Tear Sheet: American Electric Power Co. Inc.'s Second-Quarter Financial Performance Was Weaker Than Expected

The company?s second-quarter financial results were weaker than expected, primarily due to less favorable weather and rising interest costs that pressured its already weak financial measures. We expect AEP's funds from operations (FFO) to debt for the 12 months ended June 2023 will fall to less than 13%, which is significantly below our 16% downgrade threshold. As of year-end 2022, the company?s FFO to debt was 14.8%, though it declined to 13.1% for the 12 months ended March 2023. While our base-case forecast continues to assume a significant improvement in the second half of 2023, AEP's weaker-than-expected quarterly financial performance may pressure it to overperform on other aspects of its strategic plan to maintain its credit quality. Our key assumptions

...July 31, 2023 American Electric Power Co. Inc.'s (AEP) financial measures remain weak for the current rating. The company's second-quarter financial results were weaker than expected, primarily due to less favorable weather and rising interest costs that pressured its already weak financial measures. We expect AEP's funds from operations (FFO) to debt for the 12 months ended June 2023 will fall to less than 13%, which is significantly below our 16% downgrade threshold. As of year-end 2022, the company's FFO to debt was 14.8%, though it declined to 13.1% for the 12 months ended March 2023. While our base-case forecast continues to assume a significant improvement in the second half of 2023, AEP's weaker-than-expected quarterly financial performance may pressure it to overperform on other aspects of its strategic plan to maintain its credit quality. Our base case continues to assume an improvement in the company's financial performance. Our key assumptions include the expected sale of AEP's...

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