Dive Brief:
- American Electric Power gave an update on its financial outlook yesterday, saying it would increase capital investment between 2017 and 2019 in an effort to boost operating earnings as it refocuses its business on regulated operations.
- The company will invest $17.3 billion in its regulated operations and contracted renewables, including $9 billion on transmission projects.
- AEP said it now expects earnings growth from 5% to 7%, up from previous estimates of 4% to 6%.
Dive Insight:
AEP chief Nicholas Akins said the company's bid to remake itself has been successful, and the overwhelming majority of earnings are now coming from the regulated side of its operations. The company had owned large amounts of generation but announced in September it was selling 5.2 GW of fossil fuel capacity after price supports for several of its plants were blocked.
"AEP has successfully refocused our business with 97% of our forecasted earnings coming from our regulated operations," said Akins, the company's chairman, CEO and president. He said the AEP is in a "unique position" because it can grow earnings through organic investment in regulated businesses now, which in turn will bolster system reliability and shareholder returns.
The spending plan includes $1 billion on renewables projects, and reinvestment of $2.2 billion in levered proceeds after it completes the sale of some generation. The bulk of the new spending will go into transmission.
Akins touted the program's "10-year runway of low-risk investment opportunities," which he said include projects to refurbish and replace aging infrastructure, along with new investments that support renewable generation.
The company expects AEP Transmission Holding Co. to become one of its largest subsidiaries by 2019, contributing approximately 90 cents per share to AEP's total regulated earnings. AEP said its annual planned transmission investment makes up about 14% of the total annual forecasted transmission investment for all investor-owned utilities in the nation.
Earlier this year, Ohio regulators approved subsidies for the company's struggling power plants, but the supports were subsequently struck down by the Federal Energy Regulatory Commission, leading AEP to sell the generation. AEP is also heading efforts to partially re-regulate Ohio's market after its failed bid to nail support for some of its power generation.