Q3 2021 American Electric Power Company Inc Earnings Call

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Ladies and gentlemen, thank you for standing by welcome to American Electric power third quarter of 2021, the earliest conference call.

At this time your telephone lines are in a listen only mode. Later, there will be an opportunity for questions and answers. If you would like to ask a question during the call. Please press one zero on your Touchtone phone you will hear an indication you've been placed into Q and you may remove yourself from the queue by repeating the one zero comat.

If you're on a speakerphone, we ask that you. Please pick up your handset and to please make certain your phone was on mute. It before you press any buttons that as a reminder of your conference call today is being recorded.

I will now turn the conference call over to your host Vice President of Investor Relations Darzi Reece go ahead. Please.

Thank you Alan Good morning, everyone and welcome to the third quarter of 2021 earnings call for American Electric power. We appreciate you taking the time to join US today, our earnings release presentation slides and related financial information are available on our web site at ADP 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, and jewelry slowed our Chief Financial Officer.

We'll take your questions. Following their remarks, I will now turn the call over to Nick.

Okay. Thanks, Dorothy welcome again, everyone to American electric powered third quarter of 2021 earnings call.

Today, we are pleased to report a strong third quarter operating earnings of $1.43 per share for the third quarter. This brings our year to date operating earnings to 376 per share versus 356 per share last year, which gives us confidence in raising the midpoint of our guidance range for 2021.

<unk> service territory continues to prove his resiliency and stability with continued economic recovery experienced in the third quarter in fact, AEP posted the strongest sales quarter in over a decade and the gross regional product for the AP footprint of third quarter was the hottest on record as well as job growth being the strongest since 1984 the <unk>.

<unk> and diversity of our portfolio robustness of our organic growth opportunities and are consistent ability to execute against our plan places AEP. Among what we believe should be one of the country's premium regulated utilities.

Our strength.

Our strong performance this quarter, coupled with the level of economic recovery experienced within a footprint provides us once again the confidence needed to raise our mid point to 470 per share in Euro 2021 guidance range to 465 to 475, while reaffirming our 5% to 7% long term earnings growth rate and Doug.

I've stated previously I would still be disappointed if we were not in that upper half of our long term growth rate.

The driver of our strong performance has the talent and commitment of our employees.

Line essential service what teams have continued to adapt to ensure the needs of our customers and communities are met.

Day in and day out throughout the pandemic like many industries. The face of work Rapey will never be the same as employees returned the office, we have taken actions to ensure the safe return to the workplace environment or remain appreciative of the dedication of our employees and have the utmost confidence in their continuing ability to successfully check and adjust as we adapt to the future.

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We believe that this new work environment will continue to enable more efficiency flexibility and creativity that will contribute to the culture that sales in meeting our strategic objectives.

This new feature award along with Digitization and automation will continue to provide benefits for achieving excellent program.

Our growth opportunities over the next decade, or a significant drilling bar driven by our future Board renewables plan of over 16, Gigawatts of new renewable resources by 2030, and the transmission and distribution investment's needed to support the needs of a clean energy economy for our customers and communities.

Additionally, the completion of the strategic review of our Kentucky companies and our decision to move forward with a sale to Liberty utilities enable that enables us to focus our attention on executing that transaction and delivering on our growth strategy.

So let's cover the announcer Aloe, Kentucky power.

Earlier this week on Tuesday at market close we announced the sale of Kentucky power and Kentucky, Transco to Liberty utilities, the regulated utility operation of Algonquin power.

The sale as a result of the strategic review that we launched back in April the sale of subject to regulatory approvals, including approvals from the Federal Energy Regulatory Commission, which is within 180 days and the Kentucky Public Service Commission within 120 days. The transaction is also subject to federal clears pursuant to Hart, Scott Rodino, which depicts.

He is within 30 to 60 days and the clearance from the committee on foreign investment in the United States.

90, 120 days for that approval, we anticipate making these regulatory filings in late November and early December.

Separately, we will file with both the Kentucky, West, Virginia and for commissions the necessary changes to the Mitchell plant operating agreement to accommodate the <unk> investments recently approved by the West Virginia Commission. The following will include a plan to resolve the question of Mitchell ownership post 2028, both state commissions are expect.

Seeing these filings as both issued recent orders directing us to do so these filings will be made in the mid to late November time frame.

We're also very pleased with the outcome of the strategic review and noted the future owner of our Kentucky assets will be a great steward for all stakeholders in Kentucky are valued employees customers and and certainly the communities.

Lastly, I want to thank all the Kentucky employees in the corporate support employees for their patients. During this review and for their continued focus on safety and operational excellence during this period and as the transaction is completed.

Now move into several several of the regulatory activities.

Ohio, We expect an order in the fourth quarter on the settlement reached and filed with the Commission earlier. This year as a reminder of the settlement has broad support from the settling parties, including the Commission staff Your house consumers Council industrial companies commercial companies and other entities like the Ohio Hospital Association. Additionally, AEP, Ohio.

Gridsmart phase three settlement was followed yesterday and it pays the way to to continue our deployment of advanced smart grid technologies, including completion of our a mommy to roll out the remaining 475000 will customers. The unopposed settlement with support from Commission staff allows consumers council and several of our largest.

Customers demonstrates that AP, Ohio continues to maintain a great working relationship with our regulator and interested parties.

Public service company of Oklahoma reached a settlement in the rate case with the Oklahoma staff and other parties. The settlement was presented to the commission on October 5th the Black box settlement includes 57 million net increase in rates, while adding another $102.7 million in base rates. In addition to continuing to practise of allowing some interim recovery.

<unk> of Capex Rogers, the router collecting collected collecting for Maverick and said that's north Central Rand assets was also included an order is expected by year end with rates reflected in November bills in Indiana, followed its base rate case on the July 1st based on our future test your model seeking non.

$7 million net revenue increase with a 10% off road.

Major items included recognition of over $500 million in capital investment per year in Indiana continuation of the transmission track or a federal tax rider in the event of a change in federal tax rates and the advancement of Ami's to provide customers greater control of insight into their usage. The hearing you said before the Indiana utility regulatory Commission on.

December 2nd with an order expected by April of 22.

Southwestern wrecked your power company jurisdictions cases are pending in Louisiana, Texas, and Arkansas Disruptive, Texas Commission deliberation set for November 18th parties filed exceptions to the preliminary draft order issued by the hearing examiner in reply. So those exceptions were filed yesterday <unk> is seeking a net revenue increase of $73 million with them.

Roy of 10, 35% are falling includes investments made from February 2018 accelerated depreciation for those hills Platte, a storm reserve and increased vegetation management, we expect an order in the fourth quarter with rates being retroactive back to March of 21 and.

In <unk>, Louisiana testimony has been filed and hearing is scheduled for January of 22, or K six to 73 million net revenue increase in the 10, 35% of all the law and order is expected between the second and third quarter of 22.

And so I'll go Arkansas, we are seeking a 56 million net revenue increase with a 10 three five <unk>.

The following contains with Formula right plan for subsequent years and consider is the pending retirement, a previously announced coal lignite assets. This following his time to along with the north Central and service dates and to provide a mechanism both for recovery of costs associated with the investment and flow through of the P. T C. As repko customers. A hearing is set for March of 22.

Both swept Cohen PSL continue to make progress to recognise the storm yearly expenditures as a reminder, we filed for recovery of a whack return over five years in Louisiana, Arkansas, Oklahoma, and Texas PSA was moving forward with the state on the securitization of course as Premier another Oklahoma wall.

We have continued our efforts to secure approvals and clearer clarity regarding investments necessary to comply with the EPA CCR needle G requirements. We received still gets to construct with CCR compliance plans in Virginia, West, Virginia, and Kentucky, While West, Virginia approved <unk> investments, Virginia, and Kentucky did not West Virginia.

Has since determined it was in the public interest to move forward with <unk> investments for all three plants and has issued an order regarding it supportive west Virginia investing to preserve the option for these these plants to run past 2028 approving both the investment and would cost recovery from West Virginia customers will be working with our commissions to implement the.

West, Virginia decision, making necessary adjustments to respect each state's decision the.

The Virginia Commission ask us to come back with more information. So we'll do that we plan to lay out all the options before them on how to satisfy their capacity needs.

The Virginia PSC reprove, the first year revenue requirement of four $8 million for broadband, which means we now have recovery for a rural broadband efforts in both rural Virginia, and West Virginia, We continue to engage legislators and commissions and other states and stand ready to invest in synergistic mid mall broadband to support advanced grilled chicken.

Allergies in rural broadband for our communities.

We also understand is all about execution on September 10th.

He began commercial operation of the 287 megawatt Maverick wind energy center in North Central Oklahoma Maverick is one of three wind projects that compose the north central energy facilities, which will provide 14 85 megawatts of clean energy customers of our PSL Windswept coast subsidiaries that your voice project the largest single.

Slight wind farm in North America, as well under construction and will come along and the January to April 2022 timeframe transforming the way energy is generated delivered and concerns is necessary to support the needs of a clean energy economy, and AP continues to drive that transformation for the benefit of our customers and communities.

With the success of North Central setting the foundation of our future Board regulated renewables platform. We are diligently working on securing additional renewable opportunities for our customers R. O P filings are going or ongoing and planned in multiple states. So more to come on this is we fall for approval.

After of resources as a result of the Rfps that were out in the market for which some you've probably have heard of we will be able to provide greater detail on the progress being made further a federal efforts through the various tax proposals to extend and expand ptc's itc's clean.

Clean energy resources succeed even more benefits will be enjoyed by our customers.

So now moved quickly to the equalizer chart at this point and.

Quickly through this.

So far the average.

Average with the overall regulated operations is currently 9%, we generally target in the nine and a half.

And have the 10% range so.

So obviously, we continue to work on that.

Ohio, and I came in at 9.3% for the third quarter.

Hello, authorize primarily due to a timely recovery of capital investments, partially offset bahar O&M expenses, we expect that all row the trend around authorized levels as we maintain concurrent capital recovery of distribution and transmission investments. We also as I mentioned earlier expect the commission order here in the fourth quarter of 21.

<unk> came in at 7.3% is below authorized you to hire amortization primarily related to the retired coal fired generating assets and higher depreciation from increase Virginia, depreciation rates and capital investments and as you know we've.

Are still at the Appeals court appealing the Virginia Supreme Court, which is currently outstanding.

File an appeal with that Virginia Supreme Court, So we're still waiting on that.

As far as Kentucky's concern six 9% below authorized user loss of load from weak economic conditions and lots of major customers transmission revenues were also lower due to a delay in some capital projects.

And uhm came in at 10.3% it's.

It's above it's authorized sorry.

Primarily due to increase in sales, partially offset by increased though and young and depreciation expenses associated with items continued capital investment programs.

As far as PSA. It was concern came in at 676% is below it's authorized level, primarily due to increased capital investment currently not in base rates and higher than anticipated equity due to the extreme February winter weather event and of course, we expect the commission order here on the right case in the fourth quarter of 21.

Swept go came in at 8.2% is below authorized you to increase capital investment currently not in base rates and the continued impact of the Arkansas sure of the Turk plant that is not in retail rates Turk issue again accounts for about 110 basis points that.

But we're not recovering in Arkansas.

Again as I mentioned earlier, we expect various commission orders.

And particularly in Texas in the fourth quarter of 2021, that's retroactive back to March.

AP, Texas.

Came in at 8.2% is below authorized primarily due to the significant level of investment in Texas and of course, we are favorable regulatory treatment there with annual D C or D. C. R F and biannual T calls filings to recover right. So significant levels of investment in Texas will continue the impact the row.

The expectation is where the row trend towards an authorized 9.4% in the longer term.

AP transmission Holdco came in at 11.2%. It was a bird authorized primarily driven by differences between actual and forecast expenses. The Transco has benefit from a forward looking formula right mechanism, which helps minimize regulatory lag and that forecast that Roy is around 11% in 2021. So overall.

I'll continue to make progress cases, obviously, we're waiting to hear the results of several cases that that should provide some additional benefits, but but that work continues.

So in closing, we're we're executing all cylinders and continue to drive the results expected of a premium regulated utility. The AP portfolio is one that has enabled our investments in the wires saw the business supporting our transmission investments, including the 33 per share this quarter through our AP trends transmission Holdco investments our plan to transition.

Generation fleet and reduce carbon emissions by 80% by 2030 and net zero by 2050 is well underway with two of our three wind facilities of our 2 billion investment in north central when under our belt, providing a solid foundation for the next decade of growth throughout this transition we remain engaged in the trusted voice on energy transferred.

<unk> efforts, helping to ensure responsible transition to a clean energy economy, and we will continue to support federal efforts in that regard and state efforts as well.

Finally, our strong quarter performance gives us the confidence again.

Our mid point at 470, where the range of 465 to 475, and we continue to have all 17000 employees dedicated to our customers and communities to enable the strong performance.

Are disciplined in controlling cost our progress to manage the portfolio and the significance of our future organic growth opportunities provides us with a cough, that's needed and raising the midpoint and nearing the guidance range.

Two weeks ago, I was really struck by the halftime performance of the Ohio State Buckeyes marching band they set their goals in my opinion really really high never did I expect to see a marching band dedicate their halftime show to the music of rush to hear Tom Sawyer Wildwoods, the limelight and others was truly amazing when they are difficult.

To even play even though they they were also marching while designing guitar players drums and other choreography on the field the creativity and the execution came through to deliver a truly remarkable show. It made me think of our team and a P. On November 11th I've been a piece of the year for 10 years and four.

And it deleted great company with Great people, who have an outstanding track record of delivering on the promises made to investors and customers consistently year in and year out.

And we fully expect to continue our drive to take this company to the next level toward a cleaner G economy, and a solid infrastructure foundation by setting aggressive goals and delivering with creativity and solid execution with that I'll turn it over to Julie. Thanks, So much snuck, thanks, D'arcy and like I Love, you Buckeye reference carboxy love that yeah.

I love that thank you very much bigger than this weekend anyway, it's good to be with everybody. This morning, I'm going to walk us through the third quarter and year debate financial results and share some updates on our service territory load and finished with some commentary on financing plans credit metrics and liquidity, let's go to slide six which shows the comparison of gapped operating earnings for the quarter and year to date <unk>.

Dr earnings for the third quarter, one dollar and 59 cents per share compared to one dollar and 51 cents per share in 2020 top ratings through September were $3.90 per share compared to $3.56 per share in 2020, There's a reconciliation of gapped operating earnings on pages 14, and 15 at the presentation today.

It's gonna Slide seven where we can talk about our quarterly operating earnings performance by segment.

Operating earnings for the third quarter totaled one dollar and 43 cents per share or $717 million compared to one dollar and 47 cents per share or $728 million in 2020.

<unk> the vertically integrated utilities were 87 cents per share up two cents favorable drivers included rate changes across multiple jurisdictions, whether primarily in the west transmission revenue in lower income tax items.

Items were offset somewhat by higher O&M expensive due in part to lower prior year O&M, which included actions, we took to adjust to the pandemic and higher depreciation expense as well as lower normalized margins and lower NFU D C.

The transmission and distribution utilities segment earned 31 cents per share flat to last year favorable drivers. In this segment included rate changes transmission revenue in income taxes offsetting these favorable items were O&M expensive again, a function of lower prior your O&M associated with pandemic grown efforts depreciation and property taxes.

Maybe a few transmission Holdco segment continued to grow contributing 33 cents per share with an improvement of five cents driven by the return on investment growth generation in marketing produced four cents per share down nine cents from last year influenced by the prior year land sales lower retail volumes and margins generation and income taxes finally corporate.

Other went down two cents per share driven by lower investment gains an unfavorable not interest expense. This is partially offset by lower income taxes. The lower investment gains are related to a pullback of some of the charge point related games, we've talked about and prior quarters, let's have a look at all the year to date results on slide number eight operating earnings through September totaled.

$3.76 per share or $1.9 billion compared to $3.56 per share or $1.8 billion in 2021.

Let the drivers by segment operating earnings for vertically integrated utilities were one dollar and 87 cents per share down three cents higher O&M and depreciation expenses. Other smaller decreases included lower normalized sales and wholesale load hire other taxes and a prior period fuel adjustment.

Setting these unfavorable variances were weight changes across various operating companies and the impact of weather get a Walmart the normal temps in the winter of 2020, and the summer of 2021, which created a favorable year over your comp for us.

Other favorable items in the segment included higher off system sales transmission revenue and have interest expense and income taxes.

The transmission and distribution utilities segment earned 85 cents per share up a penny from last year earnings in this segment, we're update a higher transmission revenue weight changes weather normalized load in income taxes, partially offsetting discoverable items were increased depreciation O&M other taxes and interest expenses.

P transmission Holdco segment contributed one dollar and two cents per share up 27 cents from last year related to investment and favorable you are opening your true up.

Generation in marketing produce 20 cents per share down 11 cents from last year did a favorable one time items in the prior year relating to in Oklahoma.

Government and the sale of <unk> and then this land sales in 2021 higher energy margins and lower expenses in the generation business offset the unfavorable ERCOT market prices on the wholesale business. During storm here in February. We also saw an unfavorable result in retail due to lower power and gas margins income taxes will also.

That one favorable.

Finally, corporate in other words up to six cents per share driven by investment desk, and lower taxes, and partially offset by higher O&M. Let me take a quick minute here to talk about the investment game, which is predominantly a function of our direct and indirect investment charge point and just stay on the waterfall. That's produced a 6% benefit year to date in 2021 is compared to the corresponding 2002.

Period, you may recall that in the fourth quarter and full year 2020, disinvestment produced a five cent contribution and we would expect the year over year Vance to be more pronounced at this point in 2021 as we have no benefit during the same period in 2020.

Turning to page nine I'll update you on on normalized low performance for the quarter before we get into the specifics let me start by reminding everyone that everything that you see on the slide is showing your opening your growth that means these numbers can be influenced by what was going on last year or what is happening now in 2021, given all that occurred on the economy last year, it's obvious that these.

Growth rates are at least partially being influenced by the comparison basis.

Thanks to the macro follow up question like how does today's low compared to prepandemic level and I'll get to that question on the next slide but before I do let's take a look at what are normalized low growth west for the quarter starting in the upper left corner normalized residential sales were down 1.6% compared to last year, bringing the year to date declined down to nine tenths of a percent.

That last year residential sales were up 3.8% in the third quarter. When the economy is just starting to reopen one year later.

Down only 1.6%, which thinking just there's been a shake up in residential sales as more businesses have embraced a remote workforce for jobs that can be performed at home.

The last time to print out on a residential trying to think you'll notice that we're adding a new bar to the right.

Showing our latest projection for 2021 based on the load forecast update the original guidance assumed residential sales decreased by 1.1% in 2021. The latest updates shows an improvement as we now expect residential to empty your down nine tenths of a percent moving.

Moving right weather normalized commercial sales increased by 5%, bringing your debate growth up to 4.3% last year third quarter commercial sales were down four 6%. So again, we're seeing a net positive stories of commercial sales classes bouncing back faster than expected and while we're seeing a strong bounce back in the sectors most impacted by the pain been et cetera.

Schools churches, and hotels, we're actually seeing the strongest growth and commercial sales this year from growth in data centers, especially in central Ohio.

Give you some perspective last year the sector was the ninth largest commercial sector across the AP system today, if the sixth largest and the likelihood further up in the rankings as more data center loads are expected to come in online over the next several years, you'll also notice that her latest load forecast update now suggest that commercial sales will endear up three seven <unk>.

Sent as opposed to the 5% decline assumed in the original guidance forecast economies recovered much faster than the originally said, which is one of the reasons why we've updated the forecast.

And it's showing that an improvement in that regard in the lower left corner, you'll see it industrial sales also had a very strong quarter industrial sales for the quarter increased by 7%, bringing here to date up to 4.2%.

Just real sales were up at every operating company in nearly every sector pointed out however that the 7% growth in the third quarter of this year did not quite offset the 7.8% decline experienced last year, which means we still have a little more room to grow before the industrial class fully recovers from the pandemic recession. The good news is we have a lot of momentum to work with no lettuce.

The latest load update now projects industrial sales will endear up 4.3%, which is a two point, which is 2.4% higher than assumed in the original guidance forecast.

Finally, when you put it all together in the lower right corner, you'll see that Normalised retail sales increased by 3% for the quarter and were up 2.3% for the first nine months by all indications the recovery from the pandemic and recession is happening faster than expected in our service territory position to benefit from future economic growth.

You'll recall that the original guidance forecast normalized low growth of two tenths of a percent in 2021 based on our latest update we're not expecting to any you're up 2.2%, which is disappointing factor in narrowing our earnings guidance range and raising the midpoint for 2021.

Going to slide 10, I want to answer the question from earlier bass, how our current low performance compares to pretend Prepandemic levels. This bar chart is designed to answer that question. The blue bars are the same date bars that we shared on the prior page as a reminder, these represent growth versus 2020, which was influenced by the restrictions implemented to manage the public health.

Crisis.

Orange bars here show, how the year to date sales in 2021 compared to 2019, which was the most recent prepandemic year for comparison.

Tell us how close we are to fully <unk>.

A full recovery from the pandemic starting at the left you'll notice that are reported residential sales are down nine tenths of a percent compared to last year, but they're actually up 1.6% compared to a pandemic levels. This as a gauge for how our customers behaviors have changed since the pandemic with more people working from home the.

The next bar shows that while commercial sales are up for 3% compared to last year. They are still eight tenths of a percent below the prepandemic levels given the recent growth, we're seeing especially in the datacenter loads, we would expect commercial.

The commercial sales cross to fully recover very soon.

Moving further right.

While the industrial sales are up 4.2% compared to last year. They are still 3% lower than prepandemic levels, given some of the headwinds for manufacturing today with supply chain disruptions later shortages et cetera. It may take a little longer before the industrial crashed fully recovered from the pandemic recession, but we do expect to eclipse the prepandemic levels in 2022.

In total are normalized loaded up 2.3% compared to last year and is now within seven tenths of a percent of being fully recovered from the pandemic. So it's safe to say that we're pleased with the strength and balance of this recovery and the a P system.

Let's check on I need to check on the companies capitalization and liquidity on page 11.

On a gap basis, our debt to capital ratio decreased 0.4% from the prior quarter to 62.2%. When did you listed for the storm during event the ratio is slightly lower than it was at year end 2022, or sorry, 2020, and now stands at 61.5%, let's talk about our F. S noted that metric as in the first and second.

<unk> the effective storm year. He continues to have a temporary a noticeable impact on the 2021 metric taking a look at the upper right quadrant honest page, you'll see our FSA did that metric based on the traditional movies and gap calculated basis as well as on and adjusted Moody's and gap calculated basis on a traditional unadjusted basis or <unk>.

Started that ratio increased by 0.9% during the quarter to 10.2% on a moody's basis, and just to again reiterate reading. It is there any agencies continue to take the anticipated recovery into consideration as it relates to our credit rating. So very important to note that on and adjusted basis. The Moody's at that noted that metric is 13.

6% this figure removes or just the calculation to eliminate the impact of approximately $1.2 billion of cash outflows associated with covering the unplanned during driven fuel and purchase power and E. S. P. P region directly impacting P. S O and swept in particular the metric is also adjusted to remove the effectiveness.

He did that we used to finding unplanned payments. They should give you a sense of where we would be from a business as usual perspective with that 13.6%.

Importantly is Nick mentioned, the recovery of the Uni driven feeling purchase power expensive and the PSL and swept her jurisdictions as well underway and we're making progress as a result inconsistent with what we have previously communicated we still anticipate our cash flow metrics to return to the low to mid teens target range next year, obviously, we're trying to push toward the mid teens range, but that will take.

It is a little while longer but what we're definitely on our way there and there's you know we'll keep you posted on our progress before we leave the balance sheet topic I do want to make note of the intended change to our 2022 financing plan in light of our announced sale of Kentucky power in Kentucky Transco, you may recall that we had planned to issue $1.4 billion of equity in 2022.

Inclusive of 100 million dollar dividend reinvestment plan to find our growth Capex programme, while we will provide our typical three and your forward annual review of our cash flow and financial metrics at the upcoming why Congress. What we can expect to see is that the 20th 22 forecast will be adjusted to eliminate the previously planned $1.4 billion.

Of equity financing that I, just mentioned with any residual proceeds being used to reduce reduce a small portion of the 2022 that convincing but we'd planned. These actions will have no impact on our previously studied credit metric targets are messaging in that regard.

I bet today on page 39 will see our current cash flow forecast with what you're already familiar we've included a note on the side to reflect the fact that the numbers have not been updated for the announced Kentucky transaction, along with a red circle around the 2022 financing equity financing amount that will be changed and updated when we roll out the move you in a couple of weeks in conjunction with.

E I conference so while we're talking about the Kentucky transaction I can also share, but we expect that the sale will be one to two cents accretive in 2022 and will reflect this in our 2022 earnings guidance that we provide to you at the conference. Okay. So back to our regularly scheduled earnings called programming and commentary.

Let's take a quick moment to visit our liquidity summary on the lower right side of slight 11, our five year 4 billion dollar bank revolver in to your 1 billion dollar revolving credit facility, along with proceeds from a quarter and Douglas she wants to put our liquidity position, which was really strong at 517.

At the lower left side of the page you'll see that are qualified pension continues to be well funded at 104%. Additionally, R. O pet is funded at 173.9%, let's go to slide 12, and I'll do a quick wrap up and we can get to your questions I performance through the first three quarters of this year give us confidence to narrow our operating guidance to the upper half of our current range.

Holding a new range of $4.65 per share to $4.75 per share with a mid point of $4.70 per share. As we've stated we are committed to a long term growth.

A 5% to 7%.

2021 earnings guidance revision is yet another demonstration of our drive to deliberate performance in the upper upper half of our guidance range from a strategic perspective, we are making significant progress in addressing items that are top of mind for our current and prospective investors were mountain contract to sell Kentucky power in Kentucky, Transco, which we expect to complete in the second quarter of 2022.

This this transaction enables us to avoid the $1.4 billion equity issuance that was part of our original for craft would share with you for 2022, and therefore alleviate the overhaul the equity overhang and also allows us to deliver a transaction that we estimate to be one to two cents accretive in 2022.

Won't be able to do this while concurrently preserving our ability to get our episode of debt metrics comfortably into that mid to late teens range by 2022, which is commensurate with a moody's be double eight to stay there waiting as you know we continue to target bad.

The intention is to remain in this credit metric range again with a preference to try to get closer to that point as as we move along in time.

All of this positions us to continue our generation transformation, which is underpinned by the renewable investment opportunity. We've shared with you and complemented by our ongoing energy delivery investment. So he doesn't you can expect to see from us at the upcoming <unk> conference in the early November in addition to the updated three year forward cash flow and financing plan will be introducing them sharing the details behind on <unk>.

22 earnings guidance and our longer term capital plan you know, we typically go out five years, all of which will incorporate the effects of the announced Kentucky sale. So with that surely do appreciate your time and attention and I'm going to turn it over to the operator, so we can get to your questions.

Thank you and as a reminder, if you would like to ask a question press one zero on your Touchtone phone, you'll hear an indication you've been placed into Q and you may remove yourself from the queue by repeating the woman's yoga mat.

Also please pick up your handset before pressing anyway.

We will go first to the line of Julia do most Smith.

Your line is open go ahead please.

I'm, sorry, I'm, having some technical difficulty one moment, while we open your line.

Your line is open go ahead please.

Very good and can can you hear me now hey, Julia how are you.

Quite well. Thank you congratulations on the transaction there nicely done yeah banks.

Absolutely so perhaps just dive into that with a little bit more can you talk about what happens with the Mitchell plan here just as a function of the sale will be transferred to Wheeling or how are we thinking about that visa view liberty.

And any kind of.

Pricing bear in in terms of transfer or what have you.

Yeah. So.

That's why the operating agreement being filed.

Wheeling will become the operator.

And it does get transferred to.

Two wheelie.

In 2028, and so and that's that's really.

We'll continue with Kentucky being half owner.

Mitchell until that period of time, so, but really will take over the operations of the plant and those those.

The employees will move over to Wheeling as well and then we'll continue working with the West Virginia.

In Kentucky Commission to get to get resolved the operating agreement related issues and then of course at the end of 2028, the transfer was over at a fair market value.

Top of approach so.

That's that's the plan and that'll be that'll get filed here in November and December timeframe, and and we'll go through that and actually both commissions of you'll have have the incentive to get this resolved because we do have various views of the yield G piece of it so regardless of whether we had this transaction.

Or not we would be needing to fall for the operating agreement change change out just cause the different directions at the Commission's have gone. So so we'll get that resolved as part part and parcel to the overall approvals.

Excellent nicely nicely might be gone fair market value of that and.

And then just visa visa.

Ongoing transactions in the portfolio evaluation of it clearly believe even the equity lives here in in the very near term.

How do you think about it just continued evaluation of your portfolio year I mean.

Clearly, it's not necessarily a near term dynamic, but while they give you the opportunity to speak to that a little bit further.

Yeah sure I mean, I've said over and over I guess for us for a couple of years now, but even beyond that we.

We do have to get to portfolio management to enable us to look at the sources and uses of of the of the capital needs that we have and and to manage the balance sheet is is is Julie has mentioned.

Target, we target the mid teens, and we want to get there and obviously.

Well in a way of getting there.

So we want to do that but at the same time be able to fund the capital growth and when you think about it.

Yeah, we sold the unregulated generation, we soldier overalls resold, some hydro related facilities and with with Kentucky.

You're talking about 6 billion of assets that have been sold that they viewed.

Substantial growth I mean to the tune of seven seven.

$7 billion a year in capital.

So it's.

It's part of a part of the process to determine what the portfolio needs to be in the future and will continue to do that certainly we have.

Jack and Julie and others will continue to review that portfolio and we'll manage it in the proper way I think I think.

Yeah, I'll say this Kentucky power you you think about the threshold you know that.

At one point, we talked about we always we always invested in go units no matter, what and and obviously, we've changed that focus to make sure. It's more deliberative in terms of in.

In terms of the decision points that are made it's it's quite a quite a move for AEP to get to a point, where we're managing our portfolio in a way that that first of all we became fully regulated and then we start to look at that portfolio to determine okay. What's the best approach to fuel 20 billion and.

And potential renewables investment. So so when you think about that we have to consider it not that I can tell you. The last time, we sold a a regulated utility was I guess the the us.

The Scranton, Pennsylvania system in the Pennsylvania.

In Pennsylvania, and the New Jersey system back in back in the 19 forties and fifties. So so it's a pretty substantial change and when you think about Kentucky power itself.

One of the first acquisitions of American gas and electric and 1922.

So by the time, we get through this it's it's been 100 years. So when you think about the threshold level of portfolio management as occurred in this in this company.

Really it really should shanawa, though in terms of our seriousness of making sure that we're imagine that portfolio in the proper way.

Lager answered what you asked for it but I wanted to at least get all of that out there.

Very very much appreciate it or leave it there.

Okay.

Well, let's go to the line of sharp rates with Guggenheim Partners go ahead. Please.

Orange are good morning, guys and congrats on Kentucky Yep.

Just a follow up on Julians question, a little bit more.

We sort of thinking about trigger points for another ashes, so what kind of a catalyst because the 10 gigawatts of solar and wind that you're looking to build through 25, I mean, even if you assume a 50 51 PPA structure could yield an incremental 3 billion right of spending opportunities.

You, obviously have a slew of Iop's do you need to see affirmations with the various filings are actual approvals and <unk>. So I should we sort of think about how these could be funded especially in light of where the stock trades. So we had an order.

Yep Yep.

When you think about the way we were approaching the renewables piece of it.

Process has been that we we Tom the need for equity associated with those particular.

Investments when they actually come on one and we get regular regulated recovery. So we get the cash flow to support to support those investments at the time they they come on line and that means you know obviously yard.

If I voted yet doesn't suffer as.

As a result of that so if we continue that approach.

And and and keep in mind too I've always said that.

For us to take a look at a regulated entity or other parts of our portfolio doesn't match the future needs in terms of where we are and where we're going as a company is there is there if.

If we have Ah Ah Ah chronically underperforming part of the portfolio. There is important for us to take a look at that may be temporary it could be longterm, but but certainly we have to we have to make sure that we're evaluating each one of these.

Each one of these assets in a way that says okay.

It doesn't it doesn't matter.

Where it's located as long as we're getting as long as we're getting.

Certainly the return expectation and also the forward view of the utility.

Is positive and that's compared with others. So we have to compare in various parts of our service territories, and and that's where we where we make those decisions.

Perfect and then just you know Nick appreciate we're gonna head into E. I will get an update here, but do you see the current renewable additions at least through 25 to 10 gigawatts right between solar and wind swinging materially with some some of these counteractive items like federal policy benefits versus the input cost pressures were seen.

And the space impacting some project Timing's. So do you see any of this swinging at all yeah, Yeah I do.

And and you know when we actually go do the analysis and we've done analysis for all the jurisdictions, but you know conditions change load changes.

Pdc's Itc's can change as a result, which change the change the business cases, where some may have been on the margins, particularly in the east now become benefits to customers. So so I think.

Those numbers will continue to change and I can tell you from what I've, what I've seen so far those numbers will change and and some will go up so we will go down but overall nominally it should be on path.

What we've talked about.

It looks like we'll have more to report on that probably during the first quarter 22 and cause it will have the the integrated resource brands and when those integrated resource brands are filed that's where I mentioned today is you'll have a more definitive.

View of what what those projects look like because there'll be the results of Rfps and there'll be the results of actual projects that are put in for regulated approval. So more.

More definition, but I I would I would.

I would certainly say that the anomaly there'll be in that category. We've previously discussed and show you should anticipate is when we go to the E. I, you'll see a refreshed five year forward Capex plan. So 22 through 26, and you start to begin to see a little bit more of this renewable opportunity dropped in so stay tuned for that.

And we'll be able to talk more granularly with you here in a couple of weeks at all what I would say that.

When you see that.

It certainly will reflect.

I don't know if you call a risk adjusted approach or whatever but it's a nominal view for us to make financial plans and then just like with north central we make decisions on whether it goes up or down based upon our ownership.

Got it terrific guys. Congrats on the results you soon.

[noise]. Thank you.

Mexico to the line of Steve Fleshman with Wilks Research go ahead. Please.

Yeah, Hey, good morning.

Can you hear me, Nick Yeah, Oh, Yeah, near you ignore object great. Thanks.

One question that there might be a bit premature but.

There is obviously a lot going on in D C with the.

The reconciliation bill in the like in one of the provisions it's gotten.

More focus last few days.

Minimum tax.

Provision.

And I'd just be curious kind of.

How you are thinking for larger companies like like yourself or how you are thinking if that has any impact for largely regulated utility like you or or does it not really have much of an impact well I would say and we've been vocal about this and the industry's been vocal about it.

If you put a minimum 15% tax and a lot of US are as you know heavy on Capitol.

And it's gross capital is also infrastructure related capital. So so an increase in with a minimum tax.

Certainly.

Have a have a a cooling effect on on our ability to continue with not only development of infrastructure.

And have an effect on that not not to mention customer's bills ultimately because the taxes are a pass through to our to our customers.

But also you know.

The administration has a focus on clean energy and it will have an effect on on renewables transformation, that's existing as well. So so I think I think I'll put a payroll over over all.

All the utilities ability to to continue investing capital in the way that we are.

Now if if we do do that then obviously, there's customer impacts associated with it and again.

Sort of a hidden tax on our customers.

So we're not we're not we're not not for that provision I think actually we we've been we've been.

We've been very forthright about bills and trying to be an honest broker. When we were talking about C. E. B P and all the other the other things that that.

It was important for us to be able to make this transformation from a clean energy standpoint, and certainly the P. T. C. S. I T sees with the expansion of long term storage.

Nuclear and but but certainly in terms of wind and solar.

Are very important to continue that process to move to a clean energy economy in and we can get along the way. There. This industry is very focused on doing that in in in any kind of any kind of.

Tax headwind that goes the other direction is not helpful and I think you'll probably hear that across the board.

Okay.

Okay and.

More too.

More direct AEP things the just on the approval for the Kentucky sale could you remind us what the standard for approval as in Kentucky is it.

Is it just in the public interest or benefits.

Yeah, but it's it's in the public interest obviously, because they'd have to look at the sooner and determine is that the right.

Approach and has it done in the proper way it actually.

There's been some discussions in Kentucky previously I think it's probably.

Gone past some of that now that that I wanted to make sure. We were operating Kentucky. The way, we should and we've been operating it the way we always have so we've been investing we've been doing the things that we need to do.

Whether we owned it or not and I think that the.

Certainly the the buyer is recognize that and during the transition.

We will continue to support a smooth transition to ensure that that the services provided and things that need to be done to.

To make Kentucky power successful will be there to do it so.

And and of course will support Liberty utilities Nagual Gwen.

And doing that.

Great and then one just quick question maybe for jewelry just the.

The proceeds from the Kentucky sale look like they're matching us pretty much 141 with.

Reducing the equity need, but obviously when you sell an asset you lose some cash flow out the Kentucky maybe.

Maybe it wasn't the best.

Cash flow. So just are doing like offsets and other businesses that are making up.

For the loss cash flow from the I should Trump yeah.

Yeah. Thanks, Thanks for the question, Steve you're right I mean, we do lose the funds from operation as it relates to Kentucky in Kentucky, Transco, Although you Gotta keep in mind that we also eliminate about $1.3 billion a debt associated with those assets to cause that goes away and then the other thing that we think through just to take it a step further is.

If we avoid issuing equity we avoid having to cover off additional dividends that were in our original plan. So I am able to sidestep that as well and that comes with Ah maybe also having some additional dollars to reduce debt at the parent as I mentioned in my opening comments anything above and beyond that $1.4 billion.

Channeled toward.

Debt reduction that was otherwise plan for 2022, and then also keep in mind that Kentucky power had very strained at that they did that to begin with so to eliminate that piece of Ah I guess.

Add to the overall average F F. I did that for the organization is also I met positive for us. So we're able to to be able to put these numbers together and quite frankly from a nurse I started that perspective is mildly beneficial and obviously a little bit of a cough.

Cost on the debt to cap, because we're not issuing additional equity, but the the numbers I'll do hang together and Ah Coincidentally were able to take literally about $1.4 billion a plant equity added plan and again, you'll see that a D. I when you refresh the forecast.

Great. Thanks, so much.

Thank you.

Well, let's go to the lineup your guest Chopra with with Evercore ISI go ahead. Please.

Orange a yes.

Good morning.

Maybe just along the ear for photo deadlines. All my first question is do Julie.

Just.

In terms of 2024, I'm thinking about your equity needs and my model.

Sure.

Target.

That.

Actually is it mid teens are that modem.

There's obviously, that's gonna dictate right how much equity you might need in 2024 so.

Sure there Yep Gotcha, you'll see 2024, when we rollout R E I guidance. So three years forward, but as we continue to say what we're talking about mid to low teams and the reason I say that is you know as I mentioned today. If you look at our FSA did that on and adjusted basis. So backing out the yearly consequence, where something like 13.6.

Percent on a Moody's basis as you know our target has them to be around that the double eight to table waiting that's why we talk about mid to low team the low to mid teens, obviously, our preference and expectation is to start to push more towards what I would characterize as Ned it'd be nice to have at least a 14 handle I'm at F. F I did that.

And that is absolutely the plan, but we'll be able to share more with you as as we get to eat and unveiled at that forecast, but I I wouldn't change how you're thinking about it. So you know.

Think about mid to late teens as it relates to Moody's beat all the way to with a preference toward 14 ish plus percent.

Got it okay. So as long as there's more mid to late teens.

<unk> 2024 year.

Just a big picture questions. If you talk to them about natural gas prices. So maybe just talk about your guys' generation portfolio, a few calls any hedges and and back in customer both.

Yeah, I'll take the from a customer wait perspective, if I, if I could because that's how we think about it because ultimately this impacts our customers. When you think about for example, do some sensitivity analyses around let's say a 10% hike in natural gas prices as we all know they've gone up substantially.

At the end.

Pack to customer rates varies significantly from one operating company to the next depending on a few of them except for example, if I looked at Appalachian Power company. The average residential impact price in in terms of a 10% heightened gas prices would equate to a 0.9% increase in the customers right.

Let's compare and contrast that to say.

<unk> are swept code, where there's much more gas concentration so PSA we'd be talking about 1.6% increase in customer rates swept cold 1.5%. So this is something we are very sensitive too because there's you know overall, we're extremely sensitive to customer rate increases in the aggregate as we continue to execute on our our general Capex program and I don't know if.

And if you had any additional yeah, I'd say certainly.

Your question actually shows the reinforcement of renewables transformation, because it's a perfect hedge.

To natural gas, if north central where employees during the time of the storm urea would've saved customers $225 million. So so when you think about.

The process, we're going through it's great to have natural gas.

Certainly.

But at the times.

Where you can layer in renewables.

To do that it turns out to be a significant benefit to consumers. So so it reinforces that and and I think probably this winter will show it.

I understood. Thanks, guys appreciate the time yeah.

Well, let's go to the line of Andrew whistle with Deutsche Bank Go ahead. Please.

Laurent Andrew.

Hey, good morning.

Big for a lot of good to update your one remaining question I had was after a few rate case settlements and expectations for several other outstanding cases to be resolved into coming months can you share expectations around which might filed new rate cases over the next 12 months or so.

Yeah, I'm trying to think of what else we will be following because just about every jurisdiction we have a case that.

But we expect.

Approval love and and and certainly a lot of cases, there are still still ongoing in just about all the jurisdiction. So so I'd say, we were always reviewing that.

On a regular basis, but at this point.

Well, we have plenty of active cases that we gotta get crossed the finish line and then determine where we're at the other part too is there's okay, what happens to the denominator.

You know because.

Julie mentioned load is changing significantly and and and it continues to do that as we emerge from hopefully opposed Covid world.

And if that's if that's the case then then.

That will be a determinant.

In terms of when we would file for for any case so.

And and I think.

Of course if.

If if we do have a tax changes that occur then that'll that'll force a whole whole new view going forward to many of these cases.

Just like it did when we got tax reform last off around except this one may be on the upside.

Okay, great. So would it be fair to say that 22 or at least the second half of 22 might be a quieter here as far as the regulatory calendar they won't be out.

In terms of followings, but probably.

Boise in terms of resolved.

[laughter] alright, thank you very much.

As a reminder, if you do have questions press, one and zero on your Touchtone phone at this time.

We will go next one moment please.

We'll go next to the line of Michael Peters with Goldman Sachs Go ahead. Please.

Hi, Nagarjuna how.

How are you doing.

I'm fine rough year for your Bayou Bengals this year.

Lot of change he got it.

A couple of questions for you with the Kentucky sale in and you guys have and.

Your your slide number five I think it is over the years has done a good job of detailing how hard it's been known authorized in Kentucky.

Now they Kentucky will be kind of off the off your plate when you look at the other jurisdictions.

What are the ones, where you say hey, we still struggle to earn authorized here.

And what are the structural changes, whether it's legislation and we've seen lots of utilities in places like North Carolina, Kansas, Missouri go in and make structural changes via legislation. What are the structural changes you are going to seek outside of just normal rate case filings that could help improve authorized.

<unk> versus onto a chance in those jurisdictions.

Yeah, you know you're you're seeing you've.

You've seen a fundamental shift in all of the remaining operating companies.

We've made a lot of progress so riders and we have a lot of focus on getting concurrent recovery in cash in the door and what you're seeing really in terms of law. These lags is the amount of investment that replacing in these companies, but as well as you make the transition from certainly from from wires related activity.

Where the riders and then there's the.

The renewables conversion that occurs.

The way we're doing the renewables is commensurate with the recovery. So we should see the authorized.

All returns be closer to the authorized as time goes forward, we don't see any fundamental issues in any of the jurisdictions that are left that that says that we have significant headwinds I mean, the only thing you could probably point too is the is the is a turk issue.

Sweat go but other than that.

And they actually when you think about Arkansas.

We keep saying, we're not recovering the Arkansas portion portion of terror.

That's not because the commission that was because of the Supreme Court of Arkansas. So so.

We've got a very good relations with the commissions and all the jurisdictions and and you feel like the fundamentals are there for continued improvement.

Relative to that to that regulatory lag that exist and and because we're spending.

More areas in our generation is really renewables.

And that's helping out every time, we put an investment in the end of the timing of the investment improves if if I were to death. It improves the the the returns of the individual companies and and I think it will continue to make progress in that regard so.

So I would I would be.

Pretty optimistic that that will continue to make progress in all of these jurisdictions.

Got it and just a quick follow up and this may be a Julie went just curious when we think about your multiyear kind of your guidance growth rate and kind of the the language I'm wanting to be at the high end.

Outside of the transmission segment, the Standalone segment, what does that embed it as an orange aura, we at the rest of it kind of regulated businesses.

And so Michael.

Nick mentioned, we strive to be in the upper half of the guidance range not necessarily upper and although that'd be very nice. So just a point of clarification there unless it relates to returns as you can see with the kind of been hovering around the 9% Ro.

Return level I think that's a safe place for you to assume.

That will kind of hang out there for a while until we get a little more traction another thing I, if I could circling back to your original question and when you look at the Equalizer chart often times, we get questions around AEP, Texas and why the lower although we relative to authorize there and so back to your question around growth.

And how do you manage the business a T. Texas, we continue to invest a significant amount of capital on an annualized basis and while we weren't very progressive wait recovery mechanisms in place that we really enjoy them I can tell you this while.

While the other we may look a touch depressed relative to authorized that company continues to produce earnings growth and to say the 8% to 10% range. So that certifies our ability to back to your original point given that upper half of the range. So.

Then.

Our system wide average assume roughly around nine percentage and trending upward over time, and then around eight P. Texas you know keep in mind. The capital is intentional there as we continue to try to take care of the customer and grow that business and it's paying dividends insensitive, Oregon eight to 10 per cent keeping us both out of it.

Very good to us and we had to go on that page is actually the increase in equity layers as well. So you see improvement in the equity layers and then we're still investing and still meeting the 5% to 7% and and be the upper half and that kind of thing. So so and of course, we continue to manage the F F.

That towards the mid teens. So so that so all the pieces are starting to fit together and there's a lot of optimization that will occur for us to.

To execute on to ensure that we're continuing to meet meet the earnings objectives, but at the same time.

First thing in the right things that enable us to.

To to bridge that gap on the on the on the regulatory lag.

Got it. Thank you guys. So much appreciating congrats of Kentucky, [noise] Yep sure thing. Thanks.

[noise] right.

Cause we have no one else in queue at this time.

Thank you for joining us on today's call as always the I R team will be available to answer any additional questions. You may have Alan would you. Please give the replay information.

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Great day and be safe.

Hi, there.

Testing out your web Castle Street.

Every year, we produced dozens of web Casper AEP employees.

And leadership.

Some of them are available to everyone to watch like the quarterly earnings Web cat.

Others Harper selected viewing for employees in a specific business unit like generation transmission I T.

Eating company web Cams can come to you from the studio at one Riverside Plaza in Columbus.

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Work to do a live webcast.

It can degrade the signal and cause the stream to drop.

Only use the direct dedicated Ethernet connection.

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If you plan to display a live webcast for a group of employees on your computer or in a conference room. It's a good idea to allow yourself plenty of.

Time in advance ideally the day before.

Test your equipment and network connection to ensure you can view the light cream with clean audio and video.

Don't wait until the last minute before a live event to get your computer hooked up in a conference room.

Certain of how the projector speakers in network connection may work in there.

The H P. T V test center by clicking the link from the H P. T V section of H E T.

The test center has answers to frequently asked question linked to test stream into the latest H P approved media player installer to ensure your computer software is up to date.

If you experience a problem viewing the lives 10th Street.

Webcam, please don't call or submit questions to the web cast moderator called the I T help desk, an Ottoman at 8835 30 50.

Technicians, there are on call to assist you.

To the I T team responsible for monitoring the technical aspects of life webcast events.

If you lose the screen during a live webcast quit all programs.

Launch the H P. T V web page and click the watch video button again to reload the stream.

Once again our goal is.

Dealing experience for you. Please make sure to follow the key three tips for successful viewing of any coming events.

The screen the day prior to the web cats.

If you have any problem called the help desk at 8835 30 50.

On the day of the webcast prior to viewing.

All other applications.

Peter including Lotus notes.

Thanks, again for taking the time to learn how to ensure a great dealing experience.

Great day and be safe.

Hi, there.

Testing out your web Castle Street.

Every year, we produced dozens of web cast for a T employees business units and leadership.

Some of them are available to everyone to watch like the quarterly earnings Web cat.

Others.

Selected viewing for employees in a specific business unit like generation transmission I T or an operating company web cast can come to you from the studio at one Riverside Plaza in Columbus.

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[noise].

[music].

[music].

Welcome to the quarterly management up.

[music], featuring Nick Aitken's Lethal board.

Julie slow.

And your moderator Bailey cool things.

Good morning, and thank you for joining us for the quarterly management update webcast today, we're talking about our earnings and safety performance in the third quarter, but first more on the big announcement, we made earlier this week after completing a strategic review of our operations in Kentucky, we are going to sell Kentucky.

Power and the AEP, Kentucky Trans cow, we expect to complete the say on the second quarter of next year pending regulatory approvals. So we're gonna start right off with making me sad to talk more about why this decision was made and the next step.

Okay. So this has been going on for quite a while a lot of discussion about the portfolio and how we manage that portfolio, particularly when you think about all of the the requirements. We have on capital going forward and when we have you know a massive amounts of renewal.

Bulls can get an employee, but also transmission and distribution you'd have to look at all the operating companies and make decisions about how to manage that portfolio in the future and so and and I talked about this a little bit on the on the earnings golf.

We sold the the unregulated generation, we sold River Arts, we actually sold 6 billion in assets was fueling the growth that the the 5% to 7%, but also when you look at the ability to get a recovery of those investments are as well.

The underlying growth expectations for the different different territories. It was important to look at that from across the board. Once we became fully regulated then you know when you look at sources and uses and certainly Kentucky was one of those areas that we felt like that that was.

I'll be better suited for for someone who who is is really used to dealing with a smaller utilities and an Algonquin certainly was a success successful bidder Liberty utilities is or is there a regulated.

A subsidiary and and I think as we look at it.

There's no question as we go board, we're gonna have to look at how much capital we use the ploy Ah, which now next year is gonna be $8 billion billion. This capital forecast. So so when you do that you have to think about okay. How do you find that going forward and and maintain a very credible balance sheet.

Did you go through this process so what's gonna forces to make some decisions as we go along now with the renewables investments being made though the way we're doing it you're you're bringing them in to focus on becoming operational at the same time, we get recovery. So it doesn't impact the credit metrics as as much those are those are.

He facets of what we look at there's been no doubt that the that the market is one has to see repair of the balance sheet. They Wanna see a continued focus on that portfolio management approach. So that we can effectively Ah ah improve the valuation of the company going forward.

For it to Chucky employs though yeah.

Yeah.

We've been there done that I've been part of it when they P bought C. S. W. How is it C. S. W. And it took two years to get done not six months, but but two years and and you're always wondering okay. What what the future holds but in this case by by selling an operating utility.

Individuals who work for the utility and support the utility or or certainly important resources that the buyer is focused on so and I've talked to their C E O and and and he is very excited very focused on bringing Kentucky and of the family about goggles.

Companies and there'll be the Kentucky, you'll be there their largest regulated subsidiary I think the Empire district is the largest one right now and and as we go through this process, though we sort of made the transition and that transition is really around.

The needs of of managing a portfolio of companies now that we're fully regulated.

Where we really couldn't do it because if you sold a regulated company. It would it would hurt you in terms of the valuation of the company, but now with more investments being made across the board did you start making decisions about what the wisest investments and make me clearing away for the financing of those.

Estimates going forward so it's it sounds very.

I hope he doesn't sound callous, but certainly certainly it sounds it's objective and we have to be able to look at the portfolio objectively because we have expectations from our shareholders my customers certainly from from the various operating utilities to ensure that we keep the opera.

Racial integrity of the system at the financial integrity as well and so that's been a part of the process and and and the last Ah I mentioned the call. The last time, we did this.

I feel like bullets born because.

That was in in the forties fifties, I forgot when but but P. Y told me about this but then it was traumatic for them to sell the the Scranton electric system, and the New Jersey system, which which a G. E. D owns at that particular time so.

Ah so now you're going to see and I think you'll you'll see this you've seen it in the industry actually where like Exelon is selling off their nuclear dominion with her natural gas assets and even southern companies sold one of their opera utilities in Florida and it's it's.

Because of that continual management that needs to occur in and that'll occur throughout the industry. So I I fully expect in the future you're gonna see more Ah Ah Ah Ah emanated top activity.

Mm across the board now that being said.

Our remaining operating utilities are all functioning very well, we're very comfortable with the regulatory approaches taken in those states I'm very comfortable with the growth prospects of the various operating companies. So so and they're all.

Round the same size.

Larger midsize utilities. So it makes a lot of sense to continue to to continue to manage those those assets.

Uh-huh.

A couple of things I guess.

Nick mentioned this is really all about gross so putting that in perspective within the industry. The industry is growing tremendously.

Everyone needs to invest in new generation and wires investments.

$8 billion a year, that's a tremendous amount of money that we need to invest in the system and so we need to make sure that we've got those very strong balance sheet to be able to support that and so what we're really doing here is we're growing the business.

Holidaying in shrinking our footprint a bit now when we talk about the other operating companies I mean, our ability to grow our transmission investments in our distribution investments is very much a function of our footprint our ability to pursue regulated renewables opportunities. It's also a function of our foot.

And so you know I I think it's I guess, so a level of comfort. It's we're really just trying to balance all of this house and figure out how do we grow.

For the benefit of our investors, we can't do anything without our investors support and so sometimes you know shrinking to grow with as a part of that transition.

I would like to say, it's just a thanks to Kentucky power employees. I mean, you guys continue to do your job day in and day out we know that this is stressful for Ya.

Create your efforts I wanted to talk briefly about just some of the next steps, we're gonna need to be making a number of regulatory filings in our various jurisdictions, we need to have an operating agreement in place for the Mitchell Powerplant then Mitchell Powerplants as you May recall is owned by both Kentucky and Apple So I should say Wheeling and the opera.

We'll switch over to Wheeling, So there's still quite a bit of things that need to be worked out from the regulatory side, but we'll be getting and setting time with the employees. So that they can meet the new owners, they're excited to be operating this business.

You know once this just settles down folks will feel a lot more comfortable.

You may want to talk about the credit metrics and now it plays in at all yeah, absolutely. So obviously, great care and consideration you know we make these decisions you know objectively as Mckinnon Masters underpin a lot of it and so is Nick mentioned, having a strong balance sheet is critical to being able to manage the business going forward.

So what are the Kentucky transaction will allow us to do is essentially eliminate about $1.3 billion of that because when you sell the assets that that goes along with it. So that begins to help the credit metrics and as I mentioned before and you've heard me talk about them. It's about other webcast is and we look at cash flow from operations and we divide that by the amount of debt.

We have such an extent that we're able to eliminate some of that that that metric improves and that allows us to have a little more run way to do things as we go forward in the future.

Yeah.

As a reminder.

What is your opportunity. So if you have questions for.

Julie Senator questions at a P dot com and we're gonna get to as many of them as we can today when you're out.

So now we're going to take a look at third quarter operating ring. So operating earnings for the third quarter of this year came in at 700.67.

$716.7 million and not slightly below the third quarter of last year now when we look at our financial performance here today.

Things are going well, we're 20th.

We were at this time last year, we've also narrowed or 2021 operating earnings guidance range by 10 cents, which is gonna put us in the upper half of our projections for this year and we're gonna jump right into this why did we narrow our guidance and what is the signal to investors. Yeah. Yeah. Thank you for the question I guess first things first it is.

Normal and typical for American electric power to revise its guidance range at this point in the year, we've got three quarters behind us you've got a cough.

[noise] ago. It stands to reason that you're able to get a better handle on what do you think he might come in at the end of the year. So narrowing at 10 cents is is acceptable and actually expected by the street pushing it up and I didn't get that midpoint up five cents versus the original 20th set guide strange that's even better so that should be viewed favorably by the street as far as why you know.

You mentioned that we looked at the the quarter and we saw a year over year decline, but in fact, when we look at our forecast me look at our forecast not necessarily your over here are forecast would suggest that we've got a fair amount of runway not not to say it without risk. When you think about it loads come in really strong better than we had anticipated when we put that original forecast together to think about it we put our.

Forecasts together for 2021 back in 2020 until October of 2020, we unveiled that and back then at that point, we still didn't have all the vaccinations. You know we didn't have all the recovery going on et cetera. So things have gotten a lot better than anticipate as a matter of fact, we've increased our load forecasts and I think we initially thought we'd be down.

Or I'm, sorry, I'm up 0.2% in total Normalised load in fact, we think it's gonna be about 2.2 per cent now so about 200 basis points or two per cent more than we thought it was gonna be that significant our investments are working well. So in particular you can look at the transmission company doing very well so earnings very solid there and whether it's.

Then a benefit to us as well and they also think about all the stuff that our team has done from an O&M perspective, so he shot out to the entire organization for taking great care and making sure that our O&M is coming in where it needs to be that allows us to take these actions to push the guidance range up so that should be viewed as a positive and give us and the street more confidence in where we're gonna ultimately shake out.

Yeah.

What's behind some of the load growth or what are some economic factors fuelling on ground right now yeah, I think I'm certainly we had one of the best quarters on record in terms of in terms of growth.

Our territory.

All of our territory he seemed to be pretty resilient from what's going on relative to the economy and we expect that to continue you know we've actually seen it come back faster than what we saw originally and and that's helpful. But also.

Remains to be seen house supply chain will have an impact, but but right. Now we continue to see that that can be really dramatic progress. That's being made that helps us in terms of anytime anytime that denominator is growing it helps from a rate perspective, because then we have more calls.

I mean, we have more customers to spread the cost over an overall lowers rates and enables us to make further investments as well. So that's a key part of what we're looking at and and as we go through the year. Just like you know we've benefited from higher growth and what we thought.

We need to make sure that we adjust accordingly next year, if it weren't even more positive or negative and that's that's part of the process. We have to go through on a regular basis, particularly with the way. The economy is right. Now is it is it recovers from the Covid period. So.

Be seen but we we're we're optimistic very optimistic about the about the territory's that where we operate in and you see all the sectors continued to grow and and that's that's clearly important you know we have like 10 different sectors, we look at and and those those continue to grow across the board.

Except for mining, perhaps but yeah actually it's transportation manufacturing spin off a little bit and that's because of the chip shortage, yeah, but you know your appointment.

Commercial industrial doing very well across all operating companies you know, we're seeing a lot of lift and that was a.

All segments that were negatively impacted so churches schools those types of things right. So there really rebounding at this point. We're also seeing a fair amount of Ah load growth from data centers and that's predominantly focused in Ohio, and Ohio Service territory. So it's all good it's all good and interestingly, we're also and we expected.

To be down right because it was so strong last year with everybody working from home, but somebody that's got some stickiness to it so it's not down as much. So we've adjusted our forecast who accommodate that as well. So again. Another reason why we have a fair amount of wind in our sails and confidence and increasing the guidance range at this point. So we'll see how much we can hold onto a 2022.

Yeah great.

Well in this morning, we also wanted to talk about safety because we've had some challenges in 2021 and those of continued into the third quarter, our employees and experienced more injuries. During the third quarter of this year than they did in 2020 and the injuries are experiencing are more severe in the last month alone employ.

And contractors experience six serious injuries, some of which could have been fatalities.

At least when when we talk about those serious event the electric contact in particular were quite close calls. So why don't we learn from these are bad yeah. Thanks, mainly and you know first of all I'd like to do is just kind of talk about 2021.

As we're looking back from you know that 2020th standpoint, we had the best year, we've ever had and that is really from the hard efforts of every single person. That's a part of the a P team and our extended contractor team.

Never in our history have we had the performance that we had last year and so when you know look at what's happening. This year. It really makes us all pause and and dig deeper in terms of what are we what are we doing to learn from the events that we've had and to your point, we have had six event.

Over the past 60 days I mean, it it really has been a very short period of time that these events have occurred and might even be 30 days and so we are having a safety.

We are doing a deep dive summary of each and every event and really trying to figure out what are we missing because we were obviously missing something here and it's not just what are the folks in the field missing. It is what are we missing from our leadership perspective, what do we need to be doing differently. We do know we have to get out there and do more core visits or what.

Some confusion I think in the beginning of the year as to whether or not people could do those visits you know, but this is all about caring for each other whether it's folks that are on the job site looking out for each other whether it's off as leaders, making sure that we've got.

People in the field, who feel comfortable with the work that they're doing that they've got the tools that they need to get the job done. So this is gonna be a much broader review.

Look at these six.

And reflect on how can we get better at the team what I would just ask of everybody who's on this call. Please look out for each other that is how we stay safe.

Zero harm and it's really all about that level of caring there are clearly distractions that are going on sadly. This is something that we're seeing from an industry perspective, but that's no excuse we need to sit there and make sure that every single one of US goes home safe that every one of US goes home in the same condition that they came to work that's what our families are expect.

And that's what we need to expect out of each other so I would just really encourage everyone on this call pay attention to what's going on around you and figure out how we can sit there and read this needle in a positive direction cause we did it last year with our best year and we can do it again.

Yeah, I think she said at all I mean, it's it's pretty clear I.

Talked about this I think last quarter, where I feel like that there's there's a degree of complacency this coming in and it's not just to assist the entire industry.

And that's and that's really an issue when you come off of Covid and you have the additional safety type activities I think that raises safety in your mind and now you know there's there's it seems to me that that we started the year off pretty rocky start after a great years, Lisa said made a lot of progress.

The second quarter, and then it's starting to creep back up and the severity is also I mean.

We've gotten lucky on several occasions. There's no question that we didn't have an employee fatality and that's the dangerous part because you never want to be.

Lucky in that respect because the next thing is going to happen is a fatality, yeah and so you want to stay away from all of those all those elements of luck and that kind of thing and it has to be a clear regimen to be as safe as possible and then ensure your own safety and the safety of others and be observe it.

Certainly observed potential energy and all the things that they were they were focused on doing slips trips and falls turned into major issues and and it continues to be troubling aspect of our safety performance that we need to need to turn around.

Something to think about too fourthquarter is traditionally.

Not right for US we tend to see an increase in injuries at the season abstraction really.

And it's in that slips trips and falls category right and that's one of the things that we see we look for good Texas.

And what our teams are identifying are not slips trips and falls and so safety and health is gonna be proactive getting those messages out there reminding people of the need to transition and to rethink. The work now that we're going into the winter months, but you know in Indiana, He's gotta be able to identify these.

Hazards and it's it's literally focusing on the work at hand, and what can happen asking each and every one of us what can happen with the job in front of me how can this go wrong and if we do that and we do it not only for the work that we're doing but what we're doing it for the work that others are doing then we're going to get better at identifying those hazards.

Before they come and bite us and so we're we're about 10 minutes away from 11 30. So there's still time to get your questions in and if you ask a question again set neck, Lisa or Julie.

<unk> at Yahoo Dot com.

We're gonna try to get to as many as we can with the time that remains.

So we're going to start out with that Covid returned to the workplace question neck and play started returning their workplaces last week and we expect most people to be back within the next few weeks.

At the same time that we're going back. We're also seeing covered infection rates, either staying solid or increasing in some of our areas and there are questions about vaccines for children and one will that'd be available.

Why did we decided that now was the right time to go back with all of these other factors in play.

I think it was important for us to sit out or original view that if we solve it if if we saw the trajectory decrease in any particular state that that we would we would lacy start the process of returning to the office and and and of course, all a lot of work was done them.

Sure we knew who was work it would be the office all the time versus hybrid versus versus remote get that kind of thing to find but the returning your office. Obviously, we want to make sure that all the provisions for her safe return or there. So a lot of work's been done matter of.

I couldn't hardly figure out how to get through the elevator bank here the way that you know the turnstiles and all the roads and everything trying to keep people separated organized and I think that that has a focus of hours to make sure that there's some sense of normalcy that starts to come back I mean at some point you've got to start that.

Ross is now that in mind, we will check and adjust as we go along so if if right starts to start to increase in that kind of thing will will pull back, but but and we wanted to be as flexible as we can we talk about this last time I think the flexibility of getting to the after the first.

The year cause we know there's a lot of you know Thanksgiving and the holidays Christmas holidays, and so forth coming up it's important to make sure that we check and adjust as we go along but in law cases people would be out you know for the holidays and that kind of thing, which sometimes even more.

More of an issue than at work so.

So, but it was it was important for us to finally start that process now it's ragged, we know that and I would daresay that not everybody. That's supposed to come back the offices back at the office, because we've given supervisors and managers.

Certainly the flexibility to respond the way they see fit and and I think that's that's particularly important that we do that so it'll be a continuing process. We just wanted to get it started and and focus on making sure that people can return safely and feel comfortable being here.

But at the same time, it's it's it's time it's time.

I mean, it's been two years almost.

And that's.

Oh, that's a long time, it's crazy to think about it has almost been two years, yeah, Yeah, I mean March it'll be two years right.

Yeah Yeah.

At least if we also want to talk about renewables and where we are on our strategy part of North Central came online in September.

And it's gonna wind in renewables in general is a big part of transforming are generating capacity, so where are we in our transformation process sure. So let's talk about north central So Sundance and Maverick are bullets online in traverse, which will be the largest the wind farm in North America single site Wind farm will come online.

Between January and April of next year.

Any of that transformation, yes, as I look at a number of comments on a P. Now it's been interesting because.

Renewables transformation is something that our customers are looking for our communities are looking for and quite frankly financially makes sense and so we're in the process of doing a number of.

Part of our obligation and meeting the capacity needs of our various operating companies need to do I R. P integrated resource plans and file those with the commission and so a part of that is really looking at what is that lowest cost of generation and it's renewables. That's what it is coming out.

That process and so when I look at a T now and I see some folks who are thinking that it is this pushed to renewables that are driving other changes in the industry are driving the closers. It's not that it's really just the fact that the fleet needs to change and morph and this is something that is happening across the industry.

Even companies that are metals companies more commodity based they're all looking to see what can they do to green up there are generating resources and so we're really just responding to the needs of our customers and our communities. This is gonna be a really important part of our growth trajectory leading to our five to seven per cent.

So over the years what it does is it allows us to create headroom in a lot of these communities still for example, with north central.

It's a three sorry 2 billion dollar investment and it's saving customers. After that asked that has been paid for $3 billion. So what does that too.

Parents, who may be a traditional generating resource, it's actually creating headroom, it's creating that $3 billion worth of headroom and there's no fuel costs on an ongoing basis needed to support those assets and so the more renewable so we can put into our portfolio. The more we can invest in the wire side of the business. The more we can invest in.

Resiliency and and reliability and that's how we position the company for growth and that's how we position the companies to enter in our community center that that clean energy economy, because they need it.

[noise] system, they need a reliable system and they need access to clean resources.

Thank you Lisa So we talked about a lot today and that's all we have time for so we're gonna get handed over to Nick for his clothing Walmart. Okay. I'll, just say to everyone. Thank you again for a very solid quarter. You know it's unfortunate in this business. When you were a public company I just know that we have long term strategies that are in place and we have this.

Surely report card that we call earnings call every quarter and hopefully is commensurate not only operationally strategically with also financially and we we've met those objectives quarter on quarter out for the last 10 years and and there's no question that everyone in this.

Organization is focused on our ability to meet those objectives and the operational excellence is at the core of that that includes safety that includes all the things that we do operationally. So that we don't have to be focused on some major a catastrophic event that some companies have to deal with we're focused on the future and.

Focus on the future in so many ways the future of work, which we talked about which I think is going to be tremendous for us it's culturally and in terms of flexibility for employees to live their lives the way they want to do it but he also benefit from the from the work that they're doing and be valued is associated with that and then of course the future.

Terms of the renewables transformation that that certainly that focus on a clean energy economy is occurring across the country with a P is very focused and very determined to continue along that objective and they actually were positioned very well to make that happen and that's why we're rosado in in <unk>.

Washington to have these discussions about doing it in the right way now there's been some public press out there.

About a hour engagement in the process well, yes, we're fully engaged yes, we're seen as an honest broker were seen that way because that's our culture would also we have the operational excellence to back up what we're talking about in the analysis is done and I think it's a tribute to all of our employees in terms of the way.

Hey, we've continued to present ourselves the way we continue to focus in a company and be able to really focus in on the future and what it's gonna bring and I think it's a it's a bright future for all of us, including the employees of Kentucky power because there's no question that Algonquin is very focused on.

Renewables transformation, they haven't renewables subsidiary as well and I think in the future is bright from that perspective, and we're gonna support our employees are going through this process and actually Algonquin to make this transition in a very positive way. Meanwhile, the rest of a V will continue to focus on the future is.

Far as we're concerned and that future is bright so thank you again for everything that you've done this quarter and certainly as we move board what we do in the future and it's all up to US, we'll check and adjust cause there's so many ragged edges of what we're doing cause we're dragging uncharted territory in many respects, but we have to get to get through it together.

Other and we will so thank you very much.

And thank you to Lisa and Julie for joining us as well. Thank you neck and everyone out there for watching the next quarterly management update webcast is February 24th So until then stay safe.

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