Q4 2023 American Electric Power Company Inc Earnings Call

Regina: Hello, and thank you for standing by. My name is Regina, and I will be your conference operator today. At this time, I would like to welcome everyone to the American Electric Power fourth quarter 2023 earnings call. All lines have been placed on mute to prevent any background noise.

Hello, and thank you for standing by my name is Regina and I will be your conference operator today at this time I would like to welcome everyone to the American Electric power fourth quarter 2023 earnings call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session.

Regina: After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during that time, simply press star followed by the number one on your telephone keypad. To withdraw your question, press star one again.

He would like to ask a question during that time simply press star followed by the number one on your telephone keypad to withdraw your question price Starwood again, I would now like to turn the conference over to Darcy Reese Vice President of Investor Relations. Please go ahead.

Darcy Reese: I would now like to turn the conference over to Darcy Reese, Vice President of Investor Relations. Please go ahead. Thank you, Regina. Good morning, everyone. And welcome to the fourth quarter 2023 earnings call for American Electric Power. We appreciate you taking the time today to join us. Our earnings release presentation slides and related financial information are available on our website at AEP.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 expectations.

Darcy Reese: Thank you Regina good morning, everyone and welcome to the fourth quarter 2023 earnings call for American Electric power. We appreciate your taking time today to join US our earnings release presentation slides and related financial information are available on our website at <unk> Dot com today, we will be making forward looking statements. During the call. There are many factors that.

Darcy Reese: And 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 Ben folk our interim President and Chief Executive Officer, Chuck The Beula, our executive Vice President and Chief Financial Officer, and Peggy Simmons, our executive Vice President of utilities.

Darcy Reese: Please refer to our SEC filings for a discussion of these factors. Joining me this morning for opening remarks are Ben Folk, our Interim President and Chief Executive Officer; Chuck Zebula, our Executive Vice President and Chief Financial Officer; and Peggy Simmons, our Executive Vice President of Utilities. We will take your questions following their remarks. I will now turn the call over to Ben. Well, thank you, Darcy. Good morning, and welcome to American Electric Power's fourth quarter 2023 earnings call. It's great to have a chance to reconnect with you, although I never thought it would be under these circumstances.

Darcy Reese: We will take your questions. Following their remarks, I will now turn the call over to Ben.

Ben Folk: Well. Thank you Darcy good morning, and welcome to American Electric Power's fourth quarter 2023 earnings call.

Ben Folk: Great to have a chance to reconnect with you, although I never thought it would be under these circumstances.

Ben Folk: As you know, the AEP Board of Directors made a decision to remove Julie Sloat from her duties as Chair, President, and CEO. Taking this action was not easy, but the board believes it was in the best interest of AEP and its stakeholders to do so. On behalf of the board and the entire AEP family, I would like to wish Julie well and thank her for all her contributions. I would also like to assure everyone that Julie's departure was not due to any unethical behavior, disagreements about financial policy, or because of any violation of AEP's Code of Conduct.

Ben Folk: As you know the AEP board of directors made a decision to remove julie's float from her duties as chair President and CEO.

Ben Folk: Taking this action was not easy, but the board believes it was in the best interest of AEP and its stakeholders to do so.

On behalf of the board and the entire AEP family I would like to wish Julie well and thank her for all her contributions.

Ben Folk: I'd also like to assure everyone that julie's departure was not due to any ethical behavior disagreements with financial policy or because of any violation of Aep's code of conduct.

Ben Folk: Now, as many of you are aware, after my retirement from Xcel Energy, I joined the AEP board in February of 2022. I was attracted to this board because I was impressed with AEP's business model, its strong asset base, and the quality of its leadership team and board. I'm even more impressed two years later. In my tenure here, I've seen the AEP team rise to meet multiple challenges. Let me give you some examples.

Ben Folk: Now as many of you are aware after my retirement from Excel energy I joined the AEP Board in February of 2022.

Ben Folk: I was attracted to this board because I was impressed with Aep's business model its strong asset base and the quality of its leadership team and board I'm, even more impressed two years later.

Ben Folk: In my tenure here I've seen the AEP team rise to meet multiple challenges let.

Ben Folk: Let me give you some examples starting with earnings for 14 years in a row AEP has met or exceeded earnings guidance. In 2023 is no exception. Our operating earnings came in at $5.25. That's within our guidance range. Despite 37 cents of unfavorable weather and <unk>.

Ben Folk: Starting with earnings. For 14 years in a row, AEP has met or exceeded earnings guidance, and 2023 is no exception. Our operating earnings came in at $5.25, that's within our guidance range, despite $0.37 of unfavorable weather and $0.45 of increased interest costs over the prior year. As you know, controlling O&M expense has been a challenge for the industry.

Ben Folk: 45 cents, a increased interest cost over the prior year.

Ben Folk: Now as you know controlling O&M expense has been a challenge for the industry and.

Ben Folk: And AEP has met that challenge, essentially keeping O&M flat for the last 10 years while at the same time doubling its asset base. This team's continuous focus on O&M efficiency is nothing short of excellent. You may also recall that in early 2023, the Texas Commission denied a petition to be part of SWEPCO's 999-megawatt renewable energy project for $2.2 billion.

Ben Folk: <unk> has met that challenge essentially keeping O&M flat for the last 10 years, while at the same time doubling its asset base.

Ben Folk: This team's continuous focus on O&M efficiency is nothing short of excellent.

Ben Folk: You May also recall that in early 2023, the Texas Commission denied our petition to be part of <unk> 999 megawatts renewables project for $2 2 billion.

Ben Folk: But the team didn't miss a beat and put the project back on track, with Arkansas and Louisiana ultimately stepping up to move forward with the full project. As a result, and including SWEPCO, today we have commissioned approval of $6.6 billion of new renewable projects throughout AEP's service territory, representing a 70% achievement of our current five-year, $9.4 billion new generation capital plan. I hope you would agree with me that that is really solid execution.

Ben Folk: But the team didn't Miss a beat and put the project back on track with Arkansas, and Louisiana, ultimately stepping up to move forward with the full project as a result, and including swept co. Today, we have commission approval of $6 $6 billion of new renewable projects throughout Aep's service territory.

Ben Folk: Representing a 70% achievement of our current five year $9 4 billion New generation capital plan I Hope you would agree with me that that is really solid execution.

Ben Folk: Initiatives to simplify and de-risk our portfolios are focusing the board and the management, and we are pleased with the great progress made. Last year, we completed the sale of our unregulated renewables portfolio, bringing in $1.2 billion of cash proceeds. We should be closing on our New Mexico Renewable Development Solar Portfolio within the next day or two. This, in combination with the expected conclusion of our retail and distributed resources sales process in the second quarter, keeps us on schedule to achieve our 2024 asset sales target. Now, as we move forward, AEP will continue to be a disciplined portfolio manager, and we will be willing to take action when price and the ability to execute intersect. To that end, we've made the decision to retain our ownership interests in both our Prairie Wind and Pioneer Transmission joint ventures.

Ben Folk: Initiatives to simplify and Derisk, our poor portaloo are squarely in the focus of the board and the management team and we are pleased with the great progress made.

Ben Folk: Last year, we completed the sale of our unregulated renewables portfolio, bringing in $1 $2 billion of cash proceeds.

Ben Folk: We should be closing on our new Mexico wind up renewable development solar portfolio within the next day or two this in combination with the expected conclusion of our retail and distributed resources sales process in the second quarter keeps us on schedule to achieve our 2024 asset sales targets.

Ben Folk: As we move forward AEP will continue to be a disciplined portfolio manager and we would be willing to take action when price and the ability to execute intersect.

Ben Folk: To that end, we've made the decision to retain our ownership interest in both our Prairie wind and pioneer transmission joint ventures.

Ben Folk: We also completed the review of TransSource and ultimately determined that owning this joint venture fits strategically within our portfolio. We like our remaining assets and will focus going forward on doubling down on our efforts to achieve constructive regulatory outcomes that will allow us to provide the quality of service our customers need and expect. Regarding ICON Capital, our recent agreement came about from a culmination of a constructive dialogue between AEP and the ICON team. Like us, the ICON team believes AEP shares are undervalued, and there's meaningful upside potential for our investors.

Ben Folk: We also completed their review of Trans source and ultimately determined that owning this joint venture fits strategically within our portfolio.

Ben Folk: We like our remaining assets and will focus going forward on doubling down on our efforts to achieve constructive regulatory outcomes that will allow us to provide the quality of service our customers need and expect.

Ben Folk: Regarding Icahn capital a recent agreement came about from the culmination of a constructive dialogue between AEP and the icon teams.

Ben Folk: Like us the icon team believes AEP shares are undervalued and there is meaningful upside potential for our investors the.

Ben Folk: The addition to AEP's board will bring fresh perspective as we continue to execute on strategic priorities and enhance value for our stakeholders. Looking ahead, today we are reaffirming our 2024 full-year operating earnings guidance range of $5.53 to $5.73, as well as our long-term earnings growth rate of six to seven percent, which is underpinned by a 43 billion dollar five-year capital plan in addition to a 14 to 15 percent FFO to debt target, which Chuck will expand upon shortly. You should know that I am committed to my role as interim president and CEO, and So before I turn it over to Peggy for regulatory updates and Chuck for a financial review, let me also acknowledge that 2023 has been, at times, a challenging year at AEP. There's certainly been some twists and turns and a few bumps in the road.

Ben Folk: The addition to Aep's board will bring fresh perspective, as we continue to execute on our strategic priorities and enhance value for our stakeholders.

Ben Folk: Looking ahead today, we are reaffirming our 2020 for full year operating earnings guidance range of $5 53 to $5 73 as.

Ben Folk: As well as our long term earnings growth rate of 6% to 7%, which is underpinned by a 43 billion five year capital plan. In addition to 14% to 15% at the older debt target, which Chuck will expand upon shortly.

You should know that I am committed to my role as interim President and CEO and I believe I can add value while the board works to identify a permanent successor.

Speaker Change: So before I turn it over to Peggy for regulatory updates and Chuck for a financial review. Let me also acknowledged that 2023 has been at times, a challenging year at AEP Theres certainly been some twists and turns in a few bumps in the road.

Ben Folk: But I would encourage all of you to focus on the key opportunities that lie ahead. I have tremendous confidence in our team's ability to achieve our objectives as we work every day to deliver safe, reliable, and affordable energy to our customers. With that, I'll turn it over to Peggy.

Speaker Change: But I would encourage all of you to focus on the key opportunities that lie ahead, I have tremendous confidence in our team's ability to achieve our objectives. As we work every day to deliver safe reliable and affordable energy to our customer with that I'll turn it over to Peggy. Thanks.

Peggy Simmons: Thanks, Ben, and good morning, everyone. Now I'd like to turn to updates on our ongoing regulatory and legislative efforts. While we made important regulatory progress in 2023, it is clear that we can do even more to facilitate successful and constructive outcomes. Details of related activities can be found in the appendix on slides 29 through 31.

Peggy Simmons: Thanks, Ben and good morning, everyone now I'd like to turn to updates on our ongoing regulatory and legislative effort.

Peggy Simmons: While we made important regulatory progress in 2023. It is clear that we can do even more to facilitate successful and constructive outcomes.

Detail of related activities can be found in the appendix on slides 29 through 31.

Peggy Simmons: Closing the authorized versus earned ROE gap is a key area of focus for us. Our fourth-quarter ROE came in at 8.8%, a slight improvement over the third quarter. This also reflects impacts of approximately 40 basis points from mild weather conditions in 2023.

Peggy Simmons: Clothing, the authorized ROE.

Peggy Simmons: <unk> earned ROE gap is a key area of focus for us.

Peggy Simmons: Our fourth quarter ROE came in at eight 8%.

Peggy Simmons: Slight improvement over the third quarter.

Peggy Simmons: This also reflects impacts of approximately 40 basis points from mild weather conditions in 2023.

Peggy Simmons: Our efforts to improve and bridge the ROE gap are supported by work we've done related to the recent passage of legislation that will help position us to provide safe and reliable service while managing costs and reducing regulatory lag. Most importantly, we obtain securitization in Kentucky, a biannual distribution cost recovery factor, or DCRF, in Texas, and rate reviews every two years in Virginia. On the regulatory front, we secured several important wins over the course of 2023, including achieving constructive base rate case outcomes in Louisiana, Oklahoma, and Virginia, reestablishing formula rate plans in Arkansas and Louisiana, and reaching a settlement in our Ohio ESP-5 filing on which we're awaiting a commission order. Overall, in 2023, we secured $312 million in rate relief.

Peggy Simmons: Our efforts to improve and bridge. The ROE gap is supported by work we've done related to the recent passage of legislation that will help position us to provide safe and reliable service, while managing costs and reducing regulatory lag.

Peggy Simmons: Most importantly, we obtained securitization in Kentucky, a biannual distribution cost recovery factor or D. C. Our app in Texas and rate reviews every two years in Virginia.

Peggy Simmons: On the regulatory front, we secured several important wins over the course of 2023.

Peggy Simmons: Including achieving constructive base rate case outcome, and Louisiana, Oklahoma, and Virginia, Reestablishing Formula rate plans in Arkansas, and Louisiana, and reaching a settlement in our Ohio, ESP filing on which we're awaiting a commission order.

Peggy Simmons: Overall in 2023, we secured $312 million and rate relief.

Peggy Simmons: We also filed new base cases in Indiana, Michigan, and Kentucky in 2023. In Indiana, we have already reached a settlement, which we filed in December, and we expect a commission decision by June of this year. In Michigan, we continue to advance through the process and currently expect a ruling in the case in July. In Kentucky, the base case and securitization application were approved by the commission earlier this year.

Peggy Simmons: We also filed new base cases in Indiana, Michigan, and Kentucky in 2023.

In Indiana, we have already reached the settlement, which we filed in December and we expect a commission decision by June of this year.

Peggy Simmons: In Michigan, we continue to advance the process and currently expect a ruling in the case in July.

Peggy Simmons: In Kentucky, the base case and securitization application was approved by the commission earlier this year.

Peggy Simmons: Other upcoming cases include a new Oklahoma-based rate case for PSO, which we filed last month. Additional filings in the first quarter will include an AAP Texas-based rate case and the AFCA Virginia biannual rate review that should have the benefits of legislative changes attained in 2022. While we reached many constructive outcomes in 2023, we are disappointed in a couple disallowances recently received. First, in Texas, the commission issued a decision disallowing capitalization of AFUDC related to our church plant in mid-December 2023, and we filed a motion for reconsideration a week later. In West Virginia last month, the commission disallowed a portion of our March 2021 to February 2023 application under recovered fuel, and we recently filed an appeal with the West Virginia Supreme Court on February 8th.

Other upcoming cases include our new Oklahoma base rate case for peso, which we filed last month.

Peggy Simmons: Additional filings in the first quarter will include an AEP, Texas base rate case, and the Atco, Virginia biannual rate review that should have the benefits of legislative changes attained in 2023.

Peggy Simmons: While we reached many constructive outcomes in 2023, we are disappointed in a couple of Disallowances recently received.

Peggy Simmons: First in Texas. The Commission issued a decision disallowing capitalization of a F U D C related to our plant in mid December 2023.

Peggy Simmons: And we filed a motion for reconsideration reconsideration a week later.

Peggy Simmons: In West Virginia last month, the commission disallowed a portion of our March 2021 to February 2023 under recovered fuel and we recently filed an appeal with the West Virginia Supreme Court on February eight.

Peggy Simmons: We are also disappointed with the FERC order we received in January 2024 related to the treatment of accumulated deferred income taxes associated with the Net Operating Loss Carry Forward, or NOLC, mostly affecting our transmission hole segment. We just filed for rehearing on February 20th. Chuck will discuss the related unfavorable net financial impact on 2023 operating earnings. Looking ahead, we know there's more work to be done as we advance our regulatory strategies in 2024 to achieve a forecasted regulated ROE of 9.1 percent. We are well on our way this year with almost 70% of rate relief being either secured or related to mechanisms that are more administrative in nature.

Peggy Simmons: We are also disappointed with the FERC order we received in January 2024 related to treatment of accumulated deferred income taxes associated with net operating loss carryforwards or Nols.

Peggy Simmons: Mostly affecting our transmission Holdco segment.

Peggy Simmons: We just filed for rehearing on February 20th.

Peggy Simmons: Shortly Chuck will discuss the related unfavorable net financial impact to 2023 operating earnings.

Peggy Simmons: Looking ahead, we know there's more work to be done as we advance our regulatory strategies in 2024 to achieve our forecasted regulated Roe.

Nine 1%.

Peggy Simmons: We are well on our way this year with almost 70% of rate relief either secured or related to mechanisms that are more administrative in nature.

Peggy Simmons: We look forward to continuing to engage constructively with our regulators and strengthening relationships at all levels. As Ben mentioned, this year AEP continued to advance our five-year, $9.4 billion regulated renewables capital plan, and we now have a total of $6.6 billion approved by various state commissions. More detail of resource additions can be viewed in the appendix on slides 32 through 34. As previously disclosed, we received approval for APCO's 143 megawatts of wind generation, totaling more than $400 million of investment. This is in addition to the previously approved 209 megawatts of solar and wind projects for approximately $500 million. In 2023, I&M also received commission approval in both Indiana and Michigan for 469 megawatts of solar projects, representing $1 billion of investment. PSO's 995.5-megawatt renewables portfolio for $2.5 billion, and SWEPCO's 999-megawatt renewable energy for $2.2 billion.

Peggy Simmons: We look forward to continuing to engage constructively with our regulators and strengthening relationship at all level.

Peggy Simmons: As Ben mentioned this year AEP continued to advance our five year $9 $4 billion regulated renewables capital plan and now have a total of $6 $6 billion approved by various state commissions.

Peggy Simmons: More detail of resource additions can be viewed in the appendix on slide 32 to 34.

Peggy Simmons: As previously disclosed we received approval for <unk> 143 megawatts of wind generation totaling more than $400 million of investment.

Peggy Simmons: This is in addition to the previously approved 209 megawatts of solar and wind projects for approximately $500 million.

Peggy Simmons: In 2023, we also received commission approval in both Indiana, and Michigan for INR 469 megawatts of solar projects, representing $1 billion of investment.

Peggy Simmons: P. S. O 995, five megawatt renewable renewables portfolio for $2 $5 billion and swap code 999 megawatt renewables for $2 2 billion.

Peggy Simmons: Our Fleet Transformation Goals are aligned with and supported by our integrated resource. We have pending requests for proposals for a diverse set of additional generation resources at I&M in Kentucky, PSO, and SWEPCO, with more to come from other operating companies, including APCO. These generation investments are an integral part of our broader capital program, which is 100% focused on regulated assets, and the production tax credits that are generated from our renewable energy projects are passed along to and provide great value to our customers. In addition to these projects, AEP is advancing an additional $27 billion in investment in our transmission and distribution systems to support reliability and resilience.

Peggy Simmons: Our fleet transformation goals are aligned with and supported by our integrated resource plan, we have pending request for proposals for a diverse set of additional generation resources and I am in Kentucky, PSL and sweat Koh with more to come from other operating companies, including Atco.

Peggy Simmons: These generation investments are an integral part of our broader capital program, which is 100% focused on regulated assets and the production tax credits that are generated from our renewable energy projects or pass along to and provide great value to our customers.

Peggy Simmons: In addition to these projects AEP is advanced advancing an additional $27 billion and investment in our transmission and distribution system to support reliability and resiliency.

Charles E. Zebula: These combined investments underpin our six to seven percent EPS growth commitment while mitigating customer bill impact. With that, I'll pass it over to Chuck to walk through the performance drivers in detail supporting our financial commitment. Thanks, Peggy, and good morning to everyone on the call.

Peggy Simmons: These combined investments underpin, our 67% EPS growth commitment, while mitigating customer bill impacts with that I'll pass it over to Chad to walk through the performance drivers in detail supporting our financial commitment.

Peggy Simmons: Yeah.

Chad: Thanks, Peggy and good morning to everyone on the call I'll walk us through the fourth quarter and full year results for 2023 share some updates on our service territory load our outlook for this year and finish with commentary on credit metrics and liquidity.

Charles E. Zebula: I'll walk us through the fourth quarter and full year results for 2023, share some updates on our service territory load, our outlook for this year, and finish with commentary on credit metrics and liquidity. Let's go to slide nine, which shows the comparison of GAAP earnings to operating earnings for the quarter and year to date period. GAAP earnings for the fourth quarter were $0.64 per share compared to $0.75 per share in 2022.

Chad: Go to slide nine which shows the comparison of GAAP to operating earnings for the quarter and year to date periods.

Chad: GAAP earnings for the fourth quarter were 64 per share compared to <unk> 75 per share in 2022.

Charles E. Zebula: For the year, GAAP earnings were $4.26 compared to $4.51 in 2022. As we have highlighted throughout 2023, our year-to-date comparison of gap to operating earnings reflects the gain or loss related to the sale of certain businesses, regulatory outcomes, as well as our typical mark-to-market adjustments as non-operating. Our team is committed to minimizing the variances between gap and operating earnings as we go forward. Detailed reconciliations of gap-to-operating earnings are shown on slides 16 and 17 of the presentation today. Let's quickly cover the fourth quarter.

Chad: For the year GAAP earnings were $4 26, compared to $4 51 in 2022.

Chad: As we have highlighted throughout 2023, our year to date comparison of GAAP to operating earnings reflects the gain or loss related to the sale of certain businesses.

Chad: Regulatory outcomes as well as our typical mark to market adjustments as non operating our team is committed to minimizing the variances between GAAP and operating earnings as we go forward.

Chad: Reconciliations of GAAP to operating earnings are shown on slides 16, and 17 of the presentation today.

Chad: Let's quickly cover the fourth quarter, our fourth quarter earnings came in at $1 23 per share, which was an 18% improvement over the same period in 2020 to note that we had 25 cents a favorable O&M and strong performance in our generation and marketing segment.

Charles E. Zebula: Our fourth-quarter earnings came in at $1.23 per share, which was an $0.18 improvement over the same period in 2022. Note that we had $0.25 of favorable O&M and strong performance in our generation and marketing segment, partially offset by $0.06 of unfavorable weather, $0.09 of higher interest costs, and lower performance in transmission hold code. December weather, in particular, was the 28th warmest out of the last 30 years.

Chad: Partially offset by <unk> <unk> of unfavorable weather <unk> <unk> of higher interest costs and lower performance in transmission Holdco.

Chad: December weather in particular was the 28th warmest out of the last 30 years for reference the full details of our fourth quarter results are shown on slide 15 of the presentation.

Charles E. Zebula: For reference, the full details of our fourth quarter results are shown on slide 15 of the presentation. Now, let's have a look at our full year results for 2023 on slide 10. Operating earnings were $5.25 per share compared to $5.09 per share in 2022. Looking at the drivers by segment, operating earnings for vertically integrated utilities were $2.47 per share, down $0.09, mostly due to unfavorable weather, higher interest expense, and higher income taxes.

Chad: Let's have a look at our full year results for 2023 on slide 10.

Chad: Operating earnings were $5 25 per share compared to 509 per share in 2022.

Chad: Looking at the drivers by segment operating earnings for vertically integrated utilities were $2 47 per share down nine cents, mostly due to unfavorable weather.

Interest expense and higher income taxes. These items were partially offset by rate changes across <unk>.

Charles E. Zebula: These items were partially offset by rate changes across various operating companies, increased transmission revenue, higher normalized retail load, favorable depreciation, and lower O&M. Once again, depreciation is favorable at the vertically integrated segment, primarily due to the expiration of the Rockport Unit 2 lease in December 2022. The transmission and distribution utility segment earned $1.30 per share, up 14 cents from last year. Positive drivers in this segment included increased transmission revenue, rate changes in Texas and Ohio, and lower O&M. Partially offsetting these items were unfavorable weather, higher depreciation, and higher interest expense.

Chad: Various operating companies increased transmission revenue.

Chad: Normalized retail load favorable depreciation and lower O&M.

Chad: Once again depreciation is favorable at the vertically integrated segment, primarily due to the exploration of the Rockport unit two lease in December 2022.

Chad: The transmission and distribution utilities segment earned $1 30 per share up <unk> 14 from last year.

Chad: Positive drivers in this segment included increased transmission revenue rate changes in Texas, and Ohio, and lower O&M, partially offsetting these items were unfavorable weather higher depreciation and higher interest expense.

Charles E. Zebula: The AEP Transmission Hold Go segment contributed $1.43 per share, up $0.11 from last year. Positive investment growth of $0.09 and favorable income taxes of $0.05 were the main drivers in this segment. As Peggy mentioned, we received the FERC NOLC order in January, resulting in an unfavorable net impact to consolidated earnings of $0.07 per share, with the majority of that impact occurring at the Transmission Hold Cup. The impact of this order on our 2024 plan is approximately three cents per share. Generation and Marketing produced $0.59 per share, up $0.09 from last year. The positive variance here is primarily due to improved retail and wholesale power margins, the sale of renewable development sites, and favorable impacts associated with the contracted renewable sale in August. These items were partially offset by higher interest expense and unfavorable income tax.

Chad: The AEP transmission Holdco segment contributed $1 43 per share up <unk> 11 from last year.

Chad: Positive investment growth of nine cents and favorable income taxes of five <unk>.

Chad: Were the main drivers in this segment as Peggy mentioned, we received the FERC NOL see order in January resulting in an unfavorable net impact to consolidated earnings of <unk> seven per share with the majority of that impact occurring at the transmission Holdco.

Chad: The impact of this order to our 2024 plan is approximately <unk> <unk> per share.

Chad: Generation and marketing produced 59 per share up nine from last year.

Chad: Positive variance here is primarily due to improved retail and wholesale power margins the sale of renewable development sites and favorable favorable impacts associated with the contracted renewable cell in August these items were partially offset by higher interest.

Spence and unfavorable income taxes.

Charles E. Zebula: Finally, corporate and other was down nine cents per share, driven by higher interest expense, partially offset by a favorable year-over-year change in investment gains, largely due to investment losses that occurred in the fourth quarter of 2022. As we mentioned earlier, we are reaffirming our guidance range for 2024. For convenience, we've included an updated waterfall bridging our actual 2023 results to the midpoint of our guidance this year on slide 24. While some variances change due to last year's actual results, there is no change to our segments or overall guidance. Turning to slide 11, I'll provide an update on weather-normalized load performance. Overall retail load grew 2.5% in 2023.

Chad: Finally, corporate and other was down nine cents per share driven by higher interest expense.

Chad: Really offset by a favorable year over year change in investment gains largely due to investment losses that occurred in the fourth quarter of 2022.

Chad: As we mentioned earlier, we are reaffirming our guidance range for 2024.

Chad: For convenience we have included an updated waterfall bridging our actual 2023 results to the midpoint of our guidance this year in slide 24.

Chad: While some very introduced change due to last year's actual results. There is no change to our segments or overall guidance.

Chad: Turning to slide 11, I'll provide an update on whether normalized load performance overall.

Chad: Overall retail load grew two 5% in 2023 this was stronger than the 7% in our original guidance. Thanks to an acceleration in data center growth and our commitment to economic development across our service territory. This.

Charles E. Zebula: This was stronger than the 0.7% in our original guidance thanks to an acceleration in data center growth and our commitment to economic development across our service territory. This is most apparent when looking at the incredible expansion in commercial load shown in the upper right-hand quadrant of the slide. Commercial sales grew 7.8% for the year and were again dominated by data centers.

Chad: Most apparent when looking at the incredible expansion and commercial load shown in the upper right hand quadrant of the slide.

Chad: Commercial sales grew seven 8% for the year and were again dominated by data centers.

Charles E. Zebula: We are encouraged that the gains are becoming more geographically diverse. New projects have come online in Michigan, Kentucky, and Oklahoma to supplement the development of what we see in Ohio and Texas. This is a trend we expect to continue over the next several years as the global demand for data storage and processing accelerates through the growth of A.I. and other technology.

Chad: We are encouraged that the gains are becoming more geographically diverse.

Chad: New projects have come online in Michigan, Kentucky, and Oklahoma to supplement the development of what we see in Ohio, and Texas. This is a trend we expect to continue over the next several years as the global demand for data storage and processing accelerates.

Chad: The growth of the AI and other technologies.

Charles E. Zebula: We expect Commercial Load to continue to grow from its new, higher base this year as projects work their way through the queue, and commitments for 2025 are exceptionally robust. I believe that some of the 2025 load is going to accelerate and bleed into this year. Industrial sales grew at 1.6 percent, which you can see in the lower left-hand quadrant of the slide.

Chad: We expect commercial load to continue to grow from its new higher base. This year as projects work their way through the queue and commitments for 2025 are exceptionally robust I believe that some of the 2025 load is going to accelerate and bleed into this year.

Chad: Industrial sales grew at one 6%, which you can see in the lower left hand quadrant of the slide. This is mostly a trip attributable to a number of large industrial loads. We've recently added across our service territories, which are more than offsetting any economic challenges seen by.

Charles E. Zebula: This is mostly attributable to a number of large industrial loads we've recently added across our service territories, which are more than offsetting any economic challenges seen by our existing customers. We expect industrial load growth to continue to reflect the softness in manufacturing nationally, with only a modest increase this year. However, growth in industrial sales beyond this year should accelerate as borrowing costs moderate and several large loads currently under construction come online. In the upper left-hand corner of the slide, you'll see that residential load declined slightly in 2023. Usage per residential customer has declined for the past two years as homes have become more energy efficient and workers spend more time in an office instead of at home. The negative impact of inflation on household budgets may be influencing usage as well.

Chad: Our existing customers we.

Chad: We expect industrial load growth to continue to reflect the softness in manufacturing nationally with only a modest increase this year. However.

Chad: However growth in industrial sales beyond this year should accelerate as borrowing costs moderate and several large loads currently under construction come online.

Chad: In the upper left hand corner of this slide Youll see that residential load declined slightly in 2023.

Chad: Usage per residential customer has declined for the past two years as homes have become more energy efficient and worker spend more time in an office instead of at home.

Chad: The negative impact of inflation on household budgets may be influencing usage as well.

Charles E. Zebula: On a positive note, we've seen our residential customer base grow consistently in certain regions. In 2023, we added almost 31,000 net new residential customers across our footprint, resulting in a positive offset to this segment. Overall, we're optimistic about the positive trends in load over the next several years, especially from a commercial and industrial perspective. Our conservative approach to estimating large loads gives us a lot of confidence in the growth we forecast. In our next update, however, I would expect to see some upside in this area. Let's move on to slide 12 to discuss the company's capitalization and liquidity position. In the top left table, you can see the FFO to debt metric stands at 13.2% for 2023. Positive changes in FFO were as outlined in the third quarter call and included favorable changes in cash collateral, fuel recovery, and other various drivers. These positive changes were somewhat offset by an $830 million increase in debt during the quarter, primarily due to the issuance of long-term debt to pre-fund our March 2024 AEP Parent Maturity.

Chad: On a positive note we've seen our residential customer base grow consistently and certain regions. In 2023, we added almost 31000 net new residential customers across our footprint.

Chad: Zoning and a positive offset to this segment.

Chad: Overall, we're optimistic about the positive trends in load over the next several years, especially from a commercial and industrial perspective, our conservative approach to estimating large loads gives us a lot of confidence in the growth we forecasted in our next update however, I would.

Chad: Spec to see some upside in this area.

Let's move on to slide 12 to discuss the company's capitalization and liquidity position and.

Chad: In the top left table you can see the <unk> to debt metric stands at 13, 2% for 2023.

Chad: Positive changes in <unk>, where as outlined on the third quarter call and included favorable changes in cash collateral fuel recovery and other various drivers. These positive changes were somewhat offset by an $830 million increase in debt.

Chad: During the quarter, primarily due to the issuances issuance of long term debt to pre fund our March 2020 for AAP parent maturity.

Charles E. Zebula: We are pleased that the team has overcome strong financial headwinds due to unfavorable weather and an unprecedented increase in interest rates to end the year above Moody's downgrade threshold of 13 percent. We expect our FFO to debt metric to continue to improve throughout 2024 as we progress towards our targeted range of 14 to 15 percent. This continued positive trend assumes normal weather for 2024 and continued growth in our cash flows through various regulatory activities, including recovery of our deferred fuel balances of approximately $425 million. Our debt-to-capital increased from the prior quarter by 60 basis points to 63 percent, and our parent debt-to-total debt is approximately 21.7 percent.

Chad: We are pleased that the team has overcome his strong financial headwinds due to unfavorable weather and an unprecedented increase in interest rates to end the year above Moody's downgrade threshold of 13%, we expect our <unk> to debt metric to continue to improve throughout 2000.

Chad: <unk> 24, as we progress towards our targeted range of 14% to 15%. This continued positive trend assumes normal weather for 2024 and continued growth in our cash flows through various regulatory activities, including recovery of our deferred fuel ban.

<unk> of approximately $425 million.

Chad: Our debt to cap increased from the prior quarter by 60 basis points to 63% and our parent debt to total debt is approximately 21, 7%.

Charles E. Zebula: In the lower left quadrant of this slide, you can see our liquidity summary, which remains strong at $3.4 billion and is supported by our bank revolver and credit facility. Lastly, on the qualified pension front, our funding status remains unchanged from the prior quarter to end the year at just over 100%. While falling interest rates increased the liability during the quarter, this increase was offset by positive asset returns.

Chad: In the lower left quadrant of this slide you can see our liquidity summary, which remains strong at $3 $4 billion and is supported by our bank revolver and credit facility.

Chad: Lastly on the qualified pension front, our funding status remains unchanged for the from the prior quarter to end the year at just over 100%.

Chad: While falling interest rates increased the liability during the quarter. This increase was offset by positive asset returns.

Charles E. Zebula: Turning to slide 13, I'll give a quick recap of today's message. We delivered on our commitments for 2023 despite the significant challenges we face. Weather was one of the most mild years on record for the AEP system in the past 30 years, resulting in a negative $0.37 impact year over year and $0.21 versus normal weather.

Speaker Change: Turning to slide 13, I'll give a quick recap of today's message.

Speaker Change: We delivered on our commitments for 2023, despite the significant challenges we faced.

Speaker Change: Weather was one of the most mild years on record for the AEP system in the past 30 years, resulting in a negative 37 impact year over year and 'twenty one versus normal weather.

Charles E. Zebula: To put a little more context to those numbers, our heating degree days were down 36% compared to normal across the system. Also, interest expense was a 45 cent hurdle to overcome versus 2022 results. We work diligently throughout the year to reprioritize and balance our plan by adjusting the timing of discretionary spend while staying focused on meeting our core business needs. While admittingly facing some challenges on the regulatory front, we secured many rate outcomes that were critical in supporting our objectives to provide reliable service to our customers. Looking ahead to this year, we are optimistic about the opportunities and prepared to face any challenges ahead of us. We reaffirm our guidance for 2024 of 553 to 573 per share, our long-term growth rate of 6 to 7 percent, and an improved balance sheet while continuing to implement our capital program, taking care of the customer, earning our authorized return, and executing on our strategic priorities. I would like to take a moment and thank Julie Sloat for her 23 years with AEP. Julie has made a positive impact on AEP and will be missed by many.

Speaker Change: A little more context to those numbers, our heating degree days were down 36% compared to normal across the system.

Speaker Change: Also interest expense was a 45% hurdle to overcome versus 2022 results.

We worked diligently throughout the year to re prioritize and balance our plan by adjusting the timing of discretionary spend while staying focused on meeting our core business needs, while admittedly facing some challenges on the regulatory front, we have secured many rate outcomes that.

Speaker Change: Were critical in supporting our objectives to provide reliable service.

Speaker Change: Service to our customers.

Speaker Change: Looking into this year, we are optimistic about the opportunities and prepared to face any challenges ahead of us we reaffirm our guidance for 2024 of $5 53 to $5 73 per share our long term growth rate of 6% to 7% and an improved <unk>.

Speaker Change: Alan sheet, while continuing to implement our capital program, taking care of the customer, earning our authorized return in executing on our strategic priorities.

Speaker Change: I would like to take a moment and thank Julie slow for her 23 years with AEP.

Speaker Change: Julie has made a positive impact on AEP and will be missed by many.

Operator: Ben, we welcome you to the AEP management team. Your leadership in the industry is well respected, and you will be embraced by the employees of AEP. The entire management team looks forward to working with you and the board as we look to enhance value for all AEP stakeholders. Thank you for your time today. Operator, can you open up the call for questions? At this time, I'd like to remind everyone that in order to ask a question, simply press the star followed by the number one on your telephone keypad. Our first question will come from the line of Sharpe Reza with Guggenheim Partners. Please go ahead. Hey guys, good morning. Good morning. Morning, morning.

Speaker Change: Then we welcome you to the AAP management team your leadership in the industry is well respected and you will be embraced by the employees of AEP. The entire management team looks forward to working with you and the board as we look to enhance value for all AEP stakeholders.

Speaker Change: Thank you for your time today, operator can you open up the call for questions.

Speaker Change: At this time I'd like to remind everyone in order to ask a question simply press star followed by the number one on your telephone keypad. Our first question will come from the line of sharp rise that with Guggenheim Partners. Please go ahead.

Sharp Rise: Hey, guys good morning.

Sharp Rise: Good morning.

Sharp Rise: Good morning morning, So obviously the slides are leaning on the successes of AEP have reiterated your earnings guidance balance sheet targets growth rate Capex numbers.

Ben Folk: So obviously, the slides are, you know, leaning on the successes of AAP. You've reiterated your earnings guidance, balance sheet targets, you know, growth rate, CapEx numbers, I guess, outside of some management shuffling. What do you see as broken? I guess, what's the goal of the review? What's on the table? What's off the table? Well, this is Ben. And I can tell you that I don't think I would use the word broken.

Sharp Rise: Outside of some management shuffling.

Sharp Rise: What do you see is broken I guess, what's the goal of the review of what's on the table what's off the table.

Ben Folk: Well this is Ben.

And I can tell.

Ben Folk: I don't think I would use the word broken.

Ben Folk: I think there's areas where we can do better. I think, you know, and I think we showed you in the script many of the accomplishments we made. But we also recognize that we can do better in getting constructive regulatory outcomes. So, strategically, our priorities remain the same. We have completed, as we mentioned, a review of Transource.

Ben Folk: Think there's areas, where we can do better.

Ben Folk: I think you know and I think we showed you in there.

Ben Folk: Script, many of the accomplishments we made but we also recognize that we can do better on getting constructive regulatory outcomes. So strategically our priorities remain the same.

Ben Folk: We have completed as we mentioned a review of <unk>, we want to keep that asset.

Ben Folk: We want to keep that asset. We think it's a great asset, and I think given the various changes that FERC is looking at, I think it gives us a lot of optionality.

Ben Folk: We think it's a <unk>.

Ben Folk: Great asset and I think given the various changes that FERC is looking at I think it gives us a lot of Optionality. We will continue to be very disciplined portfolio managers I've said it on my scripted remarks, but always willing to transact where price and the ability to execute intersect and that's a key point and.

Ben Folk: We'll continue to be very disciplined portfolio managers, as I said in my scripted remarks, but always willing to transact where price and the ability to execute intersect. And that's a key point.

Ben Folk: And finally, though, if you step back, I think one of the ways you add value in this industry long term is by placing CapEx at one time's book, investing in CapEx at one time's book, and getting constructive recovery of that. And again, we've done pretty well on that, but we can do better. So we're going to look at the people, the process, and the planning that goes into those constructive outcomes. And we're going to do it through the lens of what's important to our local leaders and stakeholders. It's extremely important that we carefully listen to what they want and what they need at a local level, and I think you can translate that then into a much better chance of success, and then you get into that virtuous circle where invested capital is not only good for customers and the community but good for shareholders as well. So that's the plan going forward. And do you believe, Sarban, do you believe there's some jurisdictions where AEP currently operates where you may not be able to hit those sort of targets as you're thinking about people, process, etc.?

Ben Folk: Finally, though if you step back I think one of the ways.

Ben Folk: You add value in this industry long term.

Speaker Change: Bye bye.

Speaker Change: By placing capex at one times book investing in Capex at one times book and getting constructive recovery of that.

Speaker Change: Again, we've done pretty good on that but we can do better and we're going to look at the people the process and the planning that goes into that those constructive outcomes and we're going to do it through the lens of what's important to our local leaders and stakeholders extremely important that we keenly listen to what they want and what they need at a local level and I think you can transfer.

Speaker Change: That then to a much better.

Speaker Change: Transfer success, and then you get into that virtuous circle, where invested capital not only is good for customers and communities, but good for shareholders as well. So that's the plan going forward.

Speaker Change: And do you believe sovereign debt.

Speaker Change: Can you believe there are some jurisdictions that AEP currently operates where you may not be able to hit those sort of targets as we're thinking about people process et cetera.

Ben Folk: Well, I think there's areas where we have improvement, but I will turn it over to Peggy and Chuck to elaborate on that. I think, as it relates from a regulatory perspective, I do think what we're going to do is continue to build on the constructive legislative and regulatory outcomes that we have had. We're going to further strengthen our regulatory relationships, and we're really going to be keenly focused on execution. I think that some of the disappointments that we had in 2023, we're going to learn from them, and we're going to go back out and focus on execution from that standpoint. Okay, perfect. And then, just lastly, for me, just as Ben and you and the board are sort of thinking about where AAP stands today, I guess, what are you looking for in the next CEO? Are you kind of looking for a former CEO, the president of an opco, someone with a finance background, regulatory background, internal, external, I guess, can you just maybe specify exactly what you're looking for in the next successor? It's definitely an external search.

Speaker Change: Well I think theres areas, where we have improvement, but I will turn it over to Peggy <unk> Chuck to elaborate on that.

Peggy Simmons: I think as it relates from a regulatory perspective I do think what we're going to do is continue to build on the constructive legislative and regulatory outcomes that we have had we're going to further strengthen our regulatory relationships and we're really going to be keenly focused on execution.

Peggy Simmons: I think that some of the.

Peggy Simmons: Disappointment that we had in 2023, we're going to learn from them and we're gonna go back out and focus on the execution from that standpoint.

Speaker Change: Okay Perfect and then just lastly for me just as.

Speaker Change: And then as you and the board are sort of thinking about where AEP stands today I guess what are you looking for in the next CEO are you kind of looking for a prior CEO or president of an opco sub over the finance background regulatory background internal external I guess can you just maybe specify exactly what youre looking for.

Speaker Change: And the next successor.

Speaker Change: It's definitely an external search.

Ben Folk: I'll start with that. And, you know, I don't want to narrow it down to any specific background, but, you know, ideally, and by the way, I think we're going to get a very robust list of candidates. So AEP is a great company with great assets, and I think it's going to be an attractive destination for many, many talented people. So I think it's going to be great to pick from that talent. Ideally, you get somebody that is a seasoned executive in the utility industry, is well known in the investor community, I think that's extremely important, and has great leadership qualities.

Speaker Change: I'll start with that and.

Speaker Change: I don't want to narrow down to any specific background, but ideally and I and by the way I think we're going to get a very robust list.

Speaker Change: A list of candidates for AEP is a great company with great assets and I think it's going to be an attractive destination for many many talented people. So I think it's going to be great to pick from that talent ideally you get somebody that is a seasoned executive in the utility industry is well known.

Speaker Change: And in the Investor community I think that's extremely important as great leadership qualities.

Ben Folk: You know, we've got a lot of talent at AEP, and we want to develop that talent. And ultimately, it would be ideal if they had multi-jurisdictional experience and, you know, the ability to achieve regulatory success. Those are, that's a big wish list, but again, I think we're going to get a lot of great candidates. Got it. Terrific. Thank you, guys. I'll pass it to someone else and good luck on stage two.

Speaker Change: We've got a lot of talented AEP and we want to develop that talent and ultimately it would be ideal if they have multi jurisdictional experience and the ability to achieve regulatory success.

Speaker Change: Those are that's a.

Speaker Change: Wishlist, but again I think we I think we're going to get a lot of great candidates.

Speaker Change: Got it terrific. Thank you guys I'll pass it to someone else and good luck in phase II appreciate it.

Ben Folk: I appreciate it. Thank you. Your next question comes from the line of Jeremy Tonet with J.P. Morgan. Please go ahead. Hey, Jeremy. Jeremy, your line might be on mute.

Speaker Change: Thank you.

Speaker Change: Your next question comes from the line of Jeremy Tonet with J P. Morgan. Please go ahead.

Speaker Change: Jeremy.

Jeremy Bryan Tonet: Jeremie your line might be on mute.

Ben Folk: Hi, good morning. Good morning. I just wanted to kind of continue along these lines if I could, and I was wondering if you were able to comment, I guess, on the recent agreement AAP announced with Icon Capital and kind of how that ties into the change at the top here, given the relatively short tenure, and just wondering if there's anything else we should be expecting, I guess, along these lines looking forward to Icon's recent announcement. Yeah, I really just will I mean, you know, the additional ICON board members came after discussions with the ICOD team and the AEP team. You know, we actually welcome their perspective.

Jeremy Bryan Tonet: Hi, good morning.

Jeremy Bryan Tonet: Morning.

Jeremy Bryan Tonet: Just wanted to kind of continue along these lines, if I could and I was wondering.

Speaker Change: If you're able to comment I guess on the recent agreement AEP announced icahn capital and kind of how that ties into.

Speaker Change: The change at the top here given the relatively short tenure.

Speaker Change: And just wondering if there's anything else, we should be expecting I guess, along these lines looking forward.

Speaker Change: Icons recent announcement.

Speaker Change: Yeah, I really just we'll probably just rehash, what we've said in the press release and in our scripted remarks I mean.

Speaker Change: The icon.

Speaker Change: Additional board members came after.

Speaker Change: Discussions with the icon team in AEP team.

Speaker Change: We actually welcome their perspective, they share the opinion as we do that AEP shares are undervalued and we want to work together to unleash shareholder value.

Ben Folk: They share the opinion, as we do, that AEP shares are undervalued, and we want to work together to unleash shareholder value. Regarding Julie's departure, I mean, I really can't go into any more details than what we've already said. It was a full board decision after discussions with Julie, and we decided that the best path forward is to transition to a new CEO.

Speaker Change: Regarding julie's departure, I mean, I really can't go into any more details than what we've already said it was a full board decision after discussions with Julian we decided that the best path forward is to transition to our new CEO.

Ben Folk: We're going to continue to work hard to deliver shareholder value. I think the ICON board members will give us a fresh perspective as we pursue these.

Speaker Change: We're going to continue to work hard to deliver shareholder value.

Speaker Change: The icon Board members will give us a fresh perspective as we pursue those goals.

Speaker Change: Got it that's very helpful and just as we think about the strategic path going forward at this juncture.

Ben Folk: That's very helpful. And just as we think about the strategic path going forward at this juncture, are all options on the table, or are some options off the table? Just want to kind of see the parameters of what we could expect going forward. Well, you know, we really like the assets we have. Okay, we've completed the strategic reviews. But I mean, you know, the price if we're going to continue to look for opportunities to do the right thing for our shareholders. But I think we're in a nebulous position where the assets we have can also achieve our strategic goals.

Speaker Change: Are all options on the table or any options off the table just wanted to kind of see the parameters of what we could expect going forward.

Speaker Change: Well, we really like the assets we have okay. We've completed the strategic reviews, but I mean.

Price.

Speaker Change: We're going to continue to look for opportunities to do the right thing for our shareholders, but I think we're in an enviable position at the assets. We have can also achieve our strategic goals and and.

Ben Folk: And Chuck mentioned where we are with FFO to debt and those targets. So I think we're in a pretty good position, quite honestly. So again, as I said before, not to be redundant, but I guess it will be. We'll be good portfolio managers, and we'll continue to be open to transactions if the price is right and the ability to execute is viable. But in the meantime, we're going to do the blocking and tackling that will, in the long term, get you the results that you're going to want to see. Very helpful. Thank you for that. Thank you very much.

And Chuck mentioned, where we are with <unk> to debt and those targets. So I think we're in a pretty good position quite honestly. So again as I said before that to be redundant, but I guess it will be we'll be good portfolio managers and we will continue to be open to transactions that the prices right and the ability to execute is viable.

Speaker Change: But in the meantime, we're going to do the blocking and tackling that in the long term gets you. The result that your results that you're going to want to see.

Speaker Change: Wonderful very helpful. Thank you for that.

Speaker Change: Welcome.

Charles E. Zebula: Your next question will come from the line of Nick Campanella with Barclays. Please go ahead. Hey, good morning, everyone.

Speaker Change: Your next question will come from the line of Nick Campanella with Barclays. Please go ahead.

Nicholas Campanella: Hey, good morning, everyone and thanks for the prepared remarks, taking my questions. Good morning.

Charles E. Zebula: Thanks for the prepared remarks and taking my questions. Good morning. So I guess, you know, you acknowledged in your remarks, there's been some twists and turns and some regulatory volatility in 23. You have some headwinds that you highlighted from the FERC order on taxes, you know, the Oklahoma rate order. Among a few other items, but just the six of seven has been pretty resilient and unchanged this entire time. So can you maybe help us all understand just what's kind of allowing AEP to absorb these issues and, you know, where the offsets have been kind of in the five-year plan that allows you to continue to reaffirm? Well, I mean, I'll, I'll kick it over to Chuck in a minute.

Nicholas Campanella: So I guess you acknowledged in your remarks, theres been some twists and turns and some regulatory volatility in 'twenty three.

Nicholas Campanella: <unk> had some headwinds that you highlighted from the FERC order on taxes, the Oklahoma rate order.

Nicholas Campanella: Hum.

Speaker Change: A few other items, but just the six to seven has been pretty resilient and unchanged. This entire time. So can you just maybe help us all understand just whats kind of allowing AEP to absorb these issues and where are the offsets have been kind of.

Speaker Change: And the five year plan that allows you to continue to reaffirm.

Speaker Change: Well I mean.

Speaker Change: So I'll kick it over to Chuck in a minute, but the.

Ben Folk: But, you know, the $43 billion in a five-year capital plan underpins the six to 7%. And, you know, in the years where we might have unfavorable weather or other things like that, that's the resiliency of this AEP management team that I talked about. And, you know, it's not just one year; it's a look back, I mentioned 14 years of doing what we said we were going to do.

Speaker Change: $43 billion on our five year capital plan underpins, the 6% to 7%.

Speaker Change: In the years, where we might have unfavorable weather other things like that that's the resiliency of this AEP management team that I talked about.

Chuck: And it's not just one year look back I mentioned 14 years of getting what we said we were going to do.

Charles E. Zebula: Yeah, sometimes you get regulatory bumps in the road, and other things that might happen. But, you know, if you look back historically, and we look forward, we produce, I mean, we're in 11 jurisdictions, we're going to file rate cases. But if you look at history, we generally do pretty well.

Chuck: Yes, sometimes you get regulatory bumps in the road and other things that might happen, but.

Chuck: If you look back historically and we look forward.

Chuck: We produce I mean, we're in 11 jurisdictions, we're going to file rate cases, but if you look at history.

Chuck: We generally do pretty well and when we have a bump in the road, we figure out how to absorb it.

Charles E. Zebula: And when we have a bump in the road, we figure out how to absorb it and what we need to do better going forward. Chuck, I don't know if you want to add to that.

Speaker Change: And what we need to do better going forward Chuck I don't know if you want to add to that but yes, no Ben as you said.

Charles E. Zebula: Yeah, no, Ben, as you said, it is underpinned by a $43 billion five-year capital plan. You know, I also point to Ben's observation as a board member and in his opening remarks about our O&M. There's a chart in our deck that you can refer to, right, we've doubled the rate base of this company while basically keeping O&M flat over that entire 10 year period. I think that's a remarkable accomplishment.

Speaker Change: Underpinned by the 43 billion five year capital plan.

Speaker Change: Also I'd point to.

Speaker Change: What's been made.

Speaker Change: <unk> as a board member.

Speaker Change: In his opening remarks about our O&M, there's a chart in our deck that you can refer to right. We've doubled the rates rate base of this company, while basically keeping O&M flat over that entire 10 year period.

Speaker Change: I think that's a remarkable accomplishment and that's our plan going forward as we continue to grow this company and basically re purpose and reallocate O&M.

Charles E. Zebula: And that's our plan going forward, as we continue to grow this company and basically repurpose and reallocate O&M. I also talked in my remarks about the load opportunities. You know, I tend, you know, to kind of take a measured approach to this.

Speaker Change: I also talked in my remarks about the load opportunities.

Speaker Change: I attend.

<unk> to kind of take a measured approach to this but.

Charles E. Zebula: But, you know, we really are optimistic about the opportunities that we're seeing there. As I said, the commercial load growth is just amazing. And we're seeing some good opportunities in economic development activities in industrial areas as well. And then, you know, lastly, of course, underpinning that plan is improved returns, right? We are not earning where we need to earn, and we need to have regulatory execution and prudency review to make sure, right, that we are hitting the mark there. So I think, all in all, you know, that kind of underpins the plan going forward. I got it.

Speaker Change: We really are optimistic about the opportunities that we're seeing there.

Speaker Change: As I said the commercial low growth is just amazing.

Speaker Change: We're seeing some good opportunities and economic development activities.

In industrial as well and then lastly of course underpinning that plan is improved returns right. We are not earning where we need to earn and we need to.

Speaker Change: I have the regulatory execution.

Speaker Change: And Prudency review to make sure that we are hitting the mark there. So I think all in all.

Speaker Change: That kind of underpins the plan going forward.

Charles E. Zebula: And I definitely appreciate the comments on diversification and the size of the overall plan as well as the O&M. Thank you for that. And then I guess just sticking with this six to seven CAGR, you know, is there any kind of shaping to that over the five-year plan? You know, is there anywhere that you kind of see yourself in that range right now?

Speaker Change: Got it and definitely appreciate the comments on diversification and the size of the overall plan as well as the O&M. Thank you for that.

Speaker Change: And then I guess just.

Speaker Change: Just sticking with this the six to seven CAGR is there any kind of shaping to that over the five year plan is there any way that you kind of see yourself in that range right now and then as we kind of think about a new CEO coming in.

Charles E. Zebula: And then as we kind of think about a new CEO coming in, you know, hopefully in the back half of this year, is it your expectation that they would come in and embrace that plan, or would they have more say in where they're taking the company? Thank you. Yes, I'll take the first question. You know, our five-year plan is really based off the midpoint of the current year's guidance. And, you know, our plan is to grow basically on that midpoint, between the six to 7% range, with no real kind of ups and downs identified through that. I'll let Ben answer that.

Speaker Change: Hopefully in the back half of this year is it your expectation that they would come into embraced that plan or where they have more say in where they're taking the company. Thank you.

Speaker Change: Yes, I'll take the first question.

Speaker Change: No.

Our five year plan is really based off the midpoint.

Speaker Change: Of the of the current year's guidance and.

Speaker Change: Our plan is to grow basically on that midpoint between the 6% to 7% range with no will kind of ups and downs identified through there I'll, let Dan answer that.

Charles E. Zebula: Yeah, I mean, first of all, we'll take our time and we'll find the absolute best successor, permanent successor that we can. I think as part of that process, obviously, we'll have strategic discussions. I mean, I think the board is very comfortable with our strategy and our strategic priorities. I suspect that the ultimate permanent successor CEO will also be comfortable with those strategies. And perhaps we can figure out a better way to execute on them.

Dan: I think first of all we'll take our time and we will find the absolute best.

Successor.

Permanent successor that we can I think as part of that process.

Dan: We will.

Dan: The strategic discussions I mean, I think the board is very comfortable with our strategy and our strategic priorities I suspect that.

Dan: The ultimate permanent.

Successor, CEO will also be comfortable with those strategies.

Dan: I can figure out a better way to execute on them that would be the goal.

Ben Folk: That would be the goal, but we're not looking at a complete redismantling of our strategic priorities. Thanks a lot for answering the questions today. I appreciate it. You're welcome.

Dan: We're not looking at a.

Dan: A complete redesign of our strategic priorities.

Speaker Change: Thanks, a lot for answering the questions today I appreciate it.

Speaker Change: Welcome. Thank you.

Charles E. Zebula: Our next question will come from the line of Carly Davenport with Goldman Sachs. Please go ahead. Hey, good morning.

Speaker Change: Our next question will come from the line of Carly Davenport with Goldman Sachs. Please go ahead.

Carly Davenport: Hey, good morning, Thank you for taking the questions a.

Charles E. Zebula: Thank you for taking the questions. A bit of a shift on the asset sale program, I guess, in terms of the decision to retain the transmission JV. So could you just talk a little bit about the rationale there and how we should think about your view on transmission as part of the portfolio or potentially as an area of sort of value monetization going forward? Well, I mean, and Chuck, this is Ben, I'll let Chuck augment what I'm going to say, which is pretty much what I said before: transmission is a great asset and we are obviously the largest transmission provider in the United States, and we We will be open to, you know, things that make sense that, you know, would do even better for shareholders, but we don't feel compelled. We don't have to do anything. I think that puts us in a better position as we move forward. Chuck, I don't know if you want to add to that.

Carly Davenport: A bit of a shift on the asset sale program I guess in terms of the decision to retain the transmission JV. So could you just talk a little bit about the rationale there and how we should think about your view on transmission as part of the portfolio or potentially as an area of sort of value monetization going forward.

Carly Davenport: Well I mean I'll, let Chuck this is Ben I'll, let Chuck.

Ben Folk: Augment what I'm going to say, which is pretty much what I said before transfer.

Chuck: Transmission is a great asset.

Chuck: And we are obviously the largest transmission provider in the United States and we like that position.

Ben Folk: We will be open.

Speaker Change: Two things.

Speaker Change: Things that makes sense that you know.

Speaker Change: Would do even better for shareholders.

Speaker Change: But we don't feel compelled we have to do anything so I think that puts us in a better position as we move forward.

Speaker Change: Chuck I don't know if you want to add to that but yeah I think we're all.

Ben Folk: We're also referring, maybe, to Pioneer and Prairie Wind and our decision to keep those assets. The reality is that these contributed earnings to AAP. They were attractive returns. Overall, it was really insignificant to our overall financing plan if we were planning on selling those assets.

Chuck: Also referring maybe to pioneer them Prairie wind and our decision to.

Chuck: To keep those assets.

Chuck: The reality is right these contribute to contribute to earnings.

Chuck: No to AEP.

Chuck: They are they.

Chuck: They're attractive returns.

Chuck: And overall it was really insignificant right to our overall financing plan. If we were planning on selling those assets. So it really it goes back to the root of Ben.

Charles E. Zebula: It really goes back to the root of what Ben said. As we reviewed the opportunities before us in competitive transmission and then looked at other transmission assets that we have, we're embracing them. It's time for us as the leader in transmission to continue to lead that space, and that's what we plan to do. That's helpful.

Chuck: <unk> said as we reviewed the opportunities before us and competitive transmission and then looked at other transmission assets that we have we.

Chuck: We're embracing it.

Chuck: It's time for us as.

Chuck: As the leader in transmission.

Chuck: To continue to lead that space and that's what we plan to do.

Speaker Change: That's helpful. I appreciate that and then Chuck probably for you just a little bit of a shift in tone around the fff's at that metrics as well for 24 can you just talk about what we should expect relative to that 14% to 15% range for 2020 for an episode of that and what the moving pieces are that you are kind of watching that could move you outside of that range.

Charles E. Zebula: Appreciate that. And then Chuck, probably for you, just a little bit of a shift in tone around the FFO to debt metrics as well for 24. Can you just talk about what we should expect relative to that 14 to 15% range for 2024 on FFO to debt and what the moving pieces are that you're kind of watching that could move you outside of that range? Yeah, so I thank you for that question. You know, and that our message has changed a bit, you know, on the timing. But what I would tell you is really timing is not what is most important.

Chuck: Yeah. So I think thank you for that question.

Speaker Change: Our message has changed a bit.

Chuck: On the timing, but what I would tell you is really kind of timing is not what is most important.

Charles E. Zebula: You know, it's really the trend that we're on, and then it's hitting the mark of 14%. And it's the sustainability of staying in that range as we go through the five-year plan. So let me comment on a couple things, right? We said we would be above 13% by year end, and we were, and we didn't make any excuses for the soft weather that happened in 2023. Note also that 13% is the downgrade threshold at Moody.

Chuck: It's really the trend that we're on and then it is hitting the mark of 14% and its the sustainability on staying in that range as we go through the five year plan. So let me kind of comment on a couple of things right. We said, we would be above 13% by year end and we were and we.

Chuck: Didn't make any excuses for the software there that happened in 2023.

Chuck: Note also that 13% is the downgrade threshold at Moody's and.

Charles E. Zebula: And second, the trend is very positive, right? This quarter, we're going to have another roll-off of cash collateral in Q1. I think the number is around three hundred and ninety million dollars that will come out of the 12 month average.

Chuck: And second right. The trend is very positive right. This quarter, we're going to have another roll off of cash collateral in Q1 thing. The number is around $390 million that will come out of the 12 month average and also we are working on.

Charles E. Zebula: And also, we are working on down our deferred fuel balance. And then lastly, we clearly show our models and review those with the agencies. Those models indicate that we will be in that range this year and will be in that range over the longer term. That's what's most important, right? Hitting the mark, trending in that positive direction, and staying in the range. So again, the timing, which month or which quarter is not important.

Chuck: Down our deferred fuel balances.

Chuck: And then lastly, right, we clearly show our models and review those with the agencies.

Chuck: Those models indicate that we will be in the range this year and be in the range over the longer term. That's what's most important right hitting them are trending in a positive direction and staying in the range. So again, the timing, which month or which quarter is not important its the three things that I.

Charles E. Zebula: It's the three things that I mentioned earlier. Got it. Thanks very much for your time.

Chuck: I mentioned earlier.

Speaker Change: Got it thanks very much for the time.

Charles E. Zebula: Your next question comes from the line of Ryan Levine with Citi. Please go ahead. Good morning. Good morning.

Speaker Change: Your next question comes from the line of Ryan Levine with Citi. Please go ahead.

Ryan Levine: Good morning.

Ryan Levine: Good morning, given the focus given them focus on people and processes. How long do you view the company's review of its regulatory strategy to take and in that context, how does the new reviewed different from how AEP has reviewed its regulatory strategy historically.

Ben Folk: Given the focus on people and processes, how long do you view the company's review of its regulatory strategy taking, and in that context, how is the new review different from how AEP has reviewed its regulatory strategy? Well, I'm going to turn it over to Peggy, who's the point on that. But this isn't like this is something we're just initiating. This is something that, you know, I've heard discussed as a board member at the board level. It's something I'm going to get very involved in with Peggy. We've got a good team, but we're going to have to, you know, we'll make sure that we do what we need to do to get better outcomes in the future. And and. I mean, there's a lot of blocking and tackling that, you know, really behind the scenes stuff that goes into the actual processing, executing, and planning of a rate case. And it's, you know; it gets really down in the weeds pretty quickly.

Ryan Levine: Well I'm going to turn it over to Peggy who's the point on that but.

Peggy Simmons: This isn't like this is something we're just initiating this is something that I've heard discussed that as a board member at the board level.

Peggy Simmons: Something I'm going to get very much involved in with Peggy.

Peggy Simmons: Got a good team, but we're going to have to we will make sure that we do what we need to do to get better outcomes in the future and.

Peggy Simmons: I mean, theres, a lot of blocking and tackling that really behind the scenes stuff that goes into the actual processing executing and planning of a rate case and it's it gets really down in the weeds pretty quickly, but those those things add up.

Peggy Simmons: But those those things add up. So Peggy, I'll turn it over to you. Yeah, I would just add that I'm looking forward to working with Ben and talking through the regulatory strategy. We've had positive regulatory outcomes in 2023. And when we shared some of those earlier, there were some disappointments that we highlighted, but I would bring forward the legislative work that we have done. And that's going to help address lag.

Speaker Change: I'll turn it over to you Yeah, I would just add it and looking forward to working with Ben and talking through the regulatory strategy.

Speaker Change: We've had positive regulatory outcomes in 2023, and when we shared some of those earlier there was some disappointment that we highlight it but I would bring forth. The legislative work that we have done and that's going to help to address lag. We've done work that's going to help too.

Peggy Simmons: We've done work that's going to help to remove some of the lag in Virginia with our biennial rate review for Virginia, where it was 3 years before. We're going to also look at improving on. We said with Kentucky that it was going to be a 2 step process, and we very much believe that we had a constructive outcome in the order that we received earlier in January with the securitization. So we're going to continue to build upon that. I agree we do have a talented team, and we're just going to keep moving forward.

Speaker Change: Remove some of the lag in Virginia with our biannual rate review for Virginia, where it was three years before.

Speaker Change: We're going to.

Speaker Change: Also look at improving on.

Speaker Change: We sit with Kentucky that it was going to be a two step process and we very much view that we had a constructive outcome in the order that we received earlier in January with the securitization. So we're going to continue to build upon that Ah I agree. We do have a talented team and we're just going to keep moving forward and I look forward again as I said to working with Dan on.

Peggy Simmons: And I look forward again, as I said, to working with Ben on ways we can continue to improve there. Great. And then, unrelated, where do you see the biggest opportunities to benefit from the data center built out in your service territory?

Speaker Change: On ways, we can continue to improve there.

Speaker Change: Great and then unrelated, but where do you see the biggest opportunities too.

Speaker Change: But from the data center build out in your service territory.

Speaker Change: And given your balance sheet constraints do you have any reservations or concerns around that opportunity.

Peggy Simmons: Thank you. Reservations or concerns around, the biggest opportunities so far have been in Ohio and Texas, and in our forecast for our five-year plan, we have included the capital needed to serve those customers. If there is incremental growth beyond that, it would be an opportunity that we have to evaluate and figure out how we would smartly finance and meet the generation needs that come with it.

Speaker Change: The biggest opportunities so far have been in Ohio, and Texas and.

Speaker Change: In our forecasts.

Speaker Change: For our five year plan, we have included.

Speaker Change: The capital needed.

Speaker Change: To serve those customers.

Speaker Change: If there is incremental growth beyond that.

Speaker Change: It would be an opportunity that we have to evaluate and and figure out how we would smartly finance it.

Speaker Change: Great, Thanks, and meet the generation needs that come with it.

Charles E. Zebula: Your next question comes from the line of Anthony Crowdell with Mizuho. Please go ahead. Hey, good morning, Ben. Good morning, Chuck. Just, hopefully, two easy ones.

Speaker Change: Your next question comes from the line of Anthony <unk> with Mizuho. Please go ahead.

Anthony: Hey, good morning, Ben.

Anthony: Good morning Cherilyn.

Anthony: Hopefully two easy ones one for you.

Ben Folk: One for you, Ben. And one for Chuck. Just, Ben, I don't know what kind of insight you could provide, but just if I think about the one percent, one percent position, excuse me, one percent position that I kind of took. And it seems that there's been some major changes on the board. I didn't think that would be a big position yet. I think two voting seats and then a non-advisory seat, just thoughts on what a change in the board that may be to expand the board. Well, I mean, you're right. There's like, I think there are 5.3 million shares that, something like that, that ICON holds.

<unk> been one for Chuck just been I don't know.

Anthony: What kind of insight you can provide but just trying to think about.

Anthony: One 1% position, 1% excuse me, 1% position that I kind of taken and it seems that theres been some major changes in the board Board I didn't think that would be.

Anthony: Big position that yet I think to voting seats, and then a non advisory seat just.

Anthony: That's on what.

Anthony: Change and avoid that maybe to expand the board.

Anthony: Well I mean, you're right. There was like I think there's five 3 million shares that something like that that icon holds.

Ben Folk: And, you know, we had discussions with ICON, and we settled on the two incremental board seats and the advisory position. I think, you know, back to Julie, I'll just repeat what I said. This was a full board decision after discussions with Julie and the board, and we determined it was best for AEP to transition to a new CEO. So, you can read what you want into that, but I think I'm just going to keep it as it is. It's a full board decision, and you need the full board to make a decision to remove a CEO. Great. And then Chuck, two quick ones.

Anthony: We had.

Anthony: Discussions with icon and we.

Anthony: We settled on.

Anthony: The two.

Anthony: Incremental board seats, and then advisory position.

Anthony: I think what.

Speaker Change: Back to Julia I'll, just repeat what I said this was a full board decision after discussions with Julie and the board and we determined it was best for AEP to transition to our new CEO. So.

Speaker Change: You can read what you wanted to that but I think I'm just going to.

Speaker Change: Keep it as it is it's a full board decision and you need the full board to make a decision to remove the CEO.

Speaker Change: Great and then Chuck too.

Chuck: Two quick ones it looks like the equity timing had moved I understand your questions to Carly earlier on you are targeting <unk>.

Charles E. Zebula: It looks like the equity timing has moved. I understand your questions to Carly earlier on, you know, you are targeting, you know, 14 to 15, but above the 13 threshold. But I think equity maybe has slid off in the near term. And then lastly, on earned returns, what type of improvement could we expect each year?

Chuck: 14% to 15, but above the 13 threshold, but I think the equity maybe slipped off of the near term and then lastly on earned returns what type of improvement could we expect could we expect each year and I'll leave it there.

Charles E. Zebula: And I'll leave it there. Okay, thanks, Anthony. Our equity needs haven't changed since EEI. You may be referring, you know, to maybe an older forecast we had, you know, some months back, but it, but what you're seeing in our deck today is consistent, right with what we showed at EEI. I'll let Peggy go ahead, Mark, talk about the return.

Speaker Change: Okay. Thanks Anthony.

Speaker Change: Our equity needs haven't changed since <unk>, you may be referring.

Speaker Change: To maybe an older forecast we had.

Speaker Change: No.

Speaker Change: Some months back, but but what youre seeing in our deck today is consistent with what we've shown at EI.

Speaker Change: Let Peggy go ahead, Mark talk about the returns.

Peggy Simmons: Yeah, as it relates to 2024, our ROE, we're projecting that 9.1% is what we're looking at for our regulated segments, and we're going to continue to work on closing the gap. A lot of what I've already said earlier, just kind of building off of some of those legislative successes that we were able to have, reducing some of the lag from that perspective. Thanks for taking my questions. I appreciate it. Thank you. Our next question comes from the line of Sophie Karp with KeyBank. Please go ahead. Hi, good morning.

Peggy Simmons: Yeah as it relates to for 2024, our Roe.

Peggy Simmons: We're projecting a nine 1%.

Peggy Simmons: For our regulated segments.

Peggy Simmons: And we're going to continue to work on closing the gap a lot of what I've already said earlier, just kind of building off of some of those legislative.

Peggy Simmons: Successes that we were able to have reducing some of the lag.

Peggy Simmons: From that perspective.

Speaker Change: Great. Thanks for taking my questions I appreciate it.

Speaker Change: Thank you.

Speaker Change: Our next question comes from the line of Sophie Karp with Keybanc. Please go ahead.

Speaker Change: Yes.

Ben Folk: Thank you for taking my question. Just a quick one for me. I guess, like, when you think about your jurisdictions, right, and the ones where you've got constructive outcomes regulatoryly, and the ones where you've got non-constructive outcomes, and how should we think about you allocating this increase in capital across these jurisdictions? Like, is there a strategy there to proactively reduce capital allocations to jurisdictions where your earned ROE just doesn't meet a hurdle for, you know, what's I'm going to turn it over to Peggy and Chuck in a minute, Sophie, but I mean, we're always going to look to put capital where we can get the best returns. There's a baseline. Capital that you need to do to make sure that you never compromise. Resiliency, Reliability, or Safety, so you know. But, Apart from that, I think it gets back to what I said.

Sophie Karp: Hi, good morning.

Sophie Karp: My question right.

Sophie Karp: Just a quick ones from me I guess like when you think about your jurisdictions right and.

Sophie Karp: The ones you've got.

Sophie Karp: The constructive outcomes regulatory Lee and nuance, where you got non constructive outcomes and how should we think about your allocating this increase in capital.

Sophie Karp: Across these jurisdictions like is there a strategy there to proactively reduce capital allocations to jurisdictions, where you are.

And I know you just don't meet our hurdle for what's attractive.

Sophie Karp: Okay.

Speaker Change: Im going to turn it over to Peggy and Chuck in a minutes, okay, but I mean, we're always going to look to put capital where we can get the best returns there is baseline <unk>.

Peggy Simmons: <unk> that you need to do to make sure that you never compromise.

Peggy Simmons: Resiliency reliability or safety.

Peggy Simmons: But.

Speaker Change: Apart from that I think it gets back to what I said.

Ben Folk: It's listening to what those local jurisdictions really want and need. And that can also shape your capital needs because, quite frankly, it can shape your regulatory environment. So, I turn it over to the team if they have anything to add to that. Do you want to cut?

Speaker Change: It's listening to what those local jurisdictions really want and need and that can also shape your capital needs because quite frankly, it can shape your regulatory outcomes. So.

Speaker Change: I turn it over to the team that they have anything to add to that.

Speaker Change: And do you want on it I would just say yeah, I Echo Ben's comments, there on where there is a certain amount of capital we need to continue to be resilient and meet the reliability needs of our customers.

Peggy Simmons: I would just say, yeah, I echo Ben's comments there on, there's a certain amount of capital we need to continue to be resilient and meet the reliability needs of our customers, and as well as from a safety perspective. Those where we have really constructive outcomes, clearly, we know in I&M, we have the forward-looking test years, we're able to continue to have that capital disallocated there to meet what those needs are And we continue to look at what our outcomes are by jurisdiction. Okay, and then maybe I'm going back to data centers, right? Do you see more attractive opportunities around incremental generation to support those customers or the T&D investment? Yeah, in Ohio and Texas, right, we are, those are deregulated states.

Speaker Change: And as well as from a safety perspective.

Speaker Change: Those where we have a really constructive outcomes clearly now in <unk>, we have the forward looking test years, and we are able to.

Speaker Change: Continue to have that capital Thats allocated there to meet what those needs are and we continue to look at what our outcomes are <unk>.

Speaker Change: And by jurisdiction.

Speaker Change: Okay.

Speaker Change: Maybe I'll turn back to data centers rich do you see more attractive opportunities around incremental generation to support those customers or <unk> investment.

Rich: Yes, in Ohio, and Texas, right, where those are deregulated states.

Peggy Simmons: In our Indiana and Michigan territory, clearly, there would be opportunities for generation there to serve those customers. Okay, thank you. Thank you. Our next question comes from the line of Paul Fremont with Ledenberg. Please go ahead.

Rich: In our Indiana, Michigan territory, clearly there would be opportunities for generation there.

Rich: To serve those customers.

Rich: Yeah.

Speaker Change: Okay. Thank you.

Speaker Change: Thank you.

Speaker Change: Our next question comes from the line of Paul Fremont with Ladenburg. Please go ahead.

Peggy Simmons: Thank you. Thank you. Thank you. Thank you very much.

Speaker Change: Yes.

Paul Fremont: Thank you very much I guess first question would be on the 24 guidance does that continue.

Charles E. Zebula: I guess the first question would be on guidance does that. Inc. Yeah, our, our, our EI guidance, right? We kind of changed the waterfall based on the actual, right, but what's in or out hasn't changed. You know, Paul, as Ben mentioned, we're in the process that we plan to conclude here in the next several months on the retail and distributed businesses. We also mentioned that we're closing on NMRD today, which will have a benefit, you know, from that sale coming through, but, you know, everything is on your pin. Remember, too, when you look at the waterfall, you know, we took the generation of marketing segment revenue down to, you know, what we call much more normal contributions.

Paul Fremont: To include a contribution from that.

Paul Fremont: Retail in the distributed resources.

Paul Fremont: Sort of outlined at EI.

Speaker Change: Yeah R. R R <unk> guidance.

Speaker Change: We kind of.

Speaker Change: Change the waterfall based on the actual right, but what in or out Hasnt changed Paul.

Speaker Change: As Ben mentioned, we're in the process.

Speaker Change: We plan to conclude here.

Speaker Change: In the next several months on our retail and distributed.

Speaker Change: Businesses.

Speaker Change: He also mentioned that we closed were closing.

Speaker Change: On <unk>.

Speaker Change: <unk> today.

Speaker Change: Which there'll be a benefit from that sale.

Speaker Change: Coming through.

Speaker Change: But no everything is underpinned remember too when you look at the waterfall.

Speaker Change: We took to generation and marketing segment.

Speaker Change: <unk> two.

Speaker Change: We call much more normal contributions.

Charles E. Zebula: I'm not concerned about the ability to take the proceeds, use them as appropriate to get that accretion as we go forward, but it's still the same plan, if you will, as we put out at EES. And then Chuck mentioned that the FERC decision is expected to have a 3-cent negative impact on customers. Is that going to be treated as... Operating EPS, or is that a? No, it's operating.

Speaker Change: I am not concerned you know that.

Speaker Change: Hum.

Speaker Change: About the ability to.

Speaker Change: Take the proceeds.

Use them as appropriate.

Speaker Change: To get that accretion as we go forward, but.

Speaker Change: No. It's still it's still the same plan if you will as we put out at EI.

Speaker Change: And then Chuck mentioned that the FERC decision is expected to have a negative impact on 24 is that going to be treated as operating.

Speaker Change: Operating EPS or is that going to be excluded as nonrecurring.

Speaker Change: No it's operating.

Speaker Change: Okay.

Speaker Change:

Charles E. Zebula: And then, I guess the last question I have... Currently, there's a proceeding in Kentucky where, I guess, there are recommendations for potential disallowance. I think there's also a fuel review that could take place, may, Louisiana. Give Us. I guess an update on what your expectations are. What's happening. Yes, in Kentucky, we do have a two-year fuel review that has been underway, and we're awaiting the outcome as it relates to that.

Speaker Change: And then just last question I have is currently there's a proceeding in Kentucky.

Speaker Change: Where I guess theres recommendations for potential disallowance of fuel and purchase power costs.

Speaker Change: Theres also a fuel review that that could take place or what may be taking place in Louisiana can you give us.

Speaker Change: An update on on what your expectations are in.

Speaker Change: What's happening in those proceedings.

Speaker Change: Yes in Kentucky, we do have a two year fuel review that has been underway and we are waiting the outcome as it relates to that we had a hearing earlier.

Peggy Simmons: We had a hearing earlier this month, actually. And then from there, excuse me. What was your other question? Was it related to SWEPCO?

Speaker Change: This month actually.

And then from there.

Speaker Change: What was your other question was it related to swap out.

Peggy Simmons: Yeah, I think as part of the settlement on the renewables... Review of the Fuel. Yes, that was part, excuse me, sorry, go ahead, finish your question. No, that's it.

Speaker Change: Yes, I think as part of that settlement on the renewables there was I.

Speaker Change: I guess the ability of.

Speaker Change: Staff to do.

Speaker Change: A review of the fuel.

Speaker Change: Yes that was part excuse me sorry go ahead finish your question.

Peggy Simmons: Yeah, that was part of the review, and that is ongoing as well. So Darcy can definitely give you some more information on that, if that wasn't clear. And last question for me, in terms of the 9.1% that you're targeting for this year, I think. What type of improvement is that?

Speaker Change: That's it.

Speaker Change: Yes that was that was part of the review and that is ongoing as well so but darcy can definitely give you some more information on that if that wasn't clear enough.

Speaker Change:

Speaker Change: And last question for me in terms of the nine 1% that you're targeting for this year I think.

Speaker Change:

Speaker Change:

Speaker Change: What type of an improvement do you see as being necessary in order to hit the six to eight I think in the past you've talked about.

Charles E. Zebula: See as Being Necessary. Inc. talked about Needing to Improve the Earned ROE, Part of Hitting Your Target. Yeah, so you know, over our five-year plan, we look to be typically in a 9.5% range. So what we're looking to do is increase by 10 basis points each year.

Speaker Change: Needing to improve the B b.

<unk> earned ROE has.

Speaker Change: As part of hitting your targeted growth rate.

Speaker Change: Yeah, so over our five year plan, we look to be typically to be in the nine 5% range. So what we're looking to do with increased by 10 basis points each year, and we think that that's achievable and we continue to work through our regulatory outcomes to be able to close that gap.

Peggy Simmons: And we think that that's achievable. And we continue to work through our regulatory outcomes to be able to close that gap. Again, for any questions, press star 1 and your next question will come from the line of Paul Patterson with Glenrock. Please go ahead. Hey, good morning. How are you?

Speaker Change: Great.

Speaker Change: Again for any questions Press Star one on your next question will come from the line of Paul Patterson with Glen Rock. Please go ahead.

Paul Patterson: Hey, good morning.

Ben Folk: Good. So, it doesn't sound to me like there really is much of a change in strategy with the new chapter and the managerial change that you're looking at. Am I thinking about this correctly?

Paul Patterson: How are you.

Speaker Change: Okay.

Speaker Change: So.

Paul Patterson: Just it does it sounds to me like it really is much of a change in strategy with a new chapter in the.

Paul Patterson: <unk>.

Paul Patterson: Managerial change that you are looking at am I thinking about this correctly.

Ben Folk: Yeah, I think so. The strategy is great. We just have to execute, and that's what we're keenly focused on, Paul. Okay, I just want to make sure I'm hearing you. And then the second thing that I guess, and I think this was asked before, but is there any timing that we should be thinking about in terms of when? A new CEO would be in place. Well, let me just say I'm committed to staying as long as it takes. So, no shortcuts.

Speaker Change: Yeah, I think so the strategy is great. We just have to execute and that's what we're keenly focused on Paul Okay, just want to make sure I'm hearing this.

Speaker Change: Second thing that I guess.

Speaker Change: This was asked before but is there any timing that we should be thinking about in terms of win.

Paul: A new CEO would be in place.

Speaker Change: Well, let me just say I am committed to stay as long as it takes so no shortcuts.

Ben Folk: But you know, I can't see it being shorter than six months and, hopefully, it won't take more than a year, but again, the process will take the time it needs to take to get the absolute right candidate in place. Okay. And then finally, when we're talking about regulatory desires and goals, having watched the various jurisdictions, there are a number of jurisdictions that I get the sense, and this isn't going to surprise you, Ben, they want lower prices. And I'm just wondering, is there any sort of new or innovative way you're looking at the regulatory approach in terms of addressing maybe those concerns, increasing investment, but addressing those two concerns, other than obviously But do you follow what I'm saying in terms of making investment? and... Perhaps not seeing the resistance that I think if you look at a number of the AEP jurisdictions that there just is to new investment leading to higher rates.

Speaker Change: But I can't see it being shorter than six months.

Speaker Change: Hopefully it doesn't take more than a year, but again, it's going to.

Speaker Change: The process will take time it needs to take to get the absolute right candidate in place.

Speaker Change: Okay.

Speaker Change: And then finally, when we when we're talking about regulatory desires and goals.

Speaker Change: We watched this.

Speaker Change: Various jurisdictions there are a number of jurisdictions that I get the sense and this isn't a surprise you Ben.

Speaker Change: But what lower prices.

Speaker Change: And I'm just wondering is there any sort of newer innovative way.

Speaker Change: Youre looking at the regulatory approach in terms of addressing maybe those concerns increasing investment, but we're addressing those two concerns other than obviously the general concern that I'm sure you guys have but do you follow what I'm, saying in terms of making investments and perhaps.

Speaker Change: Perhaps not seeing the resistance that I think if you look at a number of the P. P jurisdictions that there just is too.

Speaker Change: These new investment leading to higher rates do you follow what I'm, saying.

Ben Folk: Do you understand what I'm saying? I mean, I think, I mean, I'm going to turn it over to the team, Paul. But you know, the amount of load growth that we see in our jurisdictions, I mean, that's a great opportunity for economic development that we can be a big part of either helping to drive it or certainly providing the infrastructure to allow it. Those are great opportunities. And you know, everybody wants that in all jurisdictions. But again, we're going to carefully listen to what our jurisdictions want and need and respond accordingly. Peggy or Doug?

Speaker Change: I mean, I think I mean, I'm going to turn it over to the team Paul but.

Paul: The amount of load growth that we see in our jurisdictions I mean, that's a great opportunity economic development that we can be a big part of either helping to drive it or certainly.

Paul: Providing the infrastructure to allow it those are great opportunities and.

Speaker Change: Everybody wants that in all jurisdictions, but again, we're going to be very carefully listened to what our jurisdictions want need and respond accordingly, Peggy or Doug.

Peggy Simmons: And I'll just briefly add to that. In 2023, we landed 92 new customer load additions totaling about five gigawatts and adding additional jobs to our service territory. So I think that that's certainly one area and aspect of how we're going to help with affordability, as well.

I'll just briefly add to that in 2023, we landed 92, new customer load addition debt totaling about five gig.

Speaker Change: Adding additional jobs to our service territory. So I think that that's certainly one area an aspect.

Speaker Change: How we're going to help with affordability.

Speaker Change: As well yeah.

Speaker Change: And Paul clearly the data center load that we're experiencing is going to create.

Charles E. Zebula: And, Paul, clearly, the data center load that we're experiencing is going to create an opportunity, right, to spread fixed costs, right, across a bigger base and improve the headroom opportunity there as well. Okay, great. And I appreciate it. And good to see you back then. Hopefully.

Speaker Change: An opportunity right to spread fixed costs right, along a bigger base.

Speaker Change: And improve the headroom opportunity there as well.

Speaker Change: Great.

Good to see you.

Zack: Zack that proposal.

Paul Patterson: Thank you. Thank you, Paul. I appreciate that.

Zack: Thank you. Thank you Paul I appreciate that.

Regina: Thank you for joining us on today's call. As always, the IR team will be available to answer any additional questions you may have. Regina, would you please give the replay information? Today's conference will be available for replay beginning approximately two hours after the conclusion of this call and will run through 11:59 p.m. Eastern Time on March 5th, 2024. The number to dial to access the replay is 800-770-2030, and for international callers, 647-362-9199. The conference ID number for the replay is 90-66-570. This concludes today's conference call. Thank you all for joining us. You may now disconnect.

Speaker Change: Thank you for joining us on today's call as always the IR team will be available to answer any additional questions. You may have Regina would you. Please give the replay information.

Regina: Today's conference will be available for replay beginning approximately two hours. After the conclusion of this call and will run through 11 59 P. M. Eastern time on March 5th 2020 for the number to dial in to access. The replay is 807 702030 and for international.

Regina: 64736 to 9199 the conference I'd number for the replay is 9066570. This concludes today's conference call. Thank you all for joining you may now disconnect.

Regina: Okay.

Regina:

Regina: Yeah.

Regina: [music].