American Electric Power Company, Inc. (AEP) Earnings Call Transcript & Summary

So good afternoon, everyone. I'm Darcy Reese. I'm Vice President of Investor Relations at American Electric Power, and I'm delighted to welcome you to our 2022 Analyst Day here at Nasdaq. It's been quite some time since we hosted our last Analyst Day, and it's a real pleasure to have so many of you with us in person today as well as those joining us on today's webcast. We have an exciting agenda planned for you. In just a moment, you're going to hear from our team here at AEP. Chair and CEO, Nick Akins, will kick things off with an overview of our business and talk to you about the status of our Kentucky sale. He'll be followed by President and CFO, Julie Sloat, who will walk you through our commitments and robust financial plan. Executive Vice President and Chief Commercial Officer. Greg Hall, will cover our competitive business portfolio. Senior Vice President of Grid Solutions, Antonio Smyth, will highlight some of our regulated investment opportunities. Senior Vice President of Regulatory, Matt Satterwhite, is going to cover all of our regulatory initiatives. And then finally, Executive Vice President of External Affairs, Raja Sundararajan, will sum things up walking us through economic development as well as customer affordability. Please save all your questions until the end of today's event, at which we will proceed to a Q&A session. Before I turn things over to Nick, it's an important reminder. It wouldn't be an Analyst Day if I didn't cover safe harbor statements. I want to remind everyone that during today's presentation, we will be making forward-looking statements. There are many factors that may cause such results to differ materially from these statements. So we encourage you to refer to our SEC filings. And with that, I will turn the presentation over to Nick.

Hi, everybody. Okay. Good afternoon, everyone. It's great to be with you here today, both physically and virtually. I think there's probably some people that are on virtually. And I really want take the opportunity to talk about some of the great things that we've been doing in AEP recently. And obviously, thinking about the future. Pretty soon, you're not going to care what I think anymore, you're going to care what Julie, maybe you already don't. But Julie Sloat will be taking over. Julie, over here. Obviously, many of you already know her very well, Chief Financial Officer; and now she's President and Chief Financial Officer. And hopefully, as we go forward in the year, we'll get to a point where she's, at the first of the year, will become CEO of the company. And we're very happy and privileged the Board went through an extensive process to find who the next person would be going forward. And it really says a lot that it's her because the background she has and the emphasis she places on consistency, quality of earnings and dividends, but also shareholder and customer value will be very important to this organization going forward. And you'll see some of the steps that she's taking as we go forward. We also have a strong leadership team, and it's a young leadership team now. And Julie has defined her leadership team that's really in the room today that you'll meet as we go along. Some of them you'll hear from and hear many of the things that are going on with the company. And then, of course, we just recently announced a couple of other changes, which Julie will introduce as well. As far as AEP is concerned, we have certainly moved to a pure play regulated utility. And when you look at some of the things that we've done from a strategic plan perspective, we've leveraged our scale, our financial strength, portfolio management, all those activities to ensure that we're moving forward in that vein. And with our customers, the focus on customer affordability and those types of issues still remain in play, but certainly is an opportunity for us to invest in ways that we continue to grow in terms of those 2 pinnacles of growth that we've talked about. Renewables. The transition to renewables for AEP is very pronounced. And of course, transmission and as well distribution certainly would be a key part of our future and contribute to the long-term growth of the company. We continue, and over the past 10 years, I've been CEO for almost 11 years now, and which is hard to believe. But during that time, we've had a great record of consistently exceeding our earnings projections, and we've continued to raise guidance and today is no exception for this year as well. Today, we have, by far, the largest electric transmission system in the country. And as you know, a lot of the investment that occurs today is relative to transmission and renewables. You can't do the renewables build-out that this country is talking about doing without transmission. In most parts of the country, you can't do transmission without AEP. So certainly, from our perspective, we feel well positioned from that. And you'll hear more about that a little bit later on as well. Despite the global challenges have occurred from -- certainly from a capital markets to supply chain to everything else that's going on in the world today, we certainly leveraged our track record and our scale to continue to perform. As the United States realizes some of the issues associated with climate change, ongoing inflation and certainly increased strain on their energy grids, AEP held steadfast in our belief that a cleaner, more resilient electric system certainly is the way to go in the future to support the economy, and we're well on our way of achieving those objectives. Many of the things we'll talk about today are real, are areas that we're working on our regulators with. There's multitude of integrated resource plans that certainly Antonio and others will be talking about today, They really fortify the benefits of where AEP is going in relation to these strategic visions that we have. Our ability to achieve these goals and deliver for our shareholders and our customers is predicated on our steadfast commitment and to our prioritization of the 5 core pillars of our strategic vision and execution. Those you've seen before, we'll talk about those a little bit briefly here. First is affordability. We continue to look at the affordability to customers of the massive build-out that's required to ensure the clean energy economy of the future, but also the resiliency in the future as well. There definitely is a redefinition of what resiliency means, particularly in light of what's going on in the world today. I just was in Norway last week at International Energy Conference, and there's no question that European leaders are concerned about the nature of the electric system given the Ukrainian situation and Russia, in particular. But nevertheless, it shows us the importance of how electricity contributes to the economy, not only around the world but in the U.S. and of course, in AEP's territory. AEP's territory is centered on growth. We continue to see growth. You're going to see a forecast for load that are higher than what we've typically had going into our yearly forecast. And those are really driven by a couple of things, from my opinion, and that is really centered on onshoring -- certainly manufacturing, onshoring and those kinds of activities being brought back to the U.S. are typically coming to our service territory, which accommodates manufacturing very well. And certainly, when you think about some of the other areas of growth, whenever you have fuel-related issues, energy-related issues, that bodes well in terms of pipeline growth, in terms of whether it's chemicals and other manufacturing and of course, now chip manufacturing in our territory as well. So those continue to grow considerably, and that's something we have to be ready for to make sure that the American economy and our economy can continue to function in a very positive way without interruption. Also, how do our customers want to see that? They want to see that through the clean energy economy. And the investments that we make, relative to clean energy, we'll certainly be front and center in terms of our ability to make sure our customers are seeing that clean energy promise, but also ensuring the resiliency of the grid in the meantime. And then, of course, advancing our business and achieving these goals will be extremely important in terms of how we process, design our systems, how we make sure that we continue to operate, how much O&M we continue to keep in check and reduced during that period of time to contribute to the earnings capability of the company. More capital we're deploying ensures us to be able to make accommodation for lower O&M costs, and we'll continue to do that. Then the final pillar that we have is around our company culture. We spent a lot of time in the last 10 years focused on the culture of our organization. I can tell you in '20 -- it was 2014. We were probably -- we do surveys every year. We were about at the 14th to 16th percentile, low -- very low in the fourth quartile. Today, we're at the 93rd percentile. We've made considerable progress in terms of how our organization works together to achieve these objectives. And it really is centered on diversity, equity, inclusion all the other activities that we come together to do in a very positive way. We've had that innovative spirit since the beginning of the 116 years of AEP, but we needed to make sure that we had a continued opportunity for everyone to have a voice in terms of the strategies of this company. So we've been very successful with that, but we'll continue to grow from that perspective as well. The other is taking bold steps around CO2. Now AEP has been very rational in the entire process over the several years. We do a lot of analysis in terms of what can be achieved. We certainly do a lot of analysis in terms of the opportunities ahead of us that we focus on with the regulators. But I think it's really important to see every year that goes by, we're making adjustments that are more aggressive because we see the technologies continue to improve. We see the opportunities. And actually, frankly, the public policy discussions continue to support the movement to a clean energy economy. And as we look at some of the technologies that are existence, even with the RIA that was recently passed, it expanded opportunities for not only in nuclear, but hydrogen and other forms of technology storage. Those are opportunities for us to take a look at through our integrated resource plans and ensure that we're able to make that transition. So today, we're announcing that we are changing our goals once again. We plan on achieving net zero by 2045 instead of 2050. And also, we're changing the benchmark. We used to use 2000 as a benchmark because that's when we really started our process -- processes of reducing carbon emissions with the climate exchange and all the other things that we were involved with. But most of the industries use 2005. So we changed the base in 2005 and also brought in the other scope 1, including OVEC generation, our participation in OVEC generation. So it made the targets even more aggressive when we moved to 2005 and included those aspects of it. But nevertheless, we continue to focus on 2030, making sure that we're at 80%. And then also, as we've looked at the current progress, we reduced it by 63% from those levels. So it's really an opportunity for us to continue to help define a public policy, but also be able to look at the technologies and ensure that we're doing the right thing at the right time. So clearly an opportunity. Now just to give you some insight on that, that's -- in 2005, we were at 152 million metric tons, probably the largest in the hemisphere in terms of emissions. And today, we're at 56 million metric tons, and we plan on being at 26 million tons by 2030. So substantial, substantial progress being made. And of course, the upgrading of our near-term reduction target, including Scope 1 emissions, certainly brings in that OVEC, which that in itself is another 7 million metric tons that we brought in to that base. So clearly, a lot of progress from that perspective. We're confident in our path forward and our ability to achieve these key objectives. And actually, when you look at our plans, they're reflected in the integrated resource plans that we filed in the various regulatory jurisdictions. So it's not something that we're just planning to do in the future. We're executing on those goals. And actually, we've been highly successful from a resource planning perspective in multiple states. And as you think about some of the things that we have from Virginia to -- certainly from Indiana, Michigan, all the western jurisdictions in terms of North Central, those have really been opportunities for us to continue to advance that picture. And actually, we have followed 6 integrated resource plans in our vertically integrated jurisdictions in the past 9 months. So when we told you that we were going to start executing on the 16,000 megawatts of generation, we also said that we were going to be filing resource plans in the various jurisdictions, and we've, in fact, done that and continue to take bids and doing all the things that we need to do to ensure that regulatory path is positive. So between 2021 and 2030, we plan to add 16 gigawatts of new renewable resources, which will significantly contribute to our reduced CO2 emissions, the 1.5 gigawatt 1,484 megawatts North Central wind project became fully operational in March this year and the completion of the 1 gigawatt reverse plant was concluded that represents a launch of our clean energy fleet transition. So that clearly was a big positive for us to continue that focus. And actually, in today's environment, it has produced substantial benefits for consumers. The beauty of what we're doing today is these generation resources are lowering cost to customers and allowing us to actually deploy more capital for needed distribution and transmission investment to reinforce the resiliency of the grid. It's a great recipe for us to continue to grow. It's a great recipe for our customers to benefit from a clean energy economy. And also, it's great for the country in terms of resiliency of the grid, in general. So as we look longer term, we're committed to building a resilient and reliable grid to efficiently deliver clean energy for our customers. And we'll continue to monitor the new technologies that are coming into play, and you're seeing those continually introduced into the resource plans. Right now, they don't show up that much. But as these technologies continue to progress, you'll start to see those integrated into those plans. And of course, the newly passed Inflation Reduction Act, which was something that we were involved with. We certainly want to make sure that, that process continues to advance. And actually, the permit bill. I know there's the permit part of the solution that Senator Manchin had done with Senator Schumer is something that's sort of on hold for now. AEP pulled that. We hope to get that back on track, certainly after the midterms. And that's a key part as well. The permit reform would be critical for us to be able to actively put in transmission in a meaningful way, but also ensure that we're able to put in the renewables and other applications that are necessary for resiliency of the grid. AEP has a proud history of investment in our generation fleet, and we have made great strides to reduce the environmental impact of our generation. We've invested over $9 billion in environmental controls, as you know. And obviously, we have made tremendous reductions in SOx, NOx and mercury as well. That's sort of old news. AEP certainly has helped to contribute from those kinds of emission reductions. Now it's about carbon though. We need to continue to make sure that we advance those kinds of activities and our CO2 emissions -- we're actually 70% less in 2000. And with today's announcement, we are raising that bar even further. So it's a real opportunity for us to continue to advance that. Decarbonizing our generation fleet is only part of the story. We're also taking additional opportunities associated with electric vehicles and what they mean to the grid. And we're also advancing broadband in rural communities because there's no question that in our service territory, there are people who don't have that kind of access. And we have a real opportunity to leverage the systems we're already putting in place, the data transfers or massive data transfers for evaluation of the grid. We can also make broadband available to rural communities to ensure that, that connectivity exists. We're also laying the groundwork for the transition on retirements of coal-fired generation. We're at the forefront of the just transition activities at our Pirkey plant was one area where we worked with the community. And certainly have focused on the transition that employees would make during that process. And we've worked actively to ensure that, that kind of cook book is used for other coal-fired generation. And actually, that's a promise of some of the new technologies. If we're able to maintain jobs, taxes and the transfer of that as these communities emerge from coal-fired generation, that would be a big positive and investment potential for AEP. Now as we continue, since 2010, we've made tremendous strides in diversifying our fuel mix. And in doing so, reducing our reliance on coal generation. Over this time period, we have retired or divested nearly 13 gigawatts of coal generation, the biggest decline in the electric utility industry. We have plans to reduce our coal generation even further another 5,300 megawatts by year-end 2028, Today, our coal generation represents -- assets only represent 11% of our total net plant and will represent less than 5% by year-end 2028. And we're working hard to ensure that our remaining coal fleet operates as efficiently as possible. We're not blind to the economic impacts of a coal plant, though, certainly in terms of the retirement of these facilities. where Jobs, taxes, as I mentioned earlier, are important. We'll continue to work with the affected communities to ensure that these transitions are fluid and also working from a public policy standpoint to make sure that the federal government understands these transitions are clearly important as we emerge with other types of resources. AEP has an evolving energy mix to lead the clean energy transformation, including coal, natural gas, nuclear and renewables. We are determined to transform our entire fleet to serve the energy needs of the future as well. While we are moving away from fossil fuels, we're actively adding and seeking the necessary approvals for renewable energy projects. We believe renewable sources play a key central role to meeting the needs of the clean energy future. When I became CEO of AEP in 2011, we were at the early stages of this clean energy transition. At the time, less than 5% of our generating portfolio was clean generation. Today, it's 23%. And certainly, by 2030, we're expecting it to be over 50% of our capacity that exists on the system. There's a lot of work ahead to do that, and the energy transition won't happen overnight. But certainly, it's one where we're having to really look at a balancing act between the speed of that transition, but also enabling us to make that transition in a very positive way for our customers, particularly as it relates to resiliency and reliability of the grid. I know it's been recognized certainly from a global standpoint, but also certainly recognized from our participation in the energy markets in the U.S. that there's clearly an opportunity for us to look at those resiliency aspects of the system. You're seeing increased storm activities and resiliency of the distribution and transmission system will also be a big part of that analysis. So I want to share something relative to the Kentucky. I know there's probably a lot of questions about Kentucky, and you're probably waiting to hear about that. So we do have an agreement to sell our Kentucky operations to Liberty, subsidiary of Algonquin Power. While our time line has shifted over the past year, we are in the final stretch to close this transaction. As we announced on Friday, we're pleased to have entered into a stock purchase agreement amendment with Liberty last week. We negotiated and agreed on adjusted purchase price of $2.646 billion, which is $200 million less than what we announced in October last year. The adjusted purchase price is based on developments that have occurred since last October. Also last Friday, FERC Council, our FERC Council on behalf of AEP and Liberty, submitted a letter to inform FERC that the parties are prepared to close the transaction after the FERC 203 order. The letter informed the FERC that we are no longer any condition precedent to clear, but for the FERC 203 order. So the 203 order is the last thing, then we'll get on with it. And we asked for expedited approval to enable rate credits imposed by the Kentucky Commission to be put in place. So there really is sort of an incentive to get that done so that Kentucky customers aren't hit during the winter months. And so we'll be looking for that approval. But of course, part of that deal was to make sure that the condition precedent was removed relative to the Mitchell agreements, and that certainly has enabled us to move forward. Based on the diversion orders though of Kentucky and West Virginia commissions related to the new Mitchell agreements, we are continuing with the existing Mitchell agreements and the operating agreement allows the operating committee to make certain changes. So we fell back to that position. Both parties are agreeable to that, and we're continuing on with the transaction. As you're aware, FERC has told their approval date to mid-December, December 16. So therefore, we've agreed with Liberty to not close the transaction until January 4. The certainty of the date grounded in FERC's current toll to date gives certainty to all stakeholders, including employees, customers, communities and shareholders. By defining this date, everyone can get ready from a transitional perspective. We'll get the FERC order at the latest by the 16th, and then we can get on with the transaction. Importantly, the revised deal economics do not alter our earnings guidance for the next year and beyond or revise our needs in relation to equity. So everything is confirmed on that. We're in good shape. While this has been a long process for everyone involved, it is one we're very pleased to have reached this point and are confident that we'll be successful in closing this transaction shortly after the turn of the year. So that's the update on Kentucky. We'll answer questions on that a little bit later. Before I conclude my segment here, I want to take the opportunity to step back to appreciate the work and relentless commitment of our team and to thank our investors, customers and partners for the support over the years. We're investing in the modernization security of the electric grid resource diversification and technology and innovation to enable the transition to a clean energy future, and while keeping affordability and reliability for our customers and communities top of mind. Internally, we have transformed our culture as well. The AEP of today embraces diversity, equity and inclusion and certainly strongly believe the lasting development of this positive culture will continue to drive our growth, success and the innovative spirit that exists within our company. The past decade has been a tremendous journey for me. And on a personal note, it certainly has been a career-defining role and one of the highlights of my life. For this experience, I will always be grateful. Since I was appointed as CEO of AEP, the company has grown and evolved to become one of the largest providers of energy in the United States. And I'm very proud of the 10, 11 years of progress this company has made over that time from a shareholder value perspective and certainly what we've done relative to our customers. But I didn't do it alone. It was an entire team of 17,000 employees who pushed the same -- with the same way and made sure that we were able to achieved the objectives that we set out for ourselves. As I transition out of this role to that of Executive Chairman on January 1, I'm fully confident that AEP will continue to flourish under Julie Sloat's leadership. She knows AEP and our industry very well, and she has every bit as committed as I am to our strategy, our culture of engagement and our values. She is a respected leader and a friend, and with her, American Electric Power is in the great hands. So the future of this discussion will be -- Julie will be taking over the leadership of this discussion. And I would -- I think you're probably wanting to know what she thinks about the future. And now I'll turn it over to Julie. Julie?

All right. Thanks, everyone. It's good to be here with you, and great to be back in person. I have missed it so much. So thanks for coming out. I am going to -- if we can jump to the next slide, Andy, thank you very much. I'm going to start by summarizing our stakeholder commitments, A lot of this should sound really familiar to you. So first of all, 6% to 7% annual earnings growth, operating earnings growth should sound familiar. Dividend growth in line with earnings growth, and we target a payout ratio of 60% to 70%, again, should sound familiar. Absolutely committed to the balance sheet. It all starts with the balance sheet. So what we'll be looking at is a targeted FFO to debt ratio of 14% to 15%. That's on a Moody's methodology basis, if you want to kind of go back and do the math. As you heard Nick just discussed, we are rebasing, upgrading and accelerating our net zero target by -- to 2045. So that's new information to share with you today. And then I've got to talk about the customer because it all starts with the customer, too, right? That's why we're here. So absolutely committed to making sure that our customer rates are in check, which means we're going to constantly be looking for efficiencies so we can make that happen in conjunction with delivering on the other commitments to our investors. And the other thing you're going to hear me talk more about today, and you've heard me say this before, is active management of the AEP portfolio. And specifically, what I'm talking about is derisking and simplifying our business and being able to then take dollars and channel them back to taking care of the customer, which means growing rate base and also taking care of cash flow, earnings growth and all the stuff that we know and love from utilities. Okay? Perfect. Andy, can we flip to the next slide? There you go. Okay. So let me start by saying, as you know, AEP offers steady, predictable growth, we have a low-risk regulated business. with a very robust electric infrastructure investment pipeline that we can take advantage of to deliver to the customer and to all of our other stakeholders. With that being said, today, we are lifting and narrowing our 2022 guidance range. We're going to take it to $4.97 to $5.07, which pushes our midpoint up by $0.05 to $5.02. We're also introducing our 2023 guidance for you all at $5.19 to $5.39. That is essentially a growth of 6.5% off of our 2022 original guidance forecast. So no surprises there. I can go ahead and slip to the next slide here. I want to do a little bit of a drive by here for my boss. Okay. So we went back and we looked at the points that we put on the board. So specifically, over the past decade, when Nick has been in his position, AEP total shareholder return has gone up by 245%. That compares to the S&P 500 Electric Utility Index, which was up 194%. So about 50 basis points better than the benchmark. So Nick putting points on the board. We need to acknowledge that, and we love that. But more importantly, and then this is just for me and the rest of the team, Nick, you changed the complexion of our company. and it made such a difference in the lives of all of us who work for you and work for our entire organization. And we are so grateful. We love you, and we love the fact that you put these great numbers on the board because this does matter. But more importantly, that cultural complexion change, it does make a difference because it all starts with the team. Because when investors are looking at us, they're trying to determine which of the utilities are going to be able to get the ball across the line. It starts with the team. So Nick? Thank you so much. Can we get a round of applause for Nick? Yes. We'll see. All right. So when we're out talking with investors, I get a lot of questions about the Inflation Reduction Act. And what does that mean? So I'm going to stick to the math here just a little bit to keep the old CFO hat on here. And I know Antonio is going to talk a little bit more about the practical aspects of the benefits of the IRA. But we know that this gives us a tailwind, which is a good thing for our business. and allows us to continue our transition to a clean energy economy and in a way that gives us more runway and gives us a little more clarity and confidence so that we can get these large projects done in a reasonable time line, so we can hit that 245 goal or 2045 goal. So that -- those are all good things. But admittedly, when I think about it, I'm like my goodness, how do I balance that against the BMT, the book minimum tax? And so those mathematics have to work. So I got to tell you, we're still comfortable, punchline being 14% to 15% FFO to debt. but that is largely a function of the accelerated depreciation components. That was really important to us. So I think we get this whole thing to hang together. I know the devil is always in the detail. But from a modeling perspective, a balance sheet perspective and for our equity community, no need to worry. We've got this covered. But nevertheless, Antonio will talk a little bit more about the practical aspects of it. But mathematically, we think it hangs together, okay? All right. So I had to do a quick drive-by on that because I keep getting questions about it. All right. So let's talk CapEx. We talked about the IRA that helps us with CapEx. So we're introducing today a capital forecast for the next 5 years of $40 billion. That's up $2 billion from the last look that we had. Over the last 5 years, it was $38 billion. So $2 billion up. That translates to a rate base compound annual growth rate of about 7.6%. And that also translates into roughly annually, on average, about a 4% increase in customer rates over that longer period of time. And as you know, it's a little lumpy from time to time in between periods. But on average, 4%. So let me dial it in a little bit. Of the $40 billion, 65% relates to wires. And remember, we've got a very nice, robust sustained pipeline of projects on the wire side of the business that we're able to shift around depending on where other projects come online. Because we know renewables are going to tend to be a little more lumpy. So when we don't have the perfect timing, we can shovel in some of the necessary infrastructure related to T&D investment, kind of push those dollars in and make sure that everything is kind of flow in the way we need it to flow to be able to hit all those stakeholder objectives and commitments. I'm going to dial it in just a little bit more. So let's just talk transmission. You're going to hear me beat the drum a lot today about transmission, okay, because we think that's where it's at. Of the $40 billion, $15 billion relates to transmission. So that's about 38%. As you know, AEP is a leader in the transmission space. We've been the pioneer in the transmission space. We are very well positioned, particularly so now given the investment in renewals that everyone's making. So that makes the investment in transmission, even more important and more necessary. And so when you look at us, when you look at AEP, I think some of this gets a little masked because we have transmission investment in the transmission holdco as well as then included in all of our individual operating companies. So we got it in 2 different locations. So it may be not as easily seen when you're doing your modeling and analytics. So I throw that out there. Before I go on a little bit further and flip to the next slide, I do want to call out the fact that our regulated renewables will be investing about $9 billion of the $40 billion, and that is about 22% of the total. So this really is a wires or energy delivery and renewable story, okay? There you go. So this graphic kind of tells that story, right? So we have this opportunity to serve and it's shifted over time to a combination of the wires and renewables. That's what you see on these pin wheels here. So effectively, we've almost doubled the investment over time. When you look at the $22 billion going to the $40 billion over the last couple of decades here. And 90% of our future investment is going to be in wires and renewables. So it's huge, right? And it gets better because we have a sustained runway in that core transmission investment. So as I mentioned, 5 -- of the 5-year forecast, $15 billion relates specifically to transmission. But if you look out 10 years, that pipeline is actually $35 billion. So inclusive of the $15 billion I just mentioned, kick it out in another 5 years. That total is $35 billion. So I know this may sound a little cliche, but I would tell you or submit to you that I think we have a once-in-a-lifetime or definitely a once-in-a-career situation where we're able to do like 3 things at the same time or concurrently invest to the benefit of the customer because we had to do these things. We got to do these things. Grow the rate base to the benefit of not only earnings and cash flow, but for the betterment and good for all of our investors and it keeps our capital costs lower, okay? So transmission is a great place to put the capital to work. It also tempers the rate of increase in customer bills when we've got the renewable component because we know bills are still going to go up, but they don't go up as much if you're investing in renewables versus the stuff we traditionally had invested in. So that makes this possible. This product that we deliver to customers that they need to live, but we keep it the cost in check. So that's really important. So it's the confluence of the transition to the clean energy economy in conjunction with this investment opportunity on the wire side that go hand in hand and make it super special. So here's the deal. When I think about this, I think the AEP, that this team, we need to do a better job of telling the story and the fact that we've got this incredible runway for transmission investment. And we need to make sure that you see that because I think it gets a little opaque or lost in how we're kind of organized with the Transcos in the operating company. So let me do something for you here. Okay. So let me go to the next page. And so a lot of you know that I used to be an analyst. So I'm sitting here looking at Andy here. We were just talking about being baby analysts together. I was on the buy side several years ago. Anyway, I was his client, and that's what he just said, I was. Anyway, so here's the deal. So I tried to take a tool out of the tool bag we used to use, okay? So I think about AEP and I think about the earnings stream specifically related to transmission. It's about half of our earnings, okay? So what we did real simplistically we just grew our earnings out just for giggles at 6.5% and said, okay, what's that look like? 6.5% earnings growth. That means about $2.92 relates to transmission, okay? So $2.92. So following me on this math. And that's about 50% of our total earnings. I can tell you that the transmission plant grows at about a compound annual growth rate of 10%. So I would argue that's pretty premium-related stuff. So 10% growth, that's darn good, right? I don't think anybody is going to argue with that. I think about the fact that it's predictable, it's stable. We have a demonstrated track record in it. We like this. and we think you'd like it, too, right? Okay. So I think about the fact that when we look at different multiples, like where have investments like this traded, okay? So we look at minority sales. So First Energy to transaction, 40x earnings. Boom, that's huge, right? Okay. Then I look at T&D transactions that have gone -- that have been occurred in the past, not too distant past here. We've got this from our investment banker friends 28 times. They've traded at 28x earnings. And then I just look at some of our selected high-growth peers 22x. And so then I'd say -- what else can we do? Because you guys are constantly asking me, asking this team, would you consider selling part of that business? Because look at the multiples these things are fetching even if you do a minority interest sale like 40x. So I know that you know that the value is there and how do you try to unlock it. So this suggests that we have a materially undervalued earnings stream. And so when I think about the fact, then I look back at sell-side reports that do some of the parts analysis -- and looking specifically at AEP, looking at those reports, it would suggest that we're trading -- at least our transmission component is trading at about 19.8x. So I do that math. I just think, my goodness, our earnings stream is at a discount on the order of maybe 2x earnings to 20x earnings. So do that math, 2x $2.92, that's $6 or 20 x $2.92, that's $58 a share, I think, my God, what a scream and buy this is, right? So you've got opportunities to get in now. While it's still cheap, we are at Nasdaq. We can totally hook you up. So you just come up and see me as soon as we're finished here. But the point here is -- we have a stable, predictable, necessary investment with superior growth, and it's absolutely demonstrated. So I just think to myself, really? Come on you guys you got to get in, right? So it's a great time to get in. But anyway, you'll hear me continue to beat that drum. So thank you for indulging me on that particular slide. All right. So let's talk about cost recovery. All right. So we've made a lot of progress in terms of getting efficient or progressive cost recovery mechanisms in place. About 85% of our capital is recovered through progressive mechanisms, and Matt's going to talk a little bit more about that here in a minute because we still have more we can do. Obviously, the lag reduction maintains a healthy earnings growth opportunity for us, keeps our cash flowing, all those things that we need to have happen sends the appropriate messaging and timing or timely messaging and price signals to our customers. So that's important. And then I think let's go ahead and take -- break this down, right? So let's take a look at how progressive we've gotten in the different buckets of where we do our investments. So I look at the historical trackers, forward trackers, forward rates and then you've got base rates playing in the background. How does that stack up against the different investments that we're making? And you look at transmission here on the left side, Oh my goodness, look how good that looks, right? So transmission is looking really good yet again. So we've got great recovery there. Distribution, we still -- we made a ton of progress here. We still have opportunity to go to work there, and Matt will talk about that here in a minute. Regulated renewables, another awesome place for us in terms of progressive cost recovery. And then we -- again, like we've still got opportunities that's a continuous effort for us, but we're putting serious points on the board. We'll continue to make the effort, and we'll continue to put the points on the board. But did I mention transmission? I think I thought I mentioned transmission, right? Okay, good. Very good. All right. So a couple of things. When I talked earlier about the stakeholder commitment that we have to our customers, cost efficiency is critical to us. And so this is a new view of our O&M slide. So if you look at our past presentations, what you would see is O&M that's untracked. That equates to about maybe 75% of our total O&M. But what we wanted to show you here today is really how we manage it. We have to look at the whole thing. It doesn't matter whether it's tracked or not because we're worried about what's happening with customer rates. So that's the different view you have here today. And just so you're not concerned, we broke out on the bottom a little table here on an untracked basis. So that would map back to the look that you had in previous slide presentations. But we thought this was important to call out here, particularly we think about inflationary pressures and how the company has been able to manage that. So the other thing I will call out here is that we have a proven history of managing our costs despite the rapid growth in net plant. So if you look at the left-hand side of the slide here, you can see we've grown the plant substantially over the past 10 years and looking at 2023 as projected. So we've been able to manage that. And I want to call out, if I could, a couple of examples because there's a few things that are going on behind the scenes that you don't get to necessarily see, but I want to make sure that you have confidence and our ongoing ability to manage our costs because you see that red line there is our inflation projection. You can see that our stack in terms of O&M is south of that. We do play with it from time to time. So depending on where earnings are coming in or different circumstances that we're dealing, we think we can either dial it down or dial it up depending on the year. But that, again, demonstrates the agility and flexibility that we have. So things -- I'm just going to throw a few things out there, so that you understand that we're serious about that, that we keep in mind when we're managing O&M. We think about, everybody says this, but lean management and continual improvement or continuous improvement. We're doing that. We think a lot about our workforce planning. So we think about retirements and attrition because that's bodies and dollars, really important to us. So we manage through that particular aspect. We think about our craft workforce and optimizing when you use internal resources or external resources depending on the different type of job that you do. I spent a lot of time fussing around with that stuff even when I was the President of AEP [indiscernible] I can tell you it is absolutely at work and at play in our house. And when we think about strategic sourcing. So making sure that we have accurate demand forecast, so that we can manage our supply and manage our category management activities. That's been really important, especially with supply chain pressures. Obviously, it's worked for us. So we continue to run those gauntlets. And then we think about things like data analytics, automation, digitization or digital tools. So when I think about like AMI meters, we can deal with or better understand how we can protect our revenue and make sure there's no tampering going on or there's no technology issues going on with our meters and automation as it relates to our workflow scheduling. We use drones. We manage generation monitoring with digital tools. And then we also are exploring and engaging in different strategic partnerships or how we manage our contracts with different suppliers. So even down to vegetation management, that type of thing. Every dollar counts. And the reason I'm going through this laundry list is because I want you to understand that these things are real and they're not just words. They're doing -- these are things that we're doing every day, okay? So we've got a handle on this, but it is something we are literally doing every day. So Andy, can we jump? Okay. Excellent. Thank you. All right. So from a more -- an additional fundamental piece of our business, today, what we're doing is introducing to you our revised look for our 2022 load. Because, as you know, we've been running kind of hot as we've announced earnings through the first half of this year. So this revises what we think that view is for the remainder of the year. So we feel pretty confident because we've got more than half the year behind us now, so we're good there. But you can take a look at that particular number there. Effectively, when you look at 2022 down in the lower right corner, our projection now is 2.9% in terms of normalized retail growth or gigawatt hour sales. It was 1.6%. So we're doing well on pretty much every different aspect here in terms of our customer classes. But we're good with that. The other thing I will introduce to you today is we're actually giving you a 3-year forward look. We typically don't do that. We usually only go out 1 year, but we wanted you to see a little more runway as we kind of work through the different cycles here. So that's what you see here today. And then I want to leave you with a couple of different thoughts and points. We're really starting to see the fruit of our efforts as we focus on economic development. And there was a time where we always just focused on just load, we wanted load, but it really began to shift over the last handful of years where we're focused on load's important, but you really need a jobs. So you need to bring jobs to the service territory because that's how you're able to then spread the cost over a bigger base, and that ultimately just reduces customer rates in terms of how those are being experienced. So that's been top of mind for us, and it's been working. So for example, just quickly, residential, we expect to be largely flat in a 2023 kind of coming back down and then kind of just being sustained as people work through the business cycle and have those stimulus dollars kind of run out and run through the process. So I don't think there's anything concerning there. Commercial, We expect that to be up pretty significantly despite the success we've had there in the near term. Most of that is largely driven by data center load that we know is going to be in the pipeline for us. So we have confidence in those numbers. So data centers, in particular, that give you an order of magnitude on average from 2020 to 2025. Commercial sales are expected to grow about 3.3%. Compare this to 2015 to 2020, which is not on the slide here, but they were down 1.7%. So that -- again, that improvement there is largely driven by our efforts on the economic development front. Similar situation when you look at the industrial load. So we expect industrial load to be up on average from 2020 to 2025, about 2.4%. You can see the year-over-year comparisons there on the page. And then what you do is kind of compare that to looking back from 2015 to 2020, our average industrial growth was -- actually it wasn't growth, it was maybe a 40 basis point decline. So again, a tribute to that economic development effort that has changed substantially the shape and pace of our load growth. So good story there. On the economic development front, for industrial, it's coming in across all sectors, but mostly pronounced in metals, plastics, defense and agriculture. So we'll have more detail available for you on this, in particular, when we go to EEI because, as you know, we put that fact book together and all the fine details, but we wanted to get the punch line out in front of you here today. Here's the other point I want to make while we're on this slide, if I could. So when you think about AEP, we don't swing wildly from peak to trough as it relates from whether you're in a recessionary period to an inflationary period to growth period, you name it, right? So it's pretty stable. So not entirely exciting, but that's a really good place to be when you do have a recessionary or pressure type situation. So for example, let me give you a couple of data points when I think about our loads. So historically, not a lot of volatility through any of the business cycles. So not super crazy big, that's super crazy down, okay? And then the job market has been really stable, quite frankly, even through the pandemic. So we didn't see a lot of fallout there, too. So that's been a good thing for us. We have a concentration of some energy producing sectors. This tend to be a little countercyclical. Again, those economic development efforts, super important. I think those will pay dividends, particularly if we do encounter some type of recessionary circumstance, which I think the market seems to be betting on. But nevertheless, those should be beneficial to us. So I would say again, am I biased? You bet I am, but now's a good time to own AEP because we've got all these built-in buffers. So it's not super sexy when things are going crazy on fire, but I'm telling you there's a lot of downside protection here, too. So to me, when I think about investing in a utility company, that's what I want. So of course, I have to give you that pitch. So I think about cost management in terms of our levers. I think about the fact that we've got these characteristics in the economic development aspects that I just mentioned here in terms of those buffers. And then here's another thing that I don't have on the slide. Worst-case scenario because I like belts some suspenders, like how am I going to navigate different circumstances. If we were to see a situation where I needed to toggle and manage, so I can get through the goalpost that I gave to you in terms of our stakeholder commitments, the other thing I could do is I could play a little bit with my CapEx. If I cut back a little bit, I don't necessarily impact my longer-term growth opportunity. But with interest rates where they are, even just a little trim right now, let's dollars fall to the bottom line because they don't need to finance them. I don't want to go there, but I can and still make all the stakeholder commitments and promises that I've delivered to you today. So we got lots of levers is my point. So I think it's a good time to think about AEP if you're not in the stock. Okay? All right. So the other slide I like is cash flow. So I'm a former Treasurer, I'm the CFO, I love this stuff. And I think it's really important because nothing works if this doesn't work, right? So let me show you what we've got laid out for you here today. We've made some modifications. Number one, we're introducing 2027. So that's new information. And the other thing you guys is we've updated the view for 2022 and 2023. In particular, what we've done is that we've taken the proceeds from the Kentucky sale from 2022 because now we expect to close in January of 2023 and move those to 2023. So keep that top of mind. You see that called out on the second line here on this particular slide. So what we've had to do to make that coverage in 2022 is we're going to do a little more financing on the debt side of the markets, and that's perfectly fine for us. Our metrics still completely hang together, still committed to 14% to 15% FFO to debt. So all good there. And then as it relates to 2027, since that's the new piece. The only equity component that we have included there is really on the same order of magnitude that you see in the prior 2 years. So 2025, 2026, you're talking about maybe $700 million totally digestible. Don't expect to do block trades, something we can easily manage with an at the market mechanism, et cetera. I say all that, but also keep in mind, what we don't have incorporated here, we have nothing in here for the cash flow associated with sales of assets. So for example, you know that we're in the process of selling our unregulated contracted renewables portfolio, none of that is in here. So that would work to the benefit of making sure all this stuff hangs together, particularly here's what you can expect us to do. Over time, we'll try to target those dollars that we bring in the door to reducing our equity need, but we will do that responsibly so that our balance sheet metrics hang exactly where they need to hang. We can do this and it will absolutely hang together and work accordingly. So whether it's the unregulated renewable sale or any other future asset sales, we don't incorporate those until we know exactly what those dollars are. Okay? So stay tuned for that. and we'll keep you abreast of what's going on there. But the same commitments stand, right? 60% debt to cap on a GAAP basis roughly. That's our target in that 14% to 15% on the FFO to debt, that's our target. The only other thing I'll call out here is when you look at the capital investments in the JV equity contributions, they tend to be a little lumpy year-over-year, and that's only because we've got renewables that tend to be a little more lumpy as they come into the plan. So if you ask why that might swing around a little bit, it's based on what we have in our IRPs and our expectations around that particular piece of the business. And as I said, if those move a little bit, no problem. We're able to move in transmission and distribution spend here or there. So we've got that covered. All right? Okay. So I'm getting close here, and I'll be able to hand it off to somebody here in a minute, his name is Greg Hall. But before I do, I just want to do a quick drive-by on our active management and capital recycling. So as you know, we have a very robust portfolio of regulated investment opportunities in front of us. And so when I talk about active portfolio management, it's really about constantly scrubbing our portfolio to determine does this make sense. This stuff I own with the earnings stream associated with it, cash flows and risk profiles, does it make sense based on what we're seeing in the economic backdrop and where we want to go with the business? So we've been pretty busy over the last several years. As a matter of fact, if you include the dollars that we're going to bring in the door associated with the Kentucky Power sale, we will have essentially recycled about $6 billion into the regulated business. That's the plan. So that's a lot. But we're not done. This is part of our fabric, and we'll continue to engage in this activity on an ongoing basis. So when you think about active management, think about just this rigorous review process, pushing expectations, making sure that we're moving at a faster pace because my goodness, the industry is moving at a faster pace. So we got to make sure our paces are kind of matching in that regard. So when I think about what's next, we're going to talk about the strategic review of the retail business, and that's where Greg Hall is going to come in. But before I hand it to Greg, I want to mention something to you. Just a little bit of background to help Greg tell the story. We've been in the retail business for the past, I don't know, in excess of 10 years. That sound about right? Yes. And it was largely a defensive move when we got into the business. And it began really when Ohio went through its transition to competition. And we ultimately found ourselves through corporate separation with the portfolio generation -- merchant generation portfolio that was -- had a long position of like 7,000 megawatts. That's huge. And so over the years, though, we've sold part of that off. We've retired some plants. It's actually down to what we have today from a merch perspective. is a 600-megawatt PPA. So the business has changed dramatically in terms of the asset profile. So it makes sense, we need to review, this doesn't make sense that we're in this business. So Greg is going to talk about that here in a minute. But before I hand it to Greg, I know I keep saying that. I apologize, Greg, drumroll, right? So I'll get there. But I do want to do something. I want to introduce a couple of my new team members in terms of the executive leadership team. So Greg Hall, you want to raise your hand. I know you'll be up here in a minute. But Greg Hall is our EVP and Chief Commercial Officer. And so Greg is responsible for all of our unregulated businesses, commercial operations and actually grid solutions reports everyone knows Antonio reports up through Greg as well. The whole idea there is customer touch point. That's where it starts, and we want to make sure we're having that commercial mindset. So those kind of go hand in hand. And then Peggy Simmons, who's sitting right up front here. She is EVP of Utilities. You guys may have seen this in the press release we issued on September 22 anyway. So Peggy is here with us. All of our operating companies report up to Peggy as well as some of our customer support activities as well. Peggy is the former President of PSO tried and true, battle-tested, awesome leader. It's a privilege to work with her. And then sitting next to her is Chris Beam, who is our EVP of Energy Services. So reporting up to Chris is generation, nuclear, energy delivery, supply chain and health and safety. Chris is our former APCo President and COO. And I've had the privilege of also working with Chris over several years, he is very, again, battle-tested leader, and I can't wait to get after with these guys. So with that, Greg, I'm going to hand it to you and take it away. All right?

Thank you, Julie. First of all, I'd like to say I've been in the great beneficiary of Nick's leadership over the years. So it's bittersweet to see him give his last Analyst Day, but it's tough not to get excited about working under Julie. You can feel her passion and energy. I call her the Energizer bunny. If you got vampires in an organization, you got Energizer. She is the main energizer. Every meeting is like that. It's amazing. I'm going to spend a little bit of time today talking about our competitive business platform. It's not something we talk about a lot. It makes up a very small part of our company, and we've been active in managing that portfolio over the years. Hopefully, at the end of my remarks, you'll have a little bit of appreciation about the history of this business and a little bit of the why we've gotten into that space over time and understanding on our philosophy of managing the portfolio and have clarity around the current actions we're taking. AEP has a great history of building competitive businesses in areas of the industry that are undergoing significant change. Those changes could be customer preference changes, technology changes. But most often, we've reacted to regulatory or legislative changes. And even though we've been great at building those businesses, as a result, we've also been good at rotating companies out of the portfolio when those companies no longer have strategic value to us. The risks outweigh the rewards or we need to rotate that capital into more predictable regulated investments. So I'm going to go through each of the 4 business units that are within the competitive platform now. I think the one you're most familiar with is our contracted renewables business. Why did we get into that business? If you remember, in the middle part of last decade, renewable cost curve was declining rapidly. At the same time, you had an ascending interest from customers around renewable supplies. So we knew, at AEP, we needed to build that muscle. Our regulated companies weren't quite ready to start building that investment within the operating companies themselves. So we spent the last 7 years building a diverse, attractive set of wind and solar assets across the U.S., in 11 states, 7 power markets underpinned by a portfolio of customers who were high credit quality. Those contracts have roughly 10 years left on them. And the vast majority of the EBITDA is settled with bus bar PPAs. You might remember, in February, Julie and Nick announced that we were going to strategic review of this business. I'm happy to report we finished that review in August. We've launched the process to sell that portfolio in late August. We've had a very robust response from a handful, a significant amount of financial and strategic buyers, so all kinds of buyer types interested in this portfolio. I think you saw from over the weekend. We're hoping for that same sort of result with our solicitation. Initial bids are due in 2 weeks. Once we get that initial bid list, we'll evaluate that. We'll narrow the field. We'll share with them further due diligence items, have a management presentation, and we expect final bids at the turn of the year. We hope to have a signed PSA by the end of January and a financial close in the first part of the second quarter of next year. Contemporaneous to that action, we also worked out a deal with our partner at the Flat Ridge to Win site. We've signed a purchase and sale agreement with them. We've delivered that to FERC for approval. The expectation is FERC will give us that approval here shortly, and we'll be able to close that transaction in this quarter as well. Hopefully, you can tell by these actions, this confirms our philosophy on actively managing the portfolio. Specifically, when our regulated companies had the ability and they started to get momentum in building out the renewable portfolio, there is no longer a need for us to continue to maintain the competitive portfolio, and we're able to transfer a lot of that knowledge and human capital into our regulated side to continue with that massive transition going on with our regulated companies. So what's left in the portfolio? Our portfolio is built around the customer. I think you'll hear that consistent message throughout our presentation today. We have a retail company, AEP Energy; a distributor technology company, AEP OnSite Partners. And the company that kind of optimizes the whole portfolio in the wholesale markets is our -- actually our original competitive business, AEP Energy Partners, that started back in 2007, and they optimize the whole portfolio in the wholesale marketplace. These businesses infuse into AEP, not only the commercial -- the competitive side of the business, but throughout the organization, a customer-centric commercial mindset and a set of progressive capabilities that are difficult to engender quickly within regulated utilities. So let's go to the retail business. You guys have heard about this one before. Why did we get into retail? I think Julie did a good job introducing why we got into retail. I'll just say, look, this is our customer expert within the platform. We've got to earn our customers every day. And we got to delight them to make sure they hang around to continue to build our business. That same customer focus has allowed us to build the company to 650,000 customers who consume roughly 24 terawatt hours of annual electric load and 10 Mcf of annual natural gas load. But every business has its time and season, and it's time for us to review whether this businesses we need to keep it in the portfolio or not. So we commit to you that we will conduct that strategic review over the coming months and keep you in the loop on what the ultimate outcome is. Our next business is our distributed technology business. I talked a little bit about how the first 2 businesses were started -- or the first -- the retail business was started by legislative action. This one was started by customers asking us about behind the meter generation solution sets. Oftentimes, it asked about customer savings, what customer doesn't want to know about saving cost, the resiliency plays that they were asking us about, so I wanted to move towards sustainability goals. And some want to just down all the energy independence or localized generation, they have control over. We've allocated modest capital to the business over the years. That modest capital is built as 98 projects with 91 customers and just over 300 megawatts of capacity. We've invested in a diversity of technologies solar, solar plus storage, fuel cells, reciprocating engines, stand-alone batteries, even substations. So a full diverse set of technologies that are underpinned by a portfolio of customer contracts that have, on average, about 18 years left on them. So it's a very stable sort of earnings profile for us. They become our technology expert within the platform. We've been able to hone engineering and system design skills in these technologies. We've learned how to construct these projects, operate and maintain them and manage their assets over their lifetimes. At this point, we believe the distributed energy resource market is still an emerging market. And in order to stay sharp and be able to transfer that knowledge into the broader AEP, we feel like we should stay in that business for now. Last of all, the original competitive business was AEP Energy Partners, which was started way back in 1999 by the former Governor of Texas, George Bush. You might recall him. He signed Senate Bill 7 in the law in 1999. We sold our customers down in Texas at the time, disposed of most of our generation assets, but we still had a coal plant and 2 cogeneration plants, a couple of wind farms and a portfolio of muni and co-op wholesale customers that we had to deal with. So we finally separated those businesses from our wires business in 2007. 3 main primary responsibilities of this business over that time is to continue to originate customer business, bring value to the shareholders of AEP, manage the output from the generation assets that have been transferred over time within this competitive business platform. And we've seen it start with Texas, go to Ohio come up with contracted renewables and have the distributed generation platform. We've manage that output throughout all those phases of our growth. And last of all, is to optimize the whole set of opportunity within the competitive business platform. Take the long positions from our generation output from the PPAs we've entered into and the market purchases that we've made and match them up with our short positions created by our wholesale sales and our retail customer loads. They are a risk expert within the platform. We run a very well-controlled environment with a tight risk policy. We're not out there swing in size. We have small position limits. We run mostly hedged book, and that creates a very small variance at risk, rarely gets above $600,000, $700,000. And we only operate in the markets that we know. We're not trying to be -- tackle all markets throughout the U.S. We only operate in PJM, SPP, MISO and ERCOT. We do have legacy positions within this within business. Julie talked about the 600 megawatts from Cardinal. We have legacy positions down in ERCOT and PJM. So as of this point, and we need to continue to optimize the portfolio -- the distributed generation portfolio. So we're going to stay in this business. for now as well. So in conclusion, hopefully, you've gotten a feel that AEP's competitive businesses have served us well over the years. Beyond just the earnings they've created, which have been significant over that 15-year period. They've infused intellectual capital into the DNA of AEP that can be felt on both sides of the house. It's engendered expertise and built muscle in renewables and distributed energy resources. -- is delivered to customer focus that we wouldn't be able to have otherwise and a risk set of risk management and capabilities that we've been able to engender throughout the portfolio. That being said, as Julie mentioned, we remain committed to actively managing this portfolio in order to derisk, simplify and rotate capital in a predictable regulated investments along the way. And with that, I'm going to send it over to Antonio, who's going to talk about that deep reservoir of regulated renewables and transmission and distribution investments here to come. Thank you.

Well, thank you, Greg, and good afternoon, everybody. It's great to be here with you today. So we are no doubt in a period of great transformation in our industry, and you've heard a bit about that today. But it also means we're in a great period of growth and opportunity here on the capital investment side as well. And as we look out over the next 5 years, we're going to invest $35 billion or 90% of our capital plan in electric transmission, electric distribution, and regulated renewables. All of these investments are going to be geared toward transforming our infrastructure to better serve our customers, derisking our asset base and putting us on that path to achieve our enhanced carbon reduction goals that Nick had talked about earlier. Our capital plan is strategically designed to maximize flexibility and it's going to allow us the ability to shift investment around among these segments as and if needed. And this optionality really at a large scale, the scale in which we can do that is really kind of -- really makes AEP unique and provides great value to investors because it really enhances our ability to continue to deliver on that strong track record of EPS growth well into the future. We're also working to grow our investment pipelines beyond our planning horizon, so we can introduce even more flexibility and optionality into our capital plan going forward. So you've heard quite a bit about electric transmission from both Nick and Julie. And for AEP, it all starts with transmission. We are the leader in the transmission space in North America. We develop, own, operate and maintain the largest transmission system in the country. We have over 40,000 line miles of transmission, over 2,200 substations and a net transmission plant balance of approximately $26 billion across the 13 states that we own and operate this infrastructure in. We also have a very low cost structure, which you can see here on the bottom left-hand side of this graph. And we're going to continue to use our scale and our buying power to drive down our unit costs for the benefit of our customers. in this growth area. Our system is critical. It's critical not only to serving our customers directly but it's critical to moving bulk power across the entire Eastern interconnection and ERCOT. And as you can see from the map here, we are uniquely situated in 4 different RTO ISOs and across multiple market seams. So on average, we own a little more than 20% of the transmission systems in PJM, SPP and ERCOT. And these 3 regions combined serve about 1/3 of the total U.S. population. So if you think about the size of our system, it's not only large in scale, but it's also very critical in so far as delivering power across the eastern half of the United States. The investments that we make in the transmission space, those are among the highest value investments that we make on behalf of our customers. They serve to increase reliability, resiliency and grid security. They're going to drive down costs through the reduction of congestion and the facilitation of economic dispatch generation in the markets that we serve. They're going to decrease emissions. We have over 20 gigawatts of renewables interconnected to our transmission system on a direct basis today. We expect that to increase here in the future. And these investments, they're really going to serve as the linchpin, as Nick mentioned, as we transition to a clean energy economy over time. Transmissions role and decarbonization sometimes is overlooked and it can't be overstated here. We believe that we are in the best position in the industry to enable this transition. So if you're long the transition to the clean energy economy, you should be long electric transmission as well. Our investments in this segment also support our important economic growth and development in our regions as well. We're seeing the scenarios like Central Ohio, where we're seeing multi-gigawatt load growth in that area. That doesn't happen without the development of the transmission system, which we've been working hard to do over the last few years. It doesn't happen without that system being there. And it also doesn't happen without the confidence in AEP to continue to develop that system to accommodate the follow-on load growth that is sure to happen in that area, and Raj will talk a bit about that in the future. And finally, we are leaders on the federal regulatory and policy front, and we're going to continue to partner with our regulators and other key stakeholders to drive to the right outcomes for the grid and the customers in which we serve. So looking ahead, as Julie mentioned, we have a significant need for transmission investment in our system over both the near term and the long term. We have $15 billion in our 5-year capital plan and over $35 billion of identified needs on our system over the next 10 years. Asset replacement and local reliability investments, those are the key drivers of our investments in transmission. And approximately 1/4 of our system, to over 10,000 of our line miles, nearly 400 of our transformers and over 1,100 of our circuit breakers are already past or will be past their useful lives over the next 10 years. So putting that into dollars and cents for you all, that would require approximately $2.7 billion of annual capital investment just to replace those assets that will be beyond their useful lives over the next decade. Now of course, we don't just replace assets because they're beyond their useful lives, we carefully plan the system on 3 key planning criteria when it comes to asset replacement. So we look at the system condition. So we look at the asset -- the condition of the assets. We look at the performance of the assets and we look at the risk of leaving assets beyond their useful lives on our system, and we make good planning judgment and investment decisions based on those criteria -- in the asset replacement space. But I tell you this because what this does do is it gives you a very good idea of the level of system investments that are merely required to keep our systems just running and reliable. Our 5-year capital investment plan does not include speculative investment. So we do not have RTO-driven investment opportunities that haven't already been awarded to us. We don't include customer interconnections in that 5-year plan that aren't known and measurable. We don't include interregional projects that aren't already in the fold. We don't include competitive transmission opportunities that we're pursuing in that bucket of investment. So those types of opportunities do regularly come our way but we treat them as upside to our pipeline of opportunities and we fit those in as they come along. So for example, over the last 10 years, on average, we've been awarded around $400 million each year in RTO mandated projects. So that's something -- again, it's an example of something that comes our way regularly that we work to fit into our existing plan and move things around to accommodate those. So the bottom line here is that we have a very large and diverse pipeline of opportunities. Our energy delivery team is working a 1,000-plus projects at any given time. So we have a lot of singles and doubles in the portfolio. We don't rely on large single projects or large block portfolio approvals from the RTOs to fuel our growth. We have the organic investment opportunity to grow long into the future. and that provides a great deal of certainty and controllability within our portfolio there today. So given all of the investment that we just talked about that we need to make into the system, it's imperative to have the right returns, the right capital structures and stable and efficient cost recovery mechanisms across our transmission businesses, and we have those today. We settled our 2 FERC rate cases. So our east rate case and our west rate case in 2019. And our commission approved ROEs and cap structures are what allow us to invest in the system at the appropriate levels. As you all are no doubt aware, FERC's recently changed their methodology insofar as how they calculate cost, their cost of equity and award ROEs for these types of investments. And they did that after our settlements. But even under our 2019 settlements that you see here on the screen, we are well within the range of reasonableness for our base rates there today. Over 90% of our transmission capital is tracked at the state level. This is really important and it's key to efficient cost recovery and supportive credit metrics. And it's really what ultimately allows us to keep our borrowing costs low for the benefit of our customers. So there's a reciprocal relationship between our federal rates and our state rates, and those 2 things need to work together to make it all efficient and work accordingly. So in summary here, as we leave the transmission section, we are the premier transmission company in the U.S. We own and operate the largest transmission system in the country, and we're a low-cost provider. Our system is geographically diverse, and it's critical to the reliable electric service and functioning markets across the eastern half of the United States. We have double-digit CapEx growth, like Julie highlighted earlier in the presentation. And we have a demonstrated ability to execute at a very large scale in our portfolio year in and year out. We also have a sustainable and highly diverse pipeline, like I talked about. And we have a commission that recognizes and supports the value of transmission investments through constructive regulatory framework. So all of that emphasizes and supports the case for a premium valuation in our transmission businesses relative to where we are today. So turning our focus to distribution, and you'll see some analogs here with our transmission system. Like our transmission system here in distribution, we have a very expansive and geographically diverse distribution system. That's going to require significant investments over the next 10 years and beyond. We develop, own, operate and maintain one of the largest distribution systems in the country. That system serves about 5.5 million customers and consists of approximately 214,000 line miles and 2,300 stations. In 2021, we delivered over 77 million-megawatt hours to our customers via the system. So to put that -- the size of this system into perspective for you, you could take our distribution system, you can wind it around the circumference of the earth over 8.5x. That's how large that system is. So when you put it into that context, it's actually pretty impressive. As you can see here from the graphic on the bottom left, our 2 largest state jurisdictions, Texas and Ohio. Those account for nearly half of the line miles in our system today. When it comes to our distribution investment, we see opportunity, not only in the baseline investments that are going to be required to keep our systems running and reliable, but we also see upside driven by electrification and changing customer preferences as well. Next slide, please. Thank you. Okay. So our 5-year distribution investment plan currently sits at $10.8 billion reliability and system expansion. Those are the primary drivers for our needs. Over 1/4 of our system in distribution, similar to transmission. So over 1/4 of our system here in distribution or over 60,000 of our line miles, over 2,000 of our station transformers and over 600,000 of our line transformers, those are already passed or will be past their useful lives over the next 10 years. So again, boiling that down into dollars and cents for you there, it would require about $2.1 billion of annual investment just to replace that infrastructure that's beyond its useful life. And of course, we plan the system and distribution similar to transmission, evaluating condition, performance and risk of those assets. So when we think about the long term, so when we think beyond asset replacement, we see potential upside as we work to modernize the system. Today, we're working to build out a long-term distribution investment pipeline. And this is going to be important as we modernize the system and onboard things like electric vehicles and distributed generation resources and energy storage as well. So if you think about the system -- the distribution system and how it was originally designed, it was originally designed to flow power one way, so from a source to a sync. And in the future, we're going to potentially ask that system to behave a bit differently. We're going to need that system to be smart. We're going to need to -- we're going to need to have a high degree of situational awareness and visibility into the things on that system. We're going to need the ability to reach into the system and have a broader degree of control over items on that system. And we're going to need ultimately a system that's going to be able to handle 2-way power flows and be highly efficient and optimize customer usage here in the future. So we're really excited about both the near-term and the long-term investments in the distribution segment that we have before us today. Finally, we'll talk a bit about renewable -- our renewable acquisition strategy. We're moving forward at a very fast pace on that front. And despite some of the challenges that do exist in the market today, we're on track to advance our plans to invest more than $8 billion in this segment over the next 5 years. Nick mentioned at the beginning of the presentation, over the past 9 months, we filed 6 integrated resource plans in our vertically integrated states. These integrated resource plans are important because they serve as the blueprint for which we'll develop and acquire new generation resources in the future. And they really help serve to pave the way for our required regulatory approvals for these assets as well. We have a very large opportunity on this front in front of us. As you can see, we've got 17 gigawatts of potential across different resource types across our vertically integrated utilities here over the next 10 years. And remember that this is need based. We do have a capacity need that's driving this. So we have 8 gigawatts of planned -- plant retirements and expiring PPAs and of course, renewable ports. -- portfolio standard in Virginia. Those are the things that are driving the needs for us in this segment. So we continue to make excellent progress here to achieve our goals of investing $8.6 billion in capital here in this space over the next 5 years. We recently received approval for $850 million of owned wind and solar investment at APCo. We received that approval back in July. We are in process of moving those projects forward. We filed for $2.2 billion of investment for owned wind and solar at Southwestern Electric Power Company. We made that filing a couple of months back. and we expect to file for approvals for additional resources at PSO, I&M and APCo round 2 here over the coming months. So we expect to have a substantial portion of that $8.6 billion that's in our plan today, either approved or in front of our regulators for approval over this quarter and the next quarter as well. So we're on track. We're moving at a scale that's going to position AEP as a leader here in the regulated renewable space. And of course, all of this works to support our goal -- our enhanced climate goals that Nick talked about earlier, the 80% reduction by 2030 and net zero by 2045. And finally, I'll conclude with a little bit more on the Inflation Reduction Act. This bill is foundational to our clean energy investment strategy and the tax credits contained in this bill, those provide clear benefits for both our customers and our investors as well. We believe customers are going to benefit because the credits have substantial value and they're going to start to drive down the cost of energy for these tax qualified projects. To put that in perspective for you, now our North Central wind investments that we just put into service, those cost customers $2 billion. But at the same time, they generate or are expected to generate over $1.5 billion of production tax credits over that 10-year PTC period. So when you take that into account, that represents a significant discount for these resources for our customers, and we're going to continue to aggressively pursue those opportunities. We expect the nuclear production tax credit to have a meaningful and positive outcome associated with our Cook Nuclear facility. That -- those tax credits will benefit our customers in both Indiana and Michigan. We expect the new energy storage tax credit to accelerate the runway for adoption for those resources going forward. We are very excited about that. We don't have a whole lot of energy storage in our current integrated resource plans today. We think that this legislation has the ability to change that. and really truly benefit our customers by accelerating the runway for adoption here in that space. And then finally, on the customer side of the ledger, we think customers are going to benefit from the tech neutral aspect of these tax credits. -- is going to really open the door to evaluate new technologies and really spur innovation in that space going forward to benefit our customers. So we also think investors are going to benefit as well in a few key ways. One is it's going to extend the runway for us to make investments in this space. So we're going to have a far longer period to invest in these tax qualified resources. It also -- the legislation also advantages utility ownership because the bill now allows us to bypass onerous tax normalization rules that in the past have put the industry at a bit of a disadvantage. So we're very excited about that. And the bill also allows us to transfer tax credit. So if we were ever in a situation that we couldn't utilize all these tax credits, we can now transfer them, which serves to limit any potential tax inefficiencies that we may or may not have. Also, there are bonus credits associated with facilities and energy communities and at brownfield sites. And given our service territory characteristics, we feel like we have some solid options. So again, strong benefits on the customer side, strong benefits on the investor and utility owned side of things as well. And of course, the pay for here, as Julie mentioned, is the book profits minimum tax. So of course, that's going to naturally offset some of the benefits that our customers will receive on the credit side. and just goes to show that there's never really a free launch anywhere. So bottom line here is that our -- this legislation fits very well with our clean energy strategy going forward and provides us a pretty big tailwind on both the investment side and insofar as achieving our climate goals as well. So we're very excited about where we're situated and the path that we're headed down on the capital investment front. And with that, I will turn things over to Matt Satterwhite to talk about some of our key regulatory initiatives. So thank you.

Thank you, Antonio. I'm Matt Satterwhite, the Head of Regulatory. So yes, we finally get to the part you all come for to talk about regulatory strategy. I know everyone is really excited about that. It is funny, though, I -- never ceases to amaze me how exciting it is when you hear like Antonio talk about all the opportunity that we have. There's so much opportunity in this company, but we've got to go execute on it. We got to make sure we can recover that and go in front of our regulators and get that done. And that's really the key to how we put things into action and execute for all of you and for our customers. So I want to take a second to sort of talk about our regulatory strategy overall. We're a firm believer in moving more things to regulated side, and that's because we rely on the regulatory compact. The regulatory compact is we provide safe, reliable service. In exchange for that, we get the opportunity to earn a fair return. That's vital to everything we do. and there's 2 sides to that. Obviously, we have our responsibility to go out and provide safe reliable service. But there's the expectation that when we do that, we made good decisions like what we've shown today, we're going to have the opportunity to earn that return. And so a lot of what we do in our regulatory strategy is talking to our commissions, talking to our legislators talking to everyone in our states to make sure that compact is upheld, and both sides are upheld. We're going to hold our part. We do the other side uphold their part as well. So that's what we're really focused on. Julie -- now Nick has really pressed this. Julie came from regulatory, so she's got the regulatory flowing through her blood as well. She wants us to really push this as well. But it's that premise that all public utilities are based upon that you have to keep it focused, and regulatory really does. So with that, let me talk about the strong foundation that we have. Obviously, we've done a lot of work already to be able to meet the challenge that we have now with the transition in the industry. We've moved significantly to tracking, Julie covered this earlier from 68% to 85% tracking mechanisms. We're not done yet. There's more to come. When we talk about closing the gap of ROE and authorized versus earned, this I get from moving away from the podium here. It's tough for me to be constrained back here. I'll do better, sorry. So we're not done. We're going to move towards more tracking mechanisms as we move forward in the cases that we have coming up. It's really important, again, to uphold that regulatory compact to make sure we have that mechanism. We know we can do that investment and we can bring those benefits for customers. So we're going to be doing that. But we've been doing the work all along. We've been able to lower the basis points that we have associated with moving towards the tracking that we've done from 2018 to 2022 going forward. We really believe in kind of reducing that regulatory lag, having those mechanisms that really decrease that and allow us to focus on the execution to get bring those benefits for both customers and investors. So go to the next slide. This is really to show, and you've heard it from most of our speakers today, we're focused on our customers. We understand that you can't just go out with all these great ideas and do whatever you want to do. Part of that compact is making sure you have the customer in mind with what you're doing because that's who we're here to serve and that's who we're delivering. So I just want to make sure we kept -- showed everyone the focus that we have and we're in line in our states with where are the other companies are. We watch this as we make decisions. We try to make sure we're in line with where the other utilities are. Now this is a 2021 view. It fluctuates throughout the year. sometimes you have people in rate cases and different riders that come at different times. But it's something that we put in the backbone of what we're looking at constantly to make sure we're focused on customers and make sure we're in line with all the peers that we have in our states. I couldn't come here obviously and not talk to you about the increasing fuel cost that we have. I know that's a big issue that we've talked a lot about when we come and talk in investor conferences and one-on-one with everyone. I won't go into all the details here, but I want to include some facts on that. and let you -- show you how we are being proactive, working with our regulators, as I've told you in the past, try to put mechanisms in place where we could help our customers and decrease the impact that we're having right now. So real quick up here. There's a couple of examples, Virginia and PSO. They were able to -- they have an annual fuel clause they recover. We're actually able to spread those out a little bit longer, working with our customers and our commissions to make sure we recover that over a longer period of time to help customers. In West Virginia, they're actually in hearing right now as we speak on their fuel clause. There's been some creative mechanisms brought up there and talked about. We even talked about moving to a quarterly update of the fuel because a lot of the problem is you wait so long at customers all at once, it just kind of builds up. Does that make sense? We've also talked about securitization as a possibility. There's been discussions in West Virginia. We've done that in the past. The balance has grown. So we'll see if that makes sense or not for customers on the company as we move forward to decrease the impact of that. But an interesting one I want to talk about is Arkansas. This is where we got proactive and really tried to tying things up properly. So we had an under recovery in Arkansas that we had to put forward. And Arkansas has seasonal rates. They're summer peaking so rates are higher in the summertime and lower in the winter time. So what we're able to do is work with the staff and file something that allowed us to implement the under recovery of fuel at a time period when the rates were going down for the winter period. So customers won't see as much of a shock when they see a difference between the 2 rates. It will be more in line with what they were paying before. Now they would have -- winter rates were dropping at that time, so we can kind of fit in at that same period and it won't be such a difference between what they saw in the summer months before. And those are the kind of things we sit and we talk to staff in the past, I've talked to you about how we work with commissions and work with staff all the time. We don't want anyone surprised by this stuff. We don't want any customer surprised by this. Raja and I, we talk a lot about, with our big customers, how we warn them ahead of time, what's coming, what to expect because the larger companies, they have people that have the spreadsheets, have their budgets, they're putting those out there. We want to make sure that we're communicating with all of our customers to make sure they know that. So we do a lot of work in this area to make sure customers know and they are aware. Let's go to the next slide. So here's sort of something I finally have to talk about stuff we're doing in the future, usually when I'm talking to you, I'm kind of constrained and can never share some of our plans and new things that we're doing. But there's a huge focus on closing the gap between our earned and authorized ROE. You saw earlier we talked about the different mechanisms that we have. But we're really focused in a couple of the key states we put on this slide because all of you asked about these all the time. But it's not just -- it's not just limited to these states. It's something we look at in all of our states all the time. But just to talk about a couple of these. APCo is a place where you look at the regulatory compact and you want to be proactive and push things forward, but part of it is also defending yourself at certain times when the regulatory compact isn't upheld on the other side. So a lot of you know about the triennial case a couple of years ago. The commission came out with a decision in that case, we did not agree with that decision, and we thought it really did not follow the statute. We actually appealed that case the day after we got the order because we were so confident that this didn't apply the statute properly. It's a hard decision to go appeal. Obviously, you want to be a partner with your commission, but we also need them to be a partner with us, and we're not supposed to make each other happy all the time. So there is some tension from time to time. But we had to do this because we knew they weren't applying the regulatory compact properly. Happy to say recently, the Supreme Court rolled in our favor and said the commission did not apply the statute properly. And the Virginia Commission, to its credit, acted quickly, authorized us to put in interim rates. Interim rates were actually implemented on October 1, and they're kind of looking at the final rates right now to see what the outcome of that is going to be. But they also allowed us because -- we appealed it, we also asked if we could have sort of a surcharge in the middle, pending the resolution of the case. We were told no, but we preserved our rights and the commissions also allowed us to go back to February 2021 to collect the rates that we should have had in place if the commission had applied the statute as the Supreme Court said. So that's just an example of you got to constantly be vigilant. You have to have those tough conversations sometimes and take those actions with your regulator to make sure you're defending yourself. So APCo seeing that benefit come in to work on that closing the gap. They also have their new triennial coming up that will be filed next year. At this point, they're trending to be eligible for a rate change as well in that case. So we'll see what happens when we file that next year and where things turn out. For PSO, Peggy is here. [indiscernible] -- so she can probably talk about PSO. She is like, no, Matt, you talk about it. PSO, the focus there really is on, what I talked about earlier, there's tracking mechanisms. They have a lot of transmission and a lot of distribution that we need to make sure we're tracking to really kind of solve that lag problem. We've really looked at all the operating companies to see what are the big things causing that lag, and that's what's really happening in the PSO territory. That's a conversation we'll have with the commissions. We'll put that in the case. There's a couple of different theories you can put in the case, but ultimately, we have to tell the commissions, we have to solve this problem for regulatory lag or we have to come back and file a rate case every year. We don't want to do that. But if we have to, to make sure we're upholding the regulatory compact and having the commission uphold their end, we're prepared to do that. But that's part of the policy conversations we have just to kind of show the facts the way that they are and really make sure we're increasing visibilities for those mechanisms where they make sense. There is sort of an overall drive within AEP right now to make sure we're focused on that distribution investment. We talked a lot about transmission. Did you hear transmission is a great thing in AEP and that might have come up today. But we're not leaving behind the distribution. It's vital. It's what touches our customers directly, it comes up to their doorstep, right to their house. And we want to make sure that we're investing in that. And it's interesting, some of Julie's appointments for her new leadership with Peggy and Chris, they're operating company presidents, and they've been right close to the customer. And it will be interesting to have the conversations exchange. We have a good mixture I think of former ex-presidents and people that weren't in those roles, so we can have that healthy tension amongst ourselves and make sure we're helping our customers and are very focused on it. So I look forward to those conversations that we're going to have, and Julie really facilitates that. Let's make sure we put everything out and debating these things out. So we're really trying to move forward and make sure that we're investing as much in distribution and helping the customers but getting the proper recovery for that. I'll skip SWEPCO for a minute because I finally have a victory lap from the things I told you about some of the other meetings, and I want to [ finish ] with that one. But on AEP Texas, we're really working -- they'll be developing a rate case here soon. And one of the drags we have on ROE there is when you file a rate case, you can't file your TCOS and your DCRF in that same period. So we're talking it out to the commission, potentially legislature, but how we can fix that. Looking at rate design, some creative rate design with Judith and the team there, about what we can do to kind of help customers in those areas. So we're really focused on Texas -- and then the other things, we've looked at how they do incentive compensation and the other things that sort of drag in cases that are just allowed. And we're going to go to the commission and sort of talk with a new focus on these things to make sure that it's understood you need the utility to be competitive and strong so it can deliver all these benefits, and we're going to do that with them. Then finally, SWEPCO. We get a lot of questions on SWEPCO. Obviously, we've moved forward with some formula rates in Arkansas that are approved. We're almost finished up with the Louisiana base case that's the formula rate as well. But I'm happy to report that last week, we made the initial filing on the putting Turk into rates in Arkansas. As many of you know, and those that don't, previously, the Arkansas Commission had approved the Turk Plant to be in rates but it went up to the Supreme Court was appealed on a technicality stricken that was about which statute they relied upon. And so we weren't able to put that in rates. So that's been a bit of a drag on the ROE for a while. In fact, Nick told me, look, I'm tired of talking about the bubble chart and saying and everyone knows about the Turk part of that, so solve this problem. So we got really proactive to decide, let's go out and put this at this time in front of the Arkansas Commission. And it makes a lot of sense. It's a nice hedge for the commission. During [ Yuri ], it was very productive and operated there. And it gives the Arkansas Commission a chance to really have that benefit for customers for something that they had already approved. So we filed a motion for confidential treatment and we'll be filing the final document probably here in about 30 days to really put that in rates to move forward. There is a capacity need in Arkansas, and part of it can be filled with this. So that's one of those you've always asked in the past, when you're going to do that, it's done, filed right now. We'll get the other filing and I'm sure we'll talk about that a lot as we talk about things in the future. Next slide. Another exciting thing that we're doing right now is really focused on our generation. We have states that have multistate generation as part of their portfolio as they move forward. Generation at commissions and states has changed over time, states it's much more of a personal thing now as each state looks at what their generation load is. And SWEPCO and APCo, two of the ones we're really focused on, there's just different policies that are focused on between the states. Everyone is well aware of the differences between Virginia and West Virginia and where they're focused, and we can't have customers or shareholders or the company caught in the middle of that. So really taking a much deeper dive to make sure we understand how we can react and then be proactive in bringing solutions when you have states that are going in different ways. So we're really stripping that down, making sure we can move forward and go to our commissions and really work with them, find out where they want to be because we want to work with our states and make sure we're implementing their energy policy. But we also want to fit the values of AEP and make sure we're going to a better place for our customers. And then in SWEPCO, that's 3 states and they share generation. We have to look at what we've done in the past and the legacy assets that we have. And if there's different retirement dates or commissions want to treat things differently, what we do with that? But there's also a much larger renewable input out there in our western jurisdiction. And with those 3 states, we want to make sure we're learning from the past and making sure that, that's much more modular, much more flexible as we maybe need to break things up potentially, so that each state can try to stand on its own. So we're working with Antonio's group and everyone all the time to say, "What are we doing as we move forward with these so that we can really understand what options that we have?" We don't want to sit back and just wait for states to say, "Here's where we are." AEP doesn't do that. We want to be leaders and really show here's where we're going and bring solutions to once they tell us the policy that they have, how we can solve the problem, so it's mutually beneficial for everyone. So we'll be talking about this over time, but really taking a real deep dive into that so we can understand that, meet the regulator and the state where they are and then also meet our investors and our customers where they are as well to make sure we have that true benefit for our customers. So overall, we're staged and we're ready for the transition that's coming. The industry is changing. There's new commissioners coming all the time and they really need leadership from companies like AEP on the regulatory side to come in and explain things and they say, here's how we can get this done and make sure that regulatory compact is upheld and that we have the opportunity for that fair return. Otherwise, the whole system breaks down. So we're dedicated to do that. We have the success in place already. We continue to make new filings, but we're not going to rest on our laurels. We're going to keep pushing. Julie is constantly saying what's next. And really, it's about calling the question. We're not going to sit back and wait to see what happens. We're going to call up a question. Because either it's going to be answer A or answer B, and we're going to be ready for what we're going to do with the next step based on whatever the answer is going to be because you can't sit back, you've got to actively manage this to make sure we could succeed all the things that Antonio and everyone has talked about. So sorry, that's all I can talk about right now, the regulatory stuff. I know everyone's pretty bummed. You want to probably talk regulatory for a while, but we can get a beer afterwards on the street, talk all the regulatory you want. I keep inviting that. No one shows up, so I don't know. But Raja is going to cut next and talk about what we're doing on the affordability side and what we can really do to try to help our customers, which is why we do what we do. Raja?

You can always count on Matt to make regulatory funds. So that's guarantee. I'm looking at my watch, it's 3:15 and Julie talks about active management. So it behooves us to act -- it behooves me to actively manage the time now going forward. So what I will do is kind of talk about a couple of things. One is -- can you go to next slide. Yes, I'm going to talk about affordability. I know we talked about in order to make $40 billion of investment that Julie talked about, affordability becomes the key paradigm to make sure that our customers not only derive for the benefits, but also pay for the cost that they incur. The first piece of affordability is a relentless focus on O&M. And I know Julie talked about it in her slide how she -- I know how we intend to focus on O&M. But the second piece is, is the investment [ in ] regulated renewables? With the plan that we have for investment in regulated renewables will -- has already provided benefits. In fact, the North Central facility that we put in place already provided last -- for PSO and SWEPCO provided fuel savings of $150 million last year. So our fuel -- deferred fuel problem that we had that Matt talked about would have been $150 million higher for PSO and similar for SWEPCO, if not for the North Central investment. And the future investment that Antonio talked about with us about regulated renewables will provide the stability of fuel -- will provide the fuel hedge and stability of rates going forward. The third piece which I think Antonio and Nick and Julie talked about was the economic development piece. And this one, we do have a fantastic story, and we'll talk about that a little bit more in detail. In terms of how the economic development team has made significant progress in terms of getting projects and even the forward-looking projects that we have in the pipeline, I'll talk about that a little in the next slides. The last one is we are in this unprecedented stage where there is multiple legislations that are passed at the federal level. You have the BIL, the build infrastructure law. You have the IRA and the IIJA, those have significant components of federal grant activity that as utilities we intend to tap into. For example, just the broadband element of it, which is the $1 billion of middle mile broadband. We submitted proposals last week for around $300 million of middle mile projects to NTIA, okay? Similarly -- and all of these are comparative proposals. That means part of this is funded by federal grants, the remaining would be funded by ratepayers. So it obviously makes behooves the state regulators to approve these investments if you're successful in getting the federal grants because part of it is already funded by the federal government. And those are not included in the CapEx plan, by the way. The second element is the grid resiliency ones. DOEs is putting proposals in late this year and early next year for close to $2.5 billion of grid resiliency projects. We intend to be active in this space to make sure that our customers derive benefits not only from these investments, but also from the federal grants that the federal legislators passed on this front. These are all, again, comparatively big projects, so we intend to be active in the space. In fact, our regulators ask us in terms of what we are doing to make sure that we are getting these federal grants on behalf of our customers. So that's a key element of it. Can you go to the next slide. So let me talk about economic development. And I think it's -- the economic development team has been with AEP for last multiples of years. In fact, we actually made that a central organization to make sure that we are indifferent of where the new load growth goes within our footprint. As long as they are -- they land in our footprint, that is our main purpose, okay? In terms of the nature of economic development activities, the key reason why we see significant amount of investments in economic development is one is access to transmission, and I will talk about that a little bit more. The second is access to renewables. So when we look at the load growth that we have seen in 2020, 2021 and 2022, the data center load growth, which I think Julie talked about, we already have committed load of 400 megawatts, 1 point -- I'm sorry, already -- load already in place of 400 megawatts, committed load of 1.5 gigawatts and potential planned load of 4 gigawatts within our footprint, okay? The second one is chemical manufacturing. That's 3,200 direct jobs that's already committed in our footprint. Primary metals, which Nucor is one example of it. It's 400 megawatts with 1,400 direct jobs. And the last one is machinery and manufacturing, which is 400 megawatts with 3,200 direct jobs. So in totality, for the last 2 years of economic development, which has been unprecedented in our AEP's footprint, we basically are seeing 22,000 direct jobs and 2,500 megawatts of load in our pipeline. And as Julie mentioned, we are going -- we are not just focusing on load, but we are focusing about jobs in our footprint because they provide long, sustainable uplift to our communities and for them to participate. So if you go to the next slide. So Nick talked about what we call it, reshoring, onshoring these opportunities. And we see this trend as something that is real. And it started off with not just with the Chips Act that was passed by federal government with IRA, which promotes domestic manufacturing, not only domestic manufacturing, but also promotes domestic manufacturing in our not so well to do areas. That provides a meaningful ability for AEP to attract this load. And we've seen the initial indications of it. One would be is the Intel project in Central Ohio. That is probably the single largest economic development activity that we've seen on our footprint. The first phase is going to be $20 billion of 3,000 jobs of an average income of $135,000. And that's meaningful for AEP's footprint. Our customers are not coming from the East Coast and West Coast. Our average income typically is around $45,000, $50,000. So getting jobs of $100,000 is significant for our footprint. The second one, obviously, is the Blue Star, which is actually a PPE manufacturer in Southwest Virginia. So where we were able to -- where we will be able to attract 2,400 new jobs with $800 million of investment. And the last one is Nucor, which is in APCO, which is $2.4 billion investment with 800 jobs with an average payroll of $80,000. And that's in West Virginia. So in summary, what I will say is the changes that we are seeing in -- the changes with us for the federal legislation even our states that are promoting domestic manufacturing, we see the -- what activity that we've seen in 2021 and 2022 to continue going forward. And that basically builds on the load forecast that we have of 1.7% load growth as opposed to a negative 0.5% load growth that we saw in the [ DC ] between 2015 to 2020 as opposed to that we are now projecting a 1.7% load growth between 2020 and 2025 going forward. And all of this is happening because of access to transmission, which is the single largest determination -- determining factor and b, renewable growth that we can provide access to renewables that want to go -- the 4 companies that want to go greener and faster. With that, hopefully, I managed my time, and I'll turn it over to Julie.

All right. Thanks, everyone. We want to get to your questions here. But just before we do, I want to say thank you. And I hope that you're as excited about being a part of this industry as I am at this incredible time of transformation. It's mind blowing to be perfectly candid. Anyway, just to really quickly recap our commitments to you, 6% to 7% earnings growth. Dividend has grown to grow in line with that, with a payout ratio target of 60% to 70%. Strong balance sheet committed to it. It all starts there. We got to have that. Obviously, upping our game as it relates to our ESG goals. So that continues on. And as I mentioned before, you can expect to see this team engage in active management of our portfolio. We are not finished. Obviously, we came up with a teaser on the retail business today. So stay tuned. We'll report back to you on that as we continue to get a little more traction. Obviously, we've got to close Kentucky. We've got to close the unregulated contracted renewables. We'll get after retail and we'll continue that effort. So stay tuned for that. Key takeaway is this, in my opinion, AEP has a proven track record, consistent earnings growth. We continue to deliver within or better than our guidance. We offer predictable, attractive relative earnings growth proposition, especially as it relates to our transition as we move to a clean energy economy and continue to enhance the energy delivery infrastructure. Did I mention transmission? I thought I did. It keeps coming to mind. Anyway, so look, on a personal note, I know there are folks here in attendance today that helped me so tremendously with my career. And specifically, what I'm talking about is when I started out as a buy-side analyst, I actually did work at the Public Utilities Commission. For some reason, that seems to have found its way into my life and into my blood, but I am forever grateful and thankful. And I can assure you I promise to work to earn your trust and respect every day. And again, thanks to those folks who helped me so much when I was learning to cover this space and got me access to management teams, taught me how to build earnings models and all that stuff, I think that will pay dividends now because I have not forgotten a single thing. So thank you for that, and I'm looking at certain faces out there, you know who I'm talking to. So thank you. Thank you. Thank you. So -- we are in this for the long game, and I know several of you probably know I'm a long-distance runner. So I'm going to ask you to kindly put your shoes on and join us in this race. We might do some speed work in the middle here so make sure those are comfortable shoes, but I promise it's going to be exciting and I want you to be a part of it. So thank you for everything, and let's do some Q&As. How about that? Are we good? All right. Darcy?

Okay. So we'd like to welcome you to the Q&A portion of today's presentation. We're going to be taking questions from in-person attendees only, but we do welcome all questions via e-mail at any time. We're going to have Annie from our Investor Relations team right over here walk around as well as Sarah from our Corporate Communications team. They're going to have mics with them to ask questions. So just raise your hand and they'll come to you. Look at this. We do have a small change with the microphone usage for our team members here. The ones on your lapels aren't working. Matt, you experienced that? It wouldn't be a day without a little bit of technical difficulty. So we've got some friends bringing in some mics for us to use. Julie, you can use that or there's also a mobile one here. Just have to turn the light. Make sure it's on green. They should all be on green and we're good to go. So with that, let's go straight.

I'm good here. I'm good here. So I'll quarter back here. Andy?

Well, since you're so nice to me, may I get the first question? Can you hear me?

I can totally hear you.

Okay. I said since you're so nice to me, I get the first question. But this is Andy Levi from HITE Hedge. First, I mean, I think Julie is going to do an amazing job and actually was very excited as I think a lot of us [ wish ] that you became CEO. So I and I think everybody else wish you best success there. So I do have actually a real question for you. So you talked about marathons running. And so I guess, in my head, can you run a little faster? And I guess what I mean by that over time, if you look at your transmission growth, it's 10% a year, which is amazing. But if you kind of look to the 6% to 7%, that means the rest of the business is growing below 6% to 7%. I guess the calculation I have is about 4%. So how do you get the other part of the business growing faster so the growth rate over time can grow faster?

No, I appreciate that. So Andy and team, we all know that our stated growth rate is 6% to 7%. You may recall, we upped that back in February because we were at 5% to 7%. We lost the bottom half off. And as you mentioned, and I continue to mention, the investment opportunity that we're pursuing right now, easily 10% growth from a transmission perspective. What we need to also be mindful of, as you mentioned, customer rates. You need to be real sensitive to that. And that's why the renewables play so nicely into this. Although it is lumpy, and you can't do that immediately. There's a little bit of a lead time on that. So that's really going to be more of a story for us as those come to fruition in like '24, '25 time frame and beyond. So keep that in mind. But Andy, yes, I absolutely want to pick up the pace. That doesn't mean I'm going to change my growth rate, but it does mean that I can look at more portfolio management type activities, making sure that we are absolutely where we need to be from a business composition perspective, getting after efficiencies -- because of marketing getting after efficiencies, that allows me more and more capital, that allows me to keep the engine going. So that velocity of capital is what we are absolutely after. And I don't know, Antonio, do you have anything that you'd like to share on your front since you're kind of at the center -- at the center of all this?

Yes. No, I think you covered it off pretty well. So in addition to balancing customer rates, I mean, we have a market there that we participate in that drives your ability to execute on some fronts, too. So -- but I think you covered it off with the customer rate limitation there.

Just anything -- any details you could share around the retail businesses, earnings, EBITDA? Sort of how should we think about the implications to your pro forma earnings profile? And then I have a follow-up question.

Yes, you bet. So on the slide that we had today relating specifically to the retail business, if you look in the footnote, on -- I think it's on the left-hand side, I must have memorized these slides, right, $0.06 is embedded in our 2022 guidance for that particular piece of the business. So we'll give you more granularity at EEI as it relates to the waterfall for 2023 when we go to the EEI conference. So that's something to think about. As it relates to more balance sheet orientation, it is not a capital-intensive business, as you know. So it's really about management of asset and risk liabilities. But if I take those and I put them together and let them against one another, my equity component associated with this business, in particular, is about $170 million. That's the net, so the equity component. Lot of that's working capital related. And then we've got maybe $30 million of that related to systems activities that support our systems investments, that support that piece of the business. But stay tuned. This is a little bit of a teaser today. We'll have more to come on that, okay? And then did you have a follow-up question?

Just can you opine on sort of the valuation? I think you had a beautiful chart here highlighting the value of the transmission assets, where they were actually transacted versus the trading valuation, right, not just for AEP, but other businesses. Just in that context, how are you thinking about the nonregulated strategic review? The announcement that came over the weekend was more or less 11x EBITDA and it was kind of in line to where yieldcos were typically transactions have happened at a higher value. So any thoughts there? How are you thinking about the interest in market there for your ongoing strategic review that is?

For sure. So just as a quick touch point on transmission since I can't seem to keep my mouth shut about it. So if you look at the valuation over here on the right side of the chart. I mentioned the minority sales. Those are going off just ridiculous multiples. We'd love that. But I get it. It doesn't entirely hang that way, but we need to have a goalpost here. So that's a 40x there. And then on the flip side, you got the 22.3x multiple for select high-growth transmission peers. So if you look down at the footnote, we have a couple of those called out in particular, so Amarin, WEC, Fortis, so you get a sense there. And then in the middle, those are some statistics that we got some of our investment banking friends on the T&D transactions. So that will give you some goalposts there. And then, of course, I took that 19.8x our team did directly from you sell-side folks, right? So we put those reports together and used your numbers. So that's where we came up with those particular figures. But again, I'll pound the drum $6 to $58 upside, just saying okay, just saying. And then I don't know, Greg, did you want to talk at all about valuations or thoughts? I know what we don't want to do is negotiate against ourselves on the unregulated renewable sale. But any thoughts in terms of how robust that process has been?

Well, we have high expectations, but the market will tell us here very soon. So I don't think I can comment on the valuation level. But we saw a good print out of the weekend. Our portfolio is very well accepted in the market. So I'm expecting good things.

Stay tuned.

I want to talk about transmission a little bit. So since this seems to be a big focus for you guys. So one could argue that when the minority sales were done, parent company did not really receive a full uplift in the valuation. So when you look at those versions, is this a theoretical kind of exercise for you? You kind of play in a sale? Do you think that could be different for you? You will actually receive that premium in your entire -- some of the population? Or how should we think about, I guess, your thought process here?

Yes, I totally understand that. And the idea was to go through the exercise to just even extrapolate and say, what could this look like? The reality is this is core to our business. We have no interest in necessarily monetizing any of this piece of business. But what we do want to do is a better job for you all to understand what the earnings stream is particular and where some of these trades have occurred. And I know it doesn't entirely hang like that or look like that because it is bundled and it is not as easily transferable as it relates to my goodness, this isn't a direct pure play. I would say that is the case for a Transcos business because that is a pure play. But I guess it's a little more of a playful mathematical way to try to get your attention and get a better understanding of where that valuation might fall out. Because I do think it is something that gets a little bit overlooked simply because of the way we're structured. So we'll continue to try to do a better job for you all because we know you're covering multiple companies, and you have multiple earnings streams, but we will continue to be mindful of that, too. as it relates to where those transactions could ultimately shake out with the understanding that it is part of the AEP family. So I get that.

On the competitive business, that's under strategic review, right, so $0.06 in the footnote that we see is the retail part of it. What about the rest of it? I guess, kind of on a more normalized basis, right? So I'm just trying to understand how much of that is, I guess, trading business versus asset platform business and renewables? And how much debt would be associated with those assets?

Yes, I appreciate the question. Let me try to answer it this way. When you look at the guidance for 2022 that we had out there, the Generation and Marketing segment was, I think, I'm going from memory here, $0.31, okay? And so we know $0.06 of that forecast relates to the retail business we talked about today, about $0.13 to $0.17 related to the contracted unregulated renewables. So you start to strip those 2 pieces away, and you can do that math. So $0.31 last $0.13 to $0.17 less than $0.06. That will give you a better understanding of where the residual piece of the business ultimately shakes out, if that kind of helps. We'll give you more detail, too, with the 2023 look when we have that available in the waterfall form at EEI, okay? I appreciate the question. Steve?

Steve Fleishman, Wolfe. Nick, congrats and Julie couldn't be happier for you. So just a question on the asset sales. The -- first of all, on Kentucky, just the $200 million difference, just how are you making that up? And I know it's not huge, but...

Yes. So I guess the way I'd characterize that, and I know Matt has been a lot closer to the transaction, too, so I may ask him to jump in a little bit here. As we continue to work through the process, cover some regulatory hurdles, et cetera, and have our conversations and negotiations with Liberty, it seemed appropriate and acceptable to both parties to be able to get comfortable with the $200 million reduction in the price that we had originally posed back in October of 2021 when we came out. So that's ultimately where we are. As you know, Steve, we threw that then into our cash flow forecast because I knew that would be top of mind for folks because as you may recall, when we initially announced this transaction, we removed about $1.4 billion of equity in the plan for 2022. So we've reflected that now in terms of that movement, not only the reduction in the sales price, but the fact that it will close in January of 2023 to demonstrate to you that we're still very comfortable with the plan. The metrics hanging together. There's been no incremental equity return to the financing plan. And I don't know, Matt or Nick, if you have any other?

Yes, I would just add, they're our partner. We're going to run a plant with them through 2028. They're going to take care of the customers that we've taken care of for 100 years. And so there were a lot of issues involved that they raised and we talked about. And I think it's just a testament to our partnership as we kind of move forward to listen to each other and get to the point where we are now to give people what they need to take this next step because that's how we do business with our partners.

Yes.

Okay. And then just on the other asset sales that are pending, how should we think about use of proceeds from both of them for kind of debt reduction purposes versus equity replacement purposes? And also by -- is there any opportunity to improve like the business position with the rating agencies by kind of getting out of these? Or you're kind of going to be in the same place?

Yes. Let me answer the last question first. In terms of risk profile and business position, I don't anticipate a material shift as it relates to our rating agency views. I'll leave it to them to make that conclusion, but that necessarily wasn't top of mind for us. And as I continue to come back to -- I use Moody's as kind of my guidepost here, Baa2 stable type rating is very comfortable for us, keeps us right in line with our peers and allows us to continue to use the balance sheet to continue to grow the business. And then thank you, Andy, for throwing that up there, whoever is doing the slides here. So when we look at our equity needs, so Steve, as you know a dollar comes in the door, it's kind of fungible once it comes in the door. So say that we get the transactions closed in 2023, the equity unit's conversion that has to happen, that's already committed, right? So that will be a done deal with the mandatory convertibles we had out there. we could conceivably take out the DRIP. We don't need that. But what you can anticipate is, at least in the front end, what I'd probably do is likely not either issue some debt that we had initially thought that we would issue or issue less or maybe cover off some maturities, but then recalibrate as I go out through the future years that would allow me to then address things in 2024 and beyond. So for example, I would be able to play with my cap structure such that I don't need to issue the equity because I've not issued as much debt or I covered off maturities. So we'll revise our cash flow forecast once we get the transaction done from a -- like an unregulated renewables perspective because what we don't want to put a dollar amount out there right now anyway because be negotiating against myself.

Just kind of high leveling it though. The other part of that is you lose cash flow from the business as you're selling. So when you put it all together, like Duke came out and said they're selling renewables, but they're going to be using the money to pay down debt? It sounds like you're in a position where you don't just have to pay down debt even losing the cash flow that some of its offsetting equity?

That's right. We're thinking about it the right way. Absolutely.

Nick Campanella, Credit Suisse. Just as it relates to the 4% bill inflation that's baked into the plan. Just how do we kind of think about the effect of fuel on that 4%? What's kind of reflected there from a commodity environment with gas forwards and electricity prices and how that can change?

Yes. You bet, I'll take a whack at I'll probably toss it over to Matt and Raja a little bit to talk about that. But as it relates to the 4%, that is a longer-term view, okay? And on average, it doesn't actually go that smoothly and it varies from operating company to operating company. As it relates specifically to fuel prices, and I'll let Matt talk about the stuff that he kind of just walked through a little bit here a few moments ago in terms of how we're handling what the deferred fuel balance is sitting on the balance sheet because that will have to come through too. But what we are anticipating as it relates to fuel cost going forward is that over time, if you look at the forward curve, that it does come down over time and starts to even out a little bit. So you see a little bit of a blending of the rate. So that does incorporate our longer-term view of 4% on average, does incorporate those forward views of fuel. We also do our internal fundamental analysis, too, to kind of either validate that or go in a slightly different direction. But Matt, did you want to talk a little bit about how we're dealing with the deferred [indiscernible]?

As we do look at the forwards, we've seen gas do this over time, go up and come back down. So we're expecting that to go down in the future. But it's something to Julie's point, we're talking to commissions about how we impact customers. The commissions also don't want this to happen, but they understand that fuel is a flow through. Back to that regulatory compact, you can't just take that away from the utilities, you're providing that to customers. So it's really sort of a mutual problem that the commissions and the companies are working on together. But as we do look forward over the future, we're trying to find those ways of finding those sweet spots to decrease the pressure on customers. Ultimately a long-term play is exactly what Antonio and Julie have talked about, and that's why we're trying to make that transition. But in the interim, it's kind of all hands on deck to approach that.

And then as it just relates to the organizational chart. I know CFO to be announced you've had a deep bench for a long time? And when can we expect an update on that front?

Yes, we're working out right now. So I hope to be able to have an announcement in the not-too-distant future. I don't have a specific date yet, but we are well in the throes of completing our interviews with the leadership team and hope to be coming back to you in the not-too-distant future because I am doing a little double duty right now. How about that?

One thing is for sure, we can't have CEO, CFO whatever else in the same position. So we've got to get them.

You're talking about Endurance Sports.

Mailroom just doing it all.

And one thing on your previous question, though, there's a lot of discussions going on with commissions, and we really need to focus on the partnership of ameliorating the volatility of what's happening in the market. And one of the main issues is not just a matter of dealing with fuel issues, whether it's regulated renewables or so forth or securitization and all those kinds of techniques that are in place to levelize things for customers. But the other is on the capital side, deploying technologies to allow customers to understand and get pricing signals so that they can adjust their monthly bill. Because when they do that, that also helps us on the unrecovered fuel balances. So I think you're going to see a lot of work going on in the industry associated with that kind of activity.

It's Shar. Not to paint Greg into a corner here on the commercial sale because I hate to do that. But I know, Greg, in the prepared remarks, you were mentioning that you were hoping for the same results as you saw over the weekend. Maybe just elaborate on point. Was it the multiple you're referring to? Was it the players involved? Obviously, you know the assets well that just transacted. Maybe if you can just contrast the 2 portfolios, especially as we're thinking about the DevCos and maybe we can back into more accurate multiple?

That's a loaded question. Well, I think overall, I think the view on renewable assets is high right now. And there's enough differences between our portfolios that it's tough to narrow in how they would be treated. The one that traded over the weekend, mostly solar. You had Dev [ and ] operating. Ours is mostly wind, just operating. So it's tough to draw a direct line in comparison. But I would say, overall, I think the -- it looks like we should be expecting a good print. But it's tough to decipher exactly what the Con Ed sale means to us.