American Electric Power (AEP) Boosts FY15 Operating EPS Outlook; Updates on Guidance

American Electric Power (NYSE: AEP) increased its operating earnings guidance (earnings excluding special items) for 2015 and reaffirmed its 2016 operating earnings guidance range. The company also forecast capital expenditure budgets for 2015 through 2017. AEP management will discuss the company's financial outlook and earnings growth strategy at the annual Edison Electric Institute Financial Conference that begins today in Dallas.

AEP increased its operating earnings guidance for 2015 to $3.40 to $3.60 per share from the previous 2015 operating earnings guidance of $3.30 to $3.60 per share. The company reaffirmed 2016 operating earnings guidance at $3.45 to $3.85 per share. Operating earnings guidance for 2014 was narrowed to $3.40 to $3.50 per share Oct. 23.

*** The Street is looking for FY15 EPS of $3.56.

AEP increased its 2015 capital expenditure budget to $4.4 billion. The company forecast its 2016 capital investment budget at $3.8 billion and its 2017 capital investment budget at $3.9 billion.

In providing operating earnings guidance, there could be differences between operating earnings and GAAP earnings for matters such as, but not limited to, impairments 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.

"Our projected 4 to 6 percent growth in operating earnings continues to be based on the strategy that we set in 2012. Over the past two years, we've consistently proven the success of that plan and our ability to increase earnings, even when faced with considerable challenges," said Nicholas K. Akins, AEP's chairman, president and chief executive officer. "We remain focused on growing our core regulated businesses. Ninety-six percent of our planned capital investments for the next three years will be in our regulated operations for the benefit of our customers to improve reliability and enhance the customer experience. At the same time, we continue to expand our process improvement initiatives to achieve sustainable cost savings in our operations. These actions will help us manage the revenue challenges presented by lagging economic recovery and the 2016 capacity market results."

AEP plans to invest at least $4.8 billion in its transmission businesses over the next three years through AEP Transmission Holding Co. and AEP's regulated utility operating companies. AEP Transmission Holding Co.'s net plant assets are approximately $2.4 billion, an increase of 83 percent in the last year.

AEP's strategy also is designed to support the company's commitment to dividend growth with a targeted dividend payout ratio of 60 to 70 percent of operating earnings. AEP has declared dividends for 418 consecutive quarters. The company increased its dividend in October by 6 percent on an annual basis to $2.12 per share.

AEP has a strong balance sheet and a stable credit outlook. The company's capital plan is supported by cash flows and financial discipline without an anticipated need for equity financing beyond the company's existing dividend reinvestment plan and employee purchases of stock through the 401K plans. AEP expects to control operations and maintenance expenses, net of earnings offsets, through continuation of its process improvement and cost-discipline programs.

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