april 28, 2016 1 - aep.com...twelve months ended 03/31/2016 earned roes (operating earnings*)...

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1st Quarter 2016 Earnings Release Presentation April 28, 2016

“Safe Harbor” Statement under the Private Securities Litigation Reform Act of 1995

This presentation contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934. Although AEP and each of its

Registrant Subsidiaries believe that their expectations are based on reasonable assumptions, any such statements may be influenced by factors that could cause actual

outcomes and results to be materially different from those projected. Among the factors that could cause actual results to differ materially from those in the forward-

looking statements are: the economic climate, growth or contraction within and changes in market demand and demographic patterns in our service territory, inflationary

or deflationary interest rate trends, volatility in the financial markets, particularly developments affecting the availability of capital on reasonable terms and developments

impairing our ability to finance new capital projects and refinance existing debt at attractive rates, the availability and cost of funds to finance working capital and capital

needs, particularly during periods when the time lag between incurring costs and recovery is long and the costs are material, electric load, customer growth and the

impact of retail competition, weather conditions, including storms and drought conditions, and our ability to recover significant storm restoration costs, available sources

and costs of, and transportation for, fuels and the creditworthiness and performance of fuel suppliers and transporters, availability of necessary generation capacity and

the performance of our generation plants, our ability to recover increases in fuel and other energy costs through regulated or competitive electric rates, our ability to build

or acquire generation capacity and transmission lines and facilities (including our ability to obtain any necessary regulatory approvals and permits) when needed at

acceptable prices and terms and to recover those costs, new legislation, litigation and government regulation, including oversight of nuclear generation, energy

commodity trading and new or heightened requirements for reduced emissions of sulfur, nitrogen, mercury, carbon, soot or particulate matter and other substances or

additional regulation of fly ash and similar combustion products that could impact the continued operation, cost recovery and/or profitability of our generation plants and

related assets, evolving public perception of the risks associated with fuels used before, during and after the generation of electricity, including nuclear fuel, a reduction in

the federal statutory tax rate could result in an accelerated return of deferred federal income taxes to customers, timing and resolution of pending and future rate cases,

negotiations and other regulatory decisions including rate or other recovery of new investments in generation, distribution and transmission service and environmental

compliance, resolution of litigation, our ability to constrain operation and maintenance costs, our ability to develop and execute a strategy based on a view regarding

prices of electricity and other energy-related commodities, prices and demand for power that we generate and sell at wholesale, changes in technology, particularly with

respect to new, developing, alternative or distributed sources of generation, our ability to recover through rates or market prices any remaining unrecovered investment in

generation units that may be retired before the end of their previously projected useful lives, volatility and changes in markets for capacity and electricity, coal, and other

energy-related commodities, particularly changes in the price of natural gas, changes in utility regulation and the allocation of costs within regional transmission

organizations, including ERCOT, PJM and SPP, the transition to market for generation in Ohio, including the implementation of ESPs, our ability to successfully and

profitably manage our separate competitive generation assets, changes in the creditworthiness of the counterparties with whom we have contractual arrangements,

including participants in the energy trading market, actions of rating agencies, including changes in the ratings of our debt, the impact of volatility in the capital markets on

the value of the investments held by our pension, other postretirement benefit plans, captive insurance entity and nuclear decommissioning trust and the impact of such

volatility on future funding requirements, accounting pronouncements periodically issued by accounting standard-setting bodies and other risks and unforeseen events,

including wars, the effects of terrorism (including increased security costs), embargoes, cyber security threats and other catastrophic events.

Investor

Relations

Contacts

Bette Jo Rozsa Managing Director Investor Relations

614-716-2840 [email protected]

Brad Funk Director

Investor Relations 614-716-3162

[email protected] 2

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First Quarter 2016 Highlights

First Quarter Company Update

Refer to appendix for reconciliation between GAAP and Operating EPS

Earnings Update

Delivered GAAP and operating earnings of $1.02 per share

Reaffirm guidance range of $3.60 - $3.80

Reaffirm 4%-6% growth rate

Regulatory & Strategic Update

• PUCO Approval of Ohio PPA

• FERC PPA Waiver Challenge

• Ohio Supreme Court orders

• Strategic Review of Competitive Generation

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OPCo 11.9%

APCo 8.8%

KPCo 5.5%

I&M 10.2%

PSO 8.6% SWEPCO

7.9%

AEP TX 8.5%

Trans 10.9%

* operating adjusts GAAP results by eliminating any material non operating items and is not weather normalized

Regulated Returns Twelve Months Ended 03/31/2016 Earned ROEs (Operating Earnings*)

Regulated Operations ROE of 9.4% as of March 31, 2016

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First Quarter Operating Earnings Segment Detail

Refer to appendix for additional explanation of variances by segment

$0.02 ($0.07)

$0.06

$0.03

$0.03

2016 Actual EPS $0.57 $0.22 $0.09 $0.14 $0.00 $1.02

Rate Changes 0.04$

Reg Prov - Va 0.03$

O&M 0.03$

OSS (0.09)$

PJM Chrgs 0.04$

Normal Load (0.04)$

Other 0.03$

Rate Changes 0.01$

Normal Load 0.01$

O&M (0.01)$

Other (0.01)$

AGR 0.01$

Trading & Mrkt 0.04$

Oklaunion PPA (0.01)$

Other 0.01$

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Normalized Load Trends

Note: Charts reflect connected load and exclude firm wholesale load & Buckeye Power backup load.

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Economic Data

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Regional Industrial Sales Trends

AEP Industrial Sales Map

Shale gas development drives industrial load growth

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(unaudited) 3/31/2016 Actual

($ in millions) Amount Maturity

Revolving Credit Facility $1,750 Jul-18

Revolving Credit Facility $1,750 Jun-17

Total Credit Facilities $3,500

Plus

Cash & Cash Equivalents $190

Less

Commercial Paper Outstanding (502)

Letters of Credit Issued (2)

Net Available Liquidity $3,186

Actual Target

FFO Interest Coverage 5.45x >3.6x

FFO to Total Debt 20.0% 15%-20%

Capitalization & Liquidity

Liquidity Summary

Credit Statistics

Note: Credit statistics represent the trailing 12 months as of 03/31/2016

Total Debt / Total Capitalization

Strong balance sheet, credit metrics, and liquidity

Qualified Pension Funding

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Summary

Q1 in line with expectation

Reaffirming 2016 Operating Earnings Guidance of $3.60 to $3.80/share and 4% to 6% growth rate

Continue strategic review of

competitive generation

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Appendix

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1st Quarter Reconciliation of GAAP to Operating Earnings

$ millions Earnings Per Share

Q1-15 Q1-16 Change Q1-15 Q1-16 Change

Reported (GAAP) Earnings $629 $501 $(128) $1.29 $1.02 $(0.27)

Non Operating Items:

Mark-to-Market Impact of Commodity Hedging Activities

(4) - 4 (0.01) - 0.01

AEP Operating Earnings $625 $501 $(124) $1.28 $1.02 $(0.26)

Weighted average no. of shares outstanding: 490M Q1-15; 491M Q1-16

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Vertically Integrated Utilities

Q1-15 Q1-16

$ millions (except EPS)

Operating Revenues $2,505 $2,246

Operating Expenses:

Energy Costs (983) (742)

Operations & Maintenance (576) (630)

Depreciation & Amortization (272) (267)

Taxes Other Than Income Taxes (97) (98)

Operating Income 577 509

Net Interest/AFUDC (114) (109)

Income Taxes (164) (122)

Operating & GAAP Earnings $299 $278

EPS from Operating Earnings $0.61 $0.57

First Quarter Summary Key Drivers: Q1-16 vs. Q1-15

Rate changes: $44M from various jurisdictions

VA regulatory provision: $23M unfavorable due to prior year reversal

Weather: $83M unfavorable vs. prior year; $21M unfavorable vs. normal

Off-System Sales: $17M unfavorable vs. prior year due

to lower market prices and reduced sales volume

Retail load: $28M favorable vs. prior year due to favorable price variances, partially offset by decreased residential sales

O&M net of offsets: $28M unfavorable vs. prior year primarily due to increased employee related expenses

Income Taxes: effective tax rate of 30.4% Q1-16 vs. 35.3% Q1-15

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Transmission & Distribution Utilities

Q1-15 Q1-16


Operating Revenues $1,270 $1,097

Operating Expenses:










First Quarter Summary Key Drivers: Q1-16 vs. Q1-15

Rate changes: $6M from Ohio DIR Weather: $11M unfavorable vs. prior year; $3M

unfavorable vs. normal

O&M net of offsets: $7M favorable primarily due to a prior year donation to the Ohio Growth Fund


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AEP Transmission Holdco

Q1-15 Q1-16


Operating Revenues $58 $89

Operating Expenses:





Net Interest/AFUDC 4 1


Equity Earnings 22 24

Other (1) (1)



First Quarter Summary Key Drivers: 1Q-16 vs. 1Q-15

$15M favorable operating income due to increased capital investment in the wholly-owned Transcos, offset by higher depreciation, O&M and taxes from increase in projects placed in service

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Generation & Marketing

Q1-15 Q1-16


Operating Revenues $1,163 $748

Operating Expenses:








Operating Earnings 183 71

Proforma Adjustments, Net of Tax 4 -

GAAP Earnings $187 $71


First Quarter Summary

See slide 12 for items excluded from Net Income to reconcile to Operating Earnings

Key Drivers: Q1-16 vs. Q1-15

Capacity revenues decreased $97M in Q1-16 vs Q1-15, due to plant retirements and transition of Ohio to full market pricing

AEP Dayton ATC liquidation pricing down 32%: $25.68/MWh in Q1-16 vs. $38.02/MWh in Q1-15

Generation decreased 4,710 GWh (34%) Q1-16 vs. Q1-15, when retirement units were in service

$22M decrease in trading and marketing activity vs. prior year

O&M : $6M favorable vs. prior year primarily due to gain on sale of land and lower employee related expenses


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Rate Changes, net of offsets (in millions)

Q1-16 vs. Q1-15

APCo/WPCo $22

I&M $8

KPCo $7

PSO $1

SWEPCO $6

Kingsport -

TOTAL $44

Impact on EPS

Retail Rate Performance

$0.06

Rate Changes, net of offsets (in millions)

Q1-16 vs. Q1-15

Ohio Power $6

Texas Central -

Texas North -

TOTAL $6

Impact on EPS $0.01

Transmission & Distribution Utilities Vertically Integrated Utilities

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Retail Load*

(weather

normalized)

Q1-16 vs. Q1-15

Ohio Power -1.9%

Texas Central 6.0%

Texas North -1.1%

TOTAL 0.5%

Impact on EPS -

Retail Load*

(weather

normalized)

Q1-16 vs. Q1-15

APCo/WPCo -0.9%

I&M 2.6%

KPCo -4.7%

PSO 2.1%

SWEPCO -3.8%

Kingsport -5.8%

TOTAL -0.6%

Impact on EPS

Retail Load Performance

*Excludes Firm Wholesale Load


$0.04

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Weather Impact

(in millions)

Q1-16 vs. Q1-15

APCo/WPCo ($34)

I&M ($19)

KPCo ($9)

PSO ($6)

SWEPCO ($14)

Kingsport ($1)

TOTAL ($83)

Impact on EPS

Weather Impact

Weather Impact

(in millions)

Q1-16 vs. Q1-15

Ohio Power -

Texas Central ($8)

Texas North ($3)

TOTAL ($11)

Impact on EPS


$0.11

$0.01

april 28, 2016 1 - aep.com...twelve months ended 03/31/2016 earned roes (operating earnings*)...

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