First Quarter 2023 Financial Performance

We made progress on our strategy in the first quarter, despite experiencing the second warmest temperatures in 30 years. AEP’s operating earnings for the first quarter were approximately $572 million. That’s roughly $45 million less than the first quarter of last year. While this isn’t an ideal situation, we’ve successfully navigated conditions like this before.

External factors can give AEP’s financial performance a boost or create drag. This quarter, two big external factors presented challenges:

• Unseasonable weather: Temperatures across our service territory were consistently warmer than average, so customers didn’t need to run their heat as much as usual.
• The timing of interest rate impacts: Part of AEP’s operations are funded by borrowing money for capital projects. It’s more expensive for us to do business when interest rates go up.
  • When you think about 2022, interest rates didn’t kick up until the second half of the year. Those interest rates have started to stabilize.
  • Comparing things year-over-year, AEP expects the negative impact of interest rates to be more prevalent in the first half of 2023. We already factored this into our operating earnings guidance for the year.

What Julie is saying: “AEP has a strong track record of delivering on our stakeholder commitments and demonstrating disciplined capital and operations and maintenance (O&M) cost management as we invest in a clean and reliable energy system to benefit our customers,” said Julie Sloat, president, chief executive officer.

Putting the quarter in perspective: It’s early in the year and we remain in a position to meet our operational and financial goals.

• Overall, our load growth was strong. Industrial and commercial load continued to grow. These increases more than made up for the decreases we experienced in residential load.
• Our economic development efforts continue to produce results. The increases in residential and commercial load are directly related to economic development projects we’ve been working on for years. For example, multiple data centers have been added in the territory and a new steel plant is coming online in Texas.
  • This activity also puts us in a better position to navigate the slowdown that’s happening in the U.S. economy.

Looking at the rest of the year: Our core business is in a strong position, and we’ve reaffirmed our operating earnings guidance range for this year. To keep things on track and ease the impacts of weather, we’re going to have to continue actively managing the business. This looks like:

• Continuing to de-risk the business and focusing on our regulated operations.
• Executing our regulated renewables plan.
• Limiting our discretionary O&M spend