Feb 12 - American Electric Power (AEP) reported fourth-quarter operating earnings that outpaced Wall Street estimates and announced an expansion of its multi-year capital spending program to respond to a sharp rise in electricity demand.
The Ohio-based utility said operating earnings were $1.19 per share for the quarter ended December 31, topping the analysts' consensus of $1.15 per share compiled by LSEG. AEP's stock rose 1.7% in premarket trading on the results.
Company management said U.S. electricity demand is increasing at an unprecedented rate, driven in large part by the build-out of data centers to handle complex, AI-related computing tasks. AEP reported that roughly 80% of its growth is being driven by large hyperscalers, naming Alphabet’s Google, Amazon.com and Meta among those customers.
To meet this surge, AEP said it has identified an additional $5 billion to $8 billion in transmission and generation projects on top of its existing $72 billion capital investment plan over the next five years. The company also disclosed that it has signed contracts for an additional 28 gigawatts of load, and that the incremental demand for new load has doubled since October.
AEP said it will work with ERCOT, the independent system operator in Texas, to expand transmission and distribution infrastructure so that these large loads can be brought online in a timely manner and within the regulatory construct.
Chief Executive Bill Fehrman emphasized the company's focus on affordability for residential customers while serving large new-load customers. "Through federal loans, state grants, innovative rate designs and direct bill assistance, we are working to limit bill impacts while continuing to invest in the system," Fehrman said.
The company further highlighted that as utilities increase spending on power plants, transmission lines and other electrical infrastructure, there is growing concern about upward pressure on customer electric bills. AEP said it is pursuing a combination of financing and regulatory tools to blunt those bill impacts while proceeding with necessary system investments.
Separately, the announcement referenced technology used by some investors to evaluate stocks. ProPicks AI evaluates AEP alongside thousands of other companies using more than 100 financial metrics to identify investments based on fundamentals, momentum and valuation. The AI has no bias, the statement said, and cited past winners such as Super Micro Computer (+185%) and AppLovin (+157%). The note invited readers to check whether AEP appears in any ProPicks AI strategies or whether other opportunities exist in the space.
Key takeaways:
- AEP beat fourth-quarter operating earnings estimates, reporting $1.19 per share versus $1.15 expected.
- The utility is expanding its five-year capital plan beyond $72 billion by identifying an additional $5 billion to $8 billion for transmission and generation projects.
- About 80% of AEP's growth is coming from large hyperscalers including Alphabet’s Google, Amazon.com and Meta; the company has signed 28 gigawatts of new load and says incremental new load demand has doubled since October.
Context and market impact: The expansion in AEP's capital program reflects a broader shift in utility investment driven by large technology customers requiring substantial new power capacity. This has implications for the utilities, energy infrastructure and technology sectors as grid upgrades and generation additions accelerate.