What American Electric Power (AEP) Said on Its Q3 Earnings Call

Key Points

• AEP reported strong Q3 results, with operating earnings rising to $2.23 per share from $1.80 a year earlier. The company expects 2026 earnings at or above the high end of its $6.25–$6.55 guidance range and issued 2027–2028 guidance.
• AEP raised its long-term annual earnings-growth outlook to 9%–11% through 2031, supported by a $100 billion capital plan and projected rate-base growth from $87 billion in 2026 to $162 billion in 2031.
• Demand from data centers and other large customers is driving expansion, with 84 gigawatts of contracted load through 2031 and major planned investments in transmission, generation and distribution. AEP expects to fund the program partly through equity issuance and plans modest dividend growth of about 2% annually.

American Electric Power NASDAQ: AEP reported third-quarter 2026 operating earnings of $2.23 per share, or $1.2 billion, compared with $1.80 per share a year earlier, as each business segment posted higher earnings. The company said results benefited from regulatory outcomes, demand growth and continued investment in transmission and generation.

The utility now expects full-year operating earnings to be at or above the high end of its recently increased 2026 guidance range of $6.25 to $6.55 per share. It also introduced operating earnings guidance of $6.75 to $7.05 per share for 2027 and $7.40 to $7.70 per share for 2028.

Chairman, President and CEO Bill Fehrman said AEP sees a substantial opportunity to expand infrastructure serving large customers and regional electric demand growth. “The U.S. utility sector is experiencing an unprecedented surge in electric demand, and AEP is right in the center of this opportunity,” Fehrman said.

Higher Long-Term Growth Outlook

AEP raised its expected annual operating earnings-per-share growth rate to 9% to 11% for 2027 through 2031, from a prior range of 7% to 9%. The company also expects an operating earnings compound annual growth rate of more than 10% through 2031, based on the original midpoint of its 2026 guidance, and projected a 10% operating earnings CAGR through 2033.

The updated outlook is underpinned by a $100 billion capital plan through 2031. AEP expects its rate base to grow from $87 billion in 2026 to $162 billion by 2031, representing a rate-base CAGR of more than 13%.

Chief Financial Officer Trevor Mihalik said the company’s expanded investment plan reflects “contracted customer demand, highly visible transmission investments, and essential distribution infrastructure needs.” AEP expects about 90% of its planned utility investments to have reduced regulatory lag through riders, trackers and forward test-year rate cases.

• Transmission: $37 billion of planned investment through 2031, with transmission rate base expected to approach $70 billion by 2031.
• Generation: $36 billion of planned investment, including a $7 billion increase in regulated gas-generation investment versus the prior five-year plan.
• Distribution: $22 billion of planned investment focused on modernization, reliability, resilience and infrastructure replacement.

Contracted Load and Transmission Projects

AEP said it has 84 gigawatts of incremental contracted load through 2031, up from 69 gigawatts discussed during its second-quarter call. Of that total, 35 gigawatts are backed by firm take-or-pay electric service agreements, while AEP said its entire 46 gigawatts of contracted load in ERCOT is supported by executed SB6-compliant letters of agreement.

The company said the majority of its contracted load in PJM and the Southwest Power Pool is reflected in the capital plan. However, management characterized the Texas investment plan as conservative while ERCOT’s batch process and broader transmission planning continue.

Kate Dixon, AEP’s senior vice president, controller and chief accounting officer, said about 85% of the AEP Texas capital plan is currently dedicated to reliability, resiliency, replacement infrastructure and grid modernization. The plan includes the approved Howard-to-Solstice transmission line, but does not include much of the broader transmission infrastructure that could be needed to support contracted Texas load.

Fehrman said ERCOT is expected to file its data-center audit report on Dec. 10, followed by discussion at a Public Utility Commission of Texas meeting the following week. AEP has collected more than $2 billion in cash or collateral for Texas-related projects, he said.

AEP also incorporated the Piketon, Ohio, transmission project into its plan. The 765-kilovolt project is supported by a 20-year offtake agreement with SB Energy, which will fund project costs, according to the company. Construction is expected to begin in the first quarter of 2027, subject to regulatory filings.

Generation, Infrastructure and Nuclear Development

Management said contracted demand and expected generation retirements are creating a need for additional dispatchable gas generation. AEP said it has framework agreements with turbine suppliers and craft labor companies and cited state policies in Indiana and Oklahoma that support accelerated generation development and cost recovery.

The company also created a new reporting segment, AEP Infrastructure, reflecting the evolution of its generation and marketing business toward investments supported by contracted and predictable cash flows. The segment will include contracted generation assets, legacy power-purchase agreements and other infrastructure investments.

AEP cited its Wyoming fuel-cell project, supported by a 20-year take-or-pay power-purchase agreement with Google, as an example. The project is expected to enter service in stages beginning in 2027 and be fully in service by December 2028, Mihalik said.

Separately, AEP recently announced a development agreement with X-energy and Amazon to evaluate a potential small modular reactor project in Indiana. Fehrman said the work is limited to development and feasibility activities requiring minimal AEP investment. A final investment decision could not occur before 2030 and would require the project to clear multiple stages and meet financial and strategic objectives.

Funding Strategy and Customer Affordability

AEP expects to generate approximately $55 billion in cash from operations over the five-year planning period, funding more than half of the capital program. The company said it added $22 billion to its capital plan while increasing expected equity funding by $5.2 billion, or 24% of the incremental investment.

Mihalik said AEP has more than $5 billion of equity forwards and expects to use a mix of those forwards, at-the-market issuance and potentially block equity or equity-linked securities. He said the company expects modest dividend growth of roughly 2% annually over the next four to five years, subject to board approval.

AEP also said fully executed take-or-pay agreements in its vertically integrated utilities could provide up to $21 billion in fixed-cost offsets for existing residential customers over the contracts’ lives, up from a prior estimate of $16 billion. Fehrman said that in Indiana, large-load growth enabled AEP to file a second rate decrease during the quarter.

About American Electric Power (NASDAQ:AEP)

American Electric Power NASDAQ: AEP is an electric utility holding company that generates, transmits and distributes electricity to residential, commercial, industrial and institutional customers. Through its operating companies, AEP provides regulated electric service and manages power generation assets using a mix of energy resources, including natural gas, coal, nuclear, hydroelectric and renewable energy.

AEP operates one of the largest electric transmission systems in the United States and supplies electricity across portions of Arkansas, Indiana, Kentucky, Louisiana, Michigan, Ohio, Oklahoma, Tennessee, Texas, Virginia and West Virginia.

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