AEP Raises Growth Targets; Seeks Dividend Hike

Thursday, 4 Oct 2007 | 10:28 AM ET

Utility company American Electric Power raised the upper end of its earnings growth targets through 2010 Thursday, citing expected increases in power prices and demand.

The company also said it would seek an annual dividend hike of 8 cents per share, or about 5 percent, from the fourth quarter of 2007, bringing its yearly payout to $1.64 per share.

Shares of AEP rose 1.4 percent to $48.05 per share in early trade on the New York Stock Exchange, outpacing the 0.3 percent gain in the broader Standard & Poor's Utility index.

AEP said it projected annual power price increases of 5.5 percent through 2010 and growth in both demand and transmission revenues.

That led the Columbus, Ohio-based company, which provides power to more than 5 million customers, to boost the range of its earnings growth forecast to 5 to 9 percent from the previous target of 5 to 7 percent.

The company narrowed its forecast for 2008 earnings per share to $3.05 to $3.25 from the $3.00 to $3.30 EPS range previously forecast. Analysts had forecast 2008 EPS at $3.20, according to data compiled by Reuters Estimates.

The expected EPS range for 2009 was increased slightly to $3.20 to $3.50 from $3.15 to $3.45, and 2010 EPS was seen at $3.45 to $3.80.

Analysts had called for 2009 earnings of $3.38 and 2010 earnings of $3.46, according to Reuters Estimates.

Capital expenditures for 2007 were expected to come in at $3.96 billion and decline over the next three years. Spending was forecast at $3.77 billion for 2008, $3.6 billion for 2009 and $3.4 billion for 2010.

While much of the earnings gain would come from the expected demand growth, AEP said it would also see gains from returns on its infrastructure investments, which would make the company more efficient.

Those efficiency gains would help reduce its power plants' usage of coal, which is expected to see price rises of 13 percent next year, the company said.

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