American Electric Power Company, Inc. · NASDAQ:AEP
American Electric Power — Q2 2020 Earnings Presentation
41 slides from American Electric Power's earnings presentation, Aug 6, 2020
Slide 1: 2nd Quarter 2020 Earnings Release Presentation
2nd Quarter 2020 Earnings Release Presentation August 6, 2020 1 GS Power and September Investor Utilities Meetings Conference | aep.com | aep.com
Slide 2: Safe Harbor Statement
“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: 2nd Quarter 2020 Business Update
2nd Quarter 2020 Business Update Reaffirm 2020 operating earnings guidance range of $4.25-$4.45 Reaffirm 5%-7% long-term growth rate COVID-19 updates Culture/diversity and inclusion efforts HB6 implications/clean energy future Move forward with North Central Wind Current rate case acti
Slide 5: Regulated Returns
Regulated Returns Twelve Months Ended 6/30/2020 Earned ROE’s (non-GAAP operating earnings, not weather normalized) AEP OH1 11.1%2 I&M 10.6% Trans APCo1 PSO 9.8% 9.3% 9.4% SWEPCO 8.3% AEP TX 7.4% KPCo1 5.7% Regulated Operations ROE of 9.1% as of June 30, 2020 1 Base rate cases pending I 2 AEP Ohio RO
Slide 6: 2nd Quarter 2020 Financial Update
2nd Quarter 2020 Financial Update 2nd Quarter 2020 Financial Update Delivered GAAP earnings of $1.05 per share or $521M for the second quarter of 2020 Delivered operating earnings of $1.08 per share or $534M for the second quarter of 2020 Delivered GAAP earnings of $2.05 per share YTD 2020 or
Slide 7: 2nd Quarter Operating Earnings Segment Detail
2nd Quarter Operating Earnings Segment Detail 1.2 0.17 0.02 (0.12) 0.05 (0.04) $1.08/sh $1.00/sh Investment Growth $ 0.03 1.0 Annual True-Up $ (0.13) FERC Settlement $ (0.03) OH Legacy Riders $ (0.03) Other $ 0.01 Generation $ 0.04 Rate Changes $ 0.03 Renewables $ 0.03 Normal Load $ (0.02) Retail $
Slide 8: YTD Operating Earnings Segment Detail
YTD Operating Earnings Segment Detail 2.5 0.04 (0.05) $2.19/sh (0.10) 0.04 (0.02) $2.10/sh 2.0 Investment Growth $ 0.06 Annual True-up $ (0.13) FERC Settlement $ (0.01) Renewables $ 0.06 OH Reg Provision $ (0.09) Other $ (0.02) Retail $ (0.02) OH Legacy Riders $ (0.03) Generation $ 0.01 Rate Changes
Slide 9: 2020 Financial Outlook
2020 Financial Outlook 2020 Earnings Guidance Range $4.25 - $4.45 2020 Guidance Commentary EEI Revised Retail Sales Growth 0.5% (3.4%) • Load forecast on track with Q1 2020 revised estimate • Slight improvement in Q2 2020 YTD 2020 Weather (vs. normal) - ($30M)1 • Expect favorable weather in July Unt
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 a gradual recovery over the remainder of the year. 10
Slide 11: Growth vs Prior Year
Normalized Retail Load Data AEP Retail Sales (GWh) Growth Monthly Normalized GWh Growth Since Beginning of COVID-19 Pandemic 3% 2% 0.4% 0% Weather Normalized -2.4% -2% Actuals -4.3% -4.8% -4% April 2020 Updated Load Forecast -6% -8% -8.6% 0% -0.7% Growth vs Prior Year -10% Mar-20 Apr-20 May-20 Jun-2
Slide 12: Capitalization and Liquidity
Capitalization and Liquidity Total Debt / Total Capitalization Credit Statistics Actual Moody’s GAAP Target Low to Mid FFO to Total Debt 14.1% 13.7% Teens Represents the trailing 12 months as of 6/30/2020 See Appendix for reconciliation to GAAP Liquidity Summary (unaudited) 6/30/2020 Actual $ in mil
Slide 13: Summary
Summary Reaffirm 2020 operating earnings guidance range of $4.25-$4.45 On track to reduce O&M by incremental $100M Reinstate $100M of previously deferred 2020 capital Capital and cash flow plans updated with the approval of North Central Wind Reaffirm 5%-7% long-term growth rate 13
Slide 14: Appendix
Appendix 14
Slide 15: 2nd Quarter Reconciliation of GAAP to Operating Earnings
2nd Quarter Reconciliation of GAAP to Operating Earnings $ in millions Earnings Per Share Q2-19 Q2-20 Change Q2-19 Q2-20 Change Reported GAAP Earnings $461 $521 $60 $0.93 $1.05 $0.12 Non Operating Items: Mark-to-Market Impact of Commodity 13 (10) (23) 0.03 (0.02) (0.05) Hedging Activities1 Severance
Slide 16: YTD Reconciliation of GAAP to Operating Earnings
YTD Reconciliation of GAAP to Operating Earnings $ in millions Earnings Per Share YTD-19 YTD-20 Change YTD-19 YTD-20 Change Reported GAAP Earnings $1,034 $1,016 ($18) $2.10 $2.05 ($0.05) Non Operating Items: Mark-to-Market Impact of Commodity 15 (4) (19) 0.03 (0.01) (0.04) Hedging Activities1 Severa
Slide 17: Vertically Integrated Utilities
Vertically Integrated Utilities 2nd Quarter Summary Key Drivers: Q2-20 vs. Q2-19 Q2-19 Q2-20 Rate Changes: $17M favorable vs. prior year primarily from rate increases at APCo/WPCo, I&M and SWEPCO $ in millions (except EPS) Weather: $17M favorable vs. prior year; $10M favorable Operating Revenues
Slide 18: Vertically Integrated Utilities
Vertically Integrated Utilities YTD Summary Key Drivers: YTD-20 vs. YTD-19 YTD-19 YTD-20 Rate Changes: $64M favorable vs. prior year primarily from rate increases at APCo/WPCo, I&M and SWEPCO $ in millions (except EPS) Weather: $45M unfavorable vs. prior year; $56M Operating Revenues $4,527 $4,3
Slide 19: Transmission and Distribution Utilities
Transmission and Distribution Utilities 2nd Quarter Summary Key Drivers: Q2-20 vs. Q2-19 Q2-19 Q2-20 Rate Changes: $3M favorable primarily due to the Ohio $ in millions (except EPS) DIR and gridSMART and Texas TCOS, partially offset by the roll off of the Ohio RSR Operating Revenues $1,046 $1,035
Slide 20: Transmission and Distribution Utilities
Transmission and Distribution Utilities YTD Summary Key Drivers: YTD-20 vs. YTD-19 YTD-19 YTD-20 Ohio Regulatory Provision: $58M unfavorable due to $ in millions (except EPS) prior year recognition of 2016 SEET provision reversal Operating Revenues $2,268 $2,141 Rate Changes: $18M favorable prim
Slide 21: AEP Transmission Holdco
AEP Transmission Holdco 2nd Quarter Summary Key Drivers: Q2-20 vs. Q2-19 Q2-19 Q2-20 $61M unfavorable Operating Earnings vs. $ in millions (except EPS) prior year primarily due to the annual true-up Operating Revenues $279 $250 and the impact of a prior year FERC Operating Expenses: settlement, pa
Slide 22: AEP Transmission Holdco
AEP Transmission Holdco YTD Summary Key Drivers: YTD-20 vs. YTD-19 YTD-19 YTD-20 $45M unfavorable Operating Earnings vs. $ in millions (except EPS) prior year primarily due to the annual true-up Operating Revenues $535 $560 and the impact of a prior year FERC Operating Expenses: settlement, partia
Slide 23: Generation & Marketing
Generation & Marketing 2nd Quarter Summary Key Drivers: Q2-20 vs. Q2-19 Q2-19 Q2-20 Generation decreased 638 GWh (44%) Q2-20 vs. $ in millions (except EPS) Q2-19 primarily due to the retirement of Conesville Plant Unit 4 in May 2020 Operating Revenues $428 $364 Operating Expenses: AEP Dayton ATC
Slide 24: Generation & Marketing
Generation & Marketing YTD Summary Key Drivers: YTD-20 vs. YTD-19 YTD-19 YTD-20 Generation decreased 627 GWh (23%) YTD-20 $ in millions (except EPS) vs. YTD-19 primarily due to the retirement of Operating Revenues $914 $810 Conesville Plant Unit 4 in May 2020 Operating Expenses: AEP Dayton ATC l
Slide 25: 2nd Quarter Rate Performance
2nd Quarter Rate Performance Vertically Integrated Utilities Transmission and Distribution Utilities Rate Changes, net of Rate Changes, net of offsets ($ in millions) offsets ($ in millions) Q2-20 vs. Q2-19 Q2-20 vs. Q2-19 APCo/WPCo $8 AEP Ohio1 ($3) I&M $1 AEP Texas $6 KPCo ($1) TOTAL $3 PSO ($7) S
Slide 26: YTD Rate Performance
YTD Rate Performance Vertically Integrated Utilities Transmission and Distribution Utilities Rate Changes, net of Rate Changes, net of offsets ($ in millions) offsets ($ in millions) YTD-20 vs. YTD-19 YTD-20 vs. YTD-19 APCo/WPCo $28 AEP Ohio1 $11 I&M $11 AEP Texas $7 KPCo ($1) TOTAL $18 PSO ($2) SWE
Slide 27: 2nd Quarter Weather Impact
2nd Quarter Weather Impact Vertically Integrated Utilities Transmission and Distribution Utilities Weather Impact Weather Impact ($ in millions) ($ in millions) Q2-20 vs. Q2-20 vs. Q2-20 vs. Q2-20 vs. Q2-19 Normal Q2-19 Normal APCo/WPCo - $3 AEP Ohio - - I&M $11 $7 AEP Texas - $1 KPCo $2 $1 TOTAL -
Slide 28: YTD Weather Impact
YTD Weather Impact Vertically Integrated Utilities Transmission and Distribution Utilities Weather Impact Weather Impact ($ in millions) ($ in millions) YTD-20 vs. YTD-20 vs. YTD-20 vs. YTD-20 vs. YTD-19 Normal YTD-19 Normal APCo/WPCo ($33) ($35) AEP Ohio - - I&M ($3) ($5) AEP Texas ($4) ($5) KPCo (
Slide 29: Impact of Weather
Impact of Weather Weather Impact on Earnings vs. Normal $100 $71 2020 Weather Impact 2019 Weather Impact Impact of Weather ($Millions) $50 $11 $- $- $0 $- $(6) $(6) $(12) $(50) $(61) $(71) $(100) Q1 Q2 Q3 Q4 YTD The impact of weather through the second quarter was $(61M) vs. normal, which is approxi
Slide 30: 2nd Quarter Retail Load Performance
2nd Quarter Retail Load Performance Vertically Integrated Utilities Transmission and Distribution Utilities Retail Load1 Retail Load1 (weather (weather normalized) normalized) Q2-20 vs. Q2-19 Q2-20 vs. Q2-19 APCo/WPCo (5.9%) AEP Ohio (7.2%) I&M (9.1%) AEP Texas 0.4% KPCo (10.4%) TOTAL (3.9%) PSO (5.
Slide 31: YTD Retail Load Performance
YTD Retail Load Performance Vertically Integrated Utilities Transmission and Distribution Utilities Retail Load1 Retail Load1 (weather (weather normalized) normalized) YTD-20 vs. YTD-19 YTD-20 vs. YTD-19 APCo/WPCo (2.6%) AEP Ohio (4.2%) I&M (5.7%) AEP Texas 0.9% KPCo (6.6%) TOTAL (2.1%) PSO (2.6%) S
Slide 32: Industrial Sales Growth
Industrial Sales Growth Aeeruic POWER AEP Industrial GWh Growth 4 9.7% 10% wn----n, 7.8% r $75 5% $50 xc] a $ s : 510% $25 mum Oil & Gas Related Sectors "ml Non-Oil & Gas Related Sectors === Oil Price -16.8% -20% ~ L$. Q2-18 Q3-18 Q4-18 Q1-19 Q2-19 Q3-19 Q4-19 Q1-20 Q2-20
Slide 33: Economic Data – AEP Service Territory
Economic Data – AEP Service Territory Source – Moody’s Analytics 33
Slide 34: 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 34
Slide 35: North Central Wind Overview
North Central Wind Overview SWEPCO and PSO Regulated Wind Investment Total Rate Base ~$2 billion (1,485 MW) Investment Name MW Investment In-Service Q1 2021 Sundance 199 $307M North Central Wind (100% PTC) Traverse 999 $1,287M EOY 2021 Maverick 287 $402M (80% PTC) Net Capacity Factor 44.0% Approved
Slide 36: Current Rate Case Activity
Current Rate Case Activity AEP Ohio AEP Texas Docket #: 20-0585-EL-AIR Docket #: 49494 Filing Date: 06/01/2020 Filing Date: 05/01/2019 Requested Rate Base: $3.1B Requested Rate Base: $5.0B Requested ROE: 10.15% Requested ROE: 10.5% Cap Structure: 45.6%D / 54.4%E Cap Structure: 55%D / 45%E Gross Reve
Slide 37: Current Rate Case Activity
Current Rate Case Activity APCo – Virginia KPCo Docket #: PUR-2020-00015 Docket #: 2020-00174 Filing Date: 03/31/2020 Filing Date: 06/29/2020 Requested Rate Base: $2.5B Requested Rate Base: $1.4B Requested ROE: 9.9% Requested ROE: 10.0% Cap Structure: 50%D / 50%E Cap Structure: 53.7%D / 3.0% AR / Gr
Slide 38: AEP and Effective Tax Rates
AEP and Effective Tax Rates Q2-20 GAAP Effective Tax Rate Reconciliation Amount Q2-20 Tax Rate ($ in millions) Pre-tax Income $1,071 Tax at Federal Rate $225 21% Tax at State Rate $28 3% Tax Credits and ($49) (5%) Amortization Excess Protected and ($137) (13%) Unprotected Other (7) (1%) Tax Expense
Slide 39: 2020 - 2024 Capital Forecast: Total $35B
2020 - 2024 Capital Forecast: Total $35B Regulated Renewables $2.1 | 6% Contracted Renewables Regulated New Generation $2.1 | 6% $0.4 | 1% Regulated Environmental Generation $0.9 | 3% Regulated Fossil/Hydro Generation $0.8 | 3% Nuclear Generation $0.4 | 1% AEP Transmission Holdco $7.8 | 22% 100% of
Slide 40: Cash Flows and Financial Metrics
Cash Flows and Financial Metrics $ in millions 2020E 2021E 2022E Cash from Operations $ 4,600 $ 4,800 $ 5,300 Capital & JV Equity Contributions 1 (5,900) (8,200) (6,500) Other Investing Activities (400) (100) (200) 2 Common Dividends (1,400) (1,400) (1,500) Excess (Required) Capital $ (3,100) $ (4,9
Slide 41: 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 6/30/20 6/30/20 $ in millions $ in millions GAAP Total Debt (incl. current maturities) $31,852 Cash Flow From Operations $4,216 Less: Adjustments: Securitization Bonds (873) Cha
American Electric Power Company — Q2 2020 Earnings Presentation on 6ix