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Strong financial performance in 2021 leads to new targets in 2022

by on February 24, 2022

The country’s economy is recovering from the impact of the pandemic, and AEP has seen those positive changes in our financial performance. We earned more in 2021 than 2020, and our load growth last year was the strongest in more than a decade. We also increased our quarterly dividend in October and reported our strongest-ever fourth quarter earnings. You can read a breakdown of the earnings by following this link.

What’s behind the numbers: Our financial performance in 2021 shows that the changes AEP has made (transitioning to renewables, focusing on capital spend and curbing O&M) are working.

  • “Our strong earnings results in 2021 were driven by continued strategic investments in a clean, reliable, resilient and cost-effective energy system to benefit our customers and communities,” said Nick Akins, chairman, president and chief executive officer.

Big changes in 2022: We are refining our financial and operations focus in 2022. We’re making these changes because we are confident in our ability to execute our strategy.

Here’s a rundown of the changes:

  • New guidance range: We are raising our 2022 operating earnings guidance range by 2 cents to $4.87 to $5.07 per share and increasing our long-term growth rate to 6% to 7%.
    • Putting the increase in context: While this might sound like a big change, AEP has been the upper part of its 5% to 7% growth rate for the past decade. You can see this in the graphic in this article. Also, many of our peer utilities have also raised their long-term growth rates.
  • Changing where we spend capital: We are shifting $1.5 billion in capital to Transmission and reducing unregulated Generation and Marketing capital by $1.3 billion.
    • Helping customers: AEP’s move to redeploy capital brings our planned transmission investment to $14.4 billion over the next five years. This will help us improve reliability for customers, modernize the grid and support the clean energy transition.
  • Evaluating potential sale of unregulated renewable assets: AEP is beginning a process to evaluate selling some or all of our unregulated contracted renewables portfolio. These renewable facilities are part of the AEP Renewables organization of AEP Energy Supply.
    • Why we’re doing this: The sale of unregulated renewables will provide additional capital to invest in our core regulated businesses to support rebuilding and reinforcing the grid and enhancing service for customers.

How employees can support these changes: We can achieve these goals when we execute on our plan. This means:

  • Being efficient with our O&M to make sure we’re living within our budgeted means.
  • Deploying the capital we said we would deploy and not leaving it on the table.

“We’re operating in a dynamic space, and this requires constant communication We want people to speak up when things aren’t going as planned so we can make adjustments. It’s important that we stay on track because we have a plan that works when it’s executed,” said Julie Sloat, executive vice president and chief financial officer.

Renewables will continue to expand: We plan to add 16,000 megawatts of renewables in our regulated states by 2030, and our work is well underway. This includes the completion of North Central wind projects which will deliver an estimated $3 billion in customer savings over the next 30 years. We are seeking regulatory approval for 409 MW of renewable generation for Appalachian Power customers and are currently in the market for additional renewable resources in our Appalachian Power, I&M, PSO and SWEPCO territories.

  • Reminder of why we’re changing: These clean energy investments and our focus on deploying new technologies and enhancing the grid will allow us to reach our goal of net zero carbon emissions by 2050

Status of Kentucky sale: As we announced in October, we expect to close on the sale of our Kentucky operations in the second quarter of 2022 once we receive the necessary state and federal regulatory approvals. We are working closely with Liberty to ensure a smooth transition for customers and the Kentucky employees who will transfer to Liberty after the close of the sale.

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