Q1 2026 Earnings Call Transcript

Hello, and thank you for standing by. My name is Regina, and I will be your conference operator today. At this time, I would like to welcome everyone to the American Electric Power First Quarter 2026 Earnings Conference Call. backgrounds. [Operator Instructions] I would now like to turn the conference over to Darcy Reese, Vice President of Investor Relations. Please go ahead.

Good morning, and welcome to American Electric Power's First Quarter 2026 Earnings Call. A live webcast of this teleconference and slide presentation are available on our website under the Events and Presentations section. Joining me today are Bill Fehrman, Chairman, President and Chief Executive Officer; and Trevor Mihalik, Executive Vice President and Chief Financial Officer. In addition, we have other members of our management team in the room to answer questions if needed, including Kate Dickson, Senior Vice President, Controller and Chief Accounting Officer.

We will be making forward-looking statements during the call. Actual results may differ materially from those projected in any forward-looking statements we make today. Factors that could cause our actual results to differ materially are discussed in the company's most recent SEC filings. Please refer to the presentation slides that accompany this call for a reconciliation to GAAP measures.

We will take your questions following opening remarks. I will now hand the call over to Bill.

Thank you, Darcy, and good morning. We appreciate you joining us for American Electric Power's First Quarter 2026 Earnings Call. I'll begin on Slides 4 and 5. This is a defining period for our industry. The pace of change is accelerating and the opportunities ahead of us are expanding.

Within this environment, AEP is extremely well situated to capture growth, given our scale, leadership position in generation and transmission, exceptional execution capabilities and our operational footprint in some of the fastest-growing regions in the country. As customer needs evolve, scale, innovation and intense focus on execution will define the next generation of utility growth. We are ready to meet unprecedented demand across our large service territory, not only driven by data centers, but also broader economic development. This is meaningfully expanding the long-term opportunity ahead of us and in the communities we serve.

At the same time, our growth is only possible with trusted partnerships. We are staying closely aligned with our stakeholders, listening to our customers, governors, regulators and policymakers while working to advance solutions that support affordability, economic development, reliability and resiliency. As we scale our system, execution and operational discipline become even more crucial. These are significant strengths of the new leadership team at AEP.

By leveraging our size and experience we are mitigating supply chain pressures and acquiring critical resources to support what is a multiyear sustained period of infrastructure build-out. This includes already securing extra high-voltage long lead-time equipment like transformers, breakers and [ Lattice ] steel. As we also said on past calls, we have secured more than 10 gigawatts of gas-fired turbine capacity. In short, we are executing on a disciplined strategy to deliver consistent and timely long-term value for both customers and shareholders.

Now turning to Slide 7 and 8 of the presentation, I will provide a high-level overview of our first quarter results strategic outlook, affordability and regulatory progress before handing it over to Trevor to walk through our financials and strong growth trajectory in more detail. We are pleased to report first quarter 2026 operating earnings of $1.64 per share or $891 million. These results build on our financial and operational momentum from 2025 and give us confidence in reaffirming our full year 2026 operating earnings guidance range of $6.15 to $6.45 per share. AEP continues to experience substantial system demand concentrated largely in our key growth states of Indiana, Ohio, Oklahoma and Texas.

In the first quarter, we contracted an additional 7 gigawatts of load, coming mostly from AEP Texas and AEP Ohio. And we now have an incremental contracted total of 63 gigawatts expected by 2030. This is an increase from the 56 gigawatts we shared just last quarter. Of the 63 gigawatts, nearly 90% are data centers, which include hyperscalers, while the rest are industrials. 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.

They are also backed by electric service agreements and levers of agreement. To be very clear, I am intensely focused on execution of the projects required to get this load connected for our customers. That is why we earn business. Of the 63 gigawatts, 53 gigawatts are in Texas and Ohio requiring large-scale transmission projects, which we believe we excel at constructing and operating.

The remaining 10 gigawatts requires new generation, for which AEP has secured the necessary long lead-time equipment and has strategic contracting arrangements to supply the labor necessary to successfully execute on our delivery commitments. Size matters, and AEP is using our breadth and scale to aim to provide what is needed to meet customer demands. Trevor will discuss the 63 gigawatts in more detail shortly. To support these projects, today, we are increasing our 5-year capital plan to $78 billion, up from the prior $72 billion, which now drives an expected 11% 5-year rate base CAGR.

The $6 billion of incremental investments includes $3.5 billion in recently approved PJM and SPP transmission investments and $2.5 billion for I&M gas-fired generation. In addition, we have line of sight to over $10 billion of projects for 2026 through 2030. These investments are incremental to the new $78 billion plan and include the Piketon transmission project, the Wyoming fuel cell initiative and additional new generation opportunities across our footprint. We stand ready to capture incremental growth opportunities while maintaining a strong balance sheet, which, as I have said many times, is a key priority for us.

Especially in light of the exceptional load expansion we are seeing, today, we are also reaffirming our premium operating earnings growth rate of 7% to 9% for 2026 through 2030. The $6 billion increase to our capital plan is driven by transmission and generation projects that come online later in the next 5 years. These investments are expected to be accretive to earnings in the back end of the plan and increase our expected long-term operating earnings CAGR to now greater than 9%. Turning to Slide 9 of our presentation, we believe our transmission, scale and expertise remain unmatched in the industry.

Today, AEP owns and operates more than 2,100 miles of ultra-high-voltage 765 kV transmission lines across 6 states. Large [ low ] customers continue to choose sites in our footprint because of the strength and sophistication of our advanced transmission network. As we have highlighted before, AEP pioneered the modern 765 kV transmission system in North America, and we have more than 6 decades of experience designing, building and operating these ultra-high voltage assets. Currently, nobody even comes close to our experience and capabilities in this area.

Hands down, we are the largest owner-operator in the United States. The strategic partnership agreement with [ Quanta Services ] that we announced late last year, continues to drive high confidence in the execution of our high-voltage transmission projects. By pairing AEP's vision for a modern, resilient grid with an industry-leading partner like [ Quanta ], we are accelerating the development of the 765 kV infrastructure build-out that will be essential to meeting the reliability, resiliency and energy delivery needs of the future. As I mentioned, we were recently awarded new 765 kV transmission projects in SPP and PJM.

For SPP, we were directly assigned a major project that consists of 315 miles of 765 kV lines from Seminole, Oklahoma to Southwest [ Freeport ], Louisiana. We also secured additional projects from Potter, Texas to Beckham County, Oklahoma. Together, these projects totaled $1.6 billion and are anticipated to be in service by 2030. In PJM, we were awarded the build-out of 330 miles of predominantly 765 KV lines in Ohio and Indiana. These projects totaled $1.9 billion and also have expected in-service dates towards the end of our 5-year plan.

Additionally, we are pleased to have been selected for a nearly 200-mile 765 kV project in MISO, which expands our competitive footprint into Wisconsin. While this project falls largely outside the current 5-year window with an in-service date of 2034, it gives us confidence and visibility in our longer-term growth rate into the future. With the addition of these projects, our transmission investment forecast now totals $33 billion, representing 42% of the overall $78 billion capital plan and underscoring our position in strengthening the nation's critical electric transmission backbone. Turning to new generation resources on Slide 10. AEP is proactively building the capacity needed to support accelerating demand and long-term growth.

As part of this effort, we have expanded our generation capital outlook by $3 billion to $24 billion through 2030, driven by new gas generation at I&M. At a broader level, our portfolio strategy is intentionally balanced and diversified with investments across natural gas, solar, wind and storage. This mix strengthens reliability while promoting a disciplined approach to delivering cost-effective investments for our customers over the long term. We have secured access to more than 10 gigawatts of gas-fired turbine capacity from leading manufacturers and are advancing our projects through the interconnection process across PJM and SPP.

We are leveraging experienced EPC partners alongside our in-house engineering expertise to deliver these projects efficiently and at scale. We are also maintaining flexibility in how we meet incremental demand for new generation, utilizing competitive RFPs and targeted bilateral acquisitions to supplement our self-developed pipeline and ensure we capture the most attractive opportunities. In parallel, we continue to evaluate nuclear solutions aiming to position AEP at the forefront of next-generation baseload technologies. As we have previously mentioned, we are actively reviewing several potential sites and interconnection locations as we assess how nuclear can play a meaningful role in the future to support load growth.

Any nuclear investment will require strong capital protection, disciplined balance sheet safeguards and significant regulatory and governmental engagement, such as loan guarantees and long lead-time equipment support. No projects will move forward if they place undue risk on our business or our shareholders. While we have been very successful with building out transmission infrastructure in PJM, AEP continues to identify some issues around how quickly and efficiently load is being connected to generation. The current state of PJM's performance and stakeholder approval process does not give me great confidence that these issues will be resolved anytime soon.

In fact, if something is not done now, I expect we could still be having these same conversations in 10 years. The PJM market worked very well when supply exceeded demand, but we are now in a very different time. As such, we are currently assessing all of our options to ensure that we are finding an efficient and effective path forward to deliver what our customers need, which simply put, is more interconnected generation to power their businesses. We are performing a similar review of our membership in SPP.

Expanding the strengthening the grid will ensure new generation resources across all technologies can connect quickly, reliably and affordably to serve our fast-growing loan. As our exciting generation plans mature, we will share the financial plans as part of our normal cadence on the third quarter call later this year. Please turn to Slide 11. We -- even as we invest to meet rapidly growing load expectations, affordability is top of mind, and we remain focused on taking decisive actions to facilitate keeping residential rate impacts manageable. With the large load contracts we have secured, we are forecasting up to $16 billion in cost offsets for existing customers from their allocated contributions to expenses during the life of these agreements.

This is a major affordability win for our existing customers and a clear validation of our customer-focused growth strategy. At the same time, our focus on customer service through accountability is delivering results. In fact, we have had a meaningful reduction in the average duration of outages across the system across the last year. which is strengthening customer relationships through more reliable power. While our rate base continues to expand, O&M is rising modestly at a 4% CAGR over the same period. driven by the additional staffing and maintenance support required to operate new generation and transmission assets being added to the system.

This operational discipline is a real differentiator for AEP and positions us exceptionally well for the future. We are also tapping federal tools to strengthen customer savings. The team has secured $315 million in generation and distribution brands. We 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.

As part of our long-term strategy, we have also applied for additional DOE loans to fund our generation and transmission investments. We expect to provide periodic updates as loan closings progress. These are meaningful dollars going right back to customers, which is just another example of how we are pairing growth with affordability. Over the past 2 years, we have led the industry in establishing the right regulatory framework for a large load growth.

We secured approvals for new data center tariffs in Ohio, followed by large low tariff solutions in Indiana, Kentucky and West Virginia, and we are not stopping there. We have active filings in Michigan, Oklahoma, Texas and Virginia. You will find a full summary of these actions on Slide 12 of today's presentation. These tariff structures are designed with a couple of clear goals: First, we are protecting our existing customers by ensuring data centers and other large load customers cover the investments required to support their energy needs.

And second, we are protecting our revenue and earnings base through minimum demand charges embedded directly within these binding take-or-pay contracts. We have made solid progress on tariff structures, and we will continue to work with our regulators and stakeholders to make sure large load customers pay their cost to serve and provide cost relief to our residential customers. Turning to Slide 13, this brings me to our strong regulatory progress in the quarter across multiple jurisdictions. This continues to be a major focus area of mine.

In Ohio, we secured commission approval of the distribution base case settlement, including an affordability measure, which contains a rate decrease for customers along with a 9.84% ROE, up from the prior ROE of 9.7%. As another example, in Arkansas, we successfully increased our ROE from 9.5% to 9.65% and Pointedly, we have not ended up with a reduced ROE in any recent rate case outcome. In Indiana, we advanced our resource strategy with approval of our expedited generation resource plan. setting the stage for an upcoming base rate case that will include a customer rate reduction, supporting our focus on affordability.

In West Virginia, we received a favorable reconsideration order that increased the authorized ROE to 9.75% from 9.25%, a significant increase. The commission also approved a modified rate base cost infrastructure investment tracker. Both of these approvals come at an important time as the state seeks to advance its long-term energy strategy. And the initiative aimed at ensuring West Virginia has the reliable, affordable energy needed to support rising demand.

With strong support from the governor, this presents significant investment opportunity under a more constructive regulatory environment. And we also continued to see consistent positive outcomes across other areas of our multistate footprint, including Oklahoma, Louisiana and Texas. Taken all together, we believe these actions and outcomes reflect the growing strength of our regulatory approach. By listening closely to state leaders and aligning our plans with their needs, we are achieving balanced regulatory results that benefit both customers and investors.

Before I wrap up, I want to underscore just how exceptional the start of this year has been. Our team is operating at a level of execution that we believe is setting a new standard for the industry. We are making significant strategic investments to meet what is truly a transformative moment for our company. At the same time, we are working hand-in-hand with our regulators and policymakers to advance their key priorities, all while taking disciplined, proactive steps to maintain affordability for our customers.

I'm extremely confident in our strategy, our capabilities and the AEP team, we are ready to capture the substantial opportunities in front of us by accelerating growth, having an intense focus on execution, driving customer affordability and and using AEP's size and scale to strengthen our competitive advantages while creating long-term value for our shareholders. I'll now turn the call over to Trevor to walk through our first quarter performance drivers and provide more detail on our financials and strong growth trajectory.

Thanks, Bill, and good morning, everyone. On today's call, I will begin by reviewing the quarter's key earnings drivers, along with our confidence in load growth, which has increased 7 gigawatts from last quarter to now 63 gigawatts. I will then discuss our newly expanded $78 billion capital plan, up $6 billion and our expected increased long-term operating earnings CAGR of now greater than 9% based on this capital plan. I will then highlight the line of sight we have to over $10 billion of investment opportunities above our base capital plan before closing with comments on our balance sheet strength.

Please turn to Slide 15 of the presentation. First quarter 2026 operating earnings were $1.64 per share compared to $1.54 per share in the first quarter of 2025. Results in our VIU and T&D segments remained strong during the quarter, driven by constructive rate case outcomes across multiple jurisdictions. As Bill noted earlier, we continue to see positive regulatory progress across our service territory. Regulated earned ROE for the quarter increased to 9.3% and is expected to reach approximately 9.5% by 2030 as we continue to execute our regulatory strategy with a focus on affordability for our customers.

In addition to robust regulatory performance, we continue to advance our transmission investment strategy and saw ongoing [ loan ] growth across our footprint, which I will discuss in more detail shortly. These positives were partially offset by prior year's favorable weather and continued spend to enhance system reliability. Transmission Holdco performance was mainly impacted by increased expense, including storm restoration and higher property taxes. We expect Transmission Holdco earnings to be favorable on a year-over-year basis by the end of 2026. In the Generation & Marketing segment, results reflected stronger wholesale margin performance, partially offset by prior year contract optimization benefits.

Finally, in Corporate and Other, the variance was largely driven by higher O&M, increased interest expense and timing related to income taxes, of which we anticipate the impact to reverse by the end of this year. Turning to Slide 16 and our current load outlook, we continue to see significant acceleration in contracted load growth. In support of that trend, we have executed on 63 gigawatts of total load, up from 56 gigawatts reported just a few months ago. This increase reflects continued progress converting projects from our planning queue into binding customer contracts.

As a reminder, these contracts include letters of agreement and long-term electric service agreements, depending on the relevant tariff provisions in each jurisdiction. As Bill mentioned, with large load ESA contracts we have secured within our vertically integrated utilities, we are forecasting up to $16 billion in cost offsets for existing customers from their allocated share of fixed expenses. Our analysis estimates contracted revenue from large customers over the life of the ESAs and evaluates how fixed cost responsibility reallocates across customer classes over time, taking into consideration load wraps.

As contracted load continues to grow, we remain equally focused on the quality and credit strength of the customers who are driving it. As Bill referenced earlier, our contracted customers must meet high credit standards. The majority of contracted megawatts are with large, well-capitalized hyperscalers and industrial customers. This high-quality and diversified customer base forms a strong foundation for long-term partnerships and infrastructure development.

With that context, I'll turn to recent activity by region, starting with PJM. Contracted load in PJM increased by approximately 1 gigawatt during the quarter, driven primarily by additional customer contracts executed in Ohio. Substantially, all of our total incremental PJM load is supported by take-or-pay ESAs. Beyond near-term additions, we continue to see a robust pipeline of longer-dated opportunities in PJM.

Most notably, we recently announced a 10-gigawatt data center campus with [ SB Energy ] in Piketon, Ohio. The majority of the incremental load associated with this project is not currently included in our load forecast that is reflected in the approximately 190 gigawatt active interconnection queue. Given the early stage of development, we anticipate incorporating this load into our forecast as commercial discussions progress and ESAs are formalized. In addition to the Piketon campus, we are also evaluating a multibillion-dollar Google data center development in Putnam County, West Virginia.

This opportunity remains in the early stages and is not included in AEP's current load forecast for financial outlook. Turning to SPP. Contracted load increased by approximately 1 gigawatt during the quarter, driven primarily by an Amazon data center project in Northwest Louisiana. Almost half of our total incremental SPP load is now supported by take-or-pay ESAs, an increase from last quarter, reflecting continued progress converting new load development into binding take-or-pay ESAs.

Stepping back, these newly announced data center projects are supported by high-quality hyperscalers, most of whom have publicly committed to funding the required infrastructure upgrades, helping to protect rate affordability for our broader customer base. At the same time, the scale of load growth we are seeing highlights the strength of our diverse footprint that is highly suited for data centers and our ability to attract large-scale economic development to the communities we serve. Turning to Slide 17 and shifting to ERCOT. This region accounted for the majority of contracted load growth during the quarter.

Load increased to 41 gigawatts, up from 36 gigawatts reported at the end of the fourth quarter. For context, I want to highlight how this load is contracted and how this differs from PJM and SPP. All 41 gigawatts of contracted load in ERCOT meet the standards under Senate Bill 6 and are secured through executed LOAs. These agreements require customers to secure, complete interconnection studies provide detailed load forecasts and fully fund related construction costs.

This structure acts as an effective filter, ensuring projects advancing into our forecast are well developed, financially backed and are executable. With that framework in place, we are working closely with ERCOT and other stakeholders to advance solutions that will support the significant and growing demand. Annually, in April, AEP Texas files its low growth forecast through ERCOT's regional transmission planning, or RTP, process. This RTP methodology analyzes peak load along with transmission and generation constraints to recommend system improvements.

In this year's April 1 RTP filing, AEP Texas submitted 31 gigawatts of incremental demand by the end of the decade. Due to submission requirements and timing, AEP Texas has since executed LOAs for another 10 gigawatts of load above the 31 gigawatts, underscoring AEP's low growth needs of 41 gigawatts in ERCOT. Keep in mind, the underlying demand in ERCOT is real. It's supported by signed customer agreements formal planning submissions and backed by roughly 60 gigawatts of active load in the ERCOT interconnection queue.

As Senate Bill 6 implementation advances, including backed processing, the focus will be increasingly on timing. We expect greater clarity and certainty later this summer as the rule-making progresses on when these loans will ultimately interconnect. AEP is committed to building the required transmission and distribution infrastructure in Texas, but timing remains highly dependent on the supporting generation. In short, the question is not whether the demand exists. but when it comes online in ERCOT.

Turning to Slide 18. I want to spend some time on our capital plan and how it continues to strengthen our long-term earnings growth profile. Today, we formally increased our 5-year capital plan by $6 billion, bringing the total to $78 billion. This increase reflects our inclusion of the SPP and PJM transmission projects Bill referenced earlier, which together represent roughly $5 billion of awarded transmission projects. Consistent with our disciplined approach to capital planning we have incorporated only approximately $3.5 billion of those awards into the capital plan.

Specifically for the SPP project, the exact division of lines between AEP and a regional peer has not yet been finalized. So we're using a conservative 50% assumption to update the capital plan. The expanded plan also includes our recent announcements related to I&M's planned acquisition of the [ Sycamore and Big Sandy ] natural gas generation facilities. From a timing perspective, this incremental $6 billion is largely associated with projects that enter service closer to the 2029 and 2030 time frame.

As a result, these investments are accretive to earnings in the back end of the plan. The best way to think about this is that these investments not only reinforce our earnings growth, but increase our expected long-term operating earnings CAGR to now greater than 9% over the period of 2026 to 2030. Beyond the base plan, we continue to see meaningful upside. For the 2026 through 2030 period, we have line of sight to over $10 billion of projects that are not included in the $78 billion plan, including the Wyoming fuel cell project [ Hudson ] transmission project and additional generation investments.

While these incremental opportunities remain subject to key gating items or require clarity and are therefore not reflected in our base capital forecast, they highlight the depth and strength of our capital pipeline. With contracted load growth now totaling 63 gigawatts combined with line of sight to over $10 billion of projects and other developing generation and transmission opportunities, we see meaningful upside to the current capital plan. We will provide a more fulsome update on the capital plan, our related financing strategy and talk through our long-term growth outlook as part of our normal cadence in the third quarter.

Turning to Slide 19, I'll walk through our updated 5-year financing plan aligned with this new expanded capital program. To support the $6 billion of additional capital formally added today, we have modestly increased the level of growth equity in the plan. Equity has increased by $1.1 billion and now total $7 billion for the period of 2026 to 2030. Importantly, this incremental equity represents only 18% of the $6 billion of incremental capital growth, underscoring our continued focus on disciplined, balanced financing. Looking at the timing of the equity issuance.

The majority remains weighted towards the back half of the 5-year plan, providing flexibility as projects advance and cash flows build with execution. Consistent with that profile, we intend to remain opportunistic across all financing instruments as market conditions evolve, funding long-term growth in a measured and shareholder-friendly manner. Let's now turn to our financing activity so far this year. Given our strong stock performance in the first quarter, we took advantage of the market and accelerated our at-the-market program. issuing $665 million of ATM equity.

This fulfills 2/3 of our full year 2026 equity needs and reflects strong progress against our financing plan. In fact, we have issued the $665 million of ATM equity at an average price of over $131 per share. Looking across the planning horizon, -- we remain well aligned with our FFO to debt targets of 14% to 15% for both S&P and Moody's. As of the first quarter, S&P FFO to debt stands at 14.7%, near the top end of our target range; while the Moody's metric is 13.9% and just below our target, And both remain well above the downgrade threshold of 13%.

Overall, the updated financing plan preserves balance sheet strength while supporting our expanded capital program. With a disciplined funding approach, a strong credit profile and flexibility to deploy a range of financing tools to take advantage of market conditions, we are well positioned to responsibly finance this growth while delivering exceptionally strong financial results over time. Turning to Slide 20. I want to close by highlighting a few key takeaways that reinforce the progress we are making across financial performance, growth execution and balance sheet discipline. First, we delivered a strong first quarter of 2026, with operating earnings of $1.64 per share.

This performance gives us confidence to reaffirm our full-year operating earnings guidance of $6.15 to $6.45 per share, reflecting robust financial results through continued positive regulatory momentum. Second, our load growth story continues to strengthen. We now have executed on 63 gigawatts of incremental contracted load through 2030, supported by a diverse and high-quality customer base. This continued large load demand provides a strong foundation for long-term infrastructure investments that enable us to deliver reliable power to our customers.

Third, we remain focused on executing our newly expanded $78 billion capital plan, which is driving an expected 11% 5-year rate base CAGR. The $6 billion of incremental investments reinforce our expected 7% to 9% annual earnings growth, increasing our expected long-term operating earnings CAGR to now greater than 9%. With contracted load growth totaling 63 gigawatts in together with line of sight to over $10 billion of projects in other developing generation and transmission opportunities, we see meaningful upside to the current plan. We will assess and incorporate further opportunities as part of our normal cadence in the third quarter.

Fourth, we continue to fund this growth in a disciplined manner, with only a modest increase in incremental equity to support the expanded capital program. At the same time, our large and diversified footprint provides the flexibility to deploy capital, where it delivers the greatest impact while maintaining financial strength as we execute at scale. Finally, we continue to work closely with regulators and other stakeholders to keep affordability front and center, including forecasting up to $16 billion in cost offsets for existing customers. Through constructive engagement, we are advancing regulatory frameworks that balance fairness for customers and shareholders and support the critical work of building and modernizing the electric grid.

Taken together, these elements highlight the momentum we are building and the discipline we bring to execution. We are confident in our strategy, supported by a growing pipeline of opportunities and a balanced financial approach. We believe AEP is one of the best positioned investor-owned utilities to deliver long-term value as we help build the critical infrastructure needed to support unprecedented growth. We operate in states that are highly receptive to our service model and are very pro business.

We continue to see strong positive momentum across the platform with electrification at the heart of our growth story. Thank you for joining us today. I will now ask the operator to please open the line for questions.

[Operator Instructions] Our first question will come from the line of Steve Fishman with Wolfe Research.

Thanks for all the updates. Bill. So so many questions. The PJM commentary, could you maybe give a little more color on kind of what -- a little more on why and what you're assessing what are -- what would it take to actually exit PJM? What would you like them to see to do to not exit maybe? Just any more color on that.

Yes. To be clear, we're not saying we're exiting PJM. What we are seeing is that as we look at the RTOs that we operate in, obviously, they're increasingly struggling to provide the responses that we need to meet the demands. And as we begin to prepare our plans and our ability to execute on this.

We're extremely comfortable that we have the equipment, we have the engineering, we have the contractors. What we need is a faster way to interconnect into these systems. And so as we've seen, there's efforts that the government has put into place to try to move PJM along and SPP along and there's fits and starts on that and it's not really moving that quickly. And for us, we need to make sure that we're doing everything we can to, number one, help push that process along and work with our state regulators and governors and policymakers to try to advance the system that we have in place today.

But as the manager of risk of this company, I also have to look at what happens in the event that we can't find a path forward on that. So we're in the very early stages of the evaluation phase, obviously, considering full ranges of options, including staying in these or shifting or exploring alternative structures. But the bottom line on this is we're going to continue to work closely with our regulators and policymakers, we're continue to engage directly with FERC and with the RTOs and with others to try to figure out how can we absolutely move this process along faster because while all of us are working very hard to get the equipment we need and the contractors we need, at the end of the day, we also have to get the interconnections we need to accelerate the interconnection and getting the generation to load.

So bottom line, we're committed to participating in a market that's responsive to the customer needs, but we also know that we have to figure out a way to get it to move more efficiently and more effectively.

Got it. That makes sense. Two other quick ones. Just on the bloom and customer agreement in Wyoming, just how confident are you about these requirements being met in the second quarter to move forward with that?

So those discussions continue to move forward. Obviously, for us, we're protected regardless of what happens on those projects. But our team has recently been in contact with the local mayor and other stakeholders in that region, there's active work going on. So I'm confident that, that project will continue forward, but there's some work that has to be done between other parties.

For us, we are ready to go. We have everything we need in place. We're essentially doing a little bit of earthwork on this project, waiting for the -- basically the full release. We're continuing to work with Bloom to ensure that we can meet schedules that the customers want to have.

And so for us, I feel as though we're in great shape on this. We're in a good position with regards to our commercial terms on this project. And hopefully, this will all get resolved by the end of the second quarter.

Our next question will come from the line of Julian DeMolenSmith with Jefferies. .

I'll echo the comments here. Lots of questions and very well done guys, really quite something to start the year here. So maybe to pick it up for where Steve left it off here. How do you think about the cadence of the line of sight for that next $10 billion as you think about it, right?

You've got this Wyoming piece, you get the Piketon piece. It seems like you might be insinuating some PJM generation opportunities. Again, I'm not sure exactly if that's right or when it's right or how you think about backstop procurement or bilateral participation. But just as you think about this refresh, you guys have obviously provided a little bit of an out-of-cycle comment here.

How do you think about the third quarter cadence for instance, versus how you would set expectations across the litany of things going?

Yes. Thanks, Julien. This is Trevor. Look, I would say, let me step back a little bit and just say we're always going to maintain a disciplined approach to capital planning where we only include really those projects that have sufficiently advanced and cleared getting the gating items with a high degree of regulatory confidence in our formal plan.

Now I will say we have announced the Pyton project and the Wyoming fuel cell project. And so that's why we wanted to shadow this $10 billion because just between those 2 projects, that could be around an $8 billion amount associated with that. And then we do have other opportunities and line of sight to additional generation in the footprint. And so I think what I wanted to do was really put a marker around pipe in and Wyoming and then also show that there is incremental opportunity around generation and really kind of get the Street comfortable with the fact that we are really being pretty conservative in the $78 billion 5-year capital plan.

And what I didn't want to do is just come out on the third quarter when we do the formal update without addressing these on the first quarter call because we have been public, at least with Piketon and Wyoming. So again, I think it really just shows the robust nature of our growing capital plan. And again, I think if you take a look over the last several years, we've been growing our capital plan. If you look at over the last 4 years at roughly a 22% CAGR in -- so it's a robust plan.

And again, the $6 billion definitive line of sight, that's why we raised the plan and then the $10 billion is incremental on top of that. We're looking forward to coming out on the third quarter call with a more robust fulsome approach.

Got it. And just on PJM, just needle you a little bit here, timeline on that decision and if you would or how you participate in the backstop just to make sure I hear that right?

So on the backstop, obviously, when that process gets formally approved, we'll -- we are already looking for potential opportunities that we could bid in to that through our unregulated businesses. But the broader piece here for me is that we have to solve the speed to market issue here. And as we're continuing to work with PJM and other stakeholders and our governors, clearly, this is an area that has to get fixed. And so the point here is we are going to intently engage in this, we're going to figure out how we can get this accelerated, make sure that we do it in an appropriate manner with our states and and see where this ends up because PJM, in particular, is clearly a system that is not expediting the connection of flow to demand.

And so we're very confident with where we sit today on the projects that we have today. But I also think in the world we're in, we need to figure out how to make it go faster.

Our next question will come from the line of David Arcaro with Morgan Stanley.

Bill, as you talk about trying to move more quickly here. Are you looking at other strategies to or potentially expanding like pursuing on-site power anywhere else across your system, expanding what you had done with the fuel cells?

As we work with our customers. We're very proud of the fact that we're able to bring to them a variety of bridging strategies to serve their loads. And we've got a number of examples where we've done fuel cells. We have access to [ aero ] derivatives.

We can do smaller interconnections into our system. So we have a variety of tools that we take to our customers to try to accelerate their ability to get their business online at the speed of which they want to move forward. And so we'll continue to offer those types of opportunities. We're also working to accelerate our ability to get transmission built.

We're looking at different ways of how we construct transmission or design of transmission to accelerate the overall construction of this. And obviously, with our partnership with Quanta, that gives us a tremendous competitive advantage with them to find innovations for speed. And so this is, for us, all about getting our customers connected as absolutely fast as possible and working with them on where they want to be short term and where they want to be long term with their power supply and making sure that we're the ones that can deliver it, so we get their load.

Got it. That makes sense. And then let's see, Trevor. I was just wondering, looking at the equity financing update here relative to the incremental CapEx, could you also touch on now going forward to the extent some of that CapEx from the $10 billion bucket is brought into the plan over time? What does the equity financing need look like proportionally to that?

Yes, sure. Let me start by saying that what we have is a strong operating cash flow model here, and we're forecasted to generate over $47 billion of operating cash flows over this 5-year period. And so to fund the growth, we will use a full range of financing tools. And you've seen us be pretty active with that, including hybrids and other equity-like instruments, structured financing and again, growth equity.

And we want to make sure we take advantage of the most optimal market conditions and fund the plan in a balanced and shareholder-friendly way. But you've heard me say many times, David, that I'm not opposed to issuing accretive growth equity. And generally, what you see in the industry is typically, it's around a 30% to 40% equity content for CapEx. And what we announced today with the $6 billion is only 18% of equity content.

And so you're always going to see us make sure we balance the most effective way to finance this in the most shareholder-friendly way. But again, I would go back to the strong operating cash flows. And the fact that we have multiple tools at our disposal and we're also very focused on our FFO to debt metrics, so I think you will see us continue to look at the timing of when that $10 billion rolls out over the plan and then the methodology in which we finance it. But right now, when you take a look at Page 19 of the presentation today, you'll see that we have $1 billion of ATM in 2026, of which $665 million is already issued and then really nothing in '27. And then we've got the ATM at $1 billion a year in each of the years, '28, '29 and '30 and then just a modest amount of growth equity in the back end of the plan.

And so again, I think what this does is it really gives us a great deal of flexibility in how we're going to finance the incremental $10 billion or what we ultimately roll out on the third quarter call. We are going to ensure that we're doing this in a very disciplined manner as we finance these great opportunities.

Our next question will come from the line of Richard Sunderland with Truist Securities.

I wanted to pick up a couple of the earlier themes around PJM, but kind of turn that to the SPP side. You spoke a little bit to progress there on the load front. But curious how you're viewing sort of SPP as a whole interest into that RCO and what it might mean for like Septoand continuing loan interest there?

Yes. So very similar view of SPP with regards to just a general focus of wanting to get load connected to generation there. SPP though, I would say, has been more aggressive in getting after these issues. We've had better luck in SPP.

They've made their filings on the [ ARRIS ] program and such. And so it's, I would say, a little bit better there with regards to being able to get our generation connected and moving forward. So -- but still, we still want to make sure that we're staying on top of this. And because it is a part of any of these projects.

And every utility out there who's trying to do this has the exact same issues we have. We're just going to engage more on this and make sure that we eliminate the risk and get our customers connected just as quickly as we can.

Got it. That's super helpful. And then turning to, I guess, a bigger-level topic around transmission, you've had a lot of commentary today on what you're doing there. I'm curious, what you see on the policy side as needs for transmission?

I mean there's been a lot of focus recently around some recent FERC actions elsewhere. And I guess just the bigger question is, do you think there are opportunities on the transmission side that go beyond the sort of engineering construction efforts you spoke to earlier?

Well, certainly, on transmission. There's keys around accelerating right-of-way acquisition, there's keys around the supply chain of this and getting ahead of that. And as we mentioned earlier, with our size and scale, we are well ahead on our supply chain and the procurement for all of these projects that carry us out through this plan. I feel very confident with regards to having what we need there to get these done.

Clearly, as we're going through the regulatory environment, I would say that at least in my discussions with the states. At the policy level, they're very supportive of transmission. They know that transmission forms the backbone for economic development. and that without a very strong transmission system that their economic development will, in some cases, be muted. And so for us anyway, we've had great success on transmission, both on the regulated side, on the competitive side.

We've got an exceptional relationship with Quanta. So we know we have the labor to get it bill. We're having very innovative design so that we can reduce right of way. We can reduce the amount of weight for each of these structures that we have.

So we're really attacking this from a multi-value stream of opportunity to continue our leadership role in the operation, maintenance and construction and transmission.

Our next question will come from the line of Nick Amicucci with Evercore ISI.

I wanted to just kind of dig in a little bit on the growth equity proportion on Slide 19. So do we think about that kind of the $3 billion of gross equity. Is that firm? Or is that kind of contingent upon the CapEx pace? And how should we think about kind of that just moving forward as you think about '28 through '30?

Yes. Definitely, Nick, I would say that, that $3 billion at the back end of the plan is tied to the $78 billion CapEx plan. And as we indicated, a lot of the uplift that we even had today with the $6 billion is in the back half of the plan when a lot of those dollars will come through. And so I would say it's pretty firm because we feel very confident about the CapEx plan.

And this is what we would need to finance that. So the good news is we need it in that 28 to 30 period. And then we've been pretty focus on getting the ATM done this year and getting that $665 million done. And so from my perspective, I think the equity is really not much of an issue right now in support of the $78 billion 5-year capital plan.

And it's really a modest amount of equity to think about what is ultimately needed to fund this growth plan.

Got it. That's helpful. And then as we -- as you kind of think about the potential uplift that we will receive with the third quarter update, to the CapEx plan. Should we -- is it fair to -- I mean we've seen a pretty consistent kind of breakdown between transmission and generation.

And just given kind of the commentary surrounding speed to market. Is it fair to assume that, that breakdown kind of persists, so a little bit more heavily skewed towards transmission?

Yes. I think that's a pretty safe assumption on this. While you have seen that we have a fair amount or $33 billion of the capital plan is associated with transmission right now. We continue to see a lot of opportunities around the transmission business, both within our service territory as well as competitive opportunities.

Bill mentioned the one up in -- MISO up in the Wisconsin area. Those are opportunities that we continue to see, and people are acknowledging that AEP is differential with regards to being the largest transmission owner operator and the one that really pioneered [ 765 ]. And so a lot of that is a competitive advantage for us around transmission. But I also will say that what we're seeing with the load growth of the 63 gigs across our footprint, generation is also very important.

And that's where we have been very aggressive in leaning into securing turbine slots and putting those turbine slots into the planning cycle. And so we're excited to roll out the updated capital plan on the third quarter call. But I didn't think that I could come out without actually updating on this call, at least the $6 billion. And then because we have mentioned the Piketon project as well as Wyoming, I needed to also at least speak to that $10 billion, which, again, in my prepared remarks, I said was fairly conservative.

Our next question will come from the line of Andrew Weisel with Scotiabank.

Thanks. Good morning, everybody. I can maybe start continuing a little bit on that last one. If you could speak to the timing and pricing of gas turbines.

You keep adding generation to the outlook. It sounds like there's potentially more to come in the near future. Are you looking at simple cycles, CCGTs or both? And given your strong relationships, you're certainly well positioned with suppliers.

How soon could you add incremental units? And what level of pricing are you seeing?

So we're building out what our customers are asking for. So we have a variety of simple cycle projects as well as combined cycle projects across the 11-state footprint. As we talk with our customers and have them continue to lock in what their longer-term expectations are for additional projects and growth of the existing facilities that they have in place, we're in communication with the major turbine suppliers to ensure that we have access to those turbines. As far as what we see sort of going forward, we're most active with Mitsubishi and GE on the supply.

We do have access to turbines going well out into the future. Obviously, the actual pricing of those are under confidentiality agreements. But for me, the important part of this is that we have access to turbines, we're able to get the equipment that we need to serve the load. We are a preferred supplier for these customers because our focus is on getting them interconnected either through a bridging strategy or through ultimate grid connection and expedited generation buildout.

And so I'm excited with where we're at. As we noted earlier, our Q actually continues to grow. We now have 190 gigawatts in our queue of people wanting to interconnect with us, which obviously solidifies our continued growth and what we're trying to do. And I think, again, a big reason for that is, that we are delivering for these customers, and we're coming up with innovative and creative solutions to make sure we get them connected as quickly as possible.

Okay. Great. And then I realize we're at the hour, but 1 more quick one. On the Wyoming fuel cells, Bill, I think you used the term that you're protected, can you discuss that a little bit?

I know you're waiting for the customers to get their work done? And you said you're hoping gets resolved by the end of the second quarter, which is just at the end of next month. Is there a deadline associated with your contract? And what happens if the end of June comes and goes without the customers figuring their side out?

Yes. I'll have Trevor give you a couple of the details here, but this was a fundamental part of this commercial arrangement, was to make sure that our company and our investors were protected on this project. Trevor, maybe you want to give them a little bit of color on this?

Sure, Bill. Yes. So the good thing here, as Bill says, we are protected. And we can -- if everything were to not proceed, we have the ability to put the fuel cells back to the hyperscale at a cost plus, and we've been public about that, it's roughly 10%.

So we're protected on that side. I think we have a deadline of the end of June, and then there is another 6-month period that the hyperscaler could -- if they can't advance discussions by the end of June, they could look to seek another location for that property. And if they can't, by the end of the year, find another property, then we can put those fuel cells to the hyperscaler at 110%.

And that property could be anywhere in the U.S.?

Correct.

Our next question will come from the line of Michael Lonegan with Barclays.

So when you say alternative strategies in obviously, you're already vertically integrated in West Virginia. Just wondering what are your thoughts on doing a [ Genco ] structure there? There's a clear backdrop in the state wanting more gas generation. Is that something you are considering? And what would you say that's within your risk tolerance there?

So we've been studying the Genco model, obviously, in Indiana is a perfect example of what they were able to complete there. We think that's an innovation that would work for us. Obviously, in West Virginia, we just completed the rate case that was in progress for a number of months, and we got a good reasonable outcome there, and we're in close communication with the governor and the energies are in West Virginia. And so we'll stay closely connected to them to determine how best to move forward.

He's very committed to his 50 gigawatts by 2050 vision. And with the more reasonable regulatory outcome that we got there now, we are in deep discussions with him and his team and the regulator there to determine how best to deliver what they want. There is tremendous opportunity in West Virginia. And so that is another major growth opportunity for us in that state.

Then a lot of questions on the financing. You touched upon your equity needs, obviously, Just would you consider selling noncore assets or a sale of a minority interest to finance additional capital or mitigate equity needs? And then if so, what assets could be on the table for potential divestitures?

Yes, Michael, I'm sure you're going to expect this answer, but we wouldn't talk about any kind of M&A and if we were contemplating that. But I would say this that we really like our footprint, we like the states we're in. We indicated that these are very pro-business states. And we're trying to grow this business and not shrink it.

And I think there are alternative forms of financing that we can execute on to fulfill what we need around our growing capital plan without having to sell assets. So I would just leave it at that. .

Our next question will come from the line of Bill Appicelli with UBS.

Most of my questions have been asked. But just as we unpack sort of the magnitude of the EPS growth upside here, you guys are modifying the language to say greater than 9%. I mean how much of this incremental capital should be reflected in earnings in 2030? And then when we think about the $10 billion, is that -- how much of that related to Piton and Wyoming could be sort of fully reflected by 2030 as well?

Yes. So I appreciate the question. And I would say AEP's growth rate certainly is 1 of the highest in the industry. And I think the key point is that the increase in the long-term earnings CAGR to greater than 9% is supported by the $6 billion of incremental capital that we formally added to the plan.

But as we said, it is weighted to the back half of the plan, and that's when we'll see more of the impact to EPS. But we do see other upside. And when you take a look at, for example, the Piketon project, if and when that advances, that's well within the 5-year capital plan. And it needs -- those assets need to be constructed by 2028. And so from that perspective, I think that's where we're saying there's upside and we're being conservative in the capital plan.

Now what I want to do, because we have almost best-in-class growth rate of this 7 to 9, and then we have intimated that we were at in over the 5-year period with the previous plan and now we're greater than 9 with this plan, I always want to be careful that we're under-promising and over-delivering. And again, as you said, that $10 billion is not in that greater than 9% EPS CAGR. But what that ultimately means with regards to financing it and how that cascades through the earnings cycle that we would come out with once we update the plan on the third quarter call.

Okay. All right. No, that's helpful. And then just going back to a comment earlier about the reliability backstop, just to confirm, it sounds like you would be interested in submitting bids for under a bilateral fully contracted structure. Is that what I heard?

So we'll continue to follow the RPG process that's going through the approval process, and we'll assess that when it comes out. And if we have an opportunity to get into that through our unreg business, we'll certainly make that assessment. We would have good potential opportunities for that. But at the end of the day, we have to see what the rules are of the game and figure out if we have something that we believe would be competitive.

Okay. And then just one other one along that same line. The cost allocation that's being proposed is going to be a function of the EDC load forecast. So within your PJM load forecast, you guys feel confident that there's not going to be any revisions to that at this point in terms of tightening for -- as it relates to what PJM is going to need to see for cost allocation?

Yes. I'm confident right now that we're good with where we sit.

Our final question will come from the line of Jeremy Tonet with JPMorgan.

This is actually Ed Kelly on for Jeremy. How are you using grid-enhancing technologies across your T&D network to do more with less and extract capacity by managing peaks better, whether that be through transmission grid management or grid edge intelligence and then using that to perhaps provide customer rebates to reduce rate of bill increases?

So our team is deeply engaged with innovation. We are tied in with a number of the manufacturers and technology developers out there on these types of of technologies and where they make sense. Our team is pursuing implementation of it. But to be very clear, I think that those help fill in some gaps, but we have tremendous need here for new generation and new transmission.

And so our focus is really on both of these -- the three legs of the school, if you will: One, getting new generation connected; two, to getting brand-new transmission built to build out the backbone and deliver the energy and reliability that our customers want. And then the third leg is the variety of of guests and energy efficiency tools and new technologies and AI and the variety of innovations that are coming our way to assess. But with the dramatic need for additional generation, additional transmission that's out there, we have a strong focus on that to make sure that we're executing well for our customers.

Great. And just one remaining question for me. Could you clarify whether the current AEP Texas capital plan supports the contracted loads added in this quarter and last quarter or whether you might need to add more capital to support these added loads?

Yes. There definitely is incremental capital that we would put in the plan. Now I would say when you look at the $78 billion capital plan, recall last fall, we shared a $72 billion capital plan that was really alongside the 28 gigawatts of contracted load outlook. And really, since that time, that contracted load outlook has now grown on an overall basis.

And again, Texas is a big part of that, to 63 gigawatts. Now I will preface this by saying that the capital plan is really not built off of a direct one-for-one relationship between incremental megawatts and capital spend, certain investments are required regardless of the load growth. And so when you look at this, some incremental load can be served by existing system capacity, depending on location, timing and other factors, However, I would say that with the significant increase in contracted load through 2030, it really implies a meaningful upside to our current capital plan. And so that's really not incorporated into the amounts that we put out at this point right now.

This concludes our question-and-answer session. I will now hand the call back over to Bill Fehrman for any closing comments.

Thank you. So we appreciate everyone joining us on today's call. We're very excited about the opportunities ahead at AEP as we continue to advance our long-term strategy. That's driving sustainable growth, enhancing the customer experience and really creating value for shareholders.

Our focus remains on disciplined execution in some of the fastest-growing regions in the country, supported by our strong operational and financial foundation. If there's any follow-up items, please reach out to our IR team with your questions, and we look forward to seeing many of you at the upcoming investor conferences and meetings. This concludes our call. And again, thank you for your continued interest in AEP.

Today's call will be available for replay beginning approximately 2 hours after completion and will run through 11:59 p.m. Eastern Time on Tuesday, May 12, 2026. Callers may access the replay by dialing (800) 770-2030 or 609-800-9909 and enter ID # 8577 followed by the pound key. This concludes today's call. Thank you all for joining. You may now disconnect.