4 th quarter 2016 earnings release presentation
play

4 th Quarter 2016 Earnings Release Presentation January 26, 2017 - PowerPoint PPT Presentation

4 th Quarter 2016 Earnings Release Presentation January 26, 2017 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


  1. 4 th Quarter 2016 Earnings Release Presentation January 26, 2017

  2. “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 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: the economic climate, growth or contraction within and changes in market demand and demographic patterns in our service territory, inflationary or deflationary interest rate trends, volatility in the financial markets, particularly developments affecting the availability of capital on reasonable terms and developments impairing our ability to finance new capital projects and refinance existing debt at attractive rates, 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 during periods when the time lag between incurring costs and recovery is long and the costs are material, electric load, customer growth and the impact of competition including competition for retail customers, weather conditions, including storms and drought conditions, and our ability to recover significant storm restoration costs, available sources and costs of, and transportation for, fuels and the creditworthiness and performance of fuel suppliers and transporters, availability of necessary generation capacity and the performance of our generation plants, our ability to recover increases in fuel and other energy costs through regulated or competitive electric rates, our ability to build transmission lines and facilities (including our ability to obtain any necessary regulatory approvals and permits) when needed at acceptable prices and terms and to recover those costs, new legislation, litigation and government regulation, including 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 our generation plants and related assets, evolving public perception of the risks associated with fuels used before, during and after the generation of electricity, including nuclear fuel, a reduction in the federal statutory tax rate could result in an accelerated return of deferred federal income taxes to customers, 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, our ability to constrain operation and maintenance costs, our ability to develop and execute a strategy based on a view regarding prices of electricity and other energy-related commodities, prices and demand for power that we generate and sell at wholesale, changes in technology, particularly with respect to energy storage and new, developing, alternative or distributed sources of generation, our ability to recover through rates or market prices 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 capacity and electricity, coal, and other energy-related commodities, particularly changes in the price of natural gas and capacity auction returns, changes in utility regulation and the allocation of costs within regional transmission organizations, including ERCOT, PJM and SPP, the market for generation in Ohio and PJM and the ability to recover investment in Ohio generation assets, our ability to successfully and profitably manage our competitive generation assets including the evaluation and execution of strategic alternatives for these assets as some of the alternatives could result in a loss, changes in the creditworthiness of the counterparties with whom we have contractual arrangements, including participants in the energy trading market, actions of rating agencies, including changes in the ratings of our debt, the impact of volatility in the capital markets on the value of the investments held by our pension, other postretirement benefit plans, captive insurance entity and nuclear decommissioning trust and the impact of such volatility on future funding requirements, accounting pronouncements periodically issued by accounting standard-setting bodies and other risks and unforeseen events, including wars, the effects of terrorism (including increased security costs), embargoes, cyber security threats and other catastrophic events. Bette Jo Rozsa Brad Funk Investor Managing Director Director Relations Investor Relations Investor Relations Contacts 614-716-2840 614-716-3162 bjrozsa@aep.com bmfunk@aep.com 2

  3. Fourth Quarter 2016 Highlights Fourth Quarter 2016 Total Shareholder Return YTD 2016 One Year Three Year Five Year 3 Refer to appendix for reconciliation between GAAP and Operating EPS

  4. 2016 Highlights & 2017 Focus 2016 Highlights 2017 Focus Financial Performance Financial Performance   Delivered Q4 2016 GAAP earnings of $0.76 and Deliver operating earnings within the operating earnings of $0.67 per share guidance range of $3.55 to $3.75 per share   Delivered 2016 GAAP earnings of $1.24 and operating Continue focus on disciplined capital earnings of $3.94 per share allocation, investing $5.7 billion in cap-ex, substantially in regulated entities with  Realized operating EPS growth, successfully offsetting particular emphasis on wires challenges in Ohio competitive generation business  Deliver 5%-7% operating earnings growth rate  Achieved regulated operating ROE of 10.7% for the with 2017 as the base year, an increase over the 2015 results of 9.6%  Increased quarterly dividend by 5.4% Regulatory and Strategic Initiatives  Close on sale of certain competitive Regulatory and Strategic Initiatives generation assets in Q1  Reached sale agreement for certain competitive  generation assets and launched capital redeployment Complete strategic review of remaining plan competitive generation assets   Resolved competitive asset concerns and implemented Continue Ohio restructuring initiative regulated business model  Reached global settlement in Ohio, providing closure for considerable number of open proceedings 4

  5. Regulated Returns Twelve Months Ended 12/31/2016 Earned ROEs (non-GAAP Operating Earnings) OPCo 13.9% Trans I&M AEP TX 12.1% * 11.7% 11.7% APCo 10.3% PSO 8.5% KPCo SWEPCO 7.5% 7.4% Regulated Operations ROE of 10.7% as of December 31, 2016 * Transco ROE 11.2% 5 Sphere size based on each company’s relative equity balance

  6. 4 th Quarter 2016 Operating Earnings vs. Prior Year $0.03 0.08 $0.67/sh 0.7 ($0.07) (0.01) 0.03 0.6 0.02 0.07 $0.03 $0.48/sh 0.5 0.4 0.3 0.2 0.1 0.0 2015 Actual Vertically Integrated Transmission & AEP Transmission Generation and Corporate and 2016 Actual Utilities Distribution Utilities Holdco Marketing Other 2016 Operating EPS $0.31 $0.15 $0.12 $0.10 ($0.01) $0.67 6 Refer to appendix for additional explanation of variances by segment

  7. 2016 Operating Earnings vs. Prior Year $0.03 $0.06 $0.03 2016 Operating EPS $2.01 $0.95 $0.54 $0.50 ($0.06) $3.94 7 Refer to appendix for additional explanation of variances by segment

  8. Normalized Retail Load Trends Note: Charts reflect connected load and exclude firm wholesale load & Buckeye Power backup load. 8

  9. Economic Data – AEP Service Territory estimates estimates estimates 9 Source: Moody’s analytics

  10. Capitalization & Liquidity Credit Statistics Total Debt / Total Capitalization Actual Target FFO Interest Coverage 5.8x >3.6x FFO to Total Debt 20.2% 15%-20% Note: Credit statistics represent the trailing 12 months as of 12/31/2016 Liquidity Summary (unaudited) 12/31/2016 Actual ($ in millions) Amount Maturity Revolving Credit Facility $3,000 June 2021 Revolving Credit Facility $500 June 2018 Qualified Pension Funding Total Credit Facilities $3,500 Plus Cash & Cash Equivalents $210 Less Commercial Paper Outstanding (1,040) Letters of Credit Issued - Net Available Liquidity $2,670 Strong balance sheet, credit metrics, and liquidity 10

Recommend


More recommend