AEP - NASDAQ

My name is Rodger, and I will be your conference operator today. At this time, I would like to welcome everyone to the American Electric Power Company's conference. Today's conference is being recorded. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press. At this time, I would like to turn the conference over to Darcy Reese, Vice President of Investor Relations. Please go ahead.

Good morning, and welcome to American Electric Power Company's fourth quarter 2024 earnings call. A live webcast of this teleconference and slide presentation are available on our website under the Events and Presentations section. We have a few members of our management team with us today, including William Fehrman, President and Chief Executive Officer, Trevor Michalek, Executive Vice President and Chief Financial Officer, and Kate Sturgis, Senior Vice President Controller and Chief Accounting Officer. We will be making forward-looking statements during the call. Actual results may differ materially from those projected in any forward-looking statement we make today. Factors that could cause our actual results to differ materially are discussed in the company's most recent SEC filings. Please refer to the presentation slides that accompany this call for a reconciliation to GAAP measures. We will take your questions following opening remarks. With that, please turn to slide four and let me hand the call over to William Fehrman.

Thank you, Darcy, and good morning, everyone. Welcome to our fourth quarter 2024 earnings call. Let me start by saying that after six months on the job, I continue to get more excited about the very strong and comprehensive AEP value proposition. Our future is extremely bright, and we are committed to delivering on our promises to customers, regulators, and investors by putting our robust capital plan to work. We are building a platform of success by focusing on execution and accountability. These are exciting times at AEP, and I see incredible value in this, which I am confident can further unlock by advancing our long-term strategy and providing safe, affordable, and reliable service across our large footprint. Before we jump into our results, I'd like to start by introducing our new CFO, Trevor Michalek, who joined AEP last month and is on the call with me today. Trevor is a proven leader and an industry veteran. He's hit the ground running and is already considered a very strong, disciplined, and focused member of our senior leadership team. Structure by eliminating management layers, reorganizing and reducing the size and scope of the service corporation, and improving procurement processes to drive much higher value from suppliers. The leadership team is coming together to make AEP a premium traded utility that is highly respected and trusted by our many stakeholders. Lastly, I'd like to take a moment to thank Charles

Thank you, Bill. Good morning to everyone on the call. I want to start today by thanking Bill and the board for placing their trust in me to help lead this organization into a bright and exciting future. I am honored and grateful for the opportunity to join a dynamic team that is focused on positioning the company for future success. And I'm committed to building on our momentum to create value for all of our stakeholders. As part of my transition, I have reviewed AEP's financial and capital plans, and I have confidence in executing on them with this team. Today, I will walk us through the fourth quarter and full-year results for 2024, expand on Bill's comments related to load growth, and discuss what we expect to see in the years ahead. I will finish with commentary on credit metrics, liquidity, and portfolio management, as well as my focus on disciplined capital allocation. Please turn to slide seven. This slide shows the comparison of GAAP to operating earnings for the quarter and year-to-date periods. GAAP earnings for the fourth quarter were $1.25 per share, compared to $0.64 per share in 2023. GAAP earnings for the year were $5.60 per share, compared to $4.26 per share in 2023. Detailed reconciliations of GAAP to operating earnings are shown in the appendix on slides 25 and 26. Next, I will briefly cover fourth quarter operating results before moving on to a more detailed walkthrough of our year-to-date results by segment. Fourth quarter operating earnings came in at $1.24 per share, which was a one-cent improvement versus the prior year. We saw $0.22 of incremental rate changes across multiple jurisdictions along with higher normalized retail sales at both the vertically integrated and transmission and distribution segments. Partially offsetting these favorable drivers were higher O&M and lower margins at the generation and marketing segment. For reference, the full details of our fourth quarter results are shown on slide eight. Let's have a look at our year-to-date results. Operating earnings for 2024 totaled $5.62 per share, compared to $5.25 per share in 2023. This was an increase of $0.37 per share or about 7% year over year. Adding to AEP's long track record of delivering on its financial commitments for investors. Looking at the drivers by segment, operating earnings for vertically integrated utilities were $2.63 per share, up $0.16 from a year earlier. Positive drivers included rate changes across multiple jurisdictions, notable outcomes in Virginia and Indiana, and a return to relatively normal weather in 2024 compared to the mild weather experienced in 2023. These items were partially offset by higher depreciation and higher O&M as we made investments to serve our customers. The transmission and distribution utility segment earned $1.51 per share, up $0.21 from last year. Favorable drivers in this segment included increased rates in Texas and Ohio, increased transmission revenue, a favorable year-over-year change in weather, and higher normalized retail sales. Partially offsetting these items were increased property taxes, depreciation, interest expense, and O&M. The AEP Transmission Holdco segment contributed $1.51 per share, up $0.08 from last year. Our continued investment in transmission assets, as the new loads are added to our system, was the main driver in the segment. Generation and marketing produced $0.48 per share, down $0.11 from last year. The reduced contribution from this segment was primarily driven by the sale of our universe of 2023, higher income taxes, and lower retail energy margins. These items were partially offset by lower interest expense and higher wholesale margins. Finally, corporate and others saw a benefit of $0.03 per share driven by lower income taxes and O&M, which are partially offset by higher net interest expense. As Bill mentioned earlier, we are reaffirming our operating earnings guidance range for 2025, of $5.75 to $5.95 per share. For convenience, we've included an updated waterfall bridging our actual 2024 results to the midpoint of our guidance for 2025 on slide 20. While some variances change due to the 2024 actual results, there is no change to our 2025 segment or overall guidance. Turning to slide nine. You can see more evidence of just how important load growth is to our financial story. Weather-normalized sales grew 3% in 2024, and we expect that to nearly triple in the years ahead. These are exciting times in the utility industry, as we incorporate this tremendous growth. As Bill mentioned, the load growth that I'm going to talk about is providing the opportunity to potentially add up to $10 billion of incremental capital over the next five years to our already sizable $54 billion plan. We are continuing to evaluate the magnitude and timing of this spend to meet the growth opportunities across our footprint. The gains we are seeing from the data centers and industrial customers represent a once-in-a-generational opportunity to shape and grow the system. So before I jump into the details, I want to emphasize a few key points about our confidence in the projections you see here. First, this isn't just a future story. This is a now story. We're already seeing these loads come online across our system. In December of 2024, we added almost 450 megawatts of hyperscale data center load in Ohio alone. Second, the load additions built into the forecast you see here are all backed by signed customer financial obligations demonstrating their commitment to bring these projects online. In fact, nearly all of these loads are backed by take-or-pay contracts and have already been accepted by certain RTOs, including PJM. This means that our customers are committed to paying for a minimum amount of power over a period of time. What's more, we've achieved tariff settlements in Indiana, Ohio, and West Virginia to strengthen and lengthen those commitments even further. Beyond those contracts, we have substantial interconnection queues waiting to sign additional commitments as well. Diving a little further into the details, you can see where the bulk of our growth is concentrated. New data centers drove double-digit growth in our commercial sales in 2024, with system-wide data processing load hitting a new high in December of 1.3 million megawatt hours. The gains are expanding beyond this transmission and distribution utilities into our higher-margin vertically integrated segment. Recently, we also connected the first of several hyperscale data center customers in Indiana, including AWS and Google. Across the entire system, we're contracted to see nearly 5 gigawatts of data processing load come online in 2025, representing almost a 25% increase from 2024. Beyond commercial load, our industrial sales are also set to accelerate after a resilient 2024. AEP's industrial load grew by more than 402,000 megawatt hours last year. This was punctuated by growth of almost 5% in Texas, highlighting the diversity of our service territory and giving us a lot of confidence going into the new year. We expect industrial sales growth to more than double in 2025 as several new large customers are contracted to come onto the system, like Cheniere in Texas. We also have several other large and well-publicized industrial projects set to come online in 2026 and 2027. More detailed load projections by class can be found on slide 13. As a reminder, we have more than 20 gigawatts of commercial and industrial load additions contracted to come onto our system through the end of the decade. Roughly half of those are in ERCOT, and the other half are spread across our PJM companies. As a result, we expect these quarterly sales numbers to continue their rapid growth for several years to come. Let's move on to slide ten to discuss the company's capitalization and liquidity. Our financial performance and strong balance sheet provided good credit metrics for the last twelve months. Our debt to capitalization remained largely consistent with our historical range. Our FFO to debt metrics stood at 14% for the twelve months ended December 31st, which was within our target range and well above our downgrade threshold of 13%. Available liquidity remained very strong at $4.6 billion and is supported by $6 billion in credit facilities. Our strong balance sheet and credit metric results, coupled with ample liquidity and the outcome of the minority interest transaction, expected to close in the second half of this year, have enhanced our financial flexibility. We can efficiently access the capital market to support the capital needs in front of us. We are committed to maintaining a strong balance sheet and credit metrics as we evaluate the upcoming capital spend opportunities and match them with optimal financing instruments. On a similar note, last week, I spoke directly with all three rating agencies and conveyed this leadership team's commitment to a strong balance sheet. Focused on executing the regulatory and financing plans, as well as disciplined allocation of O&M and capital to our companies. Finally, let's move on to slide eleven. Before we take your questions, I wanted to summarize what you heard from us today. First, you heard we had a strong year-over-year performance in 2024, growing our earnings roughly 7% with operating earnings coming in at $5.62 per share. We reinforced our commitments to stakeholders and built solid momentum heading into 2025. Second, you heard that we are absolutely focused on execution in 2025 to support one of the great load growth stories in our industry. We're executing on strategic investments and delivering our regulatory strategy, giving us confidence in our financing plans. Third, you heard we have $10 billion of incremental growth capital that we are currently evaluating. And fourth, you heard that the $2.82 billion pending minority interest transaction on the transmission assets is an exceptional value proposition to our shareholders. The transaction further boosts our earnings and credit profiles and helps to reduce near-term equity needs. Recall that the value we transacted on this is comparable to issuing equity at $170 per share. And we're still retained 95% of AEP's total transmission asset post-close. These components are key to our future success and reinforce our confidence in reaffirming our commitments, including our 2025 guidance range of $5.75 to $5.95 per share. Our long-term growth rate is 6% to 8% while targeting FFO to debt of 14% to 15%. We really appreciate your time and attention today. I'm gonna ask the operator to open the call so we can answer any of your questions that you may have. Thank you.

Thank you. We will now begin the question and answer session. If you would like to ask a question, please press star one on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your questions, simply press star one again. We'll take our first question from Shar Pourreza at Guggenheim Partners.

Hey, guys. Good morning.

Good morning, Shar.

Morning. Just on the balance sheet, the forty-six to sixty basis points of FFO improvement, you highlight that kind of on the slides as a near-term target. Can you sustain that over the plan? And then on equity, any sense on the means of issuing the remaining $2.5 billion? Is it junior or is it asset optimization, a block? I mean, I know, Bill, in your comments, you did highlight portfolio management in your prepared remarks. So just wanna get a sense on that remaining equity as well.

Sure. So here's Trevor. Sure. Appreciate the question. You know, we are targeting FFO to debt in that 14% to 15% range. And again, from our perspective, that is a target that we're looking at. I will note that, you know, we are going to have a revision to the way that Moody's calculates the deferred fuel. So, we will drop down probably forty, fifty bps, sixty bps depending on, you know, where things go with that, which I think it's gonna happen. But again, that's gonna be above the 13% threshold. And again, from our perspective, both Bill and I are very focused on issuing, you know, the or executing on the $54 billion capital plan with a strong balance sheet. So I think what you'll see is this will dip down a little bit in the current year, and then really the deferred fuel issue kind of rolls off by 2026. And so from that perspective, you know, we're really focused on getting that, you know, in that 14% to 15% range in the near term. Then getting to your financing question, you know, again, like you said, we put out that $5.35 billion of equity needs last year and kind of talked about that at EEI. The good news is with this transaction, the $2.8 billion goes a long way to solving that. So that really leaves then, like you said, the $2.5 billion of which there's, you know, call it $500 million over the five-year period, $100 million a year on the drip. So then it's a very manageable $2 billion. And then looking at various things that we have here to solve for that, you know, there's potential securitization that we're continuing to work on in some of our locations. But we'll also utilize, you know, hybrids or other equity-like instruments. And then if we need to issue equity, you know, we could do that. And I'm not opposed to issuing equity for growth, and we have a growth plan that is incredible here. Especially, you know, articulating around that incremental $10 billion, but we want to be very judicious with issuing equity, but we think there's a lot of different levers that we can pull, securitization, hybrids, and then potentially, you know, over the longer term, if we had to issue incremental equity, we would consider it. But again, very focused on FFO to debt, and also executing on, you know, this kind of historic $54 billion growth plan.

Perfect. And then just lastly, obviously, a lot of load growth and you guys have that new CapEx upside disclosures. Specifically on the 20 gigs of load you're leaning on, just wanna get a sense on how much of that is in Ohio and on the dual tariff settlements that are out there. Can the differences be bridged? And what if the commission's order swings against your settlement? I know, Bill, you've been very active on the stakeholder engagement side. Just wanna get a sense there. Thanks.

So we're very, obviously, focused on the rate case and on the tariff filing for data centers. A lot of discussion going on. We're clearly looking to try and find a solution for bringing these folks into our system and bringing the economic development opportunities with us. And so we're continuing to look. If you think about the data center story that we have, in December alone, AEP Ohio added nearly 450 megawatts of data center load from AWS and Meta. So very strong. Looking ahead, we anticipate adding similar amounts of load almost every month through 2025. We've got over 4.7 gigawatts of data processing load contracted to begin service this year. And then while most of this load, to your point, is concentrated in Ohio and actually Texas, we also have nearly a gigawatt contracted to come online in Indiana. So that's extending our growth into the vertically integrated utility segment as well. So I would note that both Google and AWS have recently begun service in Indiana. So that's very positive for us, and they're gonna continue to ramp up progressively over the next several years. So this growth certainly underscores our commitment to economic development and highlights significant opportunities ahead, but, clearly, we're going to make sure that this doesn't fall on the shoulders of our existing customers and make sure that the appropriate parties who are driving the incremental cost will pay for the incremental cost.

Perfect. Trevor, big congrats to you and the AEP team. I know you're gonna do really fantastic there. Big congrats on phase two.

Sure. I really appreciate it. Excited to be here. This is an incredible story, and quite the team here. So thank you.

Great. Thanks, guys.

We'll move next to Ross Fowler at Bank of America.

Morning.

Thanks, Ross.

So just wanna dig into maybe the data center tariffs you talked about sort of protecting yourself around sort of stranded cost risk or minimum take risk. So in that tariff, you know, have you disclosed what that rate is versus maybe other industrial commercial rates? Is it, like, a minimum power take requirement that's in there? And what kind of terms are you looking at in those tariffs that you filed?

So the tariffs are really driven by the cost of the incremental project. And so there's not a specific, say, price in the tariff until we understand what the cost of the incremental load is going to be or the incremental transmission is going to be to serve that load. And so it really is a case for us to protect the existing customer base and that the driver behind the data center cost will be covered essentially by the company that's requiring it. So we feel very good about where we sit. I would say there are a couple of differences in the tariffs if you look across the states. For instance, in Ohio, that tariff is very much focused on data centers, whereas if you look at the similar proposal in Indiana, that is a broader tariff that would apply to any and all large loads that are similar to a data center. So some minor differences across the states, but generally, the same purpose holds, which is make the customer who's driving the incremental cost pay for the incremental cost and put it in place for a longer period of time so that we know as we're building out this incredible investment that, oh, if the customer goes away in year six or seven, we still have coverage for some of those costs, and it's not stranded and placed on the shoulders of our existing customers. So very, very positive outcome for us. I think it sets us up, and I don't think that it's been a detriment to the economic growth we have if you look at the overall increases that are already signed up. We have significant growth in accordance with these tariffs. So very, very strong interest still even though these tariffs are going into place.

That's great, Bill. Thank you. And then Trevor, maybe one for you. You mentioned securitization as an avenue for maybe some of that equity need. Did you have a scaling of that versus the $2 billion you need in the current plan, or have you sort of not walked through all of that yet?

Yeah. We're still working through that with the various states, Ross, but, you know, honestly, I think you could look at it and securitization could, if successful, could potentially, you know, be a big chunk of that remaining $2 billion. So, you know, right now, if you the way I think of it is we kind of laid out the $5.35 billion over a five-year period. The $2.8 billion from the sale transaction really takes care of a big chunk of that in the immediate term here, and then we have a lot of other levers to pull over the remaining, you know, four years of the plan to solve for that $2 billion. But securitization could be, if successful, you know, a real win because it could help the customers with regards to rates, but it can also help us with regards to the need for the cash that would fill that gap on the $54 billion plan that we laid out.

Perfect. Thank you. And then if we can squeeze one more in back to techy Bill. You mentioned SMRs and kind of how you're trying to very early stages looking at that, but, you know, under the right risk structure. In other states, we've sort of seen, like, this idea where, you know, the off-taker would put in a significant portion of the capital and take more of the risk into that project? Are you thinking about similar structures there or how far have you kind of walked down the thought process of what that structure would look like or might look like?

Yeah. Thanks for that question. Obviously, very interested in SMRs as a technology, and that's really driven by the fact that our major customers are also interested in that as a solution. And as we noted, we've started with the early site permit work in Indiana and Virginia and have signed MOUs with various parties to support that type of work. We did put in our tier one application with the DOE for one of the sites and the tier two application for the other site to try and get some support for those. At a broader look, with regards to how we would think about this, clearly, I'm not going to put the company at risk in any type of a move as a first-of-a-kind type of technology. And so as we've been talking with potential customers, we haven't got to any specific arrangements or how this might look at this stage. But certainly, there's discussions ongoing to see if there's a way to do this. Clearly, the SMR technology providers, somebody needs to be first, and somebody needs to step up and figure out how they're going to deliver their product and back it. I mean, this is one of those situations where, to me, I'm buying a technology from somebody, and it should work. And it should be at a price that is very understandable and protected. And so I'm very excited about where we sit with regards to discussions, but I would say we're quite a ways away from having anything firmed up or really any firm structure at this point. But whatever we ultimately end up with, we'll be very principled and disciplined on our side of this to make sure that our shareholders and our customers are protected from any significant types of negative outcomes.

That's great. Thank you. And, Trevor, congratulations again on the new role. Wish you nothing but success.

I really appreciate it, Ross. Thank you.

We'll go next to Steven Fleishman at Wolfe Research.

Hi. Good morning.

Hey, Steve. Congrats, Trevor, as well. Let me echo that.

So just on the, I guess, on the upside to the capital plan and particularly the transmission, so, for example, there's these PJM transmission that the joint venture that you have and the like that's being decided the next month or so. Is that that would be upside to the plan that's not in the plan? To things like that.

Yeah, Steve. That's right. That would be upside to the plan. So, you know, here again, what we've got is, you know, the $54 billion plan that has very definitive things in it, and we really aren't putting things into the plan that aren't for sure. And so then when you look at this $10 billion, a lot of this is coming to fruition over the next, you know, kind of months here. And so we're gonna be pretty excited about rolling out kind of in a normal cadence on the third quarter call a revision to the $54 billion plan, but, yeah, that would be upside.

And, Steve, just to add to that, yeah, just to add that a little bit specifically to PJM, you probably know we've announced the joint planning agreements with Dominion and FirstEnergy to propose those projects through the regional transmission expansion plan. We expect PJM approval in the first quarter on those projects. And so, again, as Trevor noted, all of those, if they would come to fruition, would be upside.

Okay. And then I, you might have answered this, Trevor, and I missed it. But just in the event that you see that capital plan come up, how should we think about funding for incremental capital?

Yeah. So again, yeah. You know, Steve, I think on the incremental capital side, we really do have a lot of positives here. Again, with the $2.8 billion coming in this year, that's gonna set us up really well for, you know, call it roughly half of the equity needs that we laid out before. And then with securitization and other things, that's really gonna kind of take us a long way to filling that gap. At the end of the day, I'm not opposed to, you know, issuing equity for growth, and this kind of growth I think that really makes sense. At the end of the day, you know, there's a lot of other things that we're working on internally as we rightsize this organization to get, you know, costs in line with where this is going. As well as other opportunities we're looking at that I want to be somewhat, you know, careful here in how we say it. But there is, you know, capital allocation internally looking to support this growth plan. And, you know, equity, we take equity very seriously here. We know it's very precious, but we're not opposed to issuing equity for growth purposes.

Yep. Okay. And then, I guess, two questions on data centers. First, just a high level curious after the Eatsy kind of freak out. Just what kind of color are you getting from your customers on their plans? Is anything changed, good or bad? In terms of the commentary influenced by the customers?

Really, no change in plan for us at all. It's been full speed ahead, and when the Eatsy came out, we had conversations with a number of our customers, and none of those individuals spoke in any way that we would be seeing a change. And so I think at least for us, I can't speak for others, obviously, but it continues to be full speed ahead.

Okay. And then lastly, on the Bloom partnership, and the like, just you know, I think you had made a firm order for the 100 megawatts since it sounds like you have customers for that. Just how are you feeling about the likelihood to get, you know, into that full gigawatt, or is it too early to kind of say?

Well, first, I'm really excited about customers that we have that have taken up the first 100 megawatts that we announced when we talked about the supply agreement with Bloom last November. I feel very good about where we're at with those customers. It's obviously proven that it's a viable opportunity for others to use in order to speed their ability to build their data centers and get online significantly sooner than waiting for perhaps five to seven years for a grid interconnect. And so I like where we're at with this technology. We're obviously on the leading edge from an innovation perspective. AEP is solving problems for these data centers that while others are maybe just issuing press releases, we're actually getting to solutions for these folks. And so I'll keep, we'll keep you updated, obviously, as our Greenwood Bloom allows for further expansions up to the one gigawatt mark and keep in mind, I would note also that this potential capital outlay is also not included in the current $54 billion capital plan. As we've talked about, but it is part of the $10 billion incremental investment opportunity that we're currently evaluating. And so, obviously, if more of that comes on, we'll have more updates for you. But overall, again, the feedback on this innovation and solution for customers has been extremely positive.

Yep. Great. Thank you. Appreciate it.

Thanks, Steve.

We'll go next to Jeremy Tonet at JPMorgan.

Hi. Good morning.

Good morning.

And, Trevor, congratulations as well.

Jeremy, I appreciate it.

Just want to start off, I guess, picking up with the custom solutions as you outlined there, you know, being kind of bridge solutions. Is when if you could provide a bit more detail what it means from the AEP side potentially. Just if we could frame what that could look like from CapEx or any other way to kind of think about that, you know, potential in specifically just wires or other elements as well as it relates to AEPs.

Sure. Well, first and foremost, again, in the spirit of protecting our existing customers for these deals, all costs for the fuel cell projects will be covered by the large customers that are under stand-alone contracts with AEP. And these are very customer-specific, and they'll need state commission approval. And so we're very excited about how this is rolling out and the fact that each of these individual customers, again, will cover the costs that are associated with the project. As far as the capital side now, Trevor, maybe you add a little bit on that or how we're thinking about it.

Yeah. And then what I'd like to do on that, Jeremy, is roll that out, you know, if and when that comes to fruition, but that's all kind of part of that $10 billion upside. So we haven't really disclosed, you know, specifics around that, but expect more of that to come in the normal cadence. The only thing I would also add, Bill, is that, you know, I think AEP has had a rich history of, you know, being an innovator in this industry. You know, whether it's being the first to kind of have 765 kV lines, you know, all the way to this, you know, solution to help our commercial industrial load come on with this Bloom solution. But as Bill said, you know, we're gonna do it in a very disciplined way and, you know, it kind of talks to what AEP has done over the years to be a leader.

Got it. Thank you for that. And just pivoting here to West Virginia if you could. Just wondering if you could provide any incremental color on stakeholder conversations in just the state of, I guess, stakeholder relationships in the state at this point and how that has evolved over time.

Yeah. I really appreciate that question. I've been very focused on West Virginia since I joined AEP last August. I spent a considerable amount of time in the state and talking with key stakeholders, including the prior administration as well as members of the current administration. I would say that right now, we were very innovative again in the filing that we put in. We corrected the deficiencies that we had and put in a very robust filing. But inside of that filing, we also offered the commission a separate solution for them to consider. As I noted in my remarks, the hearing is in June, and we expect a commission decision in the third quarter. We'll obviously see progress as the intervener testimony is due in April. Rebuttal testimony is due in May. And the proposed securitization option that we have on the table is not in our current financial plans. So, again, if it does come to pass, that would be a good adjustment. But we did include it in the filing as an option and really, purposely, to support customer affordability. This option is a very strong option that helps reduce the cost to customers. And so we really look forward to collaborating with all of the stakeholders there and achieving a favorable outcome for really all parties. And I think that so far, as the process has gone through, we've gotten positive feedback on how we approach this.

Got it. Thank you for that.

We'll go next to Durgesh Chopra at Evercore ISI.

Hey. Good morning, Trevor. Welcome. I look forward to working with you. Listen, I just had two clarification questions, a lot of discussions on the topics I'm gonna ask you on. But just to clarify, Bill, I think you know, you discussed the large load tariff in Ohio and decision in Q3 by the commission. Is I understand it, the data center customers are not part of that settlement technology customers are not part of that settlement. Is that completely off the table, or could you still work in agreement with them? I guess, what I'm trying to get at with this is, is there an active dialogue conversations happening with them, or is it just now in the hands of the commission?

So you're correct. There's actually two settlements that were being discussed. There was a settlement amongst the data centers themselves that they filed. And then there was a second settlement that was ourselves plus the commission staff plus some other large load entities that was filed. Both of those went through the hearing process. And then, as I said, there's basically now in the rebuttal and hearing, excuse me, intervener testimony and rebuttal process. I would say that there's continuing discussions going on as always as you go through these processes. But at this point, I would say we're really into waiting for the commission to issue their ruling, and we'll see what happens. Again, we're very open. These are our customers. We want to work with our customers. We want to find solutions for them just like we did with the Bloom Energy deal. And so we'll always try to find a way forward. But we do have certain principles that we want to make sure stay in place, which is good protection for our existing customer base.

Well, that's very helpful, Bill. Thank you. And then, Trevor, back to you, just a little bit more color on the 2025 financing plans. Obviously, congrats on the asset sale. That's a big bite at the apple from the overall equity in the plan. And then your commentary about, you know, the deferred fuel balance while taking your effort to get down, but still keeping you comfortably above the downgrade threshold. Should we take all that to mean that from an equity standpoint, you're done for 2025, or could you still kind of punch in, you know, more equity as you think about just I'm focused on 2025. Not sure if you can answer that or not, but just thinking about whether you're done for 2025 or not.

Yeah. So I think, you know, Durgesh, the thing that I look at is, you know, the $2.8 billion of cash coming in the door when we close that transaction will really go a long way to, you know, getting what our needs are right now because really, you know, when we laid out that $5.35 billion, that was over a five-year period. So over half of that is coming in in year one. That being said, you know, again, we are really focused on this growth of the $10 billion and seeing how we can get that into our plan as quickly as possible. So, you know, and then there's other things we're dealing with as well, you know, with as Bill just mentioned, the potential securitizations. So a lot moving around right now, but, you know, I think we're in that great position with this transaction that, you know, I kind of got the benefit of stepping into after Chuck and Bill had kind of solved that issue that it really takes a lot of the pressure off of 2025 right now. But again, you know, my commitment is to, you know, be in a situation certainly where we would be above our downgrade thresholds. And this plan, fortunately, as we've got it right now with the $2.8 billion even with the deferred fuel adjustment mechanism keeps us above the 13%. And, you know, it puts us in a good position going forward. But again, a lot of moving parts around the growth, and that's what we're excited about right now is this incremental growth opportunity.

Got it. Appreciate that discussion there. Thanks, Trevor.

Thanks, Durgesh.

We'll move next to Nicholas Campanella at Barclays.

Hey. Good morning, and congrats to Trevor. Welcome to Columbus. And, you know, Chuck, if you're in the room, congrats on your retirement too. So hey. I just wanted to just a couple follow-ups. When you announced the transmission sale, you kind of said it's 1.7% accretive, like, on average to the plan. And can you just talk about the flexibility that that offers you as you work to kind of add this capital to the plan and strengthen the balance sheet and, you know, I guess where I'm heading is, when we get to the end of this year, like, is this transaction lengthening to six to eight, or do you expect kind of a step higher, you know, and at the 1.7% level? Thanks.

Yeah. So, Nick, you know, to kind of convert that into an EPS, you know, that's roughly eleven or twelve cents of, on a full-year basis, that this transaction is accretive. But again, it depends on the timing of when we close it during the year, and so that will kind of, you have to take that into consideration as it gets towards the end of the year on what that really does. My view is I think we put out the range of $5.75 to $5.95, and, you know, we'll be at this point, in that range, you know, with the transaction and, you know, in good shape with regards to credit. So again, it probably the later it goes into the year, the less impact it has on 2025. With regards to the accretion, but it more really does help with where we're gonna be on the credit metrics.

Right. Okay. And then just how are you kind of thinking about further portfolio management at this point? I mean, the transmission sale is a great data point, and I definitely note, like, kind of the clear focus here on Indiana, Ohio, and Texas, and just do you guys still see opportunity to kind of prune things in the portfolio if it's accretive to your plan?

Yeah. You know, again, I think on any type of M&A, we wouldn't really speak to it. But I tell you, the thing that we're most excited about is investing $54 billion at one time's rate base. And if you think about that, you know, that's basically the size of our market cap right now. With a potential upside of an additional $10 billion. So our view is we want to get scale and scope, and we believe we're growing this business and, you know, we think we are, we've got great footprints over a large area that helps us to mitigate risk. And so from the, at the end of the day, you know, I look across the portfolio and believe we've got a really good fit footprint relative to our competitors. And so I'm very, very positive about what I've stepped into here and feel that this is really good. But, Bill, I'm not sure if you want to add anything on this.

I think, again, as Trevor noted, we've got a tremendous opportunity in front of us. And as a company, we're going to drive ourselves to be the biggest and the best energy infrastructure company in this country. I mean, again, it's in our name. We're American Electric Power. We're gonna power America. And as Trevor noted, the opportunity is almost unlimited for us going forward, and I have very strong confidence that we're gonna be able to deliver and execute.

Alright. That's great. Excited to see it, and have a great day. Thank you.

We'll move next to Carly Davenport at Goldman Sachs.

Hey. Good morning. Thanks for squeezing me in. Maybe just one quick one for me. Just as you think about the generation needs across the portfolio to accommodate this load growth, I know you referenced some of the gas filings at PSO and SWEPCO in the opening comments. Can you just talk about the status of procurement of key equipment like turbines to execute on those plans?

Sure. I appreciate the question. We have a very strong generation plan that has been developed within AEP and a bit of it also predated me with regards to looking at strategies around procuring turbines, procuring transformers, and other key equipment. I'm very confident in the plan that the team has. Our procurement strategy is strong. And we have a lot of activity out in the market right now. We're doing RFPs for a number of our states. We have significant IRP activity going on. And obviously, there's a growing energy demand out there, which is really why we're leading the efforts in the industry to try to find solutions for them, like in the near term bloom and in the longer term SMRs. And so we'll be all over this. I'm confident in our team, and I'm confident in the fact that we're going to deliver what our states want from a generation plan. And, clearly, as the year goes on, we'll be providing more updates in that area.

Great. Thanks so much for the call. I'll leave it there.

And we have time for one more question, and that question comes from Julien Dumoulin-Smith at Jefferies.

Hi, team. It's Jamieson Ward on for Julien. How are you?

Yeah. Good. Good morning.

Morning. Yeah. Thanks for fitting us in here at the end. Very thorough Q&A covered pretty much all the questions that we had. Did have one that was remaining, which is just on the ATM that you filed. It mentioned that $400 million had been already issued. In combination with the $2.8 billion of net cash proceeds that we'd expect to receive, you know, to see you receive it in the second half of the year. Do those two meet your 2025 equity needs? Or should we assume any further usage of the ATM in 2025? Is it just the 2026 and beyond tool? Thank you.

Yeah. Look. As I said, you know, Jamieson, we're continuing to evaluate all of that. The good news is we do have access to the $1.3 billion that's remaining under the ATM. We can always hit that if we need to. But again, right now, I think we've got a very positive situation that we will be, you know, getting the $2.8 billion coming in later this year. And then as we look to the $10 billion growth opportunities here, you know, we will continue to evaluate that. But I think, you know, largely you've got it right with the ATM in place, and what we're doing with the drip program. And the cash coming in and the securitizations that potentially could come to fruition by the end of this year, we're in good shape.

Gotcha. Gotcha. Really quick follow-up there. I guess the $2.55 billion that you had left, $500 million or so for the drip, $100 per year, the $1.7 for the ATM, that $350, it would seem kind of perfect for a JSN or some sort of equity content or equity-linked security. So I guess that kind of fits with what you've described. Is that a reasonable way to think about it? And then I just had one more on the $10 billion.

Yeah. No. I think absolutely you're thinking about it correctly. There's a lot of levers for us to use here as we continue to look at things. And so, again, it's very positive with the $2.8 billion and then securitizations and other equity-like instruments are all very positive. And then if need be, we do have that $1.3 billion ATM. But again, we're in good shape here.

Terrific. And the last one I'll leave you with, I know that you've answered one or two questions already on the $10 billion. Just wondered if there was a rule of thumb, you know, a couple of years ago at EEI that talk was all about 30% or 50% or whatever percent of incremental CapEx. And I get there's certain thresholds. If you get a billion of the $10 billion, it's a different scenario than if you get all $10 billion of the $10 billion. But any rule of thumb you can give us on high-level thinking about the amount of equity or equity-like portion that be looking to finance of that incremental CapEx versus debt financing?

Yeah. The biggest thing that I would say is we're excited to roll that out, you know, in a normal cadence on our third-quarter call. And again, there's a lot of moving parts that we're managing here. And we are going to finance it in the most efficient way possible to ensure we can continue to meet the needs of our customers. But also to deliver on value to our shareholders, and that's what we're very focused on.

Thank you so much. Appreciate it.

And that concludes our Q&A session. I will now turn the conference back over to William Fehrman for closing remarks.

Yeah. Thank you. We appreciate everyone joining us on the call today. I'd like to close with just a few summary remarks. First, very exciting times are ahead for AEP as we put our robust capital plan to work, as you've heard, and continue to grow the business while delivering shareholder value. Second, I'm very confident we can unlock the incredible value in this company by advancing our long-term strategy and providing safe, affordable, and reliable service across our large footprint. And then third, Trevor and Darcy will be hitting the road actually in March, meeting with many of you and discussing AEP's very strong and comprehensive value proposition. And finally, if there are any follow-up items, please reach out to our IR team with requests. So thank you again for joining us today. This concludes our call.