American Electric Power
Aep Solar

AEP Shifting $1.5B in Capital to Transmission, Will Look to Sell Unregulated Renewables

Feb. 25, 2022
The company’s leaders have raised their long-term profit growth target to between 6% and 7%.

American Electric Power’s executives this year will launch a process to sell some or all of the company’s unregulated contracted wind and solar energy assets and redirect capital previously allocated to that business to their transmission assets.

The plan to unload up to 1,600MW of capacity will add $1.5 billion in capital spending to the transmission business between now and 2026, growing its share of Columbus-based AEP’s total $38 billion capex plan to $14.4 billion. Those numbers are likely to grow further once the company completes the sale of its Kentucky subsidiary for more than $2.8 billion.

“Our transformation strategy is working, and the investments we are making will continue to support our solid earnings growth and results,” CEO Nick Akins told analysts on a Feb. 24 conference call after announcing fourth-quarter earnings that showed load growth for the year of 2.1%, the company’s strongest number in more than a decade. “AEP stands poised to make great headway in 2022 and continue to capitalize on this momentum.”

For the fourth quarter, AEP reported net income of $539 million on $4.1 billion in revenue. Those numbers were up from $435 million and $3.6 billion, respectively, in the last three months of 2020. Operating profits rose to $496 million from $433 million. Akins and CFO Julie Sloat said they expect AEP’s load growth in 2022 to be only slightly slower than last year’s and added that, between that and their confidence in investments like those in transmission and regulated renewables, they are lifting their long-term earnings growth target to a range of 6% to 7% from the previous 5% to 7%.

Investments in regulated renewables will play a big role in that: AEP plans to put to work $8.2 billion in the next five years and sees a total renewables opportunity of 16 GW by 2030. The 2022-2026 capital plan calls for the addition of nearly 4.7 GW of wind energy and more than 1.1 GW of solar across AEP’s portfolio.

Shares of AEP (Ticker: AEP) rose more than 2% Feb. 24 to about $86.50. Over the past six months, they are down slightly.

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