Citi 2024 Energy Conference
Boston, MA
May 14, 2024
meaning of Section 21E of the Securities Exchange Act of 1934. Although AEP and each based on reasonable assumptions, any such statements may be influenced by factors that
from those projected. Among the factors that could cause actual results to differ
in economic conditions, electric market demand and demographic patterns in AEP disruption of AEP's business operations due to impacts on economic or market conditions, employees' reactions to those regulations, electricity usage, supply chain issues, customers, of escalating global trade tensions including the conflict between Russia and Ukraine, and the
inflationary or deflationary interest rate trends, volatility in the financial markets,
to finance new capital projects and refinance existing debt, the availability and cost of
-
if expected sources of capital, such as proceeds from the sale of assets or subsidiaries, do incurring costs and recovery is long and the costs are material, decreased demand for
and the ability to recover significant storm restoration costs, the cost of fuel and its and transporters and the cost of storing and disposing of used fuel, including coal ash capacity and performance of generation plants, the ability to recover fuel and other
ability to transition from fossil generation and the ability to build or acquire renewable to obtain any necessary regulatory approvals and permits) when needed at acceptable
those costs, new legislation, litigation and government regulation, including changes to commodity trading and new or heightened requirements for reduced emissions of sulfur, substances that could impact the continued operation, cost recovery and/or profitability of legislation on results of operations, financial condition, cash flows or credit ratings, the risks
the fuels used or the byproducts and wastes of such fuels, including coal ash and spent negotiations and other regulatory decisions, including rate or other recovery of new
and environmental compliance, resolution of litigation, the ability to constrain operation and sold at wholesale, changes in technology, particularly with respect to energy storage and the ability to recover through rates any remaining unrecovered investment in generation
useful lives, volatility and changes in markets for coal and other energy-related hanges in utility regulation and the allocation of costs within regional transmission
creditworthiness of the counterparties with contractual arrangements, including participants changes in the ratings of debt, the impact of volatility in the capital markets on the value of plans, captive insurance entity and nuclear decommissioning trust and the impact of such
periodically issued by accounting standard-setting bodies, and other risks and unforeseen (including increased security costs), embargoes, naturally occurring and human-caused
ability to attract and retain requisite work force and key personnel.
1
"Safe Harbor"
Statement Under the
Private Securities
Litigation Reform
Act of 1995
Darcy Reese, Vice President
Investor Relations 614-716-2614 dlreese@aep.com
Annie Pribisko, Director
Investor Relations 614-716-2646 acpribisko@aep.com
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 influenced by factors that could cause actual outcomes and results to be materially different from those projected. Among the factors that could cause actual results to differ materially from those in the forward-looking statements are: changes in economic conditions, electric market demand and demographic patterns in AEP service territories, the economic impact of increased global trade tensions including the conflicts in Ukraine and the Middle East, and the adoption or expansion of economic sanctions or trade restrictions, inflationary or deflationary interest rate trends, volatility and disruptions in the financial markets precipitated by any cause including failure to make progress on federal budget or debt ceiling matters or instability in the banking industry, particularly developments affecting the availability or cost of capital to finance new capital projects and refinance existing debt, the availability and cost of funds to finance working capital and capital needs, particularly (i) if expected sources of capital, such as proceeds from the sale of assets, subsidiaries and tax credits, and anticipated securitizations do not materialize, and (ii) during periods when the time lag between incurring costs and recovery is long and the costs are material, decreased demand for electricity, weather conditions, including storms and drought conditions, and the ability to recover significant storm restoration costs, limitations or restrictions on the amounts and types of insurance available to cover losses that might arise in connection with natural disasters or operations, the cost of fuel and its transportation, the creditworthiness and performance of fuel suppliers and transporters and the cost of storing and disposing of used fuel, including coal ash and spent nuclear fuel, the availability of fuel and necessary generation capacity and performance of generation plants, the ability to recover fuel and other energy costs through regulated or competitive electric rates, the ability to transition from fossil generation and the ability to build or acquire renewable generation, transmission lines and facilities (including the ability to obtain any necessary regulatory approvals and permits) when needed at acceptable prices and terms, including favorable tax treatment, meet cost caps imposed by regulators and other operational commitments to regulatory commissions and customers for renewable generation projects, and to recover all related costs, the impact of pandemics and any associated disruption of AEP's business operations due to impacts on economic or market conditions, costs of compliance with potential government regulations, electricity usage, supply chain issues, customers, service providers, vendors and suppliers, new legislation, litigation or government regulation, including changes to tax laws and regulations, oversight of nuclear generation, energy commodity trading and new or heightened requirements for reduced emissions of sulfur, nitrogen, mercury, carbon, soot or particulate matter and other substances that could impact the continued operation, cost recovery and/or profitability of generation plants and related assets, the impact of federal tax legislation on results of operations, financial condition, cash flows or credit ratings, the risks before, during and after generation of electricity associated with the fuels used or the byproducts and wastes of such fuels, including coal ash and spent nuclear fuel, timing and resolution of pending and future rate cases, negotiations and other regulatory decisions, including rate or other recovery of new investments in generation, distribution and transmission service and environmental compliance, resolution of litigation or regulatory proceedings or investigation, the ability to efficiently manage operation and maintenance costs, prices and demand for power generated and sold at wholesale, changes in technology, particularly with respect to energy storage and new, developing, alternative or distributed sources of generation, the ability to recover through rates any remaining unrecovered investment in generation units that may be retired before the end of their previously projected useful lives, volatility and changes in markets for coal and other energy-related commodities, particularly changes in the price of natural gas, the impact of changing expectations and demands of customers, regulators, investors and stakeholders, including focus on environmental, social and governance concerns, changes in utility regulation and the allocation of costs within regional transmission organizations, including ERCOT, PJM and SPP, changes in the creditworthiness of the counterparties with contractual arrangements, including participants in the energy trading market, actions of rating agencies, including changes in the ratings of debt, the impact of volatility in the capital markets on the value of the investments held by the pension, other postretirement benefit plans, captive insurance entity and nuclear decommissioning trust and the impact of such volatility on future funding requirements, accounting standards periodically issued by accounting standard-setting bodies, and other risks and unforeseen events, including wars and military conflicts, the effects of terrorism (including increased security costs), embargoes, wildfires, cyber security threats and other catastrophic events, the ability to attract and retain requisite work force and key personnel.
Citi 2024 Energy Conference | 2 |
AEP Is a Pure
Play Regulated
Utility
40K | $98B |
TRANSMISSION MILES | TOTAL ASSETS |
Nation's largest electric | Strong balance sheet |
transmission system | As of March 31, 2024 |
225K | $66B |
DISTRIBUTION MILES | RATE BASE |
One of the largest distribution | Solid rate base growth |
systems in the U.S. | |
23GW | $48B |
OWNED GENERATION | CURRENT MARKET |
Diverse generation fleet | CAPITALIZATION |
As of March 31, 2024 | As of May 10, 2024 |
17,000
EMPLOYEES
Across the system
5.6M
CUSTOMERS
Throughout 11 states
Statistics are as of December 31, 2023, unless separately disclosed.
Citi 2024 Energy Conference | 3 |
AEP Investment Thesis
Powering the Future as One of the Largest Utilities in the U.S. by Rate Base and Market Cap
Delivering Consistent, Strong Performance
- Commitment to 6%-7% annual operating earnings growth; dividend growth is in line with earnings
- 10%-11%consistent total shareholder return
- Strong balance sheet with a targeted FFO/Debt of 14%-15%
- 2024 operating earnings guidance range of $5.53-$5.73
- Advancing positive regulatory strategies to close the ROE gap
Operating Attractive Transmission and Distribution Assets
- Largest transmission provider in the U.S. and one of the largest distribution providers in the U.S.
- Bolstered by organic growth with diversity in geographic footprint and customer base
- Flexible and robust capital plan of $43B includes $16B of transmission investment and $11.3B of distribution investment
- High-growthtransmission business supported by stable, predictable and transparent revenue stream
Leading the Clean Energy Transition
- Proven track record of investing in sustainability and reducing fleet emissions
- Plans to add 20 GW of new resource opportunities between 2024 and 2033
- Target of net zero by 2045
- Capital forecast includes $9.4B of regulated renewable investment
Focusing on the Customer and Actively Managing the Business
- Improved customer rate outlook with a 3% annual bill increase over the 2024- 2028 forecasted period enabled by renewables and economic development activities
- Immediate-termfocus on simplifying business; continued execution of sale processes
- Thoughtful and proactive portfolio management and investment to support strategy
- Strong employee base led by experienced leaders with a shared passion for the AEP mission
Citi 2024 Energy Conference | 4 |
Proven Track
Record of EPS
Performance
Over a decade of meeting or exceeding original EPS guidance
- 2024 operating EPS guidance is $5.53-$5.73.
Actual Result
Citi 2024 Energy Conference
Actual operating EPS in comparison to original EPS guidance range
LOW | MID |
END | POINT |
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
20241
HIGH | EXCEEDING |
END | GUIDANCE RANGE |
5
Strong Dividend Growth
Targeted payout ratio 60-70% of operating earnings
Over 113 years of consecutive quarterly dividends
Targeted dividend growth in line with earnings
- Targeted dividend growth is in-line with 6%-7% annual operating earnings growth, subject to approval by Board of Directors.
$4.00
$3.58
$3.50 | $3.37 | ||||||
$3.17 | |||||||
$3.00 | |||||||
$3.00 | $2.84 | ||||||
$2.71 | |||||||
$2.39 | $2.53 | ||||||
$2.50 | |||||||
$2.27 | |||||||
$2.15 | |||||||
$1.95 | $2.03 | ||||||
$1.88 | |||||||
$1.85 | |||||||
$2.00 | |||||||
$1.71 |
$1.50
$1.00
$0.50
$- | ||||||||||||||||||
2024E1 | ||||||||||||||||||
2010 | 2011 | 2012 | 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | |||||
4%-6% | 5%-7% | 6%-7% | ||||||||||||||||
Earnings Growth Rate
EPS Growth + Dividend Yield = 10% to 11% Annual Return Opportunity
Citi 2024 Energy Conference | 6 |
Positioning for the Future
2024-2028 Capital Forecast
Rate Base Growth
Efficient Cost Recovery Mechanisms
2024-2028 Cash Flows and Financial Metrics
Citi 2024 Energy Conference | 7 |
2024-2028 Capital Forecast of $43B
The ability to quickly redeploy transmission and distribution investment ensures we deliver on our 6-7% EPS growth commitment while mitigating customer bill impact
On a system average, we expect rates to go up approximately 3% annually over the forecasted period
A balanced, flexible and robust capital plan designed to meet our customers needs
Regulated New | ||
Other Generation | Nuclear | Generation |
$1.2B • 3% | $0.5B • 1% | |
Generation | ||
Corporate | ||
$0.4B • 1% | $3.5B • 8% | |
Regulated | ||
Environmental | ||
Generation | ||
$0.3B • 1% | ||
Distribution | ||
$11.3B • 27% | ||
Regulated | ||
Renewables | $43B | |
$9.4B • 22% | TOTAL | |
AEP Transmission
Transmission $9.8B • 23%
Holdco
$6.2B • 14%
100%
of capital allocated to regulated businesses
$27B 64%
allocated to wires
$9B 22%
allocated to regulated renewables
7.2%
resulting rate base
CAGR
Citi 2024 Energy Conference | 8 |
2024-2028 Capital Forecast by Subsidiary
Capital plans are continuously optimized which may result in redeployment between functions and companies.
$ in millions, excludes AFUDC
Appalachian Power Company
Wheeling Power Company
Kingsport Power Company
Indiana Michigan Power Company
Kentucky Power Company
AEP Ohio
Public Service Company of Oklahoma
Southwestern Electric Power Company
AEP Texas Company
AEP Generating Company
AEP Transmission Holdco
Other
2024E
- 963 $ 85 $ 30
- 579
- 166
- 1,034 $ 569
$ 1,176
- 1,533 $ 10
- 1,338 $ 61
2025E
- 1,447 $ 59 $ 24 $ 923 $ 158 $ 883
$ 1,848
$ 2,242
- 1,420 $ 6
- 1,031 $ 184
2026E
- 1,400 $ 64 $ 28
- 1,101 $ 164 $ 855
$ 1,580
$ 736
- 1,451 $ 6
- 1,094 $ 92
2027E
- 865 $ 52 $ 21
- 827
- 163
- 922
- 710
$ 856
- 1,349 $ 7
- 1,203 $ 113
2028E
- 1,063 $ 60 $ 22
- 1,388 $ 185 $ 872 $ 749
$ 1,650
- 1,448 $ 5
- 1,574 $ 111
Total
- 5,738 $ 320 $ 125
- 4,818 $ 836
- 4,566
- 5,456
$ 6,660
- 7,201 $ 34
- 6,240 $ 561
Total Capital and Equity Contributions
$ 7,544 | $ 10,225 | $ 8,571 | $ 7,088 | $ 9,127 | $ 42,555 |
Citi 2024 Energy Conference | 9 |
7.2% CAGR in Rate Base Growth
Cumulative change from 2020 base
6-7% EPS growth is predicated on regulated rate base growth
2020 RATE BASE PROXY | |
Vertically Integrated Utilities | $27.2B |
T&D Utilities | $13.8B |
Transcos/Transource | $9.4B |
TOTAL | $50.4B |
(in billions) | |||||||||||||||||||||||||
$22 | |||||||||||||||||||||||||
$21 | |||||||||||||||||||||||||
$37.3B | |||||||||||||||||||||||||
$20 | |||||||||||||||||||||||||
$32.4B | |||||||||||||||||||||||||
$19 | |||||||||||||||||||||||||
$18.0 | |||||||||||||||||||||||||
$18 | |||||||||||||||||||||||||
$29.5B | |||||||||||||||||||||||||
$17 | |||||||||||||||||||||||||
$16 | $15.5 | ||||||||||||||||||||||||
$14.7 | |||||||||||||||||||||||||
$15 | $24.8B | ||||||||||||||||||||||||
$14 | |||||||||||||||||||||||||
$13 | |||||||||||||||||||||||||
$18.1B | $12.1 | $12.3 | |||||||||||||||||||||||
$12 | |||||||||||||||||||||||||
$10.9 | |||||||||||||||||||||||||
$11 | |||||||||||||||||||||||||
$15.4B | |||||||||||||||||||||||||
$10 | $9.5 | ||||||||||||||||||||||||
$11.4B | |||||||||||||||||||||||||
$9 | $8.0 | ||||||||||||||||||||||||
$8 | $7.6 | $7.6 | $7.0 | ||||||||||||||||||||||
$7 | $5.6B | $6.6 | $6.3 | $6.0 | |||||||||||||||||||||
$6 | |||||||||||||||||||||||||
$4.7 | $5.3 | ||||||||||||||||||||||||
$5 | $4.5 | ||||||||||||||||||||||||
$4.2 | |||||||||||||||||||||||||
$4 | $3.5 | $3.3 | |||||||||||||||||||||||
$3 | $2.5 $2.3 | ||||||||||||||||||||||||
$2 | |||||||||||||||||||||||||
$1.1 $1.0 | |||||||||||||||||||||||||
$1 | |||||||||||||||||||||||||
$0 | |||||||||||||||||||||||||
2021A | 2022A | 2023A | 2024E | 2025E | 2026E | 2027E | 2028E | ||||||||||||||||||
Vertically Integrated Utilities | T&D Utilities | Transcos/Transource | |||||||||||||||||||||||
Citi 2024 Energy Conference | 10 |
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AEP - American Electric Power Company Inc. published this content on 15 May 2024 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 15 May 2024 11:06:47 UTC.