Unlike FirstEnergy Corp. (NYSE:FE) and Dominion Resources, Inc. (NYSE:D), AEP is doing more than putting coal out to pasture. The utility won the 2013 Edison Award for its innovative “advanced ultra-supercritical steam cycle” coal-fired power plant. The $1.7 billion, 600 MW plant sports a record 39% efficiency using low-sulfur coal, and took the utility seven years to weave its way through regulatory and construction challenges.
Other utilities are following suit, pushing hard to turn coal into “clean coal.” Integrys Energy Group, Inc. (NYSE:TEG) currently has a $17 million rate request on the table to add coal dust collectors to an 824 MW facility, a move that would put the utility one step closer to covering environmental costs.
Savings and rates
While American Electric Power Company Inc (NYSE:AEP) is spending to cut its coal addiction, it’s also cutting costs across the board. Akins cites $5 million to $10 million in savings at each of three plants recently scrutinized for spending. Around 15 to 20 plants will ultimately undergo the same analysis, and savings initiatives like these are being implemented across the board.
While savings should continue to ramp up, rates are making their own improvements. AEP’s regulated operations currently enjoy a 10.2% ROE, which should increase as retroactive rates and expected approvals come into play.
Despite tough economic times and a continually transitioning company, AEP reaffirmed its 2013 guidance of $3.05 to $3.25 per share and expects long-term earnings growth to clock in between 4% and 6%. To top things off, this dividend stock earned its title with its 413th consecutive quarterly distribution (“Steady as you go,” according to Alkins).
The article American Electric Earnings: You Need to Watch This Dividend Stock originally appeared on Fool.com and is written by Justin Loiseau.
Fool contributor Justin Loiseau has no position in any stocks mentioned, but he does use electricity. You can follow him on Twitter, @TMFJLo, and on Motley Fool CAPS, @TMFJLo.The Motley Fool recommends Dominion Resources (NYSE:D).
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