American Electric Power Company, Inc. · NASDAQ:AEP
American Electric Power — Q4 2020 Earnings Presentation
40 slides from American Electric Power's earnings presentation, Feb 25, 2021
Slide 1: 4th Quarter 2020 Earnings Release Presentation
4TH QUARTER 2020 EARNINGS RELEASE PRESENTATION February 25, 2021
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: 2020 Highlights and 2021 Focus
2020 Highlights and 2021 Focus 2020 HIGHLIGHTS 2021 FOCUS Financial Performance Financial Performance Delivered GAAP earnings of $0.88 per share for Q4-20 Raise 2021 operating earnings guidance range to $4.55 – $4.75 and $4.44 for 2020 Deliver 5%-7% operating earnings growth rate off newly rai
Slide 5: Regulated Returns
Regulated Returns Twelve Months Ended 12/31/2020 Earned ROE’s (non-GAAP operating earnings, not weather normalized) 16% 14% 12% 11.4% 10.7% 10% 9.9% 8.6% 9.0% 8% 7.9% 7.5% 6% 5.5% 4% 2% 0% AEP APCo1 KENTUCKY I&M PSO SWEPCO1 AEP AEP OHIO1 POWER1 TEXAS TRANSMISSION Regulated Operations ROE of 9.1% (as
Slide 6: 4th Quarter 2020 Financial Update
4th Quarter 2020 Financial Update 4TH QUARTER 2020 $0.88 $0.87 $0.60 $0.31 2019 2020 2019 2020 GAAP EPS OPERATING EPS YTD 2020 $4.44 $4.44 $4.24 $3.89 2019 2020 2019 2020 GAAP EPS OPERATING EPS Note: Quarterly EPS is a stand alone amount and not always additive to full year amount due to rounding Re
Slide 7: 4th Quarter Operating Earnings Segment Detail
4th Quarter Operating Earnings Segment Detail $0.87 0.10 PER SHARE 0.05 0.04 0.05 $0.60 0.03 PER SHARE Rate Changes $0.04 Rate Changes $0.05 Invest Growth $0.04 Generation $0.04 Investment Gain $0.05 Weather $(0.06) Trans Revenue $0.03 Wholesale $0.01 O&M $(0.03) Normal Load $0.03 O&M $0.05 Retail $
Slide 8: YTD Operating Earnings Segment Detail
YTD Operating Earnings Segment Detail $4.44 0.09 PER SHARE 0.06 0.03 0.04 (0.02) $4.24 PER SHARE Rate Changes $0.20 OH Reg Investment Renewables $0.05 Investment Gain $0.05 $(0.09) $0.13 Provision Growth Weather $(0.21) Generation $0.04 Interest Expense $(0.02) OH Legacy Annual True-Up $(0.13) $(0.0
Slide 9: 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 10% 10% 6.2% 5.2% 5% 3.8% 3.2% 5% 0.5% 0.0% 0% 0% -0.9% -1.2% -1.1% -0.5% -2.1% -5% -5% -4.6% -4.2% -10% -10% -10.1% -15% -15% Q4-19 Q
Slide 10: Industrial Sales Growth
Industrial Sales Growth AEP Industrial GWh Growth 10% 9.5% 9.7% $75 5.7% 4.3% 4.9% 4.4% 1.3% Growth vs Prior Year 0% $50 -0.9% -2.1% -2.5% -3.3% -5.0% -4.7% -5.2% -6.6% -5.5% -10% -8.7% $25 Oil & Gas Related Sectors Non-Oil & Gas Related Sectors Oil Price -16.8% -20% $- Q4-18 Q1-19 Q2-19 Q3-19 Q4-19
Slide 11: Economic Data – AEP Service Territory
Economic Data – AEP Service Territory GDP Growth by Quarter Employment Growth by Quarter 5% 5% 5.0% 4.8% 1.4% 1.2% 1.9% 1.1% 2.3% 0.3% 0% 0% Growth vs Prior Year -2.0% -2.1% Growth vs Prior Year -1.3% -4.6% -2.8% -2.4% -6.3% -3.7% -4.6% -6.9% -4.4% -6.0% -5.0% -5% -5% -6.3% -9.0% -10% -11.2% -10% US
Slide 12: Capitalization & Liquidity
Capitalization & Liquidity Total Debt/Total Capitalization 61.1% 61.8% 59.8% 55.9% 55.5% 57.0% 53.2% Credit Statistics ACTUAL TARGET Moody’s GAAP FFO to Total Debt 13.0% 12.7% Low to Mid Teens Represents the trailing 12 months as of 12/31/2020 See Appendix for reconciliation to GAAP 2015 2016 2017 2
Slide 13: Proven Track Record and 2021 Outlook
Proven Track Record and 2021 Outlook PROVEN TRACK RECORD 2021 OUTLOOK Strong 2020 operating earnings achieved 5%-7% growth rate off raised 2021 earnings and in upper half of earnings guidance guidance range of $4.55 – $4.75 range Promote and accelerate a clean energy Dividend growth in line
Slide 14: Appendix
APPENDIX 14
Slide 15: 4th Quarter Reconciliation of GAAP to Operating Earnings
4th Quarter Reconciliation of GAAP to Operating Earnings $ in millions Earnings Per Share Q4-19 Q4-20 Change Q4-19 Q4-20 Change Reported GAAP Earnings $ 154 $ 436 $ 282 $ 0.31 $ 0.88 $ 0.57 Non Operating Items: Mark-to-Market Impact of Commodity 2 4 2 0.01 0.01 - Hedging Activities1 Impact of COVID-
Slide 16: YTD Reconciliation of GAAP to Operating Earnings
YTD Quarter Reconciliation of GAAP to Operating Earnings $ in millions Earnings Per Share YTD-19 YTD-20 Change YTD-19 YTD-20 Change Reported GAAP Earnings $ 1,921 $ 2,200 $ 279 $ 3.89 $ 4.44 $ 0.55 Non Operating Items: Mark-to-Market Impact of Commodity 6 (6) (12) 0.01 (0.01) (0.02) Hedging Activiti
Slide 17: Vertically Integrated Utilities
Vertically Integrated Utilities 4th Quarter Summary Key Drivers: Q4-20 vs. Q4-19 $ in millions (except EPS) Q4-19 Q4-20 Rate Changes: $26M favorable vs. prior year Operating Revenues $ 2,195 $ 2,158 primarily from rate increases at I&M and SWEPCO Operating Expenses: Weather: $34M unfavorable vs.
Slide 18: Vertically Integrated Utilities
Vertically Integrated Utilities YTD Summary Key Drivers: YTD-20 vs. YTD-19 $ in millions (except EPS) YTD-19 YTD-20 Rate Changes: $123M favorable vs. prior Operating Revenues $ 9,367 $ 8,911 year primarily from rate increases at APCo, I&M and SWEPCO Operating Expenses: Weather: $128M unfavorable
Slide 19: Transmission and Distribution Utilities
Transmission and Distribution Utilities 4th Quarter Summary Key Drivers: Q4-20 vs. Q4-19 $ in millions (except EPS) Q4-19 Q4-20 Rate Changes: $34M favorable vs. prior Operating Revenues $ 1,057 $1,039 year primarily from the Texas DCRF and the Ohio DIR Operating Expenses: Transmission Revenue: $
Slide 20: Transmission and Distribution Utilities
Transmission and Distribution Utilities YTD Summary Key Drivers: YTD-20 vs. YTD-19 $ in millions (except EPS) YTD-19 YTD-20 Ohio Regulatory Provision: $58M unfavorable due to prior recognition of 2016 SEET provision reversal Operating Revenues $ 4,511 $ 4,346 Rate Changes: $87M favorable vs. pri
Slide 21: AEP Transmission Holdco
AEP Transmission Holdco 4th Quarter Summary Key Drivers: Q4-20 vs. Q4-19 $ in millions (except EPS) Q4-19 Q4-20 $23M favorable Operating Earnings vs. Operating Revenues $ 265 $ 321 prior year primarily due to increased transmission investment Operating Expenses: Operations and Maintenance (42) (33
Slide 22: AEP Transmission Holdco
AEP Transmission Holdco YTD Summary Key Drivers: YTD-20 vs. YTD-19 $ in millions (except EPS) YTD-19 YTD-20 $7M unfavorable Operating Earnings vs. Operating Revenues $ 1,073 $ 1,199 prior year primarily due to the annual true- up and the impact of a prior year FERC Operating Expenses: settlement,
Slide 23: Generation & Marketing
Generation & Marketing 4th Quarter Summary Key Drivers: Q4-20 vs. Q4-19 $ in millions (except EPS) Q4-19 Q4-20 Generation decreased 413 GWh (30%) Operating Revenues $ 432 $ 426 Q4-20 vs Q4-19 primarily due to the retirement of Conesville Plant Unit 4 in Operating Expenses: May 2020 Energy Costs (3
Slide 24: Generation & Marketing
Generation & Marketing YTD Summary Key Drivers: YTD-20 vs. YTD-19 $ in millions (except EPS) YTD-19 YTD-20 Generation decreased 1,676 GWh (29%) Operating Revenues $ 1,865 $ 1,718 YTD-20 vs YTD-19 primarily due to the retirement of Conesville Plant Unit 4 in Operating Expenses: May 2020 Energy Cost
Slide 25: 4th Quarter Rate Performance
4th Quarter Rate Performance Vertically Integrated Utilities Transmission and Distribution Utilities Rate Changes, net of Rate Changes, net of offsets ($ in millions) offsets ($ in millions) Q4-20 vs. Q4-19 Q4-20 vs. Q4-19 APCo/WPCo $2 AEP Ohio $9 I&M $24 AEP Texas $25 KPCo $2 TOTAL $34 PSO $(6) SWE
Slide 26: YTD Rate Performance
YTD Quarter Rate Performance Vertically Integrated Utilities Transmission and Distribution Utilities Rate Changes, net of Rate Changes, net of offsets ($ in millions) offsets ($ in millions) YTD-20 vs. YTD-19 YTD-20 vs. YTD-19 APCo/WPCo $31 AEP Ohio1 $31 I&M $60 AEP Texas $56 KPCo $1 TOTAL $87 PSO $
Slide 27: 4th Quarter Weather Impact
4th Quarter Weather Impact Vertically Integrated Utilities Transmission and Distribution Utilities Weather Impact Weather Impact ($ in millions) ($ in millions) Q4-20 vs. Q4-20 vs. Q4-20 vs. Q4-20 vs. Q4-19 Normal Q4-19 Normal APCo/WPCo $(17) $(17) AEP Ohio - - I&M $(8) $(7) AEP Texas $(2) $(1) KPCo
Slide 28: YTD Weather Impact
YTD Weather Impact Vertically Integrated Utilities Transmission and Distribution Utilities Weather Impact Weather Impact ($ in millions) ($ in millions) YTD-20 vs. YTD-20 vs. YTD-20 vs. YTD-20 vs. YTD-19 Normal YTD-19 Normal APCo/WPCo $(58) $(36) AEP Ohio - - I&M $(16) $(5) AEP Texas $(17) $(7) KPCo
Slide 29: 4th Quarter Retail Load Performance
4th Quarter Retail Load Performance Vertically Integrated Utilities Transmission and Distribution Utilities Retail Load1 Retail Load1 (weather normalized) (weather normalized) Q4-20 vs. Q4-19 Q4-20 vs. Q4-19 APCo/WPCo (0.2)% AEP Ohio 1.3% I&M 0.5% AEP Texas 3.9% KPCo (6.8)% TOTAL 2.4% PSO (2.1)% SWE
Slide 30: YTD Retail Load Performance
YTD Retail Load Performance Vertically Integrated Utilities Transmission and Distribution Utilities Retail Load1 Retail Load1 (weather normalized) (weather normalized) YTD-20 vs. YTD-19 YTD-20 vs. YTD-19 APCo/WPCo (2.5)% AEP Ohio (2.4)% I&M (2.8)% AEP Texas 1.3% KPCo (7.0)% TOTAL (0.8)% PSO (2.7)% S
Slide 31: 2021 Operating Earnings Segment Detail
2021 Operating Earnings Segment Detail 0.21 (0.01) (0.02) $4.65 PER SHARE $4.44 0.08 PER SHARE (0.05) Retail Load $(0.17) Retail Load $0.05 Investment Renewables $0.03 Investment Gain $0.01 $0.15 Growth Rate Changes $0.27 Rate Changes $0.10 Generation $0.02 O&M $0.03 Annual True-Up $0.08 Weather $0.
Slide 32: Current Rate Case Activity
Current Rate Case Activity AEP OHIO APCo - VIRGINIA Docket # PUR-2020-00015 Docket # 20-0585-EL-AIR Filing Date 03/31/2020 Filing Date 06/01/2020 Requested Rate Base $2.5B Requested Rate Base $3.1B Requested ROE 9.9% Requested ROE 10.15% Cap Structure 50%D / 50%E Cap Structure 45.6%D / 54.4%E Gross
Slide 33: Current Rate Case Activity
Current Rate Case Activity KPCo SWEPCO - Louisiana SWEPCO - Texas Docket # 2020-00174 Docket # 51415 Docket # U-35441 Filing Date 10/13/2020 Filing Date 06/29/2020 Filing Date 12/18/2020 Requested Rate Base $2.0B Requested Rate Base $1.4B Requested Rate Base $2.1B Requested ROE 10.35% Requested ROE
Slide 34: Untracked O&M
Untracked O&M (in billions) $4.0 $3.5 $3.1 $3.0 $3.1 $3.1 $3.1 $3.1 $2.8 $3.0 $2.8 $2.8 $2.68 O&M focuses on $2.62 bending the O&M $2.5 curve down $2.0 O&M actual spend represents adjusted $1.5 spend throughout $1.0 each year as needed $0.5 $- 2011A 2012A 2013A 2014A 2015A 2016A 2017A 2018A 2019A 20
Slide 35: Advancing Towards a Clean Energy Future
Advancing Towards a Clean Energy Future Projected Resource Additions1 SOLAR ADDITIONS (MW) WIND ADDITIONS (MW) NATURAL GAS ADDITIONS (MW) TOTAL PROJECTED Company 2021 - 2023 - 2026 - Company 2021 - 2023 - 2026 - Company 2021 - 2023 - 2026 - RESOURCE 2022 2025 2030 2022 2025 2030 2022 2025 2030 ADDIT
Slide 36: SWEPCO Generation Replacement Plan
SWEPCO Generation Replacement Plan SWEPCO Planned Fossil Retirements and • Planned retirement of fossil generation facilities at Projected Capacity Deficiency SWEPCO drives a capacity need of nearly 2 GW by (in MW) 2030 2000 o 2021: Dolet Hills (257 MW) – lignite o 2023: Pirkey (580 MW) – coal 1500
Slide 37: North Central Wind Overview
North Central Wind Overview SWEPCO AND PSO REGULATED WIND INVESTMENT Total Rate Base Investment ~$2 billion (1,485 MW) Name MW Investment Target Date Mar. 2021 Sundance 199 $307M (100% PTC) North Central Wind Dec. 2021 Maverick 287 $402M (80% PTC) Dec. 2021 to Traverse 999 $1,287M Apr. 2022 (80% PTC
Slide 38: 2021 - 2025 Capital Forecast of $37B and Net Plant
2021 - 2025 Capital Forecast of $37B and Net Plant 2021-2025 Capital Forecast Regulated Fossil/Hydro Generation Nuclear Generation IT/Workplace Services $0.9B • 2% $0.4B • 1% $2.6B • 7% Regulated Environmental Generation $0.9B • 2% 100% of capital allocated to Regulated New Generation regulated busi
Slide 39: Cash Flows and Financial Metrics
Cash Flows and Financial Metrics $ in millions 2021E 2022E 2023E Cash from Operations $ 5,100 $ 5,700 $ 6,000 Capital & JV Equity Contributions1 (7,500) (8,000) (6,900) Other Investing Activities (300) (300) (300) Common Dividends2 (1,400) (1,500) (1,500) Required Capital $ (4,100) $ (4,100) $ (2,70
Slide 40: 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 12/31/20 12/31/20 (in millions) (in millions) Cash Flow From Operations $ 3,833 GAAP Total Debt $ 33,552 (incl. current maturities) Adjustments: Less: Changes in Working Capital
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