10-QPeriod: Q3 FY2022

AMERICAN ELECTRIC POWER CO INC Quarterly Report for Q3 Ended Sep 30, 2022

Filed October 27, 2022For Securities:AEP

Summary

American Electric Power Company, Inc. (AEP) reported earnings attributable to common shareholders of $683.7 million for the third quarter of 2022, a decrease from $796.0 million in the same period of 2021. This decline was primarily attributed to a loss on the anticipated sale of Kentucky operations and increased depreciation expense due to ongoing investments. For the nine-month period, earnings were $1,922.9 million, down from $1,949.2 million in the prior year, impacted by the Kentucky sale, an equity investment impairment, and higher depreciation, partially offset by favorable rate proceedings, increased sales volumes, and mark-to-market hedging gains. The company experienced a 2.6% increase in weather-normalized retail sales volumes for the third quarter, driven by growth in industrial and commercial sectors, while residential sales saw a slight decrease.

Financial Highlights

44 data points
Beta

Revenue

$5.53B

Net Income

$683.30M

12.4% Net Margin

EPS (Diluted)

$1.33

Total Assets

$91.25B

Cash & Equivalents

$522.20M

Free Cash Flow

$1.74B

Financial Statements
Beta
Revenue$5.53B
Operating Expenses$4.60B
Operating Income$930.10M
Interest Expense$360.70M
Net Income$683.30M
EPS (Basic)$1.33
EPS (Diluted)$1.33
Shares Outstanding (Basic)513.73M
Shares Outstanding (Diluted)515.32M

Key Highlights

  • 1Earnings per common shareholder decreased year-over-year for both the third quarter and the first nine months of 2022.
  • 2A significant loss on the expected sale of Kentucky Operations negatively impacted earnings.
  • 3The company reported a 2.6% increase in weather-normalized retail sales for Q3 2022, with industrial sales up 6.0% and commercial sales up 3.4%.
  • 4Increased depreciation expense due to continued capital investment is impacting profitability.
  • 5AEP is undergoing a strategic evaluation of its AEP Energy retail supplier business, with a decision expected in the first half of 2023.
  • 6The Inflation Reduction Act (IRA) is expected to have future impacts, primarily related to tax credits, as guidance is still pending.
  • 7Deferred fuel costs increased significantly, with a total of $1.5 billion across various jurisdictions, reflecting higher energy prices.

Frequently Asked Questions

The decrease in earnings was primarily driven by a loss related to the anticipated sale of Kentucky Operations and an increase in depreciation expense due to continued capital investments.

AEP saw a 2.6% increase in weather-normalized retail sales volumes for the third quarter of 2022 compared to the same period in 2021. Industrial sales increased by 6.0% and commercial sales increased by 3.4%, while residential sales decreased by 0.8%.

AEP has entered into an amended Stock Purchase Agreement to sell Kentucky Power Company (KPCo) and Kentucky Transmission Company (KTCo) to Liberty Utilities Co. The purchase price was reduced to approximately $2.646 billion. The sale is subject to FERC approval and is expected to close in January 2023. A significant pre-tax loss of $263 million was recorded in the first nine months of 2022 due to the anticipated sale.

Increased fuel and purchased power prices have led to an increase in under-collection of fuel costs from customers, resulting in a significant increase in deferred fuel regulatory assets. As of September 30, 2022, the total deferred fuel regulatory assets were $1.5 billion across the company's jurisdictions. The company is working with state commissions on recovery plans for these deferred balances.