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American Electric Power(AEP) - 2025 Q1 - Earnings Call Transcript
AEPAmerican Electric Power(AEP)2025-05-06 13:00

Financial Data and Key Metrics Changes - The company reported first quarter 2025 operating earnings of 1.54pershare,totaling1.54 per share, totaling 823 million, which is a 20% increase compared to the same period last year [8][22] - The company reaffirmed its 2025 operating earnings guidance range of 5.75to5.75 to 5.95 per share and a long-term operating earnings growth rate of 6% to 8% [8][38] - GAAP earnings for the first quarter were 1.50pershare,downfrom1.50 per share, down from 1.91 per share in 2024, primarily due to a charge related to the write-off of previously deferred costs [20][21] Business Line Data and Key Metrics Changes - Operating earnings for vertically integrated utilities were 0.66pershare,up0.66 per share, up 0.09 from a year earlier, driven by favorable weather and rate changes [22] - The transmission and distribution utilities segment earned 0.36pershare,up0.36 per share, up 0.07 from last year, benefiting from rate changes and higher transmission revenue [22] - Generation and marketing produced 0.14pershare,up0.14 per share, up 0.02 from last year, with favorable retail and wholesale margins [22] Market Data and Key Metrics Changes - AEP's total retail load growth has been favorable, with commercial load growing 12.3% compared to the first quarter of last year [9] - The company expects to see annual retail load growth of between 8% to 9% through 2027, representing a significant increase in demand [27] - The company has over 500 existing and potential customers requesting to connect nearly 80 gigawatts of load to its transmission system [30] Company Strategy and Development Direction - The company is committed to investing 54billionoverthenextfiveyearstomeettheneedsof5.6millioncustomersacross11states[5][8]−AEPisfocusingoninfrastructureinvestmentstosupportincreasingelectricdemand,includingplansfornewgenerationandtransmissionprojects[10][12]−Thecompanyisactivelymanagingregulatorystrategiestoensurefaircostallocationandprotectexistingcustomerswhileattractinglargeloads[11][18]Management′sCommentsonOperatingEnvironmentandFutureOutlook−Managementexpressedconfidenceinthecompany′sgrowthpotential,citingsignificanteconomicdevelopmentactivitiesacrossitsfootprint[38]−Thecompanyisoptimisticaboutachievingits2025commitmentsandmaintainingastrongbalancesheettosupportcapitalspendingneeds[8][38]−Managementhighlightedtheimportanceofregulatorydevelopmentsandcustomerengagementindrivingfuturegrowth[14][18]OtherImportantInformation−Thecompanyhasreceivedcommissionapprovalsforlargeloadtariffsinseveralstates,indicatingstrongregulatorysupportforitsgrowthinitiatives[11]−AEP′sfirstquarterearnedROEforrate−relatedbusinesseswas9.354 billion over the next five years to meet the needs of 5.6 million customers across 11 states [5][8] - AEP is focusing on infrastructure investments to support increasing electric demand, including plans for new generation and transmission projects [10][12] - The company is actively managing regulatory strategies to ensure fair cost allocation and protect existing customers while attracting large loads [11][18] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's growth potential, citing significant economic development activities across its footprint [38] - The company is optimistic about achieving its 2025 commitments and maintaining a strong balance sheet to support capital spending needs [8][38] - Management highlighted the importance of regulatory developments and customer engagement in driving future growth [14][18] Other Important Information - The company has received commission approvals for large load tariffs in several states, indicating strong regulatory support for its growth initiatives [11] - AEP's first quarter earned ROE for rate-related businesses was 9.3%, up from 9.05% at year-end [15] - The company is focused on reducing regulatory lag and has made timely filings to support its financial and operational strategies [17] Q&A Session Summary Question: How are conversations going in West Virginia regarding securitization? - Management reported positive discussions and is optimistic about achieving a favorable outcome in the upcoming hearings [41][43] Question: Are there any pullbacks from hyperscalers like Microsoft? - Management noted that despite Microsoft's delay, there is still robust demand from other customers, and the overall system demand remains strong [45][46] Question: How do you reconcile current sales trends against the 2025 forecast? - Management indicated that while near-term earnings impacts may be muted, the rapid addition of commercial and industrial load creates additional growth opportunities [51][53] Question: What are the implications of shifting from ESPs to MYPs in Ohio? - Management highlighted that the new legislation supports capital investment growth and promotes timely recovery of investments, which is beneficial for the company [55][56] Question: What is the plan for financing the potential 10 billion upside? - Management stated that they have already secured equity needs through previous transactions and have various levers to pull for future financing [100][102]