American Electric Power added $22 billion of spending and $5.2 billion of stock; CFO won't promise 24% again
American Electric Power added $22 billion of capital spending for $5.2 billion of new equity, 24% of the increase against an industry norm its own CFO puts at 30% to 40%. He would not promise the ratio survives the next addition.
Vincent Jiang · 3 min read
American Electric Power+0.57% — American Electric Power, up 0.57 percent today, the Columbus, Ohio utility serving 5.6 million customers across 11 states, rolled out a $100 billion five-year capital plan on October 28 2. The quarrel on the earnings call was about who pays for it.
The CFO would not lock the 24% equity ratio
Chief Financial Officer Trevor Mihalik said AEP added $22 billion of spending while raising equity funding by only $5.2 billion, so new shares cover 24% of the incremental build, against what he called an industry norm of 30% to 40% 13. Ross Fowler of Bank of America+2.10% — Bank of America, up 2.10 percent today asked whether 24% is the right ratio for modeling capital above the $100 billion 1. Mihalik said he would not "box ourselves in" by promising every future dollar of capital gets financed "at sub 25%" 1.
The ratio leans on equity AEP has already sold
The 24% works because most of the selling is done: over $5 billion of equity forwards, contracts to deliver shares later at a set price; $2.5 billion of marketed growth equity across two years; and a $1 billion at-the-market program, which drips stock into the market, finished before the quarter closed 1.
About $55 billion of operating cash over five years covers more than half the plan, and funds-from-operations-to-debt, a credit-rating yardstick, runs at 14% to 15%, above the 13% downgrade threshold at Moody's+1.67% — Moody's, up 1.67 percent today and S&P 1. The build still outruns the cash. Capex exceeded operating cash flow in nine of the last twelve quarters, $13.4 billion spent against $7.7 billion generated over the four quarters through June 7.
AEP's capex has outrun its operating cash in nine of the last twelve quarters
- Capital spending
- Operating cash flow
Data
| Capital spending | Operating cash flow | |
|---|---|---|
| Q3 '23 | $1.73B | $1.79B |
| Q4 '23 | $1.61B | $1.34B |
| Q1 '24 | $1.76B | $1.44B |
| Q2 '24 | $1.56B | $1.46B |
| Q3 '24 | $1.85B | $2.17B |
| Q4 '24 | $2.86B | $1.73B |
| Q1 '25 | $2.1B | $1.45B |
| Q2 '25 | $3.28B | $1.22B |
| Q3 '25 | $2.28B | $2.46B |
| Q4 '25 | $4.25B | $1.81B |
| Q1 '26 | $3.8B | $1.52B |
| Q2 '26 | $3.13B | $1.9B |
Holders get the raise, the share count waits
Third-quarter operating earnings were $2.23 a share against $1.80 a year earlier, on revenue up 13.7% 26. The long-term growth target lifted to 9% to 11% a year for 2027 through 2031, riding rate base, the asset value utilities earn returns on, from $87 billion to $162 billion, with contracted load at 84 gigawatts, 15 of them signed during the quarter 2. The shares still closed down 1.2% 4.
The forwards mean AEP has already sold the stock; the delivery date is all that remains. Dividend growth, moderated to roughly 2% a year at the board's discretion, shows where the cash goes instead, in answer to JPMorgan analyst Jeremy Tonet 1.
New equity covers 24% of AEP's added capex, below the 30 to 40% norm its CFO cites
Data
| Value | |
|---|---|
| AEP, added capex | 24% |
| Industry norm, low | 30% |
| Industry norm, high | 40% |
Texas transmission is where the 24% gets tested
The company's defense holds on credit: 35 of those 84 gigawatts sit under firm take-or-pay contracts, and roughly 90% of the utility investment recovers through reduced-lag mechanisms such as riders and trackers 1. That covers the balance sheet. The share count is a separate ledger. The prior plan stood at $78 billion 5; ERCOT's data-center audit report lands on December 10, and Texas transmission beyond the current plan is where the 24% gets tested 5.
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