American Electric Power Company, Inc. · NASDAQ:AEP
American Electric Power — Q2 2022 Earnings Presentation
44 slides from American Electric Power's earnings presentation, Jul 27, 2022
Slide 1: 2nd Quarter 2022 Earnings Release Presentation
2nd Quarter 2022 Earnings Release Presentation July 27, 2022
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: Pure Play Regulated Utility
Pure Play Regulated Utility 16,700 EMPLOYEES 26GW OWNED GENERATION 5.5M CUSTOMERS, 11 STATES 40,000 TRANSMISSION MILES LARGEST IN THE U.S. $88B TOTAL ASSETS 224,000 DISTRIBUTION MILES $56B RATE BASE $49B CURRENT MARKET CAPITALIZATION Statistics as of December 31, 2021 except for owned generation as
Slide 5: AEP's Strategic Vision and Execution
AEP’s Strategic Vision and Execution Execute Strategy Top Priorities Clean • Transform all parts of our business to align with AEP emission reduction goals Lead the transformation to a clean • Improve the reliability and resiliency of the grid to facilitate a clean energy economy for energy economy
Slide 6: 2nd Quarter 2022 Business Update
2nd Quarter 2022 Business Update 2nd Quarter 2022 operating earnings of $1.20 per share or $618M Reaffirm 2022 operating earnings guidance range of $4.87-$5.07 and 6%-7% long-term growth rate Kentucky operations sale to Liberty expected to close in Summer 2022 Progress on unregulated renewab
Slide 7: Regulatory Timeline of Kentucky Sale
Regulatory Timeline of Kentucky Sale In October 2021, AEP entered into an agreement to sell its Kentucky operations to Liberty (Algonquin Power & Utilities). The sale is expected to close in Summer 2022 pending approvals of the Kentucky Sale Transfer. Nov Dec Jan Feb Mar Apr May June July Summer Mit
Slide 8: Commitment to Regulated Renewables
Commitment to Regulated Renewables 0.5 GW 15 GW 16 GW North Central Wind 2022-2030 Regulated Renewable In-Service in 2021 Opportunity by 2030 Commissioned 1 GW NCW – Traverse site on 3/18/2022 409 MW owned resources approved at APCo 999 MW owned resources filed for approval at SWEPCO Renewable RFPs
Slide 9: Regulated Renewable Projects and RFPs
Regulated Renewable Projects and RFPs Owned Renewable Projects Approved Projected Regulatory filing date: Resource Project MWs In-Service Date December 30, 2021 Solar Amherst / Virginia 5 Q4-22 Projects Approved: Solar Bedington / West Virginia 50 Q4-23 June/July 2022 Solar Firefly / Virginia 150 Q3
Slide 10: 2nd Quarter 2022 Financial Update
2nd Quarter 2022 Financial Update 2nd QUARTER 2022 $1.20 Delivered GAAP earnings of $1.02 $1.18 $1.16 per share or $524.5M for the second quarter of 2022 $1.02 Delivered operating earnings of $1.20 per share or $617.7M for the second 2022 2021 2022 quarter of 2022 2021 GAAP EPS OPERATING EPS 202
Slide 11: 2nd Quarter Operating Earnings Segment Detail
2nd Quarter Operating Earnings Segment Detail 0.09 (0.15) 0.01 (0.07) $1.20 0.14 PER SHARE $1.18 PER SHARE Rate Changes $0.07 Rate Changes $0.05 Invest Growth $0.03 Renewables $0.05 Investment Gain $(0.08) Weather $0.05 Weather $0.03 Annual True-up $(0.07) Generation $0.04 Interest $(0.02) Normal Lo
Slide 12: YTD Operating Earnings Segment Detail
YTD Operating Earnings Segment Detail 0.05 (0.16) 0.08 (0.06) $2.42 0.18 PER SHARE $2.33 PER SHARE Rate Changes $0.18 Rate Changes $0.10 Invest Growth $0.05 Renewables $0.04 O&M $(0.04) Weather $0.04 Weather $0.02 Annual True-Up $(0.07) Generation $0.01 Investment Gain $(0.11) Normal Load $0.07 Norm
Slide 13: Weather Normalized Billed Retail Load Trends
Weather Normalized Billed Retail Load Trends AEP Normalized Residential GWh Sales AEP Normalized Commercial GWh Sales % Change vs. Prior Year % Change vs. Prior Year 15% 15% 10.0% 10% 10% 5.0% 4.2% 4.1% 4.1% 5% 5% 4.3% 0.8% 1.2% 1.0% 0% 0% -0.4% -0.8% -5% -1.6% -1.9% -3.1% -5% -10% -10% -15% -15% Q2
Slide 14: AEP's Load Exceeds Pre-Pandemic Levels
AEP’s Load Exceeds Pre-Pandemic Levels Q2-22 Normalized Load Comparison YTD-22 Normalized Load Comparison vs Q2 2019 vs YTD 2019 5% 5% 4.1% 4% 3.8% 4% 3.6% 3% 2.9% 3% 2.7% % Growth % Growth 2.3% 2.0% 2% 2% 1.1% 1% 1% 0% 0% Residential Commercial Industrial Total Retail Residential Commercial Industr
Slide 15: Capitalization and Liquidity
Capitalization and Liquidity Total Debt/Total Capitalization 61.8% 62.1% 61.5% 61.4% Credit Statistics 59.8% 55.5% 57.0% Moody’s GAAP FFO to Total Debt 13.4% 13.3% Targeted Range 14.0%-15.0% Represents the trailing 12 months as of 6/30/2022 See Appendix for reconciliation to GAAP Liquidity Summary 2
Slide 16: Summary
Summary Reaffirm 2022 operating earnings guidance range of $4.87-$5.07 Reaffirm long-term growth rate of 6%-7% Kentucky operations sale expected to close in Summer 2022 Continue to de-risk and simplify the business Analyst day scheduled for October 4th in New York City North Central Wind -
Slide 17: APPENDIX – Q2 2022 PERFORMANCE
APPENDIX – Q2 2022 PERFORMANCE 17
Slide 18: 2nd Quarter Reconciliation of GAAP to Operating Earnings
2nd Quarter Reconciliation of GAAP to Operating Earnings $ in millions Earnings Per Share Q2-21 Q2-22 Change Q2-21 Q2-22 Change Reported GAAP Earnings $ 578 $ 525 $ (53) $ 1.16 $ 1.02 $ (0.14) Non Operating Items: Mark-to-Market Impact of Commodity (7) (37) (30) (0.02) (0.07) (0.05) Hedging Activiti
Slide 19: YTD Reconciliation of GAAP to Operating Earnings
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 $ 1,153 $ 1,239 $ 86 $ 2.31 $ 2.43 $ 0.12 Non Operating Items: Mark-to-Market Impact of Commodity (12) (136) (124) (0.02) (0.27) (0.25) Hedging Activitie
Slide 20: Vertically Integrated Utilities
Vertically Integrated Utilities 2nd Quarter Summary Key Drivers: Q2-22 vs. Q2-21 $ in millions (except EPS) Q2-21 Q2-22 Rate Changes: $47M favorable vs. prior year primarily from rate increases at APCo, PSO and Operating Revenues $ 2,261 $ 2,649 SWEPCO Operating Expenses: Weather: $32M favorable
Slide 21: Vertically Integrated Utilities
Vertically Integrated Utilities YTD Summary Key Drivers: YTD-22 vs. YTD-21 $ in millions (except EPS) YTD-21 YTD-22 Rate Changes: $112M favorable vs. prior year primarily from rate increases at APCo, I&M, PSO Operating Revenues $ 4,798 $ 5,336 and SWEPCO Operating Expenses: Weather: $30M favorab
Slide 22: Transmission and Distribution Utilities
Transmission and Distribution Utilities 2nd Quarter Summary Key Drivers: Q2-22 vs. Q2-21 $ in millions (except EPS) Q2-21 Q2-22 Rate Changes: $34M favorable vs. prior year primarily from the Texas DCRF, Ohio DIR and Operating Revenues $ 1,103 $ 1,302 gridSMART Operating Expenses: Weather: $17M f
Slide 23: Transmission and Distribution Utilities
Transmission and Distribution Utilities YTD Summary Key Drivers: YTD-22 vs. YTD-21 $ in millions (except EPS) YTD-21 YTD-22 Rate Changes: $63M favorable vs. prior year primarily from the Texas DCRF, Ohio DIR and Operating Revenues $ 2,192 $ 2,548 gridSMART Operating Expenses: Weather: $11M favor
Slide 24: AEP Transmission Holdco
AEP Transmission Holdco 2nd Quarter Summary Key Drivers: Q2-22 vs. Q2-21 $ in millions (except EPS) Q2-21 Q2-22 $28M unfavorable Operating Income vs. prior year primarily due to the annual true-up, partially Operating Revenues $ 378 $ 379 offset by the increased transmission investment Operating E
Slide 25: AEP Transmission Holdco
AEP Transmission Holdco YTD Summary Key Drivers: YTD-22 vs. YTD-21 $ in millions (except EPS) YTD-21 YTD-22 $19M unfavorable Operating Income vs. prior year primarily due to the annual true-up and Operating Revenues $ 755 $ 790 higher property taxes, partially offset by the increased transmission
Slide 26: Generation & Marketing
Generation & Marketing 2nd Quarter Summary Key Drivers: Q2-22 vs. Q2-21 $ in millions (except EPS) Q2-21 Q2-22 Renewables increased primarily due to sale of renewable development sites Operating Revenues $ 427 $ 614 Operating Expenses: Generation increased 242 GWh or 30% Q2-22 vs. Q2-21 primaril
Slide 27: Generation & Marketing
Generation & Marketing YTD Summary Key Drivers: YTD-22 vs. YTD-21 $ in millions (except EPS) YTD-21 YTD-22 Renewables increased primarily due to sale of renewable development sites Operating Revenues $ 1,056 $ 1,107 Operating Expenses: Generation decreased 70 GWh or 4% YTD-22 vs. YTD-21 primaril
Slide 28: 2nd Quarter Rate Performance
2nd Quarter Rate Performance Vertically Integrated Utilities Transmission and Distribution Utilities Rate Changes, net of Rate Changes, net of offsets ($ in millions) offsets ($ in millions) Q2-22 vs. Q2-21 Q2-22 vs. Q2-21 APCo/WPCo $12 AEP Ohio $23 I&M $(3) AEP Texas $11 KPCo - Total $34 PSO $14 SW
Slide 29: YTD Rate Performance
YTD Rate Performance Vertically Integrated Utilities Transmission and Distribution Utilities Rate Changes, net of Rate Changes, net of offsets ($ in millions) offsets ($ in millions) YTD-22 vs. YTD-21 YTD-22 vs. YTD-21 APCo/WPCo $27 AEP Ohio $44 I&M $23 AEP Texas $19 KPCo $3 Total $63 PSO $24 SWEPCO
Slide 30: 2nd Quarter Weather Impact
2nd Quarter Weather Impact Vertically Integrated Utilities Transmission and Distribution Utilities Weather Impact Weather Impact ($ in millions) ($ in millions) Q2-22 vs. Q2-22 vs. Q2-22 vs. Q2-22 vs. Q2-21 Normal Q2-21 Normal APCo/WPCo $1 $4 AEP Ohio $5 $5 I&M $1 $8 AEP Texas $12 $8 KPCo $1 $1 Tota
Slide 31: YTD Weather Impact
YTD Weather Impact Vertically Integrated Utilities Transmission and Distribution Utilities Weather Impact Weather Impact ($ in millions) ($ in millions) YTD-22 vs. YTD-22 vs. YTD-22 vs. YTD-22 vs. YTD-21 Normal YTD-21 Normal APCo/WPCo - $(1) AEP Ohio $4 $4 I&M $5 $10 AEP Texas $7 $13 KPCo - - Total
Slide 32: 2nd Quarter Retail Load Performance
2nd Quarter Retail Load Performance Vertically Integrated Utilities Transmission and Distribution Utilities Retail Load1 Retail Load1 (weather normalized) (weather normalized) Q2-22 vs. Q2-21 Q2-22 vs. Q2-21 APCo/WPCo 0.3% AEP Ohio 3.0% I&M 1.4% AEP Texas 7.3% KPCo 3.8% Total 4.9% PSO 2.5% SWEPCO 4.
Slide 33: YTD Retail Load Performance
YTD Retail Load Performance Vertically Integrated Utilities Transmission and Distribution Utilities Retail Load1 Retail Load1 (weather normalized) (weather normalized) YTD-22 vs. YTD-21 YTD-22 vs. YTD-21 APCo/WPCo 0.3% AEP Ohio 2.6% I&M 0.8% AEP Texas 9.5% KPCo 3.4% Total 5.4% PSO 2.4% SWEPCO 2.5% I
Slide 34: Industrial Sales Growth
Industrial Sales Growth AEP Industrial GWh Growth 20% $120 15.7% 10% $90 7.4% 6.7% 6.0% 5.8% 5.5% 6.0% Growth vs Prior Year 4.0% 2.6% 1.3% 0% $60 -0.9% -1.3% -5.5% -4.6% -3.3% -10% -8.7% Oil & Gas Related Sectors $30 -9.6% Non-Oil & Gas Related Sectors Oil Price -16.8% -20% $- Q2-20 Q3-20 Q4-20 Q1-2
Slide 35: Economic Data – AEP Service Territory
Economic Data – AEP Service Territory GDP Growth by Quarter Employment Growth by Quarter 12.2% 12% 12% 8.5% 6.1% 6% 5.5% 5.8% 4.6% 4.3% 4.4% 4.6% 4.5% 4.0% Growth vs Prior Year 6% 4.9% 3.8% Growth vs Prior Year 4.5% 4.5% 3.2% 3.5% 1.9% 2.5% 3.0% 0% 0% -6% -6% US AEP US AEP -12% -12% Q2-21 Q3-21 Q4-2
Slide 36: 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 6/30/2022 6/30/2022 (in millions) (in millions) Cash Flow from Operations $ 5,787 GAAP Total Debt $ 38,693 (incl. current maturities) Adjustments: Less: Changes in Working Capit
Slide 37: APPENDIX – REGULATORY AND RENEWABLES
APPENDIX – REGULATORY AND RENEWABLES 37
Slide 38: Regulated Returns and Authorized Equity Layers
Regulated Returns and Authorized Equity Layers Twelve Months Ended 6/30/2022 Earned ROE’s (non-GAAP operating earnings, not weather normalized) 14% 12% 6/30/2022 Regulated 10.9% 10.6% 10% 9.7% Operations ROE of 9.1% 9.2% 8% 8.4% 8.5% 7.7% 6% 6.4% Operating companies supported by Transmission Holdcos
Slide 39: Current Rate Case Activity
Current Rate Case Activity APCo – Virginia SWEPCO – Arkansas2 SWEPCO – Louisiana Docket # PUR-2020-00015 Docket # 21-070-U Docket # U-35441 Filing Date 3/31/2020 Filing Date 7/23/2021 Filing Date 12/18/2020 Requested Rate Base $2.5B Requested Rate Base $1.56B Requested Rate Base $2.1B Requested ROE
Slide 40: Current Regulated Renewables Opportunity
Current Regulated Renewables Opportunity Wind Additions Solar Additions Included in Included in 2022-2030 2022-2026 2022-2030 2022-2026 Company Company (MW) Capital Plan (MW) Capital Plan (MW / billions) (MW / billions) APCo 1,154 803 $ 1.3 APCo 759 292 $ 0.5 I&M 800 400 $ 0.6 I&M 1,300 195 $ 0.4 PS
Slide 41: APPENDIX – FINANCIAL
APPENDIX – FINANCIAL 41
Slide 42: 2022-2026 Capital Forecast of $38B
2022-2026 Capital Forecast of $38B Regulated IT/Workplace Services Fossil/Hydro Generation $2.5B • 7% $1.0B • 3% Nuclear Generation Regulated Environmental Generation $0.3B • 1% $0.6B • 1% Regulated New Generation $0.4B • 1% Generation & Marketing $0.4B • 1% The ability to quickly redeploy Distribut
Slide 43: 2022-2026 Cash Flows and Financial Metrics
2022-2026 Cash Flows and Financial Metrics Cash proceeds related to sale of contracted renewable assets within the unregulated business are not included below. $ in millions 2022E 2023E 2024E 2025E 2026E Cash from Operations $ 5,600 $ 6,100 $ 6,400 $ 6,900 $ 7,400 Net Cash Proceeds from Sale of Kent
Slide 44: Contracted Renewable Assets
Contracted Renewable Assets In February 2022, AEP announced the sale of its contracted renewable asset portfolio within the unregulated business. The portfolio is made up of the following projects: Commercial Project Name Location Resource MW Operation Date Santa Rita East Texas Wind July 2019 257 T
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