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At more than 40,000 miles long, the Columbus, Ohio-based company's electricity transmission system is the nation's largest. AEP supplies power to about 5.5 million customers in 11 states.

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F500 2021-204-American Electric Power

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American Electric Power (AEP) is one of the largest investor-owned electric utility holding companies in the U.S., engaged in the generation, transmission, and distribution of electricity for retail and wholesale customers through multiple operating segments. The company operates an extensive infrastructure, including approximately 225,000 circuit miles of distribution lines and 40,000 miles of transmission lines, and maintains a diverse generation portfolio spanning coal, natural gas, nuclear, hydropower, solar, wind, and battery storage. AEP is executing a five-year, $54 billion capital investment plan focused on expanding and modernizing the power grid, supporting over 20 gigawatts of new power demand expected by the end of the decade.

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American Electric Power (AEP): Company Profile, Stock Price, News, Rankings

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American Electric Power

american electric power

and thank you for standing by. My name is Regina, and I will be your conference operator today. At this time, I would like to welcome everyone to the American Electric Power First Quarter twenty twenty five Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session.

I would now like to turn the conference over to Darcy Reiss, Vice President of Investor Relations. Please go ahead.

Good morning, and welcome to American Electric Power's first quarter twenty twenty five earnings call. A live webcast of this teleconference and slide presentation are available on our website under the Events and Presentations section. Joining me today are Bill Furman, President and Chief Executive Officer and Trevor Mihalik, Executive Vice President and Chief Financial Officer. In addition,

our management team in the room to answer questions if needed, including Kate Surgis, Senior Vice President and Chief Accounting Officer. We will be making forward looking statements during the call. Actual results may differ materially from those projected in any forward looking statement we make today. Factors that could cause our actual results to differ materially are discussed in the company's most recent SEC filings. Please refer to the presentation slides that accompany this call for reconciliation to GAAP measures.

We will take your questions following opening remarks. With that, please turn to Slide four, and let me hand the call over to Bill.

Thank you, Darcy, and good morning, everyone. Welcome to American Electric Power's first quarter twenty twenty five earnings call. We are off to an exceptional start to the year where we delivered strong results and have advanced our long term strategy to drive robust growth, enhance the customer experience, and achieve positive regulatory outcomes. We remain committed to investing $54,000,000,000 of capital over the next five years, an impressive amount close in size to our current market capitalization to meet the needs of 5,600,000 customers across 11 states. We are actively managing our supply chain to ensure we deliver on our commitments.

Specifically related to current planned tariffs, we estimate that the direct tariff exposure on our $54,000,000,000 base capital plan for 2025 to 2029 is minimal at approximately 0.3%. We have a sizable generation portfolio and one of the largest transmission and distribution businesses in the nation. In fact, AEP owns and operates more seven sixty five kV transmission lines than all other utilities in The United States combined, and we were recently awarded construction to build one of the first seven sixty five kV lines in Texas. We are enabling extraordinary economic development in high growth states like Indiana, Ohio, Oklahoma, and Texas and stand to benefit from these once in a lifetime opportunities presented by the associated load growth. Trevor will go into this in more detail shortly.

Our story continues to be one of consistency and commitment to delivering for our customers, states, regulators, and investors as we center on execution and accountability, and we offer a compelling value proposition to our investors as we target 10% to 12% total annual shareholder return. We have a lot of exciting ground to cover today. I'll begin with a recap of our financial results at a high level before turning to strategic growth opportunities ahead and our recent regulatory and legislative successes. I'll then hand the call over to Trevor to walk through our financial results in more detail. Please refer to today's presentation for our quarterly business highlights and achievements starting on Slide five.

This morning, we announced first quarter twenty twenty five operating earnings of $1.54 per share or $823,000,000 With this strong performance, we are reaffirming our 2025 operating earnings guidance range of $5.75 to $5.95 per share and long term operating earnings growth rate of 6% to 8%. This guidance is reinforced by a balanced and flexible $54,000,000,000 5 year capital plan with the potential for incremental investments of up to $10,000,000,000 over that same period. As we have communicated in the past, maintaining a strong balance sheet is vital to funding these capital spending needs. Later in the call, we'll go into more detail about AEP's commitment to credit quality and proactive actions we have taken in the first three months of twenty twenty five to address AEP's equity needs. As we move forward, we will remain disciplined in sourcing efficient forms of capital to manage our needs in support of incremental investment opportunities.

We remain excited about the significant growth opportunities ahead, including the load growth in many parts of our service territory. This growth is not a show me story. It is happening. AEP's total retail load growth has already been favorable over the past few years, primarily driven by commercial customers. In the first quarter of twenty twenty five, our commercial load grew 12.3% compared to the first quarter of last year.

As we look ahead, AEP is extremely well positioned to participate in future growth across our footprint. We see opportunities to invest in critically needed infrastructure to support increasing electric demand. Our current capital plan includes customer commitments for over 20 gigawatts of incremental load by 02/1930, driven by data center demand, reshoring, manufacturing, and continued economic development. This incremental 20 gigawatts is about a 55% increase over 2024 system wide summer peak load. As we have consistently said, we are absolutely committed to fair cost allocation associated with this large load growth.

To that end, we proactively filed the data center tariff modifications in Indiana, Kentucky, Virginia, and West Virginia. In the first quarter, we received commission approvals in Indiana, Kentucky, and West Virginia related to large load tariffs. The data center tariff hearing in Ohio also concluded in January, and we expect to have a commission decision in the second half of this year. These are all strong indications of our state's continuing commitment to attracting large loads with their economic impacts on local communities while also protecting our existing customer base. As we have previously discussed, meeting this incredible demand could require incremental investments of up to $10,000,000,000 underpinned by four major drivers, large load in some of our bigger service territories, continued economic development in our states, investment across the system in our transmission and distribution infrastructure, and new generation.

One of the reasons we are seeing such growth now is due to investments we made over the past decade to build an advanced 40,000 mile transmission system that can help support current large loads. Our transmission system also includes the nation's largest network of seven sixty five and three forty five kV lines. These ultra high voltage lines position us exceedingly well in attracting hyperscalers to our system who need consistent, large load, full power. We also continue to invest in our distribution system, which is one of the nation's largest at approximately 225,000 miles. This includes work to harden infrastructure, build or rebuild poles, conductors, transformers, and other assets as well as deploy automated technologies for enhanced operational performance.

These efforts will help to increase customer satisfaction, strengthen our systems resilience to weather events, and enhance the efficiency of our operations. As our generation needs increase to meet growing demand, we are engaging with key stakeholders and making thoughtful investments in new generation to align with their needs and state policies. Our team has worked diligently to develop creative energy solutions that keep our customers' needs top of mind. We have already shared our plans to begin the early site permit process in Indiana and Virginia for small modular reactors or SMRs that can generate clean, reliable energy to support significant load growth in our service territory. And we recently filed integrated resource plans or IRPs in both Arkansas and Indiana.

These IRPs, in addition to other planned IRP filings over the next year in Kentucky, Michigan, Virginia, and West Virginia, will help meet our customers' energy needs and support AEP's generating capacity obligations, reinforcing our incredible growth. The fact is that demand for power is growing at a pace not seen in decades, and our expansive footprint enables us to significantly participate in this electric infrastructure super cycle. Now let's pivot to some traditional regulatory and legislative updates. In my nine months here at AP, I have been actively engaged with stakeholders to underscore the importance of our customers and communities and how we work to meet their needs. Building on our meaningful progress in achieving positive regulatory developments in the second half of twenty twenty four, we're off to a great start in 2025 with approximately 80% of our rate related revenue already secured for this year.

In fact, ADP's first quarter earned ROE for our rate related businesses was 9.3%, up from 9.05% at year end. As a reminder, some recent regulatory successes include a recent commission decision approving construction in ERCOT's Permian Basin for one of the first seven sixty five kV transmission lines in Texas, opening up tremendous investment opportunities for AEP Texas PJM transmission system upgrades awarded to AEP affiliates, including TransSource Energy and our transmission companies. System resiliency plans approved at AEP Texas and the unanimous settlement reached at Swepto, Texas. Base cases approved in Oklahoma and Virginia and recovery of annual transmission expense approved in Kentucky. In late March, we also filed a new base case in Arkansas requesting a rate increase of $114,000,000 This ask is primarily to align regulatory recovery of certain wind projects, including rate implementation of the diversion and wagon wheel projects.

Our application includes an ROE request of 10.9%, and SWEPCO anticipates an order and new rates effective in the first quarter of twenty twenty six. Previously, APCO filed its base case in West Virginia while offering securitization of up to $2,400,000,000 as a tool to mitigate the bill impact of a proposed $250,000,000 base rate increase. The procedural schedule just kicked off last month with intervenor testimony and rebuttal testimony will follow later this month. The hearing is set to start in mid June. We look forward to working with everyone in this case to achieve a positive and balanced outcome later this year.

We are intently focused on reducing regulatory lag and have made a number of other timely filings so far in 2025, including the AEP Texas, TCAS, and DCRF by annual filings as well as Webco's annual formula rate plan in Louisiana. For INM, the team recently filed to acquire an 870 megawatt natural gas plant in 2026, which is located in Oregon, Ohio. That will help I and m customers continue to benefit from reliable and affordable resources. We are also working diligently at the legislative level in a number of jurisdictions to advance policy changes to improve both recovery and customer affordability. For example, in Ohio, the recent passage of House Bill 15 positively results in multiyear forward looking test years for future rate cases and includes grandfathering language for two behind the meter fuel cell contracts.

Trevor will go into further detail on the OPEC related impacts. And in Virginia, we supported securitization legislation that will both reduce customer bills and support critical investments in the system. You can expect to see us continue to work with federal policymakers, regulators, and state legislators as we further modernize our energy grid. We firmly believe that the best way to create value for investors is by delivering safe, affordable, and reliable energy to our customers and communities, and we are engaging with stakeholders to support efforts to do just that. I'm increasingly confident in our exciting growth potential as opportunities to benefit our customers, communities, and investors come into focus, And I look forward to building on our track record of value creation in the months and years ahead.

With that, I'll turn it over to Trevor who will walk us through AEP's first quarter performance drivers and other financial information.

Thank you, Bill. Today, I'll review our financial results for the first quarter, build on Bill's remarks about our exceptional loan growth, comment on our credit metrics, further discuss the recent successful $2,300,000,000 forward equity issuance that completes our anticipated equity needs through 2029 and address our thoughts on federal tax legislation. Let's go to Slide seven, which shows the comparison of GAAP to operating earnings for the quarter. GAAP earnings for the first quarter were $1.5 per share compared to $1.91 per share in 2024. There is a detailed reconciliation of GAAP to operating earnings for the quarter on Slide 26 of today's presentation.

In the quarter, due to the passage of Ohio House Bill 15, we recorded a charge of $28,000,000 related to the write off of previously deferred OPEC costs, which we no longer believe are probable of recovery. From an operating earnings perspective and effective upon becoming law this summer, House Bill 15 removes AEP Ohio's ability to recover losses or record gains from the sale of OVEC Power. Historical losses recovered from customers were approximately $40,000,000 in 2024. However, we expect the earnings impact going forward to be significantly muted given upcoming capacity prices in PJM. Prospectively, the impact is manageable and less than $10,000,000 of earnings on an annualized basis.

Let's walk through our quarterly operating earnings performance by segment on slide eight. Operating earnings for the first quarter totaled $1.54 per share compared to $1.27 per share in 2024. This was an increase of $0.27 per share or about 20% quarter over quarter, highlighting a strong start to the year and creating solid momentum for the rest of 2025. I would note that weather accounted for about 18¢ of the quarter over quarter variance. This was driven by the cold weather that most of our service areas experienced in the first quarter of this year, which was contrasted with the exceptionally mild weather seen in the same period of 2024.

Looking at the drivers by segments, operating earnings for the vertically integrated utilities were $0.66 per share, up $09 from a year earlier. Positive drivers included favorable changes in weather and rate changes across multiple jurisdictions. The transmission and distribution utilities segment earned $0.36 per share, up $07 from last year. Favorable drivers in this segment included rate changes driven by rider recovery of distribution investments in Ohio and the base rate case in Texas, favorable weather and higher transmission revenue. The AEP transmission holdco segments contributed $0.44 per share, up $04 from last year.

Our continued investment in transmission assets as new loads are added to our system remain the key driver in this segment. Generation and marketing produced $0.14 per share, up $02 from last year. Favorable retail and wholesale margins were partially offset by lower distributed generation margins due to the sale of the on-site partners business in September of twenty twenty four. Finally, corporate and other saw a benefit of 5¢ per share, primarily driven by the timing of income taxes, of which $03 is expected to reverse by the end of the year. Moving to slide nine.

I want to highlight the significant increases in load we continue to see across our system. As Bill mentioned, the increasing load growth coming to the system is providing the opportunity to add up to $10,000,000,000 of incremental capital over the next five years to our already sizable $54,000,000,000 plan. Since our last call, both Amazon Web Services and Google have connected hyperscale data centers to our system in Indiana, representing billions of dollars in customer investments. This comes on top of the existing data center customers in Ohio and Texas who continue to ramp up at a double digit pace. We also saw new large industrial load continue to come online in Texas across a variety of customers and industries.

All of this puts us on track to nearly triple the pace of our retail sales growth from 3% in 2024 to almost 9% in 2025. That represents the largest acceleration of load at AEP since the late nineteen sixties, a truly once in a generation opportunity. In fact, we expect that step change in growth to be maintained well into the future. Our current forecast supports annual retail load growth of between 89% through 2027. That's equivalent to roughly 52,000,000 incremental megawatt hours that we expect to serve relative to our current load of a 82,000,000 megawatt hours or nearly a 30% increase.

More than offsetting the decline in our residential sales is a massive and sustained increase in demand from our C and I customers. Based on our current contracted lows, our C and I sales mix will grow from roughly two thirds of total retail to nearly three quarters over the next several years. There is a slide in the appendix that shows a bit more detail on first quarter sales by class. Those growth rates are one of the best in the industry, and we have confidence that these lows are going to show up. We have a significant amount of demonstrated and diverse demand across our system.

But I think it's also important to highlight what that demand looks like and how we're incorporating it into our projections. You will see on slide 10 a piece of that demand through some illustrative examples of the types of projects we're adding to our system. First and foremost, let's start with a number of overall requests to connect to the system. Across our 11 state operating footprints, we currently have more than 500 existing and potential customers actively requesting to connect almost a 80 gigawatts of load to our transmission system. For context, our system wide summer peak was just under 37 gigawatts last year.

So we have nearly five times that amount active in the queue. Now, obviously, we know that not all of the requests will come online, which is why we take great care in using a probability based approach to determine the likelihood of these loads as part of our annual load forecast. So far, we've committed to adding just over 20 gigawatts onto the system over the next five years, which, in the context of our queue, is relatively conservative. Given the dynamic nature of AI driving the surge of data centers and large industrials coming online, we think it's vital to rely on demonstrated customer demand to build out our planning forecast. We believe the best mechanisms to demonstrate the demand are executed contracts backed by financial commitments, including electric service agreements or ESAs and letters of agreement or LOAs showing how firm these loads really are.

Every megawatt in the forecast you see here is supported by LOAs. In addition to LOAs and PJM, 80% of the load growth in this region is also backed by ESAs, which are take or pay contracts requiring customers to pay for power as of a certain start date irrespective of their offtake. This not only helps confirm that customers' projects are real, but also incentivizes customers to stick to the schedule, reducing the risk to our existing customers and investors from a project not coming online. This is also why we've been very active and working with our regulators to strengthen and lengthen the tariff provisions in those contracts. Our contract terms coupled with a queue that is nearly 10 times the size of our current increased load forecast gives us great confidence that this demand will show up, which in turn makes us confident in our $54,000,000,000 capital plan with incremental upside.

Should any of these projects be canceled or postponed, in addition to the protective financial provisions in the contracts, our queue means that we have other active customers to slot right into place and take up that capacity. In addition to the demonstrated demand that we're seeing across the system, it is also important to note the diversity in that demand. While data centers are driving majority of the load growth in the coming years, we are also contracted to add roughly six gigawatts of industrial load across a number of diverse industries, including steel, autos, and energy. This diversity reassures us that the demand behind our capital plan is solid and can hold up across several different economic environments, including those with tariff impacts that we may find ourselves in over the next several years. Let's move on to slide 11 to discuss AEP's liquidity and commitment to credit quality.

Recall that AEP's funding plan supporting our capital spend through 2029 originally included $5,350,000,000 sourced from equity. In January, we secured a minority equity interest investment in the Ohio and INM transcos with KKR and PSC Investments for $2,820,000,000. This deal is value accretive at 2.3 times rate base and 30.3 times price to earnings. We expect to close in the coming months, and the only remaining item outstanding is FERC approval, which we filed for on February 3. In March, we saw compelling opportunity to further derisk our funding needs through a $2,300,000,000 forward equity transaction, including the green shoe, that allowed us to capitalize on known market conditions and manage the timing of proceeds.

In combination with the expected proceeds from the minority transaction, I'm pleased that we now have completed our anticipated equity needs through 2029 associated with our $54,000,000,000 capital plan. Those two transactions are equivalent to issuing common stock at approximately $140 per share, a 25% premium to our current share price. Moving on to federal tax legislation and specific to transferability impacting FFO. We believe a complete retroactive IRA repeal is unlikely based on our many conversations with policymakers. If there is a repeal, we would expect any potential legislation to provide business certainty by protecting the qualifying tax incentives for existing projects as well as safe harbor projects currently under construction.

This would give us the ability to monetize tax credits in a timely manner and meet our financial commitments. You can see the FFO to debt metric stands at 13.2% for the twelve months ended March 31, which is a point 2% decrease from the prior quarter. However, the minority interest transaction is expected to improve near term FFO to debt by 40 to 60 basis points, which sets us up to be well above our credit threshold and puts us on a path to be in the targeted 14 to 15 FFO to debt window. Finally, let's move on to slide 12. Before we take your questions, I wanted to summarize what you heard from us today.

First, you heard that we have taken significant actions to derisk our financial plan through the highly attractive and accretive minority interest transmission transaction, which is expected to close in the coming months, coupled with a $2,300,000,000 equity offering completed in late March prior to the current market turbulence. These transactions combined complete our anticipated equity needs through 2029 to support our current $54,000,000,000 capital plan. Second, you heard that we delivered strong financial results in the first quarter, growing earnings substantially compared to last year. Positive regulatory developments have set a strong foundation and are paving the way for a successful 2025. Third, you heard about our remarkable low growth story underpinned by major economic development activities across our footprint, providing significant investment opportunities in our utilities and creating an attractive growth profile for our investors.

We highlighted the regulatory progress on retail tariffs that we've made to enable these load additions to result in a fair allocation of costs and protections for our existing customers. Fourth, you've heard about our continued focus on the execution of our unprecedented $54,000,000,000 capital plan with the potential for incremental investments of up to $10,000,000,000. In summary, our confidence in achieving our 2025 commitments remains strong, and we are reaffirming our operating earnings guidance range of $5.75 to $5.95 per share, our long term growth rate of six to 8% and targeted FFO to debt of 14% to 15%. With that, I'm going to ask the operator to open the call so we can take your questions.

Our first question will come from the line of Shar Pourreza with Guggenheim. Please go ahead.

Good morning. Oh, well, very well. Bill, just I know West Virginia is one of the first rate cases you kind of rolled up your sleeves for after that prior bad outcome, obviously predated you. I guess how are conversations going there, especially around securitization? Can you settle this before the mid June hearings?

Yes, really appreciate the question. We've been having, first of all, at a high level, really good luck with a lot of our regulatory outcomes across the system. And I'm really pleased with the work that the team has been doing to focus closer in on our local communities and our states and pushing us to do what our states want. And in the case of West Virginia, I'm excited with where we're at. The hearing is scheduled for June with the commission decision later on this year.

We've incorporated securitization as an option to enhance customer affordability. We've worked with the teams there and we believe that this offers a really significant benefit to our customers by potentially reducing the impact on their bills by almost 75%. So I think there's really some interesting opportunities here because that would essentially decrease the increase we're looking forward to around 3.8%. But ultimately, the decision rests with the commission and we look forward to working with all of the stakeholders to achieve a favorable outcome for everyone and we'll participate in discussions as they come up. But right now, overall though, I'm very, very excited with how the organization is responding in our states.

And I think as you hopefully listen to all of the positive regulatory outcomes we've had over the past few months, you'll see that we're really moving in the right direction and I'm really excited about where we're at.

Perfect. Fantastic. And then just lastly, the 20 gigawatts of load you have out there. We've seen some pullback with at least one hyperscaler in Ohio, Microsoft I think has been notable, I think in your service territory. I guess, how are conversations going with the hyperscalers more specifically?

Are you seeing any kind of sense of pullbacks? Just trying to get a sense with that customer class specifically as there seems to be some conflicting data points out there with the caveat you guys have a diversified load environment, right? But specific on hyperscalers. Thanks.

Sure. Well, of course, overall, our system demand remains really robust. And as Trevor noted, we've got over 500 existing and potential customers that are looking to connect 180 gigawatts of load on the transmission system. And so despite the fact that Microsoft made a decision to delay their projects, we've got an incredible backlog that want to come onto our system and we're very excited about working with those customers and getting them connected. I don't really see a reduction in our other load coming from data centers or hyperscalers or the industrials for that matter because we've contracted to add about six gigawatts of industrial load as well across the system and really given us a diversity that will strengthen the company overall for us going forward.

And so I think we're in a very strong position. This diversity provides confidence that the demand supporting our capital plan is really resilient and capable of enduring these various economic outcomes. So whether Microsoft is with us or not, we see really significant demand coming forward and we've got plenty of folks who want to jump in if they want to jump out.

Got it. Perfect. Fantastic guys. Congrats. See you soon.

Our next question comes from the line of Jeremy Tonet with JPMorgan. Please go ahead.

Hey, good morning. This is actually Aiden Kelly on for Jeremy. Just focusing on the low growth again. It looks like total retail sales were up around 3.2% versus the '8 point eight percent 2025 target and then also with the commercial up 12% versus 24% target. How do you reconcile like the sales trends we've seen this quarter against your 2025 forecast?

Would this imply a strong pickup later in the year? And are there any sensitivities we should think about here in general?

Yes, Aiden. Thanks for the question. This is Trevor. So I would start by saying the anticipated load growth particularly rapid 8% to 9% increase that we're seeing over the next several years does open up substantial capital investment opportunities. And we expect that to drive consistent and robust earnings growth especially in the second half of the decade.

So to your specific question, while near term earnings impacts are somewhat muted due to the general lower profit margins of the C and I customers compared to the residential customers, I would say the rapid addition of C and I load really does create additional headroom and further enhances customer affordability. Just kind of as a rule of thumb or an example, the margins from the vertically integrated residential customers are roughly five times larger than those of our data center customers. And for our T and D customers that ratio is almost eight:one. So you'll see a little bit of a decline in margins as we see some efficiencies on the residential side. But overall, this is really just a very positive growth story around C and I and what we're able to do to deploy capital over the long term.

Got it. That's helpful. Thanks, Trevor. And then just maybe switching gears to kind of the opening remarks on Ohio. Could you just walk through the puts and takes from shifting away from ESPs into MYPs?

And to what extent does this impact your regulatory strategy in the state and future rate case timing in general?

Sure. Well, HB 15 was a legislation that ultimately received approval from both chambers. It has not been sent to the governor yet. We expect that to happen really any day now. Once that happens, the governor has ten days to sign the bill and then we anticipate that the bill will become law thinking early August, which is ninety days after his approval.

My view of this legislation is that it's highly constructive. It supports capital investment growth in Ohio and really actually provides benefits to our customers. For us, the main provisions that impact our business, first and foremost, is the new legislation that ends ESP and introduces a multi year forward looking test year with a true up mechanism. So that is a significant advantage for us. It promotes timely recovery of our investments.

And then unlike other Ohio utilities, our transition from ESP five to the new construct will proceed seamlessly with no gaps in our timing. And so really looking forward to moving through that transition. It's going to be an incredible advantage for us going forward. And then the second piece was the behind the meter components of the legislation. So this legislation, again, we're happy with the outcome here.

It basically grandfathers the two projects that we had in flight with our Bloom Energy solution for the data centers that we previously have discussed. This will preserve those existing agreements and then we have basically the flexibility to deploy future fuel cell purchases to other affiliates. And so we're going to continue to offer that as an alternative in our other areas and then make sure that we deliver on our commitments to the two customers that we have in Ohio. And then the third piece of this is the OPEC issue. And I'll turn that over to Trevor to describe.

But I think overall, it's something that we'll be able to manage through. So Trevor?

Yes. Terrific. Thanks, Bill. Yes. So with regards to the OVEC situation, historically, we've indicated that ending the cost recovery would result in roughly a $40,000,000 impact and that's what it's done in years past.

Again, as we said in our prepared remarks, given the upcoming capacity prices in PJM, we expect the earnings impact to be really significantly muted to the tune of about potentially $02 or we said roughly $10,000,000 of earnings. And that's something that I think is very manageable and we can incorporate prospectively. As Bill also just mentioned here, this will probably most likely become law and take effect in mid August. And so we will get recovery up through that date. And so I think this is one of those things that is really not a huge earnings driver for us and we can deal with this going forward.

Appreciate the color. I'll leave it there. Thanks.

Our next question comes from the line of David Paz with Wolfe Research. Please go ahead.

I know you addressed this, I think, on the previous question to a certain degree, but maybe on the commercial sales, in particular, for 2025, see that they're tracking at least year over year, 12%. But you're targeting a little higher for the full year. Just are you seeing any delays whether there's a specific shaping that you may have talked about previously that's playing out in terms of just back end loaded for the year for 2025 on commercial sales?

Yes, David. So I think the good thing and we mentioned this in the prepared remarks is with the commercial load growth, what we're seeing is a lot of these counterparties are signing the LOAs and entering into firm contracts with us. And so these are again really take or pay contracts that are enabling us irrespective of what their load looks like to ensure that they are starting to pay under those contract terms. And so while the step up of 12% is really positive, we continue to see people signing these take or pay type contracts. And I think you'll continue to see additional load coming on over the next several years.

And so this is all very positive in that regard. But I wouldn't say it's shaped towards the back end or anything to that regards. I think it's really more just a steady increase in commercial load coming on that we have seen over the last several months here.

Okay. So for 2025, you still anticipate about 23%? That's right. Year end '25 versus year end '24. Okay.

And then just you you you just touched on this, the previous question on Bloom partnership. But will will there be a you know, how how should we think about the deployment versus what you have before the Ohio law? Understanding it's not, you know, the Ohio mark or AP Ohio market is is not there. But will this change any type of schedule of deployment for the remaining one gig?

Well, we're in the market to sell those to customers who are interested in this technology. It will not affect at all the two projects that we have in flight. Those will go forward as planned and those are well underway. So for the remaining 900 megawatts that we have available to us, we do have a number of customers that we're in conversations with and feel optimistic that there may be deals coming down the road. So we'll see where this all heads and can certainly report on this more as future calls come this year.

And let me add just one thing Bill if I could on The remaining 900 megawatts is really an option for us. We're not obligated to take those fuel cells. And so if we can find capacity and customers to take them that makes sense, we will do that. But again, we're not obligated to.

Yes. The original 100 megawatts that we did contract are taken care of.

Our next question comes from the line of Julien Dumoulin Smith with Jefferies. Please go ahead.

Hey, good morning team. Thank you guys very much. Appreciate it. Nicely done here. Just wanted to follow-up on the $10,000,000,000 upside number here.

I just wanted to understand a little bit of what's already approved here. What do you have line of sight even within that $10,000,000,000 bucket? It seems like there could be some various pieces there. And then also, what are you waiting for in terms of line of sight to to formally introduce that? As you say, it's within the five year program.

You comment several different times about this being tied to the load growth and and the relative degree of confidence you have on

the load growth. So effectively, what are

What are the sub pieces there that would enable you the confidence to more formally integrate them in the plan?

Yes. Julien, it's Trevor. Appreciate the question. I would say what we're really doing is we're setting the cadence where we want to come out with a formal growth plan on an annual basis and we'll generally do that around call the third quarter call right before we go into EEI. Unless there's something material that would increase that $10,000,000,000 plan or $10,000,000,000 potential upside to the $54,000,000,000 plan.

That being said, I think it's important to note that the recently awarded seven sixty five transmission lines for example in Texas, that's roughly 1,000,000,000 to $2,000,000,000 that's not in the current plan. And so as things firm up, we will continue to look at how we manage the overall portfolio spend relative to what our customers' needs and what the states want. And that will impact a large part of what that $10,000,000,000 looks like. I think roughly if you wanted to kind of take a look at that £10,000,000,000 we've said publicly that roughly about half of that £10,000,000,000 relates to transmission and the remaining is a majority of that is generation projects in the various service territories as we file and look at the various capacity and needs in the state. But again, we have great opportunities not only in ERCOT, we also have opportunities in PJM.

And we continue to flesh those out and we'll come with more definitive answers when we roll out our revised five year capital plan in the third quarter.

Got it. Okay. Fair enough. And is it maybe just to to elaborate a little bit further. What what is in that five billion generation bucket?

Can can you speak a little bit to, you know, how you think about that versus the load growth numbers that you have? Is it Is just about getting line of sight on RFPs coming out of anticipated load growth? Is there something further within that here?

No. It's largely what you just said there. It's the RFPs. It's also looking at potential wind projects or other renewable projects in various states. It's also related to potentially some combined cycles as we look at what the overall capacity needs are and the generation needs are in our service territory.

So these are items that we have a line of sight to, but we have not firmly committed to yet.

Actually, just to clarify, you've got two acquisitions out there, one potentially in Oklahoma and one in, Indiana or Ohio specifically. Those are included in the plan, and and you intend to move forward with those?

That's right. That's that's correct. Those were items that were included and we do have the needs in those states for that generation. And so those are in there. Thanks.

American Electric Power (AEP) Q1 2025 Earnings Call Transcript

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