American Electric Power Company, Inc.

Company Overview

Business Model: American Electric Power Company, Inc. (AEP) is an investor-owned electric public utility holding company. Its public utility subsidiaries engage in the generation, transmission, and distribution of electric power to retail and wholesale customers across portions of Arkansas, Indiana, Kentucky, Louisiana, Michigan, Ohio, Oklahoma, Tennessee, Texas, Virginia, and West Virginia. AEP also operates a competitive retail electric supply business and a wholesale energy trading and marketing business. American Electric Power Service Corporation provides management and professional services to AEP and its subsidiaries at cost.

Market Position: AEP is one of the largest investor-owned electric public utility holding companies in the United States, serving over five million retail customers. As of December 31, 2024, its asset portfolio includes approximately 225,000 circuit miles of distribution lines (serving 5.6 million customers), approximately 40,000 circuit miles of transmission lines (including approximately 2,100 circuit miles of 765 kV lines), and approximately 23,000 MWs of regulated owned generating capacity. The company's vertically integrated utilities operate within the PJM Interconnection and Southwest Power Pool, while its transmission and distribution utilities operate within the Electric Reliability Council of Texas and PJM Interconnection. AEP Transmission Holdco's State Transcos and Transmission Joint Ventures operate with Federal Energy Regulatory Commission-approved or Public Utility Commission of Texas-approved Returns on Equity.

Recent Strategic Developments:

• Capital Investment Plan: AEP announced a five-year, $54 billion capital investment plan for 2025-2029, with plans to add over 20,000 MWs of diverse generation resources through 2034.
• Strategic Partnership & Asset Sale: In January 2025, AEP announced a partnership to acquire a 19.9% noncontrolling interest in Ohio Transmission Company, LLC and Indiana Michigan Transmission Company, LLC for $2.82 billion. The net proceeds will finance AEP’s 2025-2029 capital plan.
• Renewable Energy Acquisitions: In December 2024, Southwestern Electric Power Company acquired 100% of Diversion Wind Energy, LLC, a newly constructed 201 MW wind facility in Baylor County, Texas.
• Fuel Cell Agreement: In November 2024, AEP executed a purchase agreement to acquire 100 MWs of solid oxide fuel cells, with an option for up to one gigawatt by the end of 2025.
• Asset Dispositions: In September 2024, AEP completed the sale of AEP OnSite Partners for approximately $318 million cash proceeds. In August 2023, AEP completed the sale of the Competitive Contracted Renewables Portfolio for approximately $1.2 billion cash proceeds.
• Regulatory Asset Recognition: In April 2024, AEP received supportive Private Letter Rulings from the Internal Revenue Service regarding Net Operating Loss Carryforwards in retail jurisdictions, leading to a $263.0 million increase in Net Income for AEP in Q1 2024.

Geographic Footprint: AEP's public utility subsidiaries serve portions of Arkansas, Indiana, Kentucky, Louisiana, Michigan, Ohio, Oklahoma, Tennessee, Texas, Virginia, and West Virginia. Operations are primarily within the PJM Interconnection, Southwest Power Pool, and Electric Reliability Council of Texas Regional Transmission Organizations.

Financial Performance

Revenue Analysis

Profitability Metrics:

• Gross Margin: 69.9%
• Operating Margin: 21.8%
• Net Margin: 15.1%

Investment in Growth:

• R&D Expenditure: Not explicitly disclosed as a separate line item.
• Capital Expenditures: $8,030.2 million (Gross Property Additions)
• Strategic Investments:
  • Acquisition of Diversion Wind Energy, LLC (201 MW wind facility) by Southwestern Electric Power Company in December 2024.
  • Purchase agreement for 100 MWs of solid oxide fuel cells, with an option for up to one gigawatt by end of 2025.
  • Forecasted construction expenditures of approximately $11.5 billion for 2025 and $42.9 billion for 2026-2029.

Business Segment Analysis

Vertically Integrated Utilities

Financial Performance:

• Earnings Attributable to AEP Common Shareholders: $1,453.2 million (+33.3% YoY)
• Total Revenues: $11,596.6 million (+1.3% YoY)
• Key Growth Drivers: Favorable rate proceedings, increased sales volumes due to weather, and regulatory asset recognition related to Net Operating Loss Carryforwards.

Product Portfolio:

• Generation, transmission, and distribution of electricity.
• Owned generation capacity of approximately 23,200 MWs as of December 31, 2024.
• Fuel mix (2024 actual net generation MWhs): Coal and Lignite 40%, Nuclear 22%, Natural Gas 22%, Renewables 16%.

Market Dynamics:

• Serves retail and wholesale customers in Arkansas, Indiana, Kentucky, Louisiana, Michigan, Ohio, Oklahoma, Tennessee, Texas, Virginia, and West Virginia.
• Subsidiaries are members of PJM Interconnection or Southwest Power Pool.
• Experienced increased customer demand in 2024, with total retail KWh sales increasing by 2.0% to 91,956 million KWhs. Commercial sales increased by 5.0% due to new data processing loads.
• Approved renewable projects totaling 2,303 MWs (owned) and 637 MWs (Power Purchase Agreements) as of December 31, 2024.

Transmission and Distribution Utilities

Financial Performance:

• Earnings Attributable to AEP Common Shareholders: $725.7 million (+3.9% YoY)
• Total Revenues: $5,907.7 million (+3.4% YoY)
• Key Growth Drivers: Transmission asset investments and favorable rate proceedings.

Product Portfolio:

• Transmission and distribution of electricity.
• AEP Texas Inc. serves retail customers in west, central, and southern Texas. Ohio Power Company provides transmission and distribution services to retail customers in Ohio.

Market Dynamics:

• AEP Texas Inc. is a member of Electric Reliability Council of Texas; Ohio Power Company is a member of PJM Interconnection.
• Total retail KWh sales increased by 8.6% to 91,039 million KWhs in 2024, driven by an 18.8% increase in commercial sales.
• AEP Texas Inc.'s 2024 base rate case resulted in a $70.0 million annual increase (9.76% Return on Equity), effective October 2024.
• Ohio Power Company's Electric Security Plan was approved for a four-year term (June 2024-May 2028) with a 9.7% Return on Equity.

AEP Transmission Holdco

Financial Performance:

• Earnings Attributable to AEP Common Shareholders: $790.2 million (+12.4% YoY)
• Total Revenues: $1,950.8 million (+12.9% YoY)
• Key Growth Drivers: Continued investment in transmission assets and Federal Energy Regulatory Commission-approved formula rates.

Product Portfolio:

• Intermediate holding company for AEP Transmission Company, LLC and AEP’s Transmission Joint Ventures.
• AEP Transmission Company, LLC wholly owns State Transcos, which had $15.4 billion of transmission and other assets in-service as of December 31, 2024.
• Plans to construct approximately $4.7 billion of additional transmission assets through 2027.

Market Dynamics:

• State Transcos and Transmission Joint Ventures (outside Electric Reliability Council of Texas) file forward-looking formula rates with the Federal Energy Regulatory Commission.
• Total filed transmission revenue requirements were $1.9 billion in 2024, up from $1.8 billion in 2023.
• In January 2025, AEP announced a partnership to acquire a 19.9% noncontrolling interest in Ohio Transmission Company, LLC and Indiana Michigan Transmission Company, LLC for $2.82 billion, with net proceeds financing AEP’s $54 billion capital plan for 2025-2029.

Generation & Marketing

Financial Performance:

• Earnings Attributable to AEP Common Shareholders: $289.2 million (vs. -$26.3 million loss in 2023)
• Total Revenues: $2,045.4 million (+25.3% YoY)
• Key Growth Drivers: Improved performance in wholesale energy trading and marketing, and retail supply business.

Product Portfolio:

• Retail supply business for customers in Ohio, Illinois, and other deregulated electricity markets.
• Wholesale energy trading and marketing business.
• Rights to Cardinal Plant Unit 1’s power and capacity through 2028.

Market Dynamics:

• AEP Energy had approximately 987,000 customer accounts as of December 31, 2024.
• AEP OnSite Partners was sold in September 2024, and AEP Renewables was sold in August 2023.

Capital Allocation Strategy

Shareholder Returns:

• Share Repurchases: Not explicitly disclosed.
• Dividend Payments: $1,902.9 million (based on $3.57 per share for 532,907,715 shares outstanding in 2024)
• Dividend Yield: Not disclosed.
• Future Capital Return Commitments: The Board declared a quarterly dividend of $0.93 per share in January 2025.

Balance Sheet Position:

• Cash and Equivalents: $202.9 million
• Total Debt: $45,166.6 million
• Net Cash Position: -$44,963.7 million
• Credit Rating: Not disclosed.
• Debt Maturity Profile: $3.3 billion of long-term debt due within one year as of December 31, 2024. Total principal amount of long-term debt payable: $1,281.5 million in 2025, $50.0 million in 2026, $1,758.3 million in 2027, $930.4 million in 2028, $1,694.5 million in 2029, and $2,750.0 million after 2029.

Cash Flow Generation:

• Operating Cash Flow: $6,804.3 million
• Free Cash Flow: -$1,225.9 million (Calculated as Operating Cash Flow - Gross Property Additions)
• Cash Conversion Metrics: Not explicitly disclosed.

Operational Excellence

Production & Service Model: AEP's public utility subsidiaries engage in the generation, transmission, and distribution of electric power. The Vertically Integrated Utilities segment owns approximately 23,200 MWs of generation capacity, utilizing a diverse fuel mix including coal and lignite, nuclear, natural gas, and renewables. The Transmission and Distribution Utilities and AEP Transmission Holdco segments focus on regulated transmission and distribution infrastructure. American Electric Power Service Corporation provides centralized management and professional services to AEP and its subsidiaries.

Supply Chain Architecture: Key Suppliers & Partners:

• Fuel Suppliers: Coal, lignite, and natural gas suppliers for generation facilities.
• Power Purchasers/Sellers: Counterparties for wholesale power and energy trading.
• Transmission Joint Ventures:
  • Electric Transmission Texas, LLC: AEP (50%), Berkshire Hathaway Energy Company (50%) for Texas-Electric Reliability Council of Texas transmission.
  • Pioneer: AEP (50%), John Lainge (50%) for Indiana transmission.
  • Transource Energy, LLC: Consolidated Variable Interest Entity for transmission facilities, with AEP holding 86.5% interest in several Transource projects (Missouri, West Virginia, Maryland, Pennsylvania, Oklahoma).

Facility Network:

• Manufacturing: Not applicable as AEP is an electric utility.
• Generation: Approximately 23,200 MWs of regulated owned generating capacity, including coal-fired, nuclear (Donald C. Cook Nuclear Plant), natural gas, hydro, solar, and wind facilities across its operating territories.
• Transmission: Approximately 40,000 circuit miles of transmission lines, including 2,100 circuit miles of 765 kV lines. AEP Transmission Holdco's State Transcos had $15.4 billion of transmission assets in-service as of December 31, 2024.
• Distribution: Approximately 225,000 circuit miles of distribution lines, serving 5.6 million customers.
• Research & Development: Not explicitly detailed as separate facilities, but AEP is evaluating compliance with new Greenhouse Gas standards and investing in new generation technologies like solid oxide fuel cells.

Operational Metrics:

• Coal Inventory: Approximately 71 days of supply as of December 31, 2024, compared to approximately 82 days in 2023. Target is approximately 35 days.
• Natural Gas Consumption: Approximately 155 billion cubic feet in 2024, a 6.7% increase from 2023.
• Safety Metrics: DART rate increased to 0.556 in 2024 from 0.384 in 2023. Total Recordable Incident Rate increased to 0.913 in 2024 from 0.690 in 2023.

Market Access & Customer Relationships

Go-to-Market Strategy: Distribution Channels:

• Direct Sales: AEP's public utility subsidiaries provide direct electric service to retail customers in regulated jurisdictions.
• Channel Partners: Not explicitly detailed.
• Digital Platforms: Not explicitly detailed.

Customer Portfolio: Enterprise Customers:

• Tier 1 Clients: Principal industries served include Petroleum and Coal Products Manufacturing, Chemical Manufacturing, Oil and Gas Extraction, Pipeline Transportation, Primary Metal Manufacturing, Data Processing (primarily data centers and cryptocurrency operations), Coal-Mining, Paper Manufacturing, Transportation Equipment, Plastics and Rubber Products, Fabricated Metals Product Manufacturing, Food Manufacturing, and Wholesale Electric Power.
• Customer Concentration: AEP Texas Inc.'s receivables are concentrated, with NRG Energy and TXU Energy accounting for 40% of total revenues in 2024 and 37% of accounts receivable. AEP Transmission Company, LLC's transactions with AEP Subsidiaries accounted for 80% of total revenues and 69% of total accounts receivable in 2024.

Geographic Revenue Distribution:

• Vertically Integrated Utilities: Total Retail KWh sales: 91,956 million KWhs (2024).
• Transmission and Distribution Utilities: Total Retail KWh sales: 91,039 million KWhs (2024).
• Growth Markets: Commercial class demand increased by 17.0% in 2024, driven by new data processing loads. AEP forecasts continued growth in 2025, with commercial sales projected to increase by 10.0%.

Competitive Intelligence

Market Structure & Dynamics

Industry Characteristics: The electric utility industry is a critical infrastructure function, subject to extensive federal and state regulation. It is characterized by significant capital investments, long asset lives, and exposure to environmental regulations, commodity price volatility, and technological changes (e.g., energy storage, alternative generation). Demand is influenced by economic conditions, weather patterns, and demographic shifts. The industry is undergoing transformation with increasing focus on decarbonization and grid modernization.

Competitive Positioning Matrix:

Direct Competitors

Primary Competitors: Not explicitly named in the filing, but AEP operates within competitive regional power markets (PJM Interconnection, Southwest Power Pool, Electric Reliability Council of Texas) alongside other utilities and market participants. Emerging Competitive Threats: New legislation, litigation, or government regulation (e.g., tax laws, nuclear oversight, energy trading, emissions), changes in technology (energy storage, alternative generation), and shifting expectations of stakeholders (e.g., Environmental, Social, and Governance). Competitive Response Strategy: AEP's strategy includes a $54 billion capital investment plan for 2025-2029 focused on transmission and distribution infrastructure upgrades and adding over 20,000 MWs of diverse generation resources through 2034. This includes significant investments in renewables and evaluating new technologies like solid oxide fuel cells.

Risk Assessment Framework

Strategic & Market Risks

Market Dynamics:

• Economic Conditions: Changes in economic conditions, electric market demand, and demographic patterns could impact performance.
• Global Conflicts & Trade: Global conflicts, trade tensions, sanctions, and tariffs pose risks.
• Interest Rate Trends: Fluctuations in interest rates affect capital availability and cost.
• Regulatory Framework Changes: New legislation altering regulatory frameworks or preventing cost recovery could impact profitability.
• Financial Market Volatility: Affects capital availability and cost.
• Shifting Demand for Electricity: Changes in demand patterns.
• Extreme Weather & Natural Disasters: Catastrophic events, including extreme weather and wildfires, can disrupt operations and incur significant costs.
• Technology Disruption: Changes in technology (e.g., energy storage, alternative generation) could lower the value of existing electric utility facilities.
• Customer Concentration: AEP Texas Inc. has significant customer concentration (40% of revenues from NRG Energy and TXU Energy in 2024). AEP Transmission Company, LLC depends on AEP affiliates for approximately 80% of its consolidated transmission revenues.

Operational & Execution Risks

Supply Chain Vulnerabilities:

• Fuel and Transportation Costs/Availability: Volatility in coal and other energy-related commodities, and availability of fuel and generation capacity.
• Supply Chain Disruptions: Disruptions, tariffs, and inflation could negatively impact operations.
• Capacity Constraints: Ability to build/acquire generation and transmission facilities. Geographic Concentration: Regional risk exposure in PJM Interconnection, Southwest Power Pool, and Electric Reliability Council of Texas. Capacity Constraints: Risks in project siting, financing, construction, and permitting. Operational Failures: Risks include operator error, equipment failure, regulatory limitations, labor disputes, cybersecurity threats, Information Technology failure, and physical attacks. Environmental Compliance: Significant costs and potential penalties associated with compliance with environmental laws (e.g., Clean Air Act, Clean Water Act, Coal Ash Regulation, Greenhouse Gas emissions regulation). The Federal Environmental Protection Agency's new Greenhouse Gas standards could force early closure of coal-fired generation facilities. Nuclear Generation Risk: AEP and Indiana Michigan Power Company are exposed to nuclear generation risk from the Donald C. Cook Nuclear Plant (2,296 MWs). Workforce: Failure to attract/retain a qualified workforce could harm results.

Financial & Regulatory Risks

Market & Financial Risks:

• Demand Volatility: Operating results fluctuate seasonally and with economic/weather conditions.
• Foreign Exchange: Not explicitly detailed as a primary risk.
• Credit & Liquidity: Access to capital and insurance markets on reasonable terms is crucial. Downgrades in credit ratings could affect capital access.
• Pension & Other Postemployment Benefits: Capital market volatility on pension, Other Postemployment Benefits, captive insurance, and nuclear decommissioning trust investments.
• Regulatory Lag: Regulatory lag can occur in base rate proceedings, affecting cost recovery.
• Wholesale Power Prices: Volatility in wholesale power prices and demand. Regulatory & Compliance Risks:
• Utility Regulation: Changes in utility regulation and Regional Transmission Organization cost allocation.
• Federal Energy Regulatory Commission/State Regulatory Policy: Transmission investment strategy is dependent on federal and state regulatory policy. Challenges to transmission formula rates.
• North American Electric Reliability Corporation Reliability Standards: Subject to higher costs/penalties related to mandatory reliability standards.
• Federal Tax Legislation: Impact of federal tax legislation.
• Litigation/Regulatory Proceedings: Involvement in legal proceedings, including those related to the February 2021 Texas winter weather and Ohio House Bill 6.
• Climate Disclosure Rules: New climate disclosure rules proposed by the Securities and Exchange Commission may increase compliance costs.

Geopolitical & External Risks

Geopolitical Exposure: Global conflicts, trade tensions, sanctions, and tariffs. Trade Relations: Impact of trade tensions and policy changes. Sanctions & Export Controls: Compliance requirements and business limitations. Other Unforeseen Events: Wars, terrorism, cybersecurity, labor strikes, Information Technology disruptions.

Innovation & Technology Leadership

Research & Development Focus: Core Technology Areas:

• Renewable Energy: Significant investment in wind and solar generation, with approved projects totaling 2,940 MWs (owned and Power Purchase Agreements).
• Advanced Generation: Executed a purchase agreement for 100 MWs of solid oxide fuel cells, with an option for up to one gigawatt.
• Grid Modernization: Capital investment plan includes transmission and distribution infrastructure upgrades. Innovation Pipeline:
• Plans to add over 20,000 MWs of diverse generation resources through 2034.
• Evaluating compliance with new Greenhouse Gas standards, which may drive further innovation in carbon capture/sequestration and natural gas co-firing.

Intellectual Property Portfolio:

• Patent Strategy: Not explicitly detailed.
• Licensing Programs: Not explicitly detailed.
• IP Litigation: Not explicitly detailed.

Technology Partnerships:

• Strategic Alliances: AEP engages in joint ventures for transmission development (e.g., Electric Transmission Texas, LLC, Pioneer, Transource Energy, LLC).
• Research Collaborations: Not explicitly detailed.

Leadership & Governance

Executive Leadership Team

Leadership Continuity: Not explicitly detailed. Board Composition: The Board of Directors reviews risks from environmental rules and potential coal plant retirement dates, holding extended meetings twice a year for strategy review, including carbon risk. Directors include William J. Fehrman, Benjamin G.S. Fowke, III, Art A. Garcia, Hunter C. Gary, Donna A. James, Sandra Beach Lin, Henry P. Linginfelter, Margaret M. McCarthy, Daryl Roberts, Daniel G. Stoddard, Sara Martinez Tucker, Lewis Von Thaer.

Human Capital Strategy

Workforce Composition:

• Total Employees: 16,330 (as of December 31, 2024) across AEP subsidiaries, plus 6,237 at American Electric Power Service Corporation.
• Geographic Distribution: Employees across operating subsidiaries in Arkansas, Indiana, Kentucky, Louisiana, Michigan, Ohio, Oklahoma, Tennessee, Texas, Virginia, and West Virginia.
• Skill Mix: Workforce composition includes <1% Traditionalists, ~12% Baby Boomers, ~37% Generation X, ~42% Millennials, <9% Generation Z. Approximately 20% women and 21% racially or ethnically diverse employees. Approximately 25% of the workforce is unionized.

Talent Management: Acquisition & Retention:

• Hiring Strategy: Not explicitly detailed.
• Retention Metrics: Not explicitly detailed, but a voluntary severance program in April 2024 saw approximately 1,000 of 16,800 eligible employees take the package.
• Employee Value Proposition: Not explicitly detailed.

Diversity & Development:

• Diversity Metrics: Women comprised approximately 20% of the workforce; racially or ethnically diverse employees approximately 21%.
• Development Programs: Not explicitly detailed.
• Culture & Engagement: Not explicitly detailed.

Environmental & Social Impact

Environmental Commitments: Climate Strategy:

• Emissions Targets: AEP expects Scope 1 Greenhouse Gas emissions to be reduced by 80% by 2030 (from a 2005 baseline).
• Carbon Neutrality: AEP aspires to net-zero Scope 1 and Scope 2 Greenhouse Gas emissions by 2045.
• Renewable Energy: Plans to add over 20,000 MWs of diverse generation resources through 2034, including significant investments in wind and solar. Supply Chain Sustainability:
• Supplier Engagement: Not explicitly detailed.
• Responsible Sourcing: Not explicitly detailed.

Social Impact Initiatives:

• Community Investment: Not explicitly detailed.
• Product Impact: Not explicitly detailed.

Business Cyclicality & Seasonality

Demand Patterns:

• Seasonal Trends: Electric power consumption is generally seasonal, influenced by heating and cooling degree days.
• Economic Sensitivity: Customer demand is influenced by economic conditions. In 2024, AEP experienced increased customer demand, particularly in the commercial class due to new data processing loads.
• Industry Cycles: Not explicitly detailed beyond general economic sensitivity.

Planning & Forecasting:

• Demand Forecasting Approach: AEP forecasts continued growth in 2025, with total sales volumes projected to increase by 3.0%, driven by a 10.0% increase in commercial sales.
• Inventory Management: Coal inventory was approximately 71 days at year-end 2024, with a target of approximately 35 days.
• Capacity Planning: AEP has a five-year, $54 billion capital investment plan for 2025-2029, including adding over 20,000 MWs of diverse generation resources through 2034.

Regulatory Environment & Compliance

Regulatory Framework: Industry-Specific Regulations:

• Federal Energy Regulatory Commission: Regulates wholesale power and transmission, including formula rates for AEP Transmission Holdco's State Transcos and Transmission Joint Ventures.
• State Utility Commissions: Regulate retail rates and distribution operations in Arkansas, Indiana, Kentucky, Louisiana, Michigan, Ohio, Oklahoma, Tennessee, Texas, Virginia, and West Virginia.
• Nuclear Regulatory Commission: Regulates Indiana Michigan Power Company's Donald C. Cook Nuclear Plant.
• Environmental Regulations: Subject to federal, state, and local environmental regulations, including the Clean Air Act (National Ambient Air Quality Standards, regional haze, Mercury and Air Toxics Standards, Cross-State Air Pollution Rule, Greenhouse Gas emissions), Clean Water Act (Effluent Limitations Guidelines rule), and Coal Ash Regulation (Coal Combustion Residuals Rule).
• Cybersecurity: Subject to mandatory cybersecurity requirements under the Federal Energy Regulatory Commission and North American Electric Reliability Corporation, and Nuclear Regulatory Commission cybersecurity regulation for the Donald C. Cook Nuclear Plant. International Compliance: Not explicitly detailed.

Trade & Export Controls:

• Export Restrictions: Not explicitly detailed.
• Sanctions Compliance: Global conflicts, trade tensions, and sanctions are identified as risk factors.

Legal Proceedings:

• Ohio House Bill 6: AEP settled derivative actions related to Ohio House Bill 6 for $450 thousand in attorneys’ fees and governance changes. In January 2025, AEP and the Securities and Exchange Commission settled an investigation related to Ohio House Bill 6, with AEP agreeing to pay a $19 million civil penalty.
• February 2021 Texas Winter Weather: AEP Parent and AEP Texas Inc. are named in approximately 100 lawsuits, and formerly owned wind farms in approximately 125 lawsuits.
• Gavin Power Station Indemnification: Owners of the Gavin Power Station seek indemnification from AEP related to a Federal Environmental Protection Agency denial of a Coal Combustion Residuals surface impoundment extension.
• Federal Energy Regulatory Commission Transmission Formula Rate Challenge: The Federal Energy Regulatory Commission directed refunds for 2021 rates related to stand-alone Net Operating Loss Carryforwards treatment, leading to a liability for probable refunds for 2021-2024 Net Operating Loss Carryforwards revenues.

Tax Strategy & Considerations

Tax Profile:

• Effective Tax Rate: Not explicitly disclosed as a single rate, but Income Tax Expense (Benefit) was -$39.2 million in 2024, compared to $54.6 million in 2023.
• Geographic Tax Planning: AEP and its subsidiaries file a consolidated federal income tax return.
• Tax Reform Impact: In April 2024, supportive Private Letter Rulings were received from the Internal Revenue Service regarding Net Operating Loss Carryforwards in retail jurisdictions, resulting in a $263.0 million increase in Net Income for AEP in Q1 2024.

Insurance & Risk Transfer

Risk Management Framework:

• Insurance Coverage: AEP maintains cybersecurity insurance. Indiana Michigan Power Company carries $2.7 billion nuclear property insurance and $750 million for nonnuclear property incidents.
• Risk Transfer Mechanisms: AEP uses derivative instruments (physical/financial forward purchase-and-sale contracts, Over-the-Counter swaps, and options) to manage market risks (commodity price, interest rate, credit). AEP's public utility subsidiaries are jointly and severally liable for power purchase-and-sale activity conducted by American Electric Power Service Corporation. The Price-Anderson Act provides $16.3 billion in insurance protection for public nuclear liability for Indiana Michigan Power Company.