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2Q13 Earnings Release Presentation
July 25, 2013
2
“Safe Harbor” Statement under the Private Securities Litigation Reform Act of 1995
Investor Relations Contacts
Bette Jo RozsaManaging DirectorInvestor Relations
Julie SherwoodDirector
Investor Relations614-716-2663
Sara MaciochAnalyst
Investor Relations614-716-2835
This presentation contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934. Although AEP and each of itsRegistrant Subsidiaries believe that their expectations are based on reasonable assumptions, any such statements may be influenced by factors that could cause actualoutcomes and results to be materially different from those projected. Among the factors that could cause actual results to differ materially from those in the forward-looking statements are: the economic climate and growth in, or contraction within, our service territory and changes in market demand and demographic patterns in ourservice territory, inflationary or deflationary interest rate trends, volatility in the financial markets, particularly developments affecting the availability of capital onreasonable terms and developments impairing our ability to finance new capital projects and refinance existing debt at attractive rates, the availability and cost of funds tofinance working capital and capital needs, particularly during periods when the time lag between incurring costs and recovery is long and the costs are material, electricload, customer growth and the impact of retail competition, particularly in Ohio, weather conditions, including storms and drought conditions, and our ability to recoversignificant storm restoration costs through applicable rate mechanisms, available sources and costs of, and transportation for, fuels and the creditworthiness andperformance of fuel suppliers and transporters, availability of necessary generating capacity and the performance of our generating plants, our ability to recoverincreases in fuel and other energy costs through regulated or competitive electric rates, our ability to build or acquire generating capacity, and transmission line facilities(including our ability to obtain any necessary regulatory approvals and permits) when needed at acceptable prices and terms and to recover those costs (including thecosts of projects that are cancelled) through applicable rate cases or competitive rates, new legislation, litigation and government regulation including oversight of nucleargeneration, energy commodity trading and new or heightened requirements for reduced emissions of sulfur, nitrogen, mercury, CO2, soot or particulate matter and othersubstances or additional regulation of fly ash and similar combustion products that could impact the continued operation and cost recovery of our plants and relatedassets, evolving public perception of the risks associated with fuels used before, during and after the generation of electricity, including nuclear fuel, a reduction in thefederal statutory tax rate could result in an accelerated return of deferred federal income taxes to customers, timing and resolution of pending and future rate cases,negotiations and other regulatory decisions including rate or other recovery of new investments in generation, distribution and transmission service and environmentalcompliance, resolution of litigation, our ability to constrain operation and maintenance costs, our ability to develop and execute a strategy based on a view regardingprices of electricity and other energy-related commodities, prices and demand for power that we generate and sell at wholesale, changes in technology, particularly withrespect to new, developing or alternative sources of generation, our ability to recover through rates or market prices any remaining unrecovered investment in generatingunits that may be retired before the end of their previously projected useful lives, volatility and changes in markets for electricity, coal, and other energy-relatedcommodities, particularly changes in the price of natural gas, changes in utility regulation, including the implementation of ESPs and the transition to market and expectedlegal separation for generation in Ohio and the allocation of costs within regional transmission organizations, including PJM and SPP, our ability to successfully managenegotiations with stakeholders and obtain regulatory approval to terminate the Interconnection Agreement, changes in the creditworthiness of the counterparties withwhom we have contractual arrangements, including participants in the energy trading market, actions of rating agencies, including changes in the ratings of our debt, theimpact of volatility in the capital markets on the value of the investments held by our pension, other postretirement benefit plans, captive insurance entity and nucleardecommissioning trust and the impact on future funding requirements, accounting pronouncements periodically issued by accounting standard-setting bodies and otherrisks and unforeseen events, including wars, the effects of terrorism (including increased security costs), embargoes, cyber security threats and other catastrophic events.
3
Company Highlights
$0.69$0.75$0.73
$0.77
2013 2012
GAAP EPS
OPERATINGEPS
Refer to appendix for reconciliations between GAAP and Operating EPS
2nd Quarter
YTD
$1.44$1.55$1.53 $1.57
2013 2012
GAAP EPS
OPERATINGEPS
Earnings Update Delivered GAAP and operating earnings of $0.69 and
$0.73 per share, respectively, for the second quarter and $1.44 and $1.53 per share, respectively, for the six month YTD period
Reaffirming 2013 operating earnings range of $3.05 -$3.25 per share
Regulatory Update Asset Transfers
Indiana Cook Plant Life Cycle Management Order
SWEPCO Texas Rate Case
Environmental Update President Obama’s speech in June 2013
Flint Creek scrubber approved by Arkansas PSC
Expected retirement of Muskingum River Unit 5
Financial Update Committed to delivering 4-6% earnings growth
Continuous improvement initiatives
Twelve Months Ended 06/30/13 Pro-forma* Earned ROEs
* pro-forma adjusts GAAP results by eliminating any material nonrecurring items and is not weather normalized
Delivered Strong Regulated Results
4Regulated operations ROE of 10.2% as of June 30, 2013
Capacity Mix Shift & Emissions Reductions
5AEP transforming fleet in response to regulation and market conditions
AEP Coal and Natural Gas Capacity AEP Emissions Reductions
Existing regulations and market conditions drive a 64% increase in gas capacity and a 27% decrease in coal capacity by 2016
AEP fleet expected to meet President’s 17% reduction target for CO2 five years sooner and without additional regulation
6
2Q13 Performance DriversSecond Quarter Reconciliation
2Q13 Performance
Ohio transition items include reduced CRES capacity reimbursements and a prior year reversal of a fuel provision
O&M expense, net of offsets, increased $39M primarily due to plant maintenance outages and increased storm restoration expenses
Weather was unfavorable by $28M vs. prior year, favorable $18M vs. normal
Other unfavorable primarily due to reduced grain and coal exports at AEP River Operations
AFUDC unfavorable $21M primarily due to Turk plant in service December 2012
Regulated retail load down $18M
Transmission Operations favorable $10M
Favorable interest income $48M
Rate Changes, net of offsets, of $105M from multiple jurisdictions
Operating Earnings
EPS ($ in millions)
2Q12 0.77$ $370Ohio Transition Items (0.09)$ O&M, net of offsets (0.05)$ Weather (0.04)$ Other (0.03)$ AFUDC (0.03)$ Regulated Retail Load (0.02)$ Transmission Operations 0.02$ Interest Income 0.06$ Rate Changes 0.14$ 2Q13 0.73$ $357EPS Based on 486MM shares in 2Q13, 485MM in 2Q12
7
YTD 2013 Performance DriversJune YTD Reconciliation
June YTD 2013 Performance
Ohio transition items include reduced CRES capacity reimbursements, prior year reversal of a fuel provision, prior year reversal of a regulatory obligation and customer switching and capacity deferral. As of June 2013, 56% of total Ohio load switched
O&M expense net of offsets increased $55M primarily due to plant maintenance outages and increased storm restoration expenses
AEP River Operations unfavorable due to reduced grain and coal exports and low water conditions
Effective tax rate of 35.6% in 2013 vs. 32.9% in 2012
AFUDC unfavorable $40M primarily due to Turk plant in service December 2012
Regulated retail load down $15M
Transmission Operations favorable $14M
Favorable interest income $48M
Weather was favorable by $50M vs. prior year, favorable $28M vs. normal
Rate Changes net of offsets of $156M from multiple operating jurisdictions
Reaffirming 2013 operating earnings guidance of $3.05 - $3.25 per share
Operating Earnings
EPS ($ in millions)
2012 1.57$ $759Ohio Transition Items (0.20)$ O&M, net of offsets (0.07)$ AEP River Operations (0.05)$ Effective Tax Rate (0.05)$ AFUDC (0.05)$ Regulated Retail Load (0.02)$ Other 0.03$ Transmission Operations 0.03$ Interest Income 0.06$ Weather 0.07$ Rate Changes 0.21$ 2013 1.53$ $744EPS Based on 486MM shares in YTD13, 484MM in YTD12
8Load negatively impacts earnings by $0.02 vs. last year
-1.9%-0.5% -1.1%
1.3%
-0.1%
0.7%
-5%
0%
5%
2Q12 3Q12 4Q12 1Q13 2Q13 YTD13
Normalized Load Trends
1.6%0.1%
-0.4%
0.5%
-2.1%-0.9%
-5%
0%
5%
2Q12 3Q12 4Q12 1Q13 2Q13 YTD13
1.8%
-3.1%-4.2%
-6.0%-5.3%
-5.7%
-10%
-5%
0%
5%
2Q12 3Q12 4Q12 1Q13 2Q13 YTD13
0.6%
-1.2% -2.0% -1.5%
-2.7%-2.1%
-5%
0%
5%
2Q12 3Q12 4Q12 1Q13 2Q13 YTD13
AEP Residential Normalized GWh Sales%Change vs. Prior Year
AEP Commercial Normalized GWh Sales%Change vs. Prior Year
AEP Industrial Normalized GWh Sales%Change vs. Prior Year
AEP Total Normalized GWh Sales%Change vs. Prior Year
Note: Charts reflect connected load and exclude firm wholesale load & Buckeye Power backup load.
9
Industrial Sales Volumes
Industrial sales headwinds
10
Capitalization & Liquidity
Liquidity Summary (06/30/2013)
Credit Statistics
Note: Credit statistics represent the trailing 12 months as of 06/30/2013
Strong balance sheet, solid credit metrics and adequate liquidity
Total Debt / Total Capitalization
74%
82%
88%92%
94%97%
70%
80%
90%
100%
2009 2010 2011 2012 1Q13 2Q13
Qualified Pension Liability Funding
Liquidity Summary(unaudited) Actual($ in millions) Amount MaturityRevolving Credit Facility 1,750$ Jul-17Revolving Credit Facility 1,750 Jun-16Term Credit Facility 1,000 May-15Total Credit Facilities 4,500
PlusCash & Cash Equivalents 117
LessCommercial Paper Outstanding (850) Amount drawn on bank loans (200) Letters of credit issued (120)
Net available Liquidity 3,447$
Actual TargetFFO Interest Coverage 4.5 >3.6xFFO To Total Debt 19.1% 15%- 20%
11
2013 repositioning efforts focused on five areas: Finance & Accounting
Information Technology
Procurement/Supply Chain
Generation
Organizational Effectiveness
2014 continuous improvementinitiatives: Lean Generation at additional plants
Information Technology
Procurement/Supply Chain
Lean Distribution
Other
Continuous Improvement Update
Positions AEP to better serve customers and operate more efficiently
$2,874 $2,937 $2,675 $2,631
$553 $607$636 $754
$0
$500
$1,000
$1,500
$2,000
$2,500
$3,000
$3,500
$4,000
2010A 2011A 2012A 2013E
$ in
mill
ions
Items withEarningsOffsets
Base UtilityO&M
Utility O&M Trend
12
2H2013 Earnings Outlook
On track to deliver 2013 earnings within the guidance range of $3.05 - $3.25
Texas rate case order – rates effective back to January 29, 2013
$52M Parent expense in 4Q12 for retirement of debt
Derecho storm expense in 3Q12 of $27M; Base Utility O&M expected to be flat to 2012
Better river conditions and forecasted harvest than 2H12
Depreciation expense related to Muskingum River Unit 5 impairment
13
Appendix
14
Reconciliation of GAAP to Operating Earnings
2nd Qtr 2nd Qtr 2nd Qtr 2nd Qtr2012 2013 Change 2012 2013 Change
Reported Earnings (GAAP) 362$ 338$ (24)$ 0.75$ 0.69$ (0.06)$
Special Items:Restructuring Program 8 - (8) 0.02 - (0.02) UK Windfall Taxes - (80) (80) - (0.16) (0.16) Muskingum River Plant Unit 5 Impairment - 99 99 - 0.20 0.20 AEP Operating Earnings 370 357 (13) 0.77 0.73 (0.04)
$ millions Earnings Per Share
YTD June YTD June YTD June YTD June2012 2013 Change 2012 2013 Change
Reported Earnings (GAAP) 751$ 701$ (50)$ 1.55$ 1.44$ (0.11)$
Special Items:Restructuring Program 8 5 (3) 0.02 0.01 (0.01) Reversal of Storm Deferral - Virginia - 19 19 - 0.04 0.04 UK Windfall Taxes - (80) (80) - (0.16) (0.16) Muskingum River Plant Unit 5 Impairment - 99 99 - 0.20 0.20 AEP Operating Earnings 759 744 (15) 1.57 1.53 (0.04)
$ millions Earnings Per Share
15
Quarterly Performance Comparison
2012 GAAP 2012 Operating 2013 GAAP 2013 Operating 2012 Volumes Earnings Adjustments Earnings 2013 Volumes Earnings Adjustments Earnings
(GWh) ($ millions) ($ millions) ($ millions) (GWh) ($ millions) ($ millions) ($ millions)
UTILITY OPERATIONS:Gross Margin:
1 East Regulated Integrated Utilities 15,475 711 - 711 15,116 724 - 724 2 Ohio Companies 12,449 568 - 568 11,057 564 - 564 3 West Regulated Integrated Utilities 10,505 367 - 367 10,211 366 - 366 4 Texas Wires 7,808 165 - 165 7,483 164 - 164 5 Off-System Sales 100 - 100 54 - 54 6 Transmission Revenue - 3rd Party 123 - 123 136 - 136 7 Other Operating Revenue 128 - 128 140 - 140
8 Utility Gross Margin 2,162 - 2,162 2,148 - 2,148
9 Operations & Maintenance (769) 13 (756) (814) - (814) 10 Depreciation & Amortization (448) - (448) (429) - (429) 11 Taxes Other than Income Taxes (202) - (202) (213) - (213) 12 Interest Exp & Preferred Dividend (224) - (224) (221) - (221) 13 Other Income & Deductions 31 - 31 (123) 154 31 14 Income Taxes (186) (5) (191) (127) (55) (182) 15 Utility Operations Earnings 364 8 372 221 99 320
16 Transmission Operations 8 - 8 18 - 18
NON-UTILITY OPERATIONS:17 AEP River Operations 3 - 3 (9) - (9) 18 Generation & Marketing (5) - (5) 4 - 4
PARENT & OTHER:19 Parent & Other Earnings (8) - (8) 104 (80) 24
20 EARNINGS 362 8 370 338 19 357
Weighted average no. of shares outstanding: EPS EPS EPS EPS 2012: 485 million 0.75 0.77 0.69 0.73
2013: 486 million
American Electric PowerFinancial Results for 2nd Quarter 2013 Actual vs 2nd Quarter 2012 Actual
16
YTD Performance Comparison
2012 GAAP 2012 Operating 2013 GAAP 2013 Operating 2012 Volumes Earnings Adjustments Earnings 2013 Volumes Earnings Adjustments Earnings
(GWh) ($ millions) ($ millions) ($ millions) (GWh) ($ millions) ($ millions) ($ millions)
UTILITY OPERATIONS:Gross Margin:
1 East Regulated Integrated Utilities 32,493 1,474 - 1,474 33,145 1,580 - 1,580 2 Ohio Companies 25,311 1,186 - 1,186 23,141 1,183 - 1,183 3 West Regulated Integrated Utilities 20,163 655 - 655 19,751 675 - 675 4 Texas Wires 13,965 310 - 310 13,549 312 - 312 5 Off-System Sales 183 - 183 108 - 108 6 Transmission Revenue - 3rd Party 237 - 237 272 - 272 7 Other Operating Revenue 233 - 233 258 - 258
8 Utility Gross Margin 4,278 - 4,278 4,388 - 4,388
9 Operations & Maintenance (1,526) 13 (1,513) (1,693) 37 (1,656) 10 Depreciation & Amortization (860) - (860) (835) - (835) 11 Taxes Other than Income Taxes (413) - (413) (422) - (422) 12 Interest Exp & Preferred Dividend (441) - (441) (447) - (447) 13 Other Income & Deductions 74 - 74 (107) 154 47 14 Income Taxes (365) (5) (370) (315) (68) (383) 15 Utility Operations Earnings 747 8 755 569 123 692
16 Transmission Operations 17 - 17 31 - 31
NON-UTILITY OPERATIONS:17 AEP River Operations 12 - 12 (11) - (11) 18 Generation & Marketing (6) - (6) 11 - 11
PARENT & OTHER:19 Parent & Other Earnings (19) - (19) 101 (80) 21
20 EARNINGS 751 8 759 701 43 744
Weighted average no. of shares outstanding: EPS EPS EPS EPS 2012: 484 million 1.55 1.57 1.44 1.53
2013: 486 million
American Electric PowerFinancial Results for YTD June 2013 Actual vs YTD June 2012 Actual
17
Detailed Operating Earnings Guidance
2012A: $3.09 2013E: $3.05 - $3.25
($ millions) ($ millions)
UTILITY OPERATIONS:Gross Margin:
1 East Regulated Integrated Utilities 65,819 GWh 2,991 66,842 GWh 3,116 2 Ohio Companies 50,294 GWh 2,456 48,481 GWh 2,207 3 West Regulated Integrated Utilities 42,234 GWh 1,396 42,473 GWh 1,539 4 Texas Wires 29,039 GWh 642 28,785 GWh 659 5 Off-System Sales 324 311 6 Transmission Revenue - 3rd Party 500 595 7 Other Operating Revenue 506 552 8 Utility Gross Margin 8,815 8,979
9 Operations & Maintenance (3,311) (3,385) 10 Depreciation & Amortization (1,734) (1,694) 11 Taxes Other than Income Taxes (827) (855) 12 Interest Expense (882) (906) 13 Other Income & Deductions 139 62 14 Income Taxes (683) (787) 15 Utility Operations Operating Earnings 1,517 1,414
16 Transmission Operations Operating Earnings 44 67 NON-UTILITY OPERATIONS:
17 AEP River Operations 15 35 18 Generation & Marketing 7 24
19 Parent & Other Operating Earnings (86) (5)
20 OPERATING EARNINGS 1,497 1,535
American Electric PowerFinancial Results for 2012 Actual Vs 2013 Guidance
2012 Actual 2013 GuidancePerformance Driver Performance Driver
18
Retail Rate Performance
Rate Changes, net of trackers (in millions)
Rate Changes, net of trackers (in millions)
2Q13 vs. 2Q12 YTD13 vs. YTD12
East Regulated Integrated Utilities $37
East Regulated Integrated Utilities
$47
Ohio Companies $46 Ohio Companies $65
West Regulated Integrated Utilities $22
West Regulated Integrated Utilities
$44
Texas Wires $0 Texas Wires $0
AEP System Total $105 AEP System Total $156
Impact on EPS Impact on EPS
May not foot due to rounding
$0.14 $0.21
19
2Q13 Retail Performance
Retail Load*(weather normalized)
Weather Impact(in millions)
2Q13 vs. 2Q12 2Q13 vs. 2Q12
East Regulated Integrated Utilities (2.1%)
East Regulated Integrated Utilities
($3)
Ohio Companies (5.0%) Ohio Companies ($6)
West Regulated Integrated Utilities (1.6%)
West Regulated Integrated Utilities
($15)
Texas Wires (1.8%) Texas Wires ($4)
Impact on EPS Impact on EPS
*Excludes Firm Wholesale Load May not foot due to rounding
$0.04$0.02
20
YTD 2013 Retail Performance
Retail Load*(weather normalized)
Weather Impact(in millions)
YTD13 vs. YTD12 YTD13 vs. YTD12
East Regulated Integrated Utilities (0.9%)
East Regulated Integrated Utilities
$50
Ohio Companies (4.5%) Ohio Companies $15
West Regulated Integrated Utilities (1.5%)
West Regulated Integrated Utilities
($10)
Texas Wires (1.3%) Texas Wires ($5)
Impact on EPS Impact on EPS
*Excludes Firm Wholesale Load
$0.07$0.02
21
Gas to Coal Switching
Overall generation from natural gas has decreased 37 percent year-to-date
Overall generation from coal has increased 4 percent year-to-date
46 days system average coal inventory at June 30, 2013
Coal approximately 94% hedged for 2013 and 68% hedged for 2014
2nd Quarter 2012 vs. 2013 Capacity Factor YTD 2012 vs. 2013 Capacity Factor
WestEast WestEast
22
Off System Sales Gross Margin Detail
CRES/RPM capacity payments decreased from last year by $42M
AEP/Dayton Hub pricing: 25% increase in liquidation prices
Lower Trading & Marketing results by $6M
Second Quarter
YTD June 2013 Physical off-system sales margins
increased from last year by $13M
CRES/RPM capacity payments decreased from last year by $79M
AEP/Dayton Hub pricing: 20% increase in liquidation prices
Lower Trading & Marketing results by $12M
2012 2013GWh ($millions) GWh ($millions)
OSS Physical Sales 4,869 44$ 6,138 42$ Capacity Payments CRES/RPM 54$ 12$ Marketing/Trading 20$ 14$ Pre-Sharing Gross Margin 118$ 68$ Margin Shared (18)$ (14)$ Net OSS 100$ 54$
2012 2013GWh ($millions) GWh ($millions)
OSS Physical Sales 9,536 76$ 14,020 89$ Capacity Payments CRES/RPM 100$ 21$ Marketing/Trading 41$ 29$ Pre-Sharing Gross Margin 217$ 139$ Margin Shared (34)$ (31)$ Net OSS 183$ 108$
