American Electric Power Company, Inc. (AEP) Earnings

Management highlights

- Core Strategic Progress Themes * Management is executing against four core priorities: enhancing financial performance, driving customer affordability, capturing portfolio growth, and improving regulatory and operational outcomes. The 2026-2030 five-year capital plan totals $78 billion, representing a major step up from the $38 billion plan approved four years prior, and is expected to deliver nearly 11% annual rate base CAGR. Management has identified over $10 billion in additional incremental investment opportunities not included in the base $78 billion plan, including the Wyoming fuel cell project, the Piketon transmission project in Ohio, and incremental new generation capacity. - Large Load Growth & Infrastructure Procurement * AEP added 6 gigawatts of new contracted large load in Q2 2026, bringing total contracted load additions through 2030 to 69 gigawatts (45 gigawatts in Texas alone), almost all from well-capitalized hyperscalers and large industrial customers. AEP has now secured 13 gigawatts of gas-fired turbine generation capacity for deployment through 2031, with optionality for an additional 10 gigawatts through 2035 via supplier framework agreements, positioning the company to meet growing demand and replace retiring generation assets. AEP submitted all 45 gigawatts of Texas contracted load to ERCOT's Batch Zero interconnection review process, and has already collected $2 billion in cash/collateral for required credit support. - Affordability Initiatives * New large load interconnections under take-or-pay agreements are projected to deliver up to $16 billion in fixed cost offsets for existing residential customers across vertically integrated utilities, with benefits already being realized through base rate reductions in Ohio, and an upcoming base rate reduction filing planned for Indiana Michigan Power in summer 2026. AEP has secured approximately $5 billion in total U.S. DOE loan guarantees and $400 million in DOE grants, expected to deliver a combined $1.4 billion in customer savings over the life of the programs. - Regulatory Outcomes * Constructive regulatory results were achieved across multiple jurisdictions in Q2: Ohio approved a distribution base case settlement with a 9.84% ROE (up from 9.7%) and a customer base rate decrease; Texas' Southwestern Electric Power Company reached a base rate settlement-in-principle with key stakeholders; Oklahoma's Public Service Company of Oklahoma entered a base rate settlement that slightly reduces authorized ROE to 9.375% but adds an enhanced transmission cost rider expected to improve earned ROE, and received approval to procure 1.3 gigawatts of new generation; Virginia completed a $1.4 billion securitization enabling Appalachian Power to file its lowest base rate increase in 30 years and approved AEP's fifth large load tariff.

Guidance

- AEP raised its 2026 full-year operating earnings guidance to a range of $6.25-$6.55 per share, from the prior range of $6.15-$6.45 per share, driven by stronger than expected year-to-date performance and expected second-half earnings uplift from recently approved regulatory outcomes. - The 7%-9% annual operating earnings growth target and expectation of greater than 9% operating EPS CAGR through 2030 (based on 2025 guidance midpoint and supported by the $78 billion capital plan) are both reaffirmed. - Management plans to release the updated 2027-2031 five-year capital plan during the Q3 2026 earnings call, which will include incremental generation investments and any newly approved projects such as the Piketon transmission opportunity.

Segment performance

The transcript does not break out full financial performance and revenue contribution percentages for individual product/operating segments, though overall consolidated results are provided. For Q2 2026, consolidated operating earnings were $1.36 per share ($742 million), down from $1.43 per share in Q2 2025, primarily due to the 2025 Transmission Holdco minority interest sale and timing-related income tax items. Year-to-date operating earnings through Q2 2026 were $3.01 per share, up from $2.98 per share in the same 2025 period. Regulated earned ROE for the quarter was 9.2%, in line with full-year 2026 forecast expectations. The Transmission Holdco segment's year-over-year earnings comparison was negatively impacted by the 2025 minority interest sale, though full-year 2026 is expected to see a favorable year-over-year contribution from the segment as infrastructure investment continues. The corporate and other segment included income tax timing items that are expected to reverse by the end of 2026.

Risks & headwinds

- ERCOT's Batch Zero interconnection eligibility review could result in some projects being delayed or reclassified to future interconnection batches, though this only shifts the timing of investment rather than eliminating the long-term growth opportunity. - Large load growth beyond the current capital plan could require incremental capital increases, and depends on continued customer commitment, interconnection approval, and successful infrastructure development. - The Wyoming fuel cell project faces a December 2026 milestone; if the milestone is not met or the project does not advance at the Cheyenne site, AEP retains financial protections for shareholder investment, but the project will not contribute to near-term growth. - New nuclear and unregulated GenCo development carry balance sheet risk; management has committed to strict capital discipline and requires clear regulatory support and strong credit protections before moving forward with any new projects in these areas. - PJM interconnection process delays and market governance issues could slow the pace of new load development in PJM jurisdictions, though productive stakeholder discussions have improved the outlook for targeted reforms.

Analyst Q&A

• Q: Is an unregulated GenCo structure a viable option to speed up hyperscaler load delivery in West Virginia, and are there meaningful growth opportunities in the state? /

  A: Management is actively evaluating the GenCo structure and finds the model intriguing. AEP already has one 1.2 gigawatt project underway in West Virginia, with multiple additional projects progressing aligned with the state governor's 50 by 50 development goals. AEP also offers bridging energy solutions similar to those pioneered with Bloom Energy to serve customers while transmission/generation infrastructure is completed, and customers have responded positively to this optionality. Management expects to announce significant new opportunities in West Virginia over the coming months.

• Q: How does the 45 gigawatts of Batch Zero load in Texas relate to the 13 gigawatts of Texas growth already included in the current $78 billion capital plan, and how likely is it that all 45 gigawatts will be approved by ERCOT? /

  A: The $78 billion base plan only includes 13 gigawatts of Texas interconnection capacity, so the 45 gigawatts of contracted Batch Zero load provides clear line of sight to future capital plan increases. AEP has already collected the full $2 billion in required cash/collateral for all 45 gigawatts, and only projects that passed rigorous qualification criteria were submitted. While ERCOT may adjust project timing (shifting some to Batch One), management is highly confident the vast majority of projects will be approved and ultimately developed, extending AEP Texas' growth runway well into the next decade.

• Q: What is the structure of the 10 gigawatts of incremental turbine optionality AEP has secured for the 2030s, and why is AEP locking in capacity this far in advance? /

  A: The 10 gigawatts are option rights via supplier framework agreements with key manufacturers (GE Vernova and Mitsubishi), not firm committed purchases. The capacity dovetails with the expected retirement of aging coal and older gas plants in AEP's vertically integrated utilities, allowing AEP to replace retiring capacity while meeting growing new load demand. As one of the largest generation owner-operators in the U.S., AEP leveraged its scale and longstanding supplier relationships to lock in access to this scarce long-lead equipment, ensuring it can continue meeting customer demand into the next decade.

• Q: When will the $16 billion in projected fixed cost offsets from new large load start delivering tangible benefits to customers, and what is the annual impact? /

  A: The $16 billion figure reflects total projected cumulative offsets over the full life of the existing customer take-or-pay contracts across AEP's vertically integrated utilities. Benefits are already starting to flow through regulatory processes: a residential rate decrease has already been approved in Ohio, and a rate decrease filing is planned for Indiana Michigan Power this summer. Management expects this trend of affordability benefits to continue as more new load comes online over time.

• Q: Does the improved transmission cost rider in the recent Oklahoma rate case settlement make the 9.5% 2030 regulated earned ROE target conservative, and will you increase capital investment in the state? /

  A: The slight authorized ROE reduction (from 9.5% to 9.375%) and the new enhanced transmission tracker broadly offset each other, so the 9.5% target remains appropriate. Oklahoma is already one of AEP's core high-growth jurisdictions alongside Texas, Ohio, and Indiana, and management expects robust investment to continue in the state consistent with existing growth plans.