American Electric Power Co. (AEP:US), which delivers electricity to more than 5 million customers in 11 states, said third-quarter profit fell 48 percent on customer defections, storm clean-up costs and sluggish demand for electricity.
Net income decreased to $487 million, or $1 a share, from $928 million, or $1.92, a year earlier, as revenue fell 2.3 percent to $4.2 billion, Columbus, Ohio-based American Electric said in a statement today. Excluding one-time costs, per-share profit was 1 cent less than the $1.03 average (AEP:US) of 15 analysts’ estimates compiled by Bloomberg.
“Despite some bright spots in the economy, particularly related to shale gas development, the recovery is tenuous and overall load growth in the regions where we operate is expected to remain essentially flat,” Nicholas Akins, American Electric’s chief executive officer, said in the statement.
American Electric said results were hurt as utility customers switched to rival power marketers in Ohio, its largest market. The company also spent $230 million restoring power to 1.4 million homes and business from Indiana to Virginia buffeted by a rare storm system known as a derecho that produced gusts of 91 miles (146 kilometers) an hour on June 29.
“They should recover most of that amount,” Andrew Bischof, a Chicago-based equity analyst with Morningstar Inc., said in a telephone interview before earnings were announced. “They’ll get future regulated returns on this through rates.”
American Electric benefited from hot summer weather across its service territory, as the number of cooling-degree days during the quarter were 36 percent above average in the central Midwest and 9 percent above average in southwestern states such as Texas and Oklahoma, Angie Storozynski, a New York City-based utilities analyst with Macquarie Capital USA Inc., wrote in a Oct. 16 note to clients.
Weather-related sales gains were tempered by falling demand for electricity, which was caused by energy conservation efforts and slow economic growth among American Electric’s industrial customer base, Bischof said. Demand declined 1.3 percent from a year earlier in the central U.S. and 4.1 percent in south- central states, according to Storozynski.
American Electric owns nearly 39,000 megawatts of generating capacity and the largest U.S. electricity transmission system, the company said on its website.
The earnings were released before regular trading began on U.S. markets. American Electric, which has 13 buy and 10 hold ratings (AEP:US) from analysts, fell 0.7 percent to $44.62 yesterday in New York.
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