American Electric Power Company, Inc. · NASDAQ:AEP
American Electric Power — Investor Presentation (September 2017)
37 slides from American Electric Power's investor presentation, Sep 14, 2017
Slide 1: September 2017 Investor Meetings
SEPTEMBER 2017 INVESTOR MEETINGS SEPTEMBER 14, 2017
Slide 2: Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995
“Safe Harbor” Statement under the Private Securities Litigation Reform Act of 1995 This presentation contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934. Although AEP and each of its Registrant Subsidiaries believe that their expectations are
Slide 3: The Premier Regulated Energy Company
THE PREMIER AMERICA’S ENERGY AMERICA’S REGULATED ENERGY PARTNER PARTNER ENERGY COMPANY 40,000+ Miles of Transmission 5.4M Customers in 11 States 26GW Owned Generation $36B Current Market Capitalization $63B Total Assets Note: Statistics as of June 30, 2017, except market capitalization which is as o
Slide 4: Doing What We Said
DOING WHAT WE SAID Completed strategic Reinvesting Growing review of proceeds regulated competitive wisely businesses assets 3
Slide 5: AEP Going Forward
AEP GOING FORWARD Well positioned Growing Earnings as a regulated dividend growth rate business consistent 5-7% with earnings 4
Slide 6: Organic Investment Opportunity Equals Increased Growth
ORGANIC INVESTMENT OPPORTUNITY EQUALS INCREASED GROWTH 2017 RESET OF BASE: $4.50 2016 Original Guidance for Regulated $3.30 4%-6% Growth Rate 0.17 2017 Regulated Earnings $3.47 Earnings from remaining G&M business 0.09 $4.25 Earnings from assets sold through Q1 2017 0.09 Midpoint of 2017 guidance $3
Slide 7: Strong, Consistent Dividend Growth
STRONG, CONSISTENT DIVIDEND GROWTH $2.50 $2.36 $2.27 $2.00 $2.15 $2.03 $1.95 $1.50 $1.00 $0.50 $0.00 2013 2014 2015 2016 2017* EPS Growth + Dividend Yield = 9% to 11% Annual Return Opportunity * Subject to Board approval 6
Slide 8: Capital Forecast
CAPITAL FORECAST $17.3B Cap-ex from 2017-2019 Contracted Renewables $1.0B | 6% Regulated Renewables $0.5B | 3% Regulated Environmental Generation 100% $1.0B | 6% Regulated AEP Transmission Fossil & Hydro Generation $0.9B | 5% Holdco $4.7B | 27% of capital allocated to Nuclear Generation regulated bu
Slide 9: 7.7% CAGR in Rate Base
7.7% CAGR IN RATE BASE CUMULATIVE CHANGE FROM 2015 BASE 2015 Rate Base Proxy Vertically Integrated Utilities $21.9B $11.4B T&D Utilities $7.8B Transcos/Transource $3.1B Total $32.8B $8.3B $4.8 $3.4 $5.1B $3.4 $2.2 $2.4 $2.6B $1.0 $1.5 $3.2 $0.8 $2.5 $0.8 $1.4 2016A 2017E 2018E 2019E Vertically Integ
Slide 10: Regulated Returns
REGULATED RETURNS 12 MONTHS ENDED 6/30/2017 EARNED ROE (NON-GAAP OPERATING EARNINGS) Regulated Totals 2014-2016 Avg: 9.8% 2017 Forecast: 9.9% 2017-2019 Avg: 10.0% Sphere size based on each company’s relative equity balance 9
Slide 11: Continuous Improvement Enables O&M Discipline
CONTINUOUS IMPROVEMENT ENABLES O&M DISCIPLINE Proven Track Record of O&M Discipline (Amounts exclude items recovered in riders/trackers) $ in billions 10
Slide 12: Weather Normalized Load Trends
WEATHER NORMALIZED LOAD TRENDS Note: Load figures are provided on a billed basis. Charts reflect connected load and exclude firm wholesale and Buckeye Power backup load. 11
Slide 13: Pending Rate Case I&M - Indiana
PENDING RATE CASE I&M - INDIANA Base rate case filed July 26, 2017 • Cause #: 44967 • Requested rate base: $4.185B • Requested ROE: 10.6% • Cap Structure: 53.5%D / 46.5%E • Base Rate Increase: $263M, ($89M increased D&A) • Test Year: December 31 2018 forecasted test year • Effective Date: Requested
Slide 14: Pending Rate Case I&M - Michigan
PENDING RATE CASE I&M - MICHIGAN Base rate case filed May 15, 2017 • Docket #: U-18370 • Requested rate base: $1.015B • Requested ROE: 10.6% • Cap Structure: 53.6%D / 46.4%E • Base Rate Increase: $51.7M, ($23M increased depreciation) • Test Year: 2018 Fully Projected, 13-mo. average • Effective Date
Slide 15: Pending Rate Case KYP - Kentucky
PENDING RATE CASE KYP-KENTUCKY Base rate case filed June 28, 2017 • Docket #: 2017-00179 • Requested rate base: $1.195B • Requested ROE: 10.0% • Cap Structure: 54.45%D/3.87%A/41.68%E • Base Rate Increase: $63.3M • Test Year: 2/28/17 plus adjustments • Effective Date: January 18, 2018 • Procedural Sc
Slide 16: Pending Rate Case PSO - Oklahoma
PENDING RATE CASE PSO - OKLAHOMA Base rate case filed June 30, 2017 • Docket #: PUD 201700151 • Requested rate base: $2.527B • Requested ROE: 10.0% • Cap Structure: 51.5%D / 48.5%E • Base Rate Increase: $156M • Test Year: December 31, 2016 • Effective Date: interim rates January 13, 2018 • Procedura
Slide 17: Pending Rate Case SWEPCO - Texas
PENDING RATE CASE SWEPCO - TEXAS Base rate case filed December 16, 2016 • Docket #: 46449 SWEPCO • Requested rate base: $1.238B Texas • Requested ROE: 10.0% • Cap Structure: 51.5%D/48.5%E • Base Rate Increase: $69M net ($106M less $37M TCRF/DCRF decrease) • Test Year: June 30, 2016 • Status Waiting
Slide 18: Solid Credit Metrics
SOLID CREDIT METRICS AEP Consolidated Cash Flows and Financial Metrics $ in millions 2016A 2017E 2018E 2019E Cash from Operations 4,500 4,400 4,800 5,000 Capital & JV Equity Contributions (4,900) (5,700) (6,000) (5,600) Other Investing Activities * (100) 1,800 (200) (200) Common Dividends ** (1,100)
Slide 19: AEP Credit Ratings
AEP CREDIT RATINGS Moody’s S&P Senior Senior Company Unsecured Outlook Unsecured Outlook American Electric Power Company, Inc. Baa1 P BBB+ S AEP, Inc. Short Term Rating P2 S A2 S AEP Texas Baa1 S A- S Appalachian Power Company Baa1 S A- S Indiana Michigan Power Company Baa1 P A- S Kentucky Power Com
Slide 20: Capital Forecast 2017-2019 by Subsidiary
CAPITAL FORECAST 2017-2019 BY SUBSIDIARY $ in millions (excluding AFUDC) 2017E 2018E 2019E Total Appalachian Power Company $780 $1,130 $693 $2,603 Wheeling Power Company $44 $63 $68 $175 Indiana Michigan Power Company $604 $508 $502 $1,614 Kentucky Power Company $96 $130 $162 $388 AEP Ohio $515 $503
Slide 21: Capitalization & Liquidity
CAPITALIZATION & LIQUIDITY Total Debt / Total Capitalization Credit Statistics Actual Target FFO to Total Debt 18.1% 15%-20% Represents the trailing 12 months as of 6/30/2017 See Appendix for reconciliation to GAAP Liquidity Summary (unaudited) 6/30/2017 Actual ($ in millions) Amount Maturity Revolv
Slide 22: Debt Maturity Profile
DEBT MATURITY PROFILE ($ in millions) Year 2017 2018 2019 2020 2021 2022 AEP, Inc. $550.0 $0.0 $0.0 $0.0 $0.0 $300.0 AEP Generating Company $0.0 $125.0 $45.0 $0.0 $0.0 $104.0 AEP Texas* $40.9 $30.0 $250.0 $50.6 $0.0 $25.0 AEP Transmission Company $0.0 $50.0 $85.0 $0.0 $50.0 $0.0 Appalachian Power* $
Slide 23: $3 Billion Annual Transmission Investment
$3 BILLION ANNUAL TRANSMISSION INVESTMENT Improving reliability by replacing aging infrastructure Enhancing resiliency to combat extreme weather and increasing physical security Integrating renewables and supporting environmental mandates Relieving congestion to support an efficient generation marke
Slide 24: AEP Transmission Manages the Largest Diverse Transmission Portfolio
AEP TRANSMISSION MANAGES ATHE DIVERSE LARGEST PORTFOLIO TRANSMISSION NETWORK IN NORTH AMERICA Located in PJM AEP Transmission Business Located in SPP Located in ERCOT Joint Operating Transcos Ventures Companies OH Transco ETT APCo/WPCo/Kgp $2,407M $2,878M $2,665M WV Transco Transource I&M $793M $318
Slide 25: AEPTHC Capital and EPS Forecast for 2017-2019
AEPTHC CAPITAL AND EPS FORECAST FOR 2017-2019 12 $0.89 - $0.92 0.95 Cumulative capital investment of $0.76 - $0.79 0.85 10 nearly $10 billion to grow EPS at a CAGR of 39% through 2019 $9.9B 0.75 $0.56 - $0.59 0.65 8 $0.54 $8.3B 0.55 6 $0.39 $6.7B 0.45 $0.31 $5.4B 0.35 4 $4.0B 0.25 $0.16 $0.09 0.15 2
Slide 26: Contracted Renewables
CONTRACTED RENEWABLES $1B CAPITAL ALLOCATED 2017-2019 Renewable Generation Asset Owner “Behind-the-Meter” Energy Assets Universal Scale Energy Assets Schools, Cities, Hospitals and Utilities, Municipalities, Key Customers Commercial / Industrial Corporations and Cooperative Accounts Accounts Solar,
Slide 27: Preferred Project Partner
PREFERRED PROJECT PARTNER Strong balance sheet Customer relationship Ability to invest Incremental sales channel Tax appetite AEP IS A WELCOMED STRATEGIC PARTNER 26
Slide 28: Contracted Renewables Outlook
CONTRACTED RENEWABLES OUTLOOK STRONG PIPELINE OF ADDITIONAL OPPORTUNITIES DEVELOPMENT PROJECTS DISCIPLINED INVESTMENT Fully contracted assets Specific return requirements Strong credit counterparties Detailed technical reviews Long-term predictable cash Measured approach to flows and earnings projec
Slide 29: Positioning for a Sustainable Future
POSITIONING FOR A SUSTAINABLE FUTURE Transforming our generation fleet Dramatically reducing emissions Adding more renewable sources Integrating renewables through the nation’s largest transmission network 28
Slide 30: AEP's Generating Resource Portfolio Past and Future Capacity
AEP'S GENERATING RESOURCE PORTFOLIO PAST AND FUTURE CAPACITY 80% 70% 70% 66% 60% 50% 47% 42% 40% 33% 30% 30% 30% 27% 24% 22% 20% 19% 14% 13% 10% 7% 6% 7% 7% 6% 4% 4% 6% 7% 7% 1% 1% 0% 1999 2005 2017 Post Future 1999 2005 2017 Post Future 1999 2005 2017 Post Future 1999 2005 2017 Post Future 1999 200
Slide 31: Investing Billions to Reduce Emissions
INVESTING BILLIONS TO REDUCE EMISSIONS 30
Slide 32: Dramatic Reductions in Emissions
DRAMATIC REDUCTIONS IN EMISSIONS Post-Ohio 2000-2016 2000-2017 Disposition CO2 actual estimated estimated 44% 56% 59% 31
Slide 33: Dramatic Reductions in Emissions
DRAMATIC REDUCTIONS IN EMISSIONS Post-Ohio 1990-2016 1990-2017 Disposition ACTUAL ESTIMATED ESTIMATED SO2 94% 94% 94% NOx 90% 91% 93% Post-Ohio 2001-2015 2001-2017 Disposition ACTUAL ESTIMATED ESTIMATED Hg 73% 92% 93% 32
Slide 34: Investing in a Greener Future
INVESTING IN A GREENER FUTURE Excludes impact of Wind Catcher Note: Actual additions depend on market conditions, regulatory approval, customer demand and other external factors. 33
Slide 35: Delivering Clean Energy Resources
DELIVERING CLEAN ENERGY RESOURCES AEP's 2017 Renewable Portfolio, in MW Hydro, Wind, Solar & Pumped Storage Owned MW PPA MW Total MW AEP Ohio 209 209 Appalachian Power Company 788 455 1,243 Indiana Michigan Power Company 38 450 488 Public Service of Oklahoma 1,137 1,137 Southwestern Electric Power C
Slide 36: Wind Catcher Energy Connection
WIND CATCHER ENERGY CONNECTION Project is expected to reduce rates for PSO & SWEPCO customers over the life of the project with savings starting year-1 of operation, while providing meaningful capital investment and earnings growth opportunity for shareholders Project Scope: 2,000 MW (nameplate) w
Slide 37: The Premier Regulated Energy Company
THE PREMIER REGULATED ENERGY COMPANY HIGHER HIGHER growth dividends MORE MORE regulated certainty 36
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