Earnings call transcript Q2 2023

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Operator

Ladies and gentlemen, thank you for standing by and welcome to the American Electric Power Second Quarter 2023 Conference Call. At this time, all parties are in a listen-only mode. Later, we will conduct a question-and-answer session. [Operator Instructions] This call is being recorded.

I'd now like to turn the conference over to our host, Vice President of Investor Relations, Ms. Reese. Darcy ahead. go Please

Darcy Reese

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

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

opening this morning Kelly, are me President Joining our Financial and Chief Executive for Ann remarks and Julie Officer; Sloat, Officer. Chief our

take questions your remarks. their will We following

I call to will turn Julie. over the now

Julie Sloat

Good time customer to a federal with morning. everyone It's change resulting new evolving this of state be Darcy. and priorities. second Electric Thanks Welcome call. to everyone rapid our American shifts and from opportunities earnings industry in policy with Power's quarter XXXX

rising navigate keeping to rates We operating earnings be growth, net-zero by with to time commitments XXXX XXXX and significant to also as In supply at annual exciting including as customer managing portfolio, chain progress interest achieving and dividend AEP continue objectives, the important on affordable. we delivering a it's an actively and our stakeholder our our purpose, X% rates constraints. guidance strengthening earnings next our make environment growth short, and definitely on dynamic strategic in through X% to with line our move providing operating earnings, we sheet balance few our quarters, central

and refreshment operating Federal Affairs success in such as our of adjustments some our environment. These restructuring more ever-changing facilitate function, regulatory will company and some us changes presidents. our of our made help to effectively of recently organizational this We of the realignment the operate team, the

know how every state over we years business grow engage to we the As investor $XX while we we delivery we keep operating in and our infrastructure. federal regulators with is and our the of support and generation our make. customer center invest we companies the five new This so the resources balance decision as next always, at why preferences best energy billion

a before updates into second of This our approach non-core our measured disciplined Related brief joint getting business some our our regarding renewables strategic ventures. our overview and our resources contracted to de-risking of retail financial performance and portfolio activities. provide and portfolio, this, I'll the and transmission quarter status to I'll morning, unregulated profile businesses, through management distributed of share our review simplifying

of successes conclude While have on to we our we our lot into regulatory still a the regulatory related work the of needs top insight customers’ providing initiatives mind. execution and recent developments I'll keep on renewables to and legislative our do as by front,

to earnings to last The year full of our million last quarter earnings year-over-year is business reversal quarter the timing compared long-term XXXX summary favorable range million share found decline operating A XXXX and interest rate be of or a reflects guidance and can year. Today growth quarter highlights earnings reaffirm XXXX pleased X%. of results $X.XX per of second per year's high today's our $XXX the of second in on share or to rates X with $X.XX AEP we're of delivered level financial presentation. $X.XX higher to weather. $XXX overview $X.XX XXXX of operating a midpoint X% our second Slide $X.XX

on development second performance within on our we perspectives quarter territory. walk in as load I ensure talk point of to drivers and line or have through Later economic our we our going operational and outlook some sight year, the Ann's believe our share this flexibility drive the that XXXX we of to deliver leverage to our at on, Given pool will commitment. service

She'll to debt targeted XX% range. some XX% FFO our details supporting to also share

this debt quarter, show to to XXXX. targeted and range is improvement be material FFO year-end our fully our in While in as in forecasts our we early expect XX.X% we this approach metric

focused on As profile. execute we our our strategic continue objectives, to we and simplifying on remain de-risking business

see In To approval we near-term sale portfolio. that approval to Holdings second in renewable from authorities. and that A sale quarter, X,XXX antitrust February the close the which with only August. of The in we sale in summary the XXX the end, of the IRG unregulated for recall can U.S., a found is of clearance Slide from subsequently you'll on be the agreement renewables and our on Investment signed year, in we received remaining the receive this Committee announced expect FERC Acquisition X. Foreign megawatt on

As we've strengthening said, be from proceeds to transaction our and sheet. core this will businesses balance the our directed of regulated

also let's some on we May, Renewable we Mexico New of Slide sales Turning portfolio, known X, have announced also to Development sale In the as touch other XXXX, asset Solar progress. NMRD. our in that

previously our our We end the distributed are transaction to half with businesses also are close resources of retail on the schedule track currently and on this first The close to joint XXXX. on Resources PNM XXXX venture partner, announced. in by of XX/XX sales as of

first proceeds five mind of sales incorporate outlook. flow keep year cash then unregulated proceeds proceeds and our billion, businesses, Please NMRD distributed related for the flow sales are renewables in our other reflected in $X.X and portfolio the the We’ll agreements obtain retail cash resources our outlook. into signed and than no that other

you some additional As part with portfolio management, commitment of to to our pleased I’m today. share news

completed we’ve that two as in and Transmission determined of sale We’re Prairie Wind Transmission non-core path have preferred strategic Pioneer the and three forward. ventures AEP’s announcing transmission our joint interest of our review of that the

expect end. processes to on and of our Energy meantime, We Transource our you continue to we strategic complete sales updated by In and launch soon we’ll progress. the review the keep review that expect year

plan, renewables a have $X.X recent billion $X.X total commissions our execution additional and regulated $X.X regulated successes. AEP’s we Through renewables now year to of and five gears an billion for switch let’s before approval. our Now capital currently approved billion

activities in detail XX to additional acquire through on the more on You can XX. resources generation appendix Slides find

approved In the projects wind Oklahoma which are May Commission service to megawatt projects. $X.X PSO’s be of for billion, XXX.X three projected and in These three toward includes renewables XXXX, XXXX. portfolio end solar the

wind Commissions that SWEPCO’s $X.X renewables containing happy of and report billion For megawatt portfolio the portfolio XXX the to solar Arkansas month, totaling project. full and approved investments, two both one I’m projects last Louisiana

projects by the going service XXXX We be expect the will into timeframe.

Louisiana with customers XX% portfolio Arkansas to the XX%. the Since SWEPCO’s giving flex projects, these will XX% total with forward will remaining Commission up wholesale and Texas related the application move of denied the

to Louisiana. to excited reasonable cost deliver serve and we Arkansas We’re and reliable the energy communities in benefits lowest of these

awaiting XXX solar storage commission and and in megawatts megawatts early We’re of owned at for as also XXX megawatts third decisions as owned of quarter energy the XXXX APCo, PSO. for expected at currently owned wind of of XXX I&M at wind

are Importantly, by operating our we’ve generation regulated Accordingly, soon. proposals aligned goals plans. integrated issued from and more for companies for and resources supported to resources requests our I&M APCo come renewables with at

XX. regulatory in several turn on I’ll updates regulatory our through be on the More Slides initiatives. found XX detail to of can and our ongoing legislative on activities appendix now

earned gap between closing unquestionably focused versus our on authorized We’re the ROEs.

anticipated take longer Closing depressed our XX by our we’ll had But included our came you little this earnings still to in that year measure which we XXXX quarter ROE. going recall a this at gap guidance. I’m may meet by weather. to guidance, X.X% is basis ROE While mild points gap confident a second in this was than due X.X%, and reduce end

and look to regard, stakeholders territories. constructive this federal, we that with prioritize to we We relationships on state our to in successful progress be their clearing needs meet service are serve. As all our needed communities the continuing of customer in building companies operating our respective preferences for the our and make path to and of we forward effective

expectations the work while for being is we fact, do many mindful company this what and priorities to any as best discussions to society. meeting is fundamental about product enabler with ex-parte way In mind commissioners our footprint engage of and that restrictions, top of I’m for together AEP’s the personally provide in in them to across our of

to request a financial Kentucky a incorporated Kentucky path for that $XXX a future X.X% regulatory company the of of to ROE Power comprehensive is service we allow health application costs provide the our affordable The safe ensure a rate review of to to provide and with a assets. June in In securitization for the filed case million service, This base managing to address XXXX, while help investment. proposed positioned to established and reliable new customers. best and will

We the early new will in that effect be expect in rates XXXX.

in Oklahoma a more tracker. recovery a continuation transmission PSO’s commission approval settled we of staff, general the for attorney and and with distribution parties case May efficient In with other of reestablishment XXXX, tracker for path cost mechanisms the base providing

While a early the we starting interim decision we June. rates in in await implemented – third quarter commission of expected commission XXXX,

Virginia’s For – triennial filed APCo of XXXX XXXX. to in March XXXX XXXX

of to in at lag allows bolster we top once make DCRF Texas of permits impact. of pending grid the a fuel calendar month, cost base help bill in AEPs the has will also order the of used most Factor across it review XXXX. proceeding. which this deferred distribution passed improve a balancing legislation through regulatory was Texas, management regulatory The We’ve the our billion recovery recovery on utility year. Distribution even and instead – important priority fuel if year needed customer This investments per to per twice an fuel balance regulatory Recovery year. focus this working expect mechanisms region. legislation We’re jurisdictions with later with Cost adapted as And file utilities remains a last cost to as quarter case $X.X be DCRF or a second by AEP’s

two in minimize securitization requested even three on consideration, Through use effective application, new are and Notably, to to XXXX, Virginia years, legislature case balance Commission mitigating In state alternatively, one April, at costs West were our decision to fuel over customers, we we fuel this amortizes we and April, effort bill manage which we while legacy the recovery fuel our further deferred bill $XXX impact. – XXXX impacts to West filed in to and approval for million path an recovery spring forward customer provide other collaborated Virginia. fuel a awaiting securitization our a the balance. in fuel active on an on options cost

storm Keep within customer mechanism option in we $XX the neutral apply essentially the mind; can on We impact deferred intention to offering solution plant billion million of to with Virginia. of securitization of West a also a use proposed mechanism the an have in affordability rate. to opportunity is balances second costs coal and $X.X that securitization that would legacy address

current in recovery state, our be clear of cost it’s important for billion $X.X to suggest let – all consider entirely options these there’s mitigate is change balances does plant units. storm the current a that addressed Amos plant While driven possible we plant desire for metrics, by securitization and nor it fuel of in customer and the our XXXX that retirement to to not that our hit this is the me coal bills. Mountaineer to impact credit schedule required Rather, our

subsequently bonds this in X. storm half XXXX. to and legacy balances in a year, a Virginia constructive balancing of on an later the This cost, hearing fuel Commission addressed securitize concerns schedule cost decision plant opportunity Virginia a fuel and to Pending September financial in possible balance, of which will report, deferred the issued issue deferred customer The West future we combination [ph] the coal first case, focus XXXX in could impacts. provides an and the April, the procedural including evidentiary on be schedule prudence ensure West beginning commission’s

so reach I’m challenges, creating the commitments, with while we’ve for to have deliver of communities our objectives, keep our our far. progress lot our safe, execute pleased on as investors. top energy Together to do plans engage strategic we to priority. and still a affordable stakeholders, with and meet our reliable, made work we value We a customers overcome clean,

performance XXXX walk our Ann Ann? through quarter, will financial now that, supporting our and details With drivers you second target.

Ann Kelly

credit year-to-date good activities all as and some and Thank some with Thanks you to service load results, on going our with finish Julie on financial share in. and targets dialing management It’s our morning. to be walk and commentary territory well for through on thoughts Darcy. I’m us our updates as portfolio liquidity, guidance, quarter and you, metrics this underway. second

were XXXX. Slide share shows of $X.XX in compared GAAP $X.XX Let’s to go through X, GAAP compared share second quarter to $X.XX to per $X.XX for operating earnings adjustment year-to-date earnings. contracted earnings business which typical reflected earnings, as comparison the comparison to to Kentucky a June, to Year-to-date a GAAP were the of per the share a GAAP share in cost, transaction per of mark-to-market the in an adjustment. a our as we’ve cost of sale expected the non-operating operating terminated on the to addition well true In loss XXXX. renewables as related our per

due Texas as earnings which second the entry the quarter Also incurred XX incentive allowing There and was new presentation to almost of earnings. non-operating in legislation favorable entirely previously was the to a reconciliation detailed booked costs, of recovery GAAP XX in reflected today. to capitalize is operating of on Pages compensation,

share, Operating $XXX on year per Let’s by totaled share performance through our earnings to $XXX $X.XX or partially the growth last compared per by increases walk and our transmission $X.XX Slide Utilities our rate both in was or driven by segment in Holding million XX. in to Company million for Transmission quarter quarterly segment. compared and XXXX. second performance operating lower earnings offset a interest primarily and the revenue O&M, weather, utility The

The continue weather impact and mild The in was guidance, as balances year, resulted versus was to unfavorable also in debt quarter first begin due interest debt less to second in is this interest continues our areas weather the the but an driven that unfavorable year. saw of be this we in prior largely the adjust higher positive as comparison weather XXXX, significant XXXX; by offset expense second of the balance we the in to of unfavorable quarter to quarter to while the Interest impact. as to primarily other in higher has increase compared well higher was rates.

this be half somewhat variance as in were the we stabilized. pronounced first to XXXX interest expecting more Again, of rates

units quarter announced of the the August this the of to renewables expect and in sale the to half contracted the of $XXX burden our in year. conversion close also equity We second lessen business million the

each note and to help prior year the expect year, the are we travel, the unfavorable to the spending. are adjusting such still weather, the actions favorable impact Finally, of spending of holding see I’d open, as discretionary timing in O&M like that actions O&M to efforts offset positions These the in reducing ongoing taking and term to the to we of to near efficiency offset that our of addition as well second half target and inflation reflecting that year. compared we timing

to utility These across Operating our results, than drivers $X.XX. lower X our and will quarter retail integrated expense, due unfavorable earnings jurisdictions, depreciation and in utilities I XXXX. for minutes. interest depreciation of Consistent O&M December favorable in trends were per the is $X.XX segment, off-system primarily with touch of the couple offset load. load Unit vertically on our Rockport first vertically integrated a the at share, down the expiration retail Favorable lease were more included sales. multiple wholesale by rate and items weather changes

I&M depreciation an $X.XXX of the each depreciation the favorable the additional of should of quarters continue QX. in lease, XXXX, to see favorable QX. $X.XX plus impact in Including about first three in was $X.XXX Rockport net

X is the sales the mention if again due which $X.XX system the also lease, is favorable longer the in fact in investment been our that consistent incremental customers. Unit second unfavorable, the exclude quarter However, we margins shared with impact Rockport depreciation no showing to off of this would've segment. that want the retail with up I about to are

the Favorable cost rider segment to items recovery rate and weather, factor and Utilities unfavorable and last drivers distribution Offsetting due interest. The these changes to the in transmission earned including largely Texas. in in Ohio depreciation, and investment $X.XX were compared favorable down retail Transmission distribution segment rider share, lower $X.XX this per Distribution year. revenue load, O&M

$X.XX The The compared Holdco segment last here the main favorable year-over-year contributed growth in Transmission AEP $X.XX favorable and true-up. investment included up share per year. change to drivers a

XXXX. in negative a had we that recall You'll true-up

Generation $X.XX expense asset These XXXX. interest year. higher higher items sale one-time by & variance primarily is partially due power to well XXXX. negative Marketing the retail margins as from in produced share $X.XX as items offset down were XXXX in last unfavorable in development and other The per favorable

per change XXXX. Finally, by favorable corporate partially The due taxes. items interest are in higher by These offset loss driven favorable gain share, and expense other income unfavorable investment was and primarily in down second primarily of and change in is quarter $X.XX O&M. a to investment the investment gain incurred

on going of operating next move will an be of our I to give information we update supplemental want the briefly in appendix slide, to Before performance forward. year-to-date on mention to the the earnings shown that load, details

You XX presentation can find today. the on Slide these details of

XX. for the we key come load continues sales update retail an components on the and Slide closely to our in of are classes. context slowing we're monitoring ahead quarter. in different of the provide performance to load trends our but I'll between our Turning retail customer normalized of budget, economy, seeing Overall

the we compared assume As conditions of hand a left will with in our that slide, load will economic slowdown the line to see upper any ago. slowing slow economic Beginning the a quarter, second that in of the positive supports year our projections residential in inflation already in on Recent be quadrant previous year. our data half we last expectations. discussed

the many even more customer into counts and is the to inflation CPI growth. between we inflationary relationship the key office a year. Our to data but our we an continue customers that as by the residential see of residential income are return on was to relationship squeezed month's grow, and driver stabilize continuing usage seeing That our decline customers the and to it expect encouraging fall. are point lessen residential pressures sign second of in This usage half of

we class. the industrial noticeable can lower slowing a the left hand in to Moving quadrant see the slide, of

year our worse load budget of not development across in the would've and an through ahead commitment beginning still quarter been by the projections, industries tied ongoing reflect load operating declined X.X% our This across would've to has if that even the economic broad for slowing been industrial We without to efforts. to expected for outlook slowdown total economic end estimate development. manufacturing actually growth based So is but the industrial country. companies,

you through the see ongoing to expect boost quarters. the demand Even the corner in with the sales of financial right however, normalized by growth slowing subdued conditions is from load end do to significant our can levels efforts, of finished to tighter the a two almost load of our last customer slowing and large this industrial commercial Year-to-date due goods development grown upper that these commercial in we remain year. Offsetting driven has each X% year-over-year volumes new efforts. economic for

AEP We commercial Ohio Thanks through should the Gains new projects come scheduled year. several ongoing Texas AEP the the to to to through technology the of with to especially robust our end to outperform be load expect year. operating continue end and of across footprint. continue our development online in

With in inflation data, been has material now the inflation dramatically a contraction to market waiting probability this a in the we've We that XXXX. components continued seen severe the economy economic labor think with coupled CPI in see. deceleration reduces key the June of of resilience progress on

economic us to our more are a economic providing commitment investments customer to customers. mitigating attract projections We area. and while This that prioritize the Our know will by value that the continue base. key service to to customer on activity to impact working rate strategy to is load local development experience our stakeholders with across near allows improve long-term discipline bolstered our

our jobs will in expected than NL each also local wins these Both load and successes benefit and recent will Samsung is our Great GM examples segment the our a boost to of only and full-time are industrial segment, more X,XXX ultimately of that not add residential bring economy. but and to Indiana. development economic Tulsa

natural decrease quarter quadrant investments associated company’s the XX.X%, at from move this position. the on debt below our to and partially upper target. of decrease look see to $X.X Let’s be increase the can of billion due our capital to debt last page, mark-to-market continues to capitalization operating debt discuss in XX the you support collateral during our at The basis and is Taking with XX liquidity stands return positions in left primary a Slide metric the points to prices. a reason gas and for which FFO decline at in company quarter, to a power issuances long-term the is and level

without Return collateral both our be of of to operations, remaining collateral reduces sides deferred in debt impact our some closer fuel, XX months our FFO will from positions so hits us funds the metric the equation on past fluctuations the of over and to XX.X%. mark-to-market

reduce see funds that announced equity year we expect by fourth debt end as We this our improvement the the close and over of we after the from quarter. sale improve in year XXXX the will and operations prior unit metric renewable conversion in

range our to We and XX% XXXX. remain achieve XXXX improvement our debt XX% committed of targeted by to and FFO to of to expect end target the in material we early

of can our in left lower slide. see quadrant summary You the liquidity the

five-year credit two-year Our liquidity support billion strong $X.X bank remains revolver billion position, at revolving $X our billion. $X which facility and

when On a percentage our unit to contracted we complete points quarter as basis, from debt XX.X%. this our by renewable GAAP sale the XX we announced to increased previously the reduce plan close equity basis quarter conversion. planned ratio third our and eliminate We transaction in prior debt-to-capital

decrease On qualified rates liability quarter positively that status front, XXX.X%. pension plan the The our returns while funding increased solid during the funded during the rising quarter to to equity status the access. due impacted improved

the Slide to go of in we XX The effects $X.XX expectations today’s our positive as and line the for in company our were roughly compared of to prior this whole. the significant to driver quarter a results second removed due in would’ve in favorable our XXXX quick we message. recap year effect, quarter-over-quarter a Let’s is primarily for earnings weather unfavorable comparison. change If been a with

year-over-year in EPS AEP in on about the years, record resulting $X.XX year-to-date weather a been the from the XXXX I and system normal past impacts weather. most $X.XX will for mild perspective versus note XX has

remainder to taking mitigate progress and through we year, on we the as to this will So the headwinds. of action focus continue other

position Overall, are and our reaffirming $X.XX $X.XX to we per in of strong remains earnings operating our share. a guidance business

continue also to rate committed growth to X%. of our long-term We be X% to

unregulated addressed, are renewables As we third to the the half in retail year, Julie portfolio resources on contracted our this and quarter close of XXXX. in first track previously and sale of the distributed our business

We’ve and Prairie in concluded business and a the venture. joint These of Pioneer our Transmission preferred interest help that initiatives of simplify sale our Wind of is two our joint our forward. Transmission transmission continue Transource strategic ventures, de-risk Energy path, review our and will going we

We that really and call, that have. can questions to open and on what’s you Brad and your time with today ask appreciate your mind to hear the going answer and that we attention any

Operator

go Instructions] us I a moment Guggenheim here. Please [Operator with Give to Shar Partners. you. can Thank just Pourreza And go ahead.

Shar Pourreza

guys. morning good Hey,

Julie Sloat

Good morning.

Shar Pourreza

Good morning.

$X.X in plan? there? the terms important balance that fuel stands which your to it guess we incremental the guess And Thanks. target, see needed quarter, you the collecting Is on target. of equity highlighted. improvement little around talk billion. a get to lot you bit hit timeframe, little basis I being XXXX detail? that’s a think could obviously, mean, can that to Just this about to enough I XX% the bit still points XXX of sales seems like you a more being that asset credit unrecovered slippage a able in I it’s early which get pathway XX%, short in to metrics, how more is I

Ann Kelly

that. take I’ll Shar, Yes.

we collateral to main mentioned, FFO to payment. of the debt As impact timing our the the is

So year and improvement. and by should that noticeable itself a that’s impact our in point debt, result a to so about basis end XXX resolve FFO to

points XXX impact renewable favorable and We the conversion. contracted sale unit proceeds from of a also the have about of basis equity the

do In of going current have deferred So year. be we have fuel, by to into we of not We into of range improvement get but cash necessary are and are, end recovery that confident our forecast the the in any the don’t be by securitization flows. year measure the our we our to have that able to is range. next

Shar Pourreza

it. Got

for thinking Okay, ongoing; the constrained, right? interest you more financing, asset maybe a or the the ongoing of could where parent fund are especially more obviously, rate right? And I stock start see to story? leverage of and is just have sales sales and currently how CapEx then current mean, do perfect. more as guess Do of I overall think never about you Julie. environment maybe strategic sort do a given we core we about plan kind have question Thanks of AEP non-core out further and simplify kind we’re equity needs, assets So there, actually the to some trades?

Julie Sloat

affordable no, we Yes, to as sure too. the work you’re make And we’re the to to right, opportunity you that question. reliable, need all lot point relates a appreciate so hitting out, I of But Shar. capital to as delivering of service. it have put we taking care metrics the and customer

need work, that are going be put where are I do growth need money So customer rates my not sure earnings only targets you going, to to when to mindful we make of real be to I me with didn’t Because to need that upset hit. But happens. I strong my make sure so happen, that that we’ll make balance sheet’s you really would guys sure think if also too. be all

around type So traditional invest related something people a utility when focused really business. non-core bonds, We’ve buy that shares let AEP to is activities looking not me know, your not that as get you been to our asset regulated question in buy they’re sales. necessarily the on, or

we investments you and, transmission the transmission of these while footprint, of we of of where if taking the footprint, our regulated that’s all that where love of dollars customers joint care because to even our us we’ve unregulated want channel why in to play. So ventures of are efforts paces that we are looking that’s our see our off and kind going our today through business end, that talked at some components about to can the

wouldn’t significant reasons. couple activity anticipate, a us for coming a I from So, additional of

this up get pretty think some taken cleaned stuff we we’re of I of. non-core once care

place. good a I think in we’re

work. there to and the space think but be part But the sheet our the that, another pieces candid to customers, we engage do for work opportunities, do being makes we that’s to dollar to makes our for is may we’re we regulated reason very need Shar, make to I really a, balance that the as sure we’re business. we asset be and why something a should sense continuing every also on make efficient in – is that our want edges, sense sure service possible, most of one in What as at put for make I be is good to some that to we sales but territories. don’t need look also

And I out community. am in calling is with folks why I’m our out another why specifically that talking reason

So commissioners, customers, on based another’s make that priorities et those sure or least of aware we whether and refinements to at aligned conversations. need its make absolutely we’re cetera, one then can

So, I balance rates never sheet. because are that got to customer own put of because have think I going sure and we really we on take because at constraints make would a care constraints not all our to that capital say we’re naturally we strong we’re

that. on working We’re

into to debt going to look once we Ann we year that to FFO and XXXX. just a get As mentioned, better lot expect end

we I think just here, bumpy it’s be going as interim a next through a the couple little months. to the in of work few

dollars numbers taking and where customer with disciplined but efficient be to need stakeholders concerned and we I’m care what our I be we too as to which continue comfortable that. around, want about as So put seeing, with consistent being our that then just we’ll feel I wouldn’t it’s very can. of the work

can that be on on ROE. do the to control. try close going best That’s I to this gap more piece is my point focus let’s that to my So the at

Shar Pourreza

Got the of then some in and does. no, And do various points the it, the it brought your appreciate outreach terrific. up we remarks then And prepared salient folks far regulatory stakeholders. you as as to

for So points. thank that you

Julie Sloat

coverage. Yep. Thank you for the

Operator

with And ahead. JPMorgan. to next we Please Jeremy go go Tonet

Jeremy Tonet

Hi, good morning.

Julie Sloat

morning. Good

Jeremy Tonet

reaching attention and just some up of local the of touching that wanted out highlighted dockets kind to local points follow pushback on here areas mentioned, ablate, media of the I to were to in of certain there. commissioners on and some have regulatory relations some you because, build you

of forward? change hear expect headquarters what regularly about them? going strategy here? wondering to outreach they of where of you Just how Is all over think more this timeframe, this wondering kind regulatory you type Just in a meet from

Julie Sloat

that love I Jeremy, Oh, question.

my going coming former perspective, operating president. to company this you tell a I’m from is from So

I in that I hat that time. from So to throw to of kind pocket on keep my time back got

let ground. they with operating path do clear so achieve I our hope this. what hope the on or boots start [ph] best can for or I, pay well me to do so do can the that to do, the they What my companies way the is, And

so objective already make to different And that’s with is my get underway. that by the way, to talking sure commissioners. And out, I’m

I’ve several the up few months already over to talking calendar out I’ve next my with been to lined continue So, and folks got effort. that

not necessarily to that’s I’m going So underway. get that, into but who when, to exactly well talking I’m

they the hearing them are to that here. I the our understand my support me from be can assured that’s we're can I take my the rest really take other operating more at is from that and everything that’s companies. I just So job care of companies. that so to that and the And here that then Really, good And or hear and the really to parent listener I need provide individual good only of they’re want that support take ultimately core team, party to my sure care importantly a of operating I service to core care stakeholders so make service customers, doing service me. investors AEP, be the reason is that exists, clearance the for happening. to and and But want I just,

the that the not want think they can that other people way the to don't successful sure right. because can to in I'm make stepping so that we not to the something's point, doing that at or be. thinking teams possibly everything right want be all. we're I I just here's Because So that's they as as can case support

the that it to You call out regulatory relates activities. points are fact pressure there as

dealing years. next be several I with going to we're think for that's what the

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doing their and think jobs to do everybody so too. And ours I we that means is got

but have really it, doing been good have adjusters. We be we to learners and listeners and

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delivering to have, able dialogue and else it pace to going and take more that only smarter a more possible. nothing on the be But in the will make can doing have effective going to we I I and product way, life to think this pick and much too. be make the So we're we're we're we customer going up the if lights think – that be the to care we're keeping of sure

So way a it we in it ever our faster we've history. got in to done do than

love I it's talking with So people. out I and think getting exciting.

out Street, You getting and so guys too, stop. with love that's you going to talking not from The know I

conversations just had. got about talk happy and I of my I'm calendar I'll and that So work out to front any I've be the to

Jeremy Tonet

little Got conversations our recent, dialing opposed transmission distribution. one just lines, a it. in which with there more. along And relations a on distribution a local as helpful. investment increased bit local a on Kentucky, as could priority more guess, I the focus That's very more stakeholder stakeholder highlight to investment help these focus In

time here? Just wondering strategy see a evolving Kentucky you how over

Julie Sloat

activities. a that healthy, CFO to with I'll well. not let ROE, on that Yes, that's financially been start as former me, going why you, And the we're case yes, I healthy when tell this. to At through Again, so got me X.X% we entity number that's work having see sustainably a that.

on different So of with variety that's of to dozens socialized well work we're went that with case meetings advance exactly stakeholders. we going a out and in and the why

also out, So understand can doing our that is everybody's understand everything successful, make so with again, we taking need learning the listening but but sure and objectives we of customers, are our in that are where only making it. stakeholders understanding to that not kind and to we comfortable what it we're what shaken we're do sure of so care

in power plan then customers, to to to, which improve care be company, state a be objective A, hopefully supposed get I to easy. to would matter of financial future is have engage it they idea to is And everybody the don't If enables make these you're the It So too. easy, activities, investments yes, case. the easy. a of take expect positioning It's really sitting the to which us doesn't the in in, need us good it place that the was will but not it. be allow doing

invest really forward enables us those the way continue state engage us a we'll about. smart in a can hopefully get in that to to path and everybody on good So in feel activities that

Jeremy Tonet

Got it.

So there's room over to distribution pivot towards transmission. more

like stakeholders Sounds there? working you're with

Julie Sloat

do has We, having. We absolutely that and to been commission. the know so that transmission very those are conversations important we're the

of And that so set into mind end well. got distribution the is that top for on. that the our worked at structures we've of forth And as we've the we that essentially because case. in keep it's matters the day, lights the also to us But

Jeremy Tonet

I'll you it. Got leave very Thank it there. much.

Julie Sloat

You bet. Thank you.

Operator

move we'll with Please to next, And go ahead. Mizuho. Crowdell Anthony

Anthony Crowdell

morning. good taking for Thanks Hey, my question.

Julie Sloat

bet. You

Anthony Crowdell

the think too following from maybe XX, I over XX been has to the long, Just capitalization gone I've Slide total – it but last XX%. first years, off, total debt

the capitalization? debt that for wondering, where you Now it see to or total I'm stabilize sits do total does spot just sweet XX%. at

Ann Kelly

Yes, absolutely. question. the Thanks for

you as is XX% can sweet going I up, we're our inched on spot has that's forward. see targeting it mean, what So and the graph.

the with expect unit right sale can now. conversion. you As see, that to renewable the proceeds we're decrease do We above contracted equity and that also

closer a couple do. basis that'll that's we work hundred to XX%, but that still to some have the points, reduce So

Anthony Crowdell

you're And into to this the midpoint XX% a could when do talked I correct planned that get and in range? stayed granular, XX% If you've something going real about? sheet XXXX. on if the here, you've to your talk balance I Is you'd about, Great. I in to target, hope be get of then I think think you

Julie Sloat

I the we're fluctuations we experiencing. in and end think to XXXX. just are fund by as be in And going FFO midpoint probably Yes, be, mentioned say would timing I say really I flows. going XXXX approaching we're to in that's due I of There we're that of the to mean, the target the quarter-over-quarter

fourth into quarter be And and will will especially so the like improving then expect we take see that's in really said, do switch collections to and so, till materially press it FFO going by to collateral we XXXX the next our time. some fourth see when you that I year. But increase, there, what's that in it the quarter

that our from rating as And our point BaaX to threshold to relates sensitive a Anthony, just is too, put remember, we're to finer little on it XX% it Moody's.

want cushion. why that's XX% so have the XX% toggle we And because we is what to to to

maybe my of the so is So XX% And keep I thing through in we fourth go as improvement pressure months little get that well. definitely the more year, you expect as some cushion, us mind the this other comments as to next some of proceed rest couple in quarter. gives can we mentioned through too as a the we with

manage to Just expectations. those want

Ann Kelly

Yes.

that volatility thing The timing is retail that lot a XX% to sale. talking payments, but highlight that, which as business, about is to collateral know, of you other just we're we're of our the seeing for relates

going would that sell that reduction we expect we once forward. volatility business, So in

Anthony Crowdell

for Where but the chart, piece, at to equalizer I lastly, could does to the how assumption Julie, allowed go ROE does and recover small ROE that XX commentary curious, all of returns I’m the the to a a just – go of especially then in it use? when mean, take XXXX? the just know reasonable I Kentucky's X.X%? utility? the that Kentucky. an I regulated I us strategy on long And pretty low. by look appreciate regulatory And you've very given is mean What’s you

Julie Sloat

Do while. cut. a Yes, expect to flash Anthony, it’s going a not take

a we our I’m looking in case, our in a at will right the authorized X.X%. Page XX It is remember ROE, slide be so current walk. X.X% requested now. number And deck

for our to work you all, manage trying we’re well something you as model. that’s So expectations around as own to as

give stay So move along case things direct that and tuned see can and then and kind how of in we more you guidance. this continue proceed dial and to let

Anthony Crowdell

Great. taking Thanks for I appreciate so questions. it. really my much

Julie Sloat

Thanks bet. on being for You call. the

Operator

America. Dumoulin-Smith And of with Please we go can go to ahead. Julien Bank

Julien Dumoulin-Smith

last the can. some morning. of to few here, it. Maybe on team. Appreciate if questions Thank follow-up you Julie and I Good

items think gives linear Just Can about talk confident, XXXX today, about the some don’t items that, you confidence on on weather these respect having obviously trajectory little that the some securitization of to be into else securitization What the as timing of just to next maybe you can you in extent, If headwinds XXXX these of speak a or fairly not too the X% to in here offsets? into bit more. X% I that bleed to the well? offsetting related want year tailwinds to forthcoming some the here. of you in talk myopic some to can you about year. as on of headwinds heading maybe some you those And here? XXXX, the of but down the with those here which

Ann Kelly

what mean, earnings the I with kind of addressing XXXX I’ll I’ll Yes. guidance is do start question.

you look, year about it’s we and we’re year for full prior $X.XX $X.XX below guided As to year-over-year the improvement.

year. last When outperform the this, look of for that’s break into $X.XX second components. I that So year helpful to down the think at need it’s we it half I to

taken on is action business. include offset that headwinds. $X.XX a about $X.XX Kentucky, And that interest had unfavorable to normal. some because those expectations. to We So is also also weather running XXXX, the where bit impact $X.XX, It’s had Interest that’s sell expected to versus about we year-to-date. $X.XX guided above didn’t we’ve of over was but

and that’s revenue. that’s $X.XX about So covered per in year

half increase anticipated of had we the first the be of in because Fed the year-over-year of much the to our of So actions. year timing

the So are – to been equity been other help that’ll bit taken the somewhat. because from reduce the coming has sale year, rates short the increase unit the a renewable bit in while of we actions conversion offset tightening back Fed little has we’ve little longer. it our debt we also proceeds the And have and half a into contracted

expect first due reverse in but the When you last half, our this to unfavorable look we spending. timing O&M at of O&M, to to year

O&M Our robust O&M on half. a because little second spending year back bit original was side for reduction last in of guidance year’s the the during the the planned of half

that mentioned had reduction then a we make actions anticipated the so and weather for in those reduction additional like up to we’ve And I’ve already taken to able volumes. be

pointing things generation trends One other us favorable business is that And marketing in that’ll we favorable benefit this we’ve and year. then that continue. lastly, then commercial there’s in our also seen to we’re And a couple load to. results expect the

that ability confidence to putting that year. all So, together give and our meet earnings guidance our the us this what for

allows X% us forward, robust In story terms EPS a really to we a X% capital pipeline capital the to maintaining that very it’s growth our that. of going have deployment and do on just

Julie Sloat

on And Julien, an just on to note, end cap that put this. of kind

solid. think core I is the

making that when mentioned, sure around next strategic all sure plans lay the billion we they at but sales to in look And we as we’ve five that make so also to put next capital that And you go. out we’re it’s execute investment the got that out $XX there, got we’re we of we the work you some over that terms Ann as know, to our dollars really regulators are not point We’ll only regulatory agree that underway. where then asset the on need into deploying few with in years, years. work continue

sure fact the so and aren’t make that the a rechanneling more perspective that business are all those dollars with sure we we hitting to those or worried people of got to making balance sheet metrics pieces flexibility. that we’re some regulated of that help falling And businesses hit, deal the we’ll concerned. little math So away, will from those us the that other need of we

event solid weather can around But it’s we on of ROEs. sense the or nature, work where closing being it dollars makes is core that. have gap easily sustain to point the and this the at something putting we the and that when So a efficient,

Julien Dumoulin-Smith

briefly follow-up And if All details. on Excellent. it. then Got right. I could a couple

ultimately in you’ve you can dynamic with been with of about a an PSO, little bit bit your maybe Just here obviously had there. how to planning, update rates? If expectations mind reflected and happens, little in Just planning a the about what’s been rates? settlement, you what ALJ respect what situation interim talk and you don’t

Julie Sloat

Yes.

rates interim think in to the was, implemented we and exceptions early I filed, as the it had the And had think settlement I it point, at relates in it file report mentioned, So then as this that ALJ it to was were put ALJ report. you submitted that place. is its yesterday – we June

if absolutely we agreement you to were would’ve that. So that the haven’t settlement you encourage at would taken expected look at But look supportive parties take to of the a a agreement, which the settlement effectively anyway. I

that. So good about we felt

to getting of exceptions days thing Parties out going because expect response argument play here. September. really, Xst. have the And close this exceptions weeks we’re four that to couple pretty that over an the will the order let And oral were mid-August next And and filed. an would effectively get is of in for to we we then have that’s scheduled August we’re

The rate but tuned. is that working inter go I process and we – rates you the stay I So like do in interesting. look at take a thought got we’ve was keep interim mentioned, effect. exceptions. apprised, And will

Julien Dumoulin-Smith

you leave Duly soon. Thank Speak you. there. right, All noted. to I’ll it luck guys. Good

Julie Sloat

Thanks, Excellent. Julien.

Operator

Next Morgan we’ll Arcaro go go ahead. David Please Stanley. with to

David Arcaro

the questions. Thanks morning. good Hey, for

Julie Sloat

Good morning.

David Arcaro

of repeat in wondering terms I’m could let’s with going thinking for and on that terms of some how outlook plans strategy forward – the to, going Wanted proposal. color give you’re what pollution? Texas just challenges you forward some see you’ve generation in generation the your renewables about had are there

Julie Sloat

Yes. absolutely. Yes,

need that and essentially is a what do doing AEP we make to an that anticipate I because capacity Texas to would we’re rehearing, to understands so we need otherwise you make have So all can we we from running Texas. believe is And doing traditional for administrative can file deal in another that perspective. we and we’re another to then that do did running need we regulatory with. accommodate the RFP process sure that doing what situation issue adequacy there sure

something proceeding forward be with. So that will that’s we

the street and see in we what standby you’ll not here So with come too future. the to distant

David Arcaro

the a it. for be, incremental CapEx plan? currently to to what’s could be extent there in And there in renewable outlook [ph] that Got guess, phone option generation the And was, I cell would there?

Julie Sloat

investment that’s type would do CapEx That’s is, of what forecast. the in a possibility. Yes, accommodate possibility. we any current But a

David Arcaro

Got confidence give level you end in sense those? this Okay. have the renewable Understood. in alternatives for could several just projects it. And wondering that being you your there of of you’ve have might put a out a states. what up then and approval do was before if you if I quarter couple any in proposals challenges those there other forth

Julie Sloat

page trying Yes, to to I’m and the so Right flip we Page XX. actually of now, can draw looking them. kind at attention everyone’s I’m

and Virginia So open in West application we’ve the filing we an for made example, Virginia. got same in

For a point investment would about capacity $XXX there. expect. about At process wind talking for as Company, this proceeding is megawatts, Appalachian along and XXX Power the storage million we’re we

report. So, nothing to have I new

third those quarter of side, open order we the to year. standby So, supportive where is Indiana And cases Looks the been have this has trying there. think Indiana, And in in staff else like so of Michigan. on Michigan expected XQ, through applications.

there that’s part But case have, settlement. Wind far course stay in the So as well. of PSO. that’s tuned Then Falls I – But the the we’re and included productive the should I investment out so at also Rock out base and moving we constructive guess case call of forward. base wind

So as proceeding. you well we’re that just know, in I mentioned underway that

David Arcaro

Got it.

much. That’s helpful. Okay. so Thanks

Julie Sloat

Thank you.

Operator

Please go we ahead. KeyBanc. to And can Karp Sophie go with

Sophie Karp

for a you of questions taking here. questions. thank couple and morning I have my Good Hi.

incremental your in renewable And right? point. curious First perception if their instance? in they that this also They’re turn would as do in near of potential like clearly and Is pretty left Louisiana as for risk far So states picked proposals that because slack much the at maybe down of lesser future I’m much this I up states appetite this is generation you renewables is have? on in particular Texas appetite goes. the think term, just those there for how full renewables, other the has that guess mind, like you

Julie Sloat

through very that we of been as that’s because that know, you Sophie, worked much, top mind for question I proceeding. as us appreciate

flexed approval along in so megawatts for got moving obviously up, and the that regard. we we’re Louisiana So, the XXX

another for X,XXX would You process may to in portfolio say was relates we also was seeking want it as had SWEPCO recall to together. underway we megawatts put interest how it particular, I in that were that we that that

an including to say, And that we’ve done want is, look to everyone so PPAs. at source what to and tabled back perspective, we’ll actually from we’ve this we all look, be coming

So there we that on take a initially shape just stay we were different because process. RFP a as what tuned It’s need. than going capacity that is expecting were to absolutely little running

need you heard saying And on regulators. me that probably to earlier we to here listening sure remember when call; make our we’re today the

so we just And exactly and this that doing it in and had is experience as to what Arkansas, we’re relates the conversation the Louisiana, Texas.

we and so are And forward. adjusting moving

will So renewables doing be be different it looks what you in source interest more RFPs than a out. there will there all tuned as be of call that. in no stay And right for they lot we like would not Yeah, now. more Texas oriented,

we’re other the So sure make all our period. are, that with day, affordable at making that needs. the work so reliable, of customers about the that alternatives what we state doing to have regulators we our end will about think we can together what need sure is this but the Because electricity

Ann Kelly

regulatory just $X.X on $X.X out to the in billion plan, talked our our billion that, have just And far capital and process have that’s another $X.X already been reiterate of Julie that projects of billion. we approved so Yes. about

on little our investments bit with well the fill have and with are else flexibility and to delayed the we distribution in these that our extent to process So transmission gets RFPs. in way we also anything a

Sophie Karp

my referencing XX you. other – mild My by the board. bps that here, XX Slide Thank is right, depressed great. this reading average weather sort question XX per across in was Great, the of I’m maybe ROEs, the bps

all think for bps weather, lot There’s would we be like how higher wasn’t these XX a it about of should roughly this? bubbles numbers of if So here. or like

Ann Kelly

on is bps XX average. That Yes.

Okay.

in about I I’m this a in So ROE though, and our comments, basis. my does X.X% opening mean of had guidance. rest this on or way for mentioned year, when thinking a answer average initially the our across operating let me XXXX anticipated about expected as it be We'd the what companies weighted because we

that is up, unless so little associated what bit had hole of ridiculous suggesting now a don't weather And all a in weather ROE that some on we're we can't think, is year. make this have that with now the circumstance I of back that half we

normal. we're bet going bet that on So to we're on going to not because

will expect we from to improve get expect what would not so I is to that X.X%, X.X%. And it

you if expect even the get X%, we've of fact pressure fully that within So reasonable. result had our to that that's be we sales closer to today as our the we and to we're range. guidance I weather, despite adjusting think And make is point well want a

weather possible scenes And we as we're away our beyond it Then relates messaging. to today so take best to with to just also very important the to make those the need behind as to the that's key authorized fundamentally ROEs understanding do the situation. sure our as earning close

Sophie Karp

it. Got

the clear, be with Transmission X.X% average is the to the just Holdco? So

Julie Sloat

Yes.

Sophie Karp

Of all distribution…

Julie Sloat

Yes. average. Weighted

Sophie Karp

it. Got Okay.

Julie Sloat

you. Thank

bet. You

Ann Kelly

you. Thank

Operator

with Patterson next to Associates. ahead. Paul Glenrock And go go we Please

Julie Sloat

Hey, Paul.

Paul Patterson

managing. I'm [Indiscernible]

you about or thought mean might I is – the doctrine been that substantially think of It and was if question kind thinking you have you any guys have and or of about bit is guys a might have ideas repealed Chevron most ground? the I'm I'm in you. Only Supreme what it, Do on sure just different what be scratching on the you've So you know what want Court whatever the you that changed my little Chevron's about or thought defense. or it about happen thinking – but it. I were that call might my fact, like that for for might to guys head this what questions looks answered. that's act have a And you

Julie Sloat

Paul, on if into lot of knowing to happy a don't strategy circle But comfort top looking now taking day to at conversation, team's that I'm is I'm this have the team. know my to team But and working rest with today. I a share mind of for have do it. our just been moment, detail right back. the of you legal I day hey, you not that the our

Paul Patterson

Okay, sure.

Julie Sloat

Yes.

Paul Patterson

you my rest thanks so follow with I'll later. much up was the guys It question, but so first were answered, and

Julie Sloat

you. Thank That'd be great.

Paul Patterson

Okay, you great. Thank

Operator

go We'll to Paul Fremont with Please go Ladenburg. ahead.

Paul Fremont

first I plans on out get securitization does proceeds, much. Thank you the change that that question to very the were guess lay my you if equity is issuance you Slide XX?

Julie Sloat

No. really doesn't. it No,

we if AEP is get into what do proceeds, footprint. would the the areas reinvest So the securitization within we other that

other APCo we're the Appalachian areas in in we earn in customers. the So while not getting on sure making continue to the that benefits that the to but so investment Power

Paul Fremont

were incremental you get percent we to say versus second of what my related if sort funded? should equity assume be then CapEx, is funded question debt And let's would

Julie Sloat

we in out plant. to we we debt target mean of mindful I kind if be try of as well. that assume obviously more going Paul, we're have an and have would invest what just we to cap get, throw there to the average typically to those I current Yes, ratios back opportunity Yes, the to of directly manage

slides to out point, plant next. be of from at the we you. is time on how already year on could time this from we're So executing one the have The front entirely that issue much in focused to

So back because that passing the put on we're CapEx work. and into you're billion right? tube, the toothpaste forth, just $XX with playing you're kind we So of got

opportunities well. for we as sure affordable point, need make this And our always again, at while is more that this to have customers we

to that's make metrics sure stopping place, essentially customers in another the strong, for afford because that, be us absolutely balance but trying stays So are what we're too those providing. going our point sure the to we're sure are essentially thread make needle, make able to sheet

reliable. and and just have and to is on definitely lights regulators continuing not system afford. to our disciplined CapEx to to why and really with the keep help that's that actually but customers is spend nice can be us stronger absolutely and what precisely Our necessary would what we also that, fun make But be spend absolutely that

constant a is it So for balancing act us.

Paul Fremont

Thank you Great. much. very

Julie Sloat

You Thank bet. you.

Operator

Instructions] [Operator

Darcy Reese

joining call. Thank on you for us today's

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

Operator

and available at Thank Replay X running be after through August you. will today Certainly. XX:XX midnight.

system XXXXXXX. AT&T participation dialing for day. can access and dial time You parties AT&T again, our any code entering numbers for XXX-XXX-XXXX at and access the call with XXX-XXX-XXXX. the Those and International code replay using X-XXX-XXX-XXXX, for teleconference. XXXXXXX. That your may does by conclude Thanks the at access the X-XXX-XXX-XXXX

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American Electric Power (AEP) 27 Jul 232023 Q2 Earnings call transcript