The operator introduces the American Electric Power's Second Quarter 2024 Earnings Call and welcomes everyone. Darcy Reese, President of Investor Relations, thanks everyone for joining and introduces the speakers for the call. Ben Fowke, President and Interim CEO, will be providing opening remarks, followed by Peggy Simmons, Executive Vice President of Utilities, who will provide a regulatory update. Chuck Zebula, Executive Vice President and CFO, will then review the financial results. The paragraph also mentions that Bill Furman will be joining AEP as the new President and CEO on August 1st.

The article discusses the appointment of Bill as the new President and CEO of AEP, highlighting his extensive experience in the energy industry and his plans for the company. The financial results for the second quarter of 2024 were also announced, with a reaffirmation of the company's earnings guidance and long-term growth rate. The article also mentions the increasing demand for data centers and AEP's plans to responsibly finance this growth initiative.

AEP is encouraging innovation in meeting energy needs, but stresses the importance of fair cost allocation and long-term grid success. They have filed new data center tariffs and a complaint with FERC. Commercial load has grown in Ohio and Texas, and they plan to seek regulatory approval for a natural gas generation facility in Oklahoma. Maintaining a strong balance is important for funding capital needs and they are open to various financing options. The sale of AEP on-site partners is expected to close in the third quarter.

The Federal EPA's Coal Combustion Residual Rule has been expanded to include inactive impoundments at existing and inactive facilities, and AEP is evaluating its applicability and developing estimates of compliance costs. They are also considering potential legal challenges and seeking cost recovery through regulatory mechanisms. The interim CEO thanks everyone for their support and introduces the new CEO, Bill. AEP is planning an informal meet and greet for analysts and investors to meet Bill in person. AEP is also focused on regulatory initiatives and strengthening relationships, with a focus on customer bills, affordability, system reliability, and resiliency.

The company is focused on advancing interest in each state they operate in, including economic development and creating jobs. They are working to achieve regulatory outcomes that benefit customers, communities, investors, and employees. They have received positive rate case developments in Indiana, Michigan, and AEP Texas, and are currently in the process of filing rate cases in Virginia and Oklahoma. They plan to file a rate case in West Virginia soon and are making progress on their regulatory strategies for the future.

The paragraph discusses AEP's recent fleet transformation activities and the progress made on that initiative. It also mentions APCo's requests for proposals for renewable resources and PSO's agreement to purchase a natural gas generation facility. The paragraph also mentions the leadership changes within AEP and the company's future plans and opportunities. Finally, it provides a comparison of GAAP and operating earnings for the second quarter and year-to-date periods, with a detailed reconciliation of the two on pages 13 and 14.

In the second quarter, the company incurred several expenses, including a provision for customer refunds, a severance program, and compliance costs related to the EPA CCR rule. Despite these expenses, operating earnings increased by 10.6% compared to the same quarter last year. This was driven by favorable weather and rate changes, although there was a slight decrease in income taxes and lower retail sales. The transmission and distribution utility segment also saw an increase in earnings compared to last year.

The positive drivers in this segment included favorable weather, increased transmission revenue, rate changes, and higher normalized retail sales. These were partially offset by increased property taxes and depreciation. The AEP transmission Holdco segment contributed $0.39 per share, up a penny from last year, driven by investment growth. Generation and marketing produced $0.12 per share, down a penny due to the sale of AEP renewables. Corporate and other was up $0.06 primarily due to lower income taxes and increased other operating income. Weather normalized retail sales increased by 4%, with commercial sales increasing by 12.4%. The T&D segment saw a 20% increase in commercial load, and this trend is expected to continue as more customers commit to connecting with AEP's vertically integrated companies. Data processing gains will remain concentrated in Ohio and Texas for the rest of the year, but there are strong commitments from new customers for future growth.

The company's industrial sales have remained strong, particularly in Texas, due to an increase in new customers in the energy industry. The residential segment has also seen growth in customer count and load in Texas, but remains weak in other territories. The company's FFO to debt metric and debt-to-cap ratio have improved, and they have taken financing actions to strengthen their credit. Their liquidity remains strong and their pension funding status is near 99%. Overall, the company's second quarter results have provided momentum for the year and they remain committed to their earnings guidance and long-term growth rate.

The focus for the rest of the year is on providing reliable and affordable service, executing the plan, and embracing growth opportunities. The sale of AEP on-site partners is expected to close in the third quarter, resulting in $315 million in net proceeds. The current CEO, Ben Folk, will remain involved in an advisory and board role, and the team looks forward to the arrival of the new CEO, Bill Furman. The company's direction and strategy remain on track, but the new CEO may have some latitude to make strategic changes if needed.

The speaker believes that the company's new leader, Bill, will focus on execution and make some changes, but the strategic direction will remain the same. They plan to update their CapEx plans in the fall and are open to portfolio optimization if the price and execution are favorable. However, this is challenging in the regulated utility space.

Charles Zebula and Shar Pourezza discuss the importance of maintaining investment credit ratings and defending their plan as a regulated utility with significant capital needs. They also mention the need for both transmission and distribution investments, with transmission being the priority followed by generation and distribution. They have already increased their CapEx by $500 million this year, mostly in T&D for reliability, customer hookups, and storm-related capital. As customer additions come online, the shape of their investments will reflect this growth.

The speaker, Ben, mentions that they will be laying out more information in the fall. Another speaker, Jeremy, asks about the potential for near-term data and the need for more gas generation. Peggy explains that they are being proactive in finding affordable assets to bring onto the system and will make a filing at the Commission later in the fall. Another speaker, Steve, asks about the strong commercial sales growth and how it relates to normalized sales growth in both vertical and T&D. Ben clarifies that normalized sales were up $0.02 in T&D.

The vertical line item was down $0.06, which was largely due to a 4.9% decrease in residential sales in the SWEPCO territory caused by repeated storm activity. The company has 15 gigawatts of committed data center sales to 2030, meaning they have letters of agreement from serious customers who are willing to financially commit to getting on the grid. These customers are not just inquiries, but have made a serious commitment to getting on the grid. It is unclear if these customers have committed to the new tariffs the company has filed.

The speaker discusses tariffs that have not yet been approved and how they will affect customers. They emphasize the importance of ensuring that the growth in the industry benefits all customers and mention modifications being made in Indiana and West Virginia. They then estimate that approximately 50% of the capital needs will be split between Texas and PJM, with 50% of that going to INM and AEP Ohio. They also mention interest from other vertically integrated utilities.

An unidentified analyst named Nick Campanella from Barclays asks about the company's plans for handling capital and rate-based growth. CEO Ben Fowke responds by stating that the company's focus is on getting the rules right to benefit all customers and mitigate cost increases. The analyst also asks about potential cost-cutting opportunities, to which Fowke mentions the incoming CEO Bill Furman's track record of innovation.

The speaker discusses the strategies being used to keep operation and maintenance costs in check and ensure fair tariffs for customers. They also mention a goal of bringing on 15 gigawatts of new load, primarily from data centers, by the end of the decade. The speaker declines to provide a specific timeline for this goal but notes that it is already reflected in their numbers. They also mention that the earned return on equity has remained flat at 8.9% but is expected to increase to 9.1% for the year. A question is asked about a weather-normalized number, but the speaker does not provide one.

During the conference call, an analyst asked about the outlook for the board, and specifically the roles of Ben and Bill. Ben will go back to being a board member after his time as advisor and will remain independent. Bill will also be on the board, but as a non-independent director. Sara Martinez Tucker will continue to serve as chair of the board. The size of the board will not change. In regards to cash flow, there were some changes in 2024 that led to a slightly higher need for equity, but there are no changes expected in 2025. The company will provide an update on cash flows at the upcoming EEI conference. The increase in equity was due to a $500 million increase in CapEx and changes in planned asset sales.

The paragraph discusses a question about the equity-like notes issued in June and whether there are other forms of equity alternatives being considered. The speaker also mentions a question about the company's financing slide and if their cash flow will be lower than expected due to lower asset sale proceeds and higher CapEx. The company plans to maintain a 14% to 15% range for cash flow. Another question is asked about the 15 gigawatts of data center load and how much of it can be connected without additional investments. The response is that currently none of it can be connected, but the company is looking at potential upgrades to prepare for connecting the load. Lastly, there is a question about the company's outstanding RFPs and if they include any gas.

The speaker discusses the company's focus on renewable energy and the need for dispatchable resources to be added to the grid. They also mention that residential sales have been impacted by inflation and weather occurrences in certain areas, while commercial sales have been strong but have lower margins. The company is still seeing growth in Texas and expects an improvement in the second half of the year.

The speaker asks about the finalization of the layoffs and severance process and how it will affect decision-making at the local level. They also inquire about the number of roles that will be recreated at the local level.

The company has successfully met its targets for the voluntary severance program and plans to minimize rehiring to maintain cost savings. They also plan to invest some of the savings back into local communities and increase resources in regulatory and legislative areas. The company is also facing increasing demand for generation and will need to balance this with their wires businesses.

Ben Fowke, CEO of AEP, discusses the potential impact of legislation on the energy market in Ohio and Texas. He believes that relying on the market is the most likely scenario, but notes that the company's vertically integrated utilities will need more generation in the future. Fowke is excited about the development of Green Country and the potential for increased economic development in the region. He also mentions the recent Supreme Court decision regarding Chevron and how it could potentially impact EPA and FERC regulation.

In the paragraph, the speaker discusses the current state of the courts and their interpretation of laws, specifically in regards to the EPA and FERC. They mention that there may be some changes in how the courts interpret laws, but it remains to be seen. The speaker also mentions their company's plans to challenge various EPA rules and regulations. They are unsure if there will be any changes in FERC. The speaker concludes by saying that the IR team is available for any additional questions.

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