American Electric Power Company, Inc. · NASDAQ:AEP
American Electric Power — Q2 2019 Earnings Presentation
37 slides from American Electric Power's earnings presentation, Jul 25, 2019
Slide 1: 2nd Quarter 2019 Earnings Release Presentation
2nd Quarter 2019 EARNINGS RELEASE PRESENTATION July 25, 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: 2nd Quarter 2019 Business Update
2nd Quarter 2019 Business Update North Central Wind investment opportunity at PSO and SWEPCO $2.0B regulated rate base totaling 1,485 MW Acquisition can be scaled to align with individual state resource needs and approvals Legislative updates in Ohio and Texas Contracted renewables Updat
Slide 5: Regulated Returns
Regulated Returns Twelve Months Ended 6/30/2019 Earned ROE’s (non-GAAP operating earnings, not weather normalized) AEP OH1 12.2% I&M2 11.1% Trans 10.6% APCo 8.9% PSO AEP TX2 KPCo 8.4% 8.5% 7.6% SWEPCO2 5.9% Regulated Operations ROE of 9.7% as of June 30, 2019 1 Adjusted to reflect ROE after roll-off
Slide 6: 2nd Quarter 2019 Financial Update
2nd Quarter 2019 Financial Update 2nd Quarter 2019 Financial Update Delivered GAAP earnings of $0.93 per share or $461M for the second quarter of 2019 Delivered operating earnings of $1.00 per share or $494M for the second quarter of 2019 Delivered GAAP earnings of $2.10 per share or $1.0B for
Slide 7: 2nd Quarter Operating Earnings Segment Detail
2nd Quarter Operating Earnings Segment Detail Rate Base Growth $ 0.05 Annual True-up $ 0.02 FERC Settlement $ 0.03 Rate Changes $ 0.04 Renewables $ 0.02 Trans Revenue $ 0.04 Retail $ 0.01 Rate Changes $ 0.08 O&M $ (0.02) Generation $ (0.01) Weather $ (0.13) Depreciation $ (0.04) Other $ (0.01) Norma
Slide 8: YTD Operating Earnings Segment Detail
YTD Operating Earnings Segment Detail Rate Base Growth $ 0.09 Annual True-up $ 0.02 AFUDC $ 0.03 FERC Settlement $ 0.01 OH Reg Provision $ 0.09 Renewables $ 0.02 Rate Changes $ 0.07 Retail $ 0.03 Weather $ (0.02) Generation $ (0.04) Trans Revenue $ 0.06 Rate Changes $ 0.18 O&M $ (0.04) O&M $ 0.03 We
Slide 9: Weather Normalized Billed Retail Load Trends
Weather Normalized Billed Retail Load Trends 2019 YE Est 2019 YE Est -0.5% -0.6% 2019 YE Est 2019 YE Est +0.5% -0.2% 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 comm
Slide 10: Industrial Sales Growth
(ae BOUNDLESS ENERGY Industrial Sales Growth 10% Growth vs Prior Year uw & 2° & AEP Industrial GWh Growth e a jn 4.2% mums Oil & Gas Related Sectors EEE Non-Oil & Gas Related Sectors === Oil Price Q2-17 Q3-17 Q4-17 Q1-18 Q2-18 Q3-18 Q4-18 Qi-19 -4.6% Q2-19 $80 $60 $40 $20 10
Slide 11: Economic Data – AEP Service Territory
Economic Data – AEP Service Territory Source – Moody’s Analytics 11
Slide 12: Capitalization and Liquidity
Capitalization and Liquidity Total Debt / Total Capitalization Credit Statistics Actual Target FFO to Total Debt 15.3% Mid Teens Represents the trailing 12 months as of 6/30/2019 See Appendix for reconciliation to GAAP Liquidity Summary (unaudited) 6/30/2019 Actual $ in millions Amount Maturity Revo
Slide 13: Summary
Summary Successfully achieved outcomes in expected regulatory cases North Central Wind initiative at PSO and SWEPCO Reaffirm 5% to 7% growth rate with 2019 operating earnings guidance range of $4.00 to $4.20 Santa Rita East Wind Farm (TX) 13
Slide 14: Appendix
Appendix 14
Slide 15: 2nd Quarter Reconciliation of GAAP to Operating Earnings
2nd Quarter Reconciliation of GAAP to Operating Earnings $ in millions Earnings Per Share Q2-18 Q2-19 Change Q2-18 Q2-19 Change Reported GAAP Earnings $528 $461 ($67) $1.07 $0.93 ($0.14) Non Operating Items: Mark-to-Market Impact of Commodity (12) 13 25 (0.02) 0.03 0.05 Hedging Activities1 Severance
Slide 16: 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 $983 $1,034 $51 $2.00 $2.10 $0.10 Non Operating Items: Mark-to-Market Impact of Commodity 7 15 8 0.01 0.03 0.02 Hedging Activities1 Severance Charges2 -
Slide 17: Vertically Integrated Utilities
Vertically Integrated Utilities 2nd Quarter Summary Key Drivers: Q2-19 vs. Q2-18 Q2-18 Q2-19 Rate Changes: $53M favorable vs. prior year $ in millions (except EPS) primarily from rate increases at APCo/WPCo, I&M and PSO Operating Revenues $2,349 $2,124 Operating Expenses: Weather: $81M unfavorab
Slide 18: Vertically Integrated Utilities
Vertically Integrated Utilities YTD Summary Key Drivers: YTD-19 vs. YTD-18 YTD-18 YTD-19 Rate Changes: $112M favorable vs. prior year $ in millions (except EPS) primarily from rate increases at APCo/WPCo, I&M and PSO Operating Revenues $4,757 $4,527 Operating Expenses: Weather: $95M unfavorable
Slide 19: Transmission and Distribution Utilities
Transmission and Distribution Utilities 2nd Quarter Summary Key Drivers: Q2-19 vs. Q2-18 Q2-18 Q2-19 Rate Changes: $28M favorable primarily from $ in millions (except EPS) the Ohio DIR and gridSMART in addition to the Texas Distribution Cost Recovery Factor Operating Revenues $1,137 $1,046 Operati
Slide 20: 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 $ in millions (except EPS) reversal of the 2016 SEET provision Operating Revenues $2,299 $2,268 Rate Changes: $42M favorable primarily from the Ohio D
Slide 21: AEP Transmission Holdco
AEP Transmission Holdco 2nd Quarter Summary Key Drivers: Q2-19 vs. Q2-18 Q2-18 Q2-19 $54M favorable Operating Earnings vs. prior $ in millions (except EPS) year primarily due to increased revenues and Operating Revenues $213 $279 expenses driven by increased capital Operating Expenses: investment
Slide 22: AEP Transmission Holdco
AEP Transmission Holdco YTD Summary Key Drivers: YTD-19 vs. YTD-18 YTD-18 YTD-19 $74M favorable Operating Earnings vs. prior $ in millions (except EPS) year primarily due to increased revenues and Operating Revenues $418 $535 expenses driven by increased capital Operating Expenses: investment in t
Slide 23: Generation & Marketing
Generation & Marketing 2nd Quarter Summary Key Drivers: Q2-19 vs. Q2-18 Q2-18 Q2-19 Generation decreased 549 GWh (28%) Q2-19 vs. $ in millions (except EPS) Q2-18 primarily due to retirements of Stuart Operating Revenues $445 $428 Plant in May 2018 and Conesville Plant Units 5 and 6 in May 2019 Ope
Slide 24: Generation & Marketing
Generation & Marketing YTD Summary Key Drivers: YTD-19 vs. YTD-18 YTD-18 YTD-19 Generation decreased 1,583 GWh (37%) YTD-19 $ in millions (except EPS) vs. YTD-18 primarily due to retirements of Operating Revenues $974 $914 Stuart Plant in May 2018 and Conesville Plant Units 5 and 6 in May 2019 Ope
Slide 25: 2nd Quarter Rate Performance
2nd Quarter Rate Performance Vertically Integrated Utilities Transmission and Distribution Utilities Rate Changes, net of Rate Changes, net of offsets ($ in millions) offsets ($ in millions) Q2-19 vs. Q2-18 Q2-19 vs. Q2-18 APCo/WPCo $19 AEP Ohio $25 I&M $22 AEP Texas $3 KPCo $1 TOTAL $28 PSO $12 SWE
Slide 26: YTD Rate Performance
YTD Rate Performance Vertically Integrated Utilities Transmission and Distribution Utilities Rate Changes, net of Rate Changes, net of offsets ($ in millions) offsets ($ in millions) YTD-19 vs. YTD-18 YTD-19 vs. YTD-18 APCo/WPCo $30 AEP Ohio $36 I&M $58 AEP Texas $6 KPCo - TOTAL $42 PSO $21 SWEPCO $
Slide 27: 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) Q2-19 vs. Q2-18 Q2-19 vs. Q2-18 APCo/WPCo (1.6%) AEP Ohio (1.3%) I&M (2.7%) AEP Texas (2.9%) KPCo (1.5%) TOTAL (2.0%) PSO (0
Slide 28: 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 (1.2%) AEP Ohio (0.6%) I&M (1.8%) AEP Texas (0.9%) KPCo (2.0%) TOTAL (0.7%) PSO (0.3%)
Slide 29: 2nd Quarter Weather Impact
2nd Quarter Weather Impact Vertically Integrated Utilities Transmission and Distribution Utilities Weather Impact Weather Impact ($ in millions) ($ in millions) Q2-19 vs. Q2-19 vs. Q2-19 vs. Q2-19 vs. Q2-18 Normal Q2-18 Normal APCo/WPCo ($19) $3 AEP Ohio - - I&M ($19) ($4) AEP Texas ($3) $1 KPCo ($5
Slide 30: YTD Weather Impact
YTD Weather Impact Vertically Integrated Utilities Transmission and Distribution Utilities Weather Impact Weather Impact ($ in millions) ($ in millions) YTD-19 vs. YTD-19 vs. YTD-19 vs. YTD-19 vs. YTD-18 Normal YTD-18 Normal APCo/WPCo ($33) ($2) AEP Ohio - - I&M ($16) ($2) AEP Texas ($13) ($1) KPCo
Slide 31: 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 32: 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 33: Current Rate Case Activity (continued)
Current Rate Case Activity (continued) I&M – Michigan SWEPCO – Arkansas1 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: $1.2B Requested ROE: 10.5% Requested ROE: 10.5% Cap Structure: 53.6%D / 46.4%E Cap Structure:
Slide 34: AEP and Effective Tax Rates
AEP and Effective Tax Rates Q2-19 Effective Tax Rate Reconciliation Estimated 2019 and Future Cash Tax Rates 2019 Amount Description Future Q2-19 Tax Rate ($ in millions) ($ in millions) Consolidated Federal $406 Pre-tax Income $390 Taxable Income Federal Income Tax Liability $85 Tax at Federal Rate
Slide 35: 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 36: 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 37: 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 6/30/19 6/30/19 $ in millions $ in millions GAAP Total Debt (incl. current maturities) $27,709 Cash Flow From Operations $5,016 Less: Adjustments: Securitization Bonds (950) Cha
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