The conference call for American Electric Power's first quarter 2024 earnings began with an introduction from the operator, followed by opening remarks from the company's Vice President of Investor Relations, Darcy Reese. The call included forward-looking statements and a discussion of factors that may affect future results. The company's President and Interim CEO, Ben Fowke, provided a financial update and reaffirmed their earnings guidance for the full year. The call also included a regulatory update from the Executive Vice President of Utilities, Peggy Simmons, and a detailed financial review from the Executive Vice President and CFO, Chuck Zebula.

The speaker is pleased with the company's 14.2% FFO to debt ratio and assures the audience that AEP's direction and strategy are on track. They have been meeting with various stakeholders and are confident in the company's financial targets. The search for a permanent CEO is underway and may take 6 to 12 months. There is a need for increased capital spending in the future, particularly for commercial load growth. The company is working to ensure that commitments are secure, tariffs and contracts are fair, and growth is self-funded.

The author discusses recent commercial commitments made by Amazon Web Services and Google to build data centers in the Midwest, which will likely lead to increased transmission investment opportunities for AEP. The company's commercial load in the first quarter of 2024 saw a 10.5% increase over the previous year. AEP also plans to file a system resiliency plan in Texas and is open to equity alternatives to fund potential capital spending. The author provides an update on the sales of AEP's energy retail and distributed resources businesses and mentions the newly published federal EPA rules on greenhouse gas standards and other regulations.

The team at AEP is reviewing new regulations and plans to pursue legal challenges and work with other states to provide reliable and affordable energy. They also announced a voluntary severance program to save labor costs and mitigate inflationary pressures. The company is confident in their strategy and excited about future opportunities for growth and creating value for investors. The regulatory successes and challenges are being reviewed and plans are in place to strengthen AEP's regulatory compacts.

AEP is investing in people resources at the local level to enhance their engagement in the changing utility industry. They are focused on regulatory and legislative areas, and are working with state regulators to achieve outcomes that benefit customers, communities, and investors. They have reduced their authorized versus actual ROE gap and have seen a slight improvement in their ROE. AEP Ohio's Electric Security Plan V was recently approved, covering a 4-year term. They have also filed new base cases in Indiana, Michigan, Oklahoma, and Texas, and have completed a procedural schedule for a biennial rate review in Virginia.

The company has recently filed their annual formula rate plan for their Arkansas and Louisiana jurisdictions. They are also making progress on their 5-year, $9.4 billion regulated renewable capital plan, with $6.6 billion already approved by state commissions. The company is also considering market input and resource adequacy as they work towards their fleet transformation targets. They have pending requests for proposals for additional generation resources and are focused on regulated assets. Looking ahead, they are focused on achieving a forecasted regulated ROE of 9.1% and are committed to engaging constructively with regulators. The financial results for the first quarter show an increase in GAAP earnings compared to last year, with a detailed reconciliation provided in the presentation.

In the first quarter, the company saw an increase in operating earnings of $98 million or $0.16 per share compared to the previous year. This was primarily due to rate changes, favorable weather, and lower income taxes. However, these positive factors were partially offset by higher interest, depreciation, and other taxes. The AEP Transmission Holdco segment had the largest contribution to earnings, driven by investment growth and lower income taxes. Despite overall positive earnings, the company estimates a $80 million unfavorable impact from mild weather in the first quarter.

In the first quarter, Generation & Marketing saw an increase in earnings per share due to higher generation and retail margins, as well as lower interest expenses. However, there were also some negative factors such as lower wholesale margins and higher taxes. Retail load also grew, driven by economic development and the demand for data centers. Industrial load also saw some growth, but the company is monitoring the impact of higher interest rates on their customers.

The company is confident in its ability to maintain steady demand for electricity despite potential economic challenges, thanks to the expected increase in large new customers. Their FFO to debt ratio has improved, their liquidity remains strong, and their pension funding status is stable. Overall, the first quarter results were solid and the company remains focused on improving financial performance, offsetting cost increases, and bringing economic development to their communities.

The company has successfully sold their New Mexico solar assets and is still in the process of finalizing their AEP Energy and AEP OnSite Partners process. They are confident in their first quarter results and reaffirm their operating earnings guidance. They remain committed to their long-term growth rate and appreciate investors' interest. The next question comes from JPMorgan about the alignment of data center forecasts and the system's ability to provide power, as well as how rates will be structured to avoid burdening other rate payers. The company is well-equipped to accommodate the first wave of data center growth due to their previous transmission investments.

The speaker discusses the need for additional transmission and generation to meet the growing demand for energy. They mention the hard work of their economic development team and the supportive business community in States. Data center load is also increasing, and the speaker is focused on ensuring fair load growth for all customers and keeping rates affordable. They are developing new tariffs and believe this growth will benefit all customers. The data center load is more similar to industrial customers rather than commercial. The external CEO search is ongoing, and the speaker does not mention any changes in the desired characteristics of a candidate or the progress of the search.

Ben Fowke and Peggy Simmons discuss the progress of AEP's search for a new CEO and their corporate strategy of decentralization. They are looking for candidates with specific qualities and expect to have a new CEO in place within 4 to 10 months. AEP is also working on placing more resources in local communities to better serve stakeholders, but this may require some cost-cutting measures.

The speaker mentions the importance of ongoing conversations in light of changes in the industry. The company has announced deals in Ohio, Texas, and Indiana, and is currently working on RFPs in Indiana. The company will have to serve the generation component in Indiana, and is also focusing on redefining tariffs. While there will be more capital needed, it will be manageable and doable. The company is currently in its target range for FFO to debt.

The company expects to maintain its current financial range throughout the year and plans to defend it. The annual customer bill increase has been reduced to 3% through 2028, and this does not include the anticipated infrastructure investment for future data center growth. The company has done extensive work to ensure that the incremental investment needed will not significantly impact customer rates, and they are confident in moving forward with it.

The speakers are discussing how they are addressing unique issues presented by data centers, such as wanting to be behind the meter but also have an emergency tariff with the utility. They emphasize the need for fairness and balance for all customers, as well as ensuring that growth is self-funded and does not jeopardize reliability. They mention that their tariffs and analysis will help with this.

The speaker discusses an updated load growth forecast that will be released later in the year, potentially during the third quarter earnings call or at the EEI conference. They also mention remaining committed to simplifying the business and potentially selling assets on an opportunistic basis. However, they are cautious about executing any potential sales and will only do so if the price is right. They also mention their focus on maintaining a strong balance sheet.

Carly Davenport from Goldman Sachs asks about the company's financing needs and potential impacts from changes in rates. CEO Ben Fowke confirms that their plan is still intact and there have been no significant changes. He also discusses the surprising success of the commercial load and data centers, attributing it to the rapid ramp-up of new customers. Nicholas Campanella from Barclays asks about the need for growth equity and why the company doesn't address their equity needs sooner.

During a recent conference call, Ben Fowke and Charles Zebula discussed the company's plans for portfolio optimization and a new financing plan. They mentioned that they will be defending their BBB credit and maintaining a strong balance sheet, and that the financing plan and CapEx updates will be announced soon. They also clarified that these updates are separate from the ongoing CEO search process.

The interviewer asks if the company's updates and plans are being delayed until a new CEO is in place, to which Ben Fowke responds that they are not. He assures that the company is moving forward and focusing on accommodating growth and putting more control at the local level. He also mentions challenging the EPA's proposed ruling and the company's use of carbon capture technology and accelerated plant retirements, specifically targeting coal.

In this paragraph, the speaker discusses the need for the energy industry to take responsibility for initiatives such as onshore data centers, artificial intelligence, and reshoring of manufacturing. They emphasize the importance of building transmission infrastructure and the need for dispatchable generation, such as SMRs, while also acknowledging the challenges and costs associated with complying with various environmental regulations. The speaker expresses passion for defending the grid and customers, even if it means taking legal action. The paragraph also mentions an incremental 10 to 15 gigawatts of load growth by the end of the decade.

The company is anticipating an increase in load, particularly in Ohio, and will likely need to conduct incremental RFPs to accommodate this growth. They are also considering the possibility of entering the generation game in Ohio, but this would require legislation. In ERCOT, they do not currently own generation but would need to build transmission and potentially acquire generation in the future.

In response to a question about the voluntary separation program, CEO Ben Fowke explains that the annual savings will offset the severance cost in the first year and benefit the company in the following years. He also mentions that they are considering all options to fund potential new investments, but will prioritize maintaining their BBB credit rating. In regards to the PLR ruling, there will be a one-time gain and the company is still determining the ongoing impact.

The company has been dealing with an issue regarding the different tax situations of its affiliates, which has been compounded by its significant capital program and bonus depreciation. To address this issue, they requested a private letter ruling from the IRS and received it in the first quarter. The PLR stated that the stand-alone NOL must be included in rate base, and any adjustments to offset it would constitute a normalization violation. The company plans to work with regulators to make the necessary adjustments to rates going forward. West Virginia has already agreed to the stand-alone approach.

The speakers discuss past issues and upcoming changes in the energy industry. They mention potential reforms at FERC and the use of grid-enhancing technologies. They also note that their team has been involved in the planning process with FERC. The call will be available for replay.

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