The paragraph is an introduction to the American Electric Power Company's fourth quarter 2024 earnings call. Rodger, the conference operator, introduces the call and announces that it is being recorded. After setting the format of the call, he hands it over to Darcy Reese, the Vice President of Investor Relations, who welcomes attendees and lists the management team members present, including William Fehrman, the CEO. Darcy mentions that forward-looking statements will be made and refers to accompanying slides for GAAP reconciliation. William Fehrman then begins his remarks, expressing enthusiasm about AEP's strong value proposition.

The paragraph discusses AEP's optimistic outlook and commitment to fulfilling promises to stakeholders through a robust capital plan. The company is focused on execution and accountability and introduces the new CFO, Trevor Michalek, a strong leader with industry experience. AEP is undergoing structural changes to become a highly respected utility, expressing gratitude to Charles Zebula for his long service. The paragraph also announces AEP's fourth-quarter 2024 operating earnings of $1.24 per share, totaling $5.62 per share for the full year, and highlights a recent dividend increase from $0.88 to $0.93 per share, demonstrating a commitment to shareholder value.

The paragraph discusses AEP's reaffirmation of its 2025 operating earnings guidance and long-term growth rate, supported by a $54 billion capital plan from 2025 to 2029. AEP emphasizes maintaining a strong balance sheet to finance future opportunities and highlights a recent transaction selling a minority interest in its Ohio and INM transmission business to KKR and PSP Investments for $2.82 billion. This transaction is highly accretive and allows AEP to retain 95% of its transmission assets while reallocating capital to improve reliability and meet rising energy demand. The company also generated substantial cash proceeds in 2024 through the sale of its New Mexico Renewable Development solar portfolio. Working with policymakers and regulators, AEP aims to fulfill their objectives effectively.

AEP's future growth is driven by four key factors: increasing demand in service territories, economic development initiatives, investments in transmission and distribution infrastructure, and new generation capacity. Their capital plan aims to support 20 gigawatts of additional load by 2030, primarily due to rising data center demand and manufacturing growth. Significant load growth is seen in Ohio, Texas, and Indiana, attributed to AEP's advanced transmission system, which offers a competitive edge. The company is executing a $54 billion capital plan, emphasizing fair cost allocations for large loads. Tariff modifications for large loads have been filed in several states, with decisions pending in some. AEP is also committed to enhancing distribution infrastructure to meet customer energy needs and improve service.

AEP is investing over $13 billion in modernizing their extensive distribution network, including upgrading poles, conductors, transformers, and implementing technologies like AMI meters and GridSmart, alongside an enhanced vegetation management program, to improve reliability and customer satisfaction while reducing outages and operational costs. With power demand surging, up to an additional $10 billion may be needed for transmission, distribution, and generation infrastructure beyond their existing $54 billion capital plan. Notable opportunities include $4-5 billion in recently approved transmission projects within their primary RTOs. Furthermore, AEP plans future projects, such as their partnership with Bloom Energy for fuel cells, designed to help large customers maintain operations during grid expansion and serve as backup once connected.

The paragraph outlines AEP Ohio's commitment to providing innovative energy solutions, such as fuel cell technology and small modular reactors (SMRs), to meet customers' power needs more quickly and efficiently. AEP is actively seeking approval for projects and is partnering with the US Department of Energy for potential SMR locations. The company emphasizes the importance of risk sharing and adapting to the fast-paced technology demands of clients. Additionally, AEP is engaged with stakeholders across states to align investments with local needs, aiming to enhance returns on equity and attract capital by fulfilling commitments and listening to state preferences.

In 2024, the operating company achieved significant regulatory progress, including favorable rate case outcomes in several states, approval of the Ohio Electric Security Plan, and filing system resiliency plans in Texas. The company is also addressing a base rate case in West Virginia with securitization to mitigate proposed increases. In terms of power generation, approvals for new and converted natural gas facilities have been filed, with plans to meet future energy needs through integrated resource planning. Overall, the focus remains on collaboration with stakeholders, maintaining affordability, reliability, resiliency, and security, while acknowledging the efforts of AEP employees.

The paragraph discusses the company's strategic plans as they enter 2025, including a return to full-time office work by June 1st and a focus on executing opportunities efficiently. Trevor Michalek expresses gratitude for his leadership role and outlines his commitment to driving the company's future success. He plans to review financial and capital plans, discuss 2024 financial results, explore growth expectations, and focus on credit metrics and capital allocation. The paragraph highlights a positive change in GAAP earnings, with detailed reconciliations available in the appendix.

The paragraph discusses the financial performance of a company in the fourth quarter and year-to-date for 2024. Fourth-quarter operating earnings increased to $1.24 per share, slightly higher than the previous year, driven by rate changes and higher retail sales, but partially offset by higher operational costs in the generation and marketing segment. Year-to-date operating earnings increased by 7% to $5.62 per share compared to 2023, reflecting a solid performance across segments. Specifically, the vertically integrated utilities segment benefited from rate changes and normalized weather, leading to earnings of $2.63 per share. The transmission and distribution utility segment earned $1.51 per share, lifted by rate increases and better weather. However, these gains were partially offset by higher expenses such as property taxes and depreciation. The AEP Transmission Holdco segment also saw an increase in earnings, contributing $1.51 per share.

The paragraph discusses the financial performance and future outlook of a utility company, highlighting key elements such as continued investment in transmission assets due to new load additions. It reports a decrease in generation and marketing earnings per share compared to the previous year, mainly due to asset sales, higher taxes, and lower retail energy margins, partially offset by lower interest expenses and higher wholesale margins. Corporate earnings benefited from lower taxes and operational costs. The company reaffirms its 2025 earnings guidance and notes significant future growth potential from increased load demand, especially from data centers and industrial customers, which could lead to up to $10 billion in additional capital investment. The company stresses the immediate nature and strategic importance of this growth to its financial story.

The paragraph discusses significant growth in data center and industrial power loads for the company. In December 2024, about 450 megawatts of new data center load was added in Ohio, with future load additions backed by firm customer commitments and take-or-pay contracts, particularly involving RTOs like PJM. Tariff settlements in Indiana, Ohio, and West Virginia are extending these commitments. The majority of the growth is in data centers, with system-wide data processing reaching 1.3 million megawatt hours in December 2024 and expected to increase by almost 25% in 2025. Industrial sales also showed resilience, with notable growth in Texas, underscoring the company's diverse service area and boosting confidence for future growth.

The paragraph discusses anticipated industrial sales growth driven by new large customer contracts, especially in Texas, and several upcoming industrial projects. The company has more than 20 gigawatts of commercial and industrial load additions planned across ERCOT and PJM regions. Financially, the company maintains strong credit metrics with a debt to capitalization ratio within historical ranges, a 14% FFO to debt ratio, and $4.6 billion in liquidity supported by credit facilities. This financial strength, enhanced by an imminent minority interest transaction, allows efficient capital market access to support future capital needs. The leadership is committed to preserving this financial health and has communicated this to credit rating agencies.

The paragraph summarizes a presentation highlighting the company's achievements and future plans. It mentions a strong year-over-year performance in 2024, with significant growth in earnings. The company is focused on executing strategies in 2025 to capitalize on industry load growth and is evaluating $10 billion in growth capital. A significant transaction involving transmission assets is noted as beneficial for shareholders, enhancing earnings and reducing equity needs. The company reaffirms its financial commitments, including 2025 earnings guidance and long-term growth targets. Finally, the paragraph invites participants to ask questions in a Q&A session.

In the paragraph, Shar Pourreza from Guggenheim Partners asks about the sustainability of the company's FFO improvement and the plans for issuing the remaining $2.5 billion in equity, whether through junior or asset optimization. Trevor Michalek responds by explaining that the company aims for a 14% to 15% FFO to debt ratio, noting potential impacts from Moody's recalculating deferred fuel. He emphasizes the commitment to maintaining a strong balance sheet while executing a $54 billion capital plan. The deferred fuel issue is expected to resolve by 2026, and the recent $2.8 billion transaction significantly addresses their equity needs, initially set at $5.35 billion.

The paragraph discusses a financial strategy involving the management of a $2.5 billion amount over a five-year period, reducing it to $2 billion through securitization, hybrids, or equity issuance. The speaker highlights a growth plan involving an incremental $10 billion and a historic $54 billion growth initiative, emphasizing the careful use of equity and focus on FFO to debt. Shar Pourreza inquires about load growth and CapEx disclosures, specifically concerning the 20 gigawatts in Ohio and tariff settlements. William Fehrman responds, emphasizing efforts to engage stakeholders, find solutions for data centers, and capitalize on economic opportunities through their system.

The paragraph discusses AEP Ohio's significant expansion in data center load, highlighted by the addition of nearly 450 megawatts from AWS and Meta in December alone, and projecting similar monthly increases through 2025. Over 4.7 gigawatts of data processing load is contracted for this year, primarily in Ohio and Texas, with nearly a gigawatt in Indiana. This growth benefits economic development and extends into the vertically integrated utility segment. The company emphasizes that those driving costs will bear them, not existing customers. Trevor Michalek and Shar Pourreza exchange congratulations on the progress. Ross Fowler from Bank of America inquires about data center tariffs, focusing on protective measures against stranded costs and the specifics of these tariffs compared to other rates.

In the paragraph, William Fehrman discusses how tariffs for incremental projects are based on the cost of serving additional loads or transmission needs, primarily to protect existing customers. The approach ensures that those driving the incremental costs, like data centers, pay for them. He notes variations in tariff application across states, citing Ohio's focus on data centers versus Indiana's broader application for large loads. The tariffs are designed to secure long-term investment, preventing costs from being passed onto current customers if a company exits early. Fehrman views this as beneficial and not hindering economic growth, as evidenced by significant interest and growth under these tariffs. Ross Fowler then asks Trevor Michalek about securitization as a potential funding method for their $2 billion equity need, indicating that details had not been fully analyzed yet.

In the paragraph, the speaker discusses their financial strategy to cover a $5.35 billion plan over five years, highlighting that $2.8 billion from a sale partially addresses this. They mention considering securitization as a potential solution for the remaining $2 billion, which could benefit both customers and their cash needs. Ross Fowler then asks about their approach to Small Modular Reactors (SMRs) and project risk structures. William Fehrman responds by emphasizing interest in SMRs due to customer demand, noting early site permit work in Indiana and Virginia, and mentioning applications to the Department of Energy (DOE) for support.

The paragraph discusses the cautious approach toward advancing SMR (small modular reactor) technology, emphasizing not putting the company at risk while exploring potential customer arrangements. Discussions are ongoing, but no firm agreements have been made. The focus is on ensuring technology reliability and protecting shareholders and customers. The dialogue ends with congratulations to Trevor Michalek on his new role. The following section addresses the potential upside to the capital plan, particularly regarding transmission projects like PJM, suggesting these could positively impact the plan if decided upon.

The paragraph discusses plans related to a $54 billion investment strategy, mentioning the potential addition of a $10 billion project that could be realized soon. The conversation highlights ongoing collaborations, such as joint planning agreements with Dominion and FirstEnergy, and anticipates approval from PJM in the first quarter. Trevor Michalek addresses potential funding for increased capital, emphasizing positive developments like $2.8 billion expected this year and other financial strategies such as securitization. He mentions the possibility of issuing equity for growth if necessary and highlights ongoing internal efforts to optimize organizational costs.

The paragraph discusses the company's approach to capital allocation and equity issuance for growth, emphasizing careful consideration but openness to issuing equity if needed. William Fehrman mentions no change in plans despite concerns known as the "Eatsy freak out," with customers not indicating any alterations. The company remains focused on their data center growth strategy. Fehrman also expresses satisfaction with the Bloom partnership, highlighting customer interest in the initial 100 megawatts and confidence in the technology's potential to expedite data center construction compared to traditional grid interconnects. Overall, the company is optimistic about their innovative approach and continued progress.

The paragraph discusses AEP's efforts in providing innovative solutions to data centers, emphasizing that they are actively implementing solutions rather than just issuing press releases. AEP's Greenwood Bloom project allows for potential expansion up to one gigawatt and is not included in the current $54 billion capital plan but is part of a $10 billion incremental investment opportunity. The feedback on these innovations has been positive. William Fehrman confirms that AEP's custom solutions, particularly for fuel cell projects, will have costs covered by large customers with stand-alone contracts, requiring state commission approval. This approach aims to protect existing customers while meeting specific needs.

The paragraph discusses AEP's strategic considerations and stakeholder engagements. Trevor Michalek mentions plans related to a $10 billion upside but withholds specific details, emphasizing AEP's history of innovation and disciplined approach. Jeremy Tonet inquires about AEP's stakeholder relationships in West Virginia. William Fehrman responds, highlighting his focus on the state since joining AEP and his interactions with both past and current administrations. He mentions AEP's innovative corrected filing, which includes an alternative solution for the commission to consider. A hearing is scheduled for June, with a decision expected in the third quarter, and key testimonies due in April and May.

The paragraph discusses a proposed securitization option that, while not included in current financial plans, is considered beneficial for reducing customer costs and supporting affordability. Positive feedback has been received regarding its potential implementation. The conversation then shifts to a discussion led by Durgesh Chopra from Evercore ISI, who inquires about large load tariffs in Ohio and whether data center and technology customers are part of the settlement discussions. William Fehrman clarifies that there are two separate settlements: one among data centers and another involving the commission staff and other large load entities. Both have undergone hearings, and discussions are ongoing in the rebuttal and testimony phase.

The paragraph discusses the company's anticipation of a commission ruling and its commitment to finding solutions for customers while maintaining protection for its existing customer base. Durgesh Chopra inquires about the 2025 financing plans, congratulating on a recent asset sale, and asks if the company is set from an equity perspective for 2025. Trevor Michalek responds by highlighting the significance of the $2.8 billion cash inflow from a transaction, stating that it will address current needs, especially given the $5.35 billion target over five years. He emphasizes the focus on growing to $10 billion and mentions ongoing concerns, including potential securitizations.

The paragraph discusses a financial transaction that has improved their position for 2025 and talks about a commitment to stay above downgrade thresholds. Despite the deferred fuel adjustment mechanism, they plan to maintain above 13%, which is seen as a good position for future growth opportunities. Durgesh Chopra and Trevor Michalek discuss the benefits of the transaction. Nicholas Campanella from Barclays congratulates Trevor on his new role and Chuck on his retirement, before asking about the accretive nature of the transmission sale. Trevor explains the sale is approximately 1.7% accretive, translating to around eleven or twelve cents in EPS on a full-year basis, and discusses the flexibility it offers for strengthening the balance sheet.

The paragraph discusses the company's strategic considerations regarding timing and its impact on financial metrics, specifically mentioning a range of $5.75 to $5.95. The later a transaction closes in the year, the lesser its impact on 2025 but it likely benefits credit metrics. Nicholas Campanella inquires about the company's approach to portfolio management, noting a focus on Indiana, Ohio, and Texas, and asks about potential asset prunings. Trevor Michalek emphasizes excitement about investing $54 billion, equivalent to their current market cap, with an additional $10 billion potential upside. He notes the aim for scale and risk mitigation, expressing optimism about their footprint's strategic fit and market positioning. William Fehrman agrees with Michalek about the opportunities ahead.

In the paragraph, executives from American Electric Power (AEP) discuss their ambition to become the leading energy infrastructure company in the U.S. They express strong confidence in their plans to meet growing energy demands, mentioning strategies for procuring key equipment like turbines and transformers. They highlight current initiatives, such as requests for proposals (RFPs) and integrated resource planning (IRP) across multiple states, emphasizing both short-term and long-term energy solutions. The paragraph concludes with a promise to provide further updates as the year progresses.

In the paragraph, Jamieson Ward, speaking on behalf of Julien Dumoulin-Smith, asks Trevor Michalek about the company's financial plans and the use of its available financial instruments, particularly concerning an ATM (At-The-Market offering) and upcoming cash proceeds. Trevor Michalek responds that the company is in a favorable financial position, with $1.3 billion still accessible under the ATM, expected cash inflows of $2.8 billion later in the year, and additional potential funding through securitizations. Ward follows up with a question about the remaining funds and suggests they might be suitable for equity-linked securities, to which Michalek responds affirmatively, though the full details are not provided.

The paragraph features a financial discussion where Trevor Michalek indicates that AEP is evaluating different financing options for their $10 billion incremental capital expenditure, emphasizing the focus on efficiency and shareholder value. Jamieson Ward queries about equity financing percentages, but Michalek mentions detailed plans will be shared in their third-quarter call. The paragraph concludes with closing remarks by William Fehrman, highlighting the exciting prospects for AEP as the company implements its capital plan and aims to deliver growth and shareholder value.

The paragraph outlines the company's confidence in unlocking value through its long-term strategy and commitment to providing safe, affordable, and reliable services. It mentions that representatives Trevor and Darcy will engage with stakeholders in March to discuss the company's value proposition. Additionally, the paragraph provides contact information for follow-up inquiries through the investor relations team, and concludes with details about accessing the replay of the conference call, which is available until February 20, 2025.

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