1Q12 Earnings Release    Presentation     April 20, 2012
“Safe Harbor” Statement under the Private               Securities Litigation Reform Act of 1995This presentation contains...
First Quarter 2012 Highlights   Financial Performance           Delivered GAAP and on-going earnings of $0.80 per share ...
1Q12 Performance            First Quarter Reconciliation                                  1Q12 Performance Drivers        ...
Normalized Load Trends                       AEP Residential Normalized GWh Sales                        AEP Commercial No...
Industrial Sales Volumes                                             AEP Industrial GWh by SectorGWh2,400                 ...
Coal to Gas Switching                            Net Capacity Factor    Natural gas consumption increased 62%            ...
Capitalization & Liquidity70.0%      Total Debt / Total Capitalization                                                    ...
Questions            9
1Q12 Earnings                                                       $ millions                        Earnings Per Share  ...
Quarterly Performance Comparison                                                                                American E...
Retail Rate Performance                            Rate Changes, net of                            trackers (in millions) ...
1Q12 Retail Performance                                  Retail Load*                              Weather Impact         ...
Off System Sales Gross Margin Detail                                                            Physical off-system sales...
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American Electric Power Q1 2012 Earnings Presentation

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AEP 2012 first-quarter earnings: $0.80 per share GAAP and ongoing; Industrial sales continue to show growth; Record mild weather throughout AEP’s service territories lowers demand.

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American Electric Power Q1 2012 Earnings Presentation

  1. 1. 1Q12 Earnings Release Presentation April 20, 2012
  2. 2. “Safe Harbor” Statement under the Private Securities Litigation Reform Act of 1995This presentation contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934. Although AEP and each of its RegistrantSubsidiaries believe that their expectations are based on reasonable assumptions, any such statements may be influenced by factors that could cause actual outcomesand results to be materially different from those projected. Among the factors that could cause actual results to differ materially from those in the forward-lookingstatements are: the economic climate and growth in, or contraction within, our service territory and changes in market demand and demographic patterns, inflationary ordeflationary interest rate trends, volatility in the financial markets, particularly developments affecting the availability of capital on reasonable terms and developmentsimpairing our ability to finance new capital projects and refinance existing debt at attractive rates, the availability and cost of funds to finance working capital and capitalneeds, 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 impactof retail competition, particularly in Ohio due to the February 2012 PUCO rehearing order, weather conditions, including storms, and our ability to recover significant stormrestoration costs through applicable rate mechanisms, available sources and costs of, and transportation for, fuels and the creditworthiness and performance of fuelsuppliers and transporters, availability of necessary generating capacity and the performance of our generating plants, our ability to resolve I&M’s Donald C. Cook NuclearPlant Unit 1 restoration and outage-related issues through warranty, insurance and the regulatory process, our ability to recover regulatory assets in connection withderegulation, our ability to recover increases in fuel and other energy costs through regulated or competitive electric rates, our ability to build or acquire generatingcapacity, and transmission line facilities (including our ability to obtain any necessary regulatory approvals and permits) when needed at acceptable prices and terms andto recover those costs (including the costs of projects that are cancelled) through applicable rate cases or competitive rates, new legislation, litigation and governmentregulation 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 or additional regulation of fly ash and similar combustion products that could impact the continued operation andcost recovery of our plants, a reduction in the federal statutory tax rate, timing and resolution of pending and future rate cases, negotiations and other regulatory decisionsincluding rate or other recovery of new investments in generation, distribution and transmission service and environmental compliance, resolution of litigation, our ability toconstrain operation and maintenance costs, our ability to develop and execute a strategy based on a view regarding prices of electricity, natural gas and other energy-related commodities, changes in the creditworthiness of the counterparties with whom we have contractual arrangements, including participants in the energy tradingmarket, actions of rating agencies, including changes in the ratings of debt, volatility and changes in markets for electricity, natural gas, coal, nuclear fuel and otherenergy-related commodities, changes in utility regulation, including the implementation of ESPs and the expected legal separation and transition to market for generationin Ohio and the allocation of costs within regional transmission organizations, including PJM and SPP, accounting pronouncements periodically issued by accountingstandard-setting bodies, the impact of volatility in the capital markets on the value of the investments held by our pension, other postretirement benefit plans, captiveinsurance entity and nuclear decommissioning trust and the impact on future funding requirements, prices and demand for power that we generate and sell at wholesale,changes in technology, particularly with respect to new, developing or alternative sources of generation, our ability to recover through rates or prices any remainingunrecovered investment in generating units that may be retired before the end of their previously projected useful lives, our ability to successfully manage negotiations withstakeholders and obtain regulatory approval to terminate or amend the Interconnection Agreement and break up or modify the AEP Power Pool, evolving public perceptionof the risks associated with fuels used before, during and after the generation of electricity, including nuclear fuel and other risks and unforeseen events, including wars, theeffects of terrorism (including increased security costs), embargoes, cyber security threats and other catastrophic events. Investor Relations Contacts Chuck Zebula Bette Jo Rozsa Julie Sherwood Sara Macioch Treasurer Managing Director Director Analyst SVP Investor Relations Investor Relations Investor Relations Investor Relations 614-716-2800 614-716-2840 614-716-2663 614-716-2835 cezebula@aep.com bjrozsa@aep.com jasherwood@aep.com semacioch@aep.com 2
  3. 3. First Quarter 2012 Highlights Financial Performance  Delivered GAAP and on-going earnings of $0.80 per share  2012 Earnings guidance not reaffirmed  Remain committed to long-term strategy outlined on February 10th Progress in the 1st Quarter – Moving forward with Repositioning AEP  FINANCE – Issued $800M TCC Securitization bonds (March 14)  RETAIL – Acquired BlueStar Energy which establishes a platform for retail growth (March 7)  TRANSMISSION – Transco and ETT investments on-track; Transource JV with Great Plains Energy announced (April 4) Ohio Regulatory Update  Capacity filing hearing underway  ESP procedural schedule established Dividend payout and growth rate supported by Regulated Operations 3
  4. 4. 1Q12 Performance First Quarter Reconciliation 1Q12 Performance Drivers  Weather was unfavorable by $87M vs. Ongoing prior year, unfavorable $68M vs. normal Earnings  Gross Customer Switching up $42M from EPS ($ in millions) prior year. Total 1Q12 retail generation1Q11 $ 0.82 $392 margin lost $57M. As of March 2012,Weather $ (0.12) 28% of total AEP Ohio load lostCustomer Switching $ (0.06)Ohio POLR $ (0.05)  Loss of POLR revenues $39MTransmission Operations $ 0.01  Transmission Operations up $5MOther $ 0.01Rate Changes $ 0.08  Rate Changes net of offsets of $63M fromOperations & Maintenance $ 0.11 multiple operating jurisdictions1Q12 $ 0.80 $389  O&M expense net of offsets decreasedEPS Based on 484MM shares in 1Q12 $80M primarily due to spending discipline and reversal of a previously recorded regulatory obligation 1Q12 earnings in-line with 1Q11 earnings 4
  5. 5. Normalized Load Trends AEP Residential Normalized GWh Sales AEP Commercial Normalized GWh Sales %Change vs. Prior Year %Change vs. Prior Year15% 15%10% 10%5% 4.4% 5% 0.3% 0.3% 1.2% 0.5% -0.1% 1.1%0% 0% -1.7% -0.4% -2.8% -1.5% -1.0%-5% -5% 1Q11 2Q11 3Q11 4Q11 1Q12 2012E 1Q11 2Q11 3Q11 4Q11 1Q12 2012E AEP Industrial Normalized GWh Sales AEP Total Normalized GWh Sales* %Change vs. Prior Year %Change vs. Prior Year15% 15%10% 10% 7.1% 5.2%5% 3.3% 5% 2.5% 2.2% 2.2% 1.9% 1.4% 1.0% 1.9% 1.6%0% 0% -0.4%-5% -5% 1Q11 2Q11 3Q11 4Q11 1Q12 2012E 1Q11 2Q11 3Q11 4Q11 1Q12 2012ENote: Chart represents connected load *includes firm wholesale load Residential/Commercial sales down; Industrial sales up 5
  6. 6. Industrial Sales Volumes AEP Industrial GWh by SectorGWh2,400 Primary Metal Manuf acturing These 5 sectors account for approximately Chemical Manuf acturing 60% of AEPs total Industrial Sales. Petroleum and Coal Products Manuf acturing Mining (except Oil & Gas)2,000 Paper Manuf acturing Industry YTD vs PY Primary Metals 4.0% Chemical Mfg -1.7% Petroleum & Coal Products 6.3% Mining (except Oil & Gas) -0.7% Paper Mfg -0.4%1,6001,200 800 400 - Mar-05 Mar-06 Mar-07 Mar-08 Mar-09 Mar-10 Mar-11 Mar-12 Industrial sales continue to improve 6
  7. 7. Coal to Gas Switching Net Capacity Factor  Natural gas consumption increased 62% 1Q12 1Q11 1Q12 compared to 1Q11AEP East Coal 47.0% 61.2%  Excluding Dresden, east combined cycle Gas 47.3% 21.7% average capacity factor for 1Q12 wasAEP SPP approximately 85% Coal 75.7% 78.8% Gas 21.9% 17.2%  45 days system average coal inventory at March 31, 2012 Net Capacity Factor  Coal fully hedged for 2012, approximately 1Q12 1Q11 80% hedged for 2013AEP East Combined Cycle 77.9% 38.2% Gas switching in AEP East complete; managing coal inventories 7
  8. 8. Capitalization & Liquidity70.0% Total Debt / Total Capitalization Credit Statistics 62.5%60.0% 57.2% 57.0% 55.3% 55.3% Actual Target50.0% FFO Interest Coverage 4.7 >3.6x FFO To Total Debt 20.0% 15%- 20%40.0%30.0% Note: Credit statistics represent the trailing 12 months as of 03/31/201220.0% Liquidity Summary (03/31/2012)10.0% Liquidity Summary0.0% (unaudited) Actual 2008A 2009A 2010A 2011A 1Q2012 ($ in millions) Amount Maturity Revolving Credit Facility $ 1,750 Jul-16 Short/Long Term Debt Securitization Debt Revolving Credit Facility 1,500 Jun-15 Total Credit Facilities 3,250 Plus Pension Funding Cash & Cash Equivalents 286 At the end of the first quarter AEP’s Less Commercial Paper Outstanding (385) pension funded status was 90% Letters of credit issued (189) Net available Liquidity $ 2,962 Strong balance sheet, solid credit metrics and adequate liquidity 8
  9. 9. Questions 9
  10. 10. 1Q12 Earnings $ millions Earnings Per Share 1st Qtr 1st Qtr 1st Qtr 1st Qtr 2011 2012 Change 2011 2012 ChangeUtility Operations $ 389 $ 383 $ (6) $ 0.81 $ 0.79 $ (0.02)Transmission Operations 4 9 5 0.01 0.02 0.01Non-Utility Operations 8 8 - 0.02 0.02 0.00Parent & Other (9) (11) (2) (0.02) (0.03) (0.01)AEP On-Going Earnings 392 389 (3) 0.82 0.80 (0.02)Cost Reduction Initiative 9 - (9) 0.02 - (0.02)Carbon Capture & Storage (26) - 26 (0.06) - 0.06Litigation Settlement - Enron Bankruptcy (22) - 22 (0.05) - 0.05Special Items Total (39) - 39 (0.09) - 0.09Reported Earnings (GAAP) $ 353 $ 389 $ 36 $ 0.73 $ 0.80 $ 0.07 10
  11. 11. Quarterly Performance Comparison American Electric Power Financial Results for 1st Quarter 2012 Actual vs 1st Quarter 2011 Actual 2011 Actual 2012 Actual Performance Driver ($ millions) EPS Performance Driver ($ millions) EPS UTILITY OPERATIONS: Gross Margin:1 East Regulated Integrated Utilities 18,152 GWh @ $ 41.7 /MWhr = 757 17,018 GWh @ $ 44.9 /MWhr = 7642 Ohio Companies 13,305 GWh @ $ 53.7 /MWhr = 715 12,863 GWh @ $ 48.0 /MWhr = 6183 West Regulated Integrated Utilities 9,903 GWh @ $ 29.6 /MWhr = 293 9,657 GWh @ $ 29.9 /MWhr = 2894 Texas Wires 6,314 GWh @ $ 23.5 /MWhr = 149 6,157 GWh @ $ 23.5 /MWhr = 1455 Off-System Sales 86 846 Transmission Revenue - 3rd Party 102 1157 Other Operating Revenue 125 1018 Utility Gross Margin 2,227 2,116 9 Operations & Maintenance (835) (757)10 Depreciation & Amortization (393) (412)11 Taxes Other than Income Taxes (209) (211)12 Interest Exp & Preferred Dividend (233) (217)13 Other Income & Deductions 48 4314 Income Taxes (216) (179)15 Utility Operations On-Going Earnings 389 0.81 383 0.7916 Transmission Operations On-Going Earnings 4 0.01 9 0.02 NON-UTILITY OPERATIONS:17 AEP River Operations 7 0.02 9 0.0218 Generation & Marketing 1 - (1) - PARENT & OTHER:19 Parent Company On-Going Earnings (11) (12)20 Other Investments 2 121 Parent & Other On-Going Earnings (9) (0.02) (11) (0.03)22 ON-GOING EARNINGS 392 0.82 389 0.80 11
  12. 12. Retail Rate Performance Rate Changes, net of trackers (in millions) 1Q12 vs. 1Q11East Regulated $27Integrated UtilitiesOhio Companies $37West Regulated $0Integrated UtilitiesTexas Wires $0AEP System Total $63 Impact on EPS $0.08 May not foot due to rounding 12
  13. 13. 1Q12 Retail Performance Retail Load* Weather Impact (weather normalized) (in millions) 1Q12 vs. 1Q11 1Q12 vs. 1Q11East Regulated East Regulated (2.0%) ($45)Integrated Utilities Integrated UtilitiesOhio Companies (0.8%) Ohio Companies ($24)West Regulated West Regulated 0.3% ($9)Integrated Utilities Integrated UtilitiesTexas Wires 3.6% Texas Wires ($9) $0.00 $0.12 Impact on EPS Impact on EPS * Excludes firm wholesale load 13
  14. 14. Off System Sales Gross Margin Detail  Physical off-system sales margins 1Q11 1Q12 decreased from last year by $12M ($millions) ($millions)OSS Physical Sales $ 90 $ 78  AEP/Dayton Hub pricing: 22%Marketing/Trading $ 32 $ 22 decrease in liquidation pricesPre-Sharing Gross Margin $ 122 $ 100Margin Shared $ (36) $ (16)  Lower Trading & Marketing results byNet OSS $ 86 $ 84 $10M 14

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