American Electric Power Company, Inc. · NASDAQ:AEP
American Electric Power — Q3 2022 Earnings Presentation
43 slides from American Electric Power's earnings presentation, Oct 27, 2022
Slide 1: 3rd Quarter 2022 Earnings Release Presentation
3 Quarter 2022 Earnings rd Release Presentation October 27, 2022 AEP CONFIDENTIAL
Slide 2: Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995
“Safe Harbor” 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 based on reasonable assumptions, any such statements may be influence
Slide 3: Non-GAAP Financial Measures
Non-GAAP Financial 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 measures, including operati
Slide 4: AEP Is a Pure Play Regulated Utility
17,000 AEP Is a Pure Play Regulated Utility 40k TRANSMISSION MILES $ 91B TOTAL ASSETS EMPLOYEES Nation’s largest electric Strong balance sheet Across the system transmission system 224k DISTRIBUTION MILES $ 56B RATE BASE 5.5M CUSTOMERS One of the largest distribution As of December 31, 2021 Througho
Slide 5: AEP's Strategic Vision and Execution
STRATEGIC PILLAR STRATEGIC PRIORITIES AEP’s AFFORDABLE • Be an industry leader in cost efficiency while prioritizing spending appropriately to ensure safe and reliable service Strategic Enable equitable access to affordable and reliable electricity • Grow our business while keeping rates at or below
Slide 6: 3rd Quarter 2022 Business Update
3rd Quarter 2022 Business Update Financial highlights and commitments Active management to simplify and de-risk our business • 3rd Quarter 2022 operating earnings of $1.62 per share or $831M • Sale of Kentucky operations to Liberty expected to close in January 2023 • Narrowed 2022 operating earnings
Slide 7: Regulated Capital Investment Strategy
Regulated Capital KEY INVESTMENT STRATEGIES 2023-2027 CAPITAL INVESTMENT Investment Strategy • Transform our electric generation fleet to drive-down costs to customers and achieve our climate goals • Develop a modern and secure electric transmission $ 15.0B TRANSMISSION grid to bolster system reliab
Slide 8: 3rd Quarter 2022 Financial Update
3rd Quarter 2022 3rd QUARTER 2022 $1.59 $1.62 Financial Update $1.33 $1.43 • Delivered GAAP earnings of $1.33 per share or $683.7M for the third quarter of 2022 • Delivered operating earnings of $1.62 per share or $831M for the 2021 2022 2021 2022 third quarter of 2022 GAAP EPS OPERATING EPS YTD 202
Slide 9: 3rd Quarter Operating Earnings Segment Detail
$1.62 0.10 (0.02) Per Share 3rd Quarter 0.10 0.01 0.00 Operating $1.43 Earnings Per Share Renewables $0.01 O&M $(0.02) Segment Detail Rate Changes $0.14 Rate Changes $0.06 Invest Growth $0.02 APCo VA Weather $0.02 Income Taxes $(0.01) Generation $0.01 Investment Gain $0.03 $0.06 Triennial Review Tra
Slide 10: YTD Operating Earnings Segment Detail
0.10 (0.07) 0.14 (0.17) YTD Operating 0.28 $4.04 Per Share Earnings $3.76 Segment Detail Per Share Rate Changes $0.31 Rate Changes $0.16 Invest Growth $0.06 Renewables $0.05 O&M $(0.06) APCo VA Weather $0.04 Annual True-up $(0.07) Generation $0.02 Investment Gain $(0.07) $0.06 Triennial review Norma
Slide 11: Weather Normalized Billed Retail Load Trends
Quarterly Retail Load Performance Weather Normalized AEP Normalized Residential GWh Sales % Change vs. Prior Year AEP Normalized Commercial GWh Sales % Change vs. Prior Year Billed Retail Load 10% 10% Trends 5% 0.8% 1.2% 0.7% 5% 5.0% 4.3% 4.2% 4.1% 3.4% 3.8% 3.4% 0.3% 0% 0% -0.8% -0.4% -0.8% -1.6% -
Slide 12: Economic Development Supports Load Growth
Economic AEP Industrial Sales and Economic Growth Development 8% Gross Regional Product Supports Load Growth 7.0% Industrial Growth 6.0% 6.0% 6% 5.6% 5.2% 5.0% AEP’s commitment to economic % Growth development is helping to sustain 4% load growth, even in the face of 3.2% challenging economic condit
Slide 13: Capitalization and Liquidity
Credit Statistics1 Total Debt/Total Capitalization Capitalization 55.5% 57.0% 59.8% 61.8% 62.1% 61.5% 61.4% 61.4% and Liquidity Moody’s GAAP FFO to Total Debt 14.5% 14.5% Targeted Range 14.0%-15.0% 2017 2018 2019 2020 2021 Q1-22 Q2-22 Q3-22 Short/Long-Term Debt Securitization Debt Maintaining strong
Slide 14: Summary: Stakeholder Commitments
Summary: Stakeholder Commitments 6%-7% Annual Dividend Growth In-line with Strong Balance Sheet Operating Earnings Earnings Growth and Targeted with a Target FFO/Debt Growth Payout Ratio of 60%-70% of 14%-15% New ESG Goal of Customer Care: Commitment to Active Management of the AEP Identification an
Slide 15: Appendix: Q3 2022 Performance
Appendix Q3 2022 Performance 3rd Quarter 2022 Earnings Presentation
Slide 16: 3rd Quarter Reconciliation of GAAP to Operating Earnings
$ in millions Earnings Per Share 3rd Quarter Reconciliation of Q3-21 Q3-22 Change Q3-21 Q3-22 Change GAAP to Operating Reported GAAP Earnings $ 796 $ 684 $ (112) $ 1.59 $ 1.33 $ (0.26) Earnings Non Operating Items: Weighted average number of shares outstanding: 501.2M Q3-21 Mark-to-Market Impact of
Slide 17: YTD Reconciliation of GAAP to Operating Earnings
$ in millions Earnings Per Share YTD-21 YTD-22 Change YTD-21 YTD-22 Change YTD Reconciliation Reported GAAP Earnings $ 1,949 $ 1,923 $ (26) $ 3.90 $ 3.76 $ (0.14) of GAAP to Non Operating Items: Operating Earnings Mark-to-Market Impact of Commodity Weighted average number of (91) (167) (76) (0.18) (
Slide 18: Vertically Integrated Utilities 3rd Quarter Summary
$ in millions (except EPS) Q3-21 Q3-22 Vertically Integrated Utilities Operating Revenues $ 2,759 $ 3,224 Operating Expenses: 3rd Quarter Summary Energy Costs (855) (1,192) Key Drivers: Q3-22 vs. Q3-21 Operations and Maintenance (797) (828) • Rate Changes: $87M favorable vs. prior year primarily fro
Slide 19: Vertically Integrated Utilities YTD Summary
$ in millions (except EPS) YTD-21 YTD-22 Vertically Integrated Utilities Operating Revenues $ 7,557 $ 8,560 Operating Expenses: YTD Summary Energy Costs (2,365) (2,896) Key Drivers: YTD-22 vs. YTD-21 Operations and Maintenance (2,241) (2,376) • Rate Changes: $199M favorable vs. prior year primarily
Slide 20: Transmission and Distribution Utilities 3rd Quarter Summary
Transmission and Distribution Utilities $ in millions (except EPS) Q3-21 Q3-22 Operating Revenues $ 1,200 $ 1,530 3rd Quarter Summary Operating Expenses: Energy Costs (188) (400) Key Drivers: Q3-22 vs. Q3-21 Operations and Maintenance (443) (503) Depreciation and Amortization (164) (188) • Rate Chan
Slide 21: Transmission and Distribution Utilities YTD Summary
Transmission and Distribution Utilities $ in millions (except EPS) YTD-21 YTD-22 Operating Revenues $ 3,392 $ 4,079 YTD Summary Operating Expenses: Energy Costs (562) (885) Key Drivers: YTD-22 vs. YTD-21 Operations and Maintenance (1,169) (1,373) Depreciation and Amortization (516) (560) • Rate Chan
Slide 22: AEP Transmission Holdco 3rd Quarter Summary
AEP Transmission Holdco $ in millions (except EPS) Q3-21 Q3-22 Operating Revenues $ 392 $ 431 3rd Quarter Summary Operating Expenses: Operations and Maintenance (40) (47) Key Drivers: Q3-22 vs. Q3-21 Depreciation and Amortization (78) (90) Taxes Other Than Income Taxes (63) (70) • $13M favorable Ope
Slide 23: AEP Transmission Holdco YTD Summary
AEP Transmission Holdco $ in millions (except EPS) YTD-21 YTD-22 Operating Revenues $ 1,147 $ 1,221 YTD Summary Operating Expenses: Operations and Maintenance (97) (114) Key Drivers: YTD-22 vs. YTD-21 Depreciation and Amortization (226) (263) Taxes Other Than Income Taxes (183) (208) • $5M unfavorab
Slide 24: Generation & Marketing 3rd Quarter Summary
Generation & Marketing $ in millions (except EPS) Q3-21 Q3-22 Operating Revenues $ 521 $ 698 3rd Quarter Summary Operating Expenses: Energy Costs (445) (566) Key Drivers: Q3-22 vs. Q3-21 Operations and Maintenance (38) (45) Depreciation and Amortization (21) (23) • Renewables increased primarily due
Slide 25: Generation & Marketing YTD Summary
Generation & Marketing $ in millions (except EPS) YTD-21 YTD-22 Operating Revenues $ 1,577 $ 1,805 YTD Summary Operating Expenses: Energy Costs (1,369) (1,534) Key Drivers: YTD-22 vs. YTD-21 Operations and Maintenance (99) (71) Depreciation and Amortization (60) (69) • Renewables increased primarily
Slide 26: Vertically Integrated Utilities 3rd Quarter Performance
Vertically Integrated Utilities 3rd Quarter Performance RATE PERFORMANCE WEATHER IMPACT RETAIL LOAD PERFORMANCE Rate Changes, net Weather Impact Retail Load1 of offsets ($ in millions) (weather normalized) ($ in millions) Q3-22 vs. Q3-22 vs. Q3-22 vs. Q3-21 Q3-22 vs. Q3-21 Q3-21 Normal APCo/WPCo (0.
Slide 27: Vertically Integrated Utilities YTD Performance
Vertically Integrated Utilities YTD Performance RATE PERFORMANCE WEATHER IMPACT RETAIL LOAD PERFORMANCE Rate Changes, net Weather Impact Retail Load1 of offsets ($ in millions) (weather normalized) ($ in millions) YTD-22 vs. YTD-22 vs. YTD-22 vs. YTD-21 YTD-22 vs. YTD-21 YTD-21 Normal APCo/WPCo 0.2%
Slide 28: Transmission and Distribution Utilities 3rd Quarter Performance
Transmission and Distribution Utilities 3rd Quarter Performance RATE PERFORMANCE WEATHER IMPACT RETAIL LOAD PERFORMANCE Weather Impact Retail Load1 Rate Changes, net ($ in millions) (weather normalized) of offsets ($ in millions) Q3-22 vs. Q3-22 vs. Q3-22 vs. Q3-21 Q3-22 vs. Q3-21 Q3-21 Normal AEP O
Slide 29: Transmission and Distribution Utilities YTD Performance
Transmission and Distribution Utilities YTD Performance RATE PERFORMANCE WEATHER IMPACT RETAIL LOAD PERFORMANCE Rate Changes, net Weather Impact Retail Load1 of offsets ($ in millions) (weather normalized) ($ in millions) YTD-22 vs. YTD-22 vs. YTD-22 vs. YTD-21 YTD-22 vs. YTD-21 YTD-21 Normal AEP Oh
Slide 30: Industrial Sale Growth
Industrial Sale Growth AEP Industrial GWh Growth 20% $120 15.7% 10% $90 7.4% 6.7% 6.7% 6.0% 5.8% 6.0% Growth vs Prior Year 5.5% 4.4% 4.0% 2.6% 1.3% 0% $60 -1.3% -3.3% -4.6% -5.5% -10% -8.7% Oil & Gas Related Sectors $30 -9.6% Non-Oil & Gas Related Sectors Oil Price -20% $- Q3-20 Q4-20 Q1-21 Q2-21 Q3
Slide 31: Economic Data – AEP Service Territory
Economic Data – AEP Service Territory GDP Growth by Quarter Employment Growth by Quarter 12% 12% 6% 6.0% 4.6% 4.4% 4.6% 4.4% 5.5% 4.3% 4.0% 4.0% 6% 4.9% 5.2% 3.8% Growth vs Prior Year Growth vs Prior Year 3.2% 3.5% 3.2% 2.4% 1.7% 1.5% 1.2% 0.0% 0% 0% -6% -6% US AEP US AEP -12% -12% Q3-21 Q4-21 Q1-22
Slide 32: GAAP to Non-GAAP Reconciliations and Ratios
GAAP to Adjusted FFO Calculation Adjusted Total Debt (Non-GAAP) Calculation Non-GAAP 12 Months As of Reconciliations Ended 9/30/2022 9/30/2022 (in millions) and Ratios (in millions) GAAP Total Debt Cash Flow from Operations $ 5,600 $ 38,931 (incl. current maturities) Adjustments: Less: Changes in Wo
Slide 33: Appendix: Financial Forecast
Appendix Financial Forecast 3rd Quarter 2022 Earnings Presentation
Slide 34: 2023-2027 Capital Forecast of $40B
Other Generation Corporate $1.1B • 3% Nuclear $3.1B • 7% Generation Regulated $0.3B • 1% Environmental 2023-2027 Capital 99% Generation $0.4B • 1% Forecast of $40B Gen & Marketing of capital allocated to $0.4B • 1% regulated businesses Distribution The ability to quickly redeploy transmission and di
Slide 35: 2023-2027 Cash Flows and Financial Metrics
$ in millions 2022E 2023E 2024E 2025E 2026E 2027E 2023-2027 Cash Cash from Operations Net Cash Proceeds from Sale of Assets $ 5,400 200 $ 6,000 1,2001 $ 6,400 - $ 6,900 - $ 7,100 - $ 7,700 - Flows and Financial Capital and JV Equity Contributions2 (7,800) (6,800) (8,900) (9,700) (7,300) (6,900) Metr
Slide 36: Appendix: Active Management and Capital Recycling
Appendix Active Management and Capital Recycling 3rd Quarter 2022 Earnings Presentation
Slide 37: Regulatory Timeline of Kentucky Sale
NOV DEC JAN FEB MAR APR MAY JUN 2nd Half JAN AEP Filings 2021 2021 2022 2022 2022 2022 2022 2022 2022 2023 Mitchell Operating Mitchell Operating Regulatory Timeline Agreement1 Kentucky Public Agreement Update: • Filings made July 11, 2022 of Kentucky Sale Service Commission Order Received May 3, 202
Slide 38: Sale Update of Unregulated Contracted Renewable Assets
Sale Update of Unregulated 14 Projects Within the Portfolio Contracted Renewable Assets Project Name Location Resource Commercial MW Operation Date PROCESS Santa Rita East Texas Wind July 2019 257 Trent Mesa Texas Wind August 20181 156 In February 2022, AEP announced the sale of its Desert Sky Texas
Slide 39: Retail Business (Begin Strategic Review)
Retail Business (Begin Strategic Review)1 BUSINESS MODEL Commodity and Services Sales • Focused where AEP operating companies can’t offer solutions Mid-Atlantic Focus Electric in 7 states/27 utilities and • Base platform is electric and natural gas sales natural gas in 4 utilities in Ohio • Channel
Slide 40: Appendix: Regulatory and Climate Goals
Appendix Regulatory and Climate Goals 3rd Quarter 2022 Earnings Presentation
Slide 41: Regulated Returns
Twelve Months Ended 9/30/2022 Earned ROE’s Regulated Returns (non-GAAP operating earnings, not weather normalized) 14% 12% 9/30/22 Regulated 10.4% 10.5% 10% 10.1% Operations ROE of 9.3% 8.7% 8.9% 8.7% 8% 1 Base rate cases pending/order recently received. 6.6% 6.9% Sphere size based on each company’s
Slide 42: Current Rate Case Activity
Current Rate Case Activity APCo – Virginia Docket # PUR-2020-00015 SWEPCO – Arkansas3 SWEPCO – Louisiana Filing Date 3/31/2020 Docket # 21-070-U Docket # U-35441 1 APCo immediately filed an appeal of the Requested Rate Base $2.5B Filing Date 7/23/2021 Filing Date 12/18/2020 commission order with the
Slide 43: Taking Bold Steps to Accelerate CO2 Emission Goals
Taking Bold Steps to We are rebasing our near-term CO2 emission reduction target to 2005, Accelerate CO2 Emission upgrading our 2030 target to include full Scope 1 emissions and accelerating our net-zero goal by 5 years Goals We Have an Achievable Pathway to Net-Zero by 2045 NEW GOAL: NEAR 80% REDUC
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