Abstract | 1Q23_American Electric Power_JPMorgan

1. AEP reported Q1 2023 EPS of $1.11, matching JP Morgan's estimates and slightly beating Street median estimates but declining from last year due to weather impacts and higher O&M costs and taxes.

2. AEP reaffirmed its 2023 operating earnings guidance and long-term growth target, raised operating cash flow guidance, and maintained its capital plan of $40bn for 2023-2027 while planning to sell its NMRD JV, Retail, and Distributed Resources businesses.

3. FFO/Debt fell in Q1 2023 but AEP maintained its target range and will provide more details on achieving targets during the call.

4. Prairie Wind Transmission, Pioneer Transmission, and Transource Energy businesses are still under review with potential updates expected by the end of the year.

AEP reported operating EPS of $1.11 for Q1 2023, matching JP Morgan's estimates and slightly beating Street median estimates ($1.12) but declining from last year's Q1 EPS of $1.22 due to a -17c weather impact on results YoY. Various factors drove VIU down by -13c, including higher O&M costs and taxes, which offset rate increases, load growth, and higher transmission revenue, among other items. T&D also ended -5c lower YoY due to a -4c weather impact. Generation & Marketing increased +6c YoY, AEP Transmission Holdo edged +1c higher, while Corp & Other fell -5c lower YoY. Management is expected to address contingency flex plans on the call to offset weather headwinds YTD while holding summer weather aside.

AEP reaffirmed its 2023 operating earnings guidance range and long-term growth target. With the exclusion of the KY sale, AEP raised its operating cash flow guidance for 2023E by $400mm and $100mm for 2024E, 2026E, and 2027E. However, FFO/Debt fell from 13.2% in 4Q22 to 11.4% in 1Q23, although the company maintained its 14-15% target range. AEP also reaffirmed its capital plan of $40bn for 2023-2027 and unchanged equity needs, including DRIP ($850mm equity unit conversion + $100mm equity issuance in 2023, $600mm in 2024, $700mm/yr through 2027). AEP is expected to provide more details on plans to achieve FFO/debt targets in the call.

AEP announced in Q1 2023 its plan to sell its New Mexico Renewable Development JV, Retail and Distributed Resources businesses. NMRD consists of 8 operating projects, 1 project under construction, and 6 projects in the pipeline, with a book value of $102mm and contribution of 1c to full-year 2023 EPS guidance. The transaction is expected to close by YE23. AEP also intends to sell its $200mm Retail and $350mm Distributed Resources business with respective book values contributing 4c and 2c to 2023 EPS. The transaction is expected to close in 1H2024. AEP will continue to review Prairie Wind Transmission, Pioneer Transmission, and Transource Energy businesses (contributing 5c in 2023 EPS) until at least the end of the year. More information on the use of proceeds and prospective buyers may be revealed during the call.