Q4 2020 American Electric Power Company Inc Earnings Call
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Ladies and gentlemen, and thank you for standing by and welcome to the American Electric power of fourth quarter, 'twenty and 'twenty earnings call.
At this time of all lines are in a listen only mode. Later, we will conduct the question and answer session and instructions will be given to you at that time.
If you need assistance during the call Press Star and then zero and an upgrade of Willis issue offline.
And as a reminder, today's conference call is being recorded.
I would now like to turn the conference over to Darcy Reese. Please go ahead.
Thank you Cynthia good morning, everyone and welcome to the fourth quarter 'twenty and 'twenty earnings call for American Electric power. We appreciate your taking time today to join US our earnings release presentation slides and related financial information are available on our website and E. P Dot com.
Today, we will be making forward looking statements. During the call. There are many factors that may cause future results to differ materially from these statements. Please refer to our SEC filings for a discussion of these factors. Joining me. This morning for opening remarks are Nick Akins, Our chairman President and Chief Executive Officer, as well as Julie slowed our Chief Financial Officer.
We will take your questions. Following the remarks, I will now turn the call over to Nick.
Good Thanks, Dorothy and Dorothy says happy birthday, Betty Jo Rozsa this one's for you.
Welcome everyone to the American electric Power's fourth quarter, 'twenty and 'twenty earnings call.
'twenty 'twenty was a year of tremendous challenges the likes of which we have never seen and it appears that 'twenty 'twenty. One has thus far had its own set of challenges.
Hearts go out to everyone that has been and are impacted by the ongoing challenges of Covid and all of the customers impacted by the severe cold and ice conditions. The precipitated significant the outages from Texas to the West, Virginia, and beyond and there'll be plenty of opportunities to do a postmortem of the conditions that led to these day outages and the address changes to help.
To ensure these kinds of events do not occur again, but as of as of now getting customers back and some some return to normalcy is paramount and everyone's mind.
I'll discuss these issues a little later, but I want to tell you in the midst of significant challenges come tremendous accomplishment that make us even stronger for the future and AEP has once again delivered.
The fourth quarter further illustrating the resiliency of AEP and its employees to deliver and exceed expectations and ensuring the consistent quality of earnings and dividend growth that you would expect from a premium regulated utility Aep's operating earnings for the quarter came in at 87 cents a share ending the year at $4 44 per share, which is the top of the opera.
The earnings range that we projected for 'twenty, and 'twenty and excellent outcome buoyed by our employees aggressive moves to control costs during the COVID-19.
The downturn of the economy, the arbitrage of residential to industrial and commercial loads that we discussed in previous earnings calls and certain tax and investment related outcomes that went our way along with positive regulatory outcomes and several of our cases that concluded in 'twenty and 'twenty.
Harvard reduction efforts to technology innovations, the just transition related aspects of the complex path before us as we require substantial stakeholder engagement as we go along.
Like all of these commercials, but wait there's more and as I mentioned to you and the last earnings call. We were of finding are integrated resource plan and recommendations for all of our operating jurisdictions, which will roll out at our next first quarter of 21 earnings call or before just a brief teaser on the future plans, we are proposing up to 3300 megawatts of new.
Renewable energy to serve swept go customers to be delivered and the 2025 to 2028 timeframe.
We will give further updates on this as I said by next quarter's earnings call.
He has a lot of work to do the manage regulatory and project related activities as well as the natural activities and the respectful to our balance sheet and credit matrix.
I'm reminded of one of my favorite movies, Gladiator, and which Maximus Decimus radio says the time per half measures and talk or over it is time for serious execution by a P. The transform ourselves to embrace or a clean energy future on behalf and for our customers and communities. Additionally, we will actively manage our portfolio of add.
And companies to enable this movement, while ensuring our balance sheet and credit metric strength as we defined this path forward. This execution has been recently evidenced by our sale of the Racine Hydro plant. This form of asset optimization will continue as we focus on our core of growth opportunities.
Moving onto our economy and load the AP load forecast is up considering the recent improvement and our commercial and industrial loads still trailing pre COVID-19 levels, but improving we are optimistic about the recovery and both of our service territory and with load during 2021 modest overall growth should occur led by industrials and of folk.
All of the infrastructure of by the administration and and developing the hardening and resiliency related investments such as pop lines natural gas distribution and the other infrastructure of particularly after the winter weather events.
And you'll be covering load related topics and more detail and a couple of minutes.
Ah right case activity across our jurisdictions continues to be robust and Virginia, Appalachian power received and order and it's Virginia triangle rate case on November 24th 2020.
We were extremely disappointed and the commission's finding the NAPCO finished the triangle with the earnings and within the earnings ban and therefore was not entitled to of rate increase. This result, hinged on the commission's determination that atco should of amortize the the disposition of certain coal plant balances over 10 years, starting in June 20.
15 versus and peering the assets and 2019, which we believe was consistent with state law. The company believe the commission erred and this determination and as a result of immediately salt both rehearing and appeal the decision to the Virginia Supreme Court some more to come on that a P. Ohio, followed his base rate case and June.
And of 2020, and the parties of been engaged and ongoing settlement discussions and we'll update the commission on or before of March 4th as the weather. A settlement was reached if not the commission will proceed with the full hearing, but I will say that the settlement discussions continue to be positive and constructive.
And Kentucky The commission issue the constructive order on January 13th of ordering the company of net revenue increase of $52 million out of it 65 million request with a non 0.3 per cent of row and modify the transmission tracker from 80 per cent to 100 per cent.
And are swept co jurisdictions, we have rate cases, pending and Louisiana and Texas swept code of follow this Texas case and October seeking of net revenue increase of $73 million and row of 10.35% of the following included investments made from February 2018 accelerated depreciation for three coal plants and and and.
Kris and storm reserves and vegetation management hearings are scheduled for the end of May with the final order expected at the end of October and Louisiana, and the company followed the space right case on December 18th seeking of 10.35 per cent of row, and net revenue increase of 93 million.
A little over a month and of the year and we've experienced the ice storms and the eastern wreck and record cold temperatures and the west our Abco and Kentucky territory and sustained significant ice and tree damage to our transmission and distribution system of back to back storms, our team's along with significant support from our operating companies and mutual assistance teams.
Have made headway on restoring service true are impacted communities, we intend to file for the appropriate regulatory recovery as we have with other major storms.
The tragedy of them full of in Texas and important one for me the address first and foremost again, our thoughts and prayers go out to the people of Texas, and particularly to those families and communities, who lost family members of our experienced loss and damage as a result of the polar vortex and then go off the state.
As you know or a P. Texas affiliate provides energy delivery services to a little over 1 million customers of the state the unprecedented weather conditions required or of caught to direct a P and others to immediately curtail load and to operate and an emergency condition to maintain the stability and integrity of the Texas grid. During this event.
Our focus centered on the responding to the directors of from our caught to ensure that the flow of available power continued throughout this crisis. We also worked with our communities to identify critical owes such as hospitals and other first responder resources and and effort to mitigate the impact of key resources within our communities throughout this emergency.
I could not have been more proud of our team's response and dealing with the situation that confronted them. This event serves as of sober reminder, as to the critical nature of our nation's energy supply and maintaining and supporting not only our economy, but also of our fundamental way of life as of T and D utility with cost base rates and the <unk> portion of Texas.
Our AEP, Texas subsidiary is not a generator nor is it a retail electric provider. So we expect minimal if any financial impact from the <unk>, Texas weather events or a P wind assets and or of caught began to experience outages on February 10th and started returning the service on February 19th we expect the all three.
And for them to be returned to fully of full availability. Soon we have no financial exposure from our hedges, which are all based upon the unit contingent performance also financial performance related the wholesale load, Sir Bye AEP energy partners and ERCOT is not material.
And the S. P. P. We also experience minimal load-shedding events, but fuel costs were substantially hard during this event and as you know we were kind of a few of through our fuel clauses as of pass through that being said and the swept co and P. S. O jurisdictions, we will work with the various state commissions on any alternative fuel recovery mechanisms the less.
And the impacts to our customers much like we do with the major storm costs, but most of the but we have to be respectful of the cash flow metrics and the capital structure of of the company going forward. So certainly away. The average cost of capital is extremely important from that perspective. These events along with others around the country of indicator of the need for specific policy.
<unk> the focus on further refinements and reliability and resiliency of of the grid.
Specifically, we would encourage more robust reliability assessments across electric gas and the other critical infrastructure classes determined where interdependencies of exist and market designs that promote adequate capacity levels and the increase generation reserve margins the provider sufficient safety net during the emergency situations and.
In addition to counteract the frequency of intensity and the impact of storms, we need to ensure of higher level of system resilience by implementing transmission planning and interconnection reforms to enable regions to lean on each other during times of crisis as well as winter relation requirements for power plants natural gas delivery systems and critical infrastructure.
I actually and 2014 testified before the Senate and energy commodity regarding some of these recommendations after the pull of vortex of hit the P. J M territories, all stakeholders must do better to address the issues that led us of these failures the of impact of so many customers at the worst possible time, whether it's when.
<unk> and summer weather event reliability or the speed at which the clean energy future can occur a P stands ready to be an active participant and resolving these issues both from the state and National perspective, We will also remain active on the other significant issues impacting our society from Rachel and Justice to Covid related.
Safety as we strive to advance and a positive way the communities that we are so fortunate to serve.
And so now all moved to the equalizer chart.
And that's the I think the second page of of the handout.
And I'll go through that sort of overall Roy is non 0.1% across the board, we generally target the row for a regulated segments goodbye and to be and the non and and have the 10 per cent range, but as you see the roe's below or not weather normalized and keep in mind that we're also thickening the equity layers as we go along as well.
And you'll also note and the table.
At least the indication of the size of the bubbles that you see a P transmission Holdco is now our largest company based on the average equity followed by Abco with a P, Texas, a and M. A P, Ohio and swept co being comparable to each other.
So first with AP, Ohio, the the R. R O for AP, Ohio at the end of the fourth quarter was 10.7 per cent a.
Oh, How's Roy was above authorized primarily do the favorable regulatory items, partially offset by the roll off of the legacy fuel and capacity carrying charge recoveries that we discussed in the past we expect the row the trend around the authorized levels of 10% as we maintain concurrent capital recovery of distribution and transmission of investment.
And June 2020, as I said earlier, a P O, Ohio, followed the base case, and and certainly will see and outcome of that pretty soon.
[noise] Abco.
The row for Atco at the end of the fourth quarter was 8.6%. It's all Roy was below authorized you to lower normalised usage, and how our amortization and depreciation from increased Virginia depreciation rates increased capital investments, partially offset bow and the lower O&M expenses and and of course, we already talked about the Virginia.
Try annual review.
Abco did subsequently file a petition for reconsideration with the commission, which was granted and December 2020, and the result and suspension of that final order at this point.
As far as Kentucky's concern we ended the fourth quarter at 5.5 per cent.
Roy the row and he was below authorized do till also load from weak economic conditions and loss of major customers along with higher expenses transmission revenues were also lower due to the delay of some capital projects and of course, you knew we follow the the base rate case, there. So we fully expect that all row to improve after the the.
Right case the outcome.
And EM.
It's all Roy is 11.4% items row. He was above authorized to use the continued management of of O&M expenses reduce the interest expense and rates true ups, partially offset by lower commercial and industrial sales and M. As projecting the trend below 10% consistent with the authorized row.
He's of non 0.86% of in Michigan, and non 0.7 per cent and.
And Indiana P.
So.
There is non non percent.
Roy was below it's authorized level of primarily do the lower normalised usage and unfavorable weather and 2020, partially offset by continued management of O&M expenses and Ps's 2019 base case approved the transmission tracker, the partial distribution tracker and and Roy of non 0.4%.
So it was 2019 base case settlement also required Volleying of case no later than October of 2021.
And some more to come on that swept co. The row for sweat co at the end of the fourth quarter was seven five per cent of Roy was below authorized due to the loss of load and the continued impact of the Arkansas share of Turk, which we've discussed several times that equates to about 110 basis points disc out associated with her.
Work and then and October 2020 is you know I've already talked about this followed the Texas case and then we recently with all of the Louisiana case as well so more to kind of on that one AP, Texas.
The row is 7.9% of at the end of the fourth quarter is below authorized use of lag associated with the timing of annual cost recovery filings and the one time adjustments from our finalize base rate case earlier and 2020 favorable regulatory treatment allows AEP, Texas to file annual D. C. R F and biannual T cost followings to recover.
The cost of the capital investment and had the wait till after the rate case the to follow those while the exception is is for the row the trend towards and the authorized row of non 0.4% and the longer term continued significant levels of investment in Texas will of.
And will continue the impact the row.
Avi transmission Holdco game.
Came and it fourthquarter at 9.9% it was blow authorized primarily driven by the annual revenue true up and the second quarter of 2022 return of the over collection of 2019 revenues and then transmission is forecasting there are all ready to be in the mid 10% range and 2021.
So all of it all and outstanding year of both financially and operationally given the significant challenges and 2020 and and we were off to a great start and 2021, a P. As shown time and time again hour agility, and resilience and meaning our objective of consistent quality of earnings and dividends and and body of truly premium electric utility.
And as we emerge from the Covid challenge and get the economy back on track and 2021, while working on the clean energy future to paraphrase of the lyrics of Johnny Nash you passed away and 2020 I can see clearly now the range is gone and we can remove all obstacles and are way too of bright Sunshiny day.
As many of you are you know Brian Tierney has moved on to take over our focus on the corporate strategy. After serving over 11 years of CFO I want to thank him for his dedications of the company and to our Investor as well and this important role now I'll turn it over to our new C. F O who many of you already know Julie slowed she.
Which is everything with the infectious energy and focus that will take a piece of the next level, even Brian would agree with that Julie drive.
And it thank you Darcy and happy birthday, Betty jail, it's good to be with everyone. This morning, and I'm Gonna walk us through the fourth quarter results spend a little more time on the full of your financial results share some thoughts on our service territory load and economy review, our balance sheet and liquidity and then we'll finish up with our revised outlook for 2021, and so let's go to slide number.
Which shows the comparison of GAAP to operating earnings for the quarter and for the year. The date periods GAAP earnings for the fourth quarter, where 88 cents per share compared to 31 cents per share and 2019 gap GAAP earnings for the year or $4.44 per share compared to $3.89 per share and 2019 and there's a <unk>.
Conciliation of GAAP, the operating earnings on pages, 15, and 16 of the presentation today, So let's walk through our fourth quarter operating earnings performance by segment, which is laid out on slide number seven operating earnings for the fourth quarter totaled 87 cents per share compared to 60 cents per share and 2019, the detailed by segment provided and the.
[noise] box it on the chart, but to summarize the change and our collective regulated businesses was driven by lower O&M and the return on and incremental investment to serve our customers, which more than offset higher depreciation and under unfavorable weather and.
And the generation and marketing side earnings were up five cents from 2019, and this was driven by land sales and favorable effects associated with the retirement of plant and the generation business as well as higher wholesale margins low of retail margins. We're all set by the expected timing of the income taxes corporate and other was the 10 cents from last year primary.
Get a lower taxes relating to state state tax adjustments and consolidating items and investment game on a privately held investment all of which was partially offset by higher O&M.
So let's take a look at our fully get results on page number eight.
And you'll operating earnings for 2020 or $4.44 per share or $2.2 billion compared to $4.24 per share or $2.1 billion and 2019.
Looking at the drivers by segment operating earnings per vertically integrated utilities were $2.21 per share up four cents and here over here and favorable items and the segment included lower O&M the impact of right and changes across the multiple jurisdictions and higher transmission revenue primarily do the true.
Whether it was unfavorable did of warmer than normal temperatures and 2020 and of warmer summer and 2019.
Other decreases include the higher depreciation and tax expenses and lower revenue revenue items and a F E D C.
[noise] transmission and distribution distribution utilities segment earned a dollar and three cents per share up three cents from 2019 favorable drivers and the segment included higher rate changes the recovery of increased transmission investment and are caught and the impact of the Ohio transmission trip, both on O&M and transmission revenue either O&M was.
Favorable did it did a concerted effort to decrease O&M expenditures, two one time and sustainable reductions.
These items were partially offset by the 2019 reversal of of regulatory provision and Ohio and higher depreciation associated with the increased investment other other smaller drivers include the things like higher interest and tax expenses the roll off of legacy writers and Ohio Prior year, Texas carrying charges unfavorable weather and a F E D C.
The transmission and the a P transmission Holdco segment contributed a dollar three cents per share and down two cents from 2019 due to the impact of the annual of true up and prior year for settlement of fundamental return on investment growth continued isn't that plant increased by $1.3 billion or 13% since December of 2019.
[noise] generation and marketing produced 36 cents per share of six cents and you're over here the renewables business screw with asset acquisitions land sales and the other one time of items more than offset the impact of the week or wholesale prices on the generation business and lower retail margins finally.
The corporate and other without the nine cents per share driven by taxes from lower state taxes and adjustments as well as an investment game, partially offsetting these items with higher interest expense overall, we're pleased with our 2020 financial results as we landed and the upper half of our operating earnings guidance range. So, let's take a look at our normalised load for the quarter on paint and nine.
Starting and the lower right corner are fourthquarter normalize load came and two tenths of a per cent above the fourth quarter of 2019.
And with significant not only because it was the first time, we saw positive low growth since the pandemic began but it was also the strongest quarter for low growth and over two years.
From the ear ache piece of 2020 normalized load finished down 2.2 per cent compared to 2019 normalized load has continued to improve since bottoming out and the second quarter of 2020, when COVID-19 restrictions were at the highest levels of strong finish for the year and a retail low there's one of the drivers that enabled us to reach the upper and of our guidance range and <unk>.
2020, and I'll talk a little bit more about why does occur of when we get to slide 11, and what we can do some economic data of specific to our service territory, but for 2021, we're projecting two tenths of of percent growth and normalized load well this'll be and improve it from the 2.2% decline and 2020 and also shows that our service territory of gradually getting back to its normal growth.
Projector.
And the upper left quadrant are normalized residential sales increased by 5.2 per cent and the fourth quarter and and and the year up three two per cent for both of the quarter and year to date comparisons growth and residential sales of spread across every operating company.
Is it until load spiked and the second quarter of 2020, and the Covid restrictions were at the highest and people are spending the majority of of the time at home.
Looking to this year, while we expect residential sales to the claim by 1.1 per cent and 2021 as vaccinations of rolled out and and we migrate to our post pandemic lives. We are assuming of moderate sustained load the benefit from the segment given the stickiness from of from work from home relationships are arrangements for many office workers across our service territory.
Toy for the foreseeable future so.
So let's side over the commercial sales and the upper right quadrant normalized commercial sales decreased by 2.1% and the fourth quarter and finished the year down 4.2 per cent, even though of commercial sales were down across all operating companies and the quarter, we're seeing steady improvement since the pandemic began and fact the same sectors that were hardest hit by the shutdowns and the second quarter of 2020.
And the most and proof sectors and the fourth quarter, specifically the sectors included schools churches restaurants and hotels.
And the New York forward, the 2021, and we expect commercial sales to experience and modest 0.5% decline as the service territory continues to recover which is still a significant improvement from the record setting four two per cent decline and we saw in 2020, the improvement and commercial sales will likely track with vaccinations and and the service territory population acquired Additionally.
And the entity this class of.
Customers should be positioned for a strong recovery.
And the lower left chart industrial sales increased or decreased by two per cent and the quarter ending the ear down 5.7 per cent, even though industrial sales were down for the quarter and aggregate. We did have a few operating companies, namely I and M. A P, Ohio, and a P, Texas posted growth and industrial sales compared to the fourth quarter of 2019.
And.
Our projection for 2021 assumes industrial sales and will continue to recover and and the ear up 1.9%.
And slide 10, we have a little more color on the industrial recover we saw and the fourth quarter. The Blue bar show the growth and sales to our oil and gas customers led by growth and the pipeline transportation sector are total oil and gas sector sales and the fourth quarter came and 1.3 per cent of above last year and in fact, the pipeline transportation sector has been the fastest growing sector since two.
18, and the Orange by of show the growth and industrial sales, excluding oil and gas while it was still down three three per cent for the quarter you can see how dramatic the sequential improvement and has been since the second quarter the.
And the industrial sectors that are experiencing the strongest growth for the quarter were pipeline transportation and plastic and rubber manufacturing. This is mostly all set by softer demand from the oil and gas extraction mining and primary metals.
Overall, we're seeing evidence of faster recovery and the industrial sector, which supports our project and growth and industrial sales for 2021, and we anticipate improvements across the most sectors with the exception of the coal mining sector as the industry faces headwinds with the ship toward reduce carbon dioxide emissions.
So if he joined the on slide 11, and I can provide the update I mentioned, a few moments ago on the latest economic conditions within the footprint starting with the chart on the left you'll notice the a P service territory experience of 2% decline and gross regional product compared to the fourth quarter of 2019. This was 40 basis points better than the U S. A P service territory was less and pack.
By the virus and had fewer restrictions on businesses and other parts of the country, which a lot of our territory economy to fare better and the U S. Throughout the band pandemic looking.
Looking forward the AP service territory is expected to grow by 4.8 per cent in 2021 relatively consistent with the economic recovery and the U S.
Moving to employment on the right you can see that job that the job market for the a P service territory also performed better than the U S. Throughout the pandemic for the quarter employment was down for six per cent, which was 1.4% better than the U. S. This is largely the result of the mix of jobs within our local economy, which has a heavier relative concentration of manufacture.
And the government jobs and of smaller share of leisure and hospitality jobs go and.
And forward, we expect the job growth of 1.1 per cent of our service territory and 2021.
So let's swing over the page 12, and check on the companies capitalization and liquidity position or that the cap ratio increase the seven per cent and the fourth quarter to 61.8 per cent as I thought of that increased by two per cent during the quarter to 13 per cent on of Moody's basis, primarily due to changes and regulatory assets and working capital or liquidity position.
And remains strong at 2.5 billion supported by a revolving credit facility.
Like to touch based on a couple of things relating to our financing plan and we received questions from time to time on that so are our current financing plan does not include and assumption of any asset rotation I'd like to share that we do believe it is incumbent upon us to engage and analysis of any opportunity was that of our portfolio and can generate more value for another part of it and it can generate for us.
Since the the extent that we engage and such activity that would result, and the sale of and asset our business unit and the associated probe seeds with the likely supplant some of the planned equity and our debt financing and stay on page 39, and the appendix of the presentation today.
Talked about the severe winter weather, and Texas, which impacted both S. P. P and are caught I Wanna take a moment to provide some quantification exposure details since that's the top of mind for US and also for you and you know the winter storm increase the demand for natural gas and limited natural gas supply availability, resulting and unanticipated market prices for natural gas power plants to.
And eat reliability needs for the SPP electric system.
[noise] paso's preliminary estimate of natural gas costs and purchase of of purchases of electricity or approximately $825 million swept coast preliminary estimate of natural gas cost is $375 million to provide some perspective paso's annual you and purchase power costs are roughly $550 million of 600 and.
And so you get the sense of how big that is importantly, Paso and swept co have active feel causes causes that permit recovery of prudently incurred fuel and purchase power expensive. However, we would expect this recovery to likely occur over an extended period of time and effort to mitigate the impact on customer bills, which is.
And with the filing we submitted yesterday speaking of regulatory asset and mechanism to recover of the costs inclusive of PSA was weighted average cost of the capital. So we're taking this into consideration as it relates to our financing plans since the payments to suppliers are do and March on that note. We're contemplating the use of long term debt and the possibility of making funding contributions to P. S O and swept co.
From the parent company.
As far as her cut exposure goes as Nick mentioned this would be related to and a P. Texas is receipt of funds from the reps a P renewables wind generation assets and the wholesale load sort of by a pantry and partners. This exposure should not be significant.
Switching gears a qualified pension funding increased five per cent during the quarter to 101.8 per cent and are open and funding increased 24% of 169% strong equity returns and both plans where the primary driver for the funded the status increase and during the fourth quarter. The hope had planned funded the status also been of.
Weighted from lower than expected per capita and Medicare advantage rates, which reduce the liability.
So let's go to slide slide 13 to do a quick recap of where we've been and where we're going so we begin 2020 with the proven track record our earnings and 2020 I'm.
Sorry, we begin 2021 with the proven track record our earnings were strong and 2020 as we continued to invest capital and our businesses and earn of return on this investment and and in response to expect the decline and sales from the pandemic and early mild weather, we implemented O&M savings from both one time and sustainable reductions and we also got some help from favorable sales next shift.
[noise], we received the approval of of or North Central Wind project, and Oklahoma and that will be of benefit to our pizza and Slifko customers. And addition over time, we've been able to grow our dividend and lie with earnings and expect to be able to do so go and forward our dividend payout ratio is solidly within our state and target range of of 60 to 70 per cent. So as we look forward 2020, we feel confident and rainy.
The thing are operating earnings guidance range to $4.55 per share to $4.75 per share. This is up from of previously stated 2021 operating as guidance range earnings guidance range of $4.51 per share the $4.71 per share.
There's and operating earnings waterfall and page 31 of the appendix, reflecting the midpoint of this updated guidance. The primary differences from what we shared it E I relate to normalize load and whether reflecting twenty-twenty actual results as well as continued focus on sustainable O&M savings from lessons learned during the pandemic not surprisingly examples on the O&M front and.
Things like reduce non essential travel and training since we know now of great deal of this can be done very effectively and a virtual of format sustaining some of the reduction of material and supply expenses and minimizing overtime and efficiency modifications and our field true practices et cetera. Just the name of few specifically were originally forecasting out of 2021.
The untracked O&M to be $2.7 billion, but now we are forecasting this to be 2.62 billion compared to the 2.68 billion actual for 2020. So as we proceed through 2021, and we'll finalize are pending rate cases, and move forward with additional opportunities and the renewable space supporting R. E. S. G focus as we transition tour.
The clean energy future, we will continue or of disciplined approach to allocate and capital and we're confident there is significant runway and our capital programs to reaffirm our five to seven per cent growth right off the increased 2021 operating earnings guidance range. So thanks, so much for joining us for the call today with that and I'm Gonna turn it over to the operator for your questions.
Thank you and ladies and gentlemen, and if you wish to ask a question. Please pass of one and then zero on your Touchtone phone.
He of town indicated that you are and cute once again, it's one and then zero for any questions or comments.
And one moment piece of the first question.
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The the line shop hurries up with the Guggenheim Partners and your line is open.
Orange or in the morning Gosh, good morning, and the morning goes good morning, and just a couple of course, just a couple of quick question share just on the Ohio settlement and it seems like you've been kind of close to resolution for some time now where it sort of the procedures schedule being pause to make room for continued dialogue is your of sort of and it pushes and <unk>.
Takes we should be sort of thinking about at this juncture of you.
And the noise and the state and all impacting the conversations.
No the noise, the northern states and there's no impact there, we continue and discussions with the parties and if you know the the typical issues of distribution writers and and row and that kind of thing so nothing unusual and.
And and like I said I think the the the some of the discussions of going positively and the cause.
The parties continues and engage with with one another and we all know we have the March 4th and and I think that that could actually be two or three days different as well, but nevertheless ah.
And everyone's focused on getting the concluded.
Excellent and then just on and they're gonna under the risky and hide yourself, obviously put in and immaterial impact just sort of the financing plan, but it does sort of show kind of your desire to focus on the core business. So how are you sort of thinking about further asked and optimization that could potentially of.
Shed some of the equity needs related to the north central whether we're thinking about a full utility transaction within the underperforming assets for instance, or of partial sale transaction, maybe similar to the do GIC deal and he sort of you know updated thoughts here on the incremental opportunities you're seeing in the near term.
Yeah, there's a lot of creative ways, obviously and and do showed one of those but there's others as well Ah. Yes will continue to look at all of our assets actually and and as I mentioned and the call and the time per half measures and and and and talk is over so we've got to get about the process.
[noise] of ensuring that we're we're making the way to move to that clean energy future of that means we're gonna have to make sure of that were rotating capital effectively and a day.
And with assets from and optimization standpoint, and and the effective fashion going forward. So that is a prime motivation for us.
And particularly with you know of maintaining our balance sheet structure of the where it is we want to make absolutely sure that we manage this process actively and all all of those ways. So and that's why you know Brian is over and the strategy area to focus on some of these activities as well. So we will continue that approach and and and and you you'll see.
The more to come.
Got it that that's helping the the last week from me, just on 142, and and Turkey, and he's sort of additional thoughts there on the replacement of generation and potentially and what the implications could be sort of this five year capital plan you presented of this morning, and thanks, yes or either of the the 3300 megawatts. So.
As in the incremental 2400 megawatts of what we had before and and some of that is related the perky. Obviously when you talked about rock port that's still yet to come. So there's still there's still plenty of analysis of getting done of all of our operating jurisdictions and that's what I've talked about before where it will come out with with our and.
And with our plans, which will be reflected and are integrated resource plans and that would accommodate rock port and any of the other ER measures that we have and plays the mood to that cleaner and the future. So you'll see you'll see that but like I said by the time, we get to the first quarter earnings call or before.
Got it congrats and the jump back into the queue great execution. Okay. Thanks, a lot I appreciate it.
Thank you and.
The next question will come from the line of the Fleischman.
Research and your line is open.
Or and Steve.
Hey, good morning. Thanks.
So so just I.
I guess the first question in terms of the 2021 guidance increase if you go back to the segments.
The I.
And I think a lot of it is Ah and the corporate another segment could you just.
Clarify better like what's driving that.
Yeah, so and and.
2020, and 2020 of the corporate and the other investments there there were some some tax related issues around the.
The tax provisions that were put in place relative the Covid and then also there was some investment returns that we're the we're actually around we were and early investor and charge point and and and certainly we had some some opportunities there too.
<unk> by the end of the year and there were warrants that we that we held so we continue to invest in a different technologies and we have investments they've gone and positively we've had and investments they've gone and negatively and and this is this happened to be of year, where it was it was positive from the investments Dan.
Point, so, but you know from an ongoing perspective, it really is not so much driven and are there still is some some investment related activity the bleeds over into the 21, but I'd say the the story of 21.
As you know when we of November he we didn't know exactly where load was going nowhere of the economy was going we're feeling much better about that and the progress and 2021 and also are achieving excellence program. We continue to advance and a very pause away from that perspective.
So we feel like rebuilt and that's certainly the confidence level was much more forest or the raise guidance, but also continue the encouraged that will be in the upper half of the guns range.
Steve This is Julie the the items that were were calling out here, obviously were much more pronounced and the fourth quarter of 2020, and specifically as it relates to and investment gain and some income tax items et cetera, and if you look at page 31, and the slide presentation. You can look again at that full year of view 2020 actual virtual.
Since 2021 projected of revised projection and you'll still and you'll see that we still have a little bit of and investment gain associated with charge point and that particular column around corporate and the other and then we'll have a little bit of pick up on the O&M front and of upsetting. This is going to be some increased interest expense.
Largely due to continuing to fund the investment program. So we have slightly higher long term that balance it out there.
Okay, just pretty verify cause I just wanna yeah.
So is the.
Yeah, Yeah I was just I was just looking at the guidance you gave of the Guy for 2021, and then the guidance that you're getting now for 2021.
And I think the corporate and others eight cents better so it sounds like that's mainly due to the.
The mix of interest.
Interest savings and and the the charge point.
Games or some other things continuing and.
As well as some O&M picked up yes improvement I should say.
That shows up and the okay and that's in the corporate the adequate.
Yep versus what we show you and and the I, yes.
Okay Super helpful. And then one other question and just on the the swept go new renewable megawatts do you have a sense how much of those.
You are going to be able to one of those all one or some of those maybe PPA or how do we know the <unk>.
And.
And we would certainly we would certainly lots of one as much of as possible because I think it's really important for the from of capital structure perspective, and and these companies to to be will well funded and and have a firm foundation within the states. We serve we feel like that the these generation resources.
Equally the renewable resources need to be vested within the operating companies. So so we will continue that approach and that those of the followings that will make and obviously the.
Some portion of it may wind up being ppas, but the but the but I think we have to get the message across the the it's important to the vitality of the operating companies and the operating utilities and these dates that we continue the florist from a from a a capital standpoint, and so I think I think.
Yeah, I think obviously to the weather events and S. B b.
Demonstrate the and I'm gonna be probably testify and again on this pretty soon but but I really think it's important for the utility to have a view of what generation looks lock and these in these particular events and the interaction and interoperability of the.
These resources with the transmission and distribution system is incredibly important I started my career and the electrical engineer and system and and system operations and I went through and ice storm and and and actually I'll tell my age now it's been 1984, but you know mills were tripping with coal popped.
And one was freezing valves refreezing.
All of these activities were occurring and it was our ability to re dispatch and the utilize the ties and those kinds of things that were important for us to be able to manage through that crosses and and that's why I think it's important for there to be control features and place and from and ownership perspective of being able to focus on ensuring those benefits.
And for our customers you look at even some of the coal fired generation that was in place that mitigated some of the impact from of fuel costs perspective.
And I'm going forward with natural gas prices going up so much. So there's a reason for each part of the portfolio and and I think it's important for the utility to be and you know to be the the the party that runs those those particular facility. So so that's my view and and and certainly will go.
Go into these cases with the with a firm view toward that.
Oh, great. Thank thank so much agree up [laughter].
Thank you. Thank you [laughter] Hi next question comes from the line of Jeremy Tony with J P. Morgan and your line is open.
Hi, Good morning, good morning, and how are you.
Good good and I just wanted to start off with the on O&M. If I could just wanted to see what you guys of she and there because it seems like it's a nice little step down even versus what you guys had a E. I there and just wondering if you could provide a bit more color and what you see now versus and and really the durability of those savings as you'd think about 2022 plus.
And Ah sticking around all of these cost savings that you're pulling out yeah.
Yeah. This is julie thanks, so much for the question, yet Oh, and and was it was a nice benefit to us and 2020, and we're gonna try to hang on to as much of that and maybe a little bit more for 2021 is you can see and our forecast so [noise] and the things that we're looking to would be things that are not only one time and nature, but then obviously of sustainable and tried to take the learn.
Things that we were able to glean from the the <unk>.
And demick really and how we had to operating and different way. So things that we're talking about and cool things like data analytics automation digital tools and thrown usage outsourcing workforce planning and and then other other related items essentially the types of things that I mentioned and my my kind of preamble at the beginning of the call.
All of her so reducing non essential travel and training I mean, we've been able to be very successful and a virtual of format and so that actually brings a fair amount of cost savings into the tens of the pocket as well reduced materials and supplies and to the extent that we can continue to rain and on advertising and minimizing overtime et cetera. So we're looking at the.
From more of the sustainability or sustainable perspective, and we'll see what else, we can kind of pull out of the hat in terms of additional learning as as we go forward and so it's a little bit of everything so I can't particularly pointed of one thing.
And in fact, it's it's a variety of the entire team pulling together to be able to make this stuff come to fruition and the track records. There we've been able to do it. So we're going to continue to turn the crank.
That's very helpful. Thanks, and maybe just pivoting over towards the the renewables I think you mentioned 10, gigawatts of wind and solar generation and regularly the state's by 2030 or kind of add there and just wondering if you could provide a bit more car and where do you think that could fallout jurisdiction wise.
It seems like you know and swept co has a good focus here, just wondering where else you might be seeing the potential over that timeframe.
That's a that's a number of it continues to be and play obviously, we originally had I think it was like of 70 508000 megawatts of renewables. The last time, we showed and and adding and the 2400 is gets the 10000 or so and then as we further update this analysis like I said about the first quarter earnings.
You'll see more renewables being place and and and as well. So so I think.
As a work in progress.
Got it okay, well stay tuned there thanks and it was just the last one if I could post the election share. Just wondering you know buttons plan for 2035, if the impacts you directly and also with the new for the first year, just wondering what that could mean and the transmission side of you see kind of more supportive actions, there and what opportunities that could bring to AEP yeah.
And I think we'll see you can continue to see supportive actions barford related the transmission because obviously, the the build out necessary the support renewables and clean energy.
Something that the body of ministration is taking on and I I'd be highly surprised if if if there's any let up on that matter of fact, they're probably more aggressive and what and what the industry feels like they can do at this point, but the but certainly.
In order to do that and aggressively meet the kind of targets, they're being placed the out there transmission will play of critical role and that means a b.
Got it that's very helpful. Thank you.
Hmm.
Thank you.
The next question comes from the line of cash to Oprah with Sir.
Sorry ever score ISI Your line is open.
Yes, how are you big the morning, Nick and Gladiators is is one of my favorite movies as well.
The.
So just Julie real quick I, just Wanna make sure I have the right.
The storm the the last week storm and later cause I think when you add those numbers of between the excellent Strep go roughly north of of $1 billion billion do call. It the.
The financing plan the interest related charges are those incorporated and you are 2021 and guidance numbers.
Not yet no and so we have not yet updated our our financing plan or actually holding tight and just a bit here until we get a little more clarity on exactly how this stuff is going to roll out and we have swimming up of all of those numbers as I mentioned, we made and application at the commission and Oklahoma. So that's another piece of that is <unk>.
Well and we will update you as we continue to move forward and and make those crystallized plans for you, but as I mentioned and what you can largely anticipate is taking on a little bit more of that obviously, you're picking up on that with the increased potential interest expense of.
And you know, obviously looking to be able to be sensitive to the customer needs as they try to absorb this cost, but then also.
Managing the balance sheet and the metrics and we really need to have to stay at that be double a too stable.
The type of rating and and arrangement.
Got it okay.
Understood. So I guess, maybe interest in terms of the interest charges and other things it looks like at least near term and you're going to borrow of that.
Is there sort of land to offset dagwood, O&M or other savings and the business.
Yeah, Yeah, yeah as a matter of fact, a couple of things that I would point out number one we're always going to work to mitigate any potential unforeseen risk range. So plan to check and just as we move through and the dynamic ear and the other thing that you may recall, making a statement about specifically and and my my Oak and it opening comments here that Apple.
Acacia and that we made at for of PSL, and Oklahoma, specifically called out. The fact that we were looking for a regulatory asset with a mechanism of that included of whack and so that's incredibly important to us as well I know Nick made the comment several times through his opening comments regarding.
Making sure that our balance sheet metrics are intact, having a whack helps us and do that cause we need to be able to purpose of of the financial integrity of the operating companies as well as the the entire enterprise. So those are the things that will be looking at.
It's sort of alone.
Understood things and.
And then just.
One quick.
Follow up on the Ohio range is Ah.
So I'm a discussion of the re cute they're the March 4th is that the drop dead date or and that'd be extended.
Yes, it can it can be extended but obviously of runs and sort of geared toward march 4th but it could be extended.
Okay. Thanks, guys yet.
Okay.
Thank you. Our next question comes from the line of Julian Mullins Smith from Bank of America.
And your line is open.
More and Julian Big Hey, Good morning, Thank you teamed and thank Nic yeah.
Maybe just to start here you see passionate about it and I'm quite curious and and you guys are the footprint that stretches R. G. OS here, how do you think about what reforms and weatherization looks like here and and how that could be pack of your capital of budget.
I hear your comments about reserve margin et cetera.
And you can elaborate a little bit further what what are your lessons learned from 2014, and you know and they can 84 year as you see them being applied, perhaps and Texas, Holistically and especially as you see your specific dialogues kicking off whether and Texas, Yeah, frankly, the other adjacent the states as well yeah.
Yeah, So and you know and 2014 are really testified over three issues, one was capacity markets and and understanding of the value of capacity and.
And certainly 24 seven base load generation, but also the second part of it was the that at that point and 2014 and it was the dash the gas.
And it was gas and renewables, if we're gonna depend upon natural gas for a substantial part of supply of this country. Then we really have to reinforce.
The ability for natural gas to perform during during these types of events and and that means and someone's going to have to be able to pay for it and and markets will have to compensate generators for those kinds of those kinds of investments and and then for the.
[noise] utility system itself. It really is around the infrastructure the support resiliency and hardening of of.
Of the system and.
And also one of the other areas I talked about and 2014 was the was how quickly we retire units and with the and the what the replacements of those are and how we're changing the nature of the generation mix and those those have different factors associated with the the planning and operation of the <unk>.
Grid. So those are critical areas, where I think.
Really.
If if I were to opine on Texas, and it'd be more around market reform the support Weatherization Mark of a form around communications that exists ear and crisis times, because it's important for operators to know and even T and D operators to know where the generations coming from to make adjustments from.
And the transmission and distribution standpoint, and so when you think about some of these opportunities the exists for us. It seems projects you know on the seems of the R. T. OS is particularly important to have interchange capability now from Texas. It may be more D C ties.
It could be Ah Ah well, obviously, it could be more transmission in general, but Texas and we'll have to decide that but I think I think there's there's.
Opportunities for more of levels of interchange more ability to put the infrastructure and place to support Weatherization and then the market changes the support the ability for capacity to be value of the way it should be based upon his contribution to the.
[noise] total to the total grid. So those those are key points and continue and and and and really we sort of see let me with California, you sort of see the same thing I mean, they're depending on heavy level of imports from out of the state if out of the state is issues and they have issues internal within the state. So when you think of.
All of those things I think the planning and the optimization of what occurs is gonna really.
Kerry of the day in terms of our ability to to.
The better.
Take care of of these types of situations.
Got it excellent and if I could just quickly could clarify your your earlier comments here. The code you I think you use the expression of of the time per half measures and talk is over and then you elaborate a little bit on the timing. There just the do you think about it and obviously you're ready moving is probably of questions.
Brian more and more since then.
[laughter], what's the timing of this and just to make sure. We're on the same day or whatever it may I think he I think he would have to see the those decisions start this year because.
When you think about.
I think what's crystallized for US and is is really the path that we're taking we're moving to a clean energy future, we need to be able to move from of regulatory standpoint, and ensure that we're achieving the.
Of the balance sheet capacity to do the things that need to be done for the transition and the optimization of the grid and I think it's really important for us to be able to manage internally the only from and O&M perspective, but also our assets what generally what the assets are the contribute you and do not only and improved return.
And for our investors, but also in terms of optimization of the business itself. So so that will be part of part of the path. Because you have to you really of 224, maybe three forcing functions, but but one of those is the movement to of clean energy economy. The other is the cat the capital structure and bad.
Alex sheet of the company and then the third is really focused on those two objectives, but ensuring that we're moving forward with infrastructure development and grid development of support resiliency and the reliability of of the grid those those things together along with electrification.
And.
I think are really going to be a tailwind for this industry going forward, but and particular a T is the largest transmission provider, we have a large distribution footprint and and we have.
Significant amount and as I said and the last earnings call and you are on the precipice of clean energy transformations. So a lot of opportunity for a V. We just need to make sure. We manage all of those throttles to ensure that were that were consistently drive and forward.
[noise] during the day.
Yeah.
Thank you.
Next to the go to the line of James Gallagher would it be and Mow capital markets and your line is open.
Good morning, and thanks, so much good morning, how are you guys decided.
Great Welcome back Julie Great of your voice, Hey, Thanks, Thanks cash [laughter].
And.
And Ah Julia address some of the rotation to mitigate you're you're financing needs, but Nick and it's been a while since you've kind of I guess updated how you're thinking about how you prioritize growth would be of the different channels that are in front of you I mean, obviously chucks working on the nonregulated and renewables and you've got plenty of opportunities of the <unk>.
Regulated growth you know on the renewable side transmission. The just wondering like how are you thinking about organic growth maybe on the regulated side or however, you prioritizing sort of all of those different opportunities in front of you.
Yeah. So obviously, our our priorities are are around true.
<unk> mission distribution of infrastructure.
Certainly on the regulated transformation of the resources that are ongoing chucks business is really with AP energy and so forth they've done a great job of managing risk around that business, but they've also done a great job in terms of their allocation of capital and and being able to manage it and.
Not only within their own part of the business, but also and until the entire enterprise. So Chuck is more than willing to turn capital over if it's of better use anywhere else and the corporation and vice versa, and we were locked with that business to be less and 10% of the overall business. So and it continues to track that.
And it gives us the ability to not only further optimise that business and you're seeing continued really continue the opportunities on that part of the business with AEP onside partners on special of relationships with customers around resources that really drive tremendous benefit for us because we can also approach that on the regulated saw it.
And as well so I think it was and there's an opportunity there, but but certainly our focus is ensuring that we're able to move forward with this clean energy transformation and all of the optimization around and the grid and the grid resiliency and the issues there and do it and a very pragmatic way that means we're going.
And have to make sure that whoever is progressing better from that perspective, that's the word the equity is going to go and and we need to ensure that that we're managing that portfolio and that fashion and so we can we can day I'll look at this business like it's of fully regulated business and we can make decisions based upon.
They're they're obviously or the.
The things that we look at like what's the what's the quality of the service territory, what's the quality of the regulatory environment, what's what's the the ongoing view of of valuation of any particular entity for us for someone else and what that means in terms of rotation of capital and.
In terms of optimization. So we are continuing that approach and.
And I would say that that we said in the past and if we if we.
For all of our utilities, if we see the ability to continue sustainable growth and quality growth and those jurisdictions, they make a lot of sense to us.
And then of course, we'd have to look at also those that are those.
Those are the challenged and and understand what those challenges are can we of ratios challenges are they are they systemic challenges those of the kinds of things we have to look at and and we will continue to do that and that's what Brian is doing.
Okay, Great and just I guess, just one last follow up on the cause I know, we're running up on time here, but I mean, when you look at like all of the opportunities like you just rolled out and other 2400 megawatts of you know of renewable transmissions always been something you've had plenty of opportunities to like do you still look at those opportunities like where you can put.
Earning assets and it like one times rate base is your best opportunities or do you see as you look of broke the landscape like inorganic you know maybe M&A of regulated properties of something that makes sense or is it just better to kind of stick to your point and the jurisdictions, where you see the growth is visible and you've got a good regulatory sort of power.
Journey the cheap yeah.
Yeah, I think our primary focus is due of the one times and and and and with the with the organic growth that has occurred and and and that's really what the previous question about whether the.
Whether we want to own the renewable assets or not you know the the question is if we own those renewable assets and that gives us more capacity to be able to invest and we could take full advantage of tax benefits and the other things that enable us to continue to.
To do it organically grow and as I said earlier, we have a very high thresh.
Threshold four four M&A, because we do feel like that we have plenty of opportunities. We just have to manage.
The.
The portfolio and a way that optimizes that going forward and so that's the way we sort of think about it and then from and M and a perspective, you know I mean.
It has to be strategic has to be accretive for shareholders has to be something that really produces strategic benefit for us and some fashion of what we're trying to do but again, that's the hot threshold.
Great. Thanks, so much for all of that.
Uh-huh.
Thank you and.
Next question comes from the line of Angelus the.
Scotia Bank and your line of one Andrew.
More and Andrew and a good morning. Good morning, Thanks for all the good detail on renewables and I just wanted to dig into one or two relative to your capex outlook.
Human shouldn't be you know the incremental capacity and swept go and and you mentioned that you'll do and AEP wide regulated and renewable plan and the coming months with a lot of that the incremental to the 37 billion I know a lot of the spending will probably come after the 2025, but.
Think of that as the upside to the plan.
Yeah, we we would.
It's early the tail, but we were of like at the be incremental so we'll be working the.
To help support that and the obviously as you said some of his 2025 some of the 2028.
So as we progress we Wanna make sure okay, if if the <unk>.
Cash flow increases load load continues to improve optimization of of of capital deployed makes it a lot of it has a lot of benefit associated with that and then there's a lot of parts of the puzzle of sort of like when we did north central we didn't know what the financing plan for that was and we.
And you to focus on that one and then we will also continue to focus on trying to make sure that they are seen as incremental that's that's our focus so so whether we have to obviate some of that with the redeployment of capital or not remains to be seen but the target is is is for it the.
Be incremental.
Okay, Great and then the RFP of slipped go you mentioned that you'd prefer to one of those assets.
Do you plan to bid and from the contract contracted renewables business as well as the from the regulated utility.
Well the from the crowd contracted renewables business.
The hour contracted renewables business or maybe the rules associated with that but but we just like with north central we did sort of of turnkey type thing that really and allows us to Tom.
The recovery with the investment itself, that's always sort of our prefer the opportunity for us because it.
It really is handled well from of financial standpoint, and also handled well from of risk standpoint relative to the construction and customers. The the risk of the customers as well. So I think we probably stick with something like that and.
And whether or contracted businesses is on the back and or not is another question I mean, obviously.
We don't really care, if it's if it's our contracted business or or or someone else as long as at the end of the day, we wound up one and it.
You have to kind of that makes sense and one last one just to clarify I think you said you still want that contracted renewables to be capped at about 10% of the company did I hear you right and and give them. The overall growing demand for renewables across the country and support out of the D. C does that mean that you'll be more selective and your.
Project or look for higher returns or lower risk and and I think about that dynamic and all that.
Exactly right, we've always manage that business around and Ah Ah higher returns we wanted the commensurate.
And Ah wherever it basis with with our regulated businesses and.
And and and we will continue the matter of fact, we turn away a lot more projects than what we actually move board with and and and as you probably have seen it guess it seems to get more aggressive all the time about what.
The return of levels are and it was really the the difference is really what people say at the end of of contract with what that terminal value is and and we really don't Wanna get into that kind of war, we really focus on one of those.
Relationships with customers and developers that help us move.
Move forward with very positive projects and and that's the way we will continue to look at that business and then onside partners and others with specific customer related issues like for example, here and here and and Columbus, We have several businesses the signed up for a joint renewables project.
And that we continue to to focus on and we do aggregation.
Of customers and Columbus, which was approved a referendum vote that AEP energy would be doing so and so those kinds of things that we can mix and match, what the and Taylor of the relationship.
The the customers looking for that I think that's that's what we're after.
Just the circle Backrow quickly till cycling the initial comment as it relates to that threshold in terms of business mix. There are a couple of reasons why that 10 per cent makes sense for us.
Number one.
A credit profile of risk management perspective, that's very important for us. So that's something with the top of mine and the other is really on tax shield associated with the debt. So we've got a couple of things that were of sensitive too and and just continued to high grade the earnings opportunities from our unregulated contract and renewables business, but that gives you the pay a little bit more per.
Specter of it if that wasn't already top of mind for you because it surely is for us.
Okay, you're very helpful and sort of echoed the congrats to Julia and congrats to the team of another strung and here.
Oh. Thank you. Thank you.
Thank you.
Our final question will come from nine of Paul Patterson, What's the name of rock Associates and your line is open.
More in the morning, how are you go and just Bryant of your voice, Julie and Paul [laughter], Oh Boy. So just some some quick flow.
All of them just on the the Oklahoma filing and I haven't had a chance to look at it.
And.
The how long do you guys expect to my understanding and if I heard you correctly that you're asking for weighted average cost of capital I was wondering how long do you expect to have the how long will take the amortized yes. It I guess.
Yeah, I heard of what you're from it yeah.
Yeah, well actually we we haven't been prescriptive and our filing so we've got a little flexibility of their and so that's another reason why I kind of mentioned or thinking about any potential financing and the interim and how that would map to any potential outcome. There I do know that and one of our peer companies out and Oklahoma made of.
Similar filing and I believe that it was 10 years on there as as well as of whack to give you a kind of perspective, but we want to be sensitive to customer bills as well as and I'm sure you can imagine.
Okay sure and when do you think we'll get some sort of feedback from from the commission.
Probably a couple of months, okay, but I don't I don't have the timeline yet sure it's or yeah, and then just of really quick one on the <unk>.
As I recall.
You guys were granted rehearing and the and.
And the yeah the.
The case and you guys are also apparently filing an appeal and I was just if you could elaborate a little bit more on that because of the there was a decision okay. Yeah.
Yeah, We did we did fall for rehearing and and and it was it was granted.
And the the parties are are falling breeze.
And.
And that it stands with the with the commission.
But also we filed and the and the Virginia the Supreme Court. So.
Because we're not waste the time.
Okay. So okay. So just the sort of understand of procedurally do you expect to get something from the Supreme Court before before the Commissioner of the Commission and I would think normally before the Supreme Court, Yes, normally the commission before the Supreme Court, but obviously, we feel like it's such an important issue and and and and focus on on what we believe state law Sir.
Is that the it's important for the Supreme Court to resolve that issue in case, the the commission doesn't.
Okay, and do you know and it would be the condition of that come out or is it the schedule and that or is it just whenever they want to.
Yeah, I think it's whenever they want.
Okay.
Awesome. Thanks, so much.
Okay. Thank you.
Thank you and speakers do you have any closing comments.
We do thank you for joining us on today's call as always the I R team will be available the answer any additional questions. You may have Cynthia would you. Please give the replay information.
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