American Electric Power Company, Inc. · NASDAQ:AEP
American Electric Power — Q3 2019 Earnings Presentation
39 slides from American Electric Power's earnings presentation, Oct 24, 2019
Slide 1: 3rd Quarter 2019 Earnings Release Presentation
3rd Quarter 2019 EARNINGS RELEASE PRESENTATION October 24, 2019 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 2019 Business Update
3rd Quarter 2019 Business Update Narrow and raise 2019 operating earnings guidance range to $4.14- $4.24 per share Reaffirm 5%-7% long-term growth rate Two-year average dividend growth of 6.3%, in line with earnings and within targeted payout ratio of 60%-70% Renewables and legislative updat
Slide 5: Regulated Returns
Regulated Returns Twelve Months Ended 9/30/2019 Earned ROE’s (non-GAAP operating earnings, not weather normalized) I&M2 Trans AEP OH1 PSO 11.6% 11.4% 11.3% 11.3% APCo AEP TX2 9.0% 8.8% KPCo 7.8% SWEPCO2 6.7% Regulated Operations ROE of 10.1% as of September 30, 2019 1 Adjusted to reflect ROE after r
Slide 6: 3rd Quarter 2019 Financial Update
3rd Quarter 2019 Financial Update 3rd Quarter 2019 Financial Update Delivered GAAP earnings of $1.49 per share or $734M for the third quarter of 2019 Delivered operating earnings of $1.46 per share or $722M for the third quarter of 2019 Delivered GAAP earnings of $3.58 per share or $1.8B for Y
Slide 7: 3rd Quarter Operating Earnings Segment Detail
3rd Quarter Operating Earnings Segment Detail 2018 Vertically Integrated Transmission and AEP Transmission Generation & Corporate and 2019 Actual Utilities Distribution Utilities Holdco Marketing Other Actual 2019 Actual EPS $0.89 $0.27 $0.25 $0.16 ($0.11) $1.46 Refer to Appendix for additional expl
Slide 8: YTD Operating Earnings Segment Detail
YTD Operating Earnings Segment Detail 2018 Vertically Integrated Transmission and AEP Transmission Generation & Corporate and 2019 Actual Utilities Distribution Utilities Holdco Marketing Other Actual 2019 Actual EPS $1.90 $0.85 $0.82 $0.30 ($0.22) $3.65 Refer to Appendix for additional explanation
Slide 9: 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. Historical and 2019 data adjusted to reflect reclass of industrial and commercial industry codes for certain customers; no revenue or earnings impa
Slide 10: Industrial Sales Growth
a Industrial Sales Growth BOUNDLESS ENERGY AEP Industrial GWh Growth 10% 4 > $80 9.1% _- Pn ~ - $60 5 5% + = 3 $ + $40 ha mam Oil & Gas Related Sectors + $20 mam Non-Oil & Gas Related Sectors ---- Oil Price -4.4%| “5% -4.6% > Q3-17 Q4-17 qQi-i8 Q2-18 Q3-18 Q418 Qi1-i9 Q2-19 Q3-19
Slide 11: Economic Data – AEP Service Territory
Economic Data – AEP Service Territory Source – Moody’s Analytics 11
Slide 12: Rate Design by Class
Rate Design by Class Fixed includes customer and demand charges 12
Slide 13: Capitalization and Liquidity
Capitalization and Liquidity Total Debt / Total Capitalization Credit Statistics Actual Target FFO to Total Debt 15.2% Mid Teens Represents the trailing 12 months as of 9/30/2019 See Appendix for reconciliation to GAAP Liquidity Summary (unaudited) 9/30/2019 Actual $ in millions Amount Maturity Revo
Slide 14: Summary
Summary Narrow and raise 2019 operating earnings guidance range to $4.14-$4.24 per share Continue strong base plan to support 5%-7% growth rate EEI expectations: detail behind 2020 guidance, 2020 financing detail, cap-ex and cash flow detail See you in Orlando at EEI! 14
Slide 15: Appendix
Appendix 15
Slide 16: 3rd Quarter Reconciliation of GAAP to Operating Earnings
3rd Quarter Reconciliation of GAAP to Operating Earnings $ in millions Earnings Per Share Q3-18 Q3-19 Change Q3-18 Q3-19 Change Reported GAAP Earnings $578 $734 $156 $1.17 $1.49 $0.32 Non Operating Items: Mark-to-Market Impact of Commodity (7) (12) (5) (0.01) (0.03) (0.02) Hedging Activities1 Severa
Slide 17: YTD Reconciliation of GAAP to Operating Earnings
YTD Reconciliation of GAAP to Operating Earnings $ in millions Earnings Per Share YTD-18 YTD-19 Change YTD-18 YTD-19 Change Reported GAAP Earnings $1,560 $1,768 $208 $3.17 $3.58 $0.41 Non Operating Items: Mark-to-Market Impact of Commodity 1 3 2 - 0.01 0.01 Hedging Activities1 Severance Charges2 20
Slide 18: Vertically Integrated Utilities
Vertically Integrated Utilities 3rd Quarter Summary Key Drivers: Q3-19 vs. Q3-18 Q3-18 Q3-19 Rate Changes: $41M favorable vs. prior year $ in millions (except EPS) primarily from rate increases at APCo/WPCo, I&M, PSO and SWEPCO Operating Revenues $2,637 $2,646 Operating Expenses: Weather: $23M f
Slide 19: Vertically Integrated Utilities
Vertically Integrated Utilities YTD Summary Key Drivers: YTD-19 vs. YTD-18 YTD-18 YTD-19 Rate Changes: $153M favorable vs. prior year $ in millions (except EPS) primarily from rate increases at APCo/WPCo, I&M, PSO and SWEPCO Operating Revenues $7,394 $7,173 Operating Expenses: Weather: $73M unfa
Slide 20: Transmission and Distribution Utilities
Transmission and Distribution Utilities 3rd Quarter Summary Key Drivers: Q3-19 vs. Q3-18 Q3-18 Q3-19 Rate Changes: $7M unfavorable primarily from the roll off Ohio PIRR and RSR, partially offset by $ in millions (except EPS) the Ohio DIR and gridSMART Operating Revenues $1,211 $1,187 Operating Exp
Slide 21: Transmission and Distribution Utilities
Transmission and Distribution Utilities YTD Summary Key Drivers: YTD-19 vs. YTD-18 YTD-18 YTD-19 Ohio Regulatory Provision: $58M favorable due to reversal of the 2016 SEET provision $ in millions (except EPS) Operating Revenues $3,511 $3,454 Rate Changes: $35M favorable primarily from the Ohio D
Slide 22: AEP Transmission Holdco
AEP Transmission Holdco 3rd Quarter Summary Key Drivers: Q3-19 vs. Q3-18 Q3-18 Q3-19 $53M favorable Operating Earnings vs. prior $ in millions (except EPS) year primarily due to increased revenues and Operating Revenues $187 $273 expenses driven by increased capital Operating Expenses: investment
Slide 23: AEP Transmission Holdco
AEP Transmission Holdco YTD Summary Key Drivers: YTD-19 vs. YTD-18 YTD-18 YTD-19 $127M favorable Operating Earnings vs. prior $ in millions (except EPS) year primarily due to increased revenues and Operating Revenues $605 $808 expenses driven by increased capital Operating Expenses: investment in
Slide 24: Generation & Marketing
Generation & Marketing 3rd Quarter Summary Key Drivers: Q3-19 vs. Q3-18 Q3-18 Q3-19 Generation decreased 370 GWh (19%) Q3-19 vs. $ in millions (except EPS) Q3-18 primarily due to retirement Conesville Plant Units 5 and 6 in May 2019 Operating Revenues $514 $519 Operating Expenses: AEP Dayton ATC
Slide 25: Generation & Marketing
Generation & Marketing YTD Summary Key Drivers: YTD-19 vs. YTD-18 YTD-18 YTD-19 Generation decreased 1,953 GWh (31%) YTD-19 $ in millions (except EPS) vs. YTD-18 primarily due to retirements of Operating Revenues $1,488 $1,433 Stuart Plant in May 2018 and Conesville Plant Units 5 and 6 in May 2019
Slide 26: 3rd Quarter Rate Performance
3rd Quarter Rate Performance Vertically Integrated Utilities Transmission and Distribution Utilities Rate Changes, net of Rate Changes, net of offsets ($ in millions) offsets ($ in millions) Q3-19 vs. Q3-18 Q3-19 vs. Q3-18 APCo/WPCo $8 AEP Ohio1 ($9) I&M $15 AEP Texas $2 KPCo - TOTAL ($7) PSO $14 SW
Slide 27: YTD Rate Performance
YTD Rate Performance Vertically Integrated Utilities Transmission and Distribution Utilities Rate Changes, net of Rate Changes, net of offsets ($ in millions) offsets ($ in millions) YTD-19 vs. YTD-18 YTD-19 vs. YTD-18 APCo/WPCo $38 AEP Ohio1 $27 I&M $73 AEP Texas $8 KPCo - TOTAL $35 PSO $35 SWEPCO
Slide 28: 3rd Quarter Weather Impact
3rd Quarter Weather Impact Vertically Integrated Utilities Transmission and Distribution Utilities Weather Impact Weather Impact ($ in millions) ($ in millions) Q3-19 vs. Q3-19 vs. Q3-19 vs. Q3-19 vs. Q3-18 Normal Q3-18 Normal APCo/WPCo $10 $25 AEP Ohio - - I&M ($3) $12 AEP Texas $8 $10 KPCo $1 $4 T
Slide 29: YTD Weather Impact
YTD Weather Impact Vertically Integrated Utilities Transmission and Distribution Utilities Weather Impact Weather Impact ($ in millions) ($ in millions) YTD-19 vs. YTD-19 vs. YTD-19 vs. YTD-19 vs. YTD-18 Normal YTD-18 Normal APCo/WPCo ($23) $23 AEP Ohio - - I&M ($19) $10 AEP Texas ($5) $9 KPCo ($6)
Slide 30: 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) Q3-19 vs. Q3-18 Q3-19 vs. Q3-18 APCo/WPCo (0.6%) AEP Ohio 0.6% I&M (2.7%) AEP Texas 1.2% KPCo (1.5%) TOTAL 0.9% PSO 1.6% SWE
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-19 vs. YTD-18 YTD-19 vs. YTD-18 APCo/WPCo (1.0%) AEP Ohio (0.1%) I&M (2.1%) AEP Texas (0.1%) KPCo (1.9%) TOTAL (0.1%) PSO 0.4% S
Slide 32: 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 33: North Central Wind – Procedural Schedules
North Central Wind – Procedural Schedules Intervenor Staff Rebuttal Settlement Jurisdiction (Docket #) Hearing Testimony Testimony Testimony Conference November November November December January PSO (PUD 2019-00048)1 1, 2019 1, 2019 22, 2019 12, 2019 13, 2020 December December January March SWEPCO
Slide 34: Current Rate Case Activity
Current Rate Case Activity AEP Texas I&M – Indiana Docket #: 49494 Docket #: 45235 Filing Date: 05/01/2019 Filing Date: 05/14/2019 Requested Rate Base: $5.0B Requested Rate Base: $4.9B Requested ROE: 10.5% Requested ROE: 10.5% Cap Structure: 55%D / 45%E Cap Structure: 53.2%D / 46.8%E Revenue Increas
Slide 35: Current Rate Case Activity (continued)
Current Rate Case Activity (continued) I&M – Michigan SWEPCO – Arkansas Docket #: U-20359 Docket #: 19-008-U Filing Date: 06/24/2019 Filing Date: 02/28/2019 Requested Rate Base: $1.2B Requested Rate Base: $1.2B Requested ROE: 10.5% Requested ROE: 10.5% Cap Structure: 53.6%D / 46.4%E Cap Structure: 4
Slide 36: AEP and Effective Tax Rates
AEP and Effective Tax Rates Q3-19 Effective Tax Rate Reconciliation Estimated 2019 and Future Cash Tax Rates 2019 Amount Description Future Q3-19 Tax Rate ($ in millions) ($ in millions) Consolidated Federal $587 Pre-tax Income $760 Taxable Income Federal Income Tax Liability $123 Tax at Federal Rat
Slide 37: 2019-2023 Capital Forecast: Total $33B
2019-2023 Capital Forecast: Total $33B Regulated Renewables Regulated Environmental $0.5B | 1% Generation Regulated Fossil/ $1.1B | 3% Hydro Generation Contracted Renewables $1.0B | 3% $2.2B | 7% Nuclear Generation $0.5B | 2% Corporate 100% $2.8B | 9% AEP Transmission Holdco of capital allocated to
Slide 38: Cash Flows and Financial Metrics
Cash Flows and Financial Metrics $ in millions 2019E 2020E 2021E 2022E Cash from Operations $ 4,700 $ 4,900 $ 5,300 $ 5,800 Capital & JV Equity Contributions (7,300) (5,800) (6,100) (6,500) Other Investing Activities (300) (400) (100) (100) Common Dividends (1,300) (1,300) (1,300) (1,400) Excess (Re
Slide 39: 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 9/30/19 9/30/19 $ in millions $ in millions GAAP Total Debt (incl. current maturities) $28,391 Cash Flow From Operations $4,639 Less: Adjustments: Securitization Bonds (1,064) C
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