AEP Slashes Guidance, Plans Stock Offering

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American Electric Power (AEP) dropped two bits of news at the end of the day–It is lowering 2009 guidance to between $2.75 and $3.05 per share and it is planning to offer approximately 50 million shares of common stock in a public offering. The money from the public offering will be used to pay down debt.

The previous guidance offered by the company in November was between $3.00 and $3.40 per share. The company planned on revising guidance once it had a better grasp of the economy and some information about Ohio energy prices. From the release:

Recent rate increases in Ohio, Indiana, Oklahoma and Virginia will help offset some of the economic impact on earnings.

Cash flow for 2009 is negatively affected by increased fuel deferrals of approximately $360 million for the Ohio Companies and approximately $185 million for Appalachian Power. The cash flow impact of the deferrals is somewhat offset by $300 million in bonus depreciation included in the American Recovery and Reinvestment Act of 2009.

To address the revenue impact of the economic downturn, AEP is reducing its capital budget for 2010 to $1.8 billion from the previous planned capital budget of $3.4 billion. The reductions in capital spending for 2010 are spread across AEP’s utility operating companies in generation, transmission and distribution. Discretionary projects are being deferred until the economic climate warrants the additional investment.

The 2009 capital budget, which was reduced in October to approximately $2.6 billion from more than $3.3 billion, remains unchanged. The company intends to keep operations and maintenance spending for 2009 and 2010 unchanged from the 2008 level of $3.4 billion.

Image: Ohio Citizen

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