10-KPeriod: FY2009

AMERICAN ELECTRIC POWER CO INC Annual Report, Year Ended Dec 31, 2009

Filed February 26, 2010For Securities:AEP

Summary

American Electric Power Co. Inc. (AEP) operates as a public utility holding company with a diverse portfolio of subsidiaries providing electric generation, transmission, and distribution services across eleven states. As of the fiscal year ending December 31, 2009, the company was navigating a challenging economic environment, with a focus on managing operational costs and capital expenditures. A significant portion of the company's strategy involves substantial investments in environmental compliance and upgrades, particularly related to air quality regulations such as the Clean Air Act, and emerging concerns around global warming and carbon emissions. AEP's financial health and operational stability are heavily influenced by regulatory approvals for rate recovery, with ongoing proceedings and potential appeals in various jurisdictions. The company is also actively exploring long-term strategies including investments in renewable energy and energy efficiency programs to meet future energy demands and environmental mandates. Given the capital-intensive nature of the utility sector, access to capital markets and maintaining favorable credit ratings are critical for future growth and operations.

Financial Highlights

48 data points
Beta

Revenue

$13.49B

Net Income

$1.36B

10.1% Net Margin

EPS (Diluted)

$2.96

Total Assets

$48.35B

Cash & Equivalents

$490.00M

Free Cash Flow

$2.37B

Financial Statements
Beta
Revenue$13.49B
Operating Expenses$10.72B
Operating Income$2.77B
Interest Expense$973.00M
Net Income$1.36B
EPS (Basic)$2.96
EPS (Diluted)$2.96
Shares Outstanding (Basic)458.68M
Shares Outstanding (Diluted)458.98M

Key Highlights

  • 1AEP operates a large, integrated electric utility system with subsidiaries serving customers across eleven states, covering generation, transmission, and distribution.
  • 2The company is making substantial investments in environmental compliance and upgrades, particularly to meet evolving Clean Air Act requirements and address global warming concerns.
  • 3Regulatory environments in key operating states are crucial, with ongoing rate case filings, approvals, and potential appeals impacting cost recovery and financial performance.
  • 4AEP is pursuing strategic initiatives in renewable energy (e.g., wind power) and energy efficiency to meet regulatory goals and reduce carbon emissions.
  • 5The company's access to capital markets and credit ratings are critical factors for funding significant planned capital expenditures, including environmental retrofits and new generation facilities.
  • 6The financial performance is subject to seasonal demand fluctuations and broader economic conditions, with 2009 showing impacts from a challenging economic climate.
  • 7AEP is actively managing fuel supply and costs, with coal being the primary fuel source, and is involved in risk management and trading activities for power, natural gas, and emissions allowances.

Frequently Asked Questions

The primary risks include the inability to recover costs of substantial planned investments in capital improvements and environmental upgrades through regulated rates, potential limitations or delays in rate recovery by regulatory commissions, and the uncertainty surrounding construction permits for new facilities like the Turk Plant. Additionally, changes in environmental regulations, such as those related to air quality and greenhouse gas emissions, pose significant compliance costs and operational challenges.

AEP is making significant investments in environmental performance, including installing pollution control equipment to comply with the Clean Air Act. The company is also exploring and investing in renewable energy sources, energy efficiency programs, and carbon capture and storage (CCS) technology as strategies to reduce CO2 emissions and address global warming concerns. They are actively participating in policy discussions to ensure feasibility and minimize economic disadvantage.

AEP is undertaking a significant construction program that includes new generation facilities (e.g., gas-fired and coal-fired plants like Stall, Turk, Mountaineer, and Great Bend) and transmission initiatives. This program is subject to continuous review and modification based on customer demand, economic conditions, capital availability, and environmental regulations. The company is also investing in smart grid technologies and energy efficiency to modernize infrastructure and manage demand.

Coal is AEP's primary fuel source, procured through a mix of long-term contracts, affiliate operations, and spot agreements. The company also uses natural gas and a smaller percentage of nuclear fuel. AEP manages fuel supply through ownership of railcars, barges, and a coal handling terminal. They also engage in risk management and trading activities for fuel and emissions allowances to optimize costs and mitigate price volatility.