American Electric Power Company, Inc. · NASDAQ:AEP
American Electric Power — Q4 2016 Earnings Presentation
29 slides from American Electric Power's earnings presentation, Jan 26, 2017
Slide 1: 4th Quarter 2016 Earnings Release Presentation
4th Quarter 2016 Earnings Release Presentation January 26, 2017
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 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: Fourth Quarter 2016 Highlights
Fourth Quarter 2016 Highlights Fourth Quarter 2016 Total Shareholder Return YTD 2016 One Year Three Year Five Year Refer to appendix for reconciliation between GAAP and Operating EPS 3
Slide 4: 2016 Highlights & 2017 Focus
2016 Highlights & 2017 Focus 2016 Highlights 2017 Focus Financial Performance Financial Performance Delivered Q4 2016 GAAP earnings of $0.76 and Deliver operating earnings within the operating earnings of $0.67 per share guidance range of $3.55 to $3.75 per share Delivered 2016 GAAP earnings o
Slide 5: Regulated Returns
Regulated Returns Twelve Months Ended 12/31/2016 Earned ROEs (non-GAAP Operating Earnings) OPCo 13.9% Trans I&M AEP TX 12.1% * 11.7% 11.7% APCo 10.3% PSO 8.5% KPCo SWEPCO 7.5% 7.4% Regulated Operations ROE of 10.7% as of December 31, 2016 * Transco ROE 11.2% Sphere size based on each company’s relat
Slide 6: 4th Quarter 2016 Operating Earnings vs. Prior Year
4th Quarter 2016 Operating Earnings vs. Prior Year 0.7 0.08 $0.03 $0.67/sh ($0.07) (0.01) 0.03 0.6 0.02 0.07 0.5 $0.48/sh $0.03 0.4 0.3 0.2 0.1 0.0 2015 Actual Vertically Integrated Transmission & AEP Transmission Generation and Corporate and 2016 Actual Utilities Distribution Utilities Holdco Marke
Slide 7: 2016 Operating Earnings vs. Prior Year
2016 Operating Earnings vs. Prior Year $0.03 $0.06 $0.03 2016 Operating EPS $2.01 $0.95 $0.54 $0.50 ($0.06) $3.94 Refer to appendix for additional explanation of variances by segment 7
Slide 8: Normalized Retail Load Trends
Normalized Retail Load Trends Note: Charts reflect connected load and exclude firm wholesale load & Buckeye Power backup load. 8
Slide 9: Economic Data – AEP Service Territory
Economic Data – AEP Service Territory estimates estimates estimates Source: Moody’s analytics 9
Slide 10: Capitalization & Liquidity
Capitalization & Liquidity Total Debt / Total Capitalization Credit Statistics Actual Target FFO Interest Coverage 5.8x >3.6x FFO to Total Debt 20.2% 15%-20% Note: Credit statistics represent the trailing 12 months as of 12/31/2016 Liquidity Summary (unaudited) 12/31/2016 Actual ($ in millions) Amou
Slide 11: AEP and Tax Reform
AEP and Tax Reform Potential Excess Deferred Taxes Key Tax Reform Considerations 20% Tax Rate • Lower tax rate (20% more likely) Total Regulated Deferred FIT $10.5B • Loss of interest deductibility • Full expensing of cap-ex Total Potential Excess Regulated Deferred FIT $4.3B Depreciation-related po
Slide 12: Proven track record & 2017 Outlook
Proven track record & 2017 Outlook Proven track record 2017 Outlook Solid 2016 operating earnings 5%-7% growth rate with 2017 operating earnings guidance range of $3.55-$3.75 Strategic capital deployment Execution of Cap Ex plan Continued O&M discipline Closure on sale of non-PPA assets
Slide 13: Appendix
Appendix 13
Slide 14: 4th Quarter Reconciliation of GAAP to Operating Earnings
4th Quarter Reconciliation of GAAP to Operating Earnings $ millions Earnings Per Share Q4-15 Q4-16 Change Q4-15 Q4-16 Change Reported (GAAP) Earnings $469 $373 ($96) $0.96 $0.76 ($0.20) Non Operating Items: Disposition of Commercial (239) (6) 233 (0.48) (0.01) 0.47 Barging Activities* Mark-to-Market
Slide 15: YTD December Reconciliation of GAAP to Operating Earnings
YTD December Reconciliation of GAAP to Operating Earnings $ millions Earnings Per Share YTD-15 YTD-16 Change YTD-15 YTD-16 Change Reported (GAAP) Earnings $2,047 $611 ($1,436) $4.17 $1.24 ($2.93) Non Operating Items: Disposition of Commercial Barging Activities* (239) (1) 238 (0.48) - 0.48 Mark-to-M
Slide 16: Vertically Integrated Utilities
Vertically Integrated Utilities Fourth Quarter EPS Summary Key Drivers: Q4-16 vs. Q4-15 Q4-15 Q4-16 Rate changes: $12M primarily from increases at APCo, $ millions (except EPS) SWEPCo and I&M, partially offset by a decrease at PSO Operating Revenues $2,013 $2,164 resulting from a fourth quarter ra
Slide 17: Vertically Integrated Utilities
Vertically Integrated Utilities YTD EPS Summary Key Drivers: YTD-16 vs. YTD-15 Rate changes: $114M primarily from increases at YTD-15 YTD-16 SWEPCo, I&M, KPCo and APCo, including recognition of $ millions (except EPS) $25 million of deferred WV rate billings in Q2 Operating Revenues $9,172 $9,092
Slide 18: Transmission & Distribution Utilities
Transmission & Distribution Utilities Fourth Quarter EPS Summary Key Drivers: Q4-16 vs. Q4-15 Q4-15 Q4-16 Rate changes: $37M primarily from Ohio Phase- $ millions (except EPS) In Recovery Rider and Distribution Investment Operating Revenues $1,037 $954 Rider and Texas Distribution Cost Recovery Fa
Slide 19: Transmission & Distribution Utilities
Transmission & Distribution Utilities YTD EPS Summary Key Drivers: YTD-16 vs. YTD-15 YTD-15 YTD-16 Rate changes: $73M primarily from Ohio Phase-In Recovery Rider and Distribution Investment Rider and $ millions (except EPS) Texas Distribution Cost Recovery Factor Operating Revenues $4,557 $4,422
Slide 20: AEP Transmission Holdco
AEP Transmission Holdco Fourth Quarter EPS Summary Key Drivers: Q4-16 vs. Q4-15 Q4-15 Q4-16 $22M favorable operating income due to $ millions (except EPS) increased revenues and expenses, driven by Operating Revenues $85 $130 increased capital investment in the wholly- Operating Expenses: owned Tr
Slide 21: AEP Transmission Holdco
AEP Transmission Holdco YTD EPS Summary Key Drivers: YTD-16 vs. YTD-15 YTD-15 YTD-16 $120M favorable operating income due to $ millions (except EPS) increased revenues and expenses, driven by Operating Revenues $329 $513 increased capital investment in the wholly- Operating Expenses: owned Transco
Slide 22: Generation & Marketing
Generation & Marketing Fourth Quarter EPS Summary Key Drivers: Q4-16 vs. Q4-15 Q4-15 Q4-16 $ millions (except EPS) Generation increased 3,208 GWh (50%) Q4-16 Operating Revenues $610 $687 vs. Q4-15 Operating Expenses: AEP Dayton ATC liquidations up 8%: Energy Costs (394) (458) $29.29/MWh in Q4-16
Slide 23: Generation & Marketing
Generation & Marketing YTD EPS Summary Key Drivers: YTD-16 vs. YTD-15 YTD-15 YTD-16 $ millions (except EPS) Generation decreased 1,124 GWh (3%) YTD-16 Operating Revenues $3,414 $2,976 vs. YTD-15, primarily due to 2015 plant Operating Expenses: retirements Energy Costs (2,165) (1,948) AEP Dayton
Slide 24: Retail Rate Performance
Retail Rate Performance Vertically Integrated Utilities Transmission & Distribution Utilities Rate Changes, net of Rate Changes, net of offsets (in millions) offsets (in millions) Q4-16 vs. Q4-15 Q4-16 vs. Q4-15 APCo/WPCo $9 AEP Ohio $24 I&M $6 AEP Texas $13 KPCo ($1) TOTAL $37 PSO ($13) SWEPCO $9 I
Slide 25: Retail Rate Performance
Retail Rate Performance Vertically Integrated Utilities Transmission & Distribution Utilities Rate Changes, net of Rate Changes, net of offsets (in millions) offsets (in millions) YTD-16 vs. YTD-15 YTD-16 vs. YTD-15 APCo/WPCo $69 AEP Ohio $56 I&M $8 AEP Texas $17 KPCo $20 TOTAL $73 PSO $7 SWEPCO $7
Slide 26: Retail Load Performance
Retail Load Performance Vertically Integrated Utilities Transmission & Distribution Utilities Retail Load* Retail Load* (weather (weather normalized) normalized) Q4-16 vs. Q4-15 Q4-16 vs. Q4-15 APCo/WPCo -0.6% AEP Ohio -0.6% I&M 0.7% AEP Texas 2.8% KPCo -1.6% TOTAL 0.8% PSO 3.1% SWEPCO -1.6% Impact
Slide 27: Retail Load Performance
Retail Load Performance Vertically Integrated Utilities Transmission & Distribution Utilities Retail Load* Retail Load* (weather (weather normalized) normalized) YTD-16 vs. YTD-15 YTD-16 vs. YTD-15 APCo/WPCo -1.5% AEP Ohio -1.0% I&M 1.5% AEP Texas 3.1% KPCo -6.3% PSO 1.3% TOTAL 0.7% SWEPCO -2.1% Kin
Slide 28: Weather Impact
Weather Impact Vertically Integrated Utilities Transmission & Distribution Utilities Weather Impact Weather Impact (in millions) (in millions) Q4-16 vs. Q4-16 vs. Q4-16 vs. Q4-16 vs. Q4-15 Normal Q4-15 Normal APCo/WPCo $25 ($15) AEP Ohio - - I&M $9 ($1) AEP Texas $5 $4 KPCo $6 ($3) TOTAL $5 $4 PSO $
Slide 29: Weather Impact
Weather Impact Vertically Integrated Utilities Transmission & Distribution Utilities Weather Impact Weather Impact (in millions) (in millions) YTD-16 vs. YTD-16 vs. YTD-16 vs. YTD-16 vs. YTD-15 Normal YTD-15 Normal APCo/WPCo $14 $14 AEP Ohio - - I&M $9 $6 AEP Texas ($1) $8 KPCo $5 $2 TOTAL ($1) $8 P
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