American Electric Power Company, Inc. · NASDAQ:AEP
American Electric Power — Q3 2023 Earnings Presentation
41 slides from American Electric Power's earnings presentation, Nov 2, 2023
Slide 1: 3rd Quarter 2023 Earnings Release Presentation
3rd Quarter 2023 Earnings Release Presentation November 2, 2023 3rd Quarter 2023 Earnings Release Presentation 1
Slide 2: 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 “Safe Harbor” Registrant Subsidiaries believe that their expectations are based on reasonable assumptions, any such statements may be influence
Slide 3: Non-GAAP Financial Measures
AEP reports its financial results in accordance with accounting principles generally accepted in the United States (GAAP). AEP Non-GAAP Financial supplements the reporting of financial information determined in accordance with GAAP with certain non-GAAP financial measures, including operating earnin
Slide 4: AEP Is a Pure Play Regulated Utility
AEP Is a Pure $ Play Regulated Utility 40K TRANSMISSION MILES 95B TOTAL ASSETS 17,000 EMPLOYEES Nation’s largest electric As of September 30, 2023 Across the system transmission system $ 225K DISTRIBUTION MILES 62B RATE BASE 5.6M CUSTOMERS One of the largest distribution Strong rate base growth Thro
Slide 5: AEP Is Powering the Future
AEP Is Powering the Future One of the Largest Utilities in the U.S. by Rate Base and Market Cap Delivering Consistent, Strong Operating Attractive Transmission Leading the Clean Energy Actively Managing the Business Performance and Distribution Assets Transition and Portfolio • Stable, resilient bus
Slide 6: 3rd Quarter 2023 Business Update
3rd Quarter 2023 Business Update Financial highlights and reaffirming stakeholder commitments Regulated renewable resource additions • 3rd Quarter 2023 operating earnings of $1.77 per share or $924M • Positive progress towards the $8.6B regulated renewables in 2023-2027 capital forecast; approved •
Slide 7: Unregulated Contracted Renewables Sale Completed
Unregulated Contracted Renewables Sale Completed • On 2/22/2023, AEP signed an agreement to sell 100% of equity of 1,365 MW unregulated contracted Transaction Description renewable assets containing 14 large-scale projects • IRG Acquisition Holdings, consortium owned by Invenergy (20%), CDPQ (40%) a
Slide 8: Other Asset Sales and Strategic Review
Other Asset Sales and Strategic Review • A 50/50 joint venture partnership with PNM Resources consisting of 9 operating projects of 185 MW and 6 development projects of 440 MW, all located in New Mexico Sell New Mexico Renewable • Book value of AEP’s investment as of 9/30/2023 was $119M Development
Slide 9: 3rd Quarter 2023 Financial Update
3rd Quarter 2023 3rd QUARTER 2023 $1.83 $1.62 $1.77 Financial Update $1.33 • Delivered GAAP earnings of $1.83 per share or $954M for the third quarter of 2023 Narrowed 2023 operating • Delivered operating earnings of 2022 2023 2022 2023 2021 2022 2021 2022 earnings guidance range to $1.77 per share
Slide 10: 3rd Quarter Operating Earnings
0.04 0.06 (0.05) $1.77 3rd Quarter 0.07 Per Share Operating $1.62 0.03 Earnings Per Share Segment Detail Rate Changes $0.061 Rate Changes $0.02 Invest Growth $0.02 Renewables $0.05 O&M $0.02 Weather $(0.02) Normal Load $0.04 Income Taxes $0.02 Generation $0.03 Net Interest $(0.08) Normal Load $0.03
Slide 11: Weather Normalized Billed Retail Load Trends
Weather Normalized AEP Normalized Residential GWh Sales AEP Normalized Commercial GWh Sales % Change vs. Prior Year % Change vs. Prior Year Billed Retail Load 10% 10% 7.8% 7.7% 7.5% 7.7% 7.3% 5.4% Trends 5% 5% 3.4% 0.8% 2.1% 4.5% 0.6% 0% 0% -0.8% -0.8% -0.6% -0.6% -0.1% -1.4% -0.9% -0.9% -2.4% -5% -
Slide 12: FFO to Total Debt Outlook
FFO to Total Debt Path to Target Range FFO to Total Projected FFO to Impact on FFO Basis Points Debt Outlook Total Debt FFO to Total Debt Trailing 12 Months as of 9/30/2023 11.4%1 Q4-22: Roll-off of Prior Year Cash Collateral Outflow $ 370M 90 bps AEP expects to be in the FFO/Debt target range by Q4
Slide 13: Capitalization and Liquidity
Capitalization Liquidity Summary Total Debt/Total Capitalization 62.9% 64.1% 64.6% 62.4% and Liquidity 57.0% 59.8% 61.8% 62.1% ($ in millions) 9/30/2023 Actual Amount Maturity Revolving Credit Facility $ 4,000 March 2027 Strong liquidity and pension 2018 2019 2020 2021 2022 Q1-23 Q2-23 Q3-23 Revolvi
Slide 14: Summary of Stakeholder Commitments
Summary of Stakeholder Commitments 6%-7% Annual Dividend Growth In-line with Strong Balance Sheet Operating Earnings Earnings Growth and Targeted with a Target FFO/Debt Growth Payout Ratio of 60%-70% of 14%-15% ESG Goal of Net Customer Care: Commitment to Active Management of the AEP Identification
Slide 15: Appendix: Q3 2023 Performance
Appendix Q3 2023 Performance 3rd Quarter 2023 Earnings Presentation
Slide 16: YTD Operating Earnings Segment Detail
YTD Operating 0.06 (0.12) Earnings $4.04 Per Share (0.13) (0.00) 0.17 $4.02 Segment Detail Per Share Rate Changes $0.221 Rate Changes $0.08 Invest Growth $0.07 Renewables $0.04 O&M $0.03 Weather $(0.24) Weather $(0.07) True-Up $0.06 Generation $(0.02) Investment Gain $0.01 Normal Load $0.07 Normal L
Slide 17: 3rd Quarter Reconciliation of GAAP to Operating Earnings
$ in millions Earnings Per Share 3rd Quarter Q3-22 Q3-23 Change Q3-22 Q3-23 Change Reconciliation of GAAP Reported GAAP Earnings $ 684 $ 954 $ 270 $ 1.33 $ 1.83 $ 0.50 to Operating Earnings Non-Operating Items: Weighted average number of shares outstanding: 513.7M Q3-22 Mark-to-Market Impact of (31)
Slide 18: YTD Reconciliation of GAAP to Operating Earnings
$ in millions Earnings Per Share YTD Reconciliation of YTD-22 YTD-23 Change YTD-22 YTD-23 Change GAAP to Operating Reported GAAP Earnings $ 1,923 $ 1,872 $ (51) $ 3.76 $ 3.62 $ (0.14) Earnings Non-Operating Items: Weighted average number of shares outstanding: 511.2M YTD-22 Mark-to-Market Impact of
Slide 19: Vertically Integrated Utilities 3rd Quarter Performance
Vertically Integrated Utilities 3rd Quarter Performance RATE PERFORMANCE WEATHER IMPACT RETAIL LOAD PERFORMANCE Rate Changes, net Weather Impact Retail Load1 of offsets ($ in millions) (weather normalized) ($ in millions) Q3-23 vs. Q3-23 vs. Q3-23 vs. Q3-22 Q3-23 vs. Q3-22 Q3-22 Normal APCo/WPCo (1.
Slide 20: Vertically Integrated Utilities YTD Performance
Vertically Integrated Utilities YTD Performance RATE PERFORMANCE WEATHER IMPACT RETAIL LOAD PERFORMANCE Rate Changes, net Weather Impact Retail Load1 of offsets ($ in millions) (weather normalized) ($ in millions) YTD-23 vs. YTD-23 vs. YTD-23 vs. YTD-22 YTD-23 vs. YTD-22 YTD-22 Normal APCo/WPCo (1.4
Slide 21: Transmission and Distribution Utilities 3rd Quarter Performance
Transmission and Distribution Utilities 3rd Quarter Performance RATE PERFORMANCE WEATHER IMPACT RETAIL LOAD PERFORMANCE Rate Changes, net Weather Impact Retail Load1 of offsets ($ in millions) (weather normalized) ($ in millions) Q3-23 vs. Q3-23 vs. Q3-22 Normal Q3-23 vs. Q3-22 Q3-23 vs. Q3-22 AEP O
Slide 22: Transmission and Distribution Utilities YTD Performance
Transmission and Distribution Utilities YTD Performance RATE PERFORMANCE WEATHER IMPACT RETAIL LOAD PERFORMANCE Rate Changes, net Weather Impact Retail Load1 of offsets ($ in millions) (weather normalized) ($ in millions) YTD-23 vs. YTD-23 vs. YTD-22 Normal YTD-23 vs. YTD-22 YTD-23 vs. YTD-22 AEP Oh
Slide 23: GAAP to Non-GAAP Reconciliations and Ratios
GAAP to Adjusted FFO Calculation Adjusted Total Debt (Non-GAAP) Calculation Non-GAAP 12 Months As of 9/30/2023 Reconciliations Ended 9/30/2023 (in millions) (in millions) and Ratios Cash Flow from Operations $ 4,231 GAAP Total Debt $ 42,220 (incl. current maturities) Adjustments: Less: Changes in Wo
Slide 24: Appendix: Portfolio Management
Appendix Portfolio Management 3rd Quarter 2023 Earnings Presentation
Slide 25: Competitive Business Platform
Competitive Business Platform DISTRIBUTED RESOURCES CUSTOMER CLASSES (SALE ANNOUNCED) • Residential • Solar • Commercial • Energy Storage • Industrial • Reciprocating Engines • Municipals • Fuel Cells • Cooperatives • Substations RETAIL SERVICES (SALE ANNOUNCED) WHOLESALE SERVICES • Electric Sales •
Slide 26: Transmission Joint Venture Businesses
AEP’s Portion AEP’s Portion Total of Net Plant of Rate Base Project Project Name Location Owners Base ROE RTO Adder Authoriz as of as of Risk ROE ed ROE 9/30/2023 9/30/2023 Transmission Joint ETT Texas BHE (50%), AEP $1,807M $1,418M 9.60% 0.00% 0.00% 9.60% Venture Businesses (ERCOT) (50%) Evergy, In
Slide 27: Appendix: Financial Forecast and Focus on O&M Efficiency
Appendix Financial Forecast and Focus on O&M Efficiency 3rd Quarter 2023 Earnings Presentation
Slide 28: 2023-2027 Capital Forecast of $40B
Other Generation Corporate $1.1B • 3% Nuclear $3.1B • 7% Generation Regulated $0.3B • 1% Environmental 2023-2027 Capital Generation Forecast of $40B $0.4B • 1% Gen & Marketing 99% of capital allocated to $0.4B • 1% regulated businesses The ability to quickly redeploy transmission Distribution and di
Slide 29: 2023-2027 Cash Flows and Financial Metrics
$ in millions 2023E1 2024E 2025E 2026E 2027E Cash from Operations $ 5,000 $ 6,700 $ 7,000 $ 7,700 $ 8,100 2023-2027 Cash Net Cash Proceeds from Sale of Assets2 1,200 - - - - Capital and JV Equity Contributions (7,100) (8,900) (9,700) (7,300) (6,900) Flows and Financial Other Investing Activities (10
Slide 30: Continuous Focus on O&M Efficiency
2023E Inflation Gap of ~$0.6B $5B Inflation ~6% Avg. 2022A – 2023E Inflation ~2% Avg. Continuous Focus 2013A – 2021A $4B on O&M Efficiency Total Non-fuel O&M O&M discipline over $3B time amid rising costs $3.0B $2.6B $2.6B $3.1B and growing asset base $2.9B $3.1B $2.9B $2.2B $2.5B $2.6B helps keep c
Slide 31: Appendix: Renewables and Regulatory
Appendix Renewables and Regulatory 3rd Quarter 2023 Earnings Presentation
Slide 32: Resource Plans Are Aligned with Climate Goals
Resource Plans Are IRP FILINGS Aligned with Climate 2022 | 2023 Goals IN – Jan 2022 MI – Feb 2022 VA– Apr 2022 VA VCEA – KY – Mar 2023 LA Draft – Mar 2023 LA – Q1-24 Mar 2023 EST Current IRPs identify a 10-YEAR RESOURCE NEEDS significant need for new clean GENERATION ADDITIONS energy resources over
Slide 33: Regulated New Generation Regulatory Status
In Service/ Total Resource Project MWs Acquisition Jurisdictional Status Investment Regulated New Solar Amherst / Virginia 5 Date Q2-23 Projects Approved July 2022 Generation 209 MW / ~$500M Wind Top Hat / Illinois 204 Q3-25 Docket # PUR-2021-00206 Regulatory 143 MW / ~$426M1 Wind Grover Hill / Ohio
Slide 34: Regulated New Generation Investment Growth
Regulated New RFPs IN PROGRESS1 Generation Investment RFP Issued April 2023 March 20232 Wind 800 MW Growth Solar 600 MW 850 MW Storage - 315 MW Continuing execution on $8.6B of renewable Natural Gas - 540 MW resource additions over Reg. Filings and Approvals Q2-24 ‒ Q4-24 Q1-24 ‒ Q2-25 the next five
Slide 35: Actions to Close the ROE Gap
APCo KPCo PSO SWEPCO AEP Texas Actions to Close 12% 9.4% the ROE Gap 10% 9.3% 9.4% 9.4% 9.4% 8% 8.2% 8.1% 7.7% Focus on achieving 6.7% 6% authorized ROEs in all operating companies 4% 2% 1.9% Regulated Operations ROE as of 9/30/2023 of 8.7%; 0% depressed by 40 bps on ACTION PLANS TO CLOSE GAP mild w
Slide 36: Current Rate Case Activity
Current Rate Case Activity APCo – Virginia I&M – Indiana I&M - Michigan Docket # PUR-2023-00002 Docket # 45933 Docket # U-21461 Filing Date 3/31/2023 Filing Date 8/9/2023 Filing Date 9/15/2023 Requested Rate Base $2.9B Requested Rate Base $5.4B Requested Rate Base $1.3B Continued focus on Requested
Slide 37: Current Rate Case Activity
Current Rate Case Activity KPCo – Kentucky1 PSO – Oklahoma Docket # 2023-00159 Docket # PUD 2022-000093 Filing Date 6/29/2023 Filing Date 11/22/2022 Requested Rate Base $1.8B Requested Rate Base $4.4B Continued focus on Requested ROE 9.9% Requested ROE 10.4% regulatory execution Cap Structure 58.4%D
Slide 38: Actively Managing Current Fuel Cost Impacts
Actively Managing APCo VA • Current Mechanism: 12-month fuel clause to reset and account for prior year • Adjustment: Reset base of fuel level with a 24-month recovery and carrying charge on under- Current Fuel Cost recovered balance starting in September 2022 Impacts APCo/WPCo WV • Current Mechanis
Slide 39: Appendix: Economic Development
Appendix Economic Development 3rd Quarter 2023 Earnings Presentation
Slide 40: Economic Development Project Announcements
Data Center Expansion New Albany, OH Sustainable Egg Carton Mfg. Van Wert, OH Economic Composite Materials for RVs Three Rivers, MI Data Center (Multiple Locations) Central Ohio Development Project Solar Panel Mfg. Pataskala, OH Announcements: Motor Vehicle Parts Stamping - Expansion 1 2021 to Q3 20
Slide 41: Recent AEP Reshoring Successes
Intel (AEP Ohio) Recent AEP • $20B investment at the first Midwest chip production plant. • Property was annexed into AEP Ohio service Reshoring territory. • The site was selected because of AEP’s Successes competence in serving large loads, team strength and depth and demonstrated ability to meet I
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