American Electric Power Company, Inc. · NASDAQ:AEP
American Electric Power — Q4 2017 Earnings Presentation
37 slides from American Electric Power's earnings presentation, Jan 25, 2018
Slide 1: 4th Quarter 2017 Earnings Release Presentation
4th Quarter 2017 Earnings Release Presentation January 25, 2018 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: 4th Quarter 2017 Highlights
4th Quarter 2017 Highlights 4th Quarter 2017 Total Shareholder Return YTD 2017 One Year Three Year Five Year Refer to appendix for reconciliation between GAAP and Operating EPS 4
Slide 5: 2017 Highlights & 2018 Focus
2017 Highlights & 2018 Focus 2017 Highlights 2018 Focus Financial Performance Financial Performance Delivered GAAP earnings of $0.81 per share for Q4 2017 Deliver operating earnings within the guidance range of and $3.89 per share for 2017 $3.75 to $3.95 per share Delivered operating earnings
Slide 6: Regulated Returns
Regulated Returns Twelve Months Ended 12/31/2017 Earned ROE’s (non-GAAP Operating Earnings) AEP OH 14.2% Trans 12.6% AEP OH * AEP TX 10% APCo 10% I&M* 8.9% 8.4% PSO* SWEPCO* KPCo* 6.2% 6.4% 5.1% Regulated Operations ROE of 9.5% as of December 31, 2017 *AEP Ohio adjusted for SEET items. Base rate cas
Slide 7: 4th Quarter Operating Earnings Segment Detail
4th Quarter Operating Earnings Segment Detail FERC 205 $ 0.01 O&M $ 0.04 Investments $ 0.03 Eff Income Tax $ 0.01 Sold Assets $ (0.08) Rate Changes $ 0.01 Held Assets $ 0.01 Rate Changes $ $0.03 0.06 OH Settlement $ 0.04 Trading & Mkt Other $ 0.01 $ 0.01 Weather $ 0.04 Normal Load $ 0.02 O&M $ 0.11
Slide 8: 2017 YTD Operating Earnings Segment Detail
2017 YTD Operating Earnings Segment Detail $0.03 ($0.07) Investment Gain $ 0.02 FERC 205 $ 0.10 O&M $ 0.02 Investments $ 0.09 Rate Changes $ 0.11 JV's Eff Income Tax $ 0.02 $ (0.01) OH Reg Prov $ (0.03) Other $ 0.01 Rate Changes Rate True-Ups $0.03 $ 0.13 $ (0.09) OH Settlement $ 0.04 Sold Assets $
Slide 9: Weather Normalized Billed Retail Load Trends
Weather Normalized Billed Retail Load Trends Note: Load figures are provided on a billed basis. Charts reflect connected load and exclude firm wholesale and Buckeye Power backup load. See Appendix for load figures on a billed plus accrued basis. 9
Slide 10: Economic Data – AEP Service Territory
Economic Data – AEP Service Territory Source – Moody’s Analytics and company records 10
Slide 11: Capitalization & Liquidity
Capitalization & Liquidity Total Debt / Total Capitalization Credit Statistics Actual Target FFO to Total Debt 18.7% Mid Teens Represents the trailing 12 months as of 12/31/2017 See Appendix for reconciliation to GAAP Liquidity Summary (unaudited) 12/31/2017 Actual ($ in millions) Amount Maturity Re
Slide 12: AEP & Tax Reform
AEP & Tax Reform Key Tax Reform Considerations Recap of Excess Deferred Taxes • AEP evaluated the right mix of cap-ex and rate base 21% growth to maintain the 5%-7% growth rate, and As of December 31, 2017 ($ in billions) Tax Rate ensure appropriate credit metrics Total Regulated Deferred FIT $11.1
Slide 13: Proven Track Record & 2018 Outlook
Proven Track Record & 2018 Outlook Proven Track Record 2018 Outlook Solid 2017 operating earnings 5-7% growth rate with 2018 operating Strategic capital deployment earnings guidance range of $3.75 - $3.95 Demonstrated O&M discipline and track Finalize pending base rate cases and move recor
Slide 14: Appendix
Appendix 14
Slide 15: 4th Quarter Reconciliation of GAAP to Operating Earnings
4th Quarter Reconciliation of GAAP to Operating Earnings $ millions Earnings Per Share Q4-16 Q4-17 Change Q4-16 Q4-17 Change Reported GAAP Earnings $373 $401 $28 $0.76 $0.81 $0.05 Non Operating Items: Mark-to-Market Impact of Commodity Hedging (4) - 4 (0.01) - 0.01 Activities (a) Disposition of Comm
Slide 16: YTD December Reconciliation of GAAP to Operating Earnings
YTD December Reconciliation of GAAP to Operating Earnings $ millions Earnings Per Share YTD-16 YTD-17 Change YTD-16 YTD-17 Change Reported GAAP Earnings $611 $1,913 $1,302 $1.24 $3.89 $2.65 Non Operating Items: Mark-to-Market Impact of Commodity Hedging (6) 3 9 (0.01) 0.01 0.02 Activities (a) Gain f
Slide 17: Vertically Integrated Utilities
Vertically Integrated Utilities 4th Quarter Summary Key Drivers: Q4-17 vs. Q4-16 Q4-16 Q4-17 Rates: $49M primarily from rate increases at $ millions (except EPS) SWEPCO, PSO and I&M, partially offset by $5M of wholesale rate decreases driven by formula Operating Revenues $2,164 $2,305 rate true-up
Slide 18: Vertically Integrated Utilities
Vertically Integrated Utilities YTD Summary Key Drivers: YTD-17 vs. YTD-16 YTD-16 YTD-17 Rates: $99M primarily from rate increases $ millions (except EPS) across multiple jurisdictions, partially offset by Operating Revenues $9,092 $9,198 $46M of wholesale rate decreases driven by formula rate tru
Slide 19: Transmission & Distribution Utilities
Transmission & Distribution Utilities 4th Quarter Summary Key Drivers: Q4-17 vs. Q4-16 Q4-16 Q4-17 Rates: $4M primarily from the Texas Distribution $ millions (except EPS) Cost Recovery Factor Operating Revenues $954 $1,106 OH Global Settlement: $28M favorable due to prior Operating Expenses: ye
Slide 20: Transmission & Distribution Utilities
Transmission & Distribution Utilities YTD Summary Key Drivers: YTD-17 vs. YTD-16 YTD-16 YTD-17 Rates: $83M primarily from the Texas Distribution $ millions (except EPS) Cost Recovery Factor and the Ohio RSR and DIR Operating Revenues $4,422 $4,419 OH Regulatory Provision: $21M unfavorable due to
Slide 21: AEP Transmission Holdco
AEP Transmission Holdco 4th Quarter Summary Key Drivers: Q4-17 vs. Q4-16 Q4-16 Q4-17 $19M favorable Operating Income primarily $ millions (except EPS) due to increased revenues and expenses driven by increased capital investment in the Operating Revenues $130 $185 wholly owned Transcos Operating E
Slide 22: AEP Transmission Holdco
AEP Transmission Holdco YTD Summary Key Drivers: YTD-17 vs. YTD-16 YTD-16 YTD-17 $88M favorable Operating Income primarily $ millions (except EPS) due to the impact of the FERC 205 filing and also due to increased revenues and expenses Operating Revenues $513 $767 driven by increased capital inves
Slide 23: Generation & Marketing
Generation & Marketing 4th Quarter Summary Key Drivers: Q4-17 vs. Q4-16 Q4-16 Q4-17 Generation decreased 7,563 GWh (78%) Q4-17 vs. $ millions (except EPS) Q4-16 primarily due to sale of plants in January Operating Revenues $687 $408 AEP Dayton ATC liquidations up 3%: $30.23/MWh Operating Expense
Slide 24: Generation & Marketing
Generation & Marketing YTD Summary Key Drivers: YTD-17 vs. YTD-16 YTD-16 YTD-17 Generation decreased 27,532 GWh (70%) YTD-17 $ millions (except EPS) vs. YTD-16 primarily due to sale of plants in January Operating Revenues $2,976 $1,880 Operating Expenses: AEP Dayton ATC liquidations up 5%: $29.2
Slide 25: 4th Quarter Retail Rate Performance
4th Quarter Retail Rate Performance Vertically Integrated Utilities Transmission & Distribution Utilities Rate Changes*, net of Rate Changes, net of offsets (in millions) offsets (in millions) Q4-17 vs. Q4-16 Q4-17 vs. Q4-16 APCo/WPCo - AEP Ohio - I&M ($1) AEP Texas $4 KPCo - TOTAL $4 PSO $12 SWEPCO
Slide 26: YTD Retail Rate Performance
YTD Retail Rate Performance Vertically Integrated Utilities Transmission & Distribution Utilities Rate Changes*, net of Rate Changes, net of offsets (in millions) offsets (in millions) YTD-17 vs. YTD-16 YTD-17 vs. YTD-16 APCo/WPCo ($8) AEP Ohio $39 I&M ($23) AEP Texas $44 KPCo $4 TOTAL $83 PSO ($2)
Slide 27: 4th Quarter Retail Load Performance
4th Quarter Retail Load Performance Vertically Integrated Utilities Transmission & Distribution Utilities Retail Load* Retail Load* (weather (weather normalized) normalized) Q4-17 vs. Q4-16 Q4-17 vs. Q4-16 APCo/WPCo 1.2% AEP Ohio 0.7% I&M 0.6% AEP Texas 5.0% KPCo (1.6%) TOTAL 2.5% PSO 1.6% SWEPCO 1.
Slide 28: YTD Retail Load Performance
YTD Retail Load Performance Vertically Integrated Utilities Transmission & Distribution Utilities Retail Load* Retail Load* (weather (weather normalized) normalized) YTD-17 vs. YTD-16 YTD-17 vs. YTD-16 APCo/WPCo (0.3%) AEP Ohio 0.1% I&M (0.7%) AEP Texas 1.8% KPCo (1.7%) TOTAL 0.8% PSO 0.7% SWEPCO 0.
Slide 29: Normalized Retail Load Trends (Billed & Accrued)
Normalized Retail Load Trends (Billed & Accrued) Note: Load figures are provided on a billed and accrued basis. Charts reflect connected load and exclude firm wholesale and Buckeye Power backup load. 29
Slide 30: Weather Impacts on AEP Earnings
Weather Impacts on AEP Earnings 30
Slide 31: 4th Quarter Weather Impact
4th Quarter Weather Impact Vertically Integrated Utilities Transmission & Distribution Utilities Weather Impact Weather Impact (in millions) (in millions) Q4-17 vs. Q4-17 vs. Q4-17 vs. Q4-17 vs. Q4-16 Normal Q4-16 Normal APCo/WPCo $22 $8 AEP Ohio - - I&M $4 $3 AEP Texas ($2) $2 KPCo $5 $2 TOTAL ($2)
Slide 32: YTD Weather Impact
YTD Weather Impact Vertically Integrated Utilities Transmission & Distribution Utilities Weather Impact Weather Impact (in millions) (in millions) YTD-17 vs. YTD-17 vs. YTD-17 vs. YTD-17 vs. YTD-16 Normal YTD-16 Normal APCo/WPCo ($49) ($36) AEP Ohio - - I&M ($25) ($19) AEP Texas ($4) $4 KPCo ($12) (
Slide 33: 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%) & 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 SWEPCO
Slide 34: Pending Base Rate Cases Summary
Pending Base Rate Cases Summary I&M – Indiana Requested Increase: $263M ($89M increased D&A) Requested ROE: 10.6% Key Dates: Evidentiary Hearing 02/08-16/2018 Anticipated Order 07/01/2018 I&M – Michigan Requested Increase: $52M ($28M increased D&A) Requested ROE: 10.6% Key Dates: Proposal for Decisi
Slide 35: AEP Consolidated Capital Forecast
AEP Consolidated Capital Forecast $17.7B Cap-ex: 2018 - 2020 Contracted Renewables $1.2B | 7% Regulated Renewables $0.5B | 3% Regulated Environmental Generation $0.6B | 3% Regulated Fossil/Hydro Generation $0.7B 4% AEP Transmission Holdco $4.4B | 25% Nuclear Generation $0.5B | 3% Corporate $1.4B | 8
Slide 36: AEP Consolidated Cash Flows and Financial Metrics
AEP Consolidated Cash Flows and Financial Metrics ($ in millions) 2018E 2019E 2020E Cash from Operations $ 4,400 $ 4,400 $ 4,800 Capital & JV Equity Contributions (6,000) (6,200) (5,500) Other Investing Activities (200) (100) (200) Common Dividends (1,200) (1,200) (1,200) Excess (Required) Capital (
Slide 37: GAAP to Non-GAAP Reconciliations & Ratios
GAAP to Non-GAAP Reconciliations & Ratios Adjusted FFO Calculation Adjusted Total Debt Calculation 12 Months As of Ended 12/31/17 12/31/17 $ millions $ millions GAAP Total Debt (incl. current maturities) $22,812 Cash Flow From Operations $4,282 Less: Adjustments: Securitization Bonds (1,424) Changes
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