Recovering Faster Than Expected

Our financial performance for this year is on track, even though earnings were down in the third quarter compared to 2020. Year-to-date, we’re 20 cents ahead of where we were last year.

The two big stories for this quarter:

• The economy in our territory is recovering faster than we expected and this is positively impacting load.
• We narrowed our 2021 operating earnings guidance range to the upper half. We made this decision because we’re confident in the load growth and our ability to carry out our strategy.

How load is changing:

• Our strongest growth this year is in commercial load. We’re also seeing a strong recovery in the sectors most affected by the pandemic. This includes places like schools, churches and hotels.
• A major contributor to the commercial load growth is an increased number of data centers, especially in central Ohio.
• There’s a lot of momentum in industrial load. Our new projections expect industrial load to increase more than our original guidance forecast.
• Residential load has decreased from 2020 but is above pre-pandemic levels. This suggests that many customers are continuing to work from home and it’s a trend that could continue.

How we’re executing on strategy: In September, we brought the second of our three North Central wind farms online. This is part of our plan to transform our generation capacity and provide customers with low-cost, clean resources. We’re also executing on our regulatory strategy and increasing our economic development efforts, which bring more load into the territory.

All this together means the economy is recovering faster than expected. This is why we’re confident narrowing our guidance range.

Our updated range: Our 2021 operating earnings guidance range is now $4.65 to $4.75 per share. Previously, the range was $4.55 to $4.75. We’re maintaining our 5 – 7% long-term growth rate.

• Dividend boost: AEP’s Board of Directors voted to increase the quarterly dividend by 4 cents to 78 cents per share. This increase is in line with our earnings growth rate of 5 – 7%.

Why we narrow our guidance: Investors want predictable returns on their investments. Narrowing our range allows investors to better predict their returns. It also shows them we’re confident we’ll be in the upper part of our original earnings guidance range.

What to watch for in the final quarter:

• O&M spending will continue to have an impact on our earnings. It’s one of the main factors that negatively impacted our 2021 third-quarter earnings.
  • In 2020, we substantially decreased O&M spending. Increases in O&M are going to have a bigger impact on our bottom line until we return to pre-pandemic performance and/or spending levels.

You can see a complete breakdown the numbers here.