Earnings Release Presentation - 3rd Quarter 2017 October 26, 2017 - AEP.com
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“Safe Harbor” Statement under the Private Securities Litigation Reform Act of 1995 This presentation contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934. Although AEP and each of its Registrant Subsidiaries believe that their expectations are based on reasonable assumptions, any such statements may be influenced by factors that could cause actual outcomes and results to be materially different from those projected. Among the factors that could cause actual results to differ materially from those in the forward-looking statements are: the economic growth or contraction within and changes in market demand and demographic patterns in our service territories, inflationary or deflationary interest rate trends, volatility in the financial markets, particularly developments affecting the availability or cost of capital to finance new capital projects and refinance existing debt, the availability and cost of funds to finance working capital and capital needs, particularly during periods when the time lag between incurring costs and recovery is long and the costs are material, electric load and customer growth, weather conditions, including storms and drought conditions, and our ability to recover significant storm restoration costs, the cost of fuel and its transportation, the creditworthiness and performance of fuel suppliers and transporters and the cost of storing and disposing of used fuel, including coal ash and spent nuclear fuel, availability of necessary generation capacity, the performance of our generation plants and the availability of fuel, including processed nuclear fuel, parts and service from reliable vendors, our ability to recover fuel and other energy costs through regulated or competitive electric rates, our ability to build transmission lines and facilities (including our ability to obtain any necessary regulatory approvals and permits) when needed at acceptable prices and terms and to recover those costs, new legislation, litigation and government regulation, including oversight of nuclear generation, energy commodity trading and new or heightened requirements for reduced emissions of sulfur, nitrogen, mercury, carbon, soot or particulate matter and other substances that could impact the continued operation, cost recovery and/or profitability of our generation plants and related assets, evolving public perception of the risks associated with fuels used before, during and after the generation of electricity, including nuclear fuel, a reduction in the federal statutory tax rate could result in an accelerated return of deferred federal income taxes to customers, timing and resolution of pending and future rate cases, negotiations and other regulatory decisions, including rate or other recovery of new investments in generation, distribution and transmission service and environmental compliance, resolution of litigation, our ability to constrain operation and maintenance costs, our ability to develop and execute a strategy based on a view regarding prices of electricity and gas, prices and demand for power that we generate and sell at wholesale, changes in technology, particularly with respect to energy storage and new, developing, alternative or distributed sources of generation, our ability to recover through rates any remaining unrecovered investment in generation units that may be retired before the end of their previously projected useful lives, volatility and changes in markets for capacity and electricity, coal and other energy-related commodities, particularly changes in the price of natural gas, changes in utility regulation and the allocation of costs within regional transmission organizations, including ERCOT, PJM and SPP, our ability to successfully and profitably manage our competitive generation assets, including the evaluation and execution of strategic alternatives for these assets as some of the alternatives could result in a loss, changes in the creditworthiness of the counterparties with whom we have contractual arrangements, including participants in the energy trading market, actions of rating agencies, including changes in the ratings of our debt, the impact of volatility in the capital markets on the value of the investments held by our pension, other postretirement benefit plans, captive insurance entity and nuclear decommissioning trust and the impact of such volatility on future funding requirements, accounting pronouncements periodically issued by accounting standard-setting bodies and other risks and unforeseen events, including wars, the effects of terrorism (including increased security costs), embargoes, cyber security threats and other catastrophic events. Bette Jo Rozsa Bette Jo Rozsa Darcy Reese Investor Managing Director Managing Director Director Relations Investor Relations Investor Relations Investor Relations 614-716-2840 614-716-2840 614-716-2614 Contacts bjrozsa@aep.com bjrozsa@aep.com dlreese@aep.com 2
Non-GAAP Financial Measures AEP reports its financial results in accordance with accounting principles generally accepted in the United States (GAAP). AEP supplements the reporting of financial information determined in accordance with GAAP with certain non-GAAP financial measures, including operating earnings (non-GAAP) and FFO to Total Debt. Operating earnings (non-GAAP) excludes certain gains and losses and other specified items, including mark-to-market adjustments from commodity hedging activities and other items as set forth in the reconciliation in the Appendix. FFO to Total Debt is adjusted for the effects of securitization, spent nuclear fuel trust, capital and operating leases, pension, capitalized interest and changes in working capital. Operating earnings could differ from GAAP earnings for matters such as impairments, divestitures, or changes in accounting principles. AEP management is not able to forecast if any of these items will occur or any amounts that may be reported for future periods. Therefore, AEP is not able to provide a corresponding GAAP equivalent for earnings guidance. Reflecting special items recorded through the third quarter of 2017, the estimated earnings per share on a GAAP basis would be $3.80 to $3.93 per share. This information is intended to enhance an investor’s overall understanding of period over period financial results and provide an indication of AEP’s baseline operating performance by excluding items that are considered by management to be not directly related to the ongoing operations of the business. In addition, this information is among the primary indicators management uses as a basis for evaluating performance, allocating resources, setting incentive compensation targets and planning and forecasting of future periods. These non-GAAP financial measures are not a presentation defined under GAAP and may not be comparable to other companies’ presentations. AEP has provided these non-GAAP financial measures as supplemental information and in addition to the financial measures that are calculated and presented in accordance with GAAP. These non-GAAP measures should not be deemed more useful than, a substitute for, or an alternative to the most comparable GAAP measures provided in the materials presented. Reconciliations of these non-GAAP measures to the most comparable GAAP measures are provided in the appendices and supplemental schedules to this presentation. Investor Bette Jo Rozsa Brad Funk Relations Managing Director Director Investor Relations Investor Relations Contacts 614-716-2840 614-716-3162 bjrozsa@aep.com bmfunk@aep.com 3
3rd Quarter 2017 Highlights 3rd Quarter 2017 Company Update Earnings Update Delivered GAAP earnings of $1.11 per share and operating earnings of $1.10 per share for the third quarter 2017 Delivered GAAP earnings of $3.07 per share and operating earnings of $2.82 per share for YTD September 2017 Narrowing 2017 operating earnings guidance range to $3.55 - $3.68 per share Board declared dividend of $0.62/share, a 5.1% increase YTD 2017 Regulatory Update Wind Catcher Energy Connection Rate Case update: I&M, KPCo, PSO, SWEPCO Ohio ESP settlement Ohio legislative update Refer to appendix for reconciliation between GAAP and Operating EPS 4
Regulated Returns Twelve Months Ended 9/30/2017 Earned ROE’s (non-GAAP Operating Earnings) AEP OH Trans 12.6% 12.7% AEP OH * AEP TX * 11.1% 10.3% APCo I&M* 8.4% 8.4% PSO* SWEPCO* 6.1% 5.9% KPCo* 4.5% Regulated Operations ROE of 9.2% as of September 30, 2017 *AEP Ohio adjusted for SEET items. Base rate cases pending at other operating companies. Sphere size based on each company’s relative equity balance 5
3rd Quarter Operating Earnings Segment Detail $0.03 ($0.07) Weather $ $0.03 (0.11) Investment Gain $ 0.02 Rate True-Ups $ (0.01) Weather $ (0.01) Sold Assets $ (0.13) O&M Rate Changes $ 0.02 $ 0.01 Normal Load $ 0.02 Held Assets $ 0.02 Other Normal Load $ (0.01) $ 0.01 O&M $ 0.02 Renewables $ 0.01 Depreciation $ (0.02) Depreciation $ (0.01) Other $ 0.01 Eff Income Tax $ (0.01) Eff Income Tax $ (0.02) Other $ (0.02) 2016 Vertically Integrated Transmission & AEP Transmission Generation and Corporate and 2017 Actual Utilities Distribution Utilities Holdco Marketing Other Actual 2017 Actual EPS $0.58 $0.29 $0.15 $0.07 $0.01 $1.10 Refer to appendix for additional explanation of variances by segment 6
2017 YTD Operating Earnings Segment Detail $0.03 ($0.07) Weather $ $0.03 (0.22) FERC 205 $ 0.09 Investment Gain $ 0.02 Rate Changes $ 0.07 Investments 0.06 Rate True-Ups $ (0.09) Rate Changes $ 0.10 JV's $ (0.01) Sold Assets $ (0.29) Normal Load $ (0.01) Reg Prov - OH $ (0.03) Held Assets $ 0.08 Depreciation $ (0.05) Normal Load $ (0.04) Renewables $ 0.02 AFUDC $ (0.03) ERCOT Trans Rev $ 0.04 Other $ 0.04 Eff Income Tax $ (0.07) O&M $ (0.02) Other $ (0.03) Depreciation $ (0.03) Eff Income Tax $ (0.03) Other $ (0.02) 2016 Vertically Integrated Transmission & AEP Transmission Generation and Corporate and 2017 Actual Utilities Distribution Utilities Holdco Marketing Other Actual 2017 Actual EPS $1.27 $0.76 $0.56 $0.25 ($0.02) $2.82 Refer to appendix for additional explanation of variances by segment 7
Weather Normalized Billed Retail Load Trends Note: Load figures are provided on a billed basis. Charts reflect connected load and exclude firm wholesale and Buckeye Power backup load. See Appendix for load figures on a billed plus accrued basis. 8
Capitalization & Liquidity Total Debt / Total Capitalization Credit Statistics Actual Target FFO to Total Debt 17.4% 15%-20% Represents the trailing 12 months as of 9/30/2017 See Appendix for reconciliation to GAAP Liquidity Summary (unaudited) 9/30/2017 Actual ($ in millions) Amount Maturity Revolving Credit Facility $3,000 Jun-21 Plus Qualified Pension Funding Cash & Cash Equivalents 344 Less Commercial Paper Outstanding (295) Letters of Credit Issued - Net Available Liquidity $3,049 Strong balance sheet, credit metrics, and liquidity 11
Summary Narrowed 2017 operating earnings guidance range to $3.55 - $3.68 per share Primary driver of fourth quarter 2017 will be significantly favorable year over year O&M Reaffirming 2018 operating earnings guidance range of $3.75 - $3.95 per share and 5% - 7% growth rate EEI expectations: detail behind 2018 guidance, 2018 financing detail, cap-ex and cash flow detail 12
Appendix 13
3rd Quarter Reconciliation of GAAP to Operating Earnings $ millions Earnings Per Share Q3-16 Q3-17 Change Q3-16 Q3-17 Change Reported GAAP Earnings (Loss) ($766) $545 $1,311 ($1.56) $1.11 $2.67 Non Operating Items: Mark-to-Market Impact of Commodity 2 - (2) - - - Hedging Activities (a) Disposition of Commercial Barge (17) - 17 (0.03) - 0.03 Operations (b) Capital Loss Valuation Adj (c) (44) - 44 (0.09) - 0.09 Impairment of Certain Merchant 1,465 (2) (1,467) 2.98 (0.01) (2.99) Generation Assets (d) AEP Operating Earnings $640 $543 ($97) $1.30 $1.10 ($0.20) (a) Items recorded in Generation and Marketing segment (b) Items recorded in Corporate and Other segment (c) Items recorded in Generation and Marketing segment and Corporate and Other segment (d) Items recorded in Generation and Marketing segment and Vertically Integrated Utilities segment Weighted average no. of shares outstanding: 492M Q3-16 and 492M Q3-17 14
YTD September Reconciliation of GAAP to Operating Earnings $ millions Earnings Per Share YTD-16 YTD-17 Change YTD-16 YTD-17 Change Reported GAAP Earnings (Loss) $238 $1,512 $1,274 $0.48 $3.07 $2.59 Non Operating Items: Mark-to-Market Impact of Commodity (2) 3 5 - 0.01 0.01 Hedging Activities (a) Gain from Competitive Generation - (129) (129) - (0.26) (0.26) Asset Sale (a) Disposition of Commercial Barge 5 - (5) 0.01 - (0.01) Operations (b) Federal Tax Audit Settlement (b) (55) - 55 (0.11) - 0.11 Capital Loss Valuation Adj (c) (44) - 44 (0.09) - 0.09 Impairment of Certain Merchant 1,465 2 (1,463) 2.98 - (2.98) Generation Assets (d) AEP Operating Earnings $1,607 $1,388 ($219) $3.27 $2.82 ($0.45) (a) Items recorded in Generation and Marketing segment (b) Items recorded in Corporate and Other segment (c) Items recorded in Generation and Marketing segment and Corporate and Other segment (d) Items recorded in Generation and Marketing segment and Vertically Integrated Utilities segment Weighted average no. of shares outstanding: 491M YTD-16 and 492M YTD-17 15
Vertically Integrated Utilities 3rd Quarter Summary Key Drivers: Q3-17 vs. Q3-16 Q3-16 Q3-17 Rate changes: $18M of rate decreases at PSO in $ millions (except EPS) addition to $5M of wholesale rate decreases Operating Revenues $2,556 $2,482 driven by formula rate true-ups partially offset Operating Expenses: by $16M of rate increases at SWEPCO, I&M and Kingsport Energy Costs (858) (869) Operations & Maintenance (673) (659) Weather: $80M unfavorable vs. prior year; Depreciation & Amortization (278) (289) $23M unfavorable vs. normal Taxes Other Than Income Taxes (99) (105) Normalized Retail load: $11M favorable vs. Operating Income 648 560 prior year primarily due to favorable retail price variances partially offset by lower east Net Interest/AFUDC (125) (124) residential sales Income Taxes (176) (139) Other 2 (11) O&M: $16M favorable (net of offsets) vs. prior year primarily due to decreased employee- Operating Earnings $349 $286 related expenses and decreased transmission Proforma Adjustments, Net of Tax (7) - services GAAP Earnings $342 $286 Income Taxes: effective tax rate of 32.7% Q3-17 EPS from Operating Earnings $0.71 $0.58 vs. 33.3% Q3-16 See slide 14 for items excluded from Net Income to reconcile to Operating Earnings 16
Vertically Integrated Utilities YTD Summary Key Drivers: YTD-17 vs. YTD-16 YTD-16 YTD-17 Rate changes: $65M of rate increases across $ millions (except EPS) multiple jurisdictions offset by $14M of rate Operating Revenues $6,928 $6,893 decreases at PSO, $42M of wholesale rate Operating Expenses: decreases driven by formula rate true-ups and a prior year recognition of deferred WV rate billings Energy Costs (2,300) (2,369) of $25M Operations & Maintenance (1,927) (2,024) Depreciation & Amortization (815) (845) Weather: $164M unfavorable vs. prior year; $117M unfavorable vs. normal Taxes Other Than Income Taxes (295) (306) Operating Income 1,591 1,349 Normalized Retail load: $5M unfavorable vs. prior year primarily due to lower east residential, Net Interest/AFUDC (354) (370) industrial and commercial sales partially offset by Income Taxes (402) (335) favorable retail price variances Other 1 (17) O&M: $6M favorable (net of offsets) vs. prior Operating Earnings $836 $627 year primarily due to decreased employee- Proforma Adjustments, Net of Tax (7) - related expenses partially offset by increased GAAP Earnings $829 $627 forestry expenses EPS from Operating Earnings $1.70 $1.27 Income Taxes: effective tax rate of 35.0% YTD-17 See slide 15 for items excluded from Net Income to reconcile to Operating Earnings vs. 32.3% YTD-16 17
Transmission & Distribution Utilities 3rd Quarter Summary Key Drivers: Q3-17 vs. Q3-16 Q3-16 Q3-17 Rate changes: $16M favorable primarily from $ millions (except EPS) the Texas Distribution Cost Recovery Factor and Operating Revenues $1,276 $1,173 the Ohio DIR Operating Expenses: Weather: $7M unfavorable vs. prior year; $1M Energy Costs (254) (216) favorable vs. normal Amortization of Generation Deferrals (66) (59) Normalized Retail Load: $7M unfavorable Operations & Maintenance (358) (303) primarily due to lower residential sales Depreciation & Amortization (181) (182) Income Taxes: effective tax rate of 35.0% Q3-17 Taxes Other Than Income Taxes (132) (134) vs. 31.0% Q3-16 Operating Income 285 279 Net Interest/AFUDC (59) (58) Income Taxes (70) (77) Operating & GAAP Earnings $156 $144 EPS from Operating Earnings $0.32 $0.29 18
Transmission & Distribution Utilities YTD Summary Key Drivers: YTD-17 vs. YTD-16 YTD-16 YTD-17 Rate changes: $79M primarily from the Texas $ millions (except EPS) Distribution Cost Recovery Factor and the Ohio DIR and RSR Operating Revenues $3,468 $3,313 Operating Expenses: OH Regulatory Provision: $21M unfavorable due Energy Costs (662) (626) to prior year reversal of provision Amortization of Generation Deferrals (173) (173) Normalized Retail Load: $30M unfavorable Operations & Maintenance (1,008) (883) primarily due to unfavorable prices and lower residential sales Depreciation & Amortization (505) (502) Taxes Other Than Income Taxes (373) (387) ERCOT Transmission Revenue: $27M favorable due to recovery of increased transmission Operating Income 747 742 investment Net Interest/AFUDC (177) (168) Income Taxes (182) (200) O&M: $16M unfavorable (net of offsets) primarily due to increased transmission services Operating & GAAP Earnings $388 $374 and forestry expenses partially offset by EPS from Operating Earnings $0.79 $0.76 decreased employee-related expenses Income Taxes: effective tax rate of 34.9% YTD-17 vs. 31.9% YTD-16 19
AEP Transmission Holdco 3rd Quarter Summary Key Drivers: Q3-17 vs. Q3-16 Q3-16 Q3-17 $21M favorable Operating Income primarily $ millions (except EPS) due to increased revenues and expenses Operating Revenues $132 $179 driven by increased capital investment in the Operating Expenses: wholly owned Transcos Operations & Maintenance (12) (23) Depreciation & Amortization (17) (26) Taxes Other Than Income Taxes (23) (29) Operating Income 80 101 Net Interest/AFUDC 1 (6) Income Taxes (35) (39) Equity Earnings 23 21 Other - (1) Operating & GAAP Earnings $69 $76 EPS from Operating Earnings $0.14 $0.15 20
AEP Transmission Holdco YTD Summary Key Drivers: YTD-17 vs. YTD-16 YTD-16 YTD-17 $132M favorable Operating Income primarily $ millions (except EPS) due to the impact of the 205/206 filings and Operating Revenues $383 $582 also due to increased revenues and expenses Operating Expenses: driven by increased capital investment in the wholly owned Transcos Operations & Maintenance (33) (54) Depreciation & Amortization (48) (75) Taxes Other Than Income Taxes (66) (85) Operating Income 236 368 Net Interest/AFUDC 4 (16) Income Taxes (103) (142) Equity Earnings 73 69 Other (2) (3) Operating & GAAP Earnings $208 $276 EPS from Operating Earnings $0.42 $0.56 21
Generation & Marketing 3rd Quarter Summary Key Drivers: Q3-17 vs. Q3-16 Q3-16 Q3-17 $ millions (except EPS) Generation decreased 8,843 GWh (78%) Q3-17 vs. Q3-16 primarily due to sale of plants in Operating Revenues $863 $466 January Operating Expenses: Energy Costs (567) (355) AEP Dayton ATC liquidations down 4%: $29.39/MWh in Q3-17 vs. $30.56/MWh in Q3-16 Operations & Maintenance (96) (57) Depreciation & Amortization (51) (6) Depreciation & Amortization: $45M favorable Taxes Other Than Income Taxes (9) (3) vs. prior year primarily due to decreased Operating Income 140 45 depreciation resulting from the Q3-16 asset impairment and plants being sold Net Interest/AFUDC (9) (1) Income Taxes (50) (12) Income Taxes: effective tax rate of 26.7% Q3-17 Operating Earnings 81 32 vs. 38.2% Q3-16 Proforma Adjustments, Net of Tax (1,450) 2 GAAP Earnings ($1,369) $34 EPS from Operating Earnings $0.16 $0.07 See slide 14 for items excluded from Net Income to reconcile to Operating Earnings 22
Generation & Marketing YTD Summary Key Drivers: YTD-17 vs. YTD-16 YTD-16 YTD-17 Generation decreased 19,969 GWh (68%) YTD- $ millions (except EPS) 17 vs. YTD-16 primarily due to sale of plants in Operating Revenues $2,289 $1,472 January Operating Expenses: AEP Dayton ATC liquidations up 6%: Energy Costs (1,491) (1,063) $28.88/MWh in YTD-17 vs. $27.35/MWh in YTD- Operations & Maintenance (290) (211) 16 Depreciation & Amortization (150) (18) Depreciation & Amortization: $132M favorable Taxes Other Than Income Taxes (29) (9) vs. prior year primarily due to decreased Operating Income 329 171 depreciation resulting from the Q3-16 asset Net Interest/AFUDC (26) (7) impairment and plants being sold Income Taxes (106) (42) Income Taxes: effective tax rate of 25.7% YTD-17 Operating Earnings 197 122 vs. 34.8% YTD-16. Current year reflects positive Proforma Adjustments, Net of Tax (1,446) 124 impact of solar investment tax credits being GAAP Earnings ($1,249) $246 recognized on an amortized basis EPS from Operating Earnings $0.40 $0.25 See slide 15 for items excluded from Net Income to reconcile to Operating Earnings 23
3rd Quarter Retail Rate Performance Vertically Integrated Utilities Transmission & Distribution Utilities Rate Changes*, net of Rate Changes, net of offsets (in millions) offsets (in millions) Q3-17 vs. Q3-16 Q3-17 vs. Q3-16 APCo/WPCo - AEP Ohio $2 I&M ($2) AEP Texas $14 KPCo - TOTAL $16 PSO ($18) SWEPCO $11 Impact on EPS $0.02 Kingsport $2 TOTAL ($7) Impact on EPS $0.01 * Includes rate true-ups. 24
YTD Retail Rate Performance Vertically Integrated Utilities Transmission & Distribution Utilities Rate Changes*, net of Rate Changes, net of offsets (in millions) offsets (in millions) YTD-17 vs. YTD-16 YTD-17 vs. YTD-16 APCo/WPCo ($8) AEP Ohio $39 I&M ($22) AEP Texas $40 KPCo $4 TOTAL $79 PSO ($14) SWEPCO $18 Impact on EPS $0.10 Kingsport $6 TOTAL ($16) Impact on EPS $0.02 * Includes rate true-ups. 25
3rd Quarter Retail Load Performance Vertically Integrated Utilities Transmission & Distribution Utilities Retail Load* Retail Load* (weather (weather normalized) normalized) Q3-17 vs. Q3-16 Q3-17 vs. Q3-16 APCo/WPCo 0.5% AEP Ohio -1.2% I&M -1.4% AEP Texas -0.6% KPCo -0.1% TOTAL -0.9% PSO -0.7% SWEPCO 2.5% Impact on $0.01 EPS** Kingsport -1.9% TOTAL 0.2% Impact on $0.02 EPS** * Includes load on a billed basis only. Excludes Firm Wholesale Load and accrued sales. ** Includes EPS impact of accrued revenues. 26
YTD Retail Load Performance Vertically Integrated Utilities Transmission & Distribution Utilities Retail Load* Retail Load* (weather (weather normalized) normalized) YTD-17 vs. YTD-16 YTD-17 vs. YTD-16 APCo/WPCo -0.8% AEP Ohio -0.1% I&M -1.2% AEP Texas 0.8% KPCo -1.8% TOTAL 0.3% PSO 0.4% SWEPCO 0.4% Impact on $0.04 EPS** Kingsport -1.9% TOTAL -0.5% Impact on $0.01 EPS** * Includes load on a billed basis only. Excludes Firm Wholesale Load and accrued sales. ** Includes EPS impact of accrued revenues. 27
Normalized Retail Load Trends (Billed & Accrued) Note: Load figures are provided on a billed and accrued basis. Charts reflect connected load and exclude firm wholesale and Buckeye Power backup load. 28
3rd Quarter Weather Impact Vertically Integrated Utilities Transmission & Distribution Utilities Weather Impact Weather Impact (in millions) (in millions) Q3-17 vs. Q3-17 vs. Q3-17 vs. Q3-17 vs. Q3-16 Normal Q3-16 Normal APCo/WPCo ($25) - AEP Ohio - - I&M ($18) ($6) AEP Texas ($7) $1 KPCo ($7) ($2) TOTAL ($7) $1 PSO ($11) ($4) SWEPCO ($18) ($11) Impact on $0.01 - EPS Kingsport ($1) - TOTAL ($80) ($23) Impact on $0.11 $0.03 EPS 29
YTD Weather Impact Vertically Integrated Utilities Transmission & Distribution Utilities Weather Impact Weather Impact (in millions) (in millions) Q3-17 vs. Q3-17 vs. Q3-17 vs. Q3-17 vs. Q3-16 Normal Q3-16 Normal APCo/WPCo ($72) ($44) AEP Ohio - - I&M ($29) ($22) AEP Texas ($2) $1 KPCo ($17) ($12) TOTAL ($2) $1 PSO ($15) ($10) SWEPCO ($29) ($30) Impact on - - EPS Kingsport ($2) $1 TOTAL ($164) ($117) Impact on $0.22 $0.16 EPS 30
Weather Impact 2017 vs 2016 For the quarter, weather was unfavorable to normal by $22M which is $87M worse than last year. Year to date the impact of weather is 31 unfavorable to normal by $116M which is approximately $166M worse than last year.
Wind Catcher Procedural Schedules 2,000 MW wind farm and dedicated ~350-mile 765kV gen-tie line ~$4.5 billion: $2.9B-Wind; $1.6B gen-tie SWEPCO (70%) & PSO (30%) Target Completion: Q4 2020 Total Customer Savings net of costs (over 25-years): $7.6B (including PTC); $2.5 billion over first 10-years SWEPCO – Arkansas SWEPCO – Texas Staff /Intervenor Direct Testimony 12/05/2017 SWEPCO rebuttal 01/09/2018 Intervenor Testimony 12/04/2017 Staff and Intervenor Surrebuttal 01/30/2018 Staff Testimony 12/11/2017 SWEPCO Sur-Surrebuttal 02/06/2018 Rebuttal/Cross Rebuttal 01/04/2018 Settlement deadline 02/20/2018 Hearing begins 01/16/2018 Hearing begins 03/01/2018 PSO – Oklahoma Intervenor/ Staff testimony 12/04/2017 SWEPCO – Louisiana Rebuttal testimony 12/22/2017 Intervenor Testimony 01/22/2018 Hearing begins 01/08/2018 SWEPCO rebuttal testimony 02/06/2018 Pre-hearing Briefs 02/16/2018 Note: FERC filing with respect to wholesale customers: 4Q 2017 Hearing begins 02/22/2018 *Oklahoma has a 240-day statutory timeline for issuing an order, bringing the requested approval date to March 31, 2018 32 Requesting State Approvals by April 30, 2018*
Pending Base Rate Cases Summary I&M – Indiana PSO – Oklahoma Requested Increase: $263M, ($89M increased D&A) Requested Increase: $156M Requested ROE: 10.6% Requested ROE: 10.0% Key dates: Key dates: OUCC/Intervenors 11/07/2017 Hearing 10/30/2017 I&M Rebuttal 12/06/2017 ALJ report 12/11/2017 Evidentiary hearing 01/16-29/2018 Interim rates 01/13/2018 Expected order 07/01/2018 I&M – Michigan SWEPCO – Texas Requested Increase: $51.7M, ($23M increased D&A) Requested Increase: $69M Requested ROE: 10.6% Requested ROE: 10.0% Key dates: Status: Waiting on order; will be Rebuttal Testimony 10/30/2017 retroactive to May 2017 Hearing 11/15-22/2017 Initial Briefs 12/18/2017 Reply Briefs 01/04/2018 Proposal for Decision (PFD) 02/09/2018 Expected order 04/12/2018 KYP – Kentucky Requested Increase: $63.3M Requested ROE: 10.31% Key dates: KY Rebuttal Testimony 11/03/2017 Hearing 12/06/2017 Expected order 01/18/2018 33
GAAP to Non-GAAP Reconciliations & Ratios Adjusted FFO Calculation Adjusted Total Debt Calculation 12 Months As of Ended 9/30/17 9/30/17 $ millions $ millions Cash Flow From Operations $4,229 GAAP Total Debt (incl. current maturities) $21,781 Adjustments: Less: Changes in Working Capital (281) Securitization Bonds (1,458) Capitalized Interest (45) Spent Nuclear Fuel Trust (268) Securitization Amortization (293) Add: Lease Payments 161 Capital Lease Obligations 300 Adjusted Funds from Operations (FFO) $3,771 Pension 259 Off-balance Sheet Leases 1,038 Adjusted Total Debt (Non-GAAP) $21,652 Adjusted Funds from Operations (FFO) $3,771 FFO to Total Debt Ratio Adjusted Total Debt (Non-GAAP) = $21,652 = 17.4% 34
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