American Electric Power Company, Inc. · NASDAQ:AEP
American Electric Power — Wolfe Utilities, Midstream & Clean Energy Conference 2021
49 slides from American Electric Power's conference presentation, Sep 30, 2021
Slide 1: Wolfe Utilities, Midstream & Clean Energy Conference
WOLFE UTILITIES, MIDSTREAM & CLEAN ENERGY CONFERENCE September 30, 2021
Slide 2: Safe Harbor Statement Under the Private Securities Litigation Reform Act
“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: The Premier Regulated Energy Company
The Premier Regulated Energy Company 16,800 EMPLOYEES 24GW OWNED GENERATION 5.5M CUSTOMERS, 11 STATES 40,000 TRANSMISSION MILES $81B TOTAL ASSETS 223,000 DISTRIBUTION MILES $50B RATE BASE $41B CURRENT MARKET CAPITALIZATION Statistics as of December 31, 2020 except for market capitalization as of Sep
Slide 4: AEP Leading the Way Forward
AEP Leading the Way Forward Confidence in Steady and Commitment to Well Positioned Compelling Predictable Growing as a Sustainable Portfolio of Earnings Growth Dividend Regulated Premium Rate of Consistent with Business Investment 5%-7% Earnings Opportunities 4 WOLFE CONFERENCE • AEP.COM
Slide 5: AEP's Strategic Vision and Execution
AEP’s Strategic Vision and Execution EXECUTE STRATEGY TOP PRIORITIES • Invest in regulated and contracted Promote clean renewables energy transformation • Optimize the generation fleet • Grow top line revenue Enable growth and prosperity • Champion economic development for our communities • Be good
Slide 6: AEP Key Themes
AEP KEY THEMES Pure Play Electric Utility with Significant Renewables Upside ● 5%-7% Earnings Growth Rate and 2021 Range ● Proven Track Record of EPS Performance ● Strong Dividend Growth ● ESG Focus and Acceleration of a Clean Energy Future ● O&M Optimization WOLFE CONFERENCE • AEP.COM
Slide 7: Strong Return Proposition for Investors
Strong Return Proposition for Investors TOTAL SHAREHOLDER RETURN 2021 RAISED OPERATING EARNINGS GUIDANCE RANGE 8% - 10% $4.55 - $4.75 DIVIDEND YIELD EPS GROWTH 3% + 5% - 7% STEADY GROWTH CONSISTENT DIVIDENDS LOW RISK, REGULATED ASSETS INVESTMENT PIPELINE INCENTIVE COMPENSATION TIED TO EPS
Slide 8: Over a Decade of Meeting or Exceeding EPS Guidance
Over a Decade of Meeting or Exceeding EPS Guidance 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 KEY ACTUAL RESULT Note: Chart is representative of actual operating EPS in comparison to original operating EPS guidance range LOW-END MID-POINT HIGH-END 8 WOLFE CONFERENCE • AEP.COM
Slide 9: Strong Dividend Growth
Strong Dividend Growth $3.50 $2.96 $2.84 $3.00 $2.71 Targeted payout $2.39 $2.53 ratio 60-70% of $2.50 $2.15 $2.27 operating earnings $2.03 $1.85 $1.88 $1.95 $2.00 $1.71 Over 110 years of consecutive $1.50 quarterly $1.00 dividends $0.50 Targeted dividend growth in line with $- earnings 2010 2
Slide 10: AEP's Commitment to ESG/Sustainability Leadership
AEP’s Commitment to ESG/Sustainability Leadership ENVIRONMENTAL SOCIAL GOVERNANCE • Accelerated carbon emission • Diversity and inclusion vision • 12 directors, 11 are reduction goals: 80% by 2030, net independent, 50% diverse • Focused on economic and zero by 2050 with an average tenure of 8 busine
Slide 11: Transforming Our Generation Fleet
Transforming Our Generation Fleet 80% 70% 70% 66% 60% 52% 50% 43% Capacity 40% 30% 27% 18% 22% 19% 21% 19% 20% 10% 7% 6% 7% 6% 4% 4% 4% 1% 1% 3% 0% 1999 2005 2021 2030 1999 2005 2021 2030 1999 2005 2021 2030 1999 2005 2021 2030 1999 2005 2021 2030 Coal Natural Gas Nuclear Hydro, Wind, Energy Efficie
Slide 12: Retirement Progress and Plans
Retirement Progress and Plans 2010 Reduce coal generation by approximately 5,600 MW by 2030 and decrease coal net ~24,800 MW1 book value through retirements and depreciation. This creates the opportunity to own replacement wind, solar and natural gas resources. 2020 ~12,100 MW1,2 2030E 2028E ~6,500
Slide 13: Future Forward - Advancing Towards a Clean Energy Future
Future Forward - Advancing Towards a Clean Energy Future Projected Regulated Resource Additions SOLAR ADDITIONS (MW) Prior Total Incremental TOTAL PROJECTED Company 2021 – 2025 2026 – 2030 Total Solar (2020 EEI) Opportunity RESOURCE ADDITIONS (MW) APCo 210 450 660 710 (50) I&M 450 450 900 1,300 (400
Slide 14: Future Forward - Advancing Towards a Clean Energy Future
Future Forward - Advancing Towards a Clean Energy Future ~8 GW of planned Capacity need plus Total regulated renewable retirements and expiring economic energy opportunity of 16.6 GW by PPAs over the next 10 years opportunity 2030 Regulated Generation Retirement and PPA AEP Regulated Operating Compa
Slide 15: North Central Wind Overview
North Central Wind Overview PSO AND SWEPCO REGULATED WIND INVESTMENT Total Rate Base Investment ~$2 billion (1,485 MW) Estimated Commercial Name MW Investment Date Apr. 14, 2021 Sundance 199 $300M (100% PTC) North Central Wind North Central Wind - Maverick Sept. 10, 2021 Maverick 287 $400M (80% PTC)
Slide 16: O&M Optimization
O&M Optimization INITIATIVES ACTIONS • Employee based O&M prioritization and optimization effort • Driven down costs in 2020 and beyond, initial results imbedded in budgets Achieving Excellence • Program was transitioned from EHS partners to internal resources and will continue annually Program • 20
Slide 17: Positioning for the Future
POSITIONING FOR THE FUTURE ● 2021-2025 Capital Forecast ● Cash Flows and Financial Metrics ● Rate Base Growth ● Efficient Cost Recovery Mechanisms WOLFE CONFERENCE • AEP.COM
Slide 18: 2021-2025 Capital Forecast of $37B and Net Plant
2021 - 2025 Capital Forecast of $37B and Net Plant 2021-2025 Capital Forecast Historical Net Plant Profiles Regulated Fossil/Hydro Nuclear Generation IT/Workplace Services Generation $0.4B • 1% $2.6B • 7% 2010 (Total $32.5B) $0.9B • 2% Regulated Environmental Generation $0.9B • 2% Generation 100% 32
Slide 19: 2021-2025 Capital Forecast by Subsidiary
2021-2025 Capital Forecast by Subsidiary $ in millions (excludes AFUDC) 2021E 2022E 2023E 2024E 2025E TOTAL Appalachian Power Company $ 878 $ 1,182 $ 986 $ 916 $ 1,002 $ 4,964 Wheeling Power Company $ 37 $ 68 $ 65 $ 38 $ 32 $ 240 Kingsport Power Company $ 21 $ 20 $ 19 $ 18 $ 18 $ 96 Indiana Michigan
Slide 20: Cash Flows and Financial Metrics
Cash Flows and Financial Metrics $ in millions 2021E 2022E 2023E Cash from Operations $ 3,800 $ 6,000 $ 6,400 Capital and 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 $ (5,400) $ (3,800) $ (2,
Slide 21: 7.4% CAGR in Rate Base Growth
7.4% CAGR in Rate Base Growth CUMULATIVE CHANGE FROM 2019 BASE $12 2019 RATE BASE PROXY $25.1B $11 Vertically Integrated Utilities $26.3B $9.8 $10 $20.7B $9 T&D Utilities $12.3B $17.3B $8.2 $8.3 Transcos/Transource $8.2B $8 $13.3B $7.3 TOTAL $46.8B $6.9 $7.0 $7 $6 $5.5 $5.5 $5.6 $5 $8.4B $4.5 $4.3 $
Slide 22: Efficient Cost Recovery Mechanisms
Efficient Cost Recovery Mechanisms Historic Trackers 26% Base Rates More than 70% of 29% 2021-2025 capital plan recovered through reduced lag mechanisms Forward Rates 7% Forward Trackers 38% 22 WOLFE CONFERENCE • AEP.COM
Slide 23: Financial Information
FINANCIAL INFORMATION ● Regulated Returns and Authorized Equity Layers ● Current Rate Case Activity ● Normalized Load Trends ● Capitalization and Liquidity ● 2021 Debt Issuances and Maturities ● Credit Ratings WOLFE CONFERENCE • AEP.COM
Slide 24: Regulated Returns and Authorized Equity Layers
Regulated Returns and Authorized Equity Layers Twelve Months Ended 6/30/2021 Earned ROE’s Authorized Equity Layers (non-GAAP operating earnings, not weather normalized) (in whole percentages) 14% Operating 6/30/17 6/30/21 Improvement Company 12% AEP Ohio2 48% 54% 6% 11.0% APCo – VA 43% 50% 7% 10% 9.
Slide 25: Current Rate Case Activity
Current Rate Case Activity AEP Ohio APCo - Virginia KPCo Docket # 20-0585-EL-AIR Docket # PUR-2020-00015 Docket # 2020-00174 Filing Date 6/1/2020 Filing Date 3/31/2020 Filing Date 6/29/2020 Requested Revenue Requested Rate Base $2.5B Requested Rate Base $1.4B $402M Increase Requested ROE 10% Request
Slide 26: Current Rate Case Activity
Current Rate Case Activity I&M - Indiana PSO Docket # 45576 Docket # 202100055 Filing Date 7/1/2021 Filing Date 4/30/2021 Requested Rate Base $5.2B Requested Rate Base $3.293B Requested ROE 10.0% Requested ROE 10.0% Cap Structure 49.1%D / 50.9%E Cap Structure 47.0%D / 53.0%E $104M $172M1 Gross Reven
Slide 27: Current Rate Case Activity
Current Rate Case Activity SWEPCO – Arkansas1 SWEPCO - Louisiana SWEPCO - Texas Docket # 21-070-U Docket # U-35441 Docket # 51415 Filing Date 7/23/2021 Filing Date 12/18/2020 Filing Date 10/13/2020 Requested Rate Base $1.56B Requested Rate Base $2.1B Requested Rate Base $2.0B Requested ROE 10.35% Re
Slide 28: Weather Normalized Billed Retail Load Trends
Weather Normalized Billed Retail Load Trends AEP Normalized Residential GWh Sales AEP Normalized Commercial GWh Sales % Change vs. Prior Year % Change vs. Prior Year 15% 15% 10.0% 10% 10% 6.2% 5.2% 5% 3.8% 5% 3.9% 1.5% 0% 0% -0.5% -1.1% -2.1% -0.5% -1.6% -5% -5% -3.1% -4.6% -10% -10% -10.1% -15% -15
Slide 29: Capitalization and Liquidity
Capitalization and Liquidity Total Debt/Total Capitalization Credit Statistics 1 62.5% 62.6% 61.8% 59.8% 61.8% Moody’s GAAP 55.9% 55.5% 57.0% FFO to Total Debt 9.3% 9.2% Adj FFO to Total Debt1 12.8% 12.8% Long-Term Target Low to Mid Teens Represents the trailing 12 months as of 6/30/2021 2016 2017 2
Slide 30: 2021 Debt Issuance and Maturities Overview
2021 Debt Issuance and Maturities Overview ($ in millions) $1,800 $1,600 $1,400 $1,200 $1,000 $800 $600 $400 $200 $- AEP, Inc.1 AEP Texas APCo I&M KPCo AEP Ohio PSO SWEPCO Transco 2021 Maturities 2021 Expected Issuances 1 In November 2020, due to favorable market conditions, AEP Inc. issued $1.5B se
Slide 31: Credit Ratings
Credit Ratings CURRENT RATINGS FOR AEP, INC. AND SUBSIDIARIES (as of 9/1/2021) Moody’s S&P Fitch Senior Senior Senior Company Unsecured Outlook Unsecured Outlook Unsecured Outlook American Electric Power Company Inc. Baa2 S BBB+ N BBB+ N AEP, Inc. Short Term Rating P2 S A2 N F2 N AEP Texas Inc. Baa2
Slide 32: Environmental, Social and Governance
ENVIRONMENTAL, SOCIAL AND GOVERNANCE ● Delivering Clean Energy Resources ● Emission Reduction Goals ● Investment in Environmental Controls ● Dramatic Reduction in Emissions WOLFE CONFERENCE • AEP.COM
Slide 33: Delivering Clean Energy Resources
Delivering Clean Energy Resources AEP's June 30, 2021 Renewable Portfolio (in MW) OWNED PPA TOTAL HYDRO, WIND, SOLAR AND PUMPED STORAGE MW MW MW AEP Ohio - 209 209 Appalachian Power Company 785 575 1,360 Indiana Michigan Power Company 56 450 506 Public Service Company of Oklahoma 91 1,137 1,228 Sout
Slide 34: Net Zero
Carbon Emission Reduction Goals AEP’s Environmental, Social and Governance (ESG) Reporting: 80% Corporate Accountability Report Climate Impact Analysis Report (a TCFD report) ESG Data Center (featuring 250+ ESG metrics) by 2030 EEI ESG Sustainability Report Net Zero Sustainability Accounti
Slide 35: Largest Investment in Environmental Controls
Largest Investment in Environmental Controls INVESTMENT IN ENVIRONMENTAL CONTROLS TOTAL $ in millions $9 BILLION $1,366 (ESTIMATED) $1,400 $1,200 $994 $1,000 $887 $811 $800 $599 $600 $540 $457 $424 $364 $384 $400 $340 $304 $275 $217 $241 $187 $136 $167 $200 $134 $102 $116 $102 $0 2000 2001 2002 2003
Slide 36: Dramatic Reductions in Emissions
Dramatic Reductions in Emissions TOTAL AEP SYSTEM – ANNUAL CO2 EMISSIONS in million metric tons 200 167 154 158 153 151 151 150 146 146 145 132 135 136 122 123 115 102 100 93 72 69 58 44 50 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 200
Slide 37: Dramatic Reductions in Emissions
Dramatic Reductions in Emissions 98% SO2 1990-2020 ACTUAL 96% NOx 2001-2020 98% ACTUAL Hg 37 WOLFE CONFERENCE • AEP.COM
Slide 38: Transmission Transformation
TRANSMISSION TRANSFORMATION ● Five-Year Capital Plan ● Investments in Asset Renewal ● Stable Cost Recovery Framework ● Transmission Customer and Shareholder Value ● Holdco Legal Entity Structure WOLFE CONFERENCE • AEP.COM
Slide 39: Five-Year Transmission Capital Plan
Five-Year Transmission Capital Plan 2021-2025 TRANSMISSION 2021-2025 TRANSMISSION INVESTMENT INVESTMENT BY RTO ($ MILLIONS) BY CATEGORY ($ MILLIONS) $54 $1,318 $524 $2,503 $3,327 $7,641 $16 Billion Investment $5,933 Diversified In Four RTOs $10,110 $578 Asset Replacment Customer Service Local Reliab
Slide 40: Investments in Asset Renewal Strengthen and Enable the Grid of the Future
Investments in Asset Renewal Strengthen and Enable the Grid of the Future AEP T-Line Age Profile - (Line Mile Age based on oldest conductor age) Life • $2.2 billion of annual on-system capital investment is 1,200 Expectancy Conductor required to replace and enhance all assets beyond life 1,000 70 ye
Slide 41: Stable Cost Recovery Framework
Stable Cost Recovery Framework PJM SPP ERCOT 9.85% Base + 10.0% Base ROE + ROE 9.4% Stable and 0.50% RTO adder 0.50% RTO adder transparent Forward Looking Allowed two updates wholesale cost Rates Yes Yes per year (not forward looking) recovery for Equity Structure Capped at 55% No Cap Capped at 42.5
Slide 42: Delivering Significant Customer and Shareholder Value
Delivering Significant Customer and Shareholder Value Shareholder Benefits Customer Benefits AEPTHC Target Earnings 2021-2023 CUMULATIVE CAPITAL 1.38-1.41 INVESTMENT ($ BILLION) 1.31-1.34 Reducing Enabling efficient economic dispatch EPS customer costs of generation in each of our regions CONTRIBUTI
Slide 43: AEP Transmission Holdco Legal Entity Structure
AEP Transmission Holdco Legal Entity Structure AEP Transmission Company, LLC (“AEP Transco”) is wholly-owned AMERICAN ELECTRIC POWER, INC. by AEP Transmission Holding Company, LLC (“AEP Trans Holdco”) AEP Trans Holdco is a wholly-owned subsidiary of American AEP Transmission Holding Co. LLC Electric
Slide 44: Utility Transformation
UTILITY TRANSFORMATION ● Expanded Core and Future Investments ● Robust Distribution Capital Expenditure Opportunities WOLFE CONFERENCE • AEP.COM
Slide 45: Expanded Core and Future Investments
Expanded Core and Future Investments • INCREASE CORE INVESTMENTS IN SYSTEM • PROMOTE AN INTERACTIVE, MODERN AND EFFICIENT GRID RELIABILITY • ADAPT GRID TO INTEGRATE MORE DIVERSE ENERGY • FULLY ADVANCE METERING INFRASTRUCTURE SOURCES (AMI) AN DISTRIBUTION AUTOMATION CIRCUIT RECONFIGURATION (DACR) PEN
Slide 46: Robust Distribution Capital Expenditure Opportunities
Robust Distribution Capital Expenditure Opportunities Capital Investments in Distribution Modernization are expected to be $8 to $10 billion over the next five years Distribution Base $4,207M Distribution investments for new service, capacity additions, base Investment material and storms Incrementa
Slide 47: Competitive Business
COMPETITIVE BUSINESS ● Competitive Business Presence ● Development Pipeline and Repower Initiatives WOLFE CONFERENCE • AEP.COM
Slide 48: Competitive Business Presence
Competitive Business Presence Active in 29 States (5 states overlap with AEP Utilities) As of June 30, 2021 48 WOLFE CONFERENCE • AEP.COM
Slide 49: Development Pipeline and Repower Initiatives
Development Pipeline and Repower Initiatives DEVELOPMENT PIPELINE REPOWER INITIATIVE Progress continues in our development portfolio across three geographically dispersed areas. Similar to Trent and Desert Sky Wind Farms, we are evaluating our other existing projects for The 128 MW Flat Ridge 3 wind
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