AEP Retains AEP Energy, Reaffirms 2024 Earnings Guidance

Rhea-AI Summary

American Electric Power (Nasdaq: AEP) announced it will retain AEP Energy, reaffirming its 2024 operating earnings guidance of $5.53 to $5.73 per share, with a long-term growth rate of 6% to 7% and FFO/Debt target of 14% to 15%. Management will present at the Citi 2024 Energy Conference, and the updated cash flow forecast is available on AEP's investor website. AEP also signed an agreement to sell AEP OnSite Partners, expecting to net $315 million in cash post-transaction. The sale should close in Q3 2024, pending regulatory approvals. AEP is investing $43 billion to improve grid reliability and reduce carbon emissions by 80% from 2005 levels by 2030, aiming for net zero by 2045.

Positive

• Reaffirmed 2024 operating earnings guidance of $5.53 to $5.73 per share.
• Projected long-term growth rate of 6% to 7%.
• FFO/Debt target of 14% to 15%.
• Retention of AEP Energy aligns with company strategy and customer value.
• Agreement to sell AEP OnSite Partners for approximately $315 million in cash.
• Sale expected to close in Q3 2024, pending regulatory approvals.
• Investment of $43 billion over the next five years to improve grid reliability.
• Target of 80% reduction in carbon emissions by 2030.
• Net zero emissions goal by 2045.

Negative

• No change to AEP's equity financing plan, indicating potential financial constraints.
• Reliance on regulatory approvals for the sale of AEP OnSite Partners, posing a risk.
• High investment requirement of $43 billion, increasing financial burden.

Insights

Financial Analyst

The reaffirmation of AEP's 2024 operating earnings guidance at $5.53 to $5.73 per share is a positive indicator of the company's financial stability and confidence in its future performance. This guidance, coupled with a long-term growth rate of 6% to 7%, suggests AEP is on a steady growth track. The FFO/Debt target of 14% to 15% reflects a healthy balance sheet, showing the company can manage its debt levels while supporting its operational needs.

An important point for investors is the decision to retain AEP Energy. By keeping this division, AEP maintains a significant presence in the competitive retail electricity and natural gas markets, which can be beneficial as the demand for these services grows in deregulated states. This choice aligns with AEP’s strategy to provide tailored energy solutions and can help sustain revenue growth.

Additionally, the sale of AEP OnSite Partners for approximately $315 million in cash after taxes and transaction fees will strengthen AEP’s liquidity position. This cash influx can be utilized for further investments or reducing debt, enhancing the financial flexibility of the company.

For retail investors, the key takeaway is that AEP's financial outlook remains strong and stable. The company's strategic decisions to retain AEP Energy and sell AEP OnSite Partners both appear to support its long-term growth objectives.

Market Research Analyst

In terms of market dynamics, AEP's decision to keep AEP Energy is notable. Operating in 28 service territories across six states and Washington D.C., AEP Energy positions the company well to capitalize on regional market opportunities and regulatory environments. With 700,000 customers, this segment is poised to benefit from increasing demands in deregulated markets.

The reaffirmed earnings guidance and growth rate indicate AEP's strong market position and ability to navigate the evolving energy landscape. AEP's proactive approach in maintaining a diversified energy portfolio, including a substantial renewable energy component, aligns with broader industry trends towards sustainability and cleaner energy solutions.

For investors, this suggests that AEP is well-prepared to meet future energy demands and regulatory standards, which can contribute to sustained competitive advantage in the energy sector. The sale of AEP OnSite Partners also suggests a strategic shift towards core operations, potentially making AEP a more focused and efficient company.

COLUMBUS, Ohio, May 13, 2024 /PRNewswire/ -- American Electric Power (Nasdaq: AEP) announced today it will retain its retail energy business, AEP Energy. The company is reaffirming its 2024 operating earnings guidance of $5.53 to $5.73 per share, long-term growth rate of 6% to 7% and FFO/Debt target of 14% to 15%.

AEP management will meet with investors tomorrow at the Citi 2024 Energy Conference. The company's updated cash flow forecast is available at https://www.aep.com/investors/ in the investor presentation for the conference. There is no change to AEP's equity financing plan resulting from this decision.

"We determined that AEP Energy fits into our current portfolio and strategy by providing value to our customers and investors," said Ben Fowke, AEP interim chief executive officer and president. "As load continues to grow in our deregulated states, AEP Energy keeps us closely connected to opportunities to support this demand and provide tailored energy solutions to customers."

AEP Energy is a certified competitive retail electricity and natural gas supply provider operating in 28 service territories in six states and Washington, D.C. with 700,000 customers.

Today, AEP also announced it signed an agreement to sell its distributed resources business, AEP OnSite Partners. AEP expects to net approximately $315 million in cash after taxes and transaction fees. The sale is expected to close in the third quarter of 2024, pending regulatory approvals.

At American Electric Power, based in Columbus, Ohio, we understand that our customers and communities depend on safe, reliable and affordable power. Our nearly 17,000 employees operate and maintain more than 40,000 miles of transmission lines, the nation's largest electric transmission system, and more than 225,000 miles of distribution lines to deliver power to 5.6 million customers in 11 states. AEP also is one of the nation's largest electricity producers with approximately 29,000 megawatts of diverse generating capacity, including nearly 6,000 megawatts of renewable energy. AEP is investing $43 billion over the next five years to make the electric grid cleaner and more reliable. We are on track to reach an 80% reduction in carbon dioxide emissions from 2005 levels by 2030 and have a goal to achieve net zero by 2045. AEP is recognized consistently for its focus on sustainability, community engagement and inclusion. AEP's family of companies includes utilities AEP Ohio, AEP Texas, Appalachian Power (in Virginia and West Virginia), AEP Appalachian Power (in Tennessee), Indiana Michigan Power, Kentucky Power, Public Service Company of Oklahoma, and Southwestern Electric Power Company (in Arkansas, Louisiana, east Texas and the Texas Panhandle). AEP also owns AEP Energy, which provides innovative competitive energy solutions nationwide. For more information, visit aep.com.

This report made by American Electric Power and its Registrant Subsidiaries contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934. Although AEP and each of its Registrant Subsidiaries believe that their expectations are based on reasonable assumptions, any such statements may be influenced by factors that could cause actual outcomes and results to be materially different from those projected. Among the factors that could cause actual results to differ materially from those in the forward-looking statements are: changes in economic conditions, electric market demand and demographic patterns in AEP service territories; the economic impact of increased global trade tensions including the conflicts in Ukraine and the Middle East, and the adoption or expansion of economic sanctions or trade restrictions; inflationary or deflationary interest rate trends; volatility and disruptions in the financial markets precipitated by any cause, including failure to make progress on federal budget or debt ceiling matters, particularly developments affecting the availability or cost of capital to finance new capital projects and refinance existing debt; the availability and cost of funds to finance working capital and capital needs, particularly if expected sources of capital such as proceeds from the sale of assets, subsidiaries and tax credits, and anticipated securitizations, do not materialize or do not materialize at the level anticipated, and during periods when the time lag between incurring costs and recovery is long and the costs are material; decreased demand for electricity; weather conditions, including storms and drought conditions, and AEP's ability to recover significant storm restoration costs; limitations or restrictions on the amounts and types of insurance available to cover losses that might arise in connection with natural disasters or operations; the cost of fuel and its transportation, the creditworthiness and performance of fuel suppliers and transporters and the cost of storing and disposing of used fuel, including coal ash and spent nuclear fuel; the availability of fuel and necessary generation capacity and the performance of generation plants; AEP's ability to recover fuel and other energy costs through regulated or competitive electric rates; the ability to transition from fossil generation and the ability to build or acquire renewable generation, transmission lines and facilities (including the ability to obtain any necessary regulatory approvals and permits) when needed at acceptable prices and terms, including favorable tax treatment, and to recover those costs; the impact of pandemics and any associated disruption of AEP's business operations due to impacts on economic or market conditions, costs of compliance with potential government regulations, electricity usage, supply chain issues, customers, service providers, vendors and suppliers; new legislation, litigation and government regulation, including changes to tax laws and regulations, 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 that could impact the continued operation, cost recovery, and/or profitability of generation plants and related assets; the impact of federal tax legislation on results of operations, financial condition, cash flows or credit ratings; the risks associated with fuels used before, during and after the generation of electricity and the byproducts and wastes of such fuels, including coal ash and spent nuclear fuel; timing and resolution of pending and future rate cases, negotiations and other regulatory decisions, including rate or other recovery of new investments in generation, distribution and transmission service and environmental compliance; resolution of litigation or regulatory proceedings or investigations; AEP's ability to efficiently manage operation and maintenance costs; prices and demand for power generated and sold at wholesale; changes in technology, particularly with respect to energy storage and new, developing, alternative or distributed sources of generation; AEP's ability to recover through rates any remaining unrecovered investment in generation units that may be retired before the end of their previously projected useful lives; volatility and changes in markets for coal and other energy-related commodities, particularly changes in the price of natural gas; the impact of changing expectations and demands of customers, regulators, investors and stakeholders, including focus on environmental, social and governance concerns; changes in utility regulation and the allocation of costs within regional transmission organizations, including ERCOT, PJM and SPP; changes in the creditworthiness of the counterparties with contractual arrangements, including participants in the energy trading market; actions of rating agencies, including changes in the ratings of debt; the impact of volatility in the capital markets on the value of the investments held by AEP's pension, other postretirement benefit plans, captive insurance entity and nuclear decommissioning trust and the impact of such volatility on future funding requirements; accounting standards periodically issued by accounting standard-setting bodies; other risks and unforeseen events, including wars and military conflicts, the effects of terrorism (including increased security costs), embargoes, wildfires, cyber security threats and other catastrophic events; and the ability to attract and retain the requisite work force and key personnel.

 

View original content to download multimedia:https://www.prnewswire.com/news-releases/aep-retains-aep-energy-reaffirms-2024-earnings-guidance-302143911.html

SOURCE American Electric Power

FAQ

What is AEP's 2024 earnings guidance?

AEP's 2024 operating earnings guidance is reaffirmed at $5.53 to $5.73 per share.

What is AEP's long-term growth rate?

AEP projects a long-term growth rate of 6% to 7%.

When will AEP sell AEP OnSite Partners?

The sale of AEP OnSite Partners is expected to close in the third quarter of 2024, pending regulatory approvals.

How much does AEP expect to net from the sale of AEP OnSite Partners?

AEP expects to net approximately $315 million in cash after taxes and transaction fees.

What are AEP's environmental goals?

AEP aims to reduce carbon emissions by 80% from 2005 levels by 2030 and achieve net zero by 2045.

How much is AEP investing to improve the electric grid?

AEP is investing $43 billion over the next five years to make the electric grid cleaner and more reliable.