American Electric Power : 59th Annual Edison Electric Institute Financial Conference 2024 EEI Handout

Published: 2024-11-11 00:07:05 ET AEP

AEP 2024 EEI Handout

59th EEI Financial Conference

Hollywood, Florida

November 10-12, 2024

"Safe Harbor"

Statement Under the

Private Securities

Litigation Reform

Act of 1995

Darcy Reese, Vice President

Investor Relations 614-716-2614 [email protected]

Annie Pribisko, Director

Investor Relations 614-716-2646 [email protected]

This presentation contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934. Although AEP and each of its Registrant Subsidiaries believe that their expectations are based on reasonable assumptions, any such statements may be influenced by factors that could cause actual outcomes and results to be materially different from those projected. Among the factors that could cause actual results to differ materially from those in the forward-looking statements are: changes in economic conditions, electric market demand and demographic patterns in AEP service territories, the economic impact of increased global conflicts and trade tensions, and the adoption or expansion of economic sanctions, tariffs or trade restrictions, inflationary or deflationary interest rate trends, volatility and disruptions in financial markets precipitated by any cause, including turmoil related to federal budget or debt ceiling matters or instability in the banking industry; particularly developments affecting the availability or cost of capital to finance new capital projects and refinance existing debt, the availability and cost of funds to finance working capital and capital needs, particularly (i) if expected sources of capital, such as proceeds from the sale of assets, subsidiaries and tax credits, and anticipated securitizations do not materialize at the level anticipated, and (ii) during periods when the time lag between incurring costs and recovery is long and the costs are material, shifting demand for electricity, the impact of extreme weather conditions, natural disasters and catastrophic events such as storms, drought conditions and wildfires that pose significant risks including potential litigation and the inability to recover significant damages and restoration costs incurred, limitations or restrictions on the amounts and types of insurance available to cover losses that might arise in connection with natural disasters or operations, the cost of fuel and its transportation, the creditworthiness and performance of parties who supply and transport fuel and the cost of storing and disposing of used fuel, including coal ash and spent nuclear fuel, the availability of fuel and necessary generation capacity and performance of generation plants, the ability to recover fuel and other energy costs through regulated or competitive electric rates, the ability to build or acquire generation (including from renewable sources), transmission lines and facilities (including the ability to obtain any necessary regulatory approvals and permits) to meet the demand for electricity at acceptable prices and terms, including favorable tax treatment, cost caps imposed by regulators and other operational commitments to regulatory commissions and customers for generation projects, and to recover all related costs, the disruption of AEP's business operations due to impacts on economic or market conditions, costs of compliance with potential government regulations, electricity usage, supply chain issues, customers, service providers, vendors and suppliers caused by pandemics, natural disasters or other events, new legislation, litigation or government regulation, including changes to tax laws and regulations, oversight of nuclear generation, energy commodity trading and new or heightened requirements for reduced emissions of sulfur, nitrogen, mercury, carbon, soot or particulate matter and other substances that could impact the continued operation, cost recovery and/or profitability of generation plants and related assets, the impact of federal tax legislation on results of operations, financial condition, cash flows or credit ratings, the risks before, during and after generation of electricity associated with the fuels used or the byproducts and wastes of such fuels, including coal ash and spent nuclear fuel, timing and resolution of pending and future rate cases, negotiations and other regulatory decisions, including rate or other recovery of new investments in generation, distribution and transmission service and environmental compliance, resolution of litigation or regulatory proceedings or investigation, the ability to efficiently manage operation and maintenance costs, prices and demand for power generated and sold at wholesale, changes in technology, particularly with respect to energy storage and new, developing, alternative or distributed sources of generation, the ability to recover through rates any remaining unrecovered investment in generation units that may be retired before the end of their previously projected useful lives, volatility and changes in markets for coal and other energy-related commodities, particularly changes in the price of natural gas, the impact of changing expectations and demands of customers, regulators, investors and stakeholders, including evolving expectations related to environmental, social and governance concerns, changes in utility regulation and the allocation of costs within regional transmission organizations, including ERCOT, PJM and SPP, changes in the creditworthiness of the counterparties with contractual arrangements, including participants in the energy trading market, actions of rating agencies, including changes in the ratings of debt, the impact of volatility in the capital markets on the value of the investments held by the pension, other postretirement benefit plans, captive insurance entity and nuclear decommissioning trust and the impact of such volatility on future funding requirements, accounting standards periodically issued by accounting standard-setting bodies, other risks and unforeseen events, including wars and military conflicts, the effects of terrorism (including increased security costs), embargoes, cybersecurity threats, labor strikes impacting material supply chains, global information technology disruptions and other catastrophic events, the ability to attract and retain requisite work force and key personnel.

59th EEI FINANCIAL CONFERENCE

AEP Offers an

14-15%

Attractive Investment

Opportunity

FFO/Debt

~4%

Targeted Range

~8%

COMMITMENT TO:

HIGH GROWTH OPPORTUNITY

INVESTMENTS SUPPORT

Rate Base CAGR

FINANCIAL STRENGTH

Dividend Yield

using 2023 Base

BEST-IN-CLASS CUSTOMER SERVICE THROUGH INNOVATION AND PROCESS TRANSFORMATION

POSITIVE OUTCOMES ACHIEVED WITH

REGULATORY INTEGRITY

1 Includes AEP Transmission Holdco and transmission investments in AEP operating companies. Calculated using 2025E transmission earnings of $3.20 as a percentage of the 2025 guidance midpoint of $5.85.

6-8%

10-12%

55%

Long-term EPS

Growth Rate

Of Operating

from

2026-2029

Earnings 1

Total Shareholder Return

Transmission

59th EEI FINANCIAL CONFERENCE

Successful Transformation into a Customer- Focused, Pure-Play Regulated Utility

Streamlining core business, focused on capturing opportunity from investments in wires and regulated generation

Aligning organizational structure and building culture of accountability and operational excellence to effectively support operating companies and enhance customer service

Timeline of

August 2023

February 2024

Strategic Actions

Completed Sale of Unregulated

Completed Sale of New

Renewables Portfolio

Mexico Solar Assets

September 2024

Completed Sale of Distributed Resources Business

Executing Our Strategy to Drive Value for

Customers and Investors

GROWTH & FINANCIAL STRENGTH

CUSTOMER SERVICE

REGULATORY INTEGRITY

Strategically invest in growth opportunities to support financial strength:

59th EEI FINANCIAL CONFERENCE

Growth & Financial Strength: Load

Customer commitments for 20 GW of load through 2029 driven by data center demand and economic development with 2/3 from the commercial class and 1/3 from the industrial class

Load figures are billed retail sales excluding firm wholesale load.

AEP Normalized Residential GWh Sales

% Change vs. Prior Year

0.1%

0.3%

-2%

-1.1%

-0.9%

-4%

2021A

2022A

2023A

2024E

2025E

2026E

2027E

AEP Industrial GWh Sales

% Change vs. Prior Year

10%

7.0%

4.5%

3.7%

4.0%

1.6%

1.0%

1.6%

-2%

-4%

2021A

2022A

2023A

2024E

2025E

2026E

2027E

AEP Normalized Commercial GWh Sales

% Change vs. Prior Year

24%

23.2%

19.0%

20%

16.1%

16%

11.1%

12%

7.8%

4.3%

4.2%

-4%

2021A

2022A

2023A

2024E

2025E

2026E

2027E

AEP Normalized Retail GWh Sales

% Change vs. Prior Year

10%

8.3%

8.4%

8.9%

2.8%

2.5%

3.5%

2.1%

-2%

-4%

2021A

2022A

2023A

2024E

2025E

2026E

2027E

Large Load Growth Benefits All Stakeholders

Investors:

Customers:

Communities:

Load growth from data center

Innovative tariff design to

Build a reliable and

and industrial customers driving

protect our customers and

affordable grid to support

incremental investments

keep rates affordable

economic development

Growth & Financial

Strength:

Transmission

Strengthening the electric transmission grid and meeting robust demand while focusing on improved system performance, increased reliability and resiliency, and security

2025-2029

CAPEX

$21

BILLION

DRIVERS

ASSET REPLACEMENT

GROWTH

RELIABILITY

TELECOM / TECHNOLOGY

Asset renewal investments based on condition, performance and risk to reduce customer outages and interruption times

New customer connections and system upgrades to facilitate load growth primarily in Indiana, Ohio and Texas

Multi-driver projects on the local network addressing reliability and customer concerns

Asset health monitoring, cyber-security requirements and enhanced situational awareness for grid operations

Transmission Investment

Robust Pipeline

Asset Renewal Investments

We see opportunities to capture

$2B of annual on-system

incremental transmission investment

capital investment is currently

above the current 5-year plan; we also

required to maintain existing

have an ongoing transmission

age profile

investment pipeline in early

development beyond 2029

Future Growth Drivers Reliability needs, load growth and transformation of the grid is driving additional capital investment needs

Growth & Financial

2025-2029

DRIVERS

Strength:

CAPEX

RELIABILITY,

Distribution

AUTOMATION

RESILIENCY &

Modernizing the electric

GROWTH

distribution system to

$13

address increased needs

and enhance customer

BILLION

RESTORATION

satisfaction

Asset renewal and reliability investments including pole, conductor, cutout, station transformer and breaker replacements and automated technology

Investments for new service, upgrades, relocation

Storm restoration work to meet service obligations

Distribution Investment

Robust Pipeline

Asset Renewal Investments

Future Growth Drivers

Significant capital investment

$2B of annual on-system capital

Electrification, higher penetration levels of

opportunity exists to renew the

investment is currently required to

distributed resources and projects to support

distribution system, improve reliability

maintain existing age profile

customer growth will drive additional distribution

and resiliency, and expand operational

investment opportunities

capabilities to accommodate increased

system needs

Growth & Financial

2025-2029 CAPEX

Strength: New

APCO I&M KPCo PSO SWEPCO

Generation

Diversifying electric

$14

generation to support

resource adequacy and

BILLION

affordability

2025-2034 RESOURCE NEEDS

GENERATION ADDITIONS

SOLAR

WIND

STORAGE

NAT. GAS3

TOTAL

2025-2034 (MW)1,2

APCo

1,505

1,244

325

3,074

I&M

2,749

1,100

300

4,350

8,499

KPCo

1,100

1,180

PSO

893

753

200

1,215

3,061

SWEPCO

973

1,198

400

2,253

4,824

TOTAL

6,200

4,295

1,225

8,918

20,638

RFPs IN PROGRESS4

1 Resource additions are from Integrated

Resource Plans (IRP) filings.

RFPs Issued

May 2024

September 2024

November 2023

January 2024

2 Investments in new generation resources will be subject to

Wind

market availability of economic projects, regulatory

Solar

800 MW

1,500 MW of SPP accredited

2,100 MW of SPP accredited

preferences and approvals and RTO capacity requirements.

4,000 MW

3 Natural gas additions may include peaking units and fuel

Storage

capacity

switching to provide reliable, affordable and flexible power.

Natural Gas

4 RFPs represent up-to MW capacity values; related

Reg. Filings and Approvals

Q2-25 - Q4-25

Q2-25 - Q2-26

Q1-25 ‒ Q4-25

Q1-25 ‒ Q1-26

regulatory filings will take into consideration commission

Projected In-service Dates

2028

2028 or 2029

2027 or 2028

preferences including owned and contracted resources.

Customer Service:

Process Transformation

and Technology

Business

Technology Innovation

Transformation

Supports Grid Reliability

Supports Efficiency

and Resiliency

•

Organizational changes

•

Use of drones for

reinforce accountability

inspections, surveys and

• Lean management and

storm damage assessments

continuous process

• New storm damage

improvement

assessment tool

•

Workforce planning

•

Generation asset data

including retirements and

analytics using predictive

other attritions

capabilities to proactively

monitor asset efficiency

Technology Innovation

New Generation Technology

Supports Safety and

Being Considered to Support

Service

Resource Adequacy

•

Emergency outage

•

Long duration battery

communication tool

storage

•

Customer workflow

•

Small modular reactors

scheduling

59th EEI FINANCIAL CONFERENCE

Disclaimer

AEP - American Electric Power Company Inc. published this content on November 11, 2024, and is solely responsible for the information contained herein. Distributed by Public, unedited and unaltered, on November 11, 2024 at 05:06:09.341.