AEP - Earnings call transcript Q4 2017 | American Electric Power Company, Inc.

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Operator

Ladies and gentlemen, thank you for standing by, and welcome to the American Electric Power Fourth Quarter 2017 Earnings conference call. At this time, all participants are in a listen-only mode, and later we will conduct a question and answer session. Instructions will be given at that time.

If you should require assistance during today’s call, please press star followed by zero. An operator will assist you offline.

conference recorded your reminder, a is today. being As conference to your will now Ms. over the turn I host, call Betty Jo Rozsa. Please go ahead.

Betty Jo Rozsa

Thank call Power. everyone quarter the you, and welcome us join to morning Tawanda. today. the time to XXXX for you Thank earnings Electric American for taking Good fourth

results available There may will Our forward-looking be these presentation are statements related differ are at that website to during financial and release, our these these factors. filings aep.com. refer call. many from making cause factors our earnings to information of for the statements. slides, on materially Today we discussion a Please SEC

presentation the presentation. Our Please of applicable information. GAAP financial measures the to includes today’s also provided non-GAAP of reconciliation refer to the in references appendix

remarks Financial Officer. morning Akins, Executive me Nick Chief and for our Chief and President Joining Brian our Officer, opening are Tierney, Chairman, this

to call will questions turn We your take the their remarks. now Nick. will I over following

Nicholas Akins

the joining Walkers everyone third the the of of Thanks for I ended you Betty of many mentioned move spent we for was didn’t watch those in winter who morning of Wall earnings to strong. quarter in at it Good are know I North White AEP’s Thrones, up the beginning quarter very but the really Jo. heat definitely summer you happy and but we mirror call for Game say get the show dragons Khaleesi’s - cold. of the would us earnings I onto and view fourth XXXX that XXXX today XXXX call. rear for XXXX, thank

chicken the on that family so XX members was football I outside weather New of Year’s a As could the again. had during cold my comfort for I wings. a one great in our spell. grilling fact, games, that as degree customers in I Day cold matter as was outside idea wings barbecue warm all though don’t this was to sold lot a But do of shareholder, all, I I’ll inside think I of we

utility fourth total per So $X.XX XXXX, This very quarter, in for in at our end operating share GAAP total leading to fashion per $X.XX starting into have XXXX versus per brought operating at at AEP’s in earnings XXXX, the consistently the five-year regulated guidance, total $X.XX share return, the three share per with with and and periods $X.XX comparable at share premium consistently earnings in wide very shareholder came and S&P good for outperformed share the definition landed to S&P share earnings per GAAP the versus XXX XXXX top $X.XX the of we by and XXXX, provided of our a per XXX ended financial per returns electric we and XXXX. performance revised the $X.XX per versus to XXXX a share looking in share so index, last in utilities year-to-date one, earnings The and share $X.XX over margin per $X.XX company. XXXX. $X.XX we year-to-date

by return year quarterly to case rate need service even X.X% in AEP year, at while for the operating our XXXX a recovery, in regulated Our the very provided we the quality our for customers. X.X%, headwinds came the increased dividend and weather ROE respectable providing investors and of with so to

and devastated as rebuilding with them certainly support AEP well well wish a in AEP We as the territory, result as to business, have Hurricane XXXX. a Harvey, our expectations our Our employees meeting significant in dealt played events a continue Florida We hit to which there in return. helping drive safe Puerto recovery as of efforts in and role which direct with Texas with major storm shareholder provided certainly was Irma. currently a Hurricane Rico efficiencies across employees

operating For range are of maintaining reaffirming guidance to per our growth XXXX, X% $X.XX $X.XX rate share X and the we of year earnings. for to our

to Tax being investing and vast and of customers. We be to taking asked of will $X component I reform that the what outcomes I be stage. provide to to recently in a allocation song that related regulated has capital good for capital billion Obviously financial rate jurisdictions this will discuss at our center would wires to quality was be in definitely objectives. been entities, and a service it illustrate quarter has be the allocation forefront, by substantially to the in the reliability key the the us Disciplined later of one meet decisions. Beatles. majority key our pick these for case the execution be quarter, various will will Taxman with

to As - accelerated growth trajectory. In consistent that it customers reductions, well, or our rate commissions adjust of customers, whether tax additional the opportunities. value no reform, our we our quality, we our provide focus benefits outcome and reform capital depreciation, also with are allocation is of working as be credit to maintaining capital, ensuring our to other state different case, projects this provide tax

discuss beyond of also, metrics, the later. a last to little what financial are we significant because conference. strong able maintain plans a capital not bit any our portion credit this Brian issuing We additional EEI provided while investment will of our equity at

have early cases Indiana, Texas, in as and we we still case we that filed Kentucky, Michigan, in were case ESP outstanding Ohio several have were that Rate XXXX know, the XXXX. you made and we in outcome generally Oklahoma As well. that outcomes filings an expect rate await in

project state Texas, Catcher we’ve know, Louisiana Wind Arkansas. all regulatory approvals you as and Oklahoma, in for the for filed Additionally,

basis putting regulatory pleased opposition very benefits jurisdictions timely a all in cases complete but The forward in on Sure, in with approvals. jurisdictions. the the I’m overall various be investors Catcher, Wind largely for continue the our what of regarding to do, teams teams the the interveners demonstrated First do have are in schedules to project. path our

the a such communities it trust economies all where is and this strongly we to of our Day testament other a settlement states are environment, investors will Catcher occur, provide serve, benefits AEP the involved. balance needs they customers. something because having also to the are our very to our continue good believe do can the so and to stakeholders. opportunity, trying really Wind benefits our do on our the risk the in unique AEP take for this and project to willingness is to provide that customers of to to customers a providing discussions We where we X project customers, service our Because our has public we customers appropriate. with is a we while we’ll associated critical advancing and and with

where will plan, continue the forward. Oklahoma a many generally Texas get rate-related AEP, in and answer let constructive, customers as All We the the Kentucky unique in quarters cases cases according are to couple in are to Commission move and in in received hedge moving well await jurisdictions. critical and this as travesty this pass, have it and been orders and an remain this questions ESP certainly the next done. against and orders case of to in confident very Michigan Ohio. and All make project, and absolute we regulators ROE Indiana, happen. this that were the need be my rate the I to of our market time In mind, would life our will it is that these

make We send to business commission the AEP is are revise continue certainly to the substantial to infrastructure allow will in hopeful the truly state. Oklahoma in for that ALJ’s message rate energy in the and Oklahoma recommendation that that case a open investments

arrest will the that X% we its given a in the X.X% ROE are be ROE, be Oklahoma. our the an these satisfaction, recovering and and best to in actually case, ALJ case fair disappointing rate After AEP’s trend. previously, approved lowest We the explained would With quality service As other return authorized we we form recommendation able the recommendation best our just but previous investments of have hopeful current has our ALJ unattractive a ROE, X% opportunities. presence investment have this a customer on negative only Oklahoma attract rates. need on to disappointing results a only if commission and

is credit Moody’s, is PSO more result on outlook important. by negative that even positive a Now

move the cases graph that equalizer have explain and of to the ongoing. some So we now I’ll

all, overall delays some to had continued have the impacted that have ’XX during ROE, we period First XX-month a into we’ve of the ’XX, X.X% overall. as moved and weather year has over well certainly and

of hear across that the graph. You’ll cases many in equalizer the going

roll there. in bubbles look Those had ROE closer at AEP a in that move right legacy ’XX, of the global XX.X% settlements we’re end same so we XXXX at roll were was so in bubble for Ohio roll over those been we’re Ohio, that ROE, So - to AEP off earlier, together see to in place legacy as keep will become in you’ll when you but issues issues AEP the the in really you the start some and two ’XX, off that includes the have that come Ohio, XX.X%, done off some fourth the from mind seed-adjusted fact so around XX% good resolved for time quarter forward.

overall weather little given year. million is of progress; it it an so final a that rate good and certainly X.X%, at fourth the the quarter, are entire settlement Kentucky a APCo moving rate was reform. making place the was the the That now. work APCo X.X% progress up impacts end case. a year. of quarter more quarter, concerned, case, a far should As was--the the at It approved we third actually It for in obviously--that there even it $XX.X was for again, which Power, for They’re as the last third of of a the the was ROE end order reflects X.X%, tax of was right at they up so move at we end but have now adjusted X.X% increase, outcome ROE it’s bit.

will was all, all solution though, So in only rates perspective. again--the of Kentucky it. outcome Long-term for part a Power, from constructive that

getting in and relative X.X% development is cases of good those progress territories, quarters. an you I&M end our other economic and so have our expect outcome, next large there case would ROE in and the we we quarter at some the regions, jurisdictions, and XXXX, expect that’s we to is couple Again, of of those Michigan of achieved occurring the The manufacturing both of placements to from an unchanged improve. outcome Indiana filed the case, fourth rate positive a continue that’s those know that are third in in quarter. probably which

that those cases So forward should move I&M. improve and help to certainly

as looking the that well, that at we’re making. coming of bode That already to at in with forward As Public for at of of the X.X%, we move so improve the pretty end of quarter a quarter for fourth the to at concerned, the final we’re hopefully case on at third at end we fourth have PSO and extensively associated and end a very ALJ this PUCT ROE outcome the is We was it epicenter well. get will ROE as X.X% SWEPCO, so recommendations far commission quarter in Their was good versus we’ve expect ROE point as Wind constructive, well case, of of the the cases at an certainly continuation expect case, point. which Texas, was and a of Oklahoma rate that investments talked the the of that did the Oklahoma SWEPCO is activity X.X% soon. of associated and lot continues adjust the continue about was this Oklahoma with quarter, X.X%. third course Catcher, Commission certainly that that to to Utility order order the

drag in that will of overall mind, continue ROE of there we slight be to XX a out keep have still Turk hanging SWEPCO. megawatts to the Just that

in refund decreased as AEP it look to at and the XX%, tax the out end Texas, was AEP there. AEP quarter at we was calculation dropped that that a place So due of taking and Texas XXXX was of XX.X% fourth Texas quarter, last

ROE fourth to AEP at to Transmission quarter XX.X% quarter XX.X%. was for XXXX, course, from It that we end things fairly the continue Transmission, AEP Transmission great so we third see Of expect AEP of consistent, at and continue. of the was end the and holdco

to of forward the expect our relative to X.X% in rate and very regulated to earlier, and discussed of those, very and a operations those we of view where we’ve cases, ones move that with you overall, couple us going continue are in will the you at good need so gives that those instructive the up we’ll So as to see--all middle put outcomes we investments. next be quarters, that

of quarter of employees the quarter, to resiliency ’XX, an the was earnings headwinds commitment regardless deliver fourth and and that it and results year’s consistent outstanding the exist. dividend the for exemplify So AEP’s quality, may

We’re with to Smart as years Brian tone XXXX, into initiatives, come. year very it and proud XXXX, ahead over reform, set also and PowerForward the Brian? forward-thinking move Wind point. the forging to this project, turn will we cases, for other rate at Catcher, of Cities, I’ll of tax this the and Ohio’s

Brian Tierney

you, with Thank provide XXXX. for and and morning some everyone. review the our and good year-to-date balance and our financial finish fourth through Nick, the tax review reform, take us economy, liquidity, I’ll results, outlook load sheet insight of discuss and on a quarter

$X.XX were $X.XX XXXX. to share per or Slide on shows begin $XXX in million X, compared for that share quarter Let’s operating $XXX fourth million, per or earnings the which

shown primarily our as by nickel year, of generation expected is of offset was impact down the the was due Corporate investment, weather was quarter detail competitive remaining All experienced segment overall regulated $X.XX to O&M earnings partially from generation a from per offset and all rate. a higher produced growth the business $X.XX sales. marketing and share year by the assets of on growth to adjustments. operating by and and regulated The segments in business year’s lower driven and of on return and in the for positive down was last the lower last All share, tax boxes the our and sale year. other marketing due competitive higher tax O&M, partially asset trading incremental chart, by the to last last compared lower our but expenses per assets impacts revenues. effective favorable segment The up on

of difference and billion, the our earnings, incremental to Offsetting recovery lower the to be weather, annual were these per competitive were year. investment positive our to Slide year for not items generation serve $X.XX per that compared or in This share sale can to $X.XX this assets, and $X.X $X.X primarily transmission X, higher occurred billion attributed that earnings share repeated were Turning last XXXX of operating or customers. O&M, XXXX. unfavorable

also to rate decreased rate items O&M positive adjustments. our response and across the the per the $X.XX. This in which weather XXXX at segment, recovery one driven impact Looking largest drivers contributed by prior XXXX, and heating relief $X.XX the which being including increased weather, was West load in down the Favorable for to vertically jurisdictions, this investment integrated of to favorable by a tax reduced utilities incremental load. due recognition in warm in in difference, with had cooling drivers was which of true-ups, our billing share, earnings of the compared Virginia, negative of were the we summer to year unfavorable formula XXXX. multiple Other deferred $X.XX winter difference warm

and this growth reflected $X.XX transmission other FERC expense utilities segment since well income variances the The included and global rates in of forecasted rate taxes in year ERCOT up last segment These distribution drivers per include of segment holdco our Favorable changes, taxes implementation true-up. Additional Net items, the grew normalized The earned $X.XX. over offset the O&M. than in investment. a transmission segment with along lower this taxes. prior up taxes, as less the largely December. The higher and earned lower year in $X.XX Ohio AFUDC. regulatory $X.X in billion, and higher also $X.XX share, depreciation AEP and lower by provision transmission the normal XXXX, revenue, return several Transmission XXX load, were by including depreciation settlement, earnings historical earnings deferred share, over XXXX. as on higher XX% reflected growth plant incremental per last The an increase of reversal

impacts and in remaining of marketing realized a lower $X.XX in positive $X.XX experienced on solar we overall This costs. into were assets, XXXX. from trading earnings lower lower down assets. service, this Finally, of higher depreciation earnings joint share, last projects Generation year. taxes, the venture lower ETT decline impact settlement an to slight due the due and to from sale revenues, offsetting produced Partially per segment earnings going our

$X.XX other taxes. from gains, the and following and O&M, was lower assets. year corporate last XXXX due up Finally, a share of investment re-basing year per sale to was generation competitive the

the weather. We headwinds are from pleased achieved for with despite were mild earnings our the year which very operating

we of year Slide the X.X% a by spring, in last we expansion in but and at take residential review percent. to of has It load. steady retail following our lower weather-normalized increased started growth sales that quarter the taken sales a the the expected Starting let’s chart, three-tenths sales up ended time, look this Now saw with west. some X finally industrial normalized particularly the right

increased sales by X.X%. two this for were ended and increase. quarter reasons the industrial clockwise, Moving year X.X% There the up for

First, quarter. across of sales companies most and operating our industries this broad growth we saw industrial

fact, growth sectors this primary our industrial by quarter, metals. five nearly and In largest experienced XX% chemicals led

fourth our from their large maintenance in system took needs offline co-generators for us. two the and on quarter purchased their Second, units routine

X.X% percent chart, Moving by to left residential geography. and The the in differs of sales year. up quarter were Residential the two-tenths down story upper the in the for here a increase sales western percent for X.X% percent footprint residential where the of seven-tenths sales by counts. our declined of were however, normalized the a a customer fourth by increased counts despite a customer In of in quarter. east, percent nine-tenths three-tenths up

modest Commercial percent. every chart, decreased bringing company declined sales normalized right except the this, sales XXXX the XXXX Appalachian as Power. way the year-to-date works the recovery a most in X.X%, of by to with its improvement in upper a quarter the the still in business cycle. Despite expect and operating eight-tenths in drop for economic Kentucky we Finally Texas, AEP contraction commercial pronounced through at

our XX. economies Slide the review Next, let’s on status regional of

in the exceeded the strong left global seven-tenths a upper the quarter. chart, percent and of drivers economy shown As prices Higher the for fourth improvement. were service in in territory GDP U.S. in primary this by AEP growth nearly XXXX the energy

For services, AEP the In XXXX X.X%. the territory again, service gap by grew western behind Over working of growth our jobs of territory in U.S. the left approximately our sector. The following closing people education a in support of categories: bottom occurred higher three our services, added and start new final X.X% retail growth The shows to lost more the and growth chart Once growth were XXXX. exception at territory than was came western X,XXX represent professional employment behind in X.X%. was created categories AEP XXXX XXXX. job the at These wage health and in percent the in the The U.S. is residential jobs growth the with the jobs followed chart XXXX typically strongest at close footprint manufacturing. there Employment sector, in the quarter, the end AEP’s in eastern XX,XXX the sales of at footprint net only the from between a in business nearly at should in which total, tenth territory shows which X.X%, the XX% closely eastern which jobs in year. right at

trends momentum traditional of economic service opposed growth choosing are in encouraged this big territory our and Despite by know, we outlier, in expect the you to as stores. shop to online people more still box As XXXX. modest are

Now review capitalization the move and company’s to Slide and XX liquidity. let’s

nine-tenths capital the of XX.X%. total to to a debt increased ratio percent quarter Our during

facility. ratio our and $X.X to the at about credit stood XX.X%, billion by in liquidity was range our net FFO revolving supported Our debt solidly BaaX at

rate, funding from Despite one discount an to plan the Our market improved returns. gains qualified due point percentage a pension XXX%. assets to outpaced liability strong in increase approximately lower plan

is in $XX quarter and liability in OPAB due Our expected a estimated investment retirees. percentage after-tax medical post-XX cost reduce the XXXX million. coverage to funding to during for for This returns both to improved primarily OPAB the change The XX estimated the plants points annual change lowered by strong and expense. expense XXX%

billion our We maintain plan did of also face ADIT and reform. years lower to In had tax taxes, increased what extended. ago so expenditures capex, offsetting Let’s $X.X effect capex of in not about means of $X cash elimination the due maintain forecasted of getting it we lower we capital rates. bonus turn and were reduced XXXX billion spending - reform largely increased maintain about the That spending retained by benefits, customers so response, that balances, $X.X capital tax taxes. do. if depreciation cash bonus talk XX the forecast about metrics, our cash and talk million to previously back of of to the what to for for is the was lower two depreciation increased increased and AEP billion. in hoped benefit steady that having $XXX to when let’s Congress would In what we story, reduce approximately Slide in XXXX, cash customers. capital contrast company to we and cash, program increased now increased XXXX Remember can we At rate. plan in balances, to taxes, to benefit had the do spending then time, increase pay our cash growth This capital was then our the about customer but talked our metrics, story our exactly ADIT growth forecast that lower and to

to we metrics through in but growth $XXX programs November, the in additional reaffirming at needs and high the equity due discussed credit reform. BaaX are not we still anticipate $XXX to million X% move you We end to with an Our do from end, no XXXX. represents X through change million each in equity raising year tax from we XXXX what anticipate the range will our equity in This rate. of XXXX, raising lower and EEI incremental

to include EEI are and Wind deductibility carry-forward. at loss often debt Two of questions not Catcher. not get we does was whether in the operating on this related parent November, other plan significant have as or a we the interest net Finally, case

we We opened expect tax be documents related the commissions state are interest a Most of NOL. mostly changes into in without and to going XXXX on our have deductible significant already parent net tax debt law. to our

have benefits the We the mechanisms provide of change customer to appropriate excess the regulators both in begun rate determine to working and tax the with ADIT.

have metrics the earnings decreasing options, taxes. investment regulatory we’ll customers and get of rates, rate accelerating increases. in several of credit offsetting the rate continued BaaX range maintain increasing We amortization the lower while our including assets, of Overall, depreciation, other and and X% our to growth stay X benefit within

track Let’s try Regulated begin can to questions. on were XXXX in businesses. our XX XXXX get we wrap your solid up capital Slide invest strong we to in earnings with to as this regulated a continue We so record.

O&M For range seven discipline $X.X a billion. kept and have years now, $X.X spending maintained billion we tight in of between and

going to be so time and increased expect In earnings, board an dividend grown to have by the directors Last year, able our dividend do basis. annual on over with addition, forward. of quarterly X.X% we AEP’s

guidance ahead Looking our XXXX, of per earnings $X.XX share. reiterating $X.XX we to to operating are

growth are significant our operating programs to to We our that also is rate. confident X% in runway X capital reaffirm there earnings

the solution around provide of finalize questions. continue tax over I turn the the our for With that, best your clarity Catcher cases, obtain to Operator customer the working Wind regulators rate will call with benefits to project, We the pending reform. on and will

Operator

of Evercore. [Operator the will Gordon instructions] come from line with question Greg Our first

is open. Your line

Nicholas Akins

you? are how Greg, Hey

Greg Gordon

good It’s can’t complain. take cold but know I I’ll still it. demand, so here, for that’s we Oh,

Nicholas Akins

good. That’s

Greg Gordon

couple a for Brian, questions you.

mentioned of I change costs. modestly That First, distracted reduction you due that making prospective in how benefit was you’re to a in was when savings a expenses much?

Brian Tierney

credit of for costs million. $XX to going about to be a It’s us

Greg Gordon

Okay, deductible, thank chose Then you that language? be Can you elaborate said it’s interest deductible. mostly tax tax you on expense not why would you. parent means which completely

Brian Tierney

properties, the very our with deductible; what’s properties EBITDA so and rules left that law have significant think we expense they our EBITDA to that’s competitive small a businesses. portion and will allowed to will small Greg, we’ll their to in regulated What not parent regulated will interest as properties, deduct it, written we well. to both which deductible. be the the be allocated doesn’t can be parent, yet, for competitive will IRS Yes will be is think In the able have to be hasn’t fully the be associated allocable company which our portion that tax that behind in be but

Greg Gordon

quantify you Can dollars this not us debt will at a time for that you of in range of think terms qualify?

Brian Tierney

tax $X About million affected.

Greg Gordon

is so Okay, really which minimis. de

Brian Tierney

I couldn’t a zero be that’s There part fully left. small forthcoming. is say and

Greg Gordon

say trajectory demand? facilities down you’ve Did it fourth major now - don’t quarter enough these drove ongoing you. disclosed the and you, Fair from of was demand thank demand and up you co-gen so an in that’s that the that factor industrial taking two shutting you why that consider

Brian Tierney

think the across really industrial was a of it. larger sectors. the it broad was portion growth portion of of most We that small our No,

Greg Gordon

that or you the things a why sort Is not of expected So very permanent? of conservatism that function demand out are a XXXX? were seeing data confident QX low are reverting fairly growth you’re forecast in you in to of

Brian Tierney

growth look the are we’re forecasted for what think in expansions, we rate permanent, and industrial that the appropriately we estimating we got we XXXX. portion year growth It’s think essentially again we’ve co-gens of look that forward with was it, because to overstate and flat industrial at not as the XXXX, the that the want with associated and full that that’s we forecast and small we we that don’t portion, at what think look

Greg Gordon

as in the Okay. looks cede question earnings $X.XX as I’ll much then expected My me for the asked last swing which well, is incredibly as you Oklahoma, ALJ confiscatory the and floor, $X.XX that what in or the case. to position versus it to looks in me an

pulling XXXX, is in company comfortable be just there though approved they what’s your question for would range well there? you decision guidance state rendered? large swing Oklahoma so or it to that can your the gave guidance the if than selling Now, second in that you’re Then down ALJ fair a fairly capital even reiterated other the indeed so that the out is you as be because in comes of as if the is, within there, of outcomes recourse you fact,

Nicholas Akins

certainly when we Greg, actually we’ve our being so--but still we said, our Oklahoma expect good given, ALJ from jurisdictions, several out guidance that given, standpoint, that an present a moving that one very of and investment guidance that after rate comfortable positive recommendation that, smaller we’re of at of million about with commission we’ve continuing with of is investment investment case, forward really Oklahoma. another and that in of PSO in previous looking On hundred that’s case, Oklahoma. your that second to an our in the repair all recovering have which just the in dollars pulled bad case, PSO, the helpful is sheet case, message and suit fashion was the think that’s and a I not rate outcome make to last Oklahoma in one balance if go sure point, follows you’re you terms

to places other have our We capital. put

customers the that earlier. you When recommendation it its doesn’t said I it we we outcomes in to and It’s ROE investment wind everything, to That’s of in making rate Oklahoma. PSO plenty places and performance in our put have at and up in something being a getting of doesn’t we’re make Oklahoma look the well-run relation the the area the very red seriously as would like take because to of want was. Oklahoma. utility, so deserve capital, We sort deserve and Kentucky

what that So look broad have is. see at to the and we view

certainly and adjustments it happen. ALJ is again, and making to we what Now expect will and be the the an we’re will those hopeful determination, made itself commission recommendation, that that’s be there

the for at Oklahoma, strategic of there yet, but capital we because let’s commission we’re issues like. that looks commission be could going look what will believe of out could the up - to we brought order see let wait on I obviously be You this. speak the that’s get that what responsive, really--let’s responses could don’t so pull options really and the just Oklahoma,

Greg Gordon

you a great thank guys. Okay, Have day.

Operator

Jonathan with Deutsche line we’ll go the of to Next Arnold Bank.

is line Your open.

Jonathan Arnold

guys. morning Good

Nicholas Akins

you How Jonathan? doing,

Jonathan Arnold

you EEI. out for as on--can that sort you XX.X rate us sense the--I give morning. (indiscernible) get at clarity of Good, this base out you the thank question think XXXX you’ve Thanks to think given to forecast shakes some for you. the versus all the of One where have

Brian Tierney

Yes, X%. to period will X%. XX over what anticipate EEI about of shown you We that previously we’d CAGR about it for at the be XX a was

Jonathan Arnold

that’s lower as Thank financing about you, thinking needs albeit the higher your main with Okay, is without the implications, earnings Presumably financing Brian. FFO, more increasing debt equity. of costs the great. we’re on offset sort the

Brian Tierney

is stay the Our rating to same-- going

Jonathan Arnold

you in forecast. debt, but no, No, have obviously, more the

Brian Tierney

True.

Jonathan Arnold

to--I mean, going mid-teens your to I now talking So you’re to debt as was about target. FFO that,

effect from think hundreds net to what one I slides teens. points EEI happen you metric? that sort to you was the us basis of give of sort of is of of to mid high Can going think

Brian Tierney

you’re upper consume the more we remember Jonathan, need to were showing, people so the significant that to balance to people taxpayer of capacity consumer from what in that’s being Yes, XXXX into teens said and showing a the back around and teens and us to then back going than saying grow mid-teens. were more sheet always high us, and that you some of then was, sheet we and balance what hey, drop we anticipate

XX% in out the we FFO bottoming before to anticipating start now debt again. climbing range We’re

Nicholas Akins

to of to implications that and has carry outcome for shareholders. add absorb positive equity, what that essence issue onto to issuing been team for a is sound to a and without just the it’s mean, the against it’s this I we’re doing I Brian debt that, our be equity. having I’ll additional what to FFO ability not to organization, doing in trading so probably financial think testament the tax able reform condition

Jonathan Arnold

parts those in corporate try finally you’ve capex, to the compare Then the just got moving in to there, but capex what’s taking you’re looks the I was in we the as what’s behind Absolutely, some wanted we of the numbers. just forecast. it pieces, out parts XXXX and where moving million behind like curious number, some get $XXX of the other that

Brian Tierney

for that, going terms a spread breadth in capital, that. environmental it’s be environmental and Jonathan, bit will piece our how and but there allocate capital, that. we across to still side still largely of to place It our renewable really businesses. piece transmission interest with a of renewables competitive will a the across portion will capital, preferred place put Transmission Contracted will be of our business, portions be distribution to of is small the and put a for of us us associated is associated preferred wire small generation. a with be still will some be our be at

where we remain spread same. our our preferences but capital work largely businesses, put will across for the to So

Jonathan Arnold

do states around this numbers set, that with then pretty on there which see your finally, and how a Okay, process? shift depending or you conversations in just you’re bit the obviously are is saying a chance go, as

Brian Tierney

our tax allocate may that’s have We have don’t portion strategic clearly will jurisdictions, So there customers change over excess to a that that’s financing play, and plans how something that all change we numbers the is it’s in anticipate materially. to income play which interests, we since that of our across different in in be deferred up firm XX back would something our time. capital and about

Nicholas Akins

Unless we Catcher. course get Wind of

Brian Tierney

to Catcher, Wind a to Catcher clearly question answering course, Wind regards require come going big change you change. us we’re that Well back I that. a and would finance is is tax of how reform. the and out in to big explain to was

Jonathan Arnold

that? partially And remind is other we Catcher would about should you that displace the how assumption think Wind Can incremental? is or things, us it

Brian Tierney

forward about plans, go we means, a about Wind Catcher need complete billion project. financing project, story and come talked what a when so we’d we that decide to $X.X get a out to it’s is significant what change tell our capital that Jonathan, in to with when approvals so and we’ve and you to you

Jonathan Arnold

you. thank Okay,

Operator

Steve the Next with we’ll Wolfe go line Research. to of Fleishman

is line Your open.

Nicholas Akins

Steve. Morning

Steve Fleishman

Wind A on morning. the good first Catcher. couple questions, Hey,

You had you timeline, talked the think? about making think. a rough decision that Is March-April, by maybe still I

Nicholas Akins

still looking get Texas at responses stayed make other project. so well the tax those but so think same can other we’re intact, time frame pretty the and still pretty really about I we a well--have that delay the are two-week had towards we April. are the the need schedules relative reform to the jurisdictions we commitments to implications, make for We in moving of kinds decisions that Yes,

in shape. still good We’re

Steve Fleishman

the been you I’m moving states. just just--but about terms you did talk of in this able, the them, are of about Maybe maybe and so that get conviction talks settlement you could why can level far of forward? ones your you’d on which still talk be it, convinced like in and good certain states, have so in recommendations one it any Yes, maybe or generally not seems some

Nicholas Akins

I to so center in if allow Yes, have adjustments move these of been okay, to the a to the the do on tends of associated and project the risk with it’s customer more protections fringes, the lot argue like about center relative cases, the fringes discussion and kinds of recommended of discussion testimony. benefits. a of these many had is rejections be thing, you and hedge for the it because - transcripts be place with of benefits that that project to read the I protections in irritated benefits the get these forward, and on is project with, the really time and caveated you you that really The the be of the transcripts and a arguments thing probably need we and do place, of lot but needs the kind the half

know, talk approved. that put mechanisms, it’s want to of because important wherever protection interveners, we’re as those to to can, those discussions a type with those out continue. certainly be for they’re additional and we able have discussions in for and is you customer framework There all of and can’t certainly content they We’re really but we might about Oklahoma certainly and guarantees with what obviously--you as Texas. having we’ve go we’ve get made discussions through that’s propose us centered. that the interveners discussions discussions encouraging the Those I obviously dialog where the confidential, those again suspect rebuttal testimony, is

Steve Fleishman

Oklahoma as you say? states might is the one you but where Okay, of discussions, have

Nicholas Akins

testimony a really yes, frame framework with the done Oh being the the Catcher timeline part testimony. Like you critical said, those in rebuttal discussions, and so. know, time it’s you’re of to originated able and of where the kinds I this have and when that’s in Wind

case, now, a far really with low XX% why was level ultra-low gas we confidence this project about at things the what even haven’t lot lot gets costs. it very As not and it’s tax looks, and even I’m took up gas arguments It as concerned, hung made whatever the less of are with because still we and project reform, than the It’s really call a fringes, times is of say so is really and with the case. a happy way our - up of that’s those NYMEX talking far I stress-tested happened. gas case on our that we gas

just can get So where reasonable it’s type a in of dialog be good if we’ll we the to shape. then discussion,

this that, certainly on caveated got no to have what’s capital we you in terms we at case when Matter There know, up in is and recovery going the rebuttal concerns in northeastern, more fuel of what was got mechanisms recommended okay, different. I approved interveners time Oklahoma we to protection testified a fact, answers of that the a customer case, Oklahoma mechanisms, the than a in ever and it look protection we’ve costs. by--they at that’s that let’s rejection, they provide we’ve spur on the have in XXs. benefited so had the This project, and the anything rail customer commission again on in work like commission--the but You had, these but stepped same said, the done. and in

Steve Fleishman

thank Great, you.

Operator

Lynch. Dumoulin-Smith line Julien the Next we’ll to Merrill with go of

open. is line Your

Julien Demoulin-Smith

Hey, good morning.

Nicholas Akins

Good how you doing? morning, are

Julien Demoulin-Smith

much. very you thank Good,

another either. Let the want move which part forward to the under obviously should to with I ultimately the me anything settlement Steve’s I fall smaller Wind you understand just context, this risk as transmission under to a bit, away can prejudge or the respect through again heard work piece? quick Catcher you frame to to the just up with the the a extent you a don’t follow wind obviously on or to moving process, just said. or bit the piece because forward of perhaps little question want compartmentalization one as settlement, of the of around I what want necessarily and project Just approval

Nicholas Akins

would let’s that certainly approval But it. states on say the - I’m give with that prejudge you we’re I all expecting it. don’t to to

maximum we’re in terms this to project. I’d really with and its the where value benefit serve accordingly outcomes. customers. can’t say--you going size, located its of proximity, have in benefit is Oklahoma think just western know, transmission capacity, getting that proposition sized and to this it’s what of wind, you’re with to The project I look You factor to the re-size have capacity high see

at whether think determination might this think benefits just we states approve we If or don’t take But of all we’ll look the that to to say have hard then it. this we’ll project project go that to We’re that forward we may probably all to I other at states look we’ll the interested, moves approve really and be it there point, it it, forward, expecting because That’s will time, so at all important out want make jurisdictions the there takers not, be to see. be as because need pretty a respond. project, the move us understanding ahead. based make that for upon really at a way we I

to prioritize our to I mentioned meet us in for and we is sure part it that don’t beneficial our shareholders places lot beneficial we our to to that today, say to focus project be done--as will own only allocation earlier entire to - and move can of being not it’s going obviously investments on customers we to make stands a our need Catcher customer, but make like capital a have extremely have not of capital, I incremental it’s financial of the merits. we a ensure to feel our our in and to well, sure we going objectives. as we opening, the Now benefit put plan just have we it’s we’re forward important said, Wind that is - only its with that are that going to is my actually, and

I’m So that confident. said, being still

Julien Demoulin-Smith

Got it, excellent.

could processes, the the back sense bit Going how on regulatory little back detail a and there’s the as you I of unrecovered you’re prior various approach of around terms about returning various mean, this flavor ways a bit addressing items, the that etc. us both think in Maybe perhaps benefits to a flowing a a across that on into conversation little tax can number the little bit of accelerating states. investment, you customers, of presumably state, that states? of reform a to impact commission you give more thinking about

Nicholas Akins

are because already of upon Yes, an situations. thing, type Kentucky part going advantage took to all-of-the-above of it. their state it own individual look jurisdictions it’s at differently based of

be We or and mindful depreciation or also are, where accelerate points to to individual each important have where touch able for areas think where adjust it’s we that. the jurisdiction, can plant address be us so I types balances particularly of things, those of

ensuring with that terms do capital and also investment of to not whether we’re moving ahead it’s can plant for depreciation balances certainly a whether experience, we positive that’s customer the a in focus so Now, in discussions only but to the way, time and this, but about positive I we’ve at same commissions opportunities we there lowering a could of customers things on distinct take with that customers obviously of component previously outcome think had advantage the really rates real critical have to are is that accelerate that forth.

a So we’ll from have--I forward. all and to we’ll really and go those reasonable we’ll things have perspective, outcomes commission believe discussed, be are

Julien Demoulin-Smith

Excellent, thank you very much.

Operator

go Next of Mehta line Citigroup. with the to we’ll Praful

open. is line Your

Praful Mehta

guys. hi much, so Thanks

Nicholas Akins

Good morning.

Praful Mehta

Morning.

on just one topic other dig into it. reform, wanted on tax to So

EEI relative understand one drop? what depreciation revenue negotiations the cash that a to if to wanted $XXX understand operations ’XX for is that that Looking from $XXX in million, flow the your of coming slides it, Just down? it the now. drop there talking right it the that million that as at all are buckets are move your to driving the about are to about that what and to and result any driving buckets are makers, of is are you’re requirement can and bonus the ’XX Is wanted

Brian Tierney

the specifically, of to numbers work not of what in in that but be. the ADIT we been Everything Page out. we’ve excess going the excess allotment negotiations we’ve that. the what part a what I’m into it ADIT, that slide way work billion is The so or shown will on is believe we the part deck really XX as conservative out they flow-back is moves the of believe conservative of a go what is as and else, kind

we be were, a making of investment than will that than included numbers what much we’re to going course, also those taxpayer and we’re us impact going Of in terms a of we thought, have less in but PTCs credits taxpayer to tax lower going a across way about impact thoughtful to of for Nick going customers. jurisdictions the excess best our and as describing, our an all negotiations billion of dollars it’s to as on risk, be are to have that ADIT, there what’s was have

Praful Mehta

think you it, perspective, I already of accretion, given to do in end there a debt about back not by from going to to debt, anything way going back Got so FFO end, agency FFO a had cushion, terms forward? are the requirement had your improving in, is the rating and you the that metrics drop--given your is the guess, at the to

Brian Tierney

described going we are and that current our but over to within the understood appropriate agencies deteriorate strength taxpayers stay position we XXXX ratings. credit strength metrics that to and we reason ratings, of in That’s in that our of against right. a metrics position starting were People for and to still that Praful, those rating we was anticipated time, investors. in being were relative metrics our the were

are our rating ratings time, we’re our issue our going have think Now be be it will for on over metrics agencies ratings. to the an but with that not in line to come don’t don’t will that cash we we an big and think and impact taxpayer a going

Praful Mehta

enough. you, Got fair

number of as again think growth, of, touched XXXX. EEI to for deck you the on just for growth in know XXXX, load down with, in Finally earlier now you this I is terms well X.X%, had load X.X% which that more I any anything just color be to you focused a get on we what more in ’XX, do to on, and the led ’XX Greg’s steady state, is drop think, wanted but think? question, should I of

Brian Tierney

it so same. an the that even stayed though adjustment going sense? essentially ’XX to was about our in ’XX means numbers for thought stayed increase of fourth be, the ’XX quarter stronger numbers so make than the we in less in same. of came The ’XX what Does Yes, our

Nicholas Akins

just of It’s (indiscernible) point a reference.

Praful Mehta

Yes, much, so guys. got it. it, Appreciate makes that Thanks sense.

Brian Tierney

Praful. Thanks

Operator

the Next JP we’ll Christopher to line go Morgan. of Turnure with

Your line is open.

Nicholas Akins

Morning Christopher.

Christopher Turnure

understanding the Morning, went I in we Brian it growth. off Is about see a same XXXX. and that previously now? to think that to Nick. the was you were XXX is if way through X% wanted base X My and XXXX guys prepared to should it clarify

Brian Tierney

forecasts. change We’ve given runway farther I that think our as that around but out any going out far that don’t as that a that, years we anticipate detail had even that, so year given even beyond can detail around see in than we out to for in we see through we a XXXX.

Christopher Turnure

In least, opposed a we XXXX to to CAGR growth as of previous consider an could be a annual rate at to X X% base? off

Brian Tierney

You Christopher, it’s so say rate, XXX. growth an it’s earnings off know,

than don’t we or came see go had we that what ’XX more As in changing forward, less as we forecast.

Christopher Turnure

touched versus a reform be as on to revaluation characterize fair we considerations we rate, have assumptions $XXX it as also DTL is and conservative it X with refund couple forecasted expected to they to here enough. already, in to both to million guys tax but million a Okay, term fair they questions the as Then themselves? flow there would of relates you just $XXX this deal as long well the to decrease reiterating lot your jurisdictions have of have as EEI, customers previous a the tax pertain as X% reform, to operating cash your relate here. as Is to

Brian Tierney

little XX% customers think We in cash to - from XX%, think, that Yes, that do equally a and jurisdiction, our that I a depending it of the and that baked earnings XX the rate to rates XX% with we going and of assume on back tax particular will that bit. the as those so to not our to that it’s of depending a are to an reflected we direct jurisdictions over years, and be two not let so each was into matter spread being now pass-through view XX% of be, that rate flow from fairly clarify XXXX, to as be, jurisdiction’s to will our ADIT since of on lower do down cash tend Similarly earnings issue. so excess issue how of interest, our we’ll they terms out, what we issues. In both but ranged customers tend issues, period both have I have in time. were you those an numbers, years we large be pointing me

Christopher Turnure

certain X X% will on in hit just point, growth impact front, any some you don’t to to cash and earnings hit the feel balance to need certain taken that that can with Okay, that at the away? because to You asset anything? kind targets eventually happening rate some right get refunds reach reg or sheet that of you or your level delay refund off essentially jurisdictions

Brian Tierney

think assume certainly for flow-backs, answer that an from would right reasonable one and ask in XX Well did years, to we would away, ADIT we would reasonable, be flow-back we so that be or and balances a over be is don’t a a that again, life range, the reasonable. We’ve these with day last that asset don’t flow-back assume think up we would not us. jurisdictions built of be associated time or period the

Nicholas Akins

ask impact occurred, that over any historically it fully we would around. and credit each and the when this entity, the with for been hasn’t commissions to would it for thing cash the regulatory wouldn’t that expect sense Back was this It of XXs metrics the because time individual same all immediately, amortized way. the dealt in back time make

Christopher Turnure

deferred Okay, necessarily that, just lower I tax rate tax the going the itself. liability on mean back just didn’t with

Brian Tierney

we flows pretty directly. Yes, assume that so customers to through

Nicholas Akins

all X jeopardy not I that that’s to there other fashion, the reiterate of this, question just growth the just is X% rate too in if case. thing through The want to is being in some any

position the growth to certainly at to able still we’re we rate. looked before, X% to X% just growth luckily, reform not it enviable the looking to talk X just rate but adjust and tax our about We’re confidently luckily--well, X to be at in and like

Christopher Turnure

you guys. Understood, thank

Operator

Next SunTrust. we’ll go to Agha the line of Ali with

Your line is open.

Ali Agha

you, morning. Thank good

Nicholas Akins

Morning Ali.

Ali Agha

past transmission been a maybe may in project. talk overall competing the that Catcher Can project, there concern? line or you that Wind Brian, complicate some the the is Nick to that rumblings a on has -

Nicholas Akins

We don’t to that. their project. projects merits, like have see own I mean, on other our stand just will

does we Our unique in in the also project load originate our high capacity is it is Oklahoma in where terminate that’s wind, it that toward but western Tulsa. territory, and at

assumptions different different them and assumptions other the have associated think with and congestion entirely. routings projects different associated with I them,

so say They’re there’s would So different, be opportunities to there’s The different, and more pie look though, of power them, originating more transaction, than right-of-ways different. ability plenty power our of to there that Oklahoma, the wind to and takers us consistency, development, in and of at element as may for that, really--they’re other are some but process I so there for is big to particular continue forward. well. opportunity of but than plenty plenty there’s more to is move enough just

Ali Agha

could approved scenario at piece where party a that there to a own you gets sell as ownership? is Also, reduce or looking of XXX% Okay. the still and everything, and or plan you’re it this project is a assuming third the to down

Nicholas Akins

No, we intend on owning XXX%.

Ali Agha

going us us on has near you out currently of just been remember okay. you that guidance amount had increases at the cases there in in? More locked rate for back EEI, from certain of term, still remind ’XX when assumed been percentage a see, that what on. I laid various rate Can going it was and I your

Brian Tierney

XX%, About Ali.

Ali Agha

again and growth, kind move that’s okay. that say just But around we well. again, percent we it you should growth it’s XXX for heard basing annual still Fifty an off ’XX, assume clarification, will within number X% beyond I an assume or are the - years? Last a question, should XXXX cumulative and could to rate, of Brian, so as you X implied go

Brian Tierney

It’s but a around X growth is years, to rate. within growth It will move the rate X%.

Ali Agha

XXX And for a base ’XX? off

Brian Tierney

Yes.

Ali Agha

you. thank Okay,

Nicholas Akins

if and EEI that looking but X%. as Now helpful; earlier, just then Wind things overall, can we about Catcher certainly other said keep during get talked mind, in be I at Financial, we’re that we’ve X to that

We’re within that at that we That’s range and and consistent. going it, what nominally what when do. look range we’re we about, we’re you be that’s can look at to

Ali Agha

thank Understood, you.

Betty Jo Rozsa

time have for one question. we more Operator,

Operator

go Stanley. we’ll of line Byrd Morgan Last, Certainly. to with the Stephen

line open. Your is

Stephen Byrd

you and good a going had well, financing in you’ve some accretive of thinking know use questions Good morning. pension guess rate but a the bit, see just I at about an it’s the as helpful. all drivers, results been back money I debt my terms to base up, your your been base CAGR. and do disclosure, guess on Thanks is positives. couple raise the I Most level high for rate that’s side addressed. of have stepping growth certainly CAGR the I of have a

I between I’m positives your drivers correctly. big earnings about sure potentially know, make is Oklahoma but just and guess drivers--I unknown here. want and on you At and power cash a very to GAAP respect thinking real confusion picture I that. often certainly see is - few I concerning, perspective I an a high there guess level So

Brian Tierney

in cash growth bonus we’ve based the about X of do the of put the what’s rates, to that in and to an rate plant still But reflected reflected to thinking same, the our is off we’re $XXX change able have having to in We range. of we with rates, that ground net benefit right. they When in increase we’ve in unchanged. we that talked third the growth in by associated X% our to continuing even the least rates. really, reflected to year at into about keep we’ve but place rate, being and annual than been happened with business and in in basing in our X% essentially X able that the at Stephen, been investment talk us to getting flows, somewhat and put That’s in on customers a in even rate with base. with you’re that EEI it that investment investment essentially that has--what being the there and growth for million ADIT the about the because formula-based of getting allows then that reduction able then transmission forecast, keep true-ups reduction that that our that stay investment lag depreciation,

Nicholas Akins

I standpoint. that think financially a for This sound that. AEP look obviously projects, other you’re in have and of the utility accentuated you fact working own why beyond and years have largest but by now, the the augmented fleet solid, things very doing occur message version customers overall and is an of Catcher jurisdictions, even wind system making that having for it but is that’s the itself, our from be adjustment it’s you with has to to at very, our power transmission continues are the consistent transitions smart been our resource in country other you have the and a we Wind

investments are So to of in modernization distribution distribution about grid talked are side that going million occurring, vehicles not plan is with that important on, incremental additional we’re we you of and when along taking know, time electric plan, the the you all there that $XXX that’s be see and of on things what’s - those the of. augmentation on as these on, that in made things the the seeing catalysts all changing goes we are advantage that in some on future adoption

Stephen Byrd

a all That’s I that’s very much, overview. had. great Thanks

Betty Jo Rozsa

everyone call. Thank on today’s joining you for us

may answer any give be As always, information? to please you you available have. the will additional replay would questions IR team Tawanda, the

Operator

XX:XX for be available replay conference Certainly. this after Ladies and through gentlemen, February X midnight. will am today at

XXX-XXX-XXXX, and code does are AT&T dial our system you today. replay code Executive conference participation XXX-XXX-XXXX. You participants, and Those numbers for and AT&T the conclude International Teleconference of for again at Thank using X-XXX-XXX-XXXX may you XXXXXX. enter time access any for dialing X-XXX-XXX-XXXX your by access the That Teleconference. access XXXXXX. may

disconnect. You may now

American Electric Power (AEP) 25 Jan 182017 Q4 Earnings call transcript