American Electric Power Company, Inc. · NASDAQ:AEP
American Electric Power — Q4 2018 Earnings Presentation
33 slides from American Electric Power's earnings presentation, Jan 24, 2019
Slide 1: 4th Quarter 2018 Earnings Release Presentation
4th Quarter 2018 EARNINGS RELEASE PRESENTATION January 24, 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: 4th Quarter 2018 Highlights
4th Quarter 2018 Highlights 4th Quarter 2018 Total Shareholder Return YTD 2018 One Year Three Year Five Year Refer to Appendix for reconciliation between GAAP and Operating EPS 4
Slide 5: 2018 Highlights & 2019 Focus
2018 Highlights & 2019 Focus 2018 Highlights 2019 Focus Financial Performance Financial Performance Delivered GAAP earnings of $0.74 per share for Q4 Deliver operating earnings within the guidance range 2018 and $3.90 per share for 2018 of $4.00-$4.20 per share Delivered operating earnings of
Slide 6: Regulated Returns
Regulated Returns Twelve Months Ended 12/31/2018 Earned ROE’s (non-GAAP operating earnings, not weather normalized) AEP OH 14.5% AEP OH* I&M 13.1% 11.4% APCo* Trans 9.4% KPCo 10.0% 9.0% AEP TX 8.5% PSO* SWEPCO 6.9% 6.5% Regulated Operations ROE of 9.7% as of December 31, 2018 *AEP Ohio adjusted for
Slide 7: 4th Quarter Operating Earnings Segment Detail
4th Quarter Operating Earnings Segment Detail Rate Base Growth $ 0.03 Weather $ (0.01) Generation $ 0.01 Rate Changes $ 0.03 Eff Inc Tax Rate $ 0.01 Depreciation $ (0.02) Non-Serv Pension $ 0.01 O&M $ (0.04) Other $ 0.01 Interest Inc/Exp $ (0.03) Eff Inc Tax Rate $ (0.02) Weather $ 0.01 Other $ (0.0
Slide 8: YTD Operating Earnings Segment Detail
YTD Operating Earnings Segment Detail Rate Base Growth $ 0.14 Annual True-up $ (0.08) Accounting Adj $ (0.03) Weather $ 0.01 Generation $ (0.04) Rate Changes $ 0.06 Eff Inc Tax Rate $ 0.04 Normal Load $ 0.01 $0.03 Depreciation $ (0.07) Other $ (0.01) Non-Serv Pension $ 0.03 Investment Gain $ (0.02)
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. * Estimate based on forecast provided at 2018 EEI Financial Conference and amended to reflect 2018 results. 9
Slide 10: Economic Data – AEP Service Territory
Economic Data – AEP Service Territory Source – Moody’s Analytics 10
Slide 11: Capitalization and Liquidity
Capitalization and Liquidity Total Debt / Total Capitalization Credit Statistics Actual Target FFO to Total Debt 17.8% Mid Teens Represents the trailing 12 months as of 12/31/2018 See Appendix for reconciliation to GAAP Liquidity Summary (unaudited) 12/31/2018 Actual ($ in millions) Amount Maturity
Slide 12: Proven Track Record & 2019 Outlook
Proven Track Record & 2019 Outlook Proven Track Record 2019 Outlook Solid 2018 operating earnings and dividend 5-7% growth rate with 2019 operating growth earnings guidance range of $4.00-$4.20 Disciplined capital allocation Finalize pending base rate cases Successful regulatory outcomes
Slide 13: Appendix
Appendix 13
Slide 14: 4th Quarter Reconciliation of GAAP to Operating Earnings
4th Quarter Reconciliation of GAAP to Operating Earnings $ millions Earnings Per Share Q4-17 Q4-18 Change Q4-17 Q4-18 Change Reported GAAP Earnings $401 $363 ($38) $0.81 $0.74 ($0.07) Non Operating Items: Impairment of Certain Merchant Generation 28 9 (19) 0.05 0.02 (0.03) Assets1 Impairment of Turk
Slide 15: YTD Reconciliation of GAAP to Operating Earnings
YTD Reconciliation of GAAP to Operating Earnings $ millions Earnings Per Share YTD-17 YTD-18 Change YTD-17 YTD-18 Change Reported GAAP Earnings $1,913 $1,924 $11 $3.89 $3.90 $0.01 Non Operating Items: Mark-to-Market Impact of Commodity 3 - (3) 0.01 - (0.01) Hedging Activities1 Gain from Competitive
Slide 16: Vertically Integrated Utilities
Vertically Integrated Utilities 4th Quarter Summary Key Drivers: Q4-18 vs. Q4-17 Q4-17 Q4-18 Weather: $11M favorable vs. prior year; $29M favorable vs. normal $ millions (except EPS) Rate Changes: $27M favorable vs. prior year primarily from Operating Revenues $2,305 $2,252 rate increases at I&M
Slide 17: Vertically Integrated Utilities
Vertically Integrated Utilities YTD Summary Key Drivers: YTD-18 vs. YTD-17 YTD-17 YTD-18 Weather: $251M favorable vs. prior year; $151M favorable vs. normal $ millions (except EPS) Rate Changes: $199M favorable vs. prior year primarily from Operating Revenues $9,198 $9,645 rate increases at I&M,
Slide 18: Transmission and Distribution Utilities
Transmission and Distribution Utilities 4th Quarter Summary Key Drivers: Q4-18 vs. Q4-17 Q4-17 Q4-18 Weather: $5M unfavorable vs. prior year; $2M $ millions (except EPS) unfavorable vs. normal Operating Revenues $1,106 $1,142 Rate Changes: $21M favorable primarily from Operating Expenses: the Oh
Slide 19: Transmission and Distribution Utilities
Transmission and Distribution Utilities YTD Summary Key Drivers: YTD-18 vs. YTD-17 YTD-17 YTD-18 Weather: $8M favorable vs. prior year; $12M $ millions (except EPS) favorable vs. normal Operating Revenues $4,419 $4,653 Rate Changes: $44M favorable primarily from Operating Expenses: the Texas Dis
Slide 20: AEP Transmission Holdco
AEP Transmission Holdco 4th Quarter Summary Key Drivers: Q4-18 vs. Q4-17 Q4-17 Q4-18 $14M favorable Operating Earnings vs. prior $ millions (except EPS) year primarily due to increased revenues and Operating Revenues $185 $199 expenses driven by increased capital Operating Expenses: investment in
Slide 21: AEP Transmission Holdco
AEP Transmission Holdco YTD Summary Key Drivers: YTD-18 vs. YTD-17 YTD-17 YTD-18 $16M favorable Operating Earnings vs. prior $ millions (except EPS) year primarily due to increased revenues and Operating Revenues $767 $804 expenses driven by increased capital Operating Expenses: investment in the
Slide 22: Generation & Marketing
Generation & Marketing 4th Quarter Summary Key Drivers: Q4-18 vs. Q4-17 Q4-17 Q4-18 AEP Dayton ATC liquidations up 16%: $ millions (except EPS) $34.97/MWh in Q4-18 vs. $30.23/MWh in Q4- Operating Revenues $408 $453 17 Operating Expenses: Income Taxes: effective tax rate of (9.6%) Q4-18 Energy Co
Slide 23: Generation & Marketing
Generation & Marketing YTD Summary Key Drivers: YTD-18 vs. YTD-17 YTD-17 YTD-18 Generation decreased 4,088 GWh (49%) YTD-18 $ millions (except EPS) vs. YTD-17 primarily due to sale of plants in Operating Revenues $1,880 $1,941 January 2017 and retirement of Stuart Plant in May 2018. Operating Expe
Slide 24: 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) Q4-18 vs. Q4-17 Q4-18 vs. Q4-17 APCo/WPCo - AEP Ohio $16 I&M $32 AEP Texas $5 KPCo $3 TOTAL $21 PSO $10 SWEPCO ($
Slide 25: 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-18 vs. YTD-17 YTD-18 vs. YTD-17 APCo/WPCo $2 AEP Ohio $21 I&M $112 AEP Texas $23 KPCo $17 TOTAL $44 PSO $38 SWEPCO $3
Slide 26: 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) Q4-18 vs. Q4-17 Q4-18 vs. Q4-17 APCo/WPCo (0.1%) AEP Ohio 0.1% I&M (1.6%) AEP Texas (3.0%) KPCo (1.3%) TOTAL (1.2%) PSO 1.9%
Slide 27: YTD Retail Load Performance
YTD Retail Load Performance Vertically Integrated Utilities Transmission and Distribution Utilities Retail Load1 Retail Load1 (weather (weather normalized) normalized) YTD-18 vs. YTD-17 YTD-18 vs. YTD-17 APCo/WPCo 1.3% AEP Ohio 0.7% I&M 0.1% AEP Texas 0.9% KPCo (0.7%) TOTAL 0.8% PSO 0.9% SWEPCO 0.8%
Slide 28: 4th Quarter Weather Impact
4th Quarter Weather Impact Vertically Integrated Utilities Transmission and Distribution Utilities Weather Impact Weather Impact (in millions) (in millions) Q4-18 vs. Q4-18 vs. Q4-18 vs. Q4-18 vs. Q4-17 Normal Q4-17 Normal APCo/WPCo $7 $15 AEP Ohio - - I&M $2 $5 AEP Texas ($5) ($2) KPCo $1 $3 TOTAL
Slide 29: YTD Weather Impact
YTD Weather Impact Vertically Integrated Utilities Transmission and Distribution Utilities Weather Impact Weather Impact (in millions) (in millions) YTD-18 vs. YTD-18 vs. YTD-18 vs. YTD-18 vs. YTD-17 Normal YTD-17 Normal APCo/WPCo $97 $61 AEP Ohio - - I&M $53 $34 AEP Texas $8 $12 KPCo $21 $11 TOTAL
Slide 30: Current Rate Case Activity
Current Rate Case Activity APCo – West Virginia PSO – Oklahoma Docket #: 18-0646-E-42T Docket #: 201800097 Filing Date: 05/09/2018 Filing Date: 09/26/2018 Requested Rate Base: $4.1B Requested Rate Base: $2.5B Requested ROE: 10.22% Requested ROE: 10.3% Cap Structure: 49.84%D / 50.16%E Cap Structure:
Slide 31: 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 32: Cash Flows and Financial Metrics
Cash Flows and Financial Metrics $ in millions 2019E 2020E 2021E Cash from Operations $ 4,700 $ 4,900 $ 5,300 Capital & JV Equity Contributions (6,500) (6,100) (6,300) Other Investing Activities (300) (400) (100) Common Dividends (1,300) (1,300) (1,400) Excess (Required) Capital $ (3,400) $ (2,900)
Slide 33: 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 12/31/18 12/31/18 $ millions $ millions GAAP Total Debt (incl. current maturities) $25,257 Cash Flow From Operations $5,238 Less: Adjustments: Securitization Bonds (1,117) Chang
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