American Electric Power Company, Inc. · NASDAQ:AEP
American Electric Power — Non-Deal Roadshow (May 2019)
53 slides from American Electric Power's roadshow presentation, May 2019
Slide 1: Investor Meetings May 2019
Investor Meetings May 2019 May Investor Meetings | aep.com 0
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: The Premier Regulated Energy Company
The Premier Regulated Energy Company 40,000 $42B Miles of Transmission Rate Base 5.4M Customers in 11 States 26GW Owned Generation $42B Current Market Capitalization 18,000 Employees $69B Total Assets Statistics as of December 31, 2018 except for market capitalization as of May 10, 2019 May Investor
Slide 4: Leading the Way
Leading the Way Strong Execution Track Record Delivered Successful Superior Balance Sale of Earnings & Regulatory Capital Sheet Non-Core Dividend Outcomes Allocation Strength Assets Growth AEP Leading the Way Forward Confidence in Commitment to Compelling Portfolio Steady and Well Positioned Growing
Slide 5: Execute Strategy
Strategic Vision 2023 Initiative Themes Improve customer experience Invest in infrastructure and renewables Invest in transmission and distribution networks Pilot technologies and business models Execute Strategy Mitigate generation exposure Invest in regulated and contracted renewables Manage custo
Slide 6: Operating Earnings Guidance
Operating Earnings Guidance Organic Investment Opportunity + Manageable Execution Risk = Growth $5.00 $4.75 $4.50 $4.25 $4.00 $3.85 $3.75 $3.50 2018 2019 2020 Future Operating Earnings $3.75 - $3.95 $4.00 - $4.20 $4.25 - $4.45 Guidance Actual $3.95 May Investor Meetings | aep.com 5
Slide 7: Strong Dividend Growth
Strong Dividend Growth $2.80 Targeted payout ratio 60-70% of $2.60 $2.68 operating $2.53 earnings $2.40 $2.39 $2.20 $2.27 Over 108 $2.15 years of $2.00 $2.03 consecutive $1.95 quarterly $1.80 $1.88 dividends $1.85 $1.71 $1.60 $1.40 Dividend growth in line with earnings $1.20 2010 2011 2012 2013 2014
Slide 8: Positioning for the Future: Capital Investment Opportunities
POSITIONING FOR THE FUTURE CAPITAL INVESTMENT OPPORTUNITIES May Investor Meetings | aep.com 7
Slide 9: Robust Organic Capital Opportunities
Robust Organic Capital Opportunities Grid modernization, aging infrastructure, physical/cyber Transmission security, reliability, market efficiency and economic development projects Grid modernization, reliability improvement projects Distribution and distribution station refurbishment Regulated ren
Slide 10: 2019-2023 Capital Forecast of $33B and Net Plant
2019-2023 Capital Forecast of $33B and Net Plant 2019-2023 Capital Forecast Historical Net Plant Profiles Regulated Regulated Renewables Environmental $0.5B | 1% Generation Regulated Fossil/Hydro $1.1B | 3% Generation Contracted Renewables $1.0B | 3% $2.2B | 7% Nuclear Generation $0.5B | 2% Corporat
Slide 11: 2019-2023 Capital Forecast by Subsidiary
2019-2023 Capital Forecast by Subsidiary $ in millions (excluding AFUDC) 2019E 2020E 2021E 2022E 2023E Total Appalachian Power Company $821 $786 $847 $939 $875 $4,267 Wheeling Power Company $42 $43 $52 $56 $33 $226 Kingsport Power Company $17 $15 $21 $19 $25 $97 Indiana Michigan Power Company $647 $
Slide 12: Cash Flows and Financial Metrics
Cash Flows and Financial Metrics $ in millions 2019E 2020E 2021E 2022E Cash from Operations $ 4,700 $ 4,900 $ 5,300 $ 5,800 Capital & JV Equity Contributions * (7,300) (5,800) (6,100) (6,500) Other Investing Activities (300) (400) (100) (100) Common Dividends ** (1,300) (1,300) (1,300) (1,400) Exces
Slide 13: 7.8% CAGR in Rate Base Growth
7.8% CAGR in Rate Base Growth Cumulative Change from 2017 Base 2017 Rate Base Proxy Vertically Integrated Utilities $23.0B T&D Utilities $9.7B Transcos/Transource $5.7B $21.6B Total $38.4B $18.1B $7.8 $14.5B $6.5 $11.1B $5.2 $6.9 $4.0 $5.7 $7.4B $4.6 $2.6 $3.5 $3.7B $2.4 $6.9 $1.2 $5.9 $1.1 $4.7 $3.
Slide 14: Efficient Cost Recovery Mechanisms
Efficient Cost Recovery Mechanisms Base Rates 31% Trackers 62% Forward Rates 7% Nearly 70% of 2019-2023 capital plan recovered through reduced lag mechanisms May Investor Meetings | aep.com 13
Slide 15: Investing in Transmission
INVESTING IN TRANSMISSION May Investor Meetings | aep.com 14
Slide 16: AEP Transmission Holdco Legal Entity Structure
AEP Transmission Holdco Legal Entity Structure AEP Transmission Company, LLC (AEP Transco) is wholly-owned by AEP Transmission Holding Company, LLC (AEP Trans Holdco) AEP Trans Holdco is a wholly-owned subsidiary of American Electric Power Company, Inc. (AEP), one of the largest utility holding comp
Slide 17: Transmission Priorities
Transmission Priorities Strategy Execution Results Targeted Capital Investments Infrastructure Improved Reliability/Resiliency Local Reliability, Telecom Earnings Growth Investment modernization, Asset Health Efficient Cost Recovery Improve Reliability, SCADA Modernize grid reducing Customer technol
Slide 18: AEPTHC Target Earnings 2018 - 2021
AEPTHC Target Earnings 2018 - 2021 AEPTHC EPS contribution grows from Over $13B projected by Significant 2021 (AEP Transcos and $0.31 in 2014 to $1.19-$1.22 in 2021 Investment the ownership percentage of Transource) Healthy Affiliate authorized ROEs ROEs ranging from 9.6% to 12.8% EPS Contribution &
Slide 19: Transmission Investment Drivers
Transmission Investment Drivers Key Transmission Investment Drivers Typical 2018-2023 Project Examples • Flushing-Smyrna (OH) – construct 13 miles to alleviate thermal overload Local Reliability • Sheridan Project (WV) – 10M T outage minutes in last 3 years • Greenland-VBI North (OK) – replace 41 mi
Slide 20: Transmission Investment Categories
Transmission Investment Categories As the foundation of the power system, transmission integrates generation and loads across large regional footprints. $4,000 $3,500 Growing complexity of the integrated power grid: distributed generation, diversity in generation fleet, $3,000 location and variabi
Slide 21: Robust Transmission Capital Expenditure Opportunities
Robust Transmission Capital Expenditure Opportunities Conductor Avg Age 47.6 years Area of Focus Life Expectancy 70 years Circuit Transmission Line Miles Transformers Breakers Life Expectancy (years) 70 60 50 Current Quantity over 6,085 234 998 Life Expectancy Quantity that will exceed Life Expectan
Slide 22: Investing in Distribution
INVESTING IN DISTRIBUTION May Investor Meetings | aep.com 21
Slide 23: Robust Distribution Capital Expenditure Opportunities
Robust Distribution Capital Expenditure Opportunities Station Circuit Distribution Transformers Breakers Life Expectancy (years) 60 50 Current Quantity over Life 923 993 Expectancy Quantity that will exceed Life Expectancy in next ten 514 977 years Total Renewal Opportunity 1,437 1,970 over ten year
Slide 24: Examples of Incremental Distribution Investment Opportunities
Examples of Incremental Distribution Investment Opportunities Grid Modernization Pole Replacement Programs Distribution Supervisory Obsolete Station Breaker Control and Data Acquisition Replacements Smart Circuits Capacity/Reliability Projects Distribution Line Re-Conductoring Distri
Slide 25: Investing in Regulated Renewables
INVESTING IN REGULATED RENEWABLES May Investor Meetings | aep.com 24
Slide 26: SWEPCO and PSO Customer Savings Plan
SWEPCO and PSO Customer Savings Plan SWEPCO and PSO Integrated Resource Plans (IRP) continue to Current IRP Wind Nameplate Forecast indicate that customers will benefit from additional low-cost wind energy Wind Procurement * 2021-2023 Takes advantage of the federal Production Tax Credit SWEPCO U
Slide 27: AEP Ohio – Solar Project Filing
AEP Ohio – Solar Project Filing Two solar REPAs with both facilities on line by end of 2021: Highland Solar, 300 MW Willowbrook Solar, 100 MW Debt Equivalency Cost Mechanism to provide recovery for use of Balance Sheet (approximately $6M annually) Green Tariff that allows all customer clas
Slide 28: Projected Resource Additions
Projected Resource Additions Solar Additions (MW) Wind Additions (MW) Natural Gas Additions (MW) Operating 2024- 2028- Operating 2024- 2028- Operating 2024- 2028- 2020-2023 2020-2023 2020-2023 Co: 2027 2030 Co: 2027 2030 Co: 2027 2030 AEP Ohio Up to 400 * - - AEP Ohio Up to 500* - - I&M - - 1,500 AP
Slide 29: Integrated Resource Plan Status
Integrated Resource Plan Status IRPs Underway/Planned Previously Approved Q4-18 Q1-19 Q2-19 Q3-19 Q4-19 IRPs 12/14/18 5/1/19 (AR) (VA) 9/30/19 12/20/19 (LA) 12/21/18 July / Aug 2019 Next IRP filing date for APCo (WV) is January 2021 May Investor Meetings | aep.com 28
Slide 30: Investing in Competitive Business
INVESTING IN COMPETITIVE BUSINESS May Investor Meetings | aep.com 29
Slide 31: Large Scale Project Map with Recently Announced Contracted Renewables Transaction
Large Scale Project Map with Recently Announced Contracted Renewables Transaction Black Oak Getty (78 MW) Solar 26% Apple Blossom (100 MW) Mehoopany (70 MW) AEP Today 351 MW Cedar Creek 2 (124 MW) Fowler Ridge 2 (100 MW) Wind Pavant (20 MWac) 74% Boulder (50 MWac) Flat Ridge 2 (235 MW) Jacumba (20 M
Slide 32: Overview of Recently Announced Contracted Renewables Transaction
Overview of Recently Announced Contracted Renewables Transaction Transaction Overview 724 net MW operating wind portfolio across seven states (CO, HI, IN, KS, MI, MN, PA) 1 Five of seven wind assets owned 50 / 50 with BP Wind Energy Operating Portfolio Long-term PPAs with A/A2-rated 2 counterp
Slide 33: Details of Recently Announced Contracted Renewables Transaction
Details of Recently Announced Contracted Renewables Transaction MW Asset Off-taker COD PPA Expire Turbine O&M Net 1 Fowler Ridge 2 (IN) 100 2009 2029 Cedar Creek 2 (CO) 124 2011 2035 BP JV Projects Flat Ridge 2 (KS) 235 2012 2036 Mehoopany (PA) 70 2012 2032 Auwahi (HI) 11 2012 2032 Total 540 Black O
Slide 34: Positioning for the Future: Financial Information
POSITIONING FOR THE FUTURE FINANCIAL INFORMATION May Investor Meetings | aep.com 33
Slide 35: Regulated Returns
Regulated Returns Twelve Months Ended 3/31/2019 Earned ROE’s (non-GAAP operating earnings, not weather normalized) AEP OH1 I&M 13.2% 12.8% Trans APCo2 9.9% 9.5% KPCo 8.6% PSO2 AEP TX 8.0% SWEPCO2 7.6% 7.2% Regulated Operations ROE of 10.1% as of March 31, 2019 1 Adjusted to reflect ROE after roll-of
Slide 36: Current Rate Case Activity
Current Rate Case Activity AEP Texas I&M – Indiana SWEPCO – Arkansas1 Docket #: 49494 Docket #: 45235 Docket #: 19-008-U Filing Date: 05/01/2019 Filing Date: 05/14/2019 Filing Date: 02/28/2019 Requested Rate Base: $5.0B Requested Rate Base: $4.9B Requested Rate Base: $1.2B Requested ROE: 10.5% Reque
Slide 37: Recently Settled Rate Cases
Recently Settled Rate Cases APCo – West Virginia PSO – Oklahoma Docket #: 18-0646-E-42T Docket #: 201800097 Filing Date: 05/09/2018 Filing Date: 09/26/2018 Requested Rate Base: $4.1B Requested Rate Base: $2.5B Requested ROE: 10.22% Requested ROE: 10.3% Cap Structure: 49.84%D / 50.16%E Cap Structure:
Slide 38: Bending the O&M Curve While Achieving Our Strategic Goals
Bending the O&M Curve While Achieving Our Strategic Goals Actuals / 2019 Plan Inflation @ 2% Bending the Curve Trajectory 4.0 3.7 3.5 O&M targets focus on 3.1 3.1 3.1 3.1 bending the O&M 3.0 2.9 curve down to create 3.0 2.8 2.8 2.8 2.8 rate headroom 2.5 O&M actual spend $B represents adjusting 2
Slide 39: Bending the O&M Curve (Initiatives)
Bending the O&M Curve (Initiatives) AEP Transmission Spacer AEP Station Check In/Check Out Replacement Capital Program Application The replacement program The first true mobile application avoids approximately $80M of its kind saves valuable time in O&M expenditures over for field technicians an
Slide 40: Bending the O&M Curve (Initiatives)
Bending the O&M Curve (Initiatives) Charge Initiative ~$200M in digital and process-enabled savings over five years through O&M reductions/cost avoidance (50%), Capital Reduction/Efficiency (25%), Revenues (10%) & Operational Efficiency (15%) Distribution/Transmission Field Time Reporting App – Mo
Slide 41: Normalized Load Trends
Normalized Load Trends Load figures are provided on a billed basis. Charts reflect connected load and exclude firm wholesale load. Historical and 2019 data adjusted to reflect reclass of industrial and commercial industry codes for certain customers; no revenue or earnings impact. May Investor Meeti
Slide 42: Capitalization and Liquidity
Capitalization and Liquidity Total Debt / Total Capitalization Credit Statistics Actual Target FFO to Total Debt 18.1% Mid Teens Represents the trailing 12 months as of 3/31/2019 Liquidity Summary (unaudited) 3/31/2019 Actual $ in millions Amount Maturity Revolving Credit Facility $4,000 Jun-22 Qual
Slide 43: 2019 Debt Issuance and Maturities Overview
2019 Debt Issuance and Maturities Overview Financing plans are subject to change depending on capital expenditures, regulatory outcomes, internal cash generation, market conditions and other factors May Investor Meetings | aep.com 42
Slide 44: Long-Term Debt Maturity Profile
Long-Term Debt Maturity Profile ($ in millions) Year 2019 2020 2021 2022 2023 2024 AEP, Inc. $0.0 $500.0 $400.0 $1,105.0 $0.0 $0.0 AEP Generating Company $45.0 $150.0 $0.0 $0.0 $0.0 $0.0 AEP Texas* $250.0 $110.6 $0.0 $425.0 $125.0 $0.0 AEP Transmission Company $85.0 $0.0 $50.0 $104.0 $60.0 $95.0 App
Slide 45: AEP Credit Ratings
AEP Credit Ratings Moody's S&P Company Senior Senior Unsecured Outlook Unsecured Outlook American Electric Power Company Inc. Baa1 S BBB+ S AEP, Inc. Short Term Rating P2 S A2 S AEP Texas Inc. Baa1 S A- S 1 AEP Transmission Company, LLC A2 S A- S 2 Appalachian Power Company Baa1 S A- S 2 Indiana Mic
Slide 46: Sustainable Future
SUSTAINABLE FUTURE May Investor Meetings | aep.com 45
Slide 47: Emission Reduction Goals
Emission Reduction Goals Environmental, Social & Governance (ESG) Reporting: AEP’s Corporate Accountability Report Clean Energy Strategy: American Electric Power: Strategic Vision for a Clean Energy Future EEI ESG Sustainability Reporting: AEP’s 2018 EEI ESG Strategy to Achieve: Report Inves
Slide 48: Transforming Our Generation Fleet
Transforming Our Generation Fleet 80% 70% 70% 66% 60% 50% Capacity 46% 40% 40% 30% 27% 27% 22% 22% 20% 19% 16% 10% 7% 6% 7% 7% 4% 4% 4% 4% 1% 1% 0% 1999 2005 2019 Future 1999 2005 2019 Future 1999 2005 2019 Future 1999 2005 2019 Future 1999 2005 2019 Future Coal Natural Gas Nuclear Hydro, Wind, Sola
Slide 49: Delivering Clean Energy Resources
Delivering Clean Energy Resources AEP's Expected Yearend 2019 Renewable Portfolio, in MW Hydro, Wind, Solar & Pumped Storage Owned MW PPA MW Total MW AEP Ohio 209 209 Appalachian Power Company 785 575 1,360 Indiana Michigan Power Company 36 450 486 Public Service Company of Oklahoma 1,137 1,137 Sout
Slide 50: Largest Investment in Environmental Controls
Largest Investment in Environmental Controls May Investor Meetings | aep.com 49
Slide 51: Dramatic Reductions in Emissions
Dramatic Reductions in Emissions 1990-2018 ACTUAL SO2 96% NOx 92% 2001-2018 ACTUAL Hg 95% May Investor Meetings | aep.com 50
Slide 52: Dramatic Reductions in Emissions
Dramatic Reductions in Emissions 2000-2018 Actual CO2 59% May Investor Meetings | aep.com 51
Slide 53: Higher Growth, Higher Dividends, More Certainty
HIGHER HIGHER growth dividends The Premier Regulated Energy Company MORE MORE certainty regulated Positioned to Deliver Superior Risk Adjusted Returns May Investor Meetings | aep.com 52
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