American Electric Power Company, Inc. · NASDAQ:AEP
American Electric Power — Q3 2020 Earnings Presentation
41 slides from American Electric Power's earnings presentation, Oct 22, 2020
Slide 1: 3rd Quarter 2020 Earnings Release Presentation
3rd Quarter 2020 Earnings Release Presentation October 22, 2020 1 GS Power and September Investor Utilities Meetings Conference | aep.com | aep.com
Slide 2: Safe Harbor Statement
“Safe Harbor” Statement under the Private Securities Litigation Reform Act of 1995 This presentation contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934. Although AEP and each of its Registrant Subsidiaries believe that their expectations are
Slide 3: Non-GAAP Financial Measures
Non-GAAP Financial Measures AEP reports its financial results in accordance with accounting principles generally accepted in the United States (GAAP). AEP supplements the reporting of financial information determined in accordance with GAAP with certain non-GAAP financial measures, including operati
Slide 4: 3rd Quarter 2020 Business Update
3rd Quarter 2020 Business Update Reaffirm 2020 operating earnings guidance range of $4.25-$4.45 Reaffirm 5%-7% long-term growth rate Dividend growth of ~6%, in line with earnings and within targeted payout ratio of 60%-70% COVID-19 updates Current regulatory activity includes: o North Cent
Slide 5: Regulated Returns
Regulated Returns Twelve Months Ended 9/30/2020 Earned ROE’s (non-GAAP operating earnings, not weather normalized) AEP OH1 I&M 10.6%2 APCo1 Trans 10.4% 9.6% 9.8% PSO 8.0% SWEPCO1 AEP TX 7.4% 7.5% KPCo1 5.3% Regulated Operations ROE of 9.0% as of September 30, 2020 1 Base rate cases pending I 2 AEP O
Slide 6: 3rd Quarter 2020 Financial Update
3rd Quarter 2020 Financial Update 3rd Quarter 2020 Financial Update Delivered GAAP earnings of $1.51 per share or $749M for the third quarter of 2020 Delivered operating earnings of $1.47 per share or $728M for the third quarter of 2020 Delivered GAAP earnings of $3.56 per share or $1.8B for Y
Slide 7: 3rd Quarter Operating Earnings Segment Detail
3rd Quarter Operating Earnings Segment Detail 1.6 $1.46/sh 0.04 0.03 (0.03) 0.01 $1.47/sh (0.04) 1.4 Rate Changes $ 0.05 Rate Changes $ 0.05 Investment Growth $ 0.03 Wholesale $ (0.01) Income Taxes $ 0.01 Weather $ (0.08) Weather $ (0.02) Income Taxes $ (0.03) Wholesale Load $ (0.04) Trans Rev $ 0.0
Slide 8: YTD Operating Earnings Segment Detail
YTD Operating Earnings Segment Detail 4.0 $3.65/sh 0.00 (0.01) (0.07) 0.01 (0.02) $3.56/sh 3.5 Rate Changes $ 0.16 OH Reg Provision $ (0.09) Investment Growth $ 0.09 Renewables $ 0.05 O&M $ 0.03 Weather $ (0.15) OH Legacy Riders $ (0.04) Annual True-up $ (0.13) Retail $ (0.01) Interest Exp $ (0.03)
Slide 9: 2020 Financial Outlook
2020 Financial Outlook 2020 Earnings Guidance Range $4.25 - $4.45 2020 Guidance Commentary EEI Revised • Improved load forecast from previously revised Retail Sales Growth 0.5% (2.7%) estimate • Mild Q1 weather • Slightly favorable Q2 weather YTD 2020 Weather (vs. normal) - ($51M) • Mild Aug. and Se
Slide 10: Weather Normalized Billed Retail Load Trends
Weather Normalized Billed Retail Load Trends Load figures are provided on a billed basis. Charts reflect connected load and exclude firm wholesale load. Revised forecast in 3Q 2020 continues to assume a gradual recovery over the remainder of the year. 10
Slide 11: Normalized Retail Load Data
Normalized Retail Load Data AEP Retail Sales (GWh) Growth 3% Weather Normalized Actuals Updated Load Forecast from Q1 Earnings Call September Load Forecast Update Growth vs Prior Year 0% -0.7% -1.7% -2.6% -3% -3.0% -4.1% -5.9% -5.8% -6% Q1-20 Q2-20 Q3-20 Q4-20 11
Slide 12: Capitalization and Liquidity
Capitalization and Liquidity Total Debt / Total Capitalization Credit Statistics Actual Moody’s GAAP Target Low to Mid FFO to Total Debt 12.8% 12.5% Teens Represents the trailing 12 months as of 9/30/2020 See Appendix for reconciliation to GAAP Liquidity Summary (unaudited) 9/30/2020 Actual $ in mil
Slide 13: Summary
Summary Reaffirm 2020 operating earnings guidance range of $4.25-$4.45 Reaffirm 5%-7% long-term growth rate EEI expectations: ESG focus, detail behind 2021 guidance, 2021 financial detail, cap- ex and cash flow detail Fourth quarter earnings call to be held in February 2021, coincident with
Slide 14: Appendix
Appendix 14
Slide 15: 3rd Quarter Reconciliation of GAAP to Operating Earnings
3rd Quarter Reconciliation of GAAP to Operating Earnings $ in millions Earnings Per Share Q3-19 Q3-20 Change Q3-19 Q3-20 Change Reported GAAP Earnings $734 $749 $15 $1.49 $1.51 $0.02 Non Operating Items: Mark-to-Market Impact of Commodity (12) (7) 5 (0.03) (0.01) 0.02 Hedging Activities1 Impact of C
Slide 16: YTD Reconciliation of GAAP to Operating Earnings
YTD Reconciliation of GAAP to Operating Earnings $ in millions Earnings Per Share YTD-19 YTD-20 Change YTD-19 YTD-20 Change Reported GAAP Earnings $1,768 $1,765 ($3) $3.58 $3.56 ($0.02) Non Operating Items: Mark-to-Market Impact of Commodity 3 (11) (14) 0.01 (0.02) (0.03) Hedging Activities1 Severan
Slide 17: Vertically Integrated Utilities
Vertically Integrated Utilities 3rd Quarter Summary Key Drivers: Q3-20 vs. Q3-19 Q3-19 Q3-20 Rate Changes: $34M favorable vs. prior year primarily from rate increases at APCo, I&M and SWEPCO $ in millions (except EPS) Weather: $50M unfavorable vs. prior year; $11M Operating Revenues $2,646 $2,43
Slide 18: Vertically Integrated Utilities
Vertically Integrated Utilities YTD Summary Key Drivers: YTD-20 vs. YTD-19 YTD-19 YTD-20 Rate Changes: $98M favorable vs. prior year primarily from rate increases at APCo/WPCo, I&M and SWEPCO $ in millions (except EPS) Weather: $95M unfavorable vs. prior year; $45M Operating Revenues $7,173 $6,7
Slide 19: Transmission and Distribution Utilities
Transmission and Distribution Utilities 3rd Quarter Summary Key Drivers: Q3-20 vs. Q3-19 Q3-19 Q3-20 Rate Changes: $31M favorable primarily due to the $ in millions (except EPS) Texas TCOS and DCRF as well as the Ohio DIR Operating Revenues $1,187 $1,165 Weather: $11M unfavorable vs. prior year;
Slide 20: Transmission and Distribution Utilities
Transmission and Distribution Utilities YTD Summary Key Drivers: YTD-20 vs. YTD-19 YTD-19 YTD-20 Ohio Regulatory Provision: $58M unfavorable due to prior $ in millions (except EPS) year recognition of 2016 SEET provision reversal Operating Revenues $3,454 $3,307 Rate Changes: $53M favorable prim
Slide 21: AEP Transmission Holdco
AEP Transmission Holdco 3rd Quarter Summary Key Drivers: Q3-20 vs. Q3-19 Q3-19 Q3-20 $14M favorable Operating Earnings vs. prior $ in millions (except EPS) year primarily due to increased transmission Operating Revenues $273 $318 investment Operating Expenses: Operations and Maintenance (32) (28)
Slide 22: AEP Transmission Holdco
AEP Transmission Holdco YTD Summary Key Drivers: YTD-20 vs. YTD-19 YTD-19 YTD-20 $31M unfavorable Operating Earnings vs. $ in millions (except EPS) prior year primarily due to the annual true-up Operating Revenues $808 $878 and the impact of a prior year FERC Operating Expenses: settlement, partia
Slide 23: Generation & Marketing
Generation & Marketing 3rd Quarter Summary Key Drivers: Q3-20 vs. Q3-19 Q3-19 Q3-20 Generation decreased 637 GWh (39%) Q3-20 vs. $ in millions (except EPS) Q3-19 primarily due to the retirement of Conesville Plant Unit 4 in May 2020 Operating Revenues $519 $482 Operating Expenses: AEP Dayton ATC
Slide 24: Generation & Marketing
Generation & Marketing YTD Summary Key Drivers: YTD-20 vs. YTD-19 YTD-19 YTD-20 Generation decreased 1,263 GWh (29%) YTD-20 $ in millions (except EPS) vs. YTD-19 primarily due to the retirement of Operating Revenues $1,433 $1,292 Conesville Plant Unit 4 in May 2020 Operating Expenses: AEP Dayton
Slide 25: 3rd Quarter Rate Performance
3rd Quarter Rate Performance Vertically Integrated Utilities Transmission and Distribution Utilities Rate Changes, net of Rate Changes, net of offsets ($ in millions) offsets ($ in millions) Q3-20 vs. Q3-19 Q3-20 vs. Q3-19 APCo/WPCo $2 AEP Ohio1 $11 I&M $24 AEP Texas $20 KPCo - TOTAL $31 PSO - SWEPC
Slide 26: YTD Rate Performance
YTD Rate Performance Vertically Integrated Utilities Transmission and Distribution Utilities Rate Changes, net of Rate Changes, net of offsets ($ in millions) offsets ($ in millions) YTD-20 vs. YTD-19 YTD-20 vs. YTD-19 APCo/WPCo $29 AEP Ohio1 $22 I&M $36 AEP Texas $31 KPCo ($1) TOTAL $53 PSO ($1) SW
Slide 27: 3rd Quarter Weather Impact
3rd Quarter Weather Impact Vertically Integrated Utilities Transmission and Distribution Utilities Weather Impact Weather Impact ($ in millions) ($ in millions) Q3-20 vs. Q3-20 vs. Q3-20 vs. Q3-20 vs. Q3-19 Normal Q3-19 Normal APCo/WPCo ($8) $17 AEP Ohio - - I&M ($6) $6 AEP Texas ($11) ($1) KPCo ($2
Slide 28: YTD Weather Impact
YTD Weather Impact Vertically Integrated Utilities Transmission and Distribution Utilities Weather Impact Weather Impact ($ in millions) ($ in millions) YTD-20 vs. YTD-20 vs. YTD-20 vs. YTD-20 vs. YTD-19 Normal YTD-19 Normal APCo/WPCo ($41) ($18) AEP Ohio - - I&M ($9) $1 AEP Texas ($15) ($6) KPCo ($
Slide 29: Impact of Weather
Impact of Weather Weather Impact on Earnings Vs. Normal $100 $71 2020 Weather Impact 2019 Weather Impact $59 $50 Impact of Weather ($Millions) $11 $10 $- $(6) $(6) $(50) $(51) $(71) $(100) Q1 Q2 Q3 Q4 YTD The impact of weather through the third quarter was $(51M) vs. normal, which is approximately $
Slide 30: 3rd Quarter Retail Load Performance
3rd Quarter Retail Load Performance Vertically Integrated Utilities Transmission and Distribution Utilities Retail Load1 Retail Load1 (weather (weather normalized) normalized) Q3-20 vs. Q3-19 Q3-20 vs. Q3-19 APCo/WPCo (4.5%) AEP Ohio (2.2%) I&M (0.4%) AEP Texas - KPCo (7.8%) TOTAL (1.2%) PSO (3.4%)
Slide 31: YTD Retail Load Performance
YTD Retail Load Performance Vertically Integrated Utilities Transmission and Distribution Utilities Retail Load1 Retail Load1 (weather (weather normalized) normalized) YTD-20 vs. YTD-19 YTD-20 vs. YTD-19 APCo/WPCo (3.2%) AEP Ohio (3.5%) I&M (3.9%) AEP Texas 0.5% KPCo (7.0%) TOTAL (1.8%) PSO (2.9%) S
Slide 32: Industrial Sales Growth
Industrial Sales Growth AEP Industrial GWh Growth 10% 9.5% 9.7% $75 6.7% 5.7% 4.3% 4.4% 3.5% 0.9% 0% Growth vs Prior Year $50 -0.9% -2.1% -2.5% -5.2% -5.0% -4.7% -6.1% -5.5% -10% -8.7% $25 Oil & Gas Related Sectors Non-Oil & Gas Related Sectors Oil Price -16.8% -20% $- Q3-18 Q4-18 Q1-19 Q2-19 Q3-19
Slide 33: Economic Data – AEP Service Territory
Economic Data – AEP Service Territory Source – Moody’s Analytics 33
Slide 34: Untracked O&M
Untracked O&M O&M focuses on bending the O&M curve down O&M actual spend represents adjusted spend throughout each year as needed 34
Slide 35: North Central Wind Overview
North Central Wind Overview SWEPCO and PSO Regulated Wind Investment Total Rate Base ~$2 billion (1,485 MW) Investment Name MW Investment Target Date Mar. 2021 Sundance 199 $307M (100% PTC) North Central Wind Dec. 2021 Maverick 287 $402M (80% PTC) Dec. 2021 to Traverse 999 $1,287M Apr. 2022 (80% PTC
Slide 36: Current Rate Case Activity
Current Rate Case Activity AEP Ohio APCo – Virginia Docket #: 20-0585-EL-AIR Docket #: PUR-2020-00015 Filing Date: 06/01/2020 Filing Date: 03/31/2020 Requested Rate Base: $3.1B Requested Rate Base: $2.5B Requested ROE: 10.15% Requested ROE: 9.9% Cap Structure: 45.6%D / 54.4%E Cap Structure: 50%D / 5
Slide 37: Current Rate Case Activity
Current Rate Case Activity KPCo SWEPCO - Texas Docket #: 2020-00174 Docket #: 51415 Filing Date: 06/29/2020 Filing Date: 10/13/2020 Requested Rate Base: $1.4B Requested Rate Base: $2.0B Requested ROE: 10% Requested ROE: 10.35% Cap Structure: 53.7%D / 3.0%AR / 43.3%E Cap Structure: 50.6%D / 49.4%E Ne
Slide 38: AEP and Effective Tax Rates
AEP and Effective Tax Rates Q3-20 GAAP Effective Tax Rate Reconciliation Amount Q3-20 Tax Rate ($ in millions) Pre-tax Income $1,756 Tax at Federal Rate $369 21% Tax at State Rate $46 3% Tax Credits and ($81) (5%) Amortization Excess Protected and ($222) (13%) Unprotected Cares Act Tax Planning1 ($5
Slide 39: 2020 - 2024 Capital Forecast: Total $35B
2020 - 2024 Capital Forecast: Total $35B Regulated Renewables Contracted Renewables $2.1 | 6% Regulated New Generation $2.1 | 6% $0.4 | 1% Regulated Environmental Generation $0.9 | 3% Regulated Fossil/Hydro Generation $0.8 | 3% Nuclear Generation $0.4 | 1% AEP Transmission Holdco $7.8 | 22% 100% of
Slide 40: Cash Flows and Financial Metrics
Cash Flows and Financial Metrics $ in millions 2020E 2021E 2022E 2023E Cash from Operations $ 4,600 $ 4,800 $ 5,300 $ 5,800 Capital & JV Equity Contributions 1 (5,900) (8,200) (6,500) (6,500) Other Investing Activities (400) (100) (200) (200) 2 Common Dividends (1,400) (1,400) (1,500) (1,500) Excess
Slide 41: GAAP to Non-GAAP Reconciliations and Ratios
GAAP to Non-GAAP Reconciliations and Ratios Adjusted FFO Calculation Adjusted Total Debt Calculation 12 Months As of Ended 9/30/20 9/30/20 $ in millions $ in millions GAAP Total Debt (incl. current maturities) $32,464 Cash Flow From Operations $3,842 Less: Adjustments: Securitization Bonds (758) Cha
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