10-QPeriod: Q2 FY2021

AMERICAN ELECTRIC POWER CO INC Quarterly Report for Q2 Ended Jun 30, 2021

Filed July 22, 2021For Securities:AEP

Summary

American Electric Power Company, Inc. (AEP) reported a solid second quarter for 2021, with earnings attributable to common shareholders increasing to $578 million from $521 million in the same period last year. This growth was driven by favorable rate proceedings across its jurisdictions and increased transmission investments, which boosted revenues and income. The company also recognized unrealized gains from its investment in ChargePoint. Despite the overall positive results, AEP experienced an increase in "Other Operation and Maintenance" expenses, partly due to the lingering impacts of the COVID-19 pandemic which had suppressed these expenses in the prior year's second quarter. For the first six months of 2021, earnings grew to $1,153 million from $1,016 million in the prior year, also benefiting from increased weather-related usage and higher transmission investments. The company's liquidity remains adequate, supported by significant revolving credit facilities.

Financial Highlights

44 data points
Beta

Revenue

$3.83B

Net Income

$573.80M

15.0% Net Margin

EPS (Diluted)

$1.15

Total Assets

$84.36B

Cash & Equivalents

$312.70M

Free Cash Flow

$1.16B

Financial Statements
Beta
Revenue$3.83B
Operating Expenses$3.02B
Operating Income$809.90M
Interest Expense$301.60M
Net Income$573.80M
EPS (Basic)$1.16
EPS (Diluted)$1.15
Shares Outstanding (Basic)499.92M
Shares Outstanding (Diluted)500.98M

Key Highlights

  • 1AEP's earnings attributable to common shareholders increased to $578 million in Q2 2021 from $521 million in Q2 2020.
  • 2Favorable rate proceedings and increased transmission investments were key drivers of revenue and income growth.
  • 3The company recognized unrealized gains from its investment in ChargePoint.
  • 4Other Operation and Maintenance expenses increased, partly due to the normalization of COVID-19 related expense reductions from the prior year.
  • 5For the first six months of 2021, net income was $1,153 million, up from $1,016 million in the same period of 2020.
  • 6Liquidity remains adequate with substantial revolving credit facilities available.
  • 7The severe winter weather in February 2021 impacted PSO and SWEPCo, leading to significant deferred fuel and purchased power costs, though management believes these are probable of future recovery.

Frequently Asked Questions

The severe winter weather resulted in significant deferred fuel and purchased power costs for PSO and SWEPCo, totaling $1.12 billion for retail customers and $62.8 million for wholesale customers. These costs were deferred as regulatory assets. While management believes these costs are probable of future recovery, the recovery periods are expected to be extended, which could impact future net income and cash flows if not fully recovered.

The 'Vertically Integrated Utilities' segment saw a decrease in net income to $228.8 million from $255.9 million, primarily due to higher operation and maintenance expenses. However, the 'Transmission and Distribution Utilities' segment reported an increase in net income to $153.7 million from $139.5 million, driven by increased transmission investment. The 'AEP Transmission Holdco' segment showed strong growth, with net income rising to $168.7 million from $91.5 million, also due to increased transmission asset investment. The 'Generation & Marketing' segment experienced a decline in net income to $52.4 million from $65.9 million, impacted by lower trading and retail margins and higher operational expenses.

AEP forecasts approximately $7.5 billion in capital expenditures for 2021 and $29.8 billion for the four-year period from 2022 to 2025. These expenditures are primarily directed towards transmission, generation, distribution, regulated and contracted renewables, and environmental compliance investments. The company expects to fund these capital requirements through operating cash flows and financing activities.

AEP is involved in several significant legal and regulatory matters. These include ongoing litigation related to Ohio House Bill 6 (HB 6), a shareholder class action lawsuit, and derivative actions against certain officers and directors. The company is also subject to environmental regulations and compliance costs, particularly related to coal combustion residual (CCR) and effluent limitation guidelines (ELG) rules, which may require significant capital investments or lead to accelerated plant retirements. Several rate cases are pending across AEP's jurisdictions, with outcomes that could materially impact the company's financial results.