American Electric Power Q2 2022 Earnings Call Transcript

Key Takeaways

  • Operating earnings of $1.20/share in Q2 and reaffirmation of full-year guidance ($4.87–$5.07) with a 6–7% long-term EPS growth target underscore AEP’s solid financial momentum.
  • Kentucky Power sale is in its final regulatory stages with a summer closing expected, despite a $165 million charge taken to reflect updated contract terms with buyer Liberty.
  • Unregulated renewable divestitures progressed: five wind and solar development sites sold, an Ohio solar site sale closing in Q3, and a 1.365 GW contracted portfolio auction launching by early September.
  • Service territory load remains robust, with Q2 normalized retail sales up 1.2% year-over-year and 3.6% above pre-pandemic (2019) levels across all customer classes.
  • Regulated renewables and transmission investments accelerated through $2.2 billion in Southwest Power Pool projects, new RFP filings in multiple states, and support of FERC’s new grid planning rule-makings.
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Earnings Conference Call
American Electric Power Q2 2022
00:00 / 00:00

There are 14 speakers on the call.

Operator

Thank you, Alan. Good morning, everyone, and welcome to the Q2 2022 earnings call for American Electric Power. We appreciate you taking the time to join us today. Our earnings release, presentation slides and related financial information are available on our website at aep.com. Today, we will be making forward looking statements during the call.

Operator

There are many factors that may cause future results to differ materially from these statements. Please refer to our SEC filings for a discussion of these Joining me this morning for opening remarks are Nick Akins, our Chairman, President and Chief Executive Officer and Julie Sloat, our Chief Financial Officer. We will take your questions following their remarks. I will now turn the call over to Nick.

Speaker 1

Okay. Thanks, Darcy. Welcome, everyone, to American Electric Power's 2nd quarter 2020 To earnings call, AEP continues to make progress on the strategic initiatives we announced earlier this year with strong execution against our plan resulting in another solid quarter. Later in the call, Julie will walk you through our 2nd quarter performance drivers, including the strong load increases we're Our territory as well as provide additional details surrounding our financial position. But I'll start with the key financial highlights for the quarter.

Speaker 1

We'll then move to an update on our Kentucky operations sale process and timeline. I will also spend time discussing The progress we are making in our transition to a clean energy future as we simplify and de risk our business profile by divesting unregulated renewable assets, while maintaining focus on our responsible generation fleet transformation and regulated renewables execution. I will close by providing some additional insights into our Ongoing regulatory activities including our transmission business. We are very pleased with our positive momentum this quarter delivering operating earnings $1.20 per share or $618,000,000 We are moving full speed ahead toward the increased operating earnings guidance range And long term earnings growth rate we provided during our Q4 2021 earnings call and we are reaffirming both financial targets this quarter. As a reminder, we are guiding to an operating earnings guidance range of $4.87 to $5.07 per share for 2022 with a $4.97 midpoint And a long term earnings growth rate of 6% to 7%.

Speaker 1

We are also continuing to ensure we are best positioned for value creation As we navigate the macro trends impacting our industry and the broader economy, we are working with states to drive expansion in our service territory While considering global economic uncertainty, inflationary pressures and of course customer bills, we're also diversifying our mix of to minimize supply chain disruptions for our customers and business, while also lessening the impact on our capital investment plan. We know that timing of the closing of the sale of Kentucky Power and AUP Kentucky Transco to Liberty is top of mind and we have been working with Liberty to obtain the approvals Gary for closing this summer. A regulatory timeline of the sale can be found on Slide 7 of today's presentation. We are pleased to report the Kentucky Commission approved the Key milestone in the transaction with an order approving the sale transfer in early May. As we have discussed previously, a prerequisite in our contract with Liberty for closing SAIL is approving the approval of new Mitchell operating agreements by both the Kentucky Public Service Commission and the West Virginia Public Service Commission.

Speaker 1

While we received the related Mitchell orders from the Kentucky Commission on May 3 and the West Virginia Commission on July 1, The 2 states approved the operating agreement with different formats and some divergent post-twenty 28 plant provisions. However, Through the two proceedings, both commissions have indicated an ability to use the existing agreement as a basis to operate the plant going forward And accomplish their differing expectations for investment and operations. For that reason, on July 11, we made a compliance filing in West Virginia And filed an update with Kentucky providing an alternative way to move forward with Mitchell operations in the near term. We informed both commissions We will operate under the existing agreement and manage the new operational focus of the 2 commissions through the operating committee. In the absence of any new agreements, the existing Mitchell operating agreement is still in effect and we believe no additional regulatory approvals should be required.

Speaker 1

Since regulatory approval of the new Mitchell operating agreements is a prerequisite in our contract with Liberty for the closing, in the absence of such proposal, We are working with Liberty on a commercial solution for Mitchell related operations and both parties remain optimistic about reaching a resolution in closing the transaction. At this time, the only regulatory matter currently pending is the 203 application at FERC related to the cell transfer, which FERC is currently considering. We are in the final stages of the Kentucky operations sale process and expect to close this summer. Moving to our unregulated renewable portfolio, in In May, we closed on the sale of 5 unregulated development sites located in the Southwest Power Pool area, Marking the successful divestiture of the majority of our wind and solar development assets. As we mentioned last quarter, we have also signed an agreement The sale of solar development site in Ohio with that transition close expected also in the Q3.

Speaker 1

In addition, we are in discussions with an interested party For the sale of our Flatridge 2 wind farm ownership consisting of 2 35 megawatts simplifying the resulting portfolio for our upcoming auction. These milestones demonstrate our commitment to continued execution. As we announced during our Q4 earnings This call in February, we are selling our unregulated contracted renewables portfolio in order to simplify and de risk the company and facilitate investment in our regulated businesses. We are in the final stages of preparation of the marketing materials for the auction and expect an official launch of the process no later than early September. After the removal of Flatridge 2, the portfolio consists of 13 65 megawatts of contracted renewable assets consisting of 1200 Megawatts of wind and 165 Megawatts of solar, geographically diversified throughout the U.

Speaker 1

S. There has been robust Inbound interest in the portfolio and we expect the process to proceed quickly. As a reminder, utilization of contracted renewable sale proceeds is not yet Our multi year financing plan, we remain focused on maximizing transaction proceeds And directing additional capital to our regulated businesses where we have meaningful pipeline of investment opportunities to better serve our customers as we push toward a clean energy future and enhanced transmission infrastructure. As always, we are open minded and will evaluate all value additive AEP continues to make significant progress in our transition to clean energy resources through our regulated renewables execution. Details regarding the specific actions we are taking can be found on Slides 89 in today's presentation.

Speaker 1

We are also firmly grounded in our principles of resiliency, reliability and affordability while recognizing the increasing value of our diverse resource portfolio The backdrop of energy related volatility. SWPCO is taking steps to secure renewable resources Making regulatory filings in May in Arkansas, Louisiana and Texas to own 3 renewable turnkey projects totaling 9 99 megawatts. This $2,200,000,000 investment is currently reflected in our 5 year $38,000,000,000 capital plan. Swepco expects to issue another RFP In the near term consistent with its RRP for energy and capacity needs, APCO's 409 Megawatts of owned Solar and wind resources were approved by West Virginia and Virginia marking an $841,000,000 capital investment That is also included in our current capital plan. Request for proposal are in process in APCO, I and M and PSO With expected in service dates in the year end 2024 and 2025 timeframe.

Speaker 1

We also expect to make regulatory filings to acquire additional renewable resources prior to year end 2022. Finally, the U. S. Supreme Court ruling at the end of June related to the Federal EPA's regulation of greenhouse gas emissions We'll not require any changes to AEP's current generation and compliance planning. Our generation fleet transformation plans are well on track.

Speaker 1

We remain fully committed to our target of an 80% carbon reduction emission reduction rate by 2,030 And net 0 by 2,050 and we are proud of the work well underway at AEP to help us achieve this goal. Reaching these targets is foundational to our long term strategy And we believe we are on the right path toward prioritizing regulated investment opportunities and transitioning our generation fleet. Turning now to a brief update on our regulatory activity. Our regulated ROE as of the end of June 2022 is 9.2%. We continue to work through regulatory cases and maintain our focus on reducing our authorized versus actual ROE spreads.

Speaker 1

Additional regulatory activity in the quarter includes a commission order received in May on Swepco's Arkansas rate case including a 9.5% ROE Marking a net revenue increase of $28,000,000 and a capital structure of 55% debt to 45% equity. We are also expecting a decision on Swepco's Louisiana rate case in the Q3. Oral arguments related to APCO's 2020 Virginia base case were held in March 2022 at the Virginia Supreme Court with an anticipated final decision later this year. FERC recently initiated several rule making Seating related to transmission planning, cost allocation, generation interconnection to the transmission grid and extreme weather preparedness. We support the commission in these actions and are in full support, full agreement that reform is needed to build the infrastructure necessary to transition our generation fleet in the most efficient and cost effective way possible, while also helping achieve our carbon reduction goals.

Speaker 1

These proposed rules align with AP's objectives of developing a more robust, reliable and flexible grid of the future that ultimately reduces cost to customers And strengthens economic development in our communities. Before I turn it over to Julie, I want to take a moment to thank our team for the incredible work That they are doing as we execute against our strategic objectives and deliver for our stakeholders. What's going on today at AEP is a perfect blend of the execution of Bachman Turner Overdrive is taking care of business with the edge of Prince's let's go crazy in the good sense of course. We have an incredible market Position a bold mission and the foundation in place to achieve our goals and deliver on our vision of further modernizing our energy grid in order to supply reliable, cleaner, low cost resources for all the communities we serve. As we think about the future and the next chapter of AEP, We're excited to share more about our plans at AAP's upcoming Analyst Day on October 4 in New York City.

Speaker 1

We will provide additional details soon and look forward to seeing you there. Julie, over to you.

Speaker 2

Thanks, Nick. Thanks, Darcy. It's good to be with everyone this morning. Good morning and thanks for dialing in. I'm going to walk us through our Q2 year to date results, share some updates on our service territory load and finish with commentary on our credit metrics and liquidity as well as some thoughts on our guidance, financial targets and then recap our current portfolio management activities underway.

Speaker 2

So let's go to Slide 10, which shows the comparison of GAAP to operating earnings. GAAP earnings for the Q2 were $1.02 per share compared to $1.16 per share in 2021. GAAP earnings through June were $2.43 per share compared to $2.31 per share In 2021, there's a detailed reconciliation of GAAP to operating earnings on Pages 18 19 of the presentation today, but I'd like to call out 3 of the reconciling items that do not affect operating earnings but relate to our asset optimization activities underway. Specifically, You'll see that we made an adjustment to arrive at our operating earnings for the quarter year to date periods consisting of Kentucky sale costs In the write off of 1 of the unregulated universal scale wind projects that's included in the portfolio, we're in the process of preparing for sale. The Kentucky sale charge reflects an anticipated reduction in the sales price as we work with Liberty to accommodate adjustments for costs that have been identified through the regulatory approvals that we've received.

Speaker 2

Turning to the renewable investment write off, the Flat Ridge II project specifically has continued For Kedar's portfolio sales process, we elected to write off the equity investment and are in discussions with an interested party for the sale of ownership interest in Flat Ridge 2. Consequently, this will remove the Flat Ridge 2 project from the portfolio we're preparing for auction, which should help improve the valuation Tuniti, as investors engage in the sales process, which is scheduled to launch no later than early September. Lastly, I'll mention that we monetized some mineral rights, which gave rise to a benefit to GAAP but not operating earnings, which helps offset the charges I just mentioned. So while I would typically not spend time walking through the gap to operating earnings reconciliation, I felt it was appropriate this time given the milestones we're clearing on the asset optimization front. And while these charges and gains are things that we need to recognize, they are entirely driven by our effort to de risk, simplify and bring cash in the door to support our continued investment in the regulated business.

Speaker 2

So with that, let's go to Slide number 11 and walk through our quarterly operating earnings performance. Operating earnings for the Q2 totaled $1.20 per share or $618,000,000 compared to $1.18 per share or $590,000,000 in 2021. Operating earnings for vertically integrated utilities were $0.59 per share, up $0.14 Favorable drivers included rate changes across multiple jurisdictions, positive weather primarily in our Western jurisdictions, Increased transmission revenue and normalized retail load and income taxes. These items were somewhat offset by increased depreciation in O and M and lower off system sales. Just as a reminder on the O and M and depreciation front, as I mentioned on the Q1 call and included in our 2022 guidance details, because of a change in accounting Related to the Rockport Unit 2 lease at I and M, we're seeing approximately $0.05 of favorable O and M offset by $0.05 of unfavorable depreciation in each quarter of 2022, but no consequential earnings impact.

Speaker 2

And so I'll have a little more to share on load performance and I'll get to that in a minute here, so just hang with me. The Transmission and Distribution Utilities segment earned $0.32 per share, up a penny compared to last year. Favorable drivers in this segment included rate changes, Load, positive weather in Texas and Ohio and increased transmission revenue. Offsetting these favorable items were unfavorable O and M and depreciation. DAP Transmission HoldCo segment contributed 0 point Growth of $0.03 was more than offset by an unfavorable true up of 0 point 0 $7 As I mentioned last quarter, this is consistent with our guidance.

Speaker 2

Our 2022 guidance had this segment down by $0.08 year over year as a result of the $0.12 of investment growth being more than offset by the annual true up That occurred this quarter and some favorable uncomparisons on the tax and financing side. This segment continues to be an important part of our 6% to 7% EPS growth as you well know. Generation and marketing produced $0.18 per share, up $0.09 from last year. The positive variance is primarily due to the sale of renewable development sites as well as increased generation margins and land sales. Finally, corporate and other was down 0 point 15 dollars per Jar driven by lower investment gains, increased income taxes and unfavorable interest.

Speaker 2

The lower investment gains are largely related to charge point gains that we had in the Q2 of 2021 that have reversed this year. The increased income taxes are related to the reduction of a consolidating tax adjustment at the parent. Let's turn to Slide 12 and our year to date operating earnings performance. Year to date operating earnings totaled $2.42 per share or 1 $1,234,000,000 compared to $2.33 per share or $1,160,000,000 in 2021. Operating earnings for the vertically integrated utilities were $1.18 per share, up $0.18 Similar to the quarter, Favorable drivers included rate changes across multiple jurisdictions, positive weather mainly in our Western jurisdictions, increased transmission revenue and normalized retail load In income taxes, these items were somewhat offset by increased depreciation and lower off system sales.

Speaker 2

Once again, the change in accounting around the Rockport Unit 2 lease Results in $0.11 of favorable O and M offset by $0.11 of unfavorable depreciation. The Transmission and Distribution Utility Segment earned $0.62 per share, up $0.08 compared to last year. Favorable drivers in this segment included rate changes in Texas and Ohio and increased normalized retail load and transmission revenue. Offsetting these favorable items were unfavorable O and M and depreciation. The APA Transmission HoldCo segment contributed $0.62 per share, down $0.06 compared to last year.

Speaker 2

Favorable investment growth of $0.05 was more than offset by unfavorable true up of $0.07 and increased property taxes. The Generation Marketing segment produced $0.21 per share, up $0.05 from last year. The positive variance is primarily due to the sale of renewable development sites and increased wholesale margins offset by lower retail margins. Finally, corporate and other was down $0.16 per share driven by lower investment gains, unfavorable interest and increased O and M. The lower investment gains again are largely related to charge point gains that we had in 2021 that have reversed this year.

Speaker 2

Turning to Slide 13, I'm going to provide an update on our normalized load and performance for the quarter. In a general sense, the AP service territory has made significant momentum Despite the well publicized headwinds impacting the macro economy, starting in the upper left corner, normalized Sales increased by 1.2% in the 2nd quarter and were up 1% year to date compared to 2021. This growth was comprised of Growth in both customer counts and weather normalized usage for both comparisons. While the results were mixed by operating company, the Strongest residential growth was in the AEP Texas service territory, which consistently has the strongest customer growth across the AEP system due to favorable demographics. Moving to the right, weather normalized commercial sales were up 4.1% compared to last year for both the quarter year to date comparison.

Speaker 2

This consistent growth in 2022 is spread throughout the service territory. The growth in the commercial sales segment was spread across every operating company and 9 of our 10 commercial sectors, the only top commercial sector that is down versus last year's hospitals, which makes sense given that hospitalizations have dropped since earlier in the pandemic. On the flip side, the fastest growing commercial sector is data centers were loaded up 32% compared to last year. Finally, focusing on the lower left corner, you see that industrial sales posted another strong quarter, up 5% for the quarter and 5.3% year to date compared to last year. Industrial sales were up at every operating company in most of our largest sectors.

Speaker 2

We experienced double digit growth in a number of key industries this quarter, including chemicals manufacturing and oil and gas extraction. We also saw robust growth in primary metals manufacturing, paper manufacturing, petroleum products and coal mining. To summarize, we've experienced broad based growth throughout the service territory on top of a recovery year. Every operating company has increased Sales in 2022 compared to last year. Growth is also consistent across every major retail class and most of the top commercial and industrial sectors served by P.

Speaker 2

We know the headlines are full of messages about a pending recession, but our sales statistics through the first half of the year show our service territory Still firmly in the expansion phase of the business cycle, we're mindful of the difficult monetary policy decisions being contemplated by the Federal Reserve to address inflationary pressures in the economy and recognize some of these decisions could impact our customers' growth opportunities going forward. But so far, we're seeing little evidence that has dampened the economic activity within our footprint through the 1st 2 quarters of this year. Moving to Slide 14, I want to provide additional context to the load we've experienced so far in 2022 and how it compares to our pre pandemic sales levels. Starting with the chart on the left, the bars show how the 2nd quarter sales compared to Pre pandemic baseline in the Q2 of 2019. You'll notice that the total retail sales are 3.6% above pre pandemic levels.

Speaker 2

Furthermore, every class is showing higher sales than before the pandemic began. This means that every class is fully recovered and is in the expansion phase of the business cycle. The chart on the right shows the same comparisons for the year to date period. You'll notice that while the numbers are slightly different, the message is the same. Through June, AEP's normalized sales are 2% above the pre pandemic levels and just like the quarter, every class has exceeded its pre pandemic levels on a year to date basis.

Speaker 2

Last year's strong growth numbers were expected considering it was a recovery year from the pandemic shutdowns. This year's growth is perhaps even more impressive considering The growth is compared to a strong recovery year. We'll continue to monitor the economy and its impact on our load over the summer months and we'll provide the results of our updated load forecast this fall. So let's move on to Slide 15 to discuss the company's capitalization and liquidity position. On a GAAP basis, Our debt to capital ratio decreased 0.1% from the prior quarter to 61.4%.

Speaker 2

Taking a look at the upper right Quadrant on this page, you'll see that our FFO to debt metric stands at 13.4% on a Moody's basis and 13.3% on a GAAP basis, which is a decrease of 0.3% and 0.4% respectively from the prior quarter. The slight decrease can be attributed to an increase in deferred fuel balances as well as a slight increase in balance sheet debt. As we stated on our last earnings call, we anticipate trending toward our targeted FFO to debt range of 14% to 15% as the year progresses. You can see our liquidity summary on the lower right of the slide. Our 5 year We're in our 2 year $1,000,000,000 revolving credit facility to support our liquidity position, which remains strong at $4,700,000,000 On the qualified pension front, while our funding status decreased to 0.8% during the quarter, it remains comfortably strong at 105.6 Negative returns on risk seeking and fixed income assets during the quarter were the primary drivers of the funded status decrease.

Speaker 2

However, Rising interest rates caused plan liabilities to decrease, which provided a favorable offset to the negative asset returns. So let's go to Slide team for a quick recap of today's message. The 2nd quarter has provided a solid foundation for the rest of 2022 and we are reaffirming our operating earnings guidance range $4.87 to $5.07 We continue to be committed to our long term growth rate of 6% to 7%. We continue to work through the Kentucky Power sale to Liberty and are on track for a closing later this summer and we'll be launching the auction process for our unregulated contracted renewables business no later than early September. So before I hand this over to the operator, I'd like to mention one thing.

Speaker 2

We had previously announced that we would be having an investor conference this year and we've set a date for that. As Nick mentioned, we'll be hosting our Investor Conference in New York City on October 4th. So we really do appreciate your time and attention today. With that, I'm going to ask the operator to open the call so we can hear what's on your mind and take any questions that you have.

Speaker 3

Thank you. And you may remove yourself from the queue by repeating the 1 then 0 command. If you're on a speakerphone, we ask you to please pick up your handset We'll first go to the line of Jeremy Tonet with JPMorgan. Go ahead. Good morning, Jeremy.

Speaker 4

Just want to start off with load growth trends, if I could. Just want to confirm here, the full year load growth estimates Have not been updated for year to date actuals or is there any reason to expect a fall off in the back half of the year?

Speaker 2

That is correct. We have not updated anything yet. We are cautiously optimistic. We'll give you an updated view as we get closer to our Analyst Day or at our Analyst Day on October 4, So stand by for that. As far as what you can expect for the second half, if I look at, for example, the residential load, Obviously, talk of recession and how inflation is outpacing wage growth could potentially have residential customers Shift in their behavior a little bit, we'll see.

Speaker 2

So we're again, we're cautiously optimistic there, but we do expect that it could be a little bit tempered on this particular customer segment by inflation, energy costs, mortgage rates, the lack of no new stimulus, those things that everybody knows about. So no surprise there, but just general trends. So we're going to continue to keep a close eye on that particular segment. On the Commercial segment, I mentioned earlier that we had great performance in 9 of the top sectors of our 10 top sectors, With hospitals being the only one that was down, again, we're keeping an eye on things like inflation, labor shortages, Supply chain and borrowing costs, but again, at this point, we don't have a reason to shift away, and things continue to click along there. And similar on the industrial We see a lot of large customer expansions that are expected to come online throughout the rest of the year, which should support The momentum, but again, we're cautiously optimistic because we know that the Federal Reserve has a big job in front of it And it has to tap the brakes, so we'll see how that ultimately impacts all of these.

Speaker 2

But so far, we're in a really good place, a really good place. So hang tight And we'll be able to give you a little more granular view in terms of our expectations when we come

Speaker 1

to you this fall. We Told you, I guess it was probably a quarter or 2 ago about reinforcing our service territory, particularly as it relates to energy And as it relates to on shoring and our certainly our territory has been very strong in terms of Both of those categories and manufacturing as well and that's clearly become a benefit for us. So and really when you think about what's going The world today associated with security aspects, that's really going to drive more toward the ability for on shoring to occur And certainly for energy security. So it bodes well for our territory.

Speaker 4

Got it. That's great to hear there. And just want to pick up with, I guess we'll hear more details at the Analyst Day on these points with load growth, but also want to see what else we might expect to hear at

Speaker 5

the Analyst Day. I suspect Both the sales processes will

Speaker 4

get some more color there, but is there anything else we should be looking for at the Analyst Day?

Speaker 1

Yes, there's Actually, you have the sales process, obviously everybody will know about Kentucky, but also the unregulated contracted renewables, There'll be new data points on that as well. And then of course, 'twenty two earnings guidance update, 2023 guidance range We'll be introduced and also we'll probably roll forward the 5 year capital and financing plans through 2027. And then there could be other things too. So we'll hold that until October 4th.

Speaker 4

Got it. We'll wait for that. And just the last one, if I could. Any thoughts on the renewable sale, whether it makes more sense to do as an entire Package or in pieces? I realize it's very early stages here, but just wondering if you had any thoughts to share on that.

Speaker 1

Yes. The team is looking at that And certainly, I think the base case would be to sell all at one time. But If there are opportunities exist to stage that out with the capital needs, that would be great. So we're still Going through that process and we'll go through, as we talked earlier, we'll be going out to the market here In the September time frame, so we'll know a lot more at that point in time. So more to come in October.

Speaker 4

Got it. Great. Thank you for that.

Speaker 3

Yes. We'll go next to the line of Julien Dumoulin Smith. Go ahead. Good morning, Julien.

Speaker 6

Hey, good morning team. Thanks for the opportunity. Appreciate it. So Maybe just a follow-up in brief on this operating arrangement and the 2 states here. I mean, just what do you need to see from Liberty to be able to move forward here at this point I just want to make sure I understand exactly.

Speaker 6

Is this just about them acquiescing to sort of the updated position from the 2 states? Or do you really need to resolve, say, A specific transfer value, etcetera, here out of 28.

Speaker 1

Yeah, Julian. Certainly Liberty has been great partners Through this entire process. And we certainly want to be fair to them because they were obviously looking for certain things out of the transaction. We were looking for certain Thanks. And I think it's going to be just a matter of going through the process and defining risk going forward.

Speaker 1

It's not as obviously, it's not as cut and dry and saying it's going to be the existing agreements and tough luck, we'll move on. It's really an issue where, you know, there is an opportunity for us to get together with them and define that future because we're going to be partners In that and Mitchell going forward, so we might as well get comfortable with that relationship.

Speaker 6

100%. Yes. Now I noticed in the comment, the various comments you made in the prepared remarks on inflation. Can you elaborate a little bit more and as to how that ties into both near and longer term? Again, I get that you guys are providing an update in a couple of months here.

Speaker 6

Just elaborate a little bit on the pressure points that you are seeing of late, just if you can define that and how that's cascading through. Maybe speak a little bit The cadence of labor arrangements, for instance, etcetera?

Speaker 1

Yes, I missed the first part.

Speaker 2

Yes, yes, yes. So Julien, I'll let Nick talk a little bit about supply and labor. But what we're also watching is in addition to our own costs and working with Our individual parties around making sure we have materials, supplies, equipment and folks that actually do the work, we're also paying attention to what's going on with our customers because as we talked earlier today, load is a big piece of our driver for earnings year to date and this quarter so far, And we hope to see that continue. But as we know, as the Fed needs to take some action and tap on the brakes, That could have some dampening effects as it relates to actually all three of our individual customer segments. Now as I mentioned earlier, Industrial segment looks reasonably healthy based on the customer expansions that we see in the pipeline, etcetera.

Speaker 2

But I don't think everyone can entirely escape The consequences, so even from a commercial standpoint, if you look at the real estate segment, in particular, interest rates have a direct impact on that piece of that sector and in that business. And then of course, on the residential side, that chews into the wallet because if you're sitting in a situation where Your wage isn't growing as quickly as your costs are. You may tend to want to tap the brakes there, not to mention mortgage costs go up as well. So keeping an eye on it from a customer perspective, managing through it as it relates to our particular P and L. But I don't know Nick if you wanted to say anything about supply chain and labor.

Speaker 1

Yes. So and Julian, sorry, I missed the first part of your question. So Julie filled it in for me. Supply chain has We've been an area of focus for the company, and they've done a great job. The supply chain organization has done a great job of getting out ahead of that, Understanding the delays that are occurring relative to delivery of transformers and those kinds of things, and then also Size of inventories and other things come into question, but in our case, we're a large Electric utility with a lot of requirements, the largest transmission system in the country, distribution, obviously widespread.

Speaker 1

So we have some we have abilities To really focus on the supply chain aspects in a positive way by expanding suppliers and certainly exerting the leverage we have associated with The large buying that we do. So we're in good shape from that perspective. Now that being said, the entire industry and And AEP are watching storm activity and those types of things and what implications that can have on the inventory levels and supply chain. So we're watching that very closely, But we have time for the economy to really pick up and catch up from that perspective. Labor It's an issue for everyone and certainly we continue to focus on that, particularly in our frontline employees to ensure that we're Meeting the customers' requirements going forward, we're very tuned in to wage rates And those types of things that are changing dramatically and certainly from a resource perspective, we also have those relationships With not only attracting our own employees, but also contractors and so forth that they were able to pull from for various reasons.

Speaker 1

So all in all, we're hanging in there and the capital plan still remains secure in terms of the ability to move these projects forward. And we believe that AEP is in a great position to continue that process.

Speaker 6

Hey, super quick clarification on SPP, their tweak to the reserve margin. Does that impact your procurement efforts at all?

Speaker 7

I know you guys you have a

Speaker 6

few things in flight, just to clarify.

Speaker 1

No, it doesn't. We're going through regular as you've seen, regular integrated resource planning processes With all of the Southwest Power Approval States and those processes will continue. I guess the good thing is that the things that we're putting in, obviously we already talked about transmission distribution in terms of supply chain activities, But in terms of resources, we're already putting integrated resource plans in for renewables and the timing of those renewables Such that we have time for the supply chain to catch up relative to solar and wind components. So we're in good shape from that perspective.

Speaker 6

Great. Thank you, guys. See you too.

Speaker 3

We'll go next to the line of Shar Pourreza with Guggenheim Partners. Go ahead. Good morning, Shar.

Speaker 7

Good morning, guys. How are you doing?

Speaker 8

Fine. How are you? Good. Nick, just on the contracted renewable sales, we're kind of thinking about the process for the sale. There's obviously some conflicting data points out there, right?

Speaker 8

Rates have picked up Materially, there seems to be a few peers in the market selling as well. But on the other hand, just given supply chain issues, steel on the ground is certainly more valuable. I guess can you elaborate a bit more on the process? When do you plan on opening up the data rooms? And it's a tight timeframe with the Analyst Day.

Speaker 8

So what data points can we get between September when you kick the process off and the Analyst Day, Which is only a few weeks of process, right? So I guess what's given you a sense?

Speaker 1

Yes. So These are well known resources and they're already there and open up a data room can be done pretty quickly And also review will be done quickly. I would say that the interest has been very robust And it will continue to be robust because and you said it, to have steel in the ground, but also the ability to continue on with these projects in a very positive sense. We took out Flatridge too, so that makes the portfolio even better. And certainly from that perspective, we expect the process to move very quickly.

Speaker 1

And when we bought the resources, some of these resources from Sempra, we This is the sites and the data room was open and we moved very quickly. And for these types of assets, even though there may be others that are selling the assets, There is a robust focus by the market on certainly attracting these types of assets. So We feel very confident we can move forward quickly and have certainly more information to share by the time we get to the Analyst Day.

Speaker 2

Shar, this is Julie. As an anecdote, when we initially made this announcement, I can tell you that not only was I receiving calls, Nick was receiving calls, Chuck Zabula, whose team is running the process, was receiving calls. So a lot of inbound calls coming in. And as far as what you can anticipate, I get it, it's a shorter timeline, Assuming we launch at the very latest in early September, we should be able to come back to you by October 4 with color on How that process is going. And you're right, I mean, there are other folks in the market as well.

Speaker 2

That's why I think we need to get out there as soon as we can and get business taken care of. So that is absolutely the objective and stay tuned we'll have more color to share with you.

Speaker 8

Do you think you could actually announce a deal on the 4th with the redeployment of the Teets or no?

Speaker 9

That would

Speaker 7

be too tight.

Speaker 1

Yes, that would be too tight for that. Obviously, and then that will depend on what we get back 2 in terms of one time versus staged in, all those types of things will have to be considered and certainly we'll have More information, but we won't have finalization of a deal. That'll be probably by the end of the year.

Speaker 6

Got it.

Speaker 8

Got it. Thanks. And just one last one on I mean, obviously, your load growth and the backdrop in general has Continued to show the ongoing strength. You highlight the fact that it's pre pandemic levels. I guess how are you sort of thinking about 22 in general and where you're within sort of that EPS range, especially given that we're kind of into the key months of the summer with Q3.

Speaker 8

I would think there's obviously this is a very strong tailwind for you especially as we're thinking about 2022 even though you guys are kind of hedging yourselves a little bit on some of the uncertainties out there.

Speaker 1

It's always good to be ahead a little bit anytime you go into the latter part of the year because Summer is always good. And then you get into Q4 with you don't know where storm activity is going to go and that But we feel really good about the position that we have right now. And certainly, If you look at the fundamentals of what's going on, I mean, you take ChargePoint out of it, it's a very, very positive quarter And certainly one in which we continue to grow and see it I mean our load guy is pretty optimistic. So And if you knew our load guy, you'd know he's it takes a long way for him to get there. But We feel really good about the position that we have.

Speaker 1

And I think as we see more towards the end of the year, then we'll have more to say when it comes to By the time Analyst Day comes around.

Speaker 8

Okay, terrific. Thank you, guys. Appreciate the color.

Speaker 3

Yeah. We'll go next to Steve Fleishman with Wolfe Research. Go ahead please. Good morning, Steve.

Speaker 10

Hey, good morning. Thanks, Nick. So just a question, I think Julie mentioned the on the Kentucky sale, the write off you took $0.15 Is that should we read that as effectively reflecting your expectation of what kind of Price change needs to be renegotiated for this Mitchell issue? Is that kind of reflecting that or is that?

Speaker 1

No, that one was really focused on when Liberty and AEP got together to focus on the Kentucky Transaction order itself and there were requirements associated with that. So and we certainly were focused on Making sure that we completed that order and this requirement. So that's what that is.

Speaker 10

Okay. So I guess maybe then just on the difference between Kentucky and West Virginia and how Mitchell is treated. Could you just give a little more Color on those differences and so we can get you kind of like think about the value difference between the 2?

Speaker 1

Yes. So and I think it's pretty obvious that Kentucky had its view of valuation In 2028 and West Virginia has its view of valuation in 2028 and the 2 In very different positions and it's probably not something you're going to resolve today. So really it becomes an issue of okay, How do we get together and think about our continued operating partnership, which could be done through the operating committee of the existing operating agreements And then certainly focus on a later date to consider the risk issues associated with that. So And I think for us, I think it's sort of a realization that there will There will be no doubt that Kentucky Power will continue to be a partner in Mitchell. And then When the time comes before 2028, there'll have to be some reconciliation between what Kentucky wants and what the West Virginia Commission wise, and we just want to make sure those risk parameters are taken care of on the front end.

Speaker 10

Okay. But I guess what matters in terms of closing is really the arrangement between you and I guess Liberty In terms of closing, so is that there'd be some kind of just ability to negotiate some kind of You know certainty on

Speaker 1

that? Well, because we have now we have an outside party involved With a third party from AEP's perspective with Mitchell going forward. So that sort of drives a different View when everything was already owned by AEP Companies. So you have to go through that process and determine, okay, what's the right approach For Liberty to have that ownership and for AEP to have ownership and at arm's length.

Speaker 10

Okay. But it sounds like you're confident this will be resolved with the buyer

Speaker 6

of the property

Speaker 1

Oh, yes. Relatively soon. Certainly, our people have been in constant contact on this issue. They're working very well together. I talked to Arun as late as yesterday.

Speaker 1

So it's really both of us are very optimistic

Speaker 10

I'm sure he will when it's his chance for it to do a call. And then just on the On transmission, just anything that you kind of expect from FERC in the second half of the year to better Identify both kind of their interest in getting a lot more transmission built, but at the same time still A little bit of kind of pressure on the ROEs and just what are you watching there?

Speaker 1

Yeah. Obviously, reliability and resiliency is of central focus not only To FERC, but the Congress as well. And I really believe they'll continue the process of All the areas of focus right now with the NOPRs, they got several NOPRs out actually and they just put initiated one around weatherization And making sure that we're as resilient as possible. And certainly from a transmission planning, which was already done, that NOPR Along with they started the state process in terms of discussions relative to cost allocation, those types of issues. So they're moving along and you know, when they issued that original NOPR under transmission, they made it clear that it wasn't going to be Sequential.

Speaker 1

It's a multitasking opportunity for us to look at all these provisions And then of course the queues associated with the new resources and RTOs, those are all being focused on. And I think FERC is doing a very credible job of marching through this and making sure that we are able to invest in transmission in a way That secures this country in so many ways. So I think that process will continue. Who knows what goes on with the ROEs, the 50 basis point adder and that kind of thing. That I mean that could take years to resolve.

Speaker 1

But, nevertheless, we'll continue moving forward with our investments and we'll continue to look forward to The rules, processes and procedures to be put in place where we as significant stakeholders in this process We're allowed to make the investments that we need to make in a timely basis. There's no question that as we look at all the Resources that are needed, the changes in the transmission system, cyber type issues that I'm sure that they'll be interested in as well, In regional activities associated with planning, ensuring that we're able to invest the way that we should on a timely basis With as little risk as possible and that's really important because there are so many changes occurring and for now, you're seeing You really are seeing implications relative to resiliency and reliability. And I think everyone needs to sort of take a pause and Ensure that we're looking at that with our eyes wide open and that we're doing the right things at the right time. And that process continues and I think FERC is doing a great job.

Speaker 10

Great. Thank you very much.

Speaker 3

Yes. By the way, most

Speaker 1

of those NOPRs are pretty consistent with AEP's positions. So we feel really good about our role in enabling the policy to move forward.

Speaker 3

We'll go next to the line of Durgesh Chopra with Evercore. Go ahead.

Speaker 11

Good morning, Durgesh. Good morning, team. A quick clarification on the Kentucky sale process is my first question. Just to be clear, the your discussions with Liberty On the Michel operating agreement and then sort of the FERC approval, those are 2 sort of independent processes, right? So you don't have to go back to FERC with asking for a revised approval or something like that once you sort of settle with Liberty on as it relates to Mitchell?

Speaker 1

Yes. Certainly, we believe with the original agreements and the ability to operate under the operating committee Under that agreement, we can really focus on the status quo and ensuring that we're able To move forward as a with a partner that's a 3rd party. So the provisions of the agreement already provide for The ability to make those kinds of adjustments. So, it's our belief that we don't we do not need to go back to FERC for additional

Speaker 3

approvals. Got it. Okay.

Speaker 11

And then just maybe wanted to get your sort of thoughts on valuation For your renewable assets, maybe just how have they evolved since the Q1 call? It's been

Speaker 1

a volatile day. Interest rates have been up. So just any color you can share with us there as you sort of kick start this process in September? Well, obviously, we know that the headwinds of inflation and those types of things are areas of a conflict with an increased valuation, but at the same time, you've got a lot of Robust interest in these assets and the fact that they continue to produce energy in A market that provides additional benefits for whoever winds up owning these assets. So, it's hard to tell what the Valuations are going to look like right now.

Speaker 1

But I don't I mean, certainly, we're not concerned about All the macro issues that are involved because these assets stand pretty well in and of the sales and you have the positives and negatives. But now that Now and that's why we obviously took the adjustment on Flatridge 2 because we really wanted that out of the portfolio So that you wouldn't be arguing with bidders about what that valuation was and what the risks were of that particular project. The rest of them Are excellent projects that should bode well in the marketplace. So, like I said, I can't tell you Any thoughts on what we see valuation to be? I think the market will tell us.

Speaker 2

Just to provide you with a little more color, If you're trying to model, aside from giving you market price points, we did include in the presentation today on Slide 44 The breakdown of all of the projects that are included in the portfolio, you'll see that we've essentially removed Flat Ridge 2 like we talked about today. As it relates to asset value and that type of thing that's on our balance sheet, if you look at our balance sheet today, our asset value Associated with the portfolio as it stands is about $2,100,000,000 The equity position is about $1,400,000,000 We do have some project debt and tax equity that total about $272,000,000 so you can plug that into your model as well. And We do get the question around how much did this contribute to earnings. So for 2022, for the Generation and Marketing segment, which is $0.31 total for our guidance, kind of that midpoint, about $0.13 to $0.17 relates specifically to this portfolio, so you can kind of begin to back into whatever valuation you want to assign to it. And there is a very low tax basis associated with it, but we do have We have some capacity to absorb a tax gain because we've got some credits sitting on the bench that we can use to offset that.

Speaker 2

So don't view that as Problematic and or a seriously gating item for us just because it's not we'll be able to hurdle over that.

Speaker 11

Excellent. Thank you both. Appreciate the color.

Speaker 10

Sure.

Speaker 3

We'll go next to the line of Nick Campanella with Credit Suisse.

Speaker 9

I noticed you have like $14,000,000 of proceeds in the funding slide still. So just can you just reaffirm that Regardless of everything going on in the past quarter that cash proceeds when you close are to be unchanged.

Speaker 2

We're good. You're good. No worries there. So no change in that modeling or those assumptions. You're good.

Speaker 9

Okay, great. Great. And then I guess just a question on strategy and just going through the Analyst Day. You've had some sense in simplifying the business profile, the sale, the unreg sales are on the horizon, obviously. As we kind of think about funding this long term CapEx plan, are you interested in pursuing further related sales, unregulated sales?

Speaker 9

Are we kind of in the later innings of this portfolio rotation strategy?

Speaker 1

Yes, I'll say, obviously, we have a lot of capital to fund And we have a great plan to do it. I would probably look at the ownership levels of the new renewables projects And that's going to provide additional opportunity for us resiliency and reliability, certainly distributing energy resources, all these types of things And our plans are really providing us the opportunity to fine tune our portfolio to match what The growth expectations we have around those areas. So, no, we're not done. We'll continue to Evaluate opportunities to add value from a shareholder perspective, but also to ensure that our customers Or seeing the capital deployment that provides a better experience and that's something that we're very focused on. So This is going to you're only seeing really the beginning of the part of our business That is going to endure going forward as we transition this company and that process will certainly continue.

Speaker 1

That's why Yes. Sort of said, it's a continued execution around NIU's taking care of business, but You know, add in a dash of let's go crazy and that sort of says, we're going to be thinking on the edge about what can be done to make sure that we fund these real opportunities we have ahead of us.

Speaker 9

All right. Thank you very much. We'll see you in October. Thanks. Yep.

Speaker 6

And for

Speaker 3

our next question, we'll go to the line of Stephen Byrd with Morgan Stanley. Good morning, Stephen.

Speaker 12

Hi, it's Dave Arcaro on for Stephen. Thanks so much for taking our questions. Hey, Dave. Wondering Dave, how are you doing? Wondering if you could give your latest expectations around federal climate policy here.

Speaker 12

Do you expect renewable tax credits to be in an extenders bill potentially toward the end of the year and just generally anything you would expect in terms of Federal climate legislation this year.

Speaker 1

Yes. I think it certainly is going to be a challenge. And I think I said that last quarter. It is going to be a challenge and the way it appears to be coming together is There were some discussions going on. There may still be discussions going on, but right now they're so focused On the healthcare pharmaceutical activities that may be bifurcated and then And certainly the CHIPS Act, now we're obviously for the CHIPS Act because Intel is locating within our territory With 2 fabs up to 8 fabs and that's a huge, huge positive.

Speaker 1

So you have things like that that are going on now, Not only that, but obviously the midterms are providing some overhang to getting Even a smaller package done, although there has been discussions of working on that and trying to get something done by September 30, But even that is going to be really a hard thing to do. So, again, I would say post election, you're probably dealing with either some form of a smaller package or Extenders, which that's a typical thing that happens when toward the end of the year When ITC's PTC start to roll off again, you'll see extenders or the IRS In terms of supply chain activities being able to extend it for some period of time. So you probably see some Band Aid solutions until you see A solid solution going forward. So I just think You know, the environment is certainly very volatile right now and it will take time to work itself out and maybe even Post election, again, you'll maybe have some Sense of calmness to be able to focus in on some of these things that are important because our industry and by the way, our 16,000 megawatts does not include any extension of ITCs, PTCs, but we are definitely for Those extensions and expansions to nuclear and as well to storage, Those are clear opportunities for us to redefine the resource plans going forward.

Speaker 1

Direct pay is also very important to us, but we that would make At least at this point, it's a tough sell. Maybe later on, we can convince everybody that that truly is a benefit to our customers. So, anything we get from that perspective will ultimately be a benefit to our customers from an economic standpoint and that will be good for Not only our movement to a clean energy economy, but the options that we have available to us, namely with storage, nuclear, Hydrogen hubs, those kinds of things need to continue to be looked at to make sure we're resilient and reliable going forward. So That's where we stand right now, I think.

Speaker 12

Got it. Thanks. That's helpful color. Maybe just one just small follow-up. I was just wondering if Flat Ridge, if the issues that you found there, is that just an exclusive to that project?

Speaker 12

It didn't have any other None of the other assets in the portfolio had similar issues as what was going on at Flat Ridge and that was the only one you plan to extract.

Speaker 1

That's right. That's why we separated that one.

Speaker 3

Yep, the

Speaker 1

others are good.

Speaker 12

Understood. Okay, great. Thanks so much. Okay.

Speaker 3

We will go next to the line of Andrew Weisel with Scotiabank. Go ahead, please.

Speaker 7

Good morning, Andrew. Thanks. Good morning, everyone. Just one for me about coal. So between reliability concerns and the Supreme Court ruling that you mentioned, do you see any potential Some coal plants online beyond their current schedule dates, beyond Mitchell, which is a bit of a unique situation.

Speaker 7

But would you consider extending them? And if so, would they be Potential backup as peekers went or keep some as either intermediate or baseload resources?

Speaker 1

Well, I think that's exactly why, you know, certainly we said a rational and reasonable approach to Moving forward from a resource perspective, we have to be able to maintain reliability, resiliency and Economics for the grid and to our customers and certainly for our units, We continue to progress along the path that we've already placed in line and actually you have to do that to be able To define a future and we're very, very focused on the just transitional aspects of our communities as we make any transition. So you touched on a point that's particularly important for resiliency and reliability reasons. The capacity provided by these units is extremely important. And whether the capacity factors move down As you bring in and layer in more renewable energy and clean energy, that's fine as long as you have the resource adequacy To be able to meet the demands and then eventually we have to find a path that ensures, you know, the communities continue to thrive from a tax Standpoint, fire protection, police protection, school boards, all that kind of stuff. We have to be able to look at We can't just shut down these communities and then decide something else.

Speaker 1

So in areas like West Virginia With coal fired generation, we have to define what that path is. It may be small modular reactors, if we can define what that risk is And limit it from a shareholder perspective. Certainly DOE is very interested in that. And it just so happens the jobs of a Small module reactor is the same as a coal plant and paying the same taxes and those types of things. That's an opportunity to take a look at or there's hydrogen hubs or storage or other activities.

Speaker 1

So we got to be able to rationalize that. But coal has provided an important benefit in coal generation, particularly during These summer months and obviously during the winter months as well and we've got to be mindful of how that process continues. So That's why we have to say it has to be rational, reasonable and with a timeframe that makes sense.

Speaker 3

Thanks. That's very helpful. Yes. We'll go next to the line of Michael Lapides with Goldman Sacks, go ahead.

Speaker 5

Hi, Nick. And Nick, I know you're excited about the Analyst Day and you're even you're probably equally as Excited to having Brian Kelly down in Baton Rouge. I'm looking at The earned ROE versus authorized exhibit. And just have a couple of questions about a few of the subs. How are you thinking about What structural changes in rate making your team is going to seek in the next couple of years in a few of the jurisdictions that are earning a good bit below 9, Meaning, we're thinking PSO where honestly you've fought under earning for a number of years, but also thinking a little bit on Go a little bit on the swap.

Speaker 1

Yes. So obviously there's been substantial opportunities there in those regions of the country because Actually, when we put in renewables, the renewables is helping from an ROE perspective. So and obviously from As it reduces rates to customers from a fuel standpoint and overall and the savings provided gives us an opportunity to deploy capital investment in those areas. Sometimes, obviously, we'll spend capital to make sure that we're doing those things to ensure resiliency or liability and all those activities. But particularly from an ROE perspective, A rate making standpoint, equity layers has certainly been a big push of ours and certainly from a Concurrent recovery standpoint, with formula based rates, we have forward looking rates in Indiana and Michigan.

Speaker 1

We'd like to see that in other jurisdictions, particularly with the massive amounts of capital that we're deploying. And then typically the renewables Or tracked as part of the investment until we get it in a rate base and that's worked out great for us. I think and you're also seeing opportunities for us To really get out ahead with the commissions on what we're trying to achieve in terms of not only benefits to our customers, but also The ability for our customers to use our product, I mean, I look at on the customer side with distributing energy resources, with the analytics And all the equipment that can be put in place to enable customers to make wise judgments will be highly beneficial not just For the operations of the grid, but also to mitigate their own fuel costs and bills during periods of time and You obviate the need for, you know, the securitization or other things that we have to do in huge storm related environments. So I think there's a lot of good things going on. And then the trackers, I think it's 85% of Our recovery is tracker based, so we'd like to improve on that as well.

Speaker 1

I think there has to be a recognition that cash Coming into the utility is particularly important and we always talk about FFO to debt. And the utilities With all the massive investments that are necessary, we need to be able to see the cash coming in the door so that we can continue to make those kinds of investments. So That's going to be a key message for our regulators going forward as well. But we're doing good things. And as long as we're doing good things and spending on the right things, We believe we're aligned with our commissions and our customers on the right path forward and we feel very good about the path that we're

Speaker 13

on. Got it. And then just

Speaker 2

maybe a little more help there too on PSO in particular. We've got securitization that we'll be completing here next month, so in August for the storm Yuri costs. So that should help to alleviate some of this pressure as well. And we'll be filing another base case, so stay tuned for that as well. And as Nick mentioned, just some refinement around utilization of different Rate adjustment clauses, etcetera, not only in West Virginia, Virginia, but then also as we take a look at SWPCO, we still have the outstanding component that's not included in rates.

Speaker 2

So we've got different ways to get after it, and you'll see us talk more about that, as we come at you here on October 4, so Stay tuned.

Speaker 5

Got it. That's great. And one quickie final up. Just Cardinal on the G and M segment had a Big benefit during the quarter just given where power prices were versus your delivered cost of coal. Can you remind us how you're thinking about the future for Cardinal going forward?

Speaker 1

Yes. So, Cardinal, you're talking about the Cardinal Cardinal Plant, yes. So we plan on completing a transaction with Buckeye related to that So they would take ownership of the plant and we would take a PPA back for a certain period. So, and then that means we will not have any Generation, to speak of, left in Ohio on the unregulated side. So and that's It's a long way from where we were in Ohio, but I think it's also there's a message for Ohio In terms of generation that needs to be placed in this state.

Speaker 1

So, that's probably another issue I can get into, But I'll stop there. But I think that's all in the plans already.

Speaker 2

Yes, Michael, so that PPA with Cardinal goes I think through 2028. Give you a fine point on that as well.

Speaker 5

Got it. Thank you, guys. Thanks, Nick. Thanks, Julie. Much appreciated, y'all.

Speaker 1

Sure thing.

Speaker 3

Talk to you later. We'll go to the line of Sophie Karp with KeyBanc. Go ahead.

Speaker 13

Hey, good morning. Thank you for squeezing me in. A lot has been discussed already, but if I may just ask a couple of questions. First on transmission. So you made a point of saying that transmission Transco remains as one of your, I guess, key growth engines.

Speaker 13

So I don't want to misquote you guys. But and also at the same time you're talking about not being done with divestitures of something that's an Amcor business. Can you maybe Help us frame how you think about transmission. Is it are you making these comments because you're getting questions about potential transmission sale and how you're thinking about that or should we not read

Speaker 1

No, don't read too much into it because transmission is a key component for our Not only for our investment in the company, but also in terms of what we see relative to Transition of the future. Transmission is a key component for resiliency, reliability and optimization as we move to a clean energy environment. So No, we're from a transmission standpoint, we feel very good about our role relative to transmission. And actually, I see distribution continuing to grow and certainly the renewables transformation itself. So no, don't read anything into that.

Speaker 13

All right. Thank you for clarifying that. And then my second question was a little bit of a housekeeping question, And I guess I'm looking at the regulatory renewables opportunity exhibited at Slide 40 and it seems like for APCO, Wind opportunity has been reduced a little bit and solar increased a little bit in the 2022, 2030 timeframe. I'm just kind of wondering if that's just some project realignment or should we be how should we be thinking about this?

Speaker 1

Yes. So in the April integrated resource plan certainly showed What was needed from an APCO perspective. So and I think there's probably More to come on that, but it's actually pretty immaterial at this point.

Speaker 13

All right. Thank you.

Speaker 3

And speakers, we have no further lines in queue at this time.

Operator

Thank you for joining us on today's call. As always, the IR team will be available to answer any additional questions you may have. Alan, would you please give the replay information?

Speaker 3

Yes, I will. Ladies and gentlemen, this conference will be made available for replay beginning today. This is the 27th of July and that starts at 5:30 p. M. You can access the AT and T replay service by dialing toll free 86 The access code is 9,751,677.

Speaker 3

That replay will be available until August 4, 2022 Those numbers again are toll free, 1-eight sixty six-two zero seven-one zero four one. Internationally, area code 4029700847. The access code is 9,750,16