American Electric Power Co. Inc.

The stable outlook on AEP and its subsidiaries reflects the company's improving business risk profile consisting almost entirely of solid regulated utility operations. We expect AEP to generate funds from operations (FFO) to debt 15%-16% through 2021 in our base case scenario. We could lower the ratings on AEP and its subsidiaries if the company's financial performance weakens such that FFO to debt is consistently below 14%, or if its business risk increases as a result of ineffective management of regulatory risk or the pursuit of risky nonregulated investments. While not likely, we could raise the ratings on AEP and its subsidiaries if the company's financial performance improves, with FFO to debt consistently above 20% while business risk is unchanged.

...Approved North Central Wind rate-based generation investment in Oklahoma is a scalable strategy. American Electric Power Co. Inc.'s (AEP's) investment is credit supportive in that regulators can approve the construction of individual wind farms without authorizing the entire plan. The company achieved regulatory approvals in Oklahoma, Louisiana, Arkansas, and at the Federal Energy Regulatory Commission (FERC). S&P Global Ratings expects AEP to fund these investments in a credit-supportive manner. In addition, these wind farms will help AEP lower its overall carbon dioxide emissions and the proportion of coal-based generation. The reduction in coal-fired generation aligns with the advancement toward a clean energy future. AEP has a goal of reducing its coal capacity to 24% of its total generation fleet by 2030. The company intends to retire 5,600 MW of coal generation within the next nine years, including the expiration of the lease on Rockport 2. With the rapid retirement of coal plants,...

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