American Electric Power Company, Inc. · NASDAQ:AEP
American Electric Power — Non-Deal Roadshow (May 2006)
46 slides from American Electric Power's roadshow presentation, May 3, 2006
Slide 1: American Electric Power Boston Investor Meetings
American Electric Power Boston Investor Meetings Hosted by A.G. Edwards May 3, 2006 1
Slide 2: Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995
“Safe Harbor” Statement under the Private Securities Litigation Reform Act of 1995 This presentation contains forward-looking statements, which are subject to risks and uncertainties. These factors include electric load and customer growth; weather conditions, including storms; available sources and
Slide 3: Mike Morris, Chairman, President & Chief Executive Officer
Mike Morris Chairman, President & Chief Executive Officer 3
Slide 4: Asset Portfolio
Asset Portfolio "ne power + A Century of Firsts
Slide 5: Strength & Scale in Assets & Operations
Strength & Scale in Assets & Operations Generation* 35,600 MW capacity Transmission 39,000 miles Distribution 206,000 miles Customers 5 million * Figures do not include mothballed or decommissioned units (1,015 MW of capacity). FUTURE EARNINGS GROWTH DRIVEN BY NATIVE LOAD GROWTH & SUBSTANTIAL UTILIT
Slide 6: Asset Portfolio: Generation Fleet Composition
Asset Portfolio: Generation Fleet Composition Capacity by Fuel Mix ¾ 35,600 MW Domestic Capacity Pumped Storage, Wind ¾ 85% System Availability Factor YE 2005 Nuclear Hydro 3% 6% Natural ¾ 63% System Capacity Factor YE 2005 Gas/Oil 19% Coal/Lignite 72% Baseload Load-Following Peaking PJM 23,985 0 1,
Slide 7: Fuel
Fuel A Century of Firsts
Slide 8: Coal Procurement
Coal Procurement AEP SYSTEM EASTERN SYSTEM Northern Northern Central Appalachia Appalachia Appalachia 24% PRB & Other 37% 18% 32% 39% Powder River Central 50% Basin & Other Appalachia Coal Supply (on average) WESTERN SYSTEM Lignite ¾ Purchase 75 MM tons per year 26% ¾ Avg. delivered price ~ $32.52/t
Slide 9: Coal Delivery
Coal Delivery EASTERN SYSTEM AEP SYSTEM 2005 Actual DELIVERY MODE DIVERSITY Belt (3%) 2005 Actual Truck 12% Belt 33% Barge 19% Direct Truck 8% 9% Rail/Barge* 33% 15% 43% Rail Direct Rail/Barge* 25% Rail Direct WESTERN SYSTEM 2005 Actual Barge Belt Direct 23% 77% Rail Direct * Coal delivered to AEP p
Slide 10: AEP's Coal Transportation Assets
AEP’s Coal Transportation Assets Coal Transportation to AEP Plants* AEP’s substantial coal 2005 Actual transportation assets include: ¾ 7,065 railcars 20% ¾ 2,318 barges ¾ 53 towboats 80% ¾ 1 active coal handling terminal (20 million tons of annual capacity) AEP-owned Asset External Carrier * Repres
Slide 11: Fuel Recovery
Fuel Recovery AEP SYSTEM Off System Sales Customer Counterparties 25% 55% 20% Shareholder Fuel Cost Recovery (on average) ¾ Fuel recovery varies by jurisdiction ¾ 80% of fuel cost is recoverable across the AEP System ¾ Active Fuel Clause Jurisdictions: • AEP EAST: APCo, I&M – MI, KGP, KPCo • AEP WES
Slide 12: Environmental
Environmental 12
Slide 13: $4.1 Billion Environmental Investment
$4.1 Billion Environmental Investment Environmental Projected Environmental Capital Investment* Investment Allocation 2010 $19 4% 8% 2009 $215 2008 $426 2007 $1,001 48% 2006 $1,455 40% 2005** $703 2004** $299 0 500 1000 1500 2000 $ in Millions Ohio Power & CSP (OH) *Environmental investment for NOx,
Slide 14: Environmental Compliance Investment
Environmental Compliance Investment Compliance Allocation Current Programs $2.0 Billion: $135 MM $578 MM $0.5 Billion for NOx $1.5 Billion for SO2 Future Programs $3,405 MM $2.1 Billion: $1.9 Billion for SO2 $0.2 Billion for Other NOx Compliance SO2 Compliance Mercury $4.1 BILLION ENVIRONMENTAL INVE
Slide 15: Environmental Installations
Environmental Installations Co-Benefit FGD – Reduces SO2 by 98% SCR - Reduces NOx by 90% Hg Capture Plant Name MW Capacity Plant Name MW Capacity Gavin 1 & 2 2600 Gavin 1 & 2 2600 Conesville 5 & 6 750 Amos 1-3 2900 Pirkey 580 Mountaineer 1300 Completed Oklaunion 539 Big Sandy 2 800 Zimmer 330 Stuart
Slide 16: Low Cost Production Supports Investment & Investment Sustains Low Cost Production
Low Cost Production Supports Investment & Investment Sustains Low Cost Production ¾ Lowers exposure to high Typical Pulverized Coal Plant cost emission allowances Comparison of Variable Production Cost ¾ Creates opportunity to burn Pre- and Post- FGD/SCR (future view)* wider variety of lower cost $3
Slide 17: Investing in IGCC
Investing in IGCC 17
Slide 18: Integrated Gasification Combined Cycle
Integrated Gasification Combined Cycle Integrated Gasification Combined Cycle (IGCC) IGCC is a clean coal technology that combines two technologies – coal gasification and combined cycle -- to offer the benefits of a low cost fuel with superior thermal and environmental performance. The IGCC process
Slide 19: Looking To The Future - IGCC
Looking To The Future - IGCC 7FA Combustion Cryogenic Turbine Oxygen Syngas Air HRSG Mercury Steam Removal Steam Stack Water Steam Turbine Electricity Sulfur Removal Coal Particulate Removal Quench Gasifier Pure Sulfur Slag/Fines Solids 162110 - GJS/CE-01/1-23-02 AEP HAS ANNOUNCED ITS INTENTION TO C
Slide 20: Investing In IGCC
Investing In IGCC Generation Technology Comparative Statistics PC IGCC NGCC Nominal Capacity (MW) 600 600 600 Heat Rate (Btu/kWh) 8700 8600 7200 Total Plant Cost (EPC) ($/kW) 1700 1900 480 Production Cost ($/MWh) 17 16 57 Cost of Electricity, without CO2 Capture ($/MWh) 58 63 90 Estimated Cost of El
Slide 21: Regulatory Overview
Regulatory Overview 21
Slide 22: Regulatory Activity Underway
Regulatory Activity Underway 9 TCC Stranded Cost Recovery True-up Filing – Final Order Issued 9 Ohio Companies filing for pass through of FERC OATT changes 9 Indiana Depreciation Petition 9 APCo Filing for Recovery of E&R Costs in Virginia 9 APCo & WPCo Base Rate & Expanded Net Energy Cost (ENEC) Fi
Slide 23: Texas Regulatory Activity
Texas Regulatory Activity TCC TCC Stranded Stranded Cost Cost Recovery Recovery Case Case February February 16, 16, 2006 2006 –– PUCT PUCT final final order order provides provides for for net net true-up true-up of of $1.475 $1.475 billion billion •• March March 3, 3, 2006 2006 –– Requested Request
Slide 24: Regulatory Activity Underway
Regulatory Activity Underway Ohio Ohio Companies Companies Pass Pass through through of of FERC FERC OATT OATT Changes Changes Filed Filed Feb Feb 3, 3, 2006 2006 -- Seeking Seeking authority authority to to pass pass through through to to customers customers the the changes changes inin the the FER
Slide 25: Regulatory Activity – Settlement Pending
Regulatory Activity – Settlement Pending Appalachian Appalachian Power Power & & Wheeling Wheeling Power Power –– West West Virginia Virginia Base Base Rate Rate Case Case & & ENEC ENEC Reactivation Reactivation Filed Filed August August 26, 26, 2005 2005 –– Seeking Seeking $183 $183 Million Million
Slide 26: IGCC Regulatory Activity
IGCC Regulatory Activity Ohio - Cost Recovery Filing Ohio Next Steps 2006: Phase Phase 11 –– PUCO PUCO AUTHORIZED AUTHORIZED 9 Secure cost recovery plan 9 Effective 9 Effective during during 2006 2006 • April 10, 2006 – PUCO 9 Seeks 9 Seeks recovery recovery of of initial initial costs, costs, inclu
Slide 27: Regulatory Activity Completed
Regulatory Activity Completed Ohio Ohio –– Rate Rate Stabilization Stabilization Plan Plan (2006 (2006 –– 2008) 2008) 9 9 Annual Annual 3% 3% and and 7% 7% generation generation rate rate increases increases at at CSP CSP & & OP, OP, respectively respectively 9 9 POLR POLR rate rate rider rider for
Slide 28: Summary Rate Case Information
Summary Rate Case Information West Virginia Base Case Rate Filing On August 26, 2005, Appalachian Power Co. and Wheeling Power Co. filed an application with the West Virginia Public Service Commission (WVPSC) to increase electric rates and charges, a request for the reactivation and modification of
Slide 29: Summary Rate Case Information
Summary Rate Case Information Virginia E&R Factor Filing On July 1, 2005, Appalachian Power Co. filed a request with the Virginia SCC to recover incremental actual and projected costs for environmental compliance and T&D System reliability in the amount of $62.1MM. The SCC has ruled that under appli
Slide 30: Capital Investment
Capital Investment "ne power + A Century of Firsts 30
Slide 31: Revised Capital Investment Forecast
Revised Capital Investment Forecast Capital Investment Forecast excluding AFUDC $3,723MM $3,611MM $3,538MM $4,000 MM $3,500 MM $3,000 MM $2,500 MM $2,000 MM New Build $1,500 MM Generation & Ongoing $1,000 MM Infrastructure Replacement $500 MM investment can be throttled $0 MM 2006 2007 2008 New Buil
Slide 32: Capital Investment Funding
Capital Investment Funding Actual Projection ($ in millions) 2004 2005 2006 2007 2008 Planned Capital Investment, excluding AFUDC Committed Construction Expenditures * $ (1,671) $ (2,499) $ (2,181) $ (1,633) $ (1,045) Discretionary Cap Ex Predicated on Rate Recovery &/or Avail. Cash n/a n/a $ (1,542
Slide 33: Forecasted Capital Expenditures
Forecasted Capital Expenditures Company 2006 2007 2008 (in thousands) AEP SYSTEM* $3,722,600 $3,611,400 $3,537,700 AEGCo $14,300 $30,000 $39,700 APCo $942,800 $691,500 $751,700 CSPCo $342,700 $473,700 $553,400 I&M $311,200 $278,700 $262,000 KPCo $100,000 $127,100 $144,000 OPCo $1,070,400 $954,500 $5
Slide 34: New Generation
New Generation IGCC PSO RFPs SWEPCO AEP RFPs •Expect to • Submitted RFPs •Submitted RFPs obtain permits totaling 900 totaling 2,100 and finalize megawatts of megawatts of engineering by baseload and baseload, 2007 peaking capacity intermediate, and peaking capacity • Construction of • Commercial 600
Slide 35: Capital Investment 2004 - 2006
Capital Investment 2004 - 2006 2004 Actual Totaled $1.6 Billion 2005 Actual Totaled $2.5 Billion (see note below ) $100 MM $7 MM Transmission $79 MM $9 MM $230 MM Transmission $392 MM $373 MM Distribution $164 MM Distribution Environmental Environmental $65 MM $259 MM Nuclear Nuclear Generation $534
Slide 36: Finance
Finance "ne power + A Century of Firsts 36
Slide 37: 2006 Earnings Guidance Range: $2.50 - $2.70
2006 Earnings Guidance Range: $2.50 - $2.70 37
Slide 38: 2006 Projected Cash Flow
2006 Projected Cash Flow ($ in millions) 2005 2006 Actual Guidance * Beginning Cash Balance $ 320 $ 401 Cash from Operations: Income from Continuing Operations 787 1,023 Depreciation and Amortization 1,318 1,363 Pension Funding in Excess of Expense (626) (126) Extraordinary items 225 - Other 173 (31
Slide 39: Capitalization
Capitalization Capital Structure Actual 12/31/2005 Actual 3/31/2006 Debt Equity Total Debt Equity Total Balance Sheet Capitalization Long-term Debt 12,226 - 12,226 12,142 - 12,142 Short-term Debt 10 - 10 226 - 226 Preferred Stock Subject to Mandatory Redemption - - - - - - Preferred Stock Not Subjec
Slide 40: Appendix
Appendix A Century of Firsts 40
Slide 41: Framework For 2006
Framework For 2006 • 2006 Earnings Guidance Range: $2.50 to $2.70 • Controlled investment in utility operations – Reliability – Environmental • Seek rate recovery for new investments • Control costs COMPANY’S STRATEGY REMAINS FOCUSED ON UTILITY OPERATIONS 41
Slide 42: Summary of Major 2006 Earnings Drivers
Summary of Major 2006 Earnings Drivers 9 Load growth of 2.5% 9 $500MM rate recovery assured or in progress 9 Rising fuel costs of 11-13% 9 Higher planned outages, increased retail load, & sale of TCC generation to impact off system sales 9 Decline in utility operations O&M 9 Parent Company improveme
Slide 43: Risks & Uncertainties
Risks & Uncertainties 2006 EPS Guidance Range is $2.50 to $2.70 2006 9 Outcome of pending regulatory proceedings 9 Texas, Ohio, Virginia, West Virginia, Indiana 9 Wholesale market volatility 9 Plant availability 9 Rising fuel costs 9 Weather GUIDANCE RANGE DESIGNED TO WITHSTAND A REASONABLE RANGE OF
Slide 44: Jurisdictional Fuel Clause Summary
Jurisdictional Fuel Clause Summary STATE FUEL CLAUSE ADJUSTMENT FREQUENCY Arkansas Yes Monthly Indiana Yes Capped at increasing rates through June 30, 2007 Kentucky Yes Monthly Louisiana Yes Monthly Michigan Yes Annually Ohio No Although there is no recovery mechanism in Ohio, the RSP provides for a
Slide 45: 2005 Retail Revenue
2005 Retail Revenue Retail Revenue Composition by State 2% 1% 3% Ohio 4% Oklahoma 4% Texas 31% 9% Indiana Virginia West Virginia 9% Louisiana Kentucky 11% 14% Arkansas 12% Michigan Tennessee 45
Slide 46: What AEP Offers
What AEP Offers • Strength and scale in assets & operations • Focused utility model • Earnings growth driven by native load & capital investment • Attractive dividend yield in excess of 4% • Stable credit profile 46
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