10-QPeriod: Q3 FY2015

AMERICAN ELECTRIC POWER CO INC Quarterly Report for Q3 Ended Sep 30, 2015

Filed October 22, 2015For Securities:AEP

Summary

American Electric Power Co. Inc. (AEP) reported an increase in earnings attributable to common shareholders to $519 million for the third quarter of 2015, up from $493 million in the same period of 2014. This improvement was driven by successful rate proceedings in various jurisdictions, annual formula rate adjustments, increased weather-related usage, and a decrease in certain expenses. For the first nine months of 2015, earnings grew to $1.58 billion from $1.44 billion in the prior year period, reflecting similar positive drivers. The company is strategically evaluating alternatives for its merchant generation fleet, which could include continued ownership, a purchased power agreement, a spin-off, or a sale, with potential implications for future net income and cash flow. A significant development is the agreement to sell its commercial barge transportation subsidiary, AEP River Operations (AEPRO), for approximately $400 million in cash, expected to result in an after-tax gain of $100 million to $150 million.

Financial Highlights

46 data points
Beta

Revenue

$4.43B

Net Income

$518.30M

11.7% Net Margin

EPS (Diluted)

$1.06

Total Assets

$61.10B

Cash & Equivalents

$177.80M

Free Cash Flow

$1.71B

Financial Statements
Beta
Revenue$4.43B
Operating Expenses$3.47B
Operating Income$960.20M
Interest Expense$220.20M
Net Income$518.30M
EPS (Basic)$1.06
EPS (Diluted)$1.06
Shares Outstanding (Basic)490.65M
Shares Outstanding (Diluted)490.80M

Key Highlights

  • 1Earnings attributable to common shareholders increased to $519 million in Q3 2015 from $493 million in Q3 2014.
  • 2Nine-month earnings increased to $1.58 billion from $1.44 billion year-over-year.
  • 3AEP is evaluating strategic alternatives for its merchant generation fleet.
  • 4Agreement signed to sell AEP River Operations (AEPRO) for approximately $400 million, expecting a $100-$150 million gain.
  • 5Vertically Integrated Utilities segment saw earnings grow to $274 million from $219 million year-over-year.
  • 6Transmission and Distribution Utilities segment's earnings increased to $113 million from $92 million.
  • 7AEP Transmission Holdco earnings rose to $46 million from $43 million year-over-year.

Frequently Asked Questions

The increase in earnings was primarily driven by successful rate proceedings in various jurisdictions, annual formula rate adjustments leading to higher revenues, an increase in weather-related usage, and a decrease in expenses due to a settlement and revision of certain asset retirement obligations. An increase in transmission investment also contributed to higher revenues and income.

AEP is currently evaluating strategic alternatives for its merchant generation fleet. These potential alternatives may include continuing ownership, entering into a purchased power agreement with a regulated affiliate, spinning off the fleet, or selling the fleet. The company has not yet made a definitive decision or set a specific timeframe for a decision.

AEP has signed an agreement to sell its commercial barge transportation subsidiary, AEPRO. The sale is expected to close in the fourth quarter of 2015, and AEP expects to net approximately $400 million in cash after taxes, debt retirement, and transaction fees. An after-tax gain ranging from approximately $100 million to $150 million is anticipated from the sale, subject to working capital and other adjustments.

Yes, AEP is involved in several ongoing regulatory and legal matters. These include rate proceedings in various jurisdictions, challenges related to environmental regulations (like CSAPR and MATS), and litigation concerning plant operations (e.g., Rockport Plant litigation). Management believes that its financial statements adequately address the impact of these matters, but adverse outcomes could reduce future net income and cash flows.