Count American Electric Power — one of the nation’s premier electric utilities — among those companies whose environment has been turned upside down by the COVID-19 coronavirus.
The utility on Wednesday reported first-quarter earnings of $495 million ($1.00/share), down 13.5% from 2019’s opening quarter earnings results of $573 million ($1.16/share). The company said revenue fell almost 10% to $3.7 billion, and electricity sales were off 12% during the quarter.
Wall Street reacted to the news on Wednesday by trading AEP’s share price down 5.5% from Tuesday’s close to $78.82. The company’s stock has lost nearly a quarter of its value since hitting an all-time high of $104.97 on Feb. 18 as the COVID-19 outbreak was heating up.
“When there is a pandemic like the one we’re experiencing today that has not occurred in 100 years, and this nation’s economy has been effectively shut down for months, there is no question that everyone is challenged and AEP is no exception,” CEO Nick Akins said during a conference call with financial analysts.
The second quarter has not been much better. Akins said new data indicates total April sales were down 4.3% from a year ago, with 10% and 7.7% drops in industrial and commercial sales, respectively, which more than offset a 6% increase in residential activity.
The Columbus, Ohio-based company has reaffirmed its 2020 operating earnings guidance range of $4.25 to $4.45/share and its 5% to 7% long-term growth rate. However, management expects to be in the lower half of its guidance, due to revised load assumptions related to COVID-19.
“Regardless of whether we forecast a V-shape, a U-shape or W-shape COVID-19 recovery,” Akins said, “we see our service territory as an arbitrage between residential load and commercial industrial load that is defined really by a pendulum between the financial characteristics of working from home versus the restart of commercial and industrial businesses.”
Referencing boxer Mike Tyson’s comment that “everyone has a plan until they get punched in the mouth,” Akins said, “Yes, we’ve been challenged a little bit, but we are very much still in the match.”
To counteract the loss of sales, AEP has cut planned operations and maintenance expense by $100 million and shifting $500 million of its planned 2020 capital spending into future years. Akins said the company still plans to invest $33 billion over the next five years.
The future capital investment does not include AEP’s $2 billion North Central Wind Project, comprised of three wind farms in Oklahoma that will produce 1.49 GW of capacity to consumers in the company’s Oklahoma and Louisiana service territories. The project has received regulatory approval in Arkansas and Oklahoma and from FERC, but Louisiana and Texas have yet to weigh in.
Akins said the regulatory proceedings are on schedule and the project is moving forward. “That was the importance of Arkansas’ approval,” he said, noting that the state can increase its megawatt allocation should another Southwestern Electric Power Company state reject the application.
