American Electric Power(AEP) - 2024 Q3 - Quarterly Results

Executive Summary & Key Announcements Third-Quarter 2024 Financial Highlights American Electric Power (AEP) reported third-quarter 2024 GAAP earnings of $1.80 per share and operating earnings of $1.85 per share, showing a slight decrease in GAAP EPS but an increase in operating EPS compared to the prior year | Metric | Q3 2024 | Q3 2023 | Change | | :--------------------- | :------ | :------ | :----- | | GAAP Earnings ($M) | 959.6 | 953.7 | 5.9 | | Operating Earnings ($M)| 985.4 | 923.8 | 61.6 | | GAAP EPS ($) | 1.80 | 1.83 | (0.03) | | Operating EPS ($) | 1.85 | 1.77 | 0.08 | 2024 Earnings Guidance Update AEP narrowed its 2024 operating earnings guidance range, maintaining its midpoint, reflecting confidence in its year-to-date progress | Metric | 2024 Guidance Range | | :-------------------------- | :------------------ | | Operating EPS (non-GAAP) | $5.58 to $5.68 | | Midpoint | $5.63 | New Long-Term Growth Rate and Capital Plan The company announced a new long-term operating earnings growth rate of 6% to 8% and expanded its five-year capital plan to $54 billion to support reliability and demand growth - New long-term growth rate: 6% to 8% based off of 2025 operating earnings guidance of $5.75 to $5.95 per share[1][5] - Expanded five-year capital plan: $54 billion to support reliability and demand growth[1][5] CEO Commentary and Strategic Focus CEO Bill Fehrman highlighted continued investments, operational excellence, and financial discipline as drivers for results. He emphasized robust growth in regulated businesses, unprecedented load growth, and recent corporate restructuring to streamline operations and improve performance - Results driven by continued investments to improve service and enhance the energy system[4] - Commitment to best-in-class service, operational excellence, and financial discipline[5] - Commercial load increased over 10% year-over-year through Q3, with an expected average annual growth of 20% over the next three years based on signed customer contracts[7] - Implemented leadership and alignment changes to streamline corporate structure and move decision-making closer to customers[9] Detailed Financial Performance Consolidated Financial Results (GAAP & Operating) AEP's consolidated revenue saw a slight increase in Q3 2024 and a more significant rise year-to-date. Operating earnings showed stronger growth than GAAP earnings for both periods | Metric ($ in billions) | Q3 2024 | Q3 2023 | Change | YTD 2024 | YTD 2023 | Change | | :--------------------- | :------ | :------ | :----- | :------- | :------- | :----- | | Revenue | 5.4 | 5.3 | 0.1 | 15.0 | 14.4 | 0.6 | | GAAP Earnings ($M) | 959.6 | 953.7 | 5.9 | 2,303.0 | 1,871.9 | 431.1 | | Operating Earnings ($M)| 985.4 | 923.8 | 61.6 | 2,317.8 | 2,077.6 | 240.2 | Segment-wise Earnings Performance The Vertically Integrated Utilities, Transmission & Distribution Utilities, and AEP Transmission Holdco segments demonstrated positive earnings growth in both GAAP and operating measures for Q3 and YTD 2024, while Generation & Marketing showed mixed results Vertically Integrated Utilities This segment reported strong growth in both GAAP and operating earnings for Q3 and YTD 2024, contributing significantly to overall company performance | Metric ($ in millions) | Q3 2024 | Q3 2023 | Change | YTD 2024 | YTD 2023 | Change | | :--------------------- | :------ | :------ | :----- | :------- | :------- | :----- | | GAAP Earnings | 571.5 | 512.5 | 59.0 | 1,198.0 | 1,051.6 | 146.4 | | Operating Earnings | 572.4 | 520.0 | 52.4 | 1,117.5 | 1,045.6 | 71.9 | Transmission & Distribution Utilities The Transmission & Distribution Utilities segment also showed healthy increases in both GAAP and operating earnings for Q3 and YTD 2024 | Metric ($ in millions) | Q3 2024 | Q3 2023 | Change | YTD 2024 | YTD 2023 | Change | | :--------------------- | :------ | :------ | :----- | :------- | :------- | :----- | | GAAP Earnings | 245.2 | 206.0 | 39.2 | 542.3 | 508.4 | 33.9 | | Operating Earnings | 245.2 | 206.0 | 39.2 | 610.8 | 488.2 | 122.6 | AEP Transmission Holdco AEP Transmission Holdco reported consistent growth in both GAAP and operating earnings for the third quarter and year-to-date periods | Metric ($ in millions) | Q3 2024 | Q3 2023 | Change | YTD 2024 | YTD 2023 | Change | | :--------------------- | :------ | :------ | :----- | :------- | :------- | :----- | | GAAP Earnings | 214.7 | 202.9 | 11.8 | 624.1 | 580.8 | 43.3 | | Operating Earnings | 214.7 | 202.9 | 11.8 | 632.3 | 580.9 | 51.4 | Generation & Marketing The Generation & Marketing segment experienced a GAAP earnings decline in Q3 2024 but a significant GAAP earnings increase year-to-date. Operating earnings showed modest growth for both periods | Metric ($ in millions) | Q3 2024 | Q3 2023 | Change | YTD 2024 | YTD 2023 | Change | | :--------------------- | :------ | :------ | :----- | :------- | :------- | :----- | | GAAP Earnings | 93.3 | 130.7 | (37.4) | 226.1 | (59.3) | 285.4 | | Operating Earnings | 99.2 | 92.8 | 6.4 | 225.6 | 204.1 | 21.5 | All Other The 'All Other' category reported increased losses in both GAAP and operating earnings for Q3 and YTD 2024 | Metric ($ in millions) | Q3 2024 | Q3 2023 | Change | YTD 2024 | YTD 2023 | Change | | :--------------------- | :------ | :------ | :----- | :------- | :------- | :----- | | GAAP Earnings (Loss) | (165.1) | (98.4) | (66.7) | (287.5) | (209.6) | (77.9) | | Operating Earnings (Loss)| (146.1) | (97.9) | (48.2) | (268.4) | (241.2) | (27.2) | Reconciliation of GAAP to Operating Earnings AEP provides detailed reconciliations from GAAP earnings to operating earnings, adjusting for special items such as mark-to-market impacts, regulatory liabilities, disallowances, and severance charges, to offer a clearer view of ongoing business performance Q3 2024 Reconciliation For Q3 2024, key adjustments from GAAP to operating earnings included mark-to-market impacts of commodity hedging activities and an SEC matter loss contingency | Special Item (Q3 2024) | Impact ($M) | Impact (EPS) | | :------------------------------------- | :---------- | :----------- | | Mark-to-Market Impact of Commodity Hedging Activities | 6.8 | 0.01 | | SEC Matter Loss Contingency | 19.0 | 0.04 | | Total Special Items | 25.8 | 0.05 | Year-to-Date 2024 Reconciliation Year-to-date 2024 reconciliation involved several significant adjustments, including mark-to-market impacts, remeasurement of excess ADIT regulatory liability, impact of NOLC on retail rate making, and provisions related to power stations and regulatory rules | Special Item (YTD 2024) | Impact ($M) | Impact (EPS) | | :------------------------------------- | :---------- | :----------- | | Mark-to-Market Impact of Commodity Hedging Activities | (52.2) | (0.09) | | Remeasurement of Excess ADIT Regulatory Liability | (44.6) | (0.09) | | Impact of NOLC on Retail Rate Making | (259.6) | (0.50) | | Disallowance - Dolet Hills Power Station | 11.1 | 0.02 | | Provision for Refund - Turk Plant | 126.4 | 0.24 | | Sale of AEP OnSite Partners | 10.4 | 0.02 | | Severance Charges | 93.6 | 0.18 | | Federal EPA Coal Combustion Residuals Rule | 110.7 | 0.21 | | SEC Matter Loss Contingency | 19.0 | 0.04 | | Total Special Items | 14.8 | 0.03 | Sales Data and Load Growth Third-Quarter 2024 Regulated Connected Load In Q3 2024, Vertically Integrated Utilities saw a slight increase in total retail electric sales, driven by commercial growth, while Transmission & Distribution Utilities experienced stronger overall retail growth, particularly in the commercial sector Vertically Integrated Utilities - Retail Electric Sales (in millions of kWh) | Category | Q3 2024 | Q3 2023 | Change | | :---------- | :------ | :------ | :----- | | Residential | 8,959 | 8,975 | (0.2)% | | Commercial | 6,910 | 6,686 | 3.4% | | Industrial | 8,562 | 8,731 | (1.9)% | | Total Retail| 25,043 | 25,010 | 0.1% | Transmission & Distribution Utilities - Retail Electric Sales (in millions of kWh) | Category | Q3 2024 | Q3 2023 | Change | | :---------- | :------ | :------ | :----- | | Residential | 8,206 | 8,442 | (2.8)% | | Commercial | 9,671 | 8,574 | 12.8% | | Industrial | 6,725 | 6,601 | 1.9% | | Total Retail| 24,815 | 23,837 | 4.1% | Year-to-Date 2024 Regulated Connected Load For the nine months ended September 30, 2024, both Vertically Integrated Utilities and Transmission & Distribution Utilities reported positive growth in total retail electric sales, with commercial load being a significant driver, especially for T&D Utilities Vertically Integrated Utilities - Retail Electric Sales (in millions of kWh) | Category | YTD 2024 | YTD 2023 | Change | | :---------- | :------- | :------- | :----- | | Residential | 24,191 | 23,406 | 3.4% | | Commercial | 18,763 | 17,781 | 5.5% | | Industrial | 25,563 | 25,686 | (0.5)% | | Total Retail| 70,235 | 68,557 | 2.4% | Transmission & Distribution Utilities - Retail Electric Sales (in millions of kWh) | Category | YTD 2024 | YTD 2023 | Change | | :---------- | :------- | :------- | :----- | | Residential | 21,079 | 20,618 | 2.2% | | Commercial | 26,871 | 22,711 | 18.3% | | Industrial | 20,363 | 19,800 | 2.8% | | Total Retail| 68,886 | 63,694 | 8.2% | Corporate Information About AEP American Electric Power (AEP) is a major utility committed to providing reliable, affordable power, investing $54 billion from 2025-2029 to enhance service. It operates the nation's largest electric transmission system, serving 5.6 million customers across 11 states with approximately 29,000 megawatts of diverse generating capacity - Investing $54 billion from 2025 through 2029 to enhance service and support growing energy needs[19] - Operates the nation's largest electric transmission system with 40,000 line miles and over 225,000 miles of distribution lines[19] - Delivers energy to 5.6 million customers in 11 states[19] - One of the nation's largest electricity producers with approximately 29,000 megawatts of diverse generating capacity[19] Forward-Looking Statements This section serves as a cautionary statement, indicating that the report contains forward-looking statements whose actual outcomes may differ materially due to various factors. These factors include changes in economic conditions, market demand, financial market volatility, regulatory changes, extreme weather, fuel costs, and technological advancements - Actual outcomes and results may be materially different from projections due to factors such as economic conditions, electric market demand, and demographic patterns[21] - Risks include volatility and disruptions in financial markets, availability and cost of funds, shifting demand for electricity, and impact of extreme weather conditions[21] - Other factors include new legislation and government regulation, timing and resolution of regulatory decisions, changes in technology, and cyber security threats[21][23]