American Electric Power Company, Inc. · NASDAQ:AEP

American Electric Power — Q2 2018 Earnings Presentation

35 slides from American Electric Power's earnings presentation, Jul 25, 2018

  1. Slide 1: 2nd Quarter 2018 Earnings Release Presentation

    2nd Quarter 2018 Earnings Release Presentation July 25, 2018 1

  2. 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

  3. 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

  4. Slide 4: 2nd Quarter 2018 Highlights

    2nd Quarter 2018 Highlights 2nd Quarter 2018 Company Update Earnings Update  Delivered GAAP earnings of $1.07 per share and operating earnings of $1.01 per share for the second quarter of 2018  Delivered GAAP earnings of $2.00 per share and operating earnings of $1.97 per share for YTD June 2018 Y

  5. Slide 5: Regulated Returns

    Regulated Returns Twelve Months Ended 6/30/2018 Earned ROE’s (non-GAAP operating earnings, not weather normalized) AEP OH 13.8% I&M* AEP OH* Trans 12.1% 11.9% 11.2% APCo* AEP TX 9.7% KPCo* 9.5% 8.7% PSO* SWEPCO* 6.5% 6.8% Regulated Operations ROE of 10.0% as of June 30, 2018 *AEP Ohio adjusted for S

  6. Slide 6: 2nd Quarter Operating Earnings Segment Detail

    2nd Quarter Operating Earnings Segment Detail Rate Changes $ 0.01 Normal Load $ (0.01) Rate Base Growth $ 0.04 Annual True-up $ (0.08) Other $ (0.01) Weather $ 0.12 Rate Changes $ 0.12 Normal Load $ 0.02 Wholesale Load $ (0.01) Transmission Rev $ 0.03 Depreciation $ (0.02) Eff Income Tax $ 0.03 Othe

  7. Slide 7: YTD Operating Earnings Segment Detail

    YTD Operating Earnings Segment Detail Rate Base Growth $ 0.08 Annual True-up $ (0.08) Other $ 0.01 Weather $ 0.01 Generation $ (0.05) Rate Changes $ 0.02 Normal Load $ 0.02 Interest Expense $ (0.03) $0.03 Depreciation $ (0.03) Investment Gain $ (0.01) Eff Income Tax $ (0.01) Weather $ 0.24 Other $ (

  8. 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

  9. Slide 9: Economic Data – AEP Service Territory

    Economic Data – AEP Service Territory Source – Moody’s Analytics 9

  10. Slide 10: Capitalization and Liquidity

    Capitalization and Liquidity Total Debt / Total Capitalization Credit Statistics Actual Target FFO to Total Debt 19.3% Mid Teens Represents the trailing 12 months as of 6/30/2018 See Appendix for reconciliation to GAAP Liquidity Summary (unaudited) 6/30/2018 Actual ($ in millions) Amount Maturity Re

  11. Slide 11: AEP Consolidated Cash Flows and Financial Metrics

    AEP Consolidated Cash Flows and Financial Metrics $ in millions 2018E 2019E 2020E 2021E Cash from Operations $ 4,400 $ 4,400 $ 4,800 $ 5,200 Capital & JV Equity Contributions (6,000) (6,200) (5,500) (6,300) Other Investing Activities (200) (100) (200) (100) Common Dividends (1,200) (1,200) (1,200) (

  12. Slide 12: Summary

    Summary  Obtain clarity on Wind Catcher  Work with state regulatory commissions to address the appropriate mechanism to provide the benefits of tax reform to customers  Continue strong base plan to support 5-7% growth rate  Reaffirm 2018 operating earnings guidance range of $3.75-$3.95 12

  13. Slide 13: Appendix

    Appendix 13

  14. Slide 14: 2nd Quarter Reconciliation of GAAP to Operating Earnings

    2nd Quarter Reconciliation of GAAP to Operating Earnings $ millions Earnings Per Share Q2-17 Q2-18 Change Q2-17 Q2-18 Change Reported GAAP Earnings $375 $528 $153 $0.76 $1.07 $0.31 Non Operating Items: Mark-to-Market Impact of Commodity - (12) (12) - (0.02) (0.02) Hedging Activities1 Gain from Compe

  15. Slide 15: 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 $967 $983 $16 $1.97 $2.00 $0.03 Non Operating Items: Mark-to-Market Impact of Commodity 3 7 4 - 0.01 0.01 Hedging Activities1 Gain from Competitive Generati

  16. Slide 16: Vertically Integrated Utilities

    Vertically Integrated Utilities 2nd Quarter Summary Key Drivers: Q2-18 vs. Q2-17 Q2-17 Q2-18  Weather: $89M favorable vs. prior year; $74M favorable vs. normal $ millions (except EPS)  Rate Changes: $86M favorable primarily from rate Operating Revenues $2,120 $2,349 increases at I&M, KPCo, PSO and

  17. Slide 17: Vertically Integrated Utilities

    Vertically Integrated Utilities YTD Summary Key Drivers: YTD-18 vs. YTD-17 YTD-17 YTD-18  Weather: $179M favorable vs. prior year; $84M favorable vs. normal $ millions (except EPS)  Rate Changes: $107M favorable primarily from rate Operating Revenues $4,411 $4,757 increases at I&M, KPCo, PSO and S

  18. Slide 18: Transmission and Distribution Utilities

    Transmission and Distribution Utilities 2nd Quarter Summary Key Drivers: Q2-18 vs. Q2-17 Q2-17 Q2-18  Rate Changes: $8M favorable primarily from $ millions (except EPS) the Texas Distribution Cost Recovery Factor Operating Revenues $1,054 $1,137  Normal Load: $4M unfavorable vs. prior year Operati

  19. Slide 19: Transmission and Distribution Utilities

    Transmission and Distribution Utilities YTD Summary Key Drivers: YTD-18 vs. YTD-17 YTD-17 YTD-18  Weather: $11M favorable vs. prior year; $12M $ millions (except EPS) favorable vs. normal Operating Revenues $2,140 $2,299  Rate Changes: $14M favorable primarily from Operating Expenses: the Texas Di

  20. Slide 20: AEP Transmission Holdco

    AEP Transmission Holdco 2nd Quarter Summary Key Drivers: Q2-18 vs. Q2-17 Q2-17 Q2-18  $60M unfavorable Operating Income vs. prior year primarily due to the annual true-up in $ millions (except EPS) 2017, partially offset by increased revenues Operating Revenues $247 $213 and expenses driven by incr

  21. Slide 21: AEP Transmission Holdco

    AEP Transmission Holdco YTD Summary Key Drivers: YTD-18 vs. YTD-17 YTD-17 YTD-18  $30M unfavorable Operating Income vs. prior year primarily due to the annual true-up in $ millions (except EPS) the second quarter of 2017, partially offset by Operating Revenues $403 $418 increased revenues and expen

  22. Slide 22: Generation & Marketing

    Generation & Marketing 2nd Quarter Summary Key Drivers: Q2-18 vs. Q2-17 Q2-17 Q2-18  AEP Dayton ATC liquidations up 19%: $ millions (except EPS) $33.77/MWh in Q2-18 vs. $28.50/MWh in Q2- Operating Revenues $412 $445 17 Operating Expenses:  Income Taxes: effective tax rate of 3.8% Q2-18 Energy Cost

  23. Slide 23: Generation & Marketing

    Generation & Marketing YTD Summary Key Drivers: YTD-18 vs. YTD-17 YTD-17 YTD-18  Generation decreased 2,663 GWh (38%) YTD-18 $ millions (except EPS) vs. YTD-17 primarily due to sale of plants in Operating Revenues $1,006 $974 January 2017 Operating Expenses:  AEP Dayton ATC liquidations up 24%: En

  24. Slide 24: 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) Q2-18 vs. Q2-17 Q2-18 vs. Q2-17 APCo/WPCo $1 AEP Ohio $2 I&M $52 AEP Texas $6 KPCo $4 TOTAL $8 PSO $13 SWEPCO $16

  25. Slide 25: 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 $1 AEP Ohio $2 I&M $52 AEP Texas $12 KPCo $9 TOTAL $14 PSO $11 SWEPCO $34 I

  26. Slide 26: 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) Q2-18 vs. Q2-17 Q2-18 vs. Q2-17 APCo/WPCo 2.8% AEP Ohio 2.1% I&M 2.8% AEP Texas 1.8% KPCo 0.6% TOTAL 2.0% PSO 0.4% SWEPCO 1.

  27. Slide 27: 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 2.5% AEP Ohio 1.4% I&M 1.1% AEP Texas 2.2% KPCo (0.2%) TOTAL 1.7% PSO 1.2% SWEPCO 2.3%

  28. Slide 28: 2nd Quarter Weather Impact

    2nd Quarter Weather Impact Vertically Integrated Utilities Transmission and Distribution Utilities Weather Impact Weather Impact (in millions) (in millions) Q2-18 vs. Q2-18 vs. Q2-18 vs. Q2-18 vs. Q2-17 Normal Q2-17 Normal APCo/WPCo $26 $22 AEP Ohio - - I&M $16 $14 AEP Texas $2 $4 KPCo $6 $6 TOTAL $

  29. Slide 29: 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 $75 $31 AEP Ohio - - I&M $30 $14 AEP Texas $11 $12 KPCo $16 $6 TOTAL

  30. Slide 30: Wind Catcher Procedural Schedules

    Wind Catcher Procedural Schedules  2,000 MW wind farm and dedicated ~350-mile 765kV gen-tie line  ~$4.5B: $2.9B wind; $1.6B gen-tie  SWEPCO (70%) and PSO (30%)  Target Completion: Q4 2020  Total Customer Savings net of costs (over 25-years): $6.5B (including PTC); $1.8B over first 10-years SWEP

  31. Slide 31: Recent Base Rate Case Orders and Settlements

    Recent Base Rate Case Orders and Settlements I&M – Indiana PSO – Oklahoma1 Gross Revenue Increase: $182M Gross Revenue Increase: $108M Less Tax Reform: $85M Less Tax Reform: $32M Net Revenue Increase: $97M Net Revenue Increase: $76M Approved ROE: 9.95% Approved ROE: 9.3% Settlement Agreement Filed:

  32. Slide 32: AEP and Tax Reform Summary

    AEP and Tax Reform Summary Regulatory Actions Recap of Excess Deferred Taxes All jurisdictions have opened dockets to defer savings as a regulatory liability and address tax benefit impacts 21% As of June 30, 2018 ($ in billions) Tax Rate Options for tax benefits: Total Regulated Deferred FIT $11.1

  33. Slide 33: AEP and Tax Reform by Jurisdiction

    AEP and Tax Reform by Jurisdiction Jurisdiction1 Change in Tax Rate Excess Unprotected ADFIT2 AEP Ohio Case pending Case pending AEP Texas-Distribution Case pending Case pending AEP Texas-Transmission  Order to pass on savings Address in later filing APCo-Virginia  Legislation enacted to pass on s

  34. Slide 34: AEP Consolidated Capital Forecast

    AEP Consolidated Capital Forecast $24B Cap-ex: 2018 - 2021 Regulated Environmental Regulated Renewables Generation $0.2B | 1% Regulated Fossil/Hydro $0.9B | 4% Generation Contracted Renewables $0.8B | 3% $1.5B | 6% Nuclear Generation $0.6B | 2% Corporate 100% $2.1B | 9% AEP Transmission Holdco of ca

  35. Slide 35: 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 6/30/18 6/30/18 $ millions $ millions GAAP Total Debt (incl. current maturities) $24,621 Cash Flow From Operations $4,580 Less: Adjustments: Securitization Bonds (1,265) Changes

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