Dive Brief:

• American Electric Power (AEP) Q1 2014 GAAP earnings and operating earnings were $560 million, up 54% from Q1 2013 GAAP earnings of $363 million, and up even more from Q1 2013 operating earnings (which exclude non-recurring, adjusted, and discontinued budget items and are considered more to the point) of $387 million.
• The performance leap, due to increased demand from Q1’s record cold, was described by President/Chair/CEO Nicholas K. Akins as “solid regulated business results and strong performance” from AEP’s “competitive energy businesses” that performed “incredibly well“ and was – even when “adjusted for weather” – AEP’s second consecutive quarter of improved earnings.
• Looking forward, AEP will continue to allocate capital to transmission in its regulated utilities. AEP is "not counting on increased load or capacity market revenues," Akins said. "Our business is now an optimization business and one in which we continually adjust the changing conditions to ensure discipline and execution."

Dive Insight:

AEP’s ability to meet the increased demand from residential and commercial ratepayers was the result of ongoing execution of the earnings growth strategy introduced in 2013 that targets 4% to 6% growth and shuttering 6,600 megawatts of coal-fired generation by 2016, and included what Akins called regulator-approved “investments in infrastructure and system improvements.”

In keeping with AEP’s recent announcement of a 2014 through 2016 investment of $4 billion largely in transmission and a continued annual investment of over $1.5 billion in transmission infrastructure, Akins said the company would use the improved cash position resulting from the Q1 earnings to increase its 2014 funding for transmission projects by $200 million to $1.7 billion.

Q1 2014 operating earnings reported: (1) Vertically Integrated Utilities up $76 million, (2) Transmission & Distribution Utilities up $11 million, (3) AEP Transmission Holdco up $11 million, (4) Generation & Marketing up $74 million, (5) AEP River Operations up $5 million.

Q1 2014 margins reported: (1) Off-System Sales up $85 million, (2) Transmission Revenue up $10 million, (3) Generation & Marketing up $94 million.