American Electric Power Company, Inc. · NASDAQ:AEP
American Electric Power — Q4 2022 Earnings Presentation
47 slides from American Electric Power's earnings presentation, Feb 23, 2023
Slide 1: 4th Quarter 2022 Earnings Release Presentation
4th Quarter 2022 Earnings Release Presentation February 23, 2023
Slide 2: Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995
“Safe Harbor” 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 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: 2022 Highlights
2022 Highlights Financial Performance Regulatory Outcomes • Delivered GAAP earnings of $0.75 per share for Q4-22 and $4.51 for 2022 • Finalized base rate cases in Arkansas, Indiana and SWEPCO Texas and achieved favorable • Delivered operating earnings of $1.05 per share for Q4-22 and $5.09 for 2022
Slide 7: 2023 Focus
2023 Focus Financial Performance Regulatory and Legislative Initiatives • Reaffirm 2023 operating earnings guidance range of $5.19-$5.39, midpoint of $5.29 • Pursue regulatory and legislative options to close the ROE gap • Mitigate inflationary cost pressures and higher interest rates as well as max
Slide 8: Regulatory Timeline of Kentucky Sale
NOV DEC JAN FEB MAR APR MAY JUN 2nd Half JAN FEB MAR APR Filings: 2021 2021 2022 2022 2022 2022 2022 2022 2022 2023 2023 2023 2023 Mitchell Operating Mitchell Operating Agreement1 Agreement Update: Regulatory Timeline Kentucky Public • Filings made 7/11/2022 of Kentucky Sale Service Commission Order
Slide 9: Transaction Overview of Unregulated Contracted Renewables Sale
Transaction Overview of Unregulated Contracted Renewables Sale • On 02/22/2023, AEP signed an agreement to sell 100% of equity of 1,365 MW unregulated contracted renewable assets Transaction Description containing 14 large-scale projects • IRG Acquisition Holdings, consortium owned by Invenergy (20%
Slide 10: 4th Quarter 2022 Financial Update
4th Quarter 2022 4th QUARTER 2022 $1.07 $0.98 $1.05 Financial Update $0.75 • Delivered GAAP earnings of $0.75 per share or $384M for the fourth quarter of 2022 • Delivered operating earnings of 2021 2022 2021 2022 $1.05 per share or $540M for the 2021 2022 2021 2022 GAAP EPS OPERATING EPS fourth qua
Slide 11: 4th Quarter Operating Earnings
0.10 (0.05) $1.05 4th Quarter Per Share Operating $0.98 0.02 (0.03) 0.03 Per Share Earnings Rate Changes $0.04 Rate Changes $0.04 Invest Growth $0.06 Generation $0.06 O&M $0.01 Segment Detail Weather $0.04 Weather $0.01 Ohio RTO Adder Provision $(0.02) Retail $0.04 Investment Loss $(0.05) Normal Loa
Slide 12: YTD Operating Earnings Segment Detail
0.24 (0.22) $5.09 0.06 (0.03) YTD Operating 0.30 Per Share Earnings $4.74 Per Share Segment Detail Rate Changes $0.36 Rate Changes $0.20 Invest Growth $0.12 Renewables $0.05 O&M $(0.04) APCo VA Weather $0.05 Annual True-up $(0.04) Generation $0.08 Investment Loss $(0.12) $0.06 Triennial review Norma
Slide 13: 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% Trends 5% 5% 4.3% 4.2% 4.1% 3.4% 5.4% 4.2% 3.0% 4.7% 0.8% 1.2% 0.6% 0.1% 0% 0% -0.8% -0.8% -0.5% -0.1% -0.1% -1.9% -5% -5% Load in AE
Slide 14: Economic Development Supports Load Growth
Economic AEP Industrial Sales and Economic Growth Development 7% Gross Regional Product Industrial Growth Supports Load Growth 6% 6.0% 5.6% 5.2% 5.0% 5% 4% AEP’s commitment to economic % Growth 3.2% development is helping to sustain 3% load growth, even in the face of 2.4% challenging economic condi
Slide 15: Capitalization and Liquidity
Credit Statistics1 Total Debt/Total Capitalization 62.9% Capitalization Moody’s GAAP 55.5% 57.0% 59.8% 61.8% 62.1% 61.4% and Liquidity FFO to Total Debt 13.2% 13.2% Targeted Range 14.0%-15.0% 2017 2018 2019 2020 2021 Q3-22 Q4-22 Short/Long-Term Debt Securitization Debt Maintaining strong balance Liq
Slide 16: 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 17: Appendix: Q4 2022 Performance
Appendix Q4 2022 Performance 4th Quarter 2022 Earnings Presentation
Slide 18: 4th Quarter Reconciliation of GAAP to Operating Earnings
$ in millions Earnings Per Share Q4-21 Q4-22 Change Q4-21 Q4-22 Change Reported GAAP Earnings $ 539 $ 384 $ (155) $ 1.07 $ 0.75 $ (0.32) 4th Quarter Non-Operating Items: Reconciliation of GAAP Accumulated Deferred Income to Operating Earnings Tax Adjustments1 (53) - 53 (0.11) - 0.11 Weighted average
Slide 19: YTD Reconciliation of GAAP to Operating Earnings
$ in millions Earnings Per Share YTD-21 YTD-22 Change YTD-21 YTD-22 Change Reported GAAP Earnings $ 2,488 $ 2,307 $ (181) $ 4.97 $ 4.51 $ (0.46) YTD Reconciliation of Non-Operating Items: GAAP to Operating Accumulated Deferred Income (53) (2) 51 (0.11) - 0.11 Tax Adjustments1 Earnings State Tax Law
Slide 20: Vertically Integrated Utilities 4th Quarter Summary
$ in millions (except EPS) Q4-21 Q4-22 Operating Revenues $ 2,441 $ 2,907 Vertically Integrated Utilities Operating Expenses: 4th Quarter Summary Energy Costs (779) (1,112) Key Drivers: Q4-22 vs. Q4-21 Operations and Maintenance (803) (905) • Rate Changes: $28M favorable vs. prior year primarily fro
Slide 21: Vertically Integrated Utilities YTD Summary
$ in millions (except EPS) YTD-21 YTD-22 Operating Revenues $ 9,998 $ 11,467 Vertically Integrated Utilities Operating Expenses: YTD Summary Energy Costs (3,144) (4,008) Key Drivers: YTD-22 vs. YTD-21 Operations and Maintenance (3,043) (3,281) • Rate Changes: $227M favorable vs. prior year primarily
Slide 22: Transmission and Distribution Utilities 4th Quarter Summary
$ in millions (except EPS) Q4-21 Q4-22 Transmission and Distribution Utilities Operating Revenues $ 1,101 $ 1,434 4th Quarter Summary Operating Expenses: Energy Costs (168) (403) Key Drivers: Q4-22 vs. Q4-21 Operations and Maintenance (405) (491) Depreciation and Amortization (175) (187) • Rate Chan
Slide 23: Transmission and Distribution Utilities YTD Summary
$ in millions (except EPS) YTD-21 YTD-22 Transmission and Distribution Utilities Operating Revenues $ 4,493 $ 5,512 YTD Summary Operating Expenses: Energy Costs (730) (1,287) Key Drivers: YTD-22 vs. YTD-21 Operations and Maintenance (1,574) (1,864) Depreciation and Amortization (690) (747) • Rate Ch
Slide 24: AEP Transmission Holdco 4th Quarter Summary
$ in millions (except EPS) Q4-21 Q4-22 AEP Transmission Holdco Operating Revenues $ 379 $ 456 4th Quarter Summary Operating Expenses: Operations and Maintenance (35) (51) Key Drivers: Q4-22 vs. Q4-21 Depreciation and Amortization (80) (92) Taxes Other Than Income Taxes (62) (70) • $22M favorable Ope
Slide 25: AEP Transmission Holdco YTD Summary
$ in millions (except EPS) YTD-21 YTD-22 AEP Transmission Holdco Operating Revenues $ 1,526 $ 1,677 YTD Summary Operating Expenses: Operations and Maintenance (132) (165) Key Drivers: YTD-22 vs. YTD-21 Depreciation and Amortization (306) (355) Taxes Other Than Income Taxes (245) (278) • Operating Ea
Slide 26: Generation & Marketing 4th Quarter Summary
$ in millions (except EPS) Q4-21 Q4-22 Generation & Marketing Operating Revenues $ 496 $ 575 4th Quarter Summary Operating Expenses: Energy Costs (438) (450) Key Drivers: Q4-22 vs. Q4-21 Operations and Maintenance (38) (48) Depreciation and Amortization (21) (24) • Generation increased 904 GWh or 53
Slide 27: Generation & Marketing YTD Summary
$ in millions (except EPS) YTD-21 YTD-22 Generation & Marketing Operating Revenues $ 2,072 $ 2,380 YTD Summary Operating Expenses: Energy Costs (1,807) (1,984) Key Drivers: YTD-22 vs. YTD-21 Operations and Maintenance (137) (119) Depreciation and Amortization (81) (93) • Renewables increased primari
Slide 28: Vertically Integrated Utilities 4th Quarter Performance
Vertically Integrated Utilities 4th Quarter Performance RATE PERFORMANCE WEATHER IMPACT RETAIL LOAD PERFORMANCE Rate Changes, net Weather Impact Retail Load1 of offsets ($ in millions) (weather normalized) ($ in millions) Q4-22 vs. Q4-22 vs. Q4-22 vs. Q4-21 Q4-22 vs. Q4-21 Q4-21 Normal APCo/WPCo (1.
Slide 29: 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-22 vs. YTD-22 vs. YTD-22 vs. YTD-21 YTD-22 vs. YTD-21 YTD-21 Normal APCo/WPCo (0.2
Slide 30: Transmission and Distribution Utilities 4th Quarter Performance
Transmission and Distribution Utilities 4th Quarter Performance RATE PERFORMANCE WEATHER IMPACT RETAIL LOAD PERFORMANCE Rate Changes, net Weather Impact Retail Load1 of offsets ($ in millions) (weather normalized) ($ in millions) Q4-22 vs. Q4-22 vs. Q4-21 Normal Q4-22 vs. Q4-21 Q4-22 vs. Q4-21 AEP O
Slide 31: 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-22 vs. YTD-22 vs. YTD-21 Normal YTD-22 vs. YTD-21 YTD-22 vs. YTD-21 AEP Oh
Slide 32: Industrial Sales Growth vs Prior Year
Industrial Sale Growth AEP Industrial GWh Growth 20% $120 15.7% 10% $90 7.4% 6.7% 6.7% 6.0% 5.8% 6.0% 6.0% 5.5% Growth vs Prior Year 4.4% 4.0% 2.6% 1.3% 0% $60 -0.3% -1.3% -3.3% -4.6% -10% Oil & Gas Related Sectors $30 -9.6% Non-Oil & Gas Related Sectors Oil Price -20% $- Q4-20 Q1-21 Q2-21 Q3-21 Q4-
Slide 33: Economic Data – AEP Service Territory
Economic Data – AEP Service Territory GDP Growth by Quarter Employment Growth by Quarter 12% 12% 6% 4.6% 4.4% Growth vs Prior Year 5.5% 4.3% 4.4% 4.0% 4.0% 6% 5.2% Growth vs Prior Year 3.2% 3.3% 3.5% 2.4% 3.2% 1.9% 1.7% 1.5% 1.2% 0.0% 0.1% 0% 0% -0.3% -6% -6% US AEP US AEP -12% -12% Q4-21 Q1-22 Q2-2
Slide 34: GAAP to Non-GAAP Reconciliations and Ratios
GAAP to Adjusted FFO Calculation Adjusted Total Debt (Non-GAAP) Calculation Non-GAAP 12 Months As of 12/31/2022 Reconciliations Ended 12/31/2022 (in millions) and Ratios (in millions) GAAP Total Debt $ 40,913 (incl. current maturities) Cash Flow from Operations $ 5,288 Less: Adjustments: Securitizat
Slide 35: Appendix: Financial Forecast
Appendix Financial Forecast 4th Quarter 2022 Earnings Presentation
Slide 36: 2023 Operating Earnings Guidance
0.11 (0.29) $5.29/sh 0.13 2023 Operating 0.08 2023 EPS Midpoint $5.09/sh 0.17 Earnings 2022 Operating EPS Guidance Rate Changes $0.35 Rate Changes $0.09 Investment/Rate $0.08 Renewables $(0.08) Investment Gain $0.07 Base Growth Retail Load $0.02 Weather $(0.04) Generation $(0.10) O&M $0.03 True-up $
Slide 37: 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 Distribution The ability to quickly redeploy transmission and di
Slide 38: Regulated Capital Investment Strategy
Regulated Capital KEY INVESTMENT STRATEGIES 2023-2027 CAPITAL INVESTMENT Investment Strategy • Transform our electric generation fleet to drive-down costs to customers and achieve our climate goals • Develop a modern and secure electric transmission $ 15B TRANSMISSION grid to bolster system reliabil
Slide 39: 2023-2027 Cash Flows and Financial Metrics
$ in millions 2023E 2024E 2025E 2026E 2027E Cash from Operations $ 5,400 $ 6,600 $ 7,000 $ 7,600 $ 8,000 2023-2027 Cash Net Cash Proceeds from Sale of Assets1 2,400 - - - - Capital and JV Equity Contributions (6,800) (8,900) (9,700) (7,300) (6,900) Flows and Financial Other Investing Activities (100
Slide 40: Appendix: Regulatory, Renewables and Economic Development
Appendix Regulatory, Renewables and Economic Development 4th Quarter 2022 Earnings Presentation
Slide 41: Regulated Returns
Twelve Months Ended 12/31/2022 Earned ROE’s Regulated Returns (non-GAAP operating earnings, not weather normalized) 14% 12% 10.9% 12/31/2022 Regulated 10.6% 10% Operations ROE of 9.1% 9.7% 8.7% 8% 8.2% 8.2% 1 Base rate cases pending/order recently received. 7.1% Sphere size based on each company’s r
Slide 42: 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 and seek a 24-month recovery with carrying charge on Current Fuel Cost under-recovered balance (September 2022) Impacts APCo/WPCo WV • Current Mechanism: 12-
Slide 43: Current Rate Case Activity
Current Rate Case Activity APCo – Virginia PSO – Oklahoma SWEPCO – Louisiana Docket # PUR-2020-00015 Docket # PUD 2022-000093 Docket # U-35441 Filing Date 3/31/2020 Filing Date 11/22/2022 Filing Date 12/18/2020 Requested Rate Base $2.5B Requested Rate Base $4.4B Requested Rate Base $2.1B Requested R
Slide 44: Regulated New Generation Regulatory Status
Regulated New Total Investment Resource Project MWs Projected In-Service Date Jurisdictional Status Generation Solar Amherst / Virginia 5 Q2-23 Regulatory 209 MW / ~$500M1 Wind Top Hat / Illinois 204 Q3-25 Projects Approved2: July 2022 Status Solar Mooringsport / Louisiana 200 Q4-25 Louisiana Order
Slide 45: Regulated New Generation Investment
Regulated New RFPs IN PROGRESS1 Generation Investment RFP Issued January 2022 March 20222 September 2022 Wind 1,000 MW 800 MW 1,900 MW Growth Solar / Storage 100 MW 500 MW 500 MW Continuing progress toward Reg. Filings and Q1-23 ‒ Q3-23 Q1-23 ‒ Q4-23 Q3-23 ‒ Q3-24 AEP’s commitment to 80% CO2 Approva
Slide 46: Economic Development Project Announcements
Economic Crypto & Cloud Computing Dowagiac, MI Data Center (Cyprus – Bldg. 1) Franklin County, OH Biopharmaceutical Mfg. New Albany, OH Development Project Pet Food Mfg. - Expansion Columbus, OH Announcements: Motor Vehicle Parts Stamping - Expansion 2021-2022 Marion, IN Plastics Extrusion Ironton,
Slide 47: Recent AEP Reshoring Successes
Nucor (APCo) • The largest single investment in West Virginia Recent AEP history. • Site chosen because of high voltage infrastructure, Reshoring AEP’s proven ability to serve large loads and AEP’s excellent customer service. Successes Intel (AEP Ohio) • $20B investment at the first Midwest chip pro
American Electric Power Company — Q4 2022 Earnings Presentation on 6ix