Ladies and gentlemen, thank you for standing by. Welcome to the American Electric Power Fourth Quarter 2019 Earnings Conference Call. At this point, all participant lines are in a listen-only mode. Later we will conduct a question-and-answer session. Instructions will be given at that time. [Operator Instructions] As a reminder, this conference is being recorded.I'd now like to turn the call now over to host Darcy Reese. Please go ahead.

Thank you, Stephanie. Good morning, everyone and welcome to the fourth quarter 2019 earnings call for American Electric Power. Thank you for taking the time today to join us. Our earnings release, presentation slides and related financial information are available on our website at aep.com.Today we will be making forward-looking statements during the call. There are many factors that may cause future results to differ materially from these statements. Please refer to our SEC filings for a discussion of these factors. Our presentation also includes references to non-GAAP financial information. Please refer to the reconciliation of the applicable GAAP measures provided in the appendix of today's presentation.Joining me this morning for opening remarks are Nick Akins, our Chairman, President and Chief Executive Officer; and Brian Tierney, our Chief Financial Officer. We will take your questions following their remarks.I will now turn the call over to Nick.

Okay. Thanks, Darcy. Good morning, everyone and thank you for joining us today for AEPs fourth quarter 2019 earnings call. I'll certainly spend some time reporting on the final quarter of the year and how the year has concluded, but there is no question AEP has hit the ground running in 2020. I know I live in Columbus, Ohio and I do root for the Buckeyes if they're not playing LSU, but I have to use an LSU analogy given their victory in the college football national championship.The way in which the LSU office executed during the season is the way I feel about our AEP team, whether it's our emphasis on customer experience, regulatory activity, major projects and initiatives, contracted and regulated to renewables, capital allocation, O&M optimization, and our focus on culture, innovation and operational excellence. These are just a few of the plays in the playbook that continue to be executed flawlessly with talent that our team possesses. The results of 2019 indicate that and the success so far in 2020 of major initiatives that I'll cover today indicate that as well.But first, let's discuss 2019, 2019 was a great year for the company. We delivered operating earnings of $0.60 per share for the quarter, bringing our operating earnings for 2019 to $4.24 per share, which was at the top end of our revised guidance range of $4.14 to $4.24 per share. As we showed at the last EEI Financial Conference, AEP has a habit of hitting the upper half of the guidance range, if not exceeding it, and this year has been no exception. As we have said repeatedly, we would be disappointed in not achieving the same track record in the future.Brian will cover GAAP and operating earnings later in today's presentation. Additionally, for 2019,…

So thank you, Nick, I'll ask the participants to listen carefully because it's a little bit subtle. This is in fact me rocking on. So good morning, everyone, I'll take us through the fourth quarter and full year financial results, focusing primarily on year-to-date, provide some insight on load and the economy, review our balance sheet and liquidity and finish with a review of our outlook for 2020.Let's start briefly on Slide 6, which shows the comparison of GAAP operating earnings for the quarter and year-to-date periods. GAAP earnings for the fourth quarter were $0.31 per share, compared to $0.74 in 2018. GAAP earnings for the year were $3.89 per share, compared to $3.90 per share in 2018. There was a reconciliation of GAAP operating earnings in the appendix.We have consistently provided value for our shareholders outperforming the S&P 500 Electric Utilities Index in total shareholder return this year, and both the S&P 500 and Electric Utilities Index over the three and five year periods respectively.Let's turn to Slide 5, in the fourth quarter operating earnings were $0.60 per share or $294 million compared to $0.72 per share or $354 million in 2018. The detail by segment is shown in the boxes on the chart. But the change in our regulated businesses was driven by higher planned O&M and depreciation more than offsetting the return on incremental investment.Generation & Marketing was down $0.07 from last year, primarily driven by the expected timing of taxes. This segment reflects the growth in the renewables business and favorable retail margins, which offset lower capacity and energy margins in the generation business.Corporate and Other was up $0.02, primarily due to lower income taxes from the expected timing of consolidated tax adjustments, partially offset by higher state taxes.Let's turn to Slide 8, and review our…

[Operator Instructions] Our first question comes from Ali Agha with STRH. Please go ahead.

Good morning, Ali.

Good morning. Thank you. First question, I just wanted to confirm that the 5% to 7% growth rate is that still based off of the original midpoint of 2018.

Yes, yes, it is. Yeah.

Okay. And then in the past I know, Nick and Brian, you've talked about – when you don't want the 5 to 7, you've talked about hitting the high end of the range. I think today I heard you say upper half. So just wanted to be clear, is the is the aspiration upper half or is it the high end which I've heard you say in the past as well?

Yeah. So we say the upper half as far as a generalization, obviously, and as we go forward there's no question. I mean, we'll be disappointed with – it's pretty much the same thing to us.

Okay, and then, Nick, can you give us your latest thoughts on Kentucky Power and where that fits in the portfolio? Might that be a source of funding for North Central Wind, just how are you thinking about it currently?

Well, certainly, we're in a position now to where we can – we have uses for – certainly for capital to invest, we're able to look at our entire portfolio and determine, okay, is there is there an opportunity for rotations? Is there an opportunity for sale of assets, those types of things? But certainly, Kentucky remains a part of our portfolio. Obviously, as we look at any future positive investment we're making, I think it's probably safe to say – and you probably see from the FFO, debt and other credit metrics that they were fully utilizing our balance sheet. So we're moving into a stage where we have to think about optimization from a ROE standpoint for investors and that forces us to look at sources and uses. So no, I'm not commenting on Kentucky in particular, I think it's important to say that now we're a fully regulated utility. We can look at investments across the board and see what the best approach is. And I think that's what we're certainly alluding to as you go through this process. And really with North Central by the time the investment is needed, we have time to go through that process.

I got you, last question Brian then, looking at your 2020 load growth projections. What's causing residential to fall off more significantly in '20 versus the trend we saw in '19?

It's just a normal business cycle. In that way we see residential and commercial generally follow industrial and now industrial is starting to come out of that and residential and commercial just haven't followed yet. It's really just a normal business cycle.

I got you, thank you.

Thank you, Ali.

Our next question comes from Andrew Weisel with Scotiabank. Please go ahead.

Good morning Andrew.

Hey, good morning. My first question is on dividends. The 2020 increase was 4.5% as far as guidance that it's growing approximately in line with the EPS growth at a high end really at about 7% range. So can you just remind us what the latest thinking is on what to expect going forward and if 6% would be a good bogey?

Yeah, it's unchanged. We fully expect our dividend growth to be commensurate with earnings growth. And as you know, we've talked about this – the 4.5% this year and then the previous year is 8.2% or something like that. So it averages out to 6%. We focus on nominally the 6%. So you can expect that in the future.

Okay, great, just wanted to affirm that. The next question, forgive me if I missed it, but can you describe what you're expecting around FERC approved transmission ROEs for your subs and would you expect your PBM and SPP allowed ROEs to be within the range of reasonableness?

Yeah, so obviously, we have that case in the northeast that has brought up at least some issues and certainly that's been evaluated, a lot of parties have filed to review that outcome of the MISO case and that was really the one that I think sort of send a message. Previously the Northeast there is a mechanism for four different measures and they went to two different measures, with MISO and I think it may be had some unintended consequences hopefully, but certainly the industry has responded, AEP has responded as far as Transource. We have settlements in our – in the east and the west. And in the East, we have a stay out provision, in the west we do not. So they're – but it wouldn't make any sense for filings to occur while the FERC is continuing to review the outcome of the MISO rehearing that's occurring. Yeah, so the stay out was in SPP. So just make sure of that, but nevertheless, right now, though, our rates, we view them as consistent with that realm of reasonableness. And we continue to see it that way. And I think, as we get through the rehearing at FERC, I think there's certainly an opportunity for us to ensure that that's the case going forward.

Any sense of when we might have better clarity on that. I know it's a tough process to predict everything if FERC is to predict in terms of timing.

Yeah, you have to ask that question. But I think that the – certainly, I think there's a necessity to get it resolved quickly because it's brought a lot of unintended risk into the investment in transmission. And I think it's important to get it rectified earlier. And as you might recall, before they start looking at actually our path project as a proxy for evaluation of when ongoing view should look like and we view that as promising and certainly, they have reacted reasonably quickly from that perspective and I think they've recognized that the market is truly watching in terms of what FERC's philosophy is relative to transmission investment, which I believe is unchanged. And actually, I think, at least what I've heard from the commissioners and public forums is that the transmission continues to be an investment that's required for optimization of the grid and historically they've incentivized that I fully expect them to continue to do that.

Great, that's very helpful. One last quick one, I know the Texas rate case settlement doesn't directly impact the North Central Wind proposal, but did that come up at all in your discussions? Did the interveners give any indication about how they're thinking about it?

No, I think they're being dealt with completely separately. AEP Texas is the case that is a base case and then actually the wind project is in the SWEPCO jurisdiction associated with Texas. So it's still integrated, regulated in that part of Texas. And they're used to dealing with wind request. It's happened before. There's a lot of precedence for review of the wind projects. And certainly we were building upon what we learned from the previous wind catcher activity and found something that we felt like addressed the concerns during that period of time, but also dealt with it in a way that's consistent with the integrated resource planning processes. And something that's fairly innocuous in terms of review by the Commission. So we certainly – as I said earlier, I think Oklahoma and Arkansas are well on their way. Louisiana and Texas are certainly in the process and we would – certainly are hopeful that they'll continue to see the benefits of that project as well and get it done very quickly.

Right, no, I know there's separate jurisdictions just asked because I think there's a lot of overlapping interveners, but fair enough. I appreciate the comment. Thank you

No, there's not really. I mean, the interveners may – the interveners themselves, they may be the same, but the issues are very different.

Understood, thanks.

Yeah.

Our next question comes from Praful Mehta with Citigroup. Please go ahead.

Good morning, Praful.

Thanks so much. Hi, good morning, guys. Congrats on a good quarter and a good year.

Thanks.

So just wanted to clarify again on the equity point and the credit point first, it was helpful to get the overall perspective on how you look at the portfolio and the credit clearly, at this point your balance sheet is being utilized well. So if North Central were to move forward, is the understanding that if there isn't any portfolio optimization opportunity that some equity would be issued at some point? Just want to clarify the timing of that and any further thoughts on that credit and equity point?

Yeah. So I'll turn it over to Brian in a second. But certainly, our view is that we sort of presented a base case of – without any rotation or any of those kinds of activities occurring we would expect equity be issued in that 50 to two thirds range. So I think that's at least the going in position and certainly we're saying the project is entirely 100% incremental to our existing capital forecast. So you would expect equity, but if there's any kind of capital rotation or sale of assets that mitigates the need for any portion or all of the equity, then certainly that'll be a part of the process. Brian?

Yeah. The only additional color I'd add to that Praful is we think that we could time any equity needs consistently with when the projects for North Central Wind would come online, a small portion at the end of 2020 and a much more significant portion at the end of '21.

Got it, okay. So the earnings and the dilution probably match that helps kind of with the earnings profile then?

That's right. We think we could time them very closely.

Okay, perfect. And then just secondly, on the renewal opportunities, in which you highlight – is this more utility side renewables or is it more on the unregulated side or both, if you can just give a little bit more color and also, how big do you see the opportunity to be? Because clearly, everybody seems to be investing more on that side and there is a significant opportunity. So if you can scale that for us, that'll be helpful too?

Yeah, so it's on both sides, both sides of the ledger and obviously we still have integrated regulated jurisdictions and the one South Bend project in partnership with Notre Dame that's on the regulated Indiana, Michigan Power and then also there's projects that others have done in our regulated footprint and as well on the contracted side we continue to advance that around the country in various forms, but not just tied to wind power solar, but other projects as well. And we're sort of a unique I guess, from the contracted business. We cover about every quadrant of the business relationship that customers would expect in the – and really are on site partners our AEP Energy or AEP Retail, all those come together to really provide sort of all-in solution for customers.So we see the growth occurring on both sides. I think with – certainly north wind – North Central is an example, obviously, the way the integrated resource plans of various jurisdictions are moving forward. I know at APCo there's a solar requirement in Virginia and then there's other opportunities for us to do it on the regulated side, as well as the unregulated. And keep in mind, we are contracted business, we limited 10% of the business because of tax reasons. And so we want the regulated side to grow to enable our contracted business to grow as well. And this is a nice balance for us, and we'll continue doing that. And certainly, I would say it's moving very much in both directions. And if you look at post North Central and which now after the purchase of the Central Wind assets, we're probably, I mean, roughly half and half. So I think it's a great diverse solution.

Got it, that's super helpful. Given the size of your footprint and as you've said, you have opportunities on both sides. Do you see that as helping you achieve that higher end or upper end of the seven or even getting beyond that? I'm just trying to again dimension how big the opportunity could be given you have it on really both sides given your footprint.

Yeah, I think that's why we said upper half because there's so many opportunities out there for us. And for our ability to continue to grow, certainly, we're going to have to continue to feed the beast in a way that continues that 5% to 7% growth trajectory. But as we said before, with all the projects that we know that are out there with the opportunities in front of us, and you can look at our integrated resource plan on the regulated side and see what's in front of us. And you can certainly see, I think there was a report recently of AEP and the trans – just the generation transformation alone, which drives the renewable piece of it, along with some natural gas. It's a real opportunity for AEP to continue to enhance that growth pattern, so really the fundamentals are there. It's a matter of execution.

Got it, super helpful, guys. Thanks so much.

[Operator Instructions] Our next question comes from Sophie Karp with KeyBanc. Please go ahead.

Good morning, Sophie.

Hi, good morning, guys.

Good morning.

Thank you for taking my question. So on North Central Wind, I guess, you've had pretty constructive settlements in a couple of jurisdictions by now, Texas being more or less the only one where you still engaged in an inactive regulatory process. I'm just curious at what point do you think you have a critical mass to officially call it a go input in the plan?

Yeah, we've got that. Once the – if we get approval from the Oklahoma Commission, maybe today, and then we get approval from Arkansas, we have the critical mass for the project to move forward. The question is at what scale? So with those two projects together, you're already at 846 megawatts of the 1,485 and it's already a 1.1 billion investment and if you move forward with Louisiana for example – and Arkansas remember has the flex up. So the flex up means it'll take the additional capacity, the wind power capacity, if it's not taken by another jurisdiction. So if Arkansas flexes up and then Louisiana approves with a flex up, then you got the 1,485 megawatts of the whole project. Now, obviously, if Texas sees its way to be a part of the project as well, which I believe they should then each of the states will participate in the full project. So right now I'd say, with Oklahoma and Arkansas, settlements are approved the project is moving forward, that's a given. Then the question becomes, okay, what scale? And that'll be determined by the other two jurisdictions and the amount of flex up that's enabled in those settlements. So I'd say you should be happy with the progress right now and I think – I also think you should be optimistic about this project being fully vetted and fully approved.

Terrific, terrific, thank you for clarifying this and then as a follow up to the same kind of line of thinking, right, it seems like this playbook is working really better than maybe some of the prior projects you're looking at. Is that something that you can use over and over again, as you scale up your investments in renewables maybe on the regulated side?

Absolutely, I think there's a pattern here and that's why I talked so much about the generation transformation that's occurring. We already have – we're retiring generation, older generation. And that's coal and natural gas and certainly replacing with new resources that provide a real opportunity and that opportunity is really driven by reducing costs for consumers and this thing – the North Central is a perfect representation of it overall if the entire project, 2 billion in investment, but over 3 billion in savings to customers and that's one of the key areas for the utility in the future is to be able to deploy capital to reduce customers’ bills and that's what we're doing and that's what many of these projects allow us to do.

Thank you. I'll jump back into the queue.

Thank you.

Our next question comes from [indiscernible]. Please go ahead,

Nice.

Hey, Nick. Congratulations on LSU.

Yeah, put that in there for you.

I wanted to – I had a clarification for you, just when you guys talk about your pro forma for a North Central Wind, is that putting it the high end of 5 to 7 or does it put a step up in earnings and then you grow off of that?

It'll be a step up. It'll be a step up. Step change when North Central gets in, but we'll continue with the 5% to 7%.

Okay, all right, that's helpful. Thank you very much. I appreciate it.

[Operator Instructions] No further questions at this time.

Thank you for joining us on today's call. As always, the IR team will be available to answer any additional questions you may have. Stephanie, would you please give the replay information?

Thank you. Ladies and gentlemen, this conference will be available for replay after 11:15am Eastern today, through midnight February 27. You may access the AT&T teleconference replay system at any time by dialing 1-866-207-1041 and entering access code 7223769. International participants may dial 402-970-08247. Those numbers again are 1-866-207-1041and for international 402-970-0847, access code 7223769.That does conclude our conference for today. Thank you for your participation and for using AT&T teleconference. You may now disconnect.