American Electric Power(AEP) - 2023 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Operating earnings for 2023 were $5.25 per share, an increase from$5.09 per share in 2022, despite challenges such as unfavorable weather and higher interest costs [7][22] - GAAP earnings for Q4 2023 were $0.64 per share, down from$0.75 per share in Q4 2022, while full-year GAAP earnings were $4.26 compared to$4.51 in 2022 [20][21] - The company reaffirmed its 2024 full-year operating earnings guidance range of $5.53 to$5.73, with a long-term earnings growth rate of 6% to 7% [11][33] Business Line Data and Key Metrics Changes - Vertically Integrated Utilities segment operating earnings were $2.47 per share, down$0.09 due to unfavorable weather and higher interest expenses [22] - Transmission and Distribution Utility segment earned $1.30 per share, up$0.14 from last year, driven by increased transmission revenue and lower O&M [23] - Generation and Marketing produced $0.59 per share, up$0.09, primarily due to improved retail and wholesale power margins [24] Market Data and Key Metrics Changes - Overall retail load grew by 2.5% in 2023, exceeding the original guidance of 0.7%, with commercial sales growing by 7.8% [26] - Industrial sales increased by 1.6%, attributed to new large industrial loads, while residential load slightly declined due to increased energy efficiency [27][28] Company Strategy and Development Direction - The company is focused on simplifying and de-risking its portfolio, having completed the sale of its unregulated renewables portfolio for $1.2 billion [9] - AEP plans to continue disciplined portfolio management and is committed to achieving constructive regulatory outcomes [10][11] - The company is advancing a$43 billion 5-year capital plan, with $6.6 billion of new renewable projects approved [11][17] Management's Comments on Operating Environment and Future Outlook - Management acknowledged 2023 as a challenging year but emphasized confidence in the team's ability to achieve objectives and deliver reliable energy [12] - The company is optimistic about future opportunities, particularly in commercial and industrial load growth, driven by data center expansions [26][28] - Management is committed to improving regulatory strategies to achieve a forecasted regulated ROE of 9.1$312 million in rate relief in 2023 and is working on several new base rate cases across various states [14][15] - AEP's FFO to debt metric stands at 13.2% for 2023, with expectations to improve to the target range of 14% to 15% in 2024 [30] Q&A Session Summary Question: What does the company see as broken in its current strategy? - Management does not view the situation as broken but acknowledges areas for improvement, particularly in achieving constructive regulatory outcomes [35][36] Question: What are the expectations for the new CEO? - The search for a new CEO is external, with a preference for a seasoned executive in the utility industry who has regulatory success experience [42][43] Question: How does the company plan to address regulatory challenges? - Management plans to strengthen regulatory relationships and focus on execution to improve outcomes [41][66] Question: What are the opportunities related to data centers? - The biggest opportunities are in Ohio and Texas, with capital included in the 5-year plan to serve these customers [70] Question: How will the company allocate capital across jurisdictions? - The company will prioritize capital allocation based on where it can achieve the best returns while ensuring reliability and safety [80]