.02 a share on average,

“Some say no chance for a second dip, some say for sure. Consumer confidence is low, retail spending is low,” Morris told analysts on a conference call. “Many of the things that we look at and control those decisions are telling us let’s be Midwest conservative, and that’s exactly what we intend to do.”

AEP said its quarterly results reflected a $34 million charge, after taxes, due to Virginia’s decision not to let the company go to rate payers for some costs associated with a project to capture carbon dioxide emissions from a coal-fired power plant and store them underground. AEP is appealing.

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

Online:

www.aep.com