American Electric Power Co., Inc. (NYSE:AEP) Q2 2019 Earnings Conference Call Transcript

Jul 25, 2019 • 09:00 am ET

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American Electric Power Co., Inc. (NYSE:AEP) Q2 2019 Earnings Conference Call Transcript

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Presentation
Executive
Nicholas K. Akins

you go quarter with financial operating performance consistent with our expectations.

So, no surprise there, and we continue to confirm our operating guidance for the year of $4 per share to $4.20 per share for the year and our long-term 5% to 7% growth rate. And of course, our Board earlier this year approved the second quarter dividend, consistent with our financial plan which Brian will also cover in more detail.

While the financials for the quarter met our expectations, there were some important catalysts for future growth that developed during the quarter. I'll continue by covering those as well as other highlights and topics for the quarter that we believe you might all be interested in. First, we made several wins of resource filings in Arkansas, Louisiana, Texas and Oklahoma in our SWEPCo and PSO operating companies, consistent with our integrated resource plan expectations.

SWEPCo and PSO were seeking regulatory approvals to acquire three wind generation facilities currently under development in North Central Oklahoma that total 1,485 megawatts, hence the name, North Central Wind initiative.

These projects are being developed by Invenergy and will be acquired on a fixed price turnkey basis at COD. If approved, 200 megawatts will be acquired by the end of 2020 with the balance being acquired at the end of 2021. This $2 billion investment, regulated investment opportunity represents a unique win-win for customers and shareholders.

The investment is expected to both lower customer rates, and provide a long-term earnings opportunity for shareholders. Customer benefits totaled approximately $3 billion nominal net of cost over the 30-year life of the facilities. The investments produced near-term customer savings and positive customer benefits under a wide array of Power, Natural Gas and production sensitivities.

We are seeking timely regulatory approvals in each state in order to take advantage of the expiring federal PTC. The net value of the PTC is accrued to our customer's total approximately at $1.4 billion and offset nearly 70% of the total capital investment over the first ten years of the project.

The acquisition can be scaled, subject to commercial limitations to along with individual state resource needs and approvals. We have the ability to take a minimum of 810 megawatts and that provided states the ability to take more megawatts in another state or states reject our applications and we have designed enough flexibility into our applications to move forward under scenarios where only one, two, three or four states approve.

These highly efficient 44% capacity factor wind investments will serve to further diversify our generation fuel mix and act as a valuable fuel price hedge for our customers over the long term.

You might wonder why we didn't acquire for the full 2,200 megawatts with our SWEPCP and PSO integrated resource plans proposed. Because these projects were competitively bid, we recognized a clear break point between the winning three projects that happen to be Invenergy projects, who we have worked with in the past and others from a pricing perspective.

We