AEP Q1 2026 Earnings Transcript

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Date

May 5, 2026, at 9 a.m. ET

Call participants

- President and Chief Executive Officer — William J. Fehrman

- Executive Vice President and Chief Financial Officer — Trevor Ian Mihalik

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Full Conference Call Transcript

William J. Fehrman: Thank you, Darcy, and good morning. We appreciate you joining us for American Electric Power Company, Inc.’s first quarter 2026 earnings call. I will begin on slides 4 and 5. This is a defining period for our industry. The pace of change is accelerating, and the opportunities ahead of us are expanding. Within this environment, American Electric Power Company, Inc. is extremely well situated to capture growth given our scale, leadership position in generation and transmission, exceptional execution capabilities, and our operational footprint in some of the fastest growing regions in the country. As customer needs evolve, scale, innovation, and intense focus on execution will define the next generation of utility growth.

We are ready to meet unprecedented demand across our large service territory not only driven by data centers, but also broader economic development. This is meaningfully expanding the long-term opportunity ahead of us and in the communities we serve. At the same time, our growth is only possible with trusted partnerships. We are staying closely aligned with our stakeholders, listening to our customers, governors, regulators, and policymakers, while working to advance solutions that support affordability, economic development, reliability, and resiliency. As we scale our system, execution and operational discipline become even more crucial. These are significant strengths of the new leadership team at American Electric Power Company, Inc.

By leveraging our size and experience, we are mitigating supply chain pressures and acquiring critical resources to support what is a multiyear sustained period of infrastructure buildout. This includes already securing extra high-voltage, long lead-time equipment like transformers, breakers, and lattice steel. As we have said on past calls, we have secured more than 10 gigawatts of gas-fired turbine capacity. In short, we are executing on a disciplined strategy to deliver consistent and timely long-term value for both customers and shareholders. Now turning to slides 7 and 8.

I will provide a high-level overview of our first quarter results, strategic outlook, affordability and regulatory progress before handing it over to Trevor to walk through our financials and strong growth trajectory in more detail. We are pleased to report first quarter 2026 operating earnings of $1.64 per share, or $891 million. These results build on our financial and operational momentum from 2025 and give us confidence in reaffirming our full year 2026 operating earnings guidance range of $6.15 to $6.45 per share. American Electric Power Company, Inc. continues to experience substantial system demand concentrated largely in our key growth states of Indiana, Ohio, Oklahoma, and Texas.

In the first quarter, we contracted an additional 7 gigawatts of load coming mostly from AEP Texas and AEP Ohio, and we now have an incremental contracted total of 63 gigawatts expected by 2030. This is an increase from the 56 gigawatts we shared just last quarter. Of the 63 gigawatts, nearly 90% are data centers, which include hyperscalers, while the rest are industrials. Contracted load customers must meet high credit standards through investment grade credit quality, parent guarantees, or other forms of credit support compliant with tariff requirements. They are also backed by electric service agreements and letters of agreement.

To be very clear, I am intensely focused on execution of the projects required to get this load connected for our customers. That is why we are in business. Of the 63 gigawatts, 53 gigawatts are in Texas and Ohio, requiring large-scale transmission projects, which we believe we excel at constructing and operating. The remaining 10 gigawatts require new generation for which American Electric Power Company, Inc. has secured the necessary long lead-time equipment and has strategic contracting arrangements to supply the labor necessary to successfully execute on our delivery commitments. Size matters, and American Electric Power Company, Inc. is using our breadth and scale to provide what is needed and to meet customer demands.

Trevor will discuss the 63 gigawatts in more detail shortly. To support these projects, today we are increasing our five-year capital plan to $78 billion, up from the prior $72 billion, which now drives an expected 11% five-year rate base CAGR. The $6 billion of incremental investments include $3.5 billion in recently approved PJM and SPP transmission investments and $2.5 billion for I&M gas-fired generation. In addition, we have line of sight to over $10 billion of projects for 2026 through 2030. These investments are incremental to the new $78 billion plan and include the Piketon transmission project, the Wyoming fuel cell initiative, and additional new generation opportunities across our footprint.

We stand ready to capture incremental growth opportunities while maintaining a strong balance sheet, which, as I have said many times, is a key priority for us. Especially in light of the exceptional load expansion we are seeing today, we are also reaffirming our premium operating earnings growth rate of 7% to 9% for 2026 through 2030. The $6 billion increase to our capital plan is driven by transmission and generation projects that come online later in the next five years. These investments are expected to be accretive to earnings in the back end of the plan and increase our expected long-term operating earnings CAGR to now greater than 9%.

Turning to slide 9, we believe our transmission scale and expertise remain unmatched in the industry. Today, American Electric Power Company, Inc. owns and operates more than 2,100 miles of ultra high-voltage 765 kV transmission lines across six states. Large load customers continue to choose sites in our footprint because of the strength and sophistication of our advanced transmission network. As we have highlighted before, American Electric Power Company, Inc. pioneered the modern 765 kV transmission system in North America, and we have more than six decades of experience designing, building, and operating these ultra high-voltage assets. Currently, nobody even comes close to our experience and capabilities in this area.

Hands down, we are the largest owner-operator in the United States. The strategic partnership agreement with Quanta Services that we announced late last year continues to drive high confidence in the execution of our high-voltage transmission projects. By pairing American Electric Power Company, Inc.’s vision for a modern, resilient grid with an industry-leading partner like Quanta, we are accelerating the development of the 765 kV infrastructure buildout that will be essential to meeting the reliability, resiliency, and energy delivery needs of the future. As I mentioned, we were recently awarded new 765 kV transmission projects in SPP and PJM.

For SPP, we were directly assigned a major project that consists of 315 miles of 765 kV lines from Seminole, Oklahoma, to southwest Shreveport, Louisiana. We also secured additional projects from Potter, Texas, to Beckham County, Oklahoma. Together, these projects total $1.6 billion and are anticipated to be in service by 2030. In PJM, we were awarded the buildout of 330 miles of predominantly 765 kV lines in Ohio and Indiana. These projects total $1.9 billion and also have expected in-service dates towards the end of our five-year plan. Additionally, we are pleased to have been selected for a nearly 200-mile 765 kV project in MISO, which expands our competitive footprint into Wisconsin.

While this project falls largely outside the current five-year window with an in-service date of 2034, it gives us confidence and visibility in our longer-term growth rate into the future. With the addition of these projects, our transmission investment forecast now totals $33 billion, representing 42% of the overall $78 billion capital plan and underscoring our position in strengthening the nation’s critical electric transmission backbone. Turning to new generation resources on slide 10, American Electric Power Company, Inc. is proactively building the capacity needed to support accelerating demand and long-term growth. As part of this effort, we have expanded our generation capital outlook by $3 billion to $24 billion through 2030, driven by new gas generation at I&M.

At a broader level, our portfolio strategy is intentionally balanced and diversified with investments across natural gas, solar, wind, and storage. This mix strengthens reliability while promoting a disciplined approach to delivering cost-effective investments for our customers over the long term. We have secured access to more than 10 gigawatts of gas-fired turbine capacity from leading manufacturers and are advancing our projects through the interconnection process across PJM and SPP. We are leveraging experienced EPC partners alongside our in-house engineering expertise to deliver these projects efficiently and at scale.

We are also maintaining flexibility in how we meet incremental demand for new generation, utilizing competitive RFPs and targeted bilateral acquisitions to supplement our self-developed pipeline and ensure we capture the most attractive opportunities. In parallel, we continue to evaluate nuclear solutions, aiming to position American Electric Power Company, Inc. at the forefront of next-generation baseload technologies. As we have previously mentioned, we are actively reviewing several potential sites and interconnection locations as we assess how nuclear can play a meaningful role in the future to support load growth. Any nuclear investment will require strong capital protection, disciplined balance sheet safeguards, and significant regulatory and governmental engagement such as loan guarantees and long lead-time equipment support.

No projects will move forward if they place undue risk on our business or our shareholders. While we have been very successful with building out transmission infrastructure in PJM, American Electric Power Company, Inc. continues to identify issues around how quickly and efficiently load is being connected to generation. The current state of PJM’s performance and stakeholder approval process does not give me great confidence that these issues will be resolved anytime soon. In fact, if something is not done now, I expect we could still be having these same conversations in 10 years. The PJM market worked very well when supply exceeded demand, but we are now in a very different time.

As such, we are currently assessing all of our options to ensure that we are finding an efficient and effective path forward to deliver what our customers need, which, simply put, is more interconnected generation to power their businesses. We are performing a similar review of our membership in SPP. Expanding and strengthening the grid will ensure new generation resources across all technologies can connect quickly, reliably, and affordably to serve our fast-growing load. As our generation plans mature, we will share the financial plans as part of our normal cadence on the third quarter call later this year. Please turn to slide 11.

Even as we invest to meet rapidly growing load expectations, affordability is top of mind, and we remain focused on taking decisive actions to keep residential rate impacts manageable. With the large load contracts we have secured, we are forecasting up to $16 billion in cost offsets for existing customers from their allocated contributions to fixed expenses during the life of these agreements. This is a major affordability win for our existing customers and a clear validation of our customer-focused growth strategy. At the same time, our focus on customer service through accountability is delivering results.

We have had a meaningful reduction in the average duration of outages across the system over the last year, which is strengthening customer relationships through more reliable power. While our rate base continues to expand, O&M is rising at a 4% CAGR over the same period, driven by the additional staffing and maintenance support required to operate new generation and transmission assets being added to the system. This operational discipline is a real differentiator for American Electric Power Company, Inc. and positions us exceptionally well for the future. We are also tapping federal tools to strengthen customer savings. The team has secured $315 million in generation and distribution grants.

We closed on a $1.6 billion DOE loan guarantee related to transmission, projected to deliver over $275 million in customer savings over the life of the loans. As part of our long-term strategy, we have also applied for additional DOE loans to fund our generation and transmission investments. We expect to provide periodic updates as loan closings progress. These are meaningful dollars going right back to customers, which is another example of how we are pairing growth with affordability. Over the past two years, we have led the industry in establishing the right regulatory framework for large load growth.

We secured approvals for new data center tariffs in Ohio, followed by large load tariff solutions in Indiana, Kentucky, and West Virginia. We are not stopping there. We have active filings in Michigan, Oklahoma, Texas, and Virginia. You will find a full summary of these actions on slide 12 of today’s presentation. These tariff structures are designed with a couple of clear goals. First, we are protecting our existing customers by ensuring data and other large load customers cover the investments required to support their energy needs. Second, we are protecting our revenue and earnings base through minimum demand charges embedded directly within these binding take-or-pay contracts.

We have made solid progress on tariff structures, and we will continue to work with our regulators and stakeholders to make sure large load customers pay their cost to serve and provide cost relief to our residential customers. Turning to slide 13, this brings me to our strong regulatory progress in the quarter across multiple jurisdictions. This continues to be a major focus area of mine. In Ohio, we secured commission approval of the distribution base case settlement, including an affordability measure which contains a rate decrease for customers, along with a 9.84% ROE, up from the prior ROE of 9.7%. In Arkansas, we successfully increased our ROE from 9.5% to 9.65%.

We have not ended up with a reduced ROE in any recent rate case outcome. In Indiana, we advanced our resource strategy with approval of our expedited genera