OREANDA-NEWS. American Electric Power (NYSE: AEP) today reported 2013 second-quarter earnings, prepared in accordance with Generally Accepted Accounting Principles (GAAP), of USD 338 million or USD 0.69 per share, compared with USD 362 million or USD 0.75 per share for second-quarter 2012.

 Operating earnings (excluding special items) for second-quarter 2013 were USD 357 million or USD 0.73 per share, USD 19 million or USD 0.04 per share higher than GAAP earnings because of a pretax USD 154 million (USD 99 million net of tax) impairment charge (USD 0.20 per share) related to the expected retirement of Muskingum River Plant Unit 5 in 2015. This impairment was partially offset by a U.S. Supreme Court decision resulting in a favorable USD 80 million (USD 0.16 per share) United Kingdom windfall profits tax credit. Year-to-date operating earnings for the six months ended June 30, 2013, were USD 43 million, or USD 0.09 per share, higher than GAAP earnings. The difference was due to the previously mentioned second-quarter items, a USD 30 million (USD 19 million net of tax) reversal of a storm cost deferral in Virginia and a USD 7 million (USD 5 million net of tax) restructuring charge in first-quarter 2013.

 A full reconciliation of 2013 and 2012 GAAP earnings with operating earnings for the quarter and year to date is included in tables at the end of this news release.

 “We are executing well on our earnings growth strategy. We continue to successfully direct significant investments to our regulated infrastructure for the benefit of our customers. The strong results from our regulated businesses, including transmission, are offsetting some of the negative earnings impacts from the transition to competition in Ohio,” said Nicholas K. Akins, AEP president and chief executive officer.

 “Despite signs of economic recovery in some states, we continue to experience load decline in portions of our service area primarily due to lagging industrial demand. However, industrial demand contributes lower margins and has less of an earnings impact than other load categories. We saw a slight decline in commercial demand in the second quarter, and residential load remains essentially flat year-over-year as expected. Weather was better than normal for the quarter, but well below the favorable weather we experienced during the second quarter last year.

 “We remain focused on controlling costs and improving our performance. Although our second-quarter results reflect higher operations and maintenance expenses related to storms and plant outages, much of this is timing. We are on track to keep our operations and maintenance expenses, net of offsets, at essentially the same level as last year,” Akins said.
 EARNINGS GUIDANCE

 AEP reaffirmed its operating earnings guidance range for 2013 of USD 3.05 to USD 3.25 per share. In providing operating earnings guidance, there could be differences between operating earnings and GAAP earnings for matters such as, but not limited to, divestitures or changes in accounting principles. AEP management is not able to estimate the impact, if any, on GAAP earnings of these items. Therefore, AEP is not able to provide a corresponding GAAP equivalent for earnings guidance.
Operating earnings from Utility Operations during second-quarter 2013 were USD 52 million lower than in second-quarter 2012. This reflects the negative impact of the transition to competition in Ohio including reduced capacity payments in the PJM Interconnection (PJM), cooler weather, incremental plant outage costs and higher storm restoration costs, partially offset by the favorable impact of rate changes. The USD 99 million difference between GAAP and operating earnings in second-quarter 2013 relates to the Muskingum River Plant Unit 5 impairment.

 Operating earnings from Transmission Operations during second-quarter 2013 increased USD 10 million compared with the same period in 2012 due to increased transmission investment.

 Operating earnings from AEP River Operations during second-quarter 2013 decreased USD 12 million compared with the same period in 2012, primarily due to reduced grain and coal exports.

 Operating earnings from Generation and Marketing, which includes AEP’s non-regulated generation and marketing and risk management activities, were USD 9 million higher during second-quarter 2013 compared with the same period in 2012, primarily because of higher trading and marketing margins.

 Operating earnings from All Other during second-quarter 2013 increased USD 32 million compared with the same period in 2012, primarily as a result of increased interest income associated with a favorable court decision related to United Kingdom windfall profit taxes.
Retail Sales – Retail margins for second-quarter 2013 were USD 7 million higher than in the same period in 2012, primarily because of favorable rate changes, partially offset by cooler weather and lower demand. Retail Sales includes the East Regulated Integrated Utilities, Ohio Power Company, West Regulated Integrated Utilities and Texas Wires.

Off-System Sales – Margins from Off-System Sales for second-quarter 2013 were USD 46 million lower than in the same period in 2012 because of reduced capacity payments in PJM.

Transmission Revenue – 3rd Party – Transmission Revenue for second-quarter 2013 was USD 13 million higher than for the same period in 2012, primarily as a result of increased revenues in the Southwest Power Pool and PJM, including revenues associated with customer switching.