American Electric Power Company, Inc. · NASDAQ:AEP
American Electric Power — Q1 2020 Earnings Presentation
34 slides from American Electric Power's earnings presentation, May 6, 2020
Slide 1: 1st Quarter 2020 Earnings Release Presentation
1st Quarter 2020 Earnings Release Presentation May 6, 2020 1 GS Power and September Investor Utilities Meetings Conference | aep.com | aep.com
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: Non-GAAP Financial Measures
Non-GAAP Financial Measures AEP reports its financial results in accordance with accounting principles generally accepted in the United States (GAAP). AEP supplements the reporting of financial information determined in accordance with GAAP with certain non-GAAP financial measures, including operati
Slide 4: AEP Leading the Way in Challenging Times
AEP Leading the Way in Challenging Times AEP is Committed to the Health and Safety of Our Employees, Our Customers and Our Communities Our Employees o Essential staff work in smaller teams, adjusted work schedules and practice physical distancing o Approximately 12,000 employees or 70% of organiza
Slide 5: 1st Quarter Highlights
1st Quarter Highlights 1st quarter 2020 operating earnings of $1.02 per share or $504M, reflecting the negative weather impact of $0.11 per share Reaffirming 2020 operating earnings guidance range of $4.25-$4.45; revised load assumption associated with COVID-19 places us in the lower half Reaf
Slide 6: Regulated Returns
Regulated Returns Twelve Months Ended 3/31/2020 Earned ROE’s (non-GAAP operating earnings, not weather normalized) Trans I&M1 11.5% AEP OH 10.5% 9.9% PSO APCo1 9.2% 8.7% AEP TX1 8.0% KPCo 6.7% SWEPCO 6.2% Regulated Operations ROE of 9.1% as of March 31, 2020 1 Base rate cases pending/settled/order r
Slide 7: 1st Quarter 2020 Financial Update
1st Quarter 2020 Financial Update $1.16 $1.19 $1.00 $1.02 2019 2020 2019 2020 GAAP EPS OPERATING EPS Refer to Appendix for reconciliation between GAAP and Operating EPS Delivered GAAP earnings of $1.00 per share or $495M for the first quarter of 2020 Delivered operating earnings of $1.02 per sha
Slide 8: 1st Quarter Operating Earnings Segment Detail
1st Quarter Operating Earnings Segment Detail 1.2 $1.19/sh (0.13) (0.08) 0.03 (0.02) 0.03 $1.02/sh 1.0 Investment Growth $ 0.03 OH Reg Provision $ (0.09) Generation $ (0.03) OH Legacy Riders $ (0.01) Renewables $ 0.03 Rate Changes $ 0.03 Retail $ 0.02 0.8 Weather $ (0.01) Income Taxes $ (0.03) Norma
Slide 9: 2020 Financial Outlook
2020 Financial Outlook 2020 Earnings Guidance Range $4.25 - $4.45 2020 Guidance Impact on EPS EEI Revised Revised 2020 Retail Sales 0.5% (3.4%) ($0.15) Load Growth Growth Projections Q1 2020 Weather - ($71M) ($0.11) Residential 3.0% Untracked O&M $2.8B $2.7B $0.17 Commercial (5.6%) Capital $6.3B $5.
Slide 10: Weather Normalized Billed Retail Load Trends
Weather Normalized Billed Retail Load Trends Load figures are provided on a billed basis. Charts reflect connected load and exclude firm wholesale load. Revised forecast assumes greatest impact on load in Q2 2020 followed by a gradual recovery over the balance of the year. 10
Slide 11: April 2020 Normalized Retail Load Data
April 2020 Normalized Retail Load Data April 2020 Normalized Load 12% 6.0% Growth vs Prior Year 0% -4.3% -7.7% -10.0% -12% Total Retail Residential Commercial Industrial Normalized retail load for April 2020 was (4.3%) lower compared to April 2019 11
Slide 12: Retail Revenue Mix by Class and Load Sensitivities
Retail Revenue Mix by Class and Load Sensitivities AEP Total Residential Commercial Industrial 5% Other 19% 50% Vertically Integrated Utilities Transmission and Distribution Utilities 2% 26% 6% 12% 22% 48% Load Sensitivities EPS 31% 55% Residential 1% +/- $ 0.040 24% Commercial 1% +/- $ 0.016 Indust
Slide 13: Impact of Weather
Impact of Weather Impact of Weather on Earnings $100 2020 Weather Impact $71 2019 Weather Impact $50 Impact of Weather ($Millions) $- $0 $(6) $(6) $(6) $(50) $(71) $(71) $(100) Q1 Q2 Q3 Q4 YTD The impact of weather in the first quarter was $(71M), which is approximately $65M below prior year first q
Slide 14: Untracked O&M
Untracked O&M O&M focuses on bending the O&M curve down O&M actual spend represents adjusted spend throughout each year as needed 14
Slide 15: Capitalization and Liquidity
Capitalization and Liquidity Total Debt / Total Capitalization Credit Statistics Actual Moody’s GAAP Target Low to Mid FFO to Total Debt 12.5%1 12.0% Teens 1 13.0% when adjusted by subtracting cash balances from total debt due to intentional borrowing to build cash for liquidity reserve purposes Rep
Slide 16: Summary
Summary Reaffirm 2020 operating earnings guidance range of $4.25-$4.45; revised load assumption associated with COVID-19 places us in the lower half Reaffirm 5%-7% long-term growth rate Continue to make progress on obtaining approvals for North Central Wind 16
Slide 17: Appendix
Appendix 17
Slide 18: 1st Quarter Reconciliation of GAAP to Operating Earnings
1st Quarter Reconciliation of GAAP to Operating Earnings $ in millions Earnings Per Share Q1-19 Q1-20 Change Q1-19 Q1-20 Change Reported GAAP Earnings $573 $495 ($78) $1.16 $1.00 ($0.16) Non Operating Items: Mark-to-Market Impact of Commodity 3 6 3 0.01 0.01 - Hedging Activities1 Severance Charges2
Slide 19: Vertically Integrated Utilities
Vertically Integrated Utilities 1st Quarter Summary Key Drivers: Q1-20 vs. Q1-19 Q1-19 Q1-20 Rate Changes: $46M favorable vs. prior year primarily from rate increases at APCo/WPCo, I&M, $ in millions (except EPS) PSO and SWEPCO Operating Revenues $2,403 $2,227 Weather: $61M unfavorable vs. prior
Slide 20: Transmission and Distribution Utilities
Transmission and Distribution Utilities 1st Quarter Summary Key Drivers: Q1-20 vs. Q1-19 Q1-19 Q1-20 Ohio Regulatory Provision: $58M unfavorable due to prior year recognition of 2016 SEET provision $ in millions (except EPS) reversal Operating Revenues $1,222 $1,107 Rate Changes: $15M favorable
Slide 21: AEP Transmission Holdco
AEP Transmission Holdco 1st Quarter Summary Key Drivers: Q1-20 vs. Q1-19 Q1-19 Q1-20 $17M favorable Operating Earnings vs. prior $ in millions (except EPS) year primarily due to increased revenues and Operating Revenues $256 $310 expenses driven by increased capital Operating Expenses: investment
Slide 22: Generation & Marketing
Generation & Marketing 1st Quarter Summary Key Drivers: Q1-20 vs. Q1-19 Q1-19 Q1-20 AEP Dayton ATC liquidations down 31%: $ in millions (except EPS) $20.14/MWh in Q1-20 vs. $29.21/MWh in Q1- 19 Operating Revenues $486 $447 Operating Expenses: Income Taxes: actual rate of (41.1%) Q1-20 vs. Energy
Slide 23: 1st Quarter Rate Performance
1st Quarter Rate Performance Vertically Integrated Utilities Transmission and Distribution Utilities Rate Changes, net of Rate Changes, net of offsets ($ in millions) offsets ($ in millions) Q1-20 vs. Q1-19 Q1-20 vs. Q1-19 APCo/WPCo $19 AEP Ohio1 $14 I&M $10 AEP Texas $1 KPCo - TOTAL $15 PSO $6 SWEP
Slide 24: 1st Quarter Weather Impact
1st Quarter Weather Impact Vertically Integrated Utilities Transmission and Distribution Utilities Weather Impact Weather Impact ($ in millions) ($ in millions) Q1-20 vs. Q1-20 vs. Q1-20 vs. Q1-20 vs. Q1-19 Normal Q1-19 Normal APCo/WPCo ($33) ($38) AEP Ohio - - I&M ($14) ($12) AEP Texas ($4) ($5) KP
Slide 25: 1st Quarter Retail Load Performance
1st Quarter Retail Load Performance Vertically Integrated Utilities Transmission and Distribution Utilities Retail Load1 Retail Load1 (weather (weather normalized) normalized) Q1-20 vs. Q1-19 Q1-20 vs. Q1-19 APCo/WPCo - AEP Ohio (1.6%) I&M (2.7%) AEP Texas 1.4% KPCo (3.6%) TOTAL (0.4%) PSO - SWEPCO
Slide 26: Industrial Sales Growth
Industrial Sales Growth | migcraic AEP Industrial GWh Growth 10% > 9.7% - $80 et 7.8% 076.2% 6.7% 5% 5 . + $60 H 2 5 ze g 0% ~ $40 é 2 2 (co) -5% ~ mmm Oil & Gas Related Sectors + $20 "ml Non-Oil & Gas Related Sectors -6.1% === Oil Price -10% J L$. Q1-18 Q2-18 Q3-18 Q4-18 Q1-19 Q2-19 Q3-19 Q4-19 Q1-
Slide 27: Economic Data – AEP Service Territory
Economic Data – AEP Service Territory Source – Moody’s Analytics 27
Slide 28: North Central Wind Overview
North Central Wind Overview SWEPCO and PSO Regulated Wind Investment Opportunity Total Rate Base ~$2 billion (1,485 MW) Investment Name MW Investment In-Service EOY 2020 Sundance 199 $307M North Central Wind (100% PTC) Traverse 999 $1,287M EOY 2021 Maverick 287 $402M (80% PTC) Net Capacity Factor 44
Slide 29: North Central Wind Procedural Schedules
North Central Wind Procedural Schedules Intervenor Staff Rebuttal Jurisdiction (Docket #) Hearing Status Testimony Testimony Testimony Settlement reached January December 10, 2019, November November PSO (PUD 2019-00048) N/A 13, 2020 commission 1, 2019 1, 2019 (Settlement Hearing) approved on Februar
Slide 30: Current Rate Case Activity
Current Rate Case Activity AEP Texas APCo – Virginia Docket #: 49494 Docket #: PUR-2020-00015 Filing Date: 05/01/2019 Filing Date: 03/31/2020 Requested Rate Base: $5.0B Requested Rate Base: $2.5B Requested ROE: 10.5% Requested ROE: 9.9% Cap Structure: 55%D / 45%E Cap Structure: 50%D / 50%E Revenue I
Slide 31: Current Rate Case Activity
Current Rate Case Activity I&M – Indiana I&M – Michigan Docket #: 452351 Docket #: U-20359 Filing Date: 05/14/2019 Filing Date: 06/24/2019 Requested Rate Base: $4.9B Requested Rate Base: $1.2B Requested ROE: 10.5% Requested ROE: 10.5% Cap Structure: 53.2%D / 46.8%E Cap Structure: 53.6%D / 46.4%E Gro
Slide 32: AEP and Effective Tax Rates
AEP and Effective Tax Rates Q1-20 Effective Tax Rate Reconciliation Amount Q1-20 Tax Rate ($ in millions) Pre-tax Income $545 Tax at Federal Rate $114 21% Tax at State Rate $13 2% Tax Credits and ($24) (4%) Amortization Excess Protected and ($51) (9%) Unprotected Other ($6) (1%) Tax Expense (Benefit
Slide 33: 2020 - 2024 Capital Forecast: Total $33B
2020 - 2024 Capital Forecast: Total $33B Regulated Renewables Regulated Environmental Regulated New Generation $0.3B | 1% $0.2 B | 0% Generation $0.9B | 3% Contracted Renewables $2.1B | 6% Regulated Fossil/Hydro Generation $0.8B | 3% Nuclear Generation $0.4B | 1% IT/Workplace Services $2.5B | 8% AEP
Slide 34: GAAP to Non-GAAP Reconciliations and Ratios
GAAP to Non-GAAP Reconciliations and Ratios Adjusted FFO Calculation Adjusted Total Debt Calculation 12 Months As of Ended 3/31/20 3/31/20 $ in millions $ in millions GAAP Total Debt (incl. current maturities) $32,357 Cash Flow From Operations $4,077 Less: Adjustments: Securitization Bonds (902) Cha
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