AEP Targets Top of 2026 Guidance, Launches $100 Billion Capital Plan

AEP said third-quarter operating earnings rose sharply and projected full-year 2026 operating EPS at or above the top of its guidance range, while launching a $100 billion capital plan centered on transmission and generation projects. The utility also set operating EPS guidance for 2027 and 2028 and outlined a 9% to 11% expected annual growth rate through 2031, supported by rising contracted electricity demand.

Third-quarter operating EPS, a non-GAAP measure, increased to $2.23 from $1.80 a year earlier. Operating earnings rose to $1.22 billion from $963 million. On a GAAP basis, AEP earned $1.19 billion, or $2.18 per share, compared with $972 million, or $1.82 per share, in the 2025 quarter.

For the first nine months of 2026, operating EPS reached $5.24, up from $4.78, while operating earnings increased to $2.85 billion from $2.55 billion. GAAP earnings moved in the opposite direction, declining to $2.77 billion, or $5.10 per share, from $3.00 billion, or $5.61 per share, reflecting specified items excluded from the company’s operating results.

AEP now expects full-year operating EPS to be at or above the $6.55 high end of its $6.25-to-$6.55 guidance range. After accounting for special items recorded through the third quarter, the company estimated a corresponding GAAP EPS range of $6.11 to $6.41.

Rates, demand and weather support quarterly growth

The vertically integrated utilities provided the largest year-over-year contribution to third-quarter operating EPS, adding $0.25 per share. Rate changes contributed $0.31, weather added $0.15 and normalized sales contributed $0.07. Those gains were partly offset by higher reliability spending, interest expense, depreciation and operating and maintenance costs.

Weather-normalized retail load at the vertically integrated utilities increased 3.2% from a year earlier during the quarter, including a 15.9% increase at Indiana Michigan Power. Load declined 1% at Appalachian Power and 0.6% at Public Service Company of Oklahoma.

The transmission and distribution utilities added $0.04 per share to the year-over-year operating EPS change. Their weather-normalized retail load rose 11.2%, with increases of 10.8% at AEP Texas and 11.6% at Ohio Power. AEP Transmission Holdco contributed another $0.03 per share, while Generation and Marketing added $0.10, primarily from wholesale and other activity.

For the year to date, rate changes were also the largest positive driver at the vertically integrated utilities, contributing $0.70 per share. Normalized sales added $0.24 and transmission revenue contributed $0.13, partially offset by reliability spending, interest expense and depreciation.

$100 billion investment plan targets transmission and generation

AEP’s new capital program calls for approximately $100.4 billion of investment from 2027 through 2031, compared with its prior $78 billion plan for 2026 through 2030. The company characterized the new program as an approximately 30% increase, including $22 billion of incremental capital relative to the previous plan.

Transmission accounts for 37% of planned spending, or $37 billion, while generation represents 36%, or $36 billion. Distribution is allocated $22 billion, with the remaining $5 billion assigned to corporate and other investments. AEP expects about 90% of utility capital to be recovered through mechanisms intended to reduce regulatory lag, including formula rates, riders, trackers and forward test years.

The plan is expected to increase AEP’s regulated rate base from $87 billion in 2026 to $162 billion in 2031, representing a compound annual growth rate of more than 13%. Transmission rate base is projected to rise from $37 billion to $69 billion over the same period.

AEP said its transmission network, which includes roughly 40,000 miles of lines, is expected to account for more than half of 2027 operating earnings. The company plans to nearly triple the mileage of its 765-kilovolt system over the next five years and has projects under development or construction across PJM, ERCOT, SPP and MISO.

Generation spending includes a gas-fired buildout at AEP’s vertically integrated utilities. The presentation listed projects totaling about 9,050 megawatts, with targeted in-service dates spanning 2027 through 2032. AEP said the investments are intended to serve growing load and are supported by secured turbine slots and engineering and construction partnerships.

Contracted load reaches 84 GW

AEP’s expected contracted load through 2031 increased to 84 gigawatts from 69 GW since its second-quarter earnings call. About 15 GW of agreements were signed during that period, primarily through additional electric service agreements.

Of the total expected contracted load, 35 GW is covered by firm take-or-pay electric service agreements, while the remainder is backed by letters of agreement. Data centers, including cryptocurrency customers, account for 92% of the contracted additions, and industrial customers represent 8%.

AEP estimates that signed electric service agreements at its vertically integrated utilities could provide up to $21 billion of fixed-cost offsets for residential customers over the life of the contracts, up from its previous $16 billion estimate. The company said data-center tariffs with protections for existing customers have been secured in six states, while additional structures are being pursued under which those customers would pay the full cost of required upgrades.

Longer-term earnings and financing outlook

AEP introduced 2027 operating EPS guidance of $6.75 to $7.05 and a 2028 range of $7.40 to $7.70. Based on the midpoint of its original 2026 guidance, the company expects annual operating EPS growth of 9% to 11% and a compound annual growth rate of more than 10% through 2031. It also projects a 10% operating EPS compound annual growth rate through 2033.

The financing plan assumes $54.9 billion of operating cash flow from 2027 through 2031, funding about 55% of capital expenditure. AEP expects to raise $44.4 billion of net debt capital and use a combination of previously arranged equity, at-the-market issuance, marketed growth equity and its dividend reinvestment plan. The company expects approximately $5.2 billion of incremental growth equity relative to its previous plan, equivalent to about 24% of the additional $22 billion in capital spending.

AEP is targeting a funds-from-operations-to-debt ratio of 14% to 15% during the forecast period. At Sept. 30, its calculated ratio was 14.7% under S&P’s methodology and 14.8% under Moody’s credit committee methodology, while Fitch FFO leverage was 5.1 times. Net available liquidity totaled $7.44 billion.

The outlook remains subject to regulatory approvals and cost recovery, execution of the expanded construction program, the availability and cost of capital, supply-chain constraints and the timing and performance of large-load commitments. AEP also identified extreme weather, wildfires, changing electricity demand, customer affordability concerns, evolving tax and environmental policy, commodity costs and cybersecurity threats among the factors that could cause actual results to differ from its projections.