American Electric Power Company, Inc. · NASDAQ:AEP
American Electric Power — Q4 2021 Earnings Presentation
48 slides from American Electric Power's earnings presentation, Feb 24, 2022
Slide 1: 4th Quarter 2021 Earnings Release Presentation
4th Quarter 2021 Earnings Release Presentation February 24, 2022
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: Pure Play Regulated Utility
Pure Play Regulated Utility 16,700 EMPLOYEES 25GW OWNED GENERATION 5.5M CUSTOMERS, 11 STATES 40,000 TRANSMISSION MILES LARGEST IN THE U.S. $88B TOTAL ASSETS 224,000 DISTRIBUTION MILES $56B RATE BASE $43B CURRENT MARKET CAPITALIZATION Statistics as of December 31, 2021 except for market capitalizatio
Slide 5: AEP's Strategic Vision and Execution
AEP’s Strategic Vision and Execution Execute Strategy Top Priorities Clean • Transform all parts of our business to align with AEP emission reduction goals Lead the transformation to a clean • Improve the reliability and resiliency of the grid to facilitate a clean energy economy for energy economy
Slide 6: 2021 Highlights
2021 Highlights Financial Performance Strong GAAP earnings of $1.07/share in Q4-21 and $4.97/share YTD-21 Strong operating earnings of $0.98/share in Q4-21 and $4.74/share YTD-21 Regulated ROE of 9.2% with improved equity layers Navigated Storm Uri while maintaining balance sheet Increased
Slide 7: Focus for 2022
Focus for 2022 Raise 2022 Earnings Guidance, Long-term Growth Rate and Targeted FFO/Debt $4.87 – $5.07 6% – 7% 14.0% – 15.0% 2022 Operating Earnings Guidance Long-Term Growth Rate FFO/Debt Target Previous: $4.85 – $5.05 Previous: 5% – 7% Previous: 13.5% – 15.0% • Commission NCW – Traverse in Q1-22,
Slide 8: Commitment to Regulated Renewables
Commitment to Regulated Renewables 0.5 GW 15 GW 16 GW North Central Wind 2022-2030 Regulated Renewable In-Service in 2021 Opportunity by 2030 Commission 1 GW NCW – Traverse site in Q1-22 409 MW owned resources filed for approval at APCo in Q4-21 Renewable RFPs in progress at APCo, I&M, PSO and SWEPC
Slide 9: Current Regulated Renewables Opportunity
Current Regulated Renewables Opportunity Wind Additions Solar Additions Included in Included in 2022-2030 2022-2026 2022-2030 2022-2026 Company Company (MW) Capital Plan (MW) Capital Plan (MW / billions) (MW / billions) APCo 1,504 803 $ 1.3 APCo 629 292 $ 0.5 I&M 800 400 $ 0.6 I&M 1,300 195 $ 0.4 PS
Slide 10: 4th Quarter 2021 Financial Update
4th Quarter 2021 Financial Update 4TH QUARTER 2021 $1.07 $0.98 $0.88 $0.87 2020 2021 2020 2021 Reported Strongest- GAAP EPS OPERATING EPS Ever Fourth Quarter Earnings Driven by Execution and 2020 2021 2020 2021 YTD 2021 Portfolio $4.97 Performance $4.74 $4.44 $4.44 2019 2020 2021 2020 2020 2019 2021
Slide 11: 4th Quarter Operating Earnings Segment Detail
4th Quarter Operating Earnings Segment Detail 0.06 0.01 (0.10) 0.06 $0.98 PER SHARE 0.08 $0.87 PER SHARE Rate Changes $0.14 Rate Changes $0.02 Invest Growth $0.06 Generation $(0.03) O&M $0.02 Weather $(0.01) Weather $(0.03) Wholesale $0.01 Investment Gain $(0.06) Normal Load $(0.06) Normal Load $0.0
Slide 12: YTD Operating Earnings Segment Detail
YTD Operating Earnings Segment Detail 0.32 (0.10) (0.04) $4.74 PER SHARE 0.07 $4.44 0.05 PER SHARE Rate Changes $0.29 Rate Changes $0.09 Invest Growth $0.22 Generation $0.02 O&M $(0.01) Weather $0.12 Weather $(0.01) Annual True-Up $0.10 Retail $(0.03) Interest $(0.01) Normal Load $(0.05) Normal Load
Slide 13: 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% 5.2% 5.0% 4.3% 4.3% 5% 5% 1.5% 0% 0% -1.1% -0.4% -1.6% -0.8% -1.6% -1.9% -2.1% -5% -5% -3.1% -10% -10% -15% -15%
Slide 14: Capitalization & Liquidity
Capitalization & Liquidity Total Debt/Total Capitalization Credit Statistics 1 62.2% 62.1% 61.4% 59.8% 61.8% Moody’s GAAP 55.9% 55.5% 57.0% FFO to Total Debt 9.9% 9.8% Adj FFO to Total Debt1 13.3% 13.2% Targeted Range 14.0%-15.0% Represents the trailing 12 months as of 12/31/2021 See Appendix for re
Slide 15: Setting the Foundation for 2022
Setting the Foundation for 2022 • Achieved strong 2021 operating earnings in upper half of earnings guidance range • Maintaining disciplined approach to capital allocation • Executing on regulated renewables • Delivering successful regulatory outcomes • Closing of Kentucky sale expected in Q2-22 • B
Slide 16: Appendix – 2021 Performance
APPENDIX – 2021 PERFORMANCE 16
Slide 17: 4th Quarter Reconciliation of GAAP to Operating Earnings
4th Quarter Reconciliation of GAAP to Operating Earnings $ in millions Earnings Per Share Q4-20 Q4-21 Change Q4-20 Q4-21 Change Reported GAAP Earnings $ 436 $ 539 $ 103 $ 0.88 $ 1.07 $ 0.19 Non Operating Items: Mark-to-Market Impact of Commodity 4 19 15 0.01 0.04 0.03 Hedging Activities1 Impact of C
Slide 18: YTD Reconciliation of GAAP to Operating Earnings
YTD Reconciliation of GAAP to Operating Earnings $ in millions Earnings Per Share YTD-20 YTD-21 Change YTD-20 YTD-21 Change Reported GAAP Earnings $ 2,200 $ 2,488 $ 288 $ 4.44 $ 4.97 $ 0.53 Non Operating Items: Mark-to-Market Impact of Commodity (6) (72) (66) (0.01) (0.14) (0.13) Hedging Activities1
Slide 19: Vertically Integrated Utilities
Vertically Integrated Utilities 4th Quarter Summary Key Drivers: Q4-21 vs. Q4-20 $ in millions (except EPS) Q4-20 Q4-21 Rate Changes: $88M favorable vs. prior year primarily from rate increases at APCo, KPCo, Operating Revenues $ 2,158 $ 2,441 PSO and SWEPCO Operating Expenses: Normal Load: $37M
Slide 20: Vertically Integrated Utilities
Vertically Integrated Utilities YTD Summary Key Drivers: YTD-21 vs. YTD-20 $ in millions (except EPS) YTD-20 YTD-21 Rate Changes: $184M favorable vs. prior year primarily from rate increases at APCo, I&M KPCo, Operating Revenues $ 8,911 $ 9,998 PSO and SWEPCO, and a formula rate true-up at I&M Ope
Slide 21: Transmission and Distribution Utilities
Transmission and Distribution Utilities 4th Quarter Summary Key Drivers: Q4-21 vs. Q4-20 $ in millions (except EPS) Q4-20 Q4-21 Rate Changes: $13M favorable vs. prior year primarily from the Texas DCRF, Ohio DIR and Operating Revenues $ 1,039 $ 1,101 gridSMART, partially offset by the roll-off of
Slide 22: Transmission and Distribution Utilities
Transmission and Distribution Utilities YTD Summary Key Drivers: YTD-21 vs. YTD-20 $ in millions (except EPS) YTD-20 YTD-21 Rate Changes: $59M favorable vs. prior year primarily from the Texas DCRF, Ohio DIR and Operating Revenues $ 4,346 $ 4,493 gridSMART, partially offset by the roll-off of Oper
Slide 23: AEP Transmission Holdco
AEP Transmission Holdco 4th Quarter Summary Key Drivers: Q4-21 vs. Q4-20 $ in millions (except EPS) Q4-20 Q4-21 $31M favorable Operating Earnings vs. prior year primarily due to increased transmission Operating Revenues $ 321 $ 379 investment Operating Expenses: Operations and Maintenance (33) (35
Slide 24: AEP Transmission Holdco
AEP Transmission Holdco YTD Summary Key Drivers: YTD-21 vs. YTD-20 $ in millions (except EPS) YTD-20 YTD-21 $165M favorable Operating Earnings vs. prior year primarily due to increased transmission Operating Revenues $ 1,199 $ 1,526 investment and the annual true-up Operating Expenses: Operations
Slide 25: Generation & Marketing
Generation & Marketing 4th Quarter Summary Key Drivers: Q4-21 vs. Q4-20 $ in millions (except EPS) Q4-20 Q4-21 Generation decreased 768 GWh or 78% Q4-21 vs. Q4-20 primarily due to unplanned outages at Operating Revenues $ 426 $ 496 Cardinal plant Operating Expenses: AEP Dayton ATC liquidations u
Slide 26: Generation & Marketing
Generation & Marketing YTD Summary Key Drivers: YTD-21 vs. YTD-20 $ in millions (except EPS) YTD-20 YTD-21 Generation increased 77 GWh or 2% YTD-21 vs. YTD-20 primarily due to higher market prices in Operating Revenues $ 1,718 $ 2,072 PJM which drove increased generation at Operating Expenses: Car
Slide 27: 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) Q4-21 vs. Q4-20 Q4-21 vs. Q4-20 APCo/WPCo $13 AEP Ohio $5 I&M $3 AEP Texas $8 KPCo $8 Total $13 PSO $10 SWEPC
Slide 28: YTD Rate Performance
YTD Rate Performance Vertically Integrated Utilities Transmission and Distribution Utilities Rate Changes, net of Rate Changes, net of offsets ($ in millions) offsets ($ in millions) YTD-21 vs. YTD-20 YTD-21 vs. YTD-20 APCo/WPCo $14 AEP Ohio $8 I&M $53 AEP Texas $51 KPCo $35 Total $59 PSO $19 SWEPCO
Slide 29: 4th Quarter Weather Impact
4th Quarter Weather Impact Vertically Integrated Utilities Transmission and Distribution Utilities Weather Impact Weather Impact ($ in millions) ($ in millions) Q4-21 vs. Q4-21 vs. Q4-21 vs. Q4-21 vs. Q4-20 Normal Q4-20 Normal APCo/WPCo $(6) $(23) AEP Ohio $(14) $(14) I&M $2 $(5) AEP Texas $(3) $(4)
Slide 30: YTD Weather Impact
YTD Weather Impact Vertically Integrated Utilities Transmission and Distribution Utilities Weather Impact Weather Impact ($ in millions) ($ in millions) YTD-21 vs. YTD-21 vs. YTD-21 vs. YTD-21 vs. YTD-20 Normal YTD-20 Normal APCo/WPCo $24 $(12) AEP Ohio $(14) $(14) I&M $16 $11 AEP Texas $7 - KPCo $3
Slide 31: 4th Quarter Retail Load Performance
4th Quarter Retail Load Performance Vertically Integrated Utilities Transmission and Distribution Utilities Retail Load1 Retail Load1 (weather normalized) (weather normalized) Q4-21 vs. Q4-20 Q4-21 vs. Q4-20 APCo/WPCo (0.2)% AEP Ohio 3.2% I&M (0.8)% AEP Texas 4.3% KPCo 0.3% Total 3.7% PSO 1.2% SWEPC
Slide 32: YTD Retail Load Performance
YTD Retail Load Performance Vertically Integrated Utilities Transmission and Distribution Utilities Retail Load1 Retail Load1 (weather normalized) (weather normalized) YTD-21 vs. YTD-20 YTD-21 vs. YTD-20 APCo/WPCo 1.6% AEP Ohio 4.4% I&M 1.3% AEP Texas 2.5% KPCo - Total 3.6% PSO 2.0% SWEPCO (1.7)% Im
Slide 33: Industrial Sales Growth
Industrial Sales Growth AEP Industrial GWh Growth 20% $75 15.7% 9.7% 10% 6.7% 7.4% 6.0% Growth vs Prior Year 4.9% 4.0% $50 1.3% 0% -0.9% -1.3% -3.3% -4.7% -5.5% -4.6% -6.6% $25 -10% -8.7% Oil & Gas Related Sectors -9.6% Non-Oil & Gas Related Sectors Oil Price -16.8% -20% $- Q4-19 Q1-20 Q2-20 Q3-20 Q
Slide 34: Economic Data – AEP Service Territory
Economic Data – AEP Service Territory GDP Growth by Quarter Employment Growth by Quarter 12% 12% 12.2% 8.5% 6% Growth vs Prior Year Growth vs Prior Year 6% 6.1% 6.2% 4.9% 5.5% 4.7% 4.4% 4.3% 4.1% 3.4% 0.5% 1.2% 1.4% 0% 0% -1.5% -2.3% -2.2% -4.2% -6.0% -5.6% -6% -6% US AEP US AEP -12% -12% Q4-20 Q1-2
Slide 35: 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 12/31/2021 12/31/2021 (in millions) (in millions) GAAP Total Debt $ 36,062 Cash Flow from Operations $ 4,949 (incl. current maturities) Less: Adjustments: Securitization Bonds (
Slide 36: Appendix – Regulatory and Renewables
APPENDIX – REGULATORY AND RENEWABLES 36
Slide 37: Regulatory Timeline of Kentucky Sale
Regulatory Timeline of Kentucky Sale In October 2021, AEP entered into an agreement to sell its Kentucky operations to Algonquin Power & Utilities for an enterprise value of $2.846B. The sale is expected to close in Q2-22 pending regulatory approvals. Nov Dec Jan Feb Mar Apr May June AEP Filings 202
Slide 38: Regulated Returns and Authorized Equity Layers
Regulated Returns and Authorized Equity Layers Twelve Months Ended 12/31/2021 Earned ROE’s (non-GAAP operating earnings, not weather normalized) 16% 14% 12/31/2021 Regulated 12% 11.4% Operations ROE of 10% 9.5% 10.0% 9.2% 8.6% 8.7% 8% 7.9% 6.2% 6.8% Operating companies supported by 6% Transmission H
Slide 39: Recent Major Regulatory Execution
Recent Major Regulatory Execution Indiana Michigan • Base rate case settlement APPROVED • Filing IRP to establish presumption for • Rockport Unit 2 settlement APPROVED – gives renewable additions in February 2022 AEP control ensuring retirement by 2028 • Filed IRP in January 2022 Ohio • Base rate ca
Slide 40: Current Rate Case Activity
Current Rate Case Activity AEP Ohio APCo – Virginia Docket # 20-0585-EL-AIR Docket # PUR-2020-00015 Filing Date 6/1/2020 Filing Date 3/31/2020 Requested Revenue Increase $402M Requested Rate Base $2.5B Requested Rate Base $3.105B Requested ROE 9.9% Requested ROE 10.15% Cap Structure 50%D / 50%E Cap
Slide 41: 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 $172M3 Gross Reven
Slide 42: 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 43: Regulated Renewable Projects and RFPs
Regulated Renewable Projects and RFPs Owned Renewable Projects Currently Seeking Regulatory Approval Projected Regulatory filing date: Resource Project MWs In-Service Date December 30, 2021 Solar Amherst / Virginia 5 Q4-22 Expected Order: Solar Bedington / West Virginia 50 Q4-23 July 2022 Solar Fire
Slide 44: North Central Wind Overview
North Central Wind Overview PSO and SWEPCO Regulated Wind Investment Total Rate Base Investment ~$2 billion (1,484 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 45: Appendix – Financial
APPENDIX — FINANCIAL AMERICAN eeEOOO [ae
Slide 46: 2022 Operating Earnings Segment Detail
2022 Operating Earnings Segment Detail 0.17 (0.08) 0.05 $4.97/sh (0.04) 2022 EPS Midpoint 0.13 $4.74/sh 2021 Operating EPS Rate Changes $0.52 Rate Changes $0.21 Invest Growth $0.12 Renewables $0.02 Investment Gain $(0.05) Retail Load $(0.03) Retail Load $0.06 True-up $(0.11) Retail $0.06 Interest $(
Slide 47: 2022-2026 Capital Forecast of $38B
2022-2026 Capital Forecast of $38B Regulated IT/Workplace Services Fossil/Hydro Generation $2.5B • 7% $1.0B • 3% Nuclear Generation Regulated Environmental Generation $0.3B • 1% $0.6B • 1% Regulated New Generation $0.4B • 1% Generation & Marketing $0.4B • 1% The ability to quickly redeploy Distribut
Slide 48: 2022-2026 Cash Flows and Financial Metrics
2022-2026 Cash Flows and Financial Metrics Cash proceeds related to sale of contracted renewable assets within the unregulated business are not included below. $ in millions 2022E 2023E 2024E 2025E 2026E Cash from Operations $ 5,600 $ 6,100 $ 6,400 $ 6,900 $ 7,400 Net Cash Proceeds from Sale of Kent
American Electric Power Company — Q4 2021 Earnings Presentation on 6ix