Summary
AMERICAN ELECTRIC POWER CO INC (AEP) disclosed a probable material impairment related to Southwestern Electric Power Company's (SWEPCo) Turk Plant in Texas. This stems from a regulatory dispute with the Public Utility Commission of Texas (PUCT) regarding the recovery of capital costs for the Turk Plant. The PUCT's preliminary order indicates it will not allow SWEPCo to exceed the previously established Texas Capital Cost Cap, leading SWEPCo to anticipate a pretax, non-cash disallowance of $80 million to $90 million in the fourth quarter of 2023. Furthermore, the PUCT will address potential customer refunds related to revenues collected from February 2013 through December 2023, which could range from $0 million to $200 million if a disallowance is ordered. AEP has stated that this impairment will be excluded from its 2023 Operating Earnings (Non-GAAP). Despite this, AEP is reaffirming its previously issued financial guidance for 2024 Operating Earnings, its long-term earnings growth rate, and its FFO/Debt target.
Key Highlights
- 1Southwestern Electric Power Company (SWEPCO) anticipates an $80-$90 million pretax, non-cash disallowance related to the Turk Plant in Texas for Q4 2023.
- 2This disallowance is a result of a Public Utility Commission of Texas (PUCT) preliminary order that will likely disallow capitalized AFUDC in excess of the Texas Capital Cost Cap for the Turk Plant.
- 3The PUCT will also consider potential customer refunds, estimated between $0-$200 million (including interest), for revenues collected from February 2013 to December 2023.
- 4AEP will exclude this impairment charge from its 2023 Operating Earnings (Non-GAAP).
- 5AEP is reaffirming its previously issued 2024 Operating Earnings guidance.
- 6The company is also reaffirming its projected 6%-7% long-term earnings growth rate.
- 7AEP is reaffirming its projected 14%-15% FFO/Debt target.