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Introduction & Market Context
American Electric Power (NYSE:NASDAQ:AEP) reported strong first quarter 2025 results, with operating earnings of $1.54 per share, representing a 21% increase from $1.27 per share in the same period last year. The company reaffirmed its 2025 operating earnings guidance of $5.75-$5.95 per share and its long-term growth rate of 6%-8%.
AEP’s presentation highlighted robust load growth driven by data centers and industrial customers, with a 12.3% increase in the commercial sector. The company has positioned itself strategically across high-growth regions, serving 5.6 million customers throughout 11 states with 40,000 transmission miles and 225,000 distribution miles.
As shown in the following overview of AEP’s footprint and key metrics:
Quarterly Performance Highlights
For Q1 2025, AEP delivered GAAP earnings of $1.50 per share ($800 million) and operating earnings of $1.54 per share ($823 million). This represents a significant improvement over Q1 2024 operating earnings of $1.27 per share, though GAAP earnings decreased from $1.91 per share in the prior year period.
The strong operating performance was driven by rate changes, weather impacts, and normalized sales growth across AEP’s business segments. The company’s vertically integrated utilities contributed $0.66 per share, transmission and distribution utilities added $0.36 per share, and AEP Transmission Holdco delivered $0.44 per share.
The following chart illustrates AEP’s Q1 2025 financial performance compared to Q1 2024:
A detailed breakdown of operating earnings by segment shows the various factors contributing to the year-over-year improvement:
Load Growth and Customer Demand
One of the most compelling aspects of AEP’s presentation was the significant load growth projected through 2027. The company forecasts 8%-9% annual retail load growth from 2025-2027, which would add more than 52 million MWh to retail sales. This growth is primarily driven by economic development, particularly in the commercial sector.
AEP’s retail sales mix is expected to shift significantly by 2027, with commercial customers growing from 34% to 45% of total sales, while residential and industrial segments decrease proportionally. Total (EPA:TTEF) retail sales are projected to increase from 182,000 GWh to 234,000 GWh by 2027.
The following chart illustrates this projected growth trajectory:
This growth is supported by specific customer investments across AEP’s service territory. The company has nearly 180 GW in the interconnection queue and 20+ GW in its load forecast, backed by signed agreements. Data centers represent the largest portion (13 GW) of this growth, followed by industrial (6 GW) and other sectors (2 GW).
Major investments highlighted in the presentation include AWS data centers in New Carlisle, IN (~2.2 GW) and Columbus (WA:CLC), OH area (~2.1 GW), Google (NASDAQ:GOOGL) data centers in Columbus, OH area (~1.2 GW), Tesla (NASDAQ:TSLA)’s Lithium Hydroxide project in Robstown, TX (~50 MW), Cheniere LNG Expansion in Corpus Christi, TX (~850 MW), and Nucor (NYSE:NUE) Steel manufacturing in Apple (NASDAQ:AAPL) Grove, WV (~375 MW).
As shown in this map of major customer investments across AEP’s territory:
Capital Investment and Financing Strategy
AEP has outlined an ambitious $54 billion capital investment plan for 2025-2029, with 100% allocated to regulated businesses. The company has de-risked its financing plan by completing all anticipated equity needs for this period, including a pending $2.82 billion minority interest transmission transaction and a $2.3 billion equity sale.
The financing plan includes $41.5 billion in cash from operations, the equity and minority interest proceeds, and $21.2 billion in future debt issuances (net of maturities), offset by $13.4 billion in dividends and other investing activities.
The following chart details AEP’s de-risked financing plan for 2025-2029:
Of the $54 billion capital forecast, 63% ($34 billion) is allocated to wires (transmission and distribution), while 26% ($14 billion) is directed toward regulated new generation, including renewables. This investment strategy is expected to drive a rate base CAGR of approximately 8%.
The detailed breakdown of capital allocation is illustrated in this chart:
Regulatory Achievements
AEP highlighted several recent regulatory successes that support its growth strategy. These include PJM awarding AEP affiliates with $1.7 billion in transmission upgrades, approval of the ERCOT Permian Basin 765 kV transmission project, and settlements for system resiliency plans in Texas.
The company also secured regulatory approvals for cost recovery, including Kentucky Power’s appeal to recover $14 million in annual transmission expenses and Public Service Company of Oklahoma’s $554 million fuel cost recovery. Additionally, large load tariffs were approved in Indiana, Kentucky, and West Virginia, enabling AEP to better serve data center and industrial customers.
The company’s regulated earned ROE was 9.3% for the twelve months ended March 31, 2025, reflecting solid returns across its operating companies.
Forward-Looking Statements
Looking ahead, AEP remains confident in its ability to deliver long-term shareholder value. The company targets a 10%-12% total shareholder return, comprising 6%-8% EPS growth and a dividend yield of approximately 4%.
AEP’s FFO/Debt ratio stood at 13.2% as of March 31, 2025, slightly below its targeted range of 14%-15%. The company aims to strengthen this metric through its operational performance and strategic initiatives.
The load growth forecast of 8%-9% annually for 2025-2027 provides a strong foundation for AEP’s financial outlook. This growth, combined with the $54 billion capital investment plan and potential for up to $10 billion in incremental investments, positions the company for sustained earnings growth in line with its long-term targets.
As illustrated in this chart showing how load growth supports AEP’s financial strength:
AEP’s Q1 2025 presentation demonstrates the company’s strong positioning in high-growth regions, with significant opportunities driven by data center and industrial demand. With its de-risked financing plan, robust capital investment strategy, and favorable regulatory outcomes, AEP appears well-positioned to deliver on its financial targets and create long-term shareholder value.
Full presentation:
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