American Electric Power Company, Inc. · NASDAQ:AEP
American Electric Power — Q3 2018 Earnings Presentation
32 slides from American Electric Power's earnings presentation, Oct 25, 2018
Slide 1: 3rd Quarter 2018 Earnings Release Presentation
3rd Quarter 2018 EARNINGS RELEASE PRESENTATION October 25, 2018 September Investor Meetings | aep.com 1
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: 3rd Quarter 2018 Highlights
3rd Quarter 2018 Highlights 3rd Quarter 2018 Company Update Earnings Update Delivered GAAP earnings of $1.17 per share and operating earnings of $1.26 per share for the third quarter of 2018 Delivered GAAP earnings of $3.17 per share and operating earnings of $3.23 per share for YTD September 20
Slide 5: Regulated Returns
Regulated Returns Twelve Months Ended 9/30/2018 Earned ROE’s (non-GAAP operating earnings, not weather normalized) AEP OH 14.1% I&M AEP OH* 12.5% 12.0% APCo* Trans 9.9% KPCo 10.4% 9.2% AEP TX PSO* 8.8% 7.7% SWEPCO 7.4% Regulated Operations ROE of 10.1% as of September 30, 2018 *AEP Ohio adjusted for
Slide 6: 3rd Quarter Operating Earnings Segment Detail
3rd Quarter Operating Earnings Segment Detail Rate Base Growth $ 0.03 Accounting Adj $ (0.03) Rate Changes $ 0.01 Weather $ 0.08 Rate Changes $ 0.09 Wholesale Load $ (0.02) Transmission Rev $ 0.01 O&M $ (0.06) Non-Serv Pension $ 0.02 Other $ 0.01 2017 Vertically Integrated Transmission and AEP Trans
Slide 7: YTD Operating Earnings Segment Detail
YTD Operating Earnings Segment Detail Rate Base Growth $ 0.11 Annual True-up $ (0.08) Accounting Adj $ (0.03) Other $ 0.01 Weather $ 0.02 Generation $ (0.05) Rate Changes $ 0.03 Other $ 0.01 $0.03Normal Load $ 0.01 Interest Expense $ (0.04) Depreciation $ (0.04) Investment Gain $ (0.02) Weather $ 0.
Slide 8: 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 and Buckeye Power backup load. * Estimate based on forecast provided at 2017 EEI Financial Conference and amended to reflect 2017 results. 8
Slide 9: Economic Data – AEP Service Territory
Economic Data – AEP Service Territory Source – Moody’s Analytics 9
Slide 10: Capitalization and Liquidity
Capitalization and Liquidity Total Debt / Total Capitalization Credit Statistics Actual Target FFO to Total Debt 19.2% Mid Teens Represents the trailing 12 months as of 9/30/2018 See Appendix for reconciliation to GAAP Liquidity Summary (unaudited) 9/30/2018 Actual ($ in millions) Amount Maturity Re
Slide 11: Summary
Summary Narrowed and raised 2018 operating earnings guidance range to $3.88-$3.98 per share Continue strong base plan to support 5-7% growth rate EEI expectations: detail behind 2019 guidance, 2019 financing detail, cap-ex and cash flow detail 11
Slide 12: Appendix
Appendix 12
Slide 13: 3rd Quarter Reconciliation of GAAP to Operating Earnings
3rd Quarter Reconciliation of GAAP to Operating Earnings $ millions Earnings Per Share Q3-17 Q3-18 Change Q3-17 Q3-18 Change Reported GAAP Earnings $545 $578 $33 $1.11 $1.17 $0.06 Non Operating Items: Mark-to-Market Impact of Commodity - (7) (7) - (0.01) (0.01) Hedging Activities1 Impairment of Cert
Slide 14: YTD Reconciliation of GAAP to Operating Earnings
YTD Reconciliation of GAAP to Operating Earnings $ millions Earnings Per Share YTD-17 YTD-18 Change YTD-17 YTD-18 Change Reported GAAP Earnings $1,512 $1,560 $48 $3.07 $3.17 $0.10 Non Operating Items: Mark-to-Market Impact of Commodity 3 1 (2) 0.01 - (0.01) Hedging Activities1 Gain from Competitive
Slide 15: Vertically Integrated Utilities
Vertically Integrated Utilities 3rd Quarter Summary Key Drivers: Q3-18 vs. Q3-17 Q3-17 Q3-18 Weather: $61M favorable vs. prior year; $38M favorable vs. normal $ millions (except EPS) Operating Revenues $2,482 $2,637 Rate Changes: $65M favorable primarily from rate increases at I&M, KPCo, PSO and
Slide 16: Vertically Integrated Utilities
Vertically Integrated Utilities YTD Summary Key Drivers: YTD-18 vs. YTD-17 YTD-17 YTD-18 Weather: $240M favorable vs. prior year; $122M favorable vs. normal $ millions (except EPS) Operating Revenues $6,893 $7,394 Rate Changes: $172M favorable primarily from rate increases at I&M, KPCo, PSO and
Slide 17: Transmission and Distribution Utilities
Transmission and Distribution Utilities 3rd Quarter Summary Key Drivers: Q3-18 vs. Q3-17 Q3-17 Q3-18 Rate Changes: $9M favorable primarily from $ millions (except EPS) the Texas Distribution Cost Recovery Factor and the Ohio DIR Operating Revenues $1,173 $1,211 Operating Expenses: Normal Load: $
Slide 18: Transmission and Distribution Utilities
Transmission and Distribution Utilities YTD Summary Key Drivers: YTD-18 vs. YTD-17 YTD-17 YTD-18 Weather: $13M favorable vs. prior year; $14M $ millions (except EPS) favorable vs. normal Operating Revenues $3,313 $3,511 Rate Changes: $23M favorable primarily from Operating Expenses: the Texas Di
Slide 19: AEP Transmission Holdco
AEP Transmission Holdco 3rd Quarter Summary Key Drivers: Q3-18 vs. Q3-17 Q3-17 Q3-18 $15M unfavorable Operating Income vs. prior $ millions (except EPS) year primarily due to accounting adjustments, Operating Revenues $179 $187 offset by increased revenues and expenses driven by increased capital
Slide 20: AEP Transmission Holdco
AEP Transmission Holdco YTD Summary Key Drivers: YTD-18 vs. YTD-17 YTD-17 YTD-18 $45M unfavorable Operating Income vs. prior $ millions (except EPS) year primarily due to the annual true-up in Operating Revenues $582 $605 the second quarter of 2017 and accounting Operating Expenses: adjustments, o
Slide 21: Generation & Marketing
Generation & Marketing 3rd Quarter Summary Key Drivers: Q3-18 vs. Q3-17 Q3-17 Q3-18 AEP Dayton ATC liquidations up 11%: $ millions (except EPS) $32.49/MWh in Q3-18 vs. $29.39/MWh in Q3- Operating Revenues $466 $514 17 Operating Expenses: Income Taxes: effective tax rate of 12.7% Q3-18 Energy Cos
Slide 22: Generation & Marketing
Generation & Marketing YTD Summary Key Drivers: YTD-18 vs. YTD-17 YTD-17 YTD-18 Generation decreased 3,223 GWh (34%) YTD-18 $ millions (except EPS) vs. YTD-17 primarily due to sale of plants in Operating Revenues $1,472 $1,488 January 2017 and retirement of Stuart Plant in May 2018. Operating Expe
Slide 23: 3rd Quarter Rate Performance
3rd Quarter Rate Performance Vertically Integrated Utilities Transmission and Distribution Utilities Rate Changes, net of Rate Changes, net of offsets (in millions) offsets (in millions) Q3-18 vs. Q3-17 Q3-18 vs. Q3-17 APCo/WPCo $1 AEP Ohio $3 I&M $29 AEP Texas $6 KPCo $4 TOTAL $9 PSO $17 SWEPCO $14
Slide 24: 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-18 vs. YTD-17 YTD-18 vs. YTD-17 APCo/WPCo $2 AEP Ohio $5 I&M $81 AEP Texas $18 KPCo $13 TOTAL $23 PSO $28 SWEPCO $48
Slide 25: 3rd Quarter Retail Load Performance
3rd Quarter Retail Load Performance Vertically Integrated Utilities Transmission and Distribution Utilities Retail Load1 Retail Load1 (weather (weather normalized) normalized) Q3-18 vs. Q3-17 Q3-18 vs. Q3-17 APCo/WPCo 0.2% AEP Ohio (0.1%) I&M (0.1%) AEP Texas 2.2% KPCo (1.1%) TOTAL 0.9% PSO (0.4%) S
Slide 26: YTD Retail Load Performance
YTD Retail Load Performance Vertically Integrated Utilities Transmission and Distribution Utilities Retail Load1 Retail Load1 (weather (weather normalized) normalized) YTD-18 vs. YTD-17 YTD-18 vs. YTD-17 APCo/WPCo 1.7% AEP Ohio 0.8% I&M 0.7% AEP Texas 2.2% KPCo (0.5%) TOTAL 1.4% PSO 0.6% SWEPCO 1.3%
Slide 27: 3rd Quarter Weather Impact
3rd Quarter Weather Impact Vertically Integrated Utilities Transmission and Distribution Utilities Weather Impact Weather Impact (in millions) (in millions) Q3-18 vs. Q3-18 vs. Q3-18 vs. Q3-18 vs. Q3-17 Normal Q3-17 Normal APCo/WPCo $15 $15 AEP Ohio - - I&M $21 $15 AEP Texas $2 $2 KPCo $5 $3 TOTAL $
Slide 28: YTD Weather Impact
YTD Weather Impact Vertically Integrated Utilities Transmission and Distribution Utilities Weather Impact Weather Impact (in millions) (in millions) YTD-18 vs. YTD-18 vs. YTD-18 vs. YTD-18 vs. YTD-17 Normal YTD-17 Normal APCo/WPCo $90 $46 AEP Ohio - - I&M $51 $29 AEP Texas $13 $14 KPCo $20 $8 TOTAL
Slide 29: Current Rate Case Activity
Current Rate Case Activity APCo – West Virginia PSO – Oklahoma Docket #: 18-0646-E-42T Docket #: 201800097 Filing Date: 05/09/2018 Filing Date: 09/26/2018 Requested Rate Base: $4.1B Requested Rate Base: $2.5B Requested ROE: 10.22% Requested ROE: 10.3% Cap Structure: 49.84%D / 50.16%E Cap Structure:
Slide 30: AEP and Tax Reform Summary
AEP and Tax Reform Summary Regulatory Actions Recap of Excess Deferred Taxes All jurisdictions opened dockets to defer savings as a regulatory liability and 21% As of September 30, 2018 ($ in billions) address tax benefit impacts Tax Rate Options for tax benefits: Total Regulated Deferred FIT $11.1
Slide 31: AEP and Tax Reform by Jurisdiction
AEP and Tax Reform by Jurisdiction Jurisdiction1 Change in Tax Rate Excess Unprotected ADFIT2 AEP Ohio Order to pass on savings Order to amortize over 6 years AEP Texas-Distribution Order to pass on savings Partial order to amortize over 5 years AEP Texas-Transmission Order to pass on savi
Slide 32: 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 9/30/18 9/30/18 $ millions $ millions GAAP Total Debt (incl. current maturities) $25,017 Cash Flow From Operations $5,100 Less: Adjustments: Securitization Bonds (1,151) Changes
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