The conference operator, Regina, welcomes everyone to the American Electric Power Fourth Quarter 2023 Earnings Call and introduces Darcy Reese, Vice President of Investor Relations. Darcy thanks everyone for joining and mentions that they will be making forward-looking statements during the call. Ben Fowke, Interim President and CEO, Chuck Zebula, CFO, and Peggy Simmons, EVP of Utilities, will be speaking and taking questions. Ben addresses the recent decision to remove Julie Sloat from her position as Chair, President, and CEO, and thanks her for her contributions.

The speaker reassures that Julie's departure was not due to any unethical behavior or policy violations. They joined the AEP board in 2022 and have been impressed with the company's business model, leadership, and performance. Despite challenges, AEP has consistently met or exceeded earnings guidance and controlled O&M expenses while doubling their asset base. The team overcame a setback in Texas and has since received commission approval for $6.6 billion in new renewable projects. The board and management are focused on simplifying and de-risking the company's portfolio.

Last year, AEP completed the sale of its unregulated renewables portfolio, bringing in $1.2 billion in cash. They are on track to reach their 2024 asset sales targets with the upcoming sale of their New Mexico renewable development solar portfolio and the expected conclusion of their retail and distributed resources sales process. AEP will continue to be a disciplined portfolio manager and has decided to retain ownership of their Prairie Wind and Pioneer Transmission joint ventures. They have also reaffirmed their 2024 full year operating earnings guidance and long-term earnings growth rate. AEP has reached an agreement with Icahn Capital, and the addition of a new board member will bring fresh perspective as they work to enhance value for stakeholders. The interim President and CEO is committed to adding value while the board searches for a permanent successor.

The speaker acknowledges that 2023 has been a challenging year for AEP, but encourages focusing on upcoming opportunities. The team has confidence in achieving objectives and delivering safe, reliable, and affordable energy to customers. Peggy then provides updates on regulatory and legislative efforts, including closing the authorized versus earned ROE gap and obtaining securitization in Kentucky, a biannual DCRF in Texas, and rate reviews every two years in Virginia. AEP also secured several important wins in 2023, resulting in $312 million in rate relief.

In 2023, the company filed new base cases in Indiana, Michigan, and Kentucky and reached a settlement in Indiana. They expect commission decisions on these cases in the coming months. They also have upcoming cases in Oklahoma, Texas, and Virginia. However, they have faced some setbacks, such as disallowances in Texas and West Virginia, and an unfavorable FERC order related to accumulated deferred income taxes. The company is focused on achieving a 9.1% regulated ROE in 2024 and has already secured rate relief for almost 70% of their cases this year.

AEP is committed to working constructively with regulators and strengthening relationships. They have received approval for various renewable energy projects, totaling billions of dollars in investment. These projects align with their integrated resource plan and support their fleet transformation goals. AEP is also investing in their transmission and distribution systems to support reliability and resiliency. These investments will help them achieve their 6% to 7% EPS growth commitment while minimizing customer bill impacts.

In the fourth quarter of 2023, GAAP earnings were $0.64 per share, compared to $0.75 per share in 2022. For the full year, GAAP earnings were $4.26 compared to $4.51 in 2022. The team is working to minimize the variances between GAAP and operating earnings. The fourth quarter earnings were $1.23 per share, with favorable O&M and strong performance in the Generation and Marketing segment, partially offset by unfavorable weather and higher interest costs. The full year operating earnings were $5.25 per share, with a decrease in earnings for the Vertically Integrated Utilities segment due to unfavorable weather, higher interest expense, and higher income taxes.

The article discusses the financial results of American Electric Power (AEP) for the year 2023. The company saw an increase in earnings per share, driven by various factors such as rate changes, increased transmission revenue, and lower operating and maintenance expenses. The Vertically Integrated segment saw favorable depreciation due to the expiration of a lease, while the Transmission and Distribution Utility segment benefited from rate changes and lower expenses. The AEP Transmission Holdco segment also saw positive growth and favorable income taxes. However, the company also faced challenges such as unfavorable weather, higher depreciation, and higher interest expense. The Generation and Marketing segment saw an increase in earnings due to improved margins and the sale of renewable development sites. Corporate and Other segment saw a decrease in earnings due to higher interest expense, partially offset by favorable investment gains. Overall, the company reaffirmed its guidance for the year 2024.

The company's segments and overall guidance have not changed, but there were some variances due to last year's results. Retail load grew 2.5% in 2023, driven by an increase in commercial load, particularly from data centers. This growth is expected to continue as the demand for data storage and processing increases. Industrial sales also saw some growth, but it is expected to remain modest this year. However, it is expected to accelerate in the future as borrowing costs decrease and new loads come online. Residential load declined slightly in 2023.

The company has seen a decline in usage per residential customer due to increased energy efficiency and more time spent in offices. However, the company has also seen growth in its residential customer base in certain regions. The company is optimistic about future load growth, particularly in the commercial and industrial sectors. The company's FFO to debt metric has improved, but they expect it to continue to improve throughout 2024. This is due to positive changes in cash flows and regulatory activities, such as the recovery of deferred fuel balances.

The company's debt and liquidity remain strong, with a slight increase in debt to cap and a stable funding status for the pension plan. Despite challenges such as mild weather and interest expenses, the company was able to meet its commitments for 2023 and reaffirm its guidance for 2024. The company remains focused on providing reliable service to customers and executing its strategic priorities. The speaker also takes a moment to thank a colleague for their long tenure with the company.

Ben Fowke, the new addition to the AEP management team, is welcomed by the company. The management team is looking forward to working with him and the board to enhance value for all stakeholders. The company has had many successes and has reiterated their earnings guidance, balance sheet targets, growth rate, and CapEx numbers. The company has completed a review of Transource and plans to keep it as an asset. They will continue to be disciplined portfolio managers and are willing to transact when price and execution intersect. The company's strategy remains the same, but they recognize the need to improve on getting constructive regulatory outcomes. Their goal is to invest in CapEx at one times book and get constructive recovery of that investment to add long-term value in the industry.

The speaker discusses the company's progress and plans to improve their processes and outcomes through listening to local leaders and stakeholders. They also mention the need for further regulatory relationships and focus on execution. The speaker then mentions that they are searching for an external candidate to be the next CEO and lists some possible qualifications they are looking for.

The speaker discusses the ideal candidate for the new CEO of AEP, mentioning qualities such as experience in the utility industry, investor community, leadership, and regulatory success. They also mention the recent agreement with Icahn Capital and how it ties into the change in leadership at AEP. The speaker states that the additional board members from Icahn were welcomed and that they will not comment further on the matter.

The speaker discusses the departure of Julie, the CEO of AEP, and mentions that the board has decided to transition to a new CEO. They also mention that they share the opinion with Icahn board members that AEP shares are undervalued and they want to work together to unleash shareholder value. The speaker states that all options are on the table for the strategic path going forward, but they are in a good position with their current assets. They will continue to look for opportunities to benefit shareholders and focus on portfolio management.

The speaker acknowledges that there have been some challenges in the regulatory environment, such as the FERC order on taxes and the Oklahoma rate order. However, AEP has a solid 5-year plan and a resilient management team that has consistently met their targets for the past 14 years. The $43 billion 5-year capital plan and the company's ability to absorb issues like weather and regulatory bumps contribute to their confidence in maintaining a 6% to 7% growth rate. The company has also been able to double its rate base while keeping O&M flat, and plans to continue growing through load opportunities and reallocation of O&M.

The speaker takes a measured approach to their optimistic outlook on opportunities in the company, including commercial load growth and economic development. They emphasize the need for improved returns and regulatory execution. The 5-year plan is based on the midpoint of current guidance and aims for a 6-7% CAGR. The new CEO will likely embrace the current strategies, but may have new ideas for execution.

The speaker explains that their goal is not to completely dismantle their strategic priorities, but they will consider opportunities that will benefit shareholders. They also discuss their decision to retain certain assets, including their position as the largest transmission provider in the United States. They believe these assets contribute to their earnings and are important for their overall financing plan. They plan to continue leading the transmission space.

The speaker, Chuck Zebula, is asked about the company's FFO to debt metrics for 2024 and what could cause them to fall outside of the 14% to 15% range. Zebula responds by saying that the timing is not as important as the trend and sustainability of staying within the range. He mentions that the company has already met their goal of being above 13% by year-end and that they are working on improving their deferred fuel balances. He also mentions that their models show they will be within the range for this year and the long term. The questioner then asks about the company's review of its regulatory strategy and how long it will take.

Ben Fowke and Peggy Simmons discuss AEP's new review of its regulatory strategy and how it differs from past reviews. Fowke has been involved in the discussion as a board member and plans to work closely with Simmons on improving outcomes. Simmons highlights positive regulatory outcomes in 2023 and legislative work that will help address lag. They also plan to continue building upon recent successes, such as the securitization order in Kentucky. In regards to the data center build-out in AEP's service territory, the biggest opportunities for benefit are yet to be determined.

During a conference call, Ben Fowke, CEO of AEP, addressed concerns about the company's balance sheet constraints and potential opportunities for growth in Ohio and Texas. He mentioned that the company's 5-year plan includes funding for serving those customers, but any additional growth would need to be evaluated for smart financing. A question was then asked about the recent changes in the company's board, to which Fowke stated that it was a full board decision to transition to a new CEO. Chuck, another executive, also answered a question about the timing of equity, stating that it may have shifted but the company is still targeting a 13% threshold.

An analyst asked about the expected improvement in earned returns each year. The company clarified that their equity needs have not changed since their previous forecast and their current projections are consistent with what was shown at EEI. They also mentioned that their ROE for 2024 is projected at 9.1% and they will continue to work on closing the gap. When asked about allocating capital across jurisdictions, the company stated that they will always strive to put capital where they can get the best returns, while also meeting baseline capital requirements for resiliency, reliability, and safety. They will also consider the needs and preferences of each local jurisdiction.

The team discusses how factors like regulatory outcomes and customer needs can shape the company's capital requirements. They also mention that the guidance for 2024 includes contributions from retail and distributed resources, and that they are in the process of concluding those businesses. They also mention the sale of NMRD, which will provide a benefit.

In this paragraph, the speaker mentions the recent FERC decision and its expected impact on the company's earnings. They also discuss ongoing proceedings in Kentucky and Louisiana related to fuel and purchased power costs. The company is targeting a 9.1% improvement this year, but in order to hit their 6% to 8% target, they will need further improvement.

Peggy Simmons discusses the company's goal to improve their earned ROE by 10 basis points each year over the next 5 years. The company's strategy remains the same, but they are focused on executing it effectively. There is no set timeline for finding a new CEO, but the process will take as long as necessary to find the right candidate. Some jurisdictions may want lower prices, which could impact the company's regulatory outcomes.

The speaker is asking if there are any new approaches to regulation that can address concerns about investment and rates while also promoting economic growth. The company's team responds by mentioning their focus on load growth and attracting new customers, particularly in the data center industry. The speaker expresses hope for the company's future. The call ends with information about accessing a replay of the call.

The conference call will be available for replay two hours after it ends until March 5, 2024. To access the replay, dial 800-770-2030 or 647-362-9199 for international callers. The conference ID number for the replay is 9066570. The call has now ended and participants may disconnect.

This summary was generated with AI and may contain some inaccuracies.