American Electric Power Q1 Earnings Call Highlights

Key Points

• AEP reported Q1 operating earnings of $1.64 per share and reaffirmed full-year operating earnings guidance of $6.15–$6.45, citing accelerating demand and constructive rate-case outcomes as key drivers.
• Contracted load rose to 63 GW through 2030 (up from 56 GW), nearly 90% from data centers including hyperscalers, with major growth in ERCOT (41 GW) and meaningful additions in PJM and SPP backed by strict credit protections and take-or-pay ESAs.
• Five-year capital plan increased to $78 billion (from $72B) with a heavy transmission focus and awarded multi‑billion‑dollar projects, boosting expected long‑term operating earnings CAGR to >9% and prompting $7 billion of planned equity issuance (including $665M sold via ATM so far).

American Electric Power NASDAQ: AEP reported first-quarter 2026 operating earnings of $1.64 per share, or $891 million, and reaffirmed full-year operating earnings guidance of $6.15 to $6.45 per share. Chairman, President and CEO Bill Fehrman said the company is seeing accelerating demand across its footprint and positioned AEP’s scale in transmission, generation and execution as key advantages as utilities respond to rising load requirements.

First-quarter performance and 2026 outlook

Executive Vice President and CFO Trevor Mihalik said first-quarter operating earnings rose from $1.54 per share in the first quarter of 2025 to $1.64 per share in 2026. He attributed strength in AEP’s vertically integrated utilities and transmission and distribution segments to “constructive rate case outcomes across multiple jurisdictions,” while noting that some positives were partially offset by comparisons to “prior years’ favorable weather” and continued spending to enhance reliability.

Mihalik said regulated earned return on equity was 9.3% for the quarter and is expected to reach “approximately 9.5% by 2030” as AEP continues executing its regulatory strategy. He said Transmission Holdco results were mainly impacted by higher expenses including storm restoration and higher property taxes, but the company expects Transmission Holdco earnings to be favorable year over year “by the end of 2026.” In generation and marketing, Mihalik said results reflected stronger wholesale margins, partially offset by the absence of prior-year contract optimization benefits. Corporate and other results were pressured by higher O&M, higher interest expense, and income tax timing, with Mihalik saying the tax timing impact is expected to reverse by year-end.

Contracted load grows to 63 GW through 2030

Fehrman said AEP contracted an additional 7 gigawatts of load during the quarter, largely from AEP Texas and AEP Ohio, bringing the incremental contracted total expected by 2030 to 63 gigawatts, up from 56 gigawatts discussed the prior quarter. He said nearly 90% of the contracted load is data centers “which include hyperscalers,” with the remainder industrial customers.

Fehrman and Mihalik emphasized credit and contract protections. Fehrman said contracted load customers must meet “high credit standards” through investment-grade credit quality, parent guarantees, or other forms of credit support compliant with tariff requirements, and are backed by electric service agreements and letters of agency. Mihalik added that AEP remains focused on “the quality and credit strength of the customers who are driving it,” describing the customer base as largely hyperscalers and industrial customers.

By region, Mihalik said:

• PJM: Contracted load increased by about 1 GW in the quarter, driven primarily by additional Ohio contracts, with “substantially all” incremental PJM load supported by take-or-pay ESAs. He also pointed to a recently announced 10 GW data center campus with SB Energy in Piketon, Ohio, saying most of that incremental load is not in AEP’s load forecast and is instead reflected in an “approximately 190 gigawatt active interconnection queue.” He said AEP expects to incorporate the load as commercial discussions progress and ESAs are formalized. Mihalik also said AEP is evaluating a “multi-billion dollar Google data center development” in Putnam County, West Virginia, which remains early stage and is not included in AEP’s current load forecast or financial outlook.
• SPP: Contracted load increased by about 1 GW, driven primarily by an Amazon data center project in Northwest Louisiana. Mihalik said almost half of AEP’s incremental SPP load is now supported by take-or-pay ESAs, up from last quarter.
• ERCOT: Texas accounted for the majority of the quarter’s contracted load growth, with contracted load rising to 41 GW from 36 GW at the end of the fourth quarter. Mihalik said all 41 GW meet standards under Texas Senate Bill 6 and are secured through executed letters of agreement, which require steps such as securing land, completing interconnection studies, providing detailed load forecasts, and fully funding construction costs. In AEP Texas’ April 1 RTP filing, the company submitted 31 GW of incremental demand by the end of the decade, and Mihalik said AEP Texas has since executed LOAs for another 10 GW above that filing. He characterized the key question in ERCOT as “not whether the demand exists, but when it comes online,” noting timing depends heavily on supporting generation and that greater clarity is expected later in the summer as rulemaking progresses.

Capital plan raised to $78 billion; transmission remains a major focus

Fehrman said AEP increased its five-year capital plan to $78 billion from $72 billion, driving an expected 11% five-year rate base CAGR. He said the $6 billion increase includes $3.5 billion in recently approved PJM and SPP transmission investments and $2.5 billion for Indiana Michigan Power gas-fired generation. Fehrman also reaffirmed AEP’s 7% to 9% operating earnings growth rate for 2026 through 2030 and said the incremental investments are expected to be accretive later in the plan, increasing expected long-term operating earnings CAGR to “greater than 9%.”

Fehrman highlighted AEP’s transmission footprint, including more than 2,100 miles of 765 kV ultra-high-voltage lines across six states, and cited the company’s strategic partnership with Quanta Services as supporting execution confidence. He said AEP was directly assigned a major SPP project consisting of 315 miles of 765 kV lines from Seminole, Oklahoma, to Southwest Shreveport, Louisiana, and also secured projects from Potter, Texas, to Beckham County, Oklahoma, totaling $1.6 billion and anticipated to be in service by 2030. In PJM, Fehrman said AEP was awarded 330 miles of predominantly 765 kV lines in Ohio and Indiana totaling $1.9 billion, also expected in service toward the end of the five-year plan. He also said AEP was selected for a nearly 200-mile 765 kV project in MISO in Wisconsin with an in-service date of 2034.

Mihalik said AEP incorporated only about $3.5 billion of roughly $5 billion of awarded PJM and SPP transmission projects into the updated plan, citing a conservative approach and noting that the exact division of the SPP lines has not been finalized, so AEP used a 50% assumption in its plan update.

Generation strategy, PJM concerns, affordability and financing

On generation, Fehrman said AEP expanded its generation capital outlook by $3 billion to $24 billion through 2030, driven by new gas generation at Indiana Michigan Power, and reiterated that AEP has secured access to “more than 10 gigawatts of gas-fired turbine capacity.” In response to an analyst question on turbine procurement, Fehrman said AEP is most active with Mitsubishi and GE and emphasized the company’s focus on having access to turbines, while noting pricing is subject to confidentiality agreements.

Fehrman also said the company continues to evaluate nuclear solutions but added that any nuclear investment would require “strong capital protection,” “disciplined balance sheet safeguards,” and significant regulatory and governmental engagement, including potential loan guarantees, and that no nuclear project will move forward if it creates undue risk for AEP or shareholders.

Fehrman raised concerns about how quickly PJM is connecting load to generation, saying the current state of PJM’s performance and stakeholder approval process “does not give me great confidence” the issues will be resolved soon. During Q&A, he clarified AEP is not saying it is exiting PJM, but said the company is evaluating options while engaging with regulators, FERC, and the RTOs to accelerate interconnections. He also said AEP is performing a similar review of its membership in SPP, though he described SPP as “more aggressive” in addressing the issues.

On affordability, Fehrman said AEP is forecasting “up to $16 billion in cost offsets for existing customers” tied to large-load customers’ allocated contributions to fixed expenses over the life of the agreements. He also said AEP has secured $315 million in generation and distribution grants and closed on a $1.6 billion DOE loan guarantee related to transmission, projected to deliver “over $275 million in customer savings” over the life of the loans.

Fehrman highlighted regulatory outcomes including Ohio commission approval of a distribution base case settlement that includes a customer rate decrease and a 9.84% ROE; an increase in Arkansas ROE to 9.65% from 9.5%; and a West Virginia reconsideration order raising authorized ROE to 9.75% from 9.25% along with approval of a modified rate-based cost infrastructure investment tracker.

On financing, Mihalik said AEP updated its five-year plan to include $7 billion of equity from 2026 through 2030, up $1.1 billion, with the incremental equity representing “only 18%” of the $6 billion increase in capital. He said AEP accelerated its at-the-market program in the first quarter, issuing $665 million of equity at an average price of “over $131 per share,” fulfilling about two-thirds of its full-year 2026 equity needs. Mihalik also said S&P FFO-to-debt was 14.7% and Moody’s was 13.9% as of the first quarter, with both above the 13% downgrade threshold.

In response to a question about whether the current AEP Texas capital plan supports newly contracted loads, Mihalik said additional capital would be needed over time and that the significant increase in contracted load through 2030 “implies a meaningful upside to our current capital plan” that is not yet incorporated.

About American Electric Power NASDAQ: AEP

American Electric Power NASDAQ: AEP is a major investor-owned electric utility headquartered in Columbus, Ohio. The company is primarily engaged in the generation, transmission and distribution of electricity, operating a diverse portfolio of power plants and an extensive high-voltage transmission network. AEP serves retail customers through its regulated utility subsidiaries and provides wholesale power and grid services across multiple regional markets in the United States.

Operations span the full utility value chain: AEP owns and operates generation assets that include fossil-fuel, natural gas, nuclear and hydropower facilities, and it has been adding renewable resources to its mix.

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