4 th Quarter 2015 Earnings Release Presentation January 28, 2016 1 - PowerPoint PPT Presentation

4 th Quarter 2015 Earnings Release Presentation January 28, 2016 1

“Safe Harbor” Statement under the Private Securities Litigation Reform Act of 1995 This presentation contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934. Although AEP and each of its Registrant Subsidiaries believe that their expectations are based on reasonable assumptions, any such statements may be influenced by factors that could cause actual outcomes and results to be materially different from those projected. Among the factors that could cause actual results to differ materially from those in the forward- looking statements are: the economic climate, growth or contraction within and changes in market demand and demographic patterns in our service territory, inflationary or deflationary interest rate trends, volatility in the financial markets, particularly developments affecting the availability of capital on reasonable terms and developments impairing our ability to finance new capital projects and refinance existing debt at attractive rates, the availability and cost of funds to finance working capital and capital needs, particularly during periods when the time lag between incurring costs and recovery is long and the costs are material, electric load, customer growth and the impact of retail competition, weather conditions, including storms and drought conditions, and our ability to recover significant storm restoration costs, available sources and costs of, and transportation for, fuels and the creditworthiness and performance of fuel suppliers and transporters, availability of necessary generation capacity and the performance of our generation plants, our ability to recover increases in fuel and other energy costs through regulated or competitive electric rates, our ability to build or acquire generation capacity and transmission lines and facilities (including our ability to obtain any necessary regulatory approvals and permits) when needed at acceptable prices and terms and to recover those costs, new legislation, litigation and government regulation, including oversight of nuclear generation, energy commodity trading and new or heightened requirements for reduced emissions of sulfur, nitrogen, mercury, carbon, soot or particulate matter and other substances or additional regulation of fly ash and similar combustion products that could impact the continued operation, cost recovery and/or profitability of our generation plants and related assets, evolving public perception of the risks associated with fuels used before, during and after the generation of electricity, including nuclear fuel, a reduction in the federal statutory tax rate could result in an accelerated return of deferred federal income taxes to customers, timing and resolution of pending and future rate cases, negotiations and other regulatory decisions including rate or other recovery of new investments in generation, distribution and transmission service and environmental compliance, resolution of litigation, our ability to constrain operation and maintenance costs, our ability to develop and execute a strategy based on a view regarding prices of electricity and other energy-related commodities, prices and demand for power that we generate and sell at wholesale, changes in technology, particularly with respect to new, developing, alternative or distributed sources of generation, our ability to recover through rates or market prices any remaining unrecovered investment in generation units that may be retired before the end of their previously projected useful lives, volatility and changes in markets for capacity and electricity, coal, and other energy-related commodities, particularly changes in the price of natural gas, changes in utility regulation and the allocation of costs within regional transmission organizations, including ERCOT, PJM and SPP, the transition to market for generation in Ohio, including the implementation of ESPs, our ability to successfully and profitably manage our separate competitive generation assets, changes in the creditworthiness of the counterparties with whom we have contractual arrangements, including participants in the energy trading market, actions of rating agencies, including changes in the ratings of our debt, the impact of volatility in the capital markets on the value of the investments held by our pension, other postretirement benefit plans, captive insurance entity and nuclear decommissioning trust and the impact of such volatility on future funding requirements, accounting pronouncements periodically issued by accounting standard-setting bodies and other risks and unforeseen events, including wars, the effects of terrorism (including increased security costs), embargoes, cyber security threats and other catastrophic events. Bette Jo Rozsa Brad Funk Investor Managing Director Director Relations Investor Relations Investor Relations Contacts 614-716-2840 614-716-3162 bjrozsa@aep.com bmfunk@aep.com 2

Fourth Quarter 2015 Highlights Fourth Quarter 2015 Total Shareholder Return YTD 2015 One Year Three Year Five Year 3 Refer to appendix for reconciliation between GAAP and Operating EPS

2015 Highlights & 2016 Focus 2015 Highlights 2016 Focus Financial Performance Financial Performance   Delivered Q4 2015 GAAP and operating earnings of Deliver operating earnings guidance range of $0.96 and $0.48 per share, respectively $3.60 to $3.80 per share   Delivered 2015 GAAP and operating earnings of Continue focus on disciplined capital $4.17 and $3.69 per share, respectively allocation, investing $5 billion in cap-ex, substantially all in regulated entities, while  Realized operating EPS growth of 7.6% over prior increasing cap-ex for 2017 and 2018 from $4 year billion to $5 billion each year   Achieved our expected regulated ROE of 9.6% for Commit to delivering 4%-6% earnings growth the year, an increase over the 2014 results of 9.0% off of 2015 original guidance  Increased quarterly dividend by 5.7% Regulatory and Strategic Initiatives Regulatory and Strategic Initiatives  Attain approval of PPA settlement  Completed sale of AEP River Operations  Complete strategic review of Competitive  Reached settlement in AEP Ohio PPA proceeding Generation   Initiated strategic review of competitive generation Continue working with states to comply with Clean Power Plan  Helped to shape outcome of Clean Power Plan 4

Regulated Returns Twelve Months Ended 12/31/2015 Earned & 2016 Pro-forma Operating ROE 2015 Earned Regulated ROE 2016 Pro-Forma Regulated ROE OPCo OPCo Trans 11.9% 11.6% APCo 11.1% I&M Trans I&M 10.7% APCo 10.2% 10.2% 9.9% PSO SWEPCO AEP TX 9.4% KPCo PSO AEP TX 9.0% SWEPCO 9.0% 8.7% 8.6% 8.6% 8.4% 7.8% KPCo 4.2% Regulated Operations ROE of 9.6% Expected Regulated Operations ROE of 10.1% as of December 31, 2015 Pro-Forma 2016 5

4 th Quarter 2015 vs. Prior Year By Segment $0.03 ($0.07) $0.03 2015 Actual EPS $0.24 $0.13 $0.09 $0.02 $0.03 $(0.03) Refer to appendix for additional explanation of variances by segment 6

2015 vs. Prior Year By Segment $0.03 $0.06 $0.03 2015 Actual EPS $1.83 $0.72 $0.39 $0.75 $0.06 $(0.06) Refer to appendix for additional explanation of variances by segment 7

Normalized Load Trends Note: Charts reflect connected load and exclude firm wholesale load & Buckeye Power backup load. 8

Economic Data GDP Growth by Quarter GDP Growth by Geography 4% 4% US AEP US AEP-East AEP-West Growth vs Prior Year 3% Growth vs Prior Year 3% 2.9% 2.7% 2.5% 2% 2.3% 2% 2.2% 2.2% 1.8% 1.4% 1.4% 1% 1% 1.2% 0% 0% Q4-14 Q1-15 Q2-15 Q3-15 Q4-15 Q4-14 Q1-15 Q2-15 Q3-15 Q4-15 Employment Growth by Quarter Employment Growth by Geography 3% US AEP 3% US AEP-East AEP-West Growth vs Prior Year Growth vs Prior Year 2.3% 2% 2% 2.1% 2.1% 2.1% 1.9% 1% 1.3% 1% 1.1% 0.9% 0.9% 0.8% 0% 0% Q4-14 Q1-15 Q2-15 Q3-15 Q4-15 Q4-14 Q1-15 Q2-15 Q3-15 Q4-15 9 Source – Moody’s Analytics

Industrial Class Data AEP Industrial GWh Growth Industrial Sales Growth in Shale Regions 15% Eagle Ford (TX) Marcellus (WV) 70% 14.9% Permian (TX) Utica (OH) 60% 11.9% Woodford (OK) 10% 10.5% 10.4% 10.1% 9.7% 50% Growth vs Prior Year GWh Growth vs Prior Year 5% 40% 4.7% 30% 0.9% 0% 20% -0.8% -3.2% -3.1% 10% -5% Oil & Gas Sectors -5.3% 0% Non-Oil & Gas -10% -10% Q4-14 Q1-15 Q2-15 Q3-15 Q4-15 Q3-14 Q4-14 Q1-15 Q2-15 Q3-15 Q4-15 AEP Industrial Sales to Oil & Gas Sectors Shale counties in AEP 4,000 $120 service territory 3,500 $105 Non-Shale counties in 3,000 $90 Brent Oil Price ($/Barrel) AEP service territory 2,500 $75 GWh 2,000 $60 1,500 $45 Oil & Gas Extraction 1,000 $30 Pipeline Transportation Petroleum & Coal Products 500 $15 Oil Price - $- Q4-13 Q1-14 Q2-14 Q3-14 Q4-14 Q1-15 Q2-15 Q3-15 Q4-15 Continued growth in oil & gas, reductions in other industrials 10