American Electric Power Company, Inc. · NASDAQ:AEP
American Electric Power — Q2 2023 Earnings Presentation
39 slides from American Electric Power's earnings presentation, Jul 27, 2023
Slide 1: 2nd Quarter 2023 Earnings Release Presentation
2nd Quarter 2023 Earnings Release Presentation July 27, 2023 2nd 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 94B TOTAL ASSETS 17,000 EMPLOYEES Nation’s largest electric Strong balance sheet Across the system transmission system $ 225k DISTRIBUTION MILES 61B RATE BASE 5.6M CUSTOMERS One of the largest distribution As of December 31, 2022 Througho
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: 2nd Quarter 2023 Business Update
2nd Quarter 2023 Business Update • 2nd Quarter 2023 operating earnings of $1.13 per share or $582M • Reaffirm 2023 operating earnings guidance range of $5.19-$5.39 and 6-7% long-term growth • Committed to FFO/Debt target of 14%-15% • Focused actions to de-risk and simplify the business profile Unr
Slide 7: Transaction Overview of Unregulated Contracted Renewables Sale
Transaction Overview of Unregulated Contracted Renewables Sale • 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%)
Slide 8: Other Asset Sales and Strategic Review
Other Asset Sales and Strategic Review Sell New Mexico Renewable • A 50/50 joint venture partnership with PNM Resources consisting of 8 operating projects of 135 MW, 1 project under construction of 50 MW, 6 development projects of 440 MW, all located in New Mexico Development (NMRD), a • Book value
Slide 9: 2nd Quarter 2023 Financial Update
2nd Quarter 2023 2nd QUARTER 2023 $1.20 $1.13 $1.02 $1.01 Financial Update • Delivered GAAP earnings of $1.01 per share or $521M for the second quarter of 2023 • Delivered operating earnings of 2022 2021 2023 2022 2022 2021 2023 2022 $1.13 per share or $582M for the 2021 2022 2021 2022 GAAP EPS OPER
Slide 10: 2nd Quarter Operating Earnings
2nd Quarter 0.11 (0.05) Operating $1.20 (0.08) Per Share (0.03) Earnings $1.13 Segment Detail (0.02) Per Share Rate Changes $0.11 Rate Changes $0.03 Invest Growth $0.02 Renewables $(0.05) O&M $(0.01) Weather $(0.09) Weather $(0.03) True-Up $0.06 Generation $(0.04) Investment Gain $0.02 Key Drivers Q
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% 7.8% Trends 5% 5% 4.1% 3.4% 5.4% 2.1% 4.5% 1.2% 0.8% 0% 0% -0.8% -0.8% -0.6% -0.6% -0.1% -1.4% -1.8% -2.4% -5% -5% Load in
Slide 12: Capitalization and Liquidity
Credit Statistics1 Total Debt/Total Capitalization 62.1% 62.9% 64.1% 64.6% Capitalization Moody’s GAAP 57.0% 59.8% 61.8% and Liquidity FFO to Total Debt 11.1% 11.1% Targeted Range 14.0%-15.0% 2018 2019 2020 2021 2022 Q1-23 Q2-23 Short/Long-Term Debt Securitization Debt FFO/Debt target of 14%-15%; Li
Slide 13: 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 14: Appendix: Q2 2023 Performance
Appendix Q2 2023 Performance 2nd Quarter 2023 Earnings Presentation
Slide 15: YTD Operating Earnings Segment Detail
YTD Operating Earnings $2.42 (0.16) Per Share Segment Detail 0.11 0.01 (0.07) (0.07) $2.24 Per Share Rate Changes $0.18 Rate Changes $0.05 Invest Growth $0.05 Renewables $(0.02) O&M $0.01 Key Drivers YTD-23 vs. YTD-22 Weather $(0.22) Weather $(0.07) True-Up $0.06 Generation $(0.06) Investment Gain $
Slide 16: 2nd Quarter Reconciliation of GAAP to Operating Earnings
$ in millions Earnings Per Share 2nd Quarter Q2-22 Q2-23 Change Q2-22 Q2-23 Change Reconciliation of GAAP Reported GAAP Earnings $ 525 $ 521 $ (4) $ 1.02 $ 1.01 $ (0.01) to Operating Earnings Non-Operating Items: Weighted average number of shares outstanding: 513.6M Q2-22 Mark-to-Market Impact of (3
Slide 17: 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 $ 1,239 $ 918 $ (321) $ 2.43 $ 1.78 $ (0.65) Earnings Non-Operating Items: Weighted average number of shares outstanding: 509.9M YTD-22 Mark-to-Market Impact of (
Slide 18: Vertically Integrated Utilities 2nd Quarter Performance
Vertically Integrated Utilities 2nd Quarter Performance RATE PERFORMANCE WEATHER IMPACT RETAIL LOAD PERFORMANCE Rate Changes, net Weather Impact Retail Load1 of offsets ($ in millions) (weather normalized) ($ in millions) Q2-23 vs. Q2-23 vs. Q2-23 vs. Q2-22 Q2-23 vs. Q2-22 Q2-22 Normal APCo/WPCo (2.
Slide 19: 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 (1.5
Slide 20: Transmission and Distribution Utilities 2nd Quarter Performance
Transmission and Distribution Utilities 2nd Quarter Performance RATE PERFORMANCE WEATHER IMPACT RETAIL LOAD PERFORMANCE Rate Changes, net Weather Impact Retail Load1 of offsets ($ in millions) (weather normalized) ($ in millions) Q2-23 vs. Q2-23 vs. Q2-22 Normal Q2-23 vs. Q2-22 Q2-23 vs. Q2-22 AEP O
Slide 21: 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 22: GAAP to Non-GAAP Reconciliations and Ratios
GAAP to Adjusted FFO Calculation Adjusted Total Debt (Non-GAAP) Calculation Non-GAAP 12 Months As of 6/30/2023 Reconciliations Ended 6/30/2023 (in millions) (in millions) and Ratios Cash Flow from Operations $ 4,179 GAAP Total Debt $ 44,010 (incl. current maturities) Adjustments: Less: Changes in Wo
Slide 23: Appendix: Portfolio Management
Appendix Portfolio Management 2nd Quarter 2023 Earnings Presentation
Slide 24: 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 25: 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 6/30/2023 6/30/2023 Transmission Joint ETT Texas BHE (50%), AEP $1,766M $1,418M 9.60% 0.00% 0.00% 9.60% Venture Businesses (ERCOT) (50%) Evergy, In
Slide 26: Appendix: Financial Forecast and Focus on O&M Efficiency
Appendix Financial Forecast and Focus on O&M Efficiency 2nd Quarter 2023 Earnings Presentation
Slide 27: 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 28: 2023-2027 Cash Flows and Financial Metrics
$ in millions 2023E 2024E 2025E 2026E 2027E Cash from Operations $ 5,800 $ 6,700 $ 7,000 $ 7,700 $ 8,100 2023-2027 Cash Net Cash Proceeds from Sale of Assets1 1,200 - - - - Capital and JV Equity Contributions (6,800) (8,900) (9,700) (7,300) (6,900) Flows and Financial Other Investing Activities (100
Slide 29: Total Non-fuel O&M
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 30: Appendix: Renewables and Regulatory
Appendix Renewables and Regulatory 2nd Quarter 2023 Earnings Presentation
Slide 31: 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 – Q4-23 Mar 2023 EST Current IRPs identify a 10-YEAR RESOURCE NEEDS significant need for new clean GENERATION ADDITIONS energy resources over
Slide 32: Regulated New Generation Regulatory Status
Total In Service/ Resource Project MWs Jurisdictional Status Investment Acquisition Date Regulated New 209 MW / ~$500M Solar Wind Amherst / Virginia Top Hat / Illinois 5 204 Q2-23 Q3-25 Projects Approved July 20221 Generation Wind Grover Hill / Ohio 143 Q4-25 Virginia Order Expected Q3 20232 Regulat
Slide 33: Regulated New Generation Investment
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 the $8.6B regulated Natural Gas - 540 MW renewables investment Reg. Filings and Approvals Q2-24 ‒ Q4-24 Q1-24 ‒ Q2-25 over the next
Slide 34: 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% 7.4% 7.7% 7.0% 7.2% Focus on achieving 6% authorized ROEs in all operating companies 4% 2% Regulated Operations ROE 1.6% as of 6/30/2023 of 8.6%; 0% depressed by 40 bps on ACTION PLANS TO CLOSE GAP mild w
Slide 35: Current Rate Case Activity
Current Rate Case Activity APCo – Virginia KPCo – Kentucky1 PSO – Oklahoma Docket # PUR-2023-00002 Docket # 2023-00159 Docket # PUD 2022-000093 Filing Date 3/31/2023 Filing Date 6/29/2023 Filing Date 11/22/2022 Requested Rate Base $2.9B Requested Rate Base $1.8B Requested Rate Base $4.4B Requested R
Slide 36: 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 37: Appendix: Economic Development
Appendix Economic Development 2nd Quarter 2023 Earnings Presentation
Slide 38: 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 Q2 20
Slide 39: 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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