American Electric Power Company, Inc. · NASDAQ:AEP

American Electric Power — Q4 2019 Earnings Presentation

38 slides from American Electric Power's earnings presentation, Feb 20, 2020

  1. Slide 1: 4th Quarter 2019 Earnings Release Presentation

    4th Quarter 2019 Earnings Release Presentation February 20, 2020 1 GS Power and September Investor Utilities Meetings Conference | aep.com | aep.com

  2. 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

  3. 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

  4. Slide 4: 2019 Highlights and 2020 Focus

    2019 Highlights and 2020 Focus 2019 Highlights 2020 Focus Financial Performance Financial Performance  Delivered GAAP earnings of $0.31 per share for Q4  Deliver operating earnings within the guidance range 2019 and $3.89 per share for 2019 of $4.25-$4.45 per share  Delivered operating earnings o

  5. Slide 5: Regulated Returns

    Regulated Returns Twelve Months Ended 12/31/2019 Earned ROE’s (non-GAAP operating earnings, not weather normalized) AEP OH 12.3% Trans I&M2 PSO 11.5% 11.0% AEP OH1 10.7% 9.6% APCo 9.2% AEP TX2 KPCo 7.4% SWEPCO2 7.7% 6.8% Regulated Operations ROE of 9.7% as of December 31, 2019 1 AEP Ohio ROE after r

  6. Slide 6: 4th Quarter 2019 Financial Update

    4th Quarter 2019 Financial Update 4th Quarter 2019 Total Shareholder Return 1 YTD 2019 1 1 Quarterly EPS is a stand alone amount and not always additive to full year amount due to rounding One Year Three Year Five Year Refer to Appendix for reconciliation between GAAP and Operating EPS 6

  7. Slide 7: 4th Quarter Operating Earnings Segment Detail

    4th Quarter Operating Earnings Segment Detail 2018 Vertically Integrated Transmission and AEP Transmission Generation & Corporate and 2019 Actual Utilities Distribution Utilities Holdco Marketing Other Actual 2019 Actual EPS $0.28 $0.14 $0.23 $0.00 ($0.05) $0.60 Refer to Appendix for additional expl

  8. Slide 8: YTD Operating Earnings Segment Detail

    YTD Operating Earnings Segment Detail 2018 Vertically Integrated Transmission and AEP Transmission Generation & Corporate and 2019 Actual Utilities Distribution Utilities Holdco Marketing Other Actual 2019 Actual EPS $2.17 $1.00 $1.05 $0.30 ($0.28) $4.24 Refer to Appendix for additional explanation

  9. Slide 9: Weather Normalized Billed Retail Load Trends

    Weather Normalized Billed Retail Load Trends 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 commercial industry codes for certain customers; no revenue or earnings impa

  10. Slide 10: Industrial Sales Growth

    1 AMERICAN Industrial Sales Growth futcrnic POWER | ial AEP Industrial GWh Growth 10% 4 $80 5% $60 GS cS 5 = % 0% $40 > é 8 6 -5% mmm Oil & Gas Related Sectors $20 l@ammml Non-Oil & Gas Related Sectors -6.1% === il Price -10% 4 $- Q4-17 Q1-18 Q2-18 Q3-18 Q4-18 Qi1-19 Q2-19 Q3-19 Q4-19 10

  11. Slide 11: Economic Data – AEP Service Territory

    Economic Data – AEP Service Territory Source – Moody’s Analytics 11

  12. Slide 12: Capitalization and Liquidity

    Capitalization and Liquidity Total Debt / Total Capitalization Credit Statistics Actual Moody’s GAAP Target Low to Mid FFO to Total Debt 13.9% 13.5% Teens Represents the trailing 12 months as of 12/31/2019 See Appendix for reconciliation to GAAP Liquidity Summary (unaudited) 12/31/2019 Actual $ in m

  13. Slide 13: Proven Track Record and 2020 Outlook

    Proven Track Record and 2020 Outlook Proven Track Record 2020 Outlook  Solid 2019 operating earnings and dividend  5-7% growth rate with 2020 operating growth earnings guidance range of $4.25-$4.45  Disciplined capital allocation  Finalize pending base rate cases  Successful regulatory outcomes

  14. Slide 14: Appendix

    Appendix 14

  15. Slide 15: 4th Quarter Reconciliation of GAAP to Operating Earnings

    4th Quarter Reconciliation of GAAP to Operating Earnings $ in millions Earnings Per Share Q4-18 Q4-19 Change Q4-18 Q4-19 Change Reported GAAP Earnings $363 $154 ($209) $0.74 $0.31 ($0.43) Non Operating Items: Mark-to-Market Impact of Commodity - 2 2 - 0.01 0.01 Hedging Activities1 Severance Charges2

  16. 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 $1,924 $1,921 ($3) $3.90 $3.89 ($0.01) Non Operating Items: Mark-to-Market Impact of Commodity - 6 6 - 0.01 0.01 Hedging Activities1 Severance Charges2 2

  17. Slide 17: Vertically Integrated Utilities

    Vertically Integrated Utilities 4th Quarter Summary Key Drivers: Q4-19 vs. Q4-18 Q4-18 Q4-19  Rate Changes: $44M favorable vs. prior year $ in millions (except EPS) primarily from rate increases at APCo/WPCo, I&M, PSO and SWEPCO Operating Revenues $2,252 $2,195 Operating Expenses:  Weather: $28M u

  18. Slide 18: Vertically Integrated Utilities

    Vertically Integrated Utilities YTD Summary Key Drivers: YTD-19 vs. YTD-18 YTD-18 YTD-19  Rate Changes: $210M favorable vs. prior year $ in millions (except EPS) primarily from rate increases at APCo/WPCo, I&M, PSO and SWEPCO Operating Revenues $9,645 $9,367 Operating Expenses:  Weather: $102M unf

  19. Slide 19: Transmission and Distribution Utilities

    Transmission and Distribution Utilities 4th Quarter Summary Key Drivers: Q4-19 vs. Q4-18 Q4-18 Q4-19  Rate Changes: $7M unfavorable primarily from the roll off Ohio PIRR and RSR, partially offset by the $ in millions (except EPS) Ohio DIR and gridSMART Operating Revenues $1,142 $1,057  Weather: $3

  20. 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 reversal of the 2016 SEET provision $ in millions (except EPS)  Rate Changes: $29M favorable primarily from the Ohio DIR Operating Revenues $4,653 $4,5

  21. Slide 21: AEP Transmission Holdco

    AEP Transmission Holdco 4th Quarter Summary Key Drivers: Q4-19 vs. Q4-18 Q4-18 Q4-19  $20M favorable Operating Earnings vs. prior $ in millions (except EPS) year primarily due to increased revenues and Operating Revenues $199 $265 expenses driven by increased capital Operating Expenses: investment

  22. Slide 22: AEP Transmission Holdco

    AEP Transmission Holdco YTD Summary Key Drivers: YTD-19 vs. YTD-18 YTD-18 YTD-19  $146M favorable Operating Earnings vs. prior $ in millions (except EPS) year primarily due to increased revenues and Operating Revenues $804 $1,073 expenses driven by increased capital Operating Expenses: investment i

  23. Slide 23: Generation & Marketing

    Generation & Marketing 4th Quarter Summary Key Drivers: Q4-19 vs. Q4-18 Q4-18 Q4-19  AEP Dayton ATC liquidations down 24%: $ in millions (except EPS) $26.41/MWh in Q4-19 vs. $34.96/MWh in Q4- 18 Operating Revenues $453 $432 Operating Expenses:  Income Taxes: actual rate of 174.8% Q4-19 vs. Energy

  24. Slide 24: Generation & Marketing

    Generation & Marketing YTD Summary Key Drivers: YTD-19 vs. YTD-18 YTD-18 YTD-19  Generation decreased 1,819 GWh (24%) YTD-19 $ in millions (except EPS) vs. YTD-18 primarily due to retirements of Operating Revenues $1,941 $1,865 Stuart Plant in May 2018 and Conesville Plant Units 5 and 6 in May 2019

  25. 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) Q4-19 vs. Q4-18 Q4-19 vs. Q4-18 APCo/WPCo $12 AEP Ohio1 ($4) I&M $11 AEP Texas ($3) KPCo - TOTAL ($7) PSO $20

  26. 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 $50 AEP Ohio1 $23 I&M $84 AEP Texas $6 KPCo - TOTAL $29 PSO $68 SWEPCO

  27. 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) Q4-19 vs. Q4-19 vs. Q4-19 vs. Q4-19 vs. Q4-18 Normal Q4-18 Normal APCo/WPCo ($15) ($1) AEP Ohio - - I&M ($4) $1 AEP Texas $3 $1 KPCo ($2) -

  28. Slide 28: 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 ($38) $22 AEP Ohio - - I&M ($23) $11 AEP Texas ($2) $10 KPCo ($9)

  29. Slide 29: 4th Quarter Retail Load Performance

    4th Quarter Retail Load Performance Vertically Integrated Utilities Transmission and Distribution Utilities Retail Load1 Retail Load1 (weather (weather normalized) normalized) Q4-19 vs. Q4-18 Q4-19 vs. Q4-18 APCo/WPCo (0.6%) AEP Ohio (3.1%) I&M (2.5%) AEP Texas 0.6% KPCo (2.8%) TOTAL (1.6%) PSO (0.9

  30. Slide 30: 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 (0.9%) AEP Ohio (0.8%) I&M (2.2%) AEP Texas 0.1% KPCo (2.1%) TOTAL (0.5%) PSO 0.1% SWE

  31. 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

  32. Slide 32: North Central Wind Procedural Schedules

    North Central Wind Procedural Schedules Intervenor Staff Rebuttal Jurisdiction (Docket #) Hearing Status Testimony Testimony Testimony Settlement reached January November November December December 10, 2019, PSO (PUD 2019-00048)1 13, 2020 1, 2019 1, 2019 4, 2019 awaiting commission (Settlement Heari

  33. Slide 33: 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

  34. Slide 34: Current Rate Case Activity

    Current Rate Case Activity I&M – Michigan SWEPCO – Arkansas 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: 49.5%D / 50.5

  35. Slide 35: AEP and Effective Tax Rates

    AEP and Effective Tax Rates Q4-19 Effective Tax Rate Reconciliation Estimated 2019 and Future Cash Tax Rates 2019 Amount Description Future Q4-19 Tax Rate ($ in millions) ($ in millions) Consolidated Federal $118 Pre-tax Income $1,907 Taxable Income Federal Income Tax Liability $25 Tax at Federal Ra

  36. Slide 36: 2020 - 2024 Capital Forecast: Total $33B

    2020 - 2024 Capital Forecast: Total $33B Regulated Renewables Regulated Environmental Regulated New Generation $0.3B | 1% $0.2 B | 0% Generation $0.9B | 3% Contracted Renewables $2.1B | 6% Regulated Fossil/Hydro Generation $0.8B | 3% Nuclear Generation $0.4B | 1% IT/Workplace Services $2.5B | 8% AEP

  37. Slide 37: Cash Flows and Financial Metrics

    Cash Flows and Financial Metrics $ in millions 2020E 2021E 2022E Cash from Operations $ 4,900 $ 4,900 $ 5,400 Capital & JV Equity Contributions (6,300) (6,200) (6,400) Other Investing Activities (500) (200) (200) Common Dividends1 (1,400) (1,400) (1,400) Excess (Required) Capital $ (3,300) $ (2,900)

  38. Slide 38: 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 12/31/19 12/31/19 $ in millions $ in millions GAAP Total Debt (incl. current maturities) $29,564 Cash Flow From Operations $4,270 Less: Adjustments: Securitization Bonds (1,029)

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