Q2 2025 American Electric Power Co Inc Earnings Call

Thank you for standing by. My name is Greg and I will be your conference operator. Today at this time I would like to welcome everyone. To today's American Electric Power second, quarter, 2025 earnings, call all lines have been placed on mute to prevent any background noise.

After the speaker's remarks, there will be a question and answer session. If you'd like to ask a question during this time, simply press star followed by the number 1 on your telephone keypad. Once again, star 1.

And if you'd like to withdraw your question, simply press *1 again. Thank you.

I would now like to turn the call over to Darcy. Reese, vice president of investor relations Darcy.

Good morning and welcome to American Electric Power second quarter, 2025 earnings call a live webcast of this teleconference and slide presentation are available on our website under the events and presentations section.

Joining me today are Bill Furman president and chief executive officer and Trevor, mahalik, Executive, Vice, President and Chief Financial Officer. In addition, we have other members of our management team in the room to answer questions if needed, including Kate Sturgis, senior vice, president, and chief accounting officer,

We will be making forward-looking statements during the call actual results. May differ materially from those projected and any forward-looking statement we make today factors that could cause our actual results to differ materially or discussed in the company's most recent SDC filings.

Please refer to the presentation slides, that accompany this call for a Reconciliation to gaap measures.

We will take your questions following opening remarks, please turn to slide 4 and let me hand the call over to Bill.

Extremely proud of the effort and dedication that our team has put forward, resulting in significant progress on our strategic objectives of delivering reliable, and affordable service to our 5.6 million customers.

Before we begin, I'd like to First recognize 3. Seasoned Executives who have recently joined and solidified. Our leadership ranks.

In May Doug Hannon was named president of AEP transmission to lead, all aspects of our best-in-class. Largest in the nation transmission business, which contributes 55% of aep's, total operating earnings.

Doug comes to AP after being CEO of Berkshire, Hathaway, energies, Envy energy. He understands the pace of play and discipline leadership. I want as we grow this segment of our company.

We look forward to benefiting from Doug's deep industry experience and strong leadership as we prepare the business for a significant growth and meeting the future demands of our customers.

And this month, Rob Bernstein was named general counsel. Rob comes to a after serving as general, counsel at Xcel Energy. But before that he worked with me at Berkshire Hathaway energy for many years

He understands the direction I want to head and how we need to get there.

This is a pivotal time for AEP. Rob's legal expertise, deep business and utility background, coupled with his disciplined leadership and commitment to excellence, will serve us well as we continue to navigate complex operational, financial, and regulatory landscapes.

Finally, Johannes eert was named chief information and Technology, officer. He joins us after a very successful career at Cox Communications for he led an expansive team that was incredibly focused on the customer both internal and external Johannes will lead our continuing efforts to build an efficient Innovative organization that supports the right technology to meet the ever-changing needs of both. Our customers and the business, we are proud to welcome these leaders who will report directly to me and support the execution of our long-term strategy.

Today, I'd like to discuss the ways in which we have advanced on our commitments to Grow Financial strength Drive, operational excellence, and deliver constructive Regulatory and legislative outcomes.

Each is a key priority that our team and I are laser focused on

We have continued to leverage our size and scale. To ensure AEP is extremely well. Positioned for unprecedented, growth and value creation.

I'll begin with the key financial highlights for the quarter cover, the low growth, opportunities ahead and provide additional insight into both federal and state level Regulatory, and legislative successes that. We have delivered since the last earnings call.

Trevor will walk us through second quarter, performance drivers and provide additional details surrounding aep's financial position.

Please refer to slide 5 of our presentation for a summary of today's remarks.

Starting with our financial results, 8p delivered, the strongest ever second quarter operating earnings in our 100-year history.

This team delivered operating earnings of $1.43 per share for 766 million.

I am seeing significant improvement in execution discipline and regulatory outcomes. That is fueling this performance.

With added strength to the management team as previously, discussed, I fully expect us to continue building on these levels of results.

My confidence in this management team and workforce across AEP is incredibly strong.

I see the culture changing to 1 of accountability performance and Trust in each other. And we are fortunate to also have exceptional support from our board of directors.

Our future is very bright and with strong results. Halfway through the year. We are now guiding to the upper half of our 5.75 to 5.95 per share operating earnings range. Additionally with the robust Capital plan, we are seeing a continued path and a reaffirming. Our long-term operating earnings growth rate of 6 to 8%.

My confidence in our ability to execute is very high. This is critically important as we look to the Future and the growth that is in front of us.

Specifically, we are executing on our 54 billion dollar, Capital plan and expect to announce a new 5-year Capital plan. This fall of approximately 70 billion dollars.

The incremental Capital can be allocated with approximately 50% to transmission, 40% to generation and 10% to distribution as we have previously. Highlighted. There have been several announcements on some 765 KV transmission projects that we will incorporate into our third quarter Capital Plan update and look forward to providing a robust Outlook later this year to support our incredible growth.

11 State footprint. We are excited about the substantial customer interest in AEP service territory and our team is taking a very disciplined approach. When thinking about this new load,

we have increased our firm customer commitments. And now expect to have 24, gigawatts of incremental load by the end of the decade, from our previously reported 21, gigawatts driven primarily by data centers. Reshoring the manufacturing, and further Economic Development.

I want to emphasize these 24, gigawatts are all backed by signed customer agreements protecting us from changes, in usage, driven volatility.

We believe this amount of committed capacity is differential compared to almost any other utility and we are well prepared to deliver on this for our customers and our states.

Beyond the 24 gigawatts, customers are also actively seeking to connect approximately 190 gigawatts of additional low to our system.

This is 5 times, our current system size of 37, gigawatts.

Potential customers are drawn to aep's footprint because of our Advanced Transmission Network capable of delivering consistent, large load power.

Recall that we own and operate more ultra-high voltage 765 kV lines than all other utilities combined, uniquely positioning us with the largest electric transmission system in the country. Please turn to the next slide.

There is a long list of accomplishments. We have achieved this quarter outlined on this page and to be very clear. We are aligning our business with the goals of our state and federal Regulators, legislators and policy makers. As previously noted, we see significant opportunities to invest in generation transmission, and distribution across our footprint and Beyond

In connection with these investments, customer affordability remains top of mind. As we consider how to fairly allocate costs related to critically needed infrastructure.

Let's walk through a couple of noteworthy accomplishments.

First.

Ohio has become a recognized hub for data centers and we are actively participating in this growing Economic Development opportunity.

Earlier this month, the Ohio commission established enhanced Financial Obligations that data centers will need to undertake to fund necessary infrastructure.

This approved data center, tariff provides assurances that there will be reliable electric grid infrastructure to deliver the power. We all count, on while keeping costs as low as possible for all customers.

This approval joins other large low. Terrorists, previously secured in Indiana, West, Virginia, and Kentucky.

A has been at the Forefront of securing these tariffs that bring down system, average costs. As we add data center customers, promote certainty around build out while providing customer protections and our powerful risk mitigation tool for us.

Moving on to Oklahoma following commission approval. In June PSO, purchased the Green Country power plant, a 70095 megawatt natural, gas fire generation facility located, in Jenks Oklahoma,

As customer energy demands rise in the region, this facility will play an important role in delivering reliable power, while ensuring grid stability for the communities, we serve and supporting the state's economic growth.

This plan has been successfully integrated into PSO operations and is performing well showing AEP strength of execution.

And finally, we continue to explore innovative ways to bring tailored power solutions to our customers during this period of massively growing power demand.

At AEP, we are at the Forefront of innovation and small. Modular reactors or smrs are just 1 option. We are considering to provide our customers with safe reliable and clean face load energy.

We have already shared our plans with you, to begin the early site. Permit process for 2 potential SMR locations, 1 in Indiana and the other in Virginia to support significant load growth in our service territory.

While this represents an exciting opportunity for us, we will continue to be extremely prudent in our Capital, allocation protection of our balance sheet and credit metric strength.

We are also continuing to pursue deployment of Bloom fuel cells.

This is a low-risk approach to bridging data center load, from first power to Ultimate grid connection.

We are excited about this innovative solution and are in discussions with various customers about this energy supply option.

Demand for power is growing at a pace I have not seen in my 45-year energy career.

This was reinforced just last week with PJM capacity prices clearing above $325 per megawatt-day, the price cap.

As we continue to see the need for capacity and energy materially rise.

Necessity, this gives us confidence in our growing Capital plan.

A fundamental and core priority of mine is to continually demonstrate to our regulators and customers that we will be highly focused on safety service, reliability and deliver balanced and constructive regulatory outcomes.

I'm proud to say, we've made great strides on this front for example.

AEP Texas was recently granted an Urgot Permian Basin 765 kV transmission project, opening the door for future 765 kV projects.

In addition system, resiliency plans at AEP, Texas and Swepco Texas received the green light AEP Ohio secured approval for its phase. 3 grid smart Rider.

Kentucky was authorized recovery of advanced metering infrastructure. And, as previously mentioned AEP Ohio, received the data center tariff approval, while PSO was granted authority to purchase the Green Country, natural gas facility in Oklahoma,

These important developments reflect collaborative efforts with our Regulators. As we find solutions that support existing and future customers.

Additionally, in the second quarter, Perk issued orders agreeing with AEP's proposed treatment of NLCS within his transmission formula rates, which Trevor will go into more detail on shortly.

A couple of our operating companies recently filed new base rate applications including Swepco, Arkansas, and March and AEP Ohio in May.

We look forward to working with all stakeholders in both of these cases to achieve, constructive and balanced outcomes. That benefit both our customers and investors.

In West Virginia late. Last year, ABCO filed, the base case and offered the option for securitization of up to 2.4 billion dollars as a means to help mitigate rate impacts on the proposed base rate. Increase,

We expect a commission order in the third quarter and appreciate the stakeholder feedback we have received during this process as we all continue to focus on customer needs and affordability.

Turning now to aep's, legislative efforts. We have also been working diligently with federal policy, makers and state legislators to deploy large amounts of capital while reducing regulatory leg.

Our team has been actively engaged throughout the legislative process leading into the federal budget reconciliation, Bill signed into law on July 4th.

The bill contains several tax Provisions, impacting utilities, primarily centered around tax credits for Generation assets.

To be very clear the legislation currently supports 100% of aep's 9.9 billion 5 year. Capital plan for wind and solar generation. Maintaining the required criteria to capture the full tax credits.

We are also closely monitoring the July 7th. Executive order to assess potential impacts on tax qualification,

Even if the U.S. Department of the Treasury issues new guidance under the order that redefines the beginning of construction criteria, we currently expect that only a few projects at the back end of the plan may need to be reassessed for tax credit eligibility.

Keep in mind that while our generation mix may vary.

The load growth remains robust and we will need future generation to service the forecasted demand. So any impacted Capital would just be reassigned to Alternative forms of generation assets at the back end of the plan.

Texas house bill 5247, which became law. On June, is an incredibly constructive piece of legislation for AEP Texas.

This unified tracker mechanism allows utilities that meet certain criteria to submit a single filing each year, instead of multiple filings for distribution and transmission Investments.

Essentially eliminating lag, further streamlining the regulatory process, and substantially improving the earned ROE.

This is highly supportive of increasing our Capital allocation to Texas as we participate in the massive infrastructure, buildout needed to drive the economic growth in the state.

With Ohio House Bill 15, taking effect in August, the new legislation eliminates electric security, plans, or ESP. And introduces a multi-year forward-looking test year, with a true up mechanism, which promotes timely and efficient recovery of Investments, AEP Ohio's, transition, for mssps to this new construct in 2028 will proceed seamlessly without any Gap in timing since the current ESP expires currently when the forward-looking test year rate case will take effect. This is very positive for AEP Ohio.

for Oklahoma and Senate Bill 9998 PSO views, the impacts of this legislation also is very constructive

Flag and increase earnings recognition. This legislation is also effective beginning in August.

I'll close by emphasizing how proud I am of all we have accomplished over the past 12 months. This tremendous progress would not be possible without the unwavering dedication of the entire AEP team and our Board of Directors.

We continue to push our strategic priorities forward and deliver for all of our customers and other stakeholders every day at a dramatically increased pace of play.

This is only the beginning and I believe we are just getting started. We will continue to work at a fast pace on our commitments. While remaining focused on customer service. Operational excellence Financial discipline sound execution and driving value for our shareholders. I'll now turn the call over to Trevor who will walk us through the second quarter of performance drivers and other financial information.

Thanks Bill and good morning to everyone.

Today, I'll review our financial results for the second quarter.

Build on bills comments regarding our exceptional load growth and then finish with comments on our commitment to the financial strength of the company.

Let's start with slide 7, which details our quarterly operating earnings performance by segment.

For your reference, there is a detailed reconciliation of GAAP to operating earnings for the quarter on slide 24 of today's presentation.

Operating earnings for the first quarter, total $143 per share, compared to $1.25 per share in 2024.

This was an increase of 18 cents per share or about 14% year-over-year highlighting the solid momentum. We have heading into the second half of 2025.

This momentum coupled with our proven ability to execute gives us the confidence to guide our operating earnings per share to the upper half of the 2025 range of $5.75 to $5.95.

As Bill briefly indicated we have been working with each of the various Regulators in our service territories to align our rate making for the tax net. Operating losses with the rulings we received from the IRS last year.

This quarter. We received a final decision from furk, aing the appropriate treatment of nol C's to our transmission formula rates.

Resulting in a 480 million or 90 cents per share. Increase to gaap earnings.

The tax benefit related to Prior years, has been excluded from operating earnings.

With the resolution of this issue. By far, we have now transitioned substantially. All of our rate making to the required regulatory approach.

Looking at the drivers by segment. Operating earnings for the vertically integrated utilities for 56 cents. Per share up 10 cents from a year earlier.

Positive drivers included rate changes across multiple jurisdictions and increasing load from data centers which I'll get to in more detail shortly.

These items were partially offset by the variance. From last year’s extremely favorable weather in the quarter and higher depreciation in the current year, driven by increased capital investment.

The transmission and distribution utility segment earned, 42 cents per share up 1 cent from last year.

Favorable drivers in this segment include rate changes driven by Rider recovery of distribution investments in Ohio and the base rate case in Texas.

As well as continued gains in retail sales from large loads.

These items were partially offset by increased year-over-year onm, primarily driven from system improvements and spending on storm related expenses.

As Bill mentioned we had an incredibly impactful legislative session in Texas. Most notably the passage of House Bill 5247, also known as the UniFi tracking mechanism for UTM.

This bill applies to AEP Texas given its inclusion in the Permian plan, participation in our cut and the significant amount of capital. We anticipate spending throughout the state over the next decade.

The UTM basically eliminates regulatory lag and supports increased capital investment in AEP Texas, in response to the legislature's. Goal of developing the electric infrastructure necessary to harden the grid, which is driven by the state's incredible economic growth.

In late June AEP. Texas made a notification filing with the commission that they intend to use the UTM process going forward.

The AEP transmission whole Coast, segment contributed 42 cents. Per share Up 3 cents from last year.

Transmission assets as new loads are added onto the system. Remain the key driver in this segment.

Generation and marketing produced 17 cents per share up 5 cents from last year.

Favorable energy margins were partially offset by lower distributed generation margins due to the sale of the on-site Partners business back in September of 2024.

Finally, corporate and other categories were relatively flat compared to last year, demonstrating our focus on overall cost controls.

Moving on to slide 8.

I'd like to speak to some of the significant increases in loads that we continue to see across the system.

The numbers you see, here are the basis behind our existing 54 billion. 5-year, Capital plan.

Keeping in mind, we expect to increase the capital plan to a new 5-year spend of up to $70 billion.

we're seeing great clarity into this Capital Growth and we will be ready to lay out the details of our revised capital and financing plans on the third quarter earnings call

The chart to the left depicts, how our load story is impacting the second quarter growth on a weather normalized basis. We've added more than 4 gigawatts of incremental Peak demand. Since this time last year growing from 33.5, gigawatts to 37.6 gigawatts,

This increase is largely due to new data centers and other industrial. Customers coming online in Indiana, Ohio, and Texas. Resulting in a roughly 200 million year-over-year increase in revenues.

this slide highlights, the strong relationship between Peak demand and Revenue,

That's because our cni. Customer bills are based more on Peak demand than megawatt-hour sales.

Higher Peak demand, coupled with a contractual minimums. Built into the latest tariff. Provisions predominantly in Indiana are driving up revenues.

These demand minimums for large load customers are helping to more than fully offset revenue impacts from energy efficiencies among our residential customers.

Turning to The Graphic on the right. And looking beyond the current quarter, our 54 billion 5-year, Capital plan is supported by 24, gigawatts of contracts that have already signed firm commitments for incremental load through the end of the decade.

We will be taking this into consideration as we update our full forecast later this year.

These contracts are a combination of letters of agreement or loas and long-term electric service, agreements, or esas, depending on tariff Provisions in the jurisdictions, in which they're located.

To put a fine point on this, we are really one of the only investor-owned utilities that not only has an incremental load of 24 gigawatts backed by signed LOAs or ESAs, but also has an incremental 190 gigawatts in the interconnection queue, actively looking to connect to our system.

This represents an unprecedented growth opportunity that is largely unique to AEP, given the size and technological profile of our transmission system.

This 190 gigawatt Q consists of requests at varying stages of development and is indicative of the fact that we have substantial unsigned load. That is looking to connect.

While we continue to see a lot of public speculation about data center load. We have developed detailed internal processes for executing on a firm pipeline of actual growth that we are already seeing come to fruition.

Earlier you heard Bill mentioned, a few of our regulatory successes and several revolved around strengthening and lengthening those tariff provisions.

Just this year, we've had large load tariffs approved in Indiana, Ohio, West Virginia, and Kentucky that provide financial protections for our existing customers as we invest to serve those new large loads.

Relying on these signed contracts as opposed to more speculative, forecasting methods, differentiates AEP and gives us confidence that these loads will materialize on our system.

Again, now that we have some of the new tariff provisions in place, particularly in Indiana and Ohio, we are working towards getting more of those requests converted into signed agreements. That can eventually be incorporated into the load forecast that we will be communicating later this year.

Let's move on to slide 9.

On the left of this slide, you can see our liquidity summary which remains very strong in above 5.6, billion dollars and is supported by 6 billion dollars of credit facilities.

$82 billion, minority transmission transaction in early June and our proactive $2.3 billion Ford equity offering in the first quarter.

As a result. FMP moved aep's Outlook to stable and reaffirmed, our Triple B flat credit rating.

We remain committed to continued credit quality and I want to reiterate that we have fulfilled, our Equity needs that supports our 54 billion Capital plan from 25 through 29.

As previously mentioned, we expect to increase this 54 billion Capital plan to a new 5-year investment plan of up to 70 billion dollars.

We are evaluating upcoming incremental, Capital spend opportunities.

And efficiently matching them with optimal financing strategies, including items like growth equity and hybrids in support of this capital expansion.

We do not have immediate Equity needs and maintain near-term. Flexibility. As we evaluate all options to efficiently Finance our growth,

We're also encouraged by favorable, legislative developments constructive regulatory outcomes and our continued focus of discipline cost management.

Together these factors support operating cash flow growth and provide a solid foundation to fund incremental capital investment.

On the top right, table? S&ps ffo to debt metrics stands at 14.8% for the 12 months. Ended, June, 30, and Moody's ffo to debt metric stands at 13.2%. For the same period using their recently revised methodology.

Finally, let's move to slide 10. Before we take your questions I'll Briefly summarize what you heard from Bill and me today.

First, you heard how we delivered strong financial performance in the second quarter, substantially growing earnings by 14% quarter over quarter.

Regarding to the upper half of our 2025, operating earnings range of 5.75 to $5.95 per share, which is driven by strong, year-to-date results, and confidence in our ability to execute for the remainder of the year.

Second, you heard that we continue to achieve constructive regulatory and legislative outcomes. This was highlighted by positive developments like House Bill 5247 in Texas and Senate Bill 998 in Oklahoma.

Alongside solid regulatory execution, on several key filings like the approval to build a new 765, KV transmission, line in Texas.

The acquisition of the Green Country, generation facility in Oklahoma and the approval of large load tariffs across several jurisdictions.

Third. You heard how we've strengthened our balance sheet through the closing of the 2.8 billion minority interest transmission transaction, on top of the 2.3 billion forward Equity offering completed late in the first quarter.

Fourth, you heard a, how our remarkable low growth story continues to evolve and contribute to earnings how our commitment to obtaining signed contracts and our sizable interconnection queue gives us great confidence. That these projects will come to fruition.

Also, you heard how those same contracts provide financial protection for our investors and other customers.

Lastly, you heard about our continued commitment to execute on our Capital plan and we expect to increase our Capital plan to a new 5-year investment plan of up to 70 billion dollars.

As we mentioned earlier, we are looking forward to sharing our plan and the associated financing on the third quarter call later this year.

It's an exciting time to be in the electric industry and I believe we are extremely well, positioned to drive, exceptional operational and financial results, and deliver value to our customers and shareholders.

I'm now going to ask the operator to open the call so we can take some of your questions.

Thank you. And at this time, I would like to remind everyone that in order to ask a question, press star, then the number 1 on your telephone keypad. Once again, star 1.

And we will pause. Just a moment to compile the Q&A roster.

All right, looks like our first question today comes from the line of Ross. Fowler, with Bank of America Ross, please go ahead.

Uh, congrats on a great quarter. Um,

Just a couple of questions for me this morning. So first, Trevor, on the indicative capex, the increase to $70 billion from the $54 billion in that five-year window that you're thinking about for Q3.

How do you, or can you, give us some color on the financing needs and the options for that incremental $16 billion?

Here, hopefully coming through the rate case, you've got the universal tracker in Texas.

How do you see the impact of the tire, cap back on your growth rate, given more real-time recovery?

Even if the capital was back at loaded back of the envelope, math would suggest kind of a 100 basis points upside. But how do you think about it?

Yeah, Roth, thanks. Thanks for those questions, I appreciate it. Um, on the financing, uh, on the capital plan. Let me just start by by saying, you know, we have been really proactive in, in financing, the existing 54 billion, Capital plan. And as I said in my prepared remarks since January, we've issued that 2.3 billion dollars of equity under a forward and then closed on the 2.82 billion minority, uh, interest, uh, transmission transaction. Which essentially took care of all of our current 5-year Equity funding needs. So by doing this, we really don't have near-term Equity. Needs even for an increase in capital plan in the near term.

Needs in the first 6 months for the 54 billion, and so again, that gives me some level of flexibility. So when I look at this incremental Capital, I'm going to uh, continue to prioritize the balance sheet strength as we explore. Uh, the multiple options around capsule capital structure, including hybrids growth equity. And then again the strong continuing um, cash flow from operations, especially given the favorable legislative developments, uh, that we've seen that reduces this regulatory lag. So, that'll increase ffo. And, uh, and also, you know, we're, we're focusing on on cost management. So together with these factors, um, I I think we we will come out uh in the third quarter with our revised financing strategy. But what it really does is gives me a level of leeway in the near term here to do things in the most efficient way.

and then, to the long term growth rate, um,

You know, you you raise a good point here. And we're seeing, um, again, robust growth, uh, from the 54 billion, uh, uh, to this up to 70 billion. But remember last year, we raised our growth rate when we were 6 to 7 and we raised it to 6 to 8. Um and and we really believe this incremental load uh with capital investments in the financing strategy in this positive Regulatory and legislative uh development is really position us well within the 6 to 8% range.

I want to see continued progress on operational and financial performance, you know, coupled with near-term impacts on expanding capital plans before we make any upward revisions to the long-term growth rate.

You know, I I'm, I'm really looking to be disciplined as we balance. Stakeholder interests, including strengthening the balance sheet and driving long-term growth. These areas. I think are critically important Ross and we really are ensuring, we're not trying to prioritize 1 over the other.

The great news is, we're seeing so much opportunity for positive Financial results, given this once in a generational growth, um but we're going to be disciplined in in how we uh roll out messaging and how we roll out the financing.

That's a perfect term, thank you. And then one more, if I may, um,

Something over to slide 12, and just looking at that Roe trajectory on the left-hand side up to the 9th.

The C Apex this is it, you know, 86 PSO is at 83 but given we're going to go to a 4 tests year, hopefully in Ohio, we're moving to the universal tracker, Texas, as that lag reduces, you would expect those 2 to move higher. That's a pretty significant portion of your rate based, so the overall trajectory of the Roe trend from that 93 should push higher as well. If I think about that correctly,

Yeah, I think there's no doubt you will see. I think an increasing Roe, we've kind of been public about the the fact that uh with the uh the UTM in Texas. Uh the objective there is the state is really trying to attract as much Capital as possible to this growing um needs in the state and this we've said is going to probably increase our Roy's in AEP Texas by 5200 basis points.

that's fantastic cover, thank you for the detail, the answers, I'll jump back into the

Thanks Ross.

Thank you, Ross. And our next question comes from the line of Steve fleshman and with uh Wolfe research, Steve please go ahead.

All right. Yeah, hi. Good morning. Thanks.

um,

So, just, uh, I guess, uh, first, uh, Bill, you mentioned, uh, kind of the SMRs. Maybe give a little more color on that.

Kind of uh, that plans there. Uh, and just uh how how you're looking at kind of protecting the risk on on that?

Sure. And, uh, good morning, Steve. Thanks for, for calling in. So our our Focus right now on smrs is really on the early site permit work. We've got very strong regulatory support, particularly in Virginia where we're allowed to invest up to 125 million with recovery.

Partnership with our customers, as I've said many times before, we will make sure that there is extremely strong capital investment protections and that we've got safeguards on our balance sheet and credit ratings. And that there's very clear Regulatory and government support for anything that would go beyond the, the early site permit, uh, process for us. So, uh, very excited about where we're at on, on our partnership with Virginia and particularly governing Allen has been incredibly supportive of, uh, looking at sites in in preparation for what might come. But, uh, for now, the focus for us is on uh, looking at, uh, basically at ground and and the availability of, uh, potential locations and doing that through the, through the government and, and the state regulatory environment

Okay, great. And then on the, uh, Trevor Mihalik on the NLC that you mentioned, is there any ongoing earnings impact from that change? I know you mentioned the one-time.

Yeah. Uh, the uh, the 1 time is the, uh, the piece of, uh, we recorded in this quarter. There is an impact that we will see, uh, later this year. Um, it's it's not going to be material, but I'll let Kate kind of address some of this as well.

Yeah, so the, um, the one-time item was primarily to do with remeasuring the balance sheet. Um, we've said before that we would expect the ongoing impact to be around 3 cents, and that's still how we see that flowing through operating earnings on an annual basis.

Okay, great. And, uh, I guess, uh,

maybe just be good to get a, uh, an update on the, the West, Virginia case,

So the West Virginia case has gone through the the uh, regulatory process. Uh, we've had extremely good engagement with all the parties. Uh, as you know, we did offer up the alternative for securitization in that case. And, uh, that's was seemingly well, received throughout the discussions with the stakeholders. All of the work is essentially complete and we're awaiting an order, which is expected to come out to late August or early September.

Okay, great. Uh, great. Thanks for the update.

Thanks Steve. Thanks Steve.

Thanks Steve.

And our next question comes from the line of David araro with Morgan Stanley, David, please go ahead.

Hey, thanks so much. Good morning.

Um, you know, reflecting on, on the campex increase that you're signaling here, you know. Um this is the second 1, I guess, just 8 9 months ago, you also increased your capex plan by 30% at that time. Here you've got another kind of 30% increase, uh, coming. So I guess I'm just wondering, you know, as we look ahead, you know, is this the new normal is there a limit? Um, you know, in terms of what you're seeing around capex opportunities? Um could this, you know, could we continue to see further escalation um in the in these 5 year capex uh plans as you roll them out.

Yeah, David, um, again, what we're seeing is just tremendous growth on the system. And I, I want to really kind of emphasize where you take a look at our overall, uh, Peak summer load is 37, gigawatts. And we've also announced that we have an incremental 24 gigawatts, um, that is, uh, signed up to connect to our system under either loas or esas. So that takes us North of 60, gigawatts on our system size. And then there's another 190 gigawatts behind that in various stages of development. We know not,

All of that is going to come online, but even a fraction of that is significant. And so from that perspective, we continue to see opportunity to continue to invest, we're going to be disciplined. Um, but even raising our Capital plan from 54 to up to 70, uh, is a sizable growth and and we want to ensure we're digesting that in a way that is, uh, disciplined and, uh, ensuring we're also protecting our balance sheet as, as we're continuing to grow this business. But the big, you know, um, thing that that I want you to take away here is across our 11 State footprint. We've got a large footprint and a lot of Economic and, and, uh, other type of activity, looking to connect. And so, a lot of positive

Get that color. Um, and then, you know, as you look at the um, pipeline of data center activity, wondering if you could just give a little color as to where you're seeing it. Um, you know, which states, uh, how does that split out among uh, your states and service territories? Um, and just curious, I mean, with such a rush of activity, like, what is the wait time? You know, how long does it take at this point to connect new data center load uh, into your system?

Yeah, we'll start at sort of a a global um a global uh view of of data centers in general. Uh, our area is extremely attractive for data centers. We have

Uh, ample fiber capacity. We have good supply of water and of course with

Having the largest transmission system in the country and the 765 kV backbone, we are incredibly well positioned to attract the data centers. Coupled with our level of operational excellence and our ability to come up with creative solutions to bridge.

Uh, these data centers over from uh, perhaps early use of fuel cells into grid. Connect, uh, is also very attractive to these customers and so uh,

We've put in very strong protections for our customers, through the use of the data center tariffs, which I noted in my comments, we have in a number of states. Uh, but even with those, we still have an incredible attraction of new data centers wanting to come into the territory. And so, uh, as we, uh, look at this, we've got, uh, an incredible background of of backlog of these Data Centers. Of course, depending on what state we're in, we'll determine what their weight times are. Um, but again, as we work with them, we're trying to give them innovative solutions so that they can come online quicker. Uh, for instance, in Ohio, we've got the 2 customers Amazon, web service, and kalajdzic that we've done, uh, fuel cells with while we work through the interconnection agreements with them, which is probably 5 to 7 years. And I'll say that's not, um, unusual in many of our locations, as, as we work,

Through this. But we also have areas of our system that still have available transmission and and those sites obviously are being discussed with the customers to allow quicker, connections. And so, uh, while a lot of our focus is on on data centers, uh, we have a lot of other activity going on in our states, we have a lot of reshoring of manufacturing and we have an incredible amount of economic development of existing businesses that continue to grow that that we're dealing with. And so uh, just overall we're in a tremendously positive Place. We've got exceptional opportunities to continue to attract these customers and and we're going to do everything in our power to execute uh, on on these agreements that we have and get them interconnected as quickly as possible.

Great. Thanks so much. Appreciate it.

Great. Thank you. David.

And our next question comes from the line of Jeremy tan with JP Morgan Jeremy. Please go ahead.

Hi, good morning.

Good morning.

um just want to pick up on uh the the capital plan uh possibly increasing notably here talked a bit about funding but wanted to talk a little bit more if you could there and just wondering as far as you know, how you might prioritize funding, or how you see asset sales potentially uh fitting into I guess the pecking order there, you know, particularly with regards to the power, uh previous, you know, uh, moves to sell

Kentucky, power in the past, just wondering how asset sales fit together versus other funding sources.

Yeah. Well, appreciate the uh appreciate the question again. The uh the additional capital for us is uh incredibly exciting for us. Uh to maybe give you a little bit of a breakdown on that. It's about 2 billion in in the inm for Generation about 3 in PSO for Generation about 7 and A2 Texas for transmission and then another couple billion for uh distribution across the app codes and then a couple billion across miscellaneous projects. And as we think about that, our focus is really on growth. Um, uh, I'm not really 1 to want to sell assets as a strategy. Uh, we'll look at all Alternatives and do what's in our best interests of shareholders. But my focus right now, is really looking at the opportunity in front of us and growing this company as as best we can.

Got it understood. Thanks for that. And, uh, we're just wandering within, you know, the transmission plans. Um, just wondering if you could expand a little bit on how maybe gets and reckoned, you know, could factor in and help for you know, speed to Market Solutions here, given, you know, data center needs here. You know, particularly given your prior experience with the ACC conductor and and and what that brought to the system

Our transmission team is uh acting uh in a forward-looking mode looking at various reckoned projects. Uh we've actually worked with the government and received a number of Grants to support uh reconnect room or system. Um but again that

That I would say adds, uh, small incremental capacity to the system. What we really need to be looking at is a dramatic 765 kV, uh, backbone edition, uh, across our service territory. And, uh, I was very excited to see Texas come out with their proposed plan to use 765 kV across the Permian area to really enhance the strength and resiliency of that system. And, um, my view would be that we need a lot more of that, uh, into, uh, our grid and into particularly PJM, SPP, and, and MSO, uh, the recognized ideas and some of the...

More Innovative products that are out. There are are interesting and intriguing, but with the size and and scale that we have in front of us, we we have to think much, much bigger and and and get moving on, on these projects.

Got it. Um, just thank you for that. Just 1 last question. If I could in uh, conversation that you you presented so far, nuclear focuses seems like more on smrs versus ap1000 and just wondering if you could provide any thoughts I guess on on 1 versus the other uh um and what drives preference

Well, for for us again, as I, as I said, our fundamental Focus right now is on, uh, just the sites and and working within our regulatory environments. And and what are states 1 is to pursue at the moment. Uh, as I as I think about SMR Technologies and and

The ap1000. Um all of those are are really something that even if we started today wouldn't be available until early to to mid next decade. I think Forum a customer perspective as we've had uh discussions with our customers. I think that there's I would say a, a leaning more towards smrs only because of the diversity that they offer and that if you have 4 of those supplying service to a, a Data Center and you need to shut 1 down to refuel, you still have

3 versus, uh, just having the risk of 1 Big Unit there. But, uh, really for us at this stage, uh, we're focused on on sites. We're focused on staying within the regulated environment. Uh, we're working with our customers to determine what they would like to do and and how they would like to do it. Uh, but again, uh I I think it's really mid to to uh, mid next decade before any of these types of things are going to be commercially available in this country.

Got it. Thank you very much.

Thanks, Jeremy.

And our next question comes from the line of Nicholas Campanella with Barclays. Nick, please go ahead.

Hey, good morning everyone. Thanks for all the updates. Um, good morning. I just wanted to ask just this morning, uh, just to put, uh, 1 quick follow up on financing and I, I apologize just doesn't sound like, there's anything near-term, uh, for equity in either plan, uh, that, that you need right now. And you know, the credits back to stable, uh, to your point, but just for funding, the 16 billion is there, just a percentage of equity that's required that we should be thinking about whether it's 20, or 40. Or I I'll just stop there. Thanks.

Um, what the near-term, uh, ffo to debt is with these really positive legislative results. So, um, we always want to be really judicious with, uh, any kind of growth Equity issuance. Um, but again, uh, I think growth Equity, when you have this type of, of robust plan is not something we should shy away from, but it is always something that we will uh uh, be very judicious with in, in issuing a shareholder equity.

Understood, uh, very clear. Um, and then just quickly on the sales growth, for, for this year. I know you guys kind of combined, uh, cni now. Uh, can you just kind of talk about what's driving, the shift on the combined View and then, um, thoughts on physical 25, overall, which I think was just updated lower. Thanks,

Yeah, absolutely. And and you, you did pick up on that, you know, we did combined, uh, in the uh, earnings slides, uh, that we presented today, uh the cni load combined together and and really there's several reasons for this 1. I think it's more in line with how others in the industry, present the load on a cni basis. Um also uh I think it's also more reflective of our business. That there is a growing convergence between how some commercial and Industrial C customers are classifying themselves. And that's particularly true. Also between um, some of the uh, the crypto versus uh, the data centers and then also um the financial Protections in

The contracts for the day data centers. Um, we kind of believe that, uh, uh, those are that commercial load associated with is more akin to an industrial load. So from that perspective, I think um, it it makes more sense and it's it's better presentation for uh our uh, our investors to see it as as 1 combined load and and overall what you're seeing is load increasing overall on the entire system on a throughput basis. So very positive in that regard across the whole retail load.

Okay. And then just 25, I think, was lower. Is that still coming from that segment? Or just, I know that there's a ton of growth in the future, but just the 25, I believe, Chris, correct me if I'm wrong, is lower. So I was just hoping you could address that as well.

Yeah, again, what we're seeing is, um, one of the things I want to emphasize here is the financial protections in the commercial load and whether or not they actually take that. The, uh, the minimums they're paying for what they've signed up for, that capacity, because they're still ramping up their data center loads in the various locations, but they want to ensure that they have connectivity to our system. And so, from that perspective, it doesn't really matter to us financially, uh, whether that load is actually coming on or not. And so, we do see some volatility as this load ramps up. Uh, but again, from our...

Our perspective. We're protected financially.

Understood, thank you.

Thanks Nick.

And our next question comes from the line of Julian Dumoulin Smith with Jeffries. Julian, please go ahead.

Hey, good morning, team nicely done, really. Truly remarkable across the board here, so great stuff. Um, in fact, Bill if I can pick it up. Oh, absolutely. Um, you know, if I can pick it up here, I mean, 20% increase in contracted load here, just in in 1 quarter up to 24. Gigs is, is remarkable. Can you provide a little bit more color on? Just the composition? I know you mentioned this a little bit earlier, like, what, what portion of that is like hyperscalers, for instance, if you can speak, if you can speak to that and then, you know, if you can speak to it like what percentage of these have progressed Beyond loas to to fully executed, the essays? I mean, just give us a little bit more color behind the 24. And then if I can take that and just add a sub point to it, how do you think about your earned Roes, right? I see this the the you know, the load growth profile, you know, per next question. How do you think about it given that you're, you're targeting a 93 here this year? Again, obviously, a lot going into that, but the scope of what's possible and earned, are we as you think about this load growth now heading over the next couple years versus earlier?

Um, long term guide.

Yeah, thanks. Uh, thanks, Julian. So, uh, to give you a breakdown of the 24th, about $2.5 billion of that is in the SPP, about $9 billion of that is in PJM, and about $13 billion of that is in OTT. And, um,

obviously, we continue to work with our customers, we're getting significant, uh, inbounds on

Great success in getting the contracts put in place. Um, and so we're continuing to push forward with.

Uh, with the designs and the, the interconnection for for these customers. Uh interestingly enough and in the spp uh about of the 2 and a half, gigawatts about uh 2.1 of that is, is data centers in about uh, 0.3 gigawatt of that is crypto. And then in pjm,

Uh, really that's split across Ohio, IN, and Appco. And, um, about $3.7 billion of that is data centers in Ohio; about $3.1 billion of that is data centers in IN.

And about uh, um.

Uh, really just a little bit, uh, of that is in, is in appco. And so, uh, erat is is probably the more interesting 1, which is where we see about 2 gigawatts on on data centers but, uh, about 5 gigawatts on crypto and so, uh, Texas is clearly becoming uh, the crypto Center for us and and we're making sure we're uh, make making sure we have, uh, the appropriate, uh, procedures in place to get crypto signed up.

Most, as most of that, as we can with Texas, as I said, becoming sort of the, the center of crypto right now. And so, uh, overall, uh, we're continuing to, to work through the agreements with these customers. Uh, I expect all of them will will move to the next to the next level. There, uh, very aggressively wanting to get contract signed. So, uh, my confidence level on this 24. Gigawatts is, is extremely high and know Trevor or anything to add. Yeah, just 1, 1 Thing Bill, and and Julian 1 of the things that that we're excited about here is as we're looking to attract, Capital to, to Texas. And and Oklahoma, when you take a look at at Texas, our authorized Roe, call it roughly 97976. And our uh, earned Roe is, is roughly 86. So that's where we're saying, 50 to 100 basis point increase with the uh, the UTM in Texas. So that'll go a long way.

Uh, to to adding to the 93 overall, earned Roe. And then in Oklahoma, similarly we've got 95 and our earned Roe is is 83 and with SB 9998 that should be pretty beneficial as well. So all very positive in that regard. And that's why we wanted to highlight both the Regulatory and the legislative, uh, positive outcomes that that we think are really driving policy in the states for the benefit of our customers, but it will also be beneficial to our shareholders.

Got it. And you think you can close the gap in Oklahoma, just to clarify that last comment there, Trevor.

Um, we will. I'm not saying we're going to close it, but I think it'll go a long way to improving the earned ROEs in Oklahoma.

Yeah, absolutely. Thank you guys. Nicely done. We'll speak soon.

Thanks Julian. Thanks Julian.

Thanks Julian.

And our final question today comes from the line of Carly Davenport, with Goldman Sachs Carly. Please go ahead.

Hey, good morning. Thanks so much for fitting me in. Um, just a quick follow-up on, uh, on Nick's question earlier on the 2025 load growth. Should we think about that as just a timing impact in terms of the, the ramp of some of these larger facilities? Are there any uh, read through to 26 and Beyond

Yeah, Carly, thanks for that. Um, I think one of the things when you really look at the CNI load ramp, the big point that we're trying to highlight here is that CNI customers are mainly billed based on peak demand. So, higher peak demand, along with the demand minimums embedded in the tariff provisions, is driving the revenue stability and really mitigates that earnings volatility.

Great. That's very clear. Thanks for the clarification on that and then just 1 other quick 1 on you mentioned on the back of the obb VA you know, passing you believe that the Renewables plans should be unchanged through 29, but just curious if there's any potential to pull any projects forward to secure the tax credits for customers or is there anything embedded in that new potential, 70 billion plan to reflect a pull forward dynamic?

Yeah, thanks, Carly look. I want to be really clear on this point. I would say right now, we have almost 10 billion dollars of Renewables in our Capital plan in our 54 billion 5 year Capital plan. And right now, under, uh, what is in obba? Uh, we we believe 100% of those projects will be, uh, eligible. Now, depending on what ultimately comes out of the EO and the treasury Department's guidelines. Um, as we said on, on our prepared remarks, there's a couple of projects on the back end of that plan. Um, and you know, I would say, worst case scenario, we would see maybe a couple of billion dollars, uh, that we would reallocate from Renewables to other sources of generation, but it largely, I would say this, the obba does not impact our uh, Renewables generation as as written right now and all of our projects qualify.

Great, thank you so much for the color.

Thanks Carly.

Thank you, Carly.

And that does conclude our Q&A session. So I will now turn the call back over to Bill. Furman bill.

Great. Thank you. Uh, we appreciate everyone joining today. I'd like to close with just a few summer, summer remarks.

So, exciting times, obviously continue ahead and I'm extremely proud of the entire a team. And all of the strong support received from our board of directors. We're driving the business forward with our plan to deliver results. For the benefit of our customers, our communities, and all other stakeholders. I'm very confident, we can unlock the incredible value in this company by advancing our long-term strategy and providing safe affordable, and reliable service across our footprint.

And finally, if there are any follow-up items, please, reach out to our IR team, with your questions. This concludes our call.