AEP Q2 2025 slides: 14% earnings growth, raises capital plan to $70 billion

Introduction & Market Context

American Electric Power (NYSE:NASDAQ:AEP) released its second quarter 2025 earnings presentation on July 30, highlighting strong financial performance and significant growth in customer demand. The utility giant reported 14% year-over-year growth in operating earnings per share, supported by robust load growth particularly from data centers. AEP shares responded positively in premarket trading, rising 1.4% to $110.75, extending gains after closing at $109.22 the previous day.

The company, which operates the largest transmission network in the U.S. spanning 11 states, continues to benefit from its strategic positioning in high-growth regions, with particular strength in its data center and industrial customer segments.

Quarterly Performance Highlights

AEP reported second quarter 2025 GAAP earnings per share of $2.29 and operating earnings of $1.43, representing a 14% increase from the $1.25 operating EPS recorded in Q2 2024. Year-to-date operating earnings reached $2.98 per share, an 18% improvement over the comparable period in 2024.

As shown in the following quarterly earnings breakdown:

Revenue grew by 7%, increasing from $2.7 billion in Q2 2024 to $2.9 billion in Q2 2025, while peak demand surged by 12%, rising from 33.5 GW to 37.6 GW over the same period. This performance continues the momentum seen in Q1 2025, when AEP reported a 9.22% earnings beat with EPS of $1.54.

The earnings growth was driven by several factors, as illustrated in this segment breakdown:

Rate changes contributed $0.10 to the year-over-year EPS increase, while normalized sales added $0.07. These positive factors were partially offset by unfavorable weather impacts of $0.06. By segment, Vertically Integrated Utilities contributed $0.56 per share, Transmission and Distribution Utilities added $0.42, AEP Transmission Holdco provided $0.42, and Generation & Marketing delivered $0.17, while Corporate and Other reduced earnings by $0.14 per share.

Load Growth and Capital Investment

AEP highlighted unprecedented customer demand growth as a key driver of its financial performance and future investment plans. The company has 24 GW of incremental load growth through 2029 backed by signed customer financial agreements, with data centers accounting for 18 GW and industrial customers representing the remaining 6 GW.

The following chart illustrates the company’s revenue and demand growth:

This significant load growth is supporting AEP’s expanded capital investment plans. The company now expects to announce a new five-year capital plan of approximately $70 billion, a substantial increase from its current $54 billion plan for 2025-2029. This expanded investment is aimed at supporting the projected load growth and strengthening AEP’s transmission and distribution infrastructure.

Financial Position and Outlook

AEP strengthened its balance sheet during the quarter by closing a $2.82 billion minority interest transmission transaction. The company maintains a strong liquidity position with $5.627 billion in net available liquidity as of June 30, 2025, including $5 billion in revolving credit facilities maturing in March 2029.

The company’s financial metrics are detailed in the following slide:

AEP’s credit ratings remain stable with Moody’s (Baa2/Stable), S&P (BBB/Stable), and Fitch (BBB/Stable). The adjusted FFO/Debt ratio stands at 13.2%, while total debt/total capitalization is 59.8%. S&P’s favorable outlook revision to stable has enhanced AEP’s financial flexibility to support its ambitious capital growth plans.

Based on the strong first-half performance, AEP is now guiding to the upper half of its 2025 operating earnings guidance range of $5.75-$5.95 per share. This represents a refinement from the company’s Q1 2025 position, when it simply reaffirmed the full-year guidance range.

Strategic Initiatives

AEP reported several regulatory and legislative successes during the quarter that support its growth strategy. These include the passage of bills to reduce regulatory lag in Ohio (HB 15), Oklahoma (SB 998), and Texas (HB 5247), as well as approvals for fuel and purchase power cost recovery in SWEPCO Texas and for customer contracts utilizing fuel cell technology in AEP Ohio.

The company’s strategic focus on high-growth regions is illustrated in this footprint map:

AEP’s extensive transmission network (40,000 miles) and distribution system (225,000 miles serving 5.6 million customers) position it well to capitalize on the significant load growth anticipated through the end of the decade. The company targets a total shareholder return of approximately 10-12%, comprising 6-8% EPS growth and a 55-65% dividend payout ratio.

In its closing remarks, AEP emphasized its continued execution of strategic initiatives and its focus on capitalizing on what it describes as "generational growth" opportunities:

With its strong Q2 performance, expanded capital investment plans, and significant load growth projections, AEP appears well-positioned to deliver on its financial targets while supporting the increasing power demands of its service territories, particularly from data centers and industrial customers.

Full presentation:

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