American Electric Power Company, Inc. (AEP) Earnings Call Transcript

[indiscernible] Joining us, and welcome to the American Electric Power Third Quarter 2026 Earnings Call. [Operator Instructions] This call is scheduled to last approximately 1 hour. I will now hand the conference over to Andy Gurgol, Vice President of Investor Relations. Andy, please go ahead.

Good morning, and welcome to American Electric Power's Third Quarter 2026 Earnings Call. A live webcast of this teleconference and slide presentation are available on our website under the Events and Presentations section. Joining me today are Bill Fehrman, Chairman, President and Chief Executive Officer; and Trevor Mihalik, Chief Financial Officer. In addition, we have other members of our management team in the room, including Kate Dixon, Senior Vice President, Controller and Chief Accounting Officer; and Darcy Reese, Vice President, Investor Relations. We will be making forward-looking statements during the call. Actual results may differ materially from those projected in any forward-looking statements we make today. Factors that could cause our actual results to differ materially are discussed in the company's most recent SEC filings. Please refer to the presentation slides that accompany this call for a reconciliation to GAAP measures. We will take your questions following opening remarks. Please start on Slide 5 as I hand the call over to Bill.

Thank you, Andy, and good morning, and thank you for joining us for our third quarter 2026 earnings call. In my remarks this morning, I'll briefly cover our third quarter results before turning to the unique advantages of AEP's portfolio and outline how they are driving sustained outsized growth and differential value for both customers and shareholders. A summary of our updated strategic outlook and financial plan can be found on Slides 5 and 6. To be very clear, AEP is extremely well positioned to capitalize on the opportunity ahead through what I would consider a best-in-class leadership team, strong relationships with state political leaders and regulators, intense focus on financial performance, balance sheet strength and exceptional execution-driven accountability across the entire organization. Combined with the size, scale and diversification of our portfolio, AEP provides reliable and affordable electric service delivers the growth investments our customers need and create substantial long-term value for our shareholders. Today, we are pleased to introduce a new long-term expected annual operating EPS growth rate of 9% to 11% for 2027 through 2031. We also expect a compounded annual growth rate of greater than 10% through 2031 based on the original 2026 guidance midpoint. This outlook is supported by a $100 billion 5-year capital plan, one of the largest in the industry, anchored by significant and durable investments in the safety, reliability and resilience of our system, particularly across generation and transmission. In support of this growth, this past quarter, we finalized commercial agreements for both the Wyoming fuel cell project and the 765 kV transmission build in Piketon, Ohio, allowing us to incorporate both into the updated capital plan. Construction is well underway on the Wyoming fuel cell project, which is underpinned by a 20-year power purchase agreement with Google. The Piketon project is supported by a 20-year offtake agreement with SB Energy, which will fund the project cost and is backed by a highly rated investment-grade counterparty. With construction expected to begin in the first quarter of 2027, we have secured substantially all of the rights of way and plan on submitting the required regulatory filing shortly. We are also pleased to share that AEP reported third quarter 2026 operating earnings of $2.23 per share or $1.2 billion. As a result, we now have confidence to expect full year operating earnings to be at or above the high end of our recently increased 2026 guidance range of $6.25 to $6.55 per share. Given the visibility we have in our growth and confidence in our execution plans, we are excited to share 2027 and 2028 operating earnings guidance ranges of $6.75 to $7.05 per share and $7.40 to $7.70 per share, respectively. Year-over-year, the midpoints of these ranges imply an approximate 9.5% increase based on the original 2026 guidance midpoint. Later in the call, Trevor will walk through third quarter performance drivers and provide additional details regarding our updated financial plan and long-term outlook. Please turn to Slide 7. The U.S. utility sector is experiencing an unprecedented surge in electric demand and AEP is right in the center of this opportunity. Given the scale of contracted and committed load across our service territory, we expect demand on our system to more than triple by 2031, and created by substantial economic development activity throughout our footprint. What sets AEP apart is not simply the scale of that growth, but where it is occurring. The 11 states we operate in generate roughly 1/4 of U.S. GDP and are attracting significant investment from data centers, manufacturing activity and energy infrastructure. These trends are driving a durable increase in electricity demand and creating substantial opportunities for long-term infrastructure investment. Importantly, the states served by AEP pair robust business fundamentals with support of state political leadership, constructive regulation and strong investment recovery mechanisms. The combination of compelling demand growth constructive regulation and transparent cost recovery frameworks position AEP to capitalize on this growth opportunity and reflects the characteristics that investors continue to reward with premium valuation. Turning to Slide 8. AEP's scale, expertise and leadership in transmission, particularly 765 kV infrastructure, provide a sustainable and increasingly valuable strategic advantage. We own and operate the nation's largest transmission network, which positions us to capture significant organic growth opportunities while offering customers a differentiated single provider solution across multiple RTOs and states, AEP pioneered the 765 transmission system in North America and has spent more than 6 decades refining the capabilities, expertise and institutional knowledge required to efficiently operate and expand this infrastructure at scale. That experience continues to drive innovation today. As an example, our engineering team has recently developed new proprietary designs that materially reduce both tower height and right-of-way requirements, allowing 765 kV infrastructure to be deployed with physical characteristics, largely in line with 345 kV transmission but deliver 6x the electricity. These types of innovations reinforce our ability to deliver transmission solutions more efficiently, support growing customer demand and create differentiated value for our customers, communities and shareholders. Please turn to Slide 9. One of the most compelling aspects of our growth strategy is that it simultaneously supports both investment and affordability as new large load customers connect to our system, they contribute incremental revenues that help offset fixed costs for existing residential customers. Supported by fully executed take-or-pay ESAs, we estimate that this could now generate up to $21 billion of benefits for existing residential customers across our vertically integrated utilities over the life of the contracts. This is up from $16 billion discussed on AEP's prior earnings call. This creates a powerful virtuous cycle in which economic development and load growth support customer affordability. We are already seeing this dynamic play out in real time. In Indiana, new large load growth enabled us to file a second rate decrease this past quarter. In short, growth when managed responsibly can benefit both customers and shareholders. I would now like to briefly address AEP's early-stage nuclear strategy. Last week, we announced a development agreement with 2 exceptional companies, X Energy and Amazon, to evaluate a potential small modular reactor project in Indiana, which is the only early-stage nuclear project we are currently advancing. Importantly, the agreement with X Energy and Amazon is limited to development activities and feasibility work requiring minimal investment by AEP. Any potential project would need to successfully progress through multiple stage gates before a final investment decision is made. The earliest that could occur is sometime in 2030, subject to meeting clear strategic and financial objectives. And as we've consistently stated regarding our approach to nuclear development, we remain highly disciplined to ensure that we are protecting our existing customers, shareholders and balance sheet. Please turn to Slide 10. This has been an extraordinarily productive year so far for AEP as we continue to execute with urgency to serve our customers and capture what we believe is a once-in-a-generation growth opportunity. Our scale, diversification and exposure to some of the most attractive growth markets in the country, position AEP exceptionally well to drive sustainable long-term value for both customers and shareholders. To deliver on our commitments, we are advancing projects through standardized designs, early procurement of long-lead equipment, long-standing key relationships with industry leaders such as [indiscernible], GE Renova and Mitsubishi and a formalized partnership with Quanta, supported by decades of experience designing, building and operating large-scale infrastructure, these key suppliers are providing top craft labor teams manufacturing capacity and technical expertise needed to execute our plan with speed and certainty. A key component of our execution strategy is continuing to work with our states to achieve constructive regulatory outcomes and enhanced cost recovery across our portfolio. In Texas, a constructive unanimous settlement was filed for SWEPCO's base rate case with a proposed 9.53% ROE, up from 9.25% and a proposed 51.98% equity layer, up from 49.4%. This positions SWEPCO well to advance growth plans and enhance safe, reliable and affordable electric service for customers. In Virginia, APCO filed a constructive rate case settlement with a proposed 9.8% ROE up slightly from 9.75%. There are 2 key features of this settlement: First, a substantial portion of operating costs, including vegetation management, are proposed to move from base rates to annual writers, thereby reducing earnings lag. Second, base rates are expected to decrease in the first year following an order, further supporting efforts to drive customer affordability. To summarize, the key takeaway is simple: We are not preparing to execute this plan, we are already well into executing on it. We have the experience, partnerships and operational capabilities in place to deliver this plan at the pace our customers need and create differential long-term value for our shareholders. I could not be more confident in the team we have assembled, the strategy we are executing, the improvements we have made and the opportunity is ahead. With that, I'll turn the call over to Trevor, who will walk through our third quarter financial performance and provide additional detail on our long-term growth and financial outlook. Trevor?

Thanks, Bill. I will begin with our financial results then review our updated financial plan, starting with the increased long-term earnings growth rate. I will also discuss details about the capital plan, rate base growth and financing strategy before closing with why we believe AEP is uniquely positioned to capture the significant growth opportunities across our footprint. Please turn to Slides 12 and 13 of the presentation. For the third quarter of 2026, AEP delivered operating earnings of $2.23 per share compared to $1.80 per share in the third quarter of 2025. Each segment contributed higher earnings versus the prior year, driven by constructive regulatory outcomes, strong demand growth across our footprint and continued transmission and generation buildout. And as Bill shared, given our strong performance year-to-date, we expect full year operating earnings to be at or above the high end of our 2026 guidance range of $6.25 to $6.55 per share. Looking ahead to 2027, you will notice that our operating earnings guidance on Page 22 in the appendix includes a new segment, AEP infrastructure. This is driven by the evolution of the generation and marketing business towards infrastructure investments supported by contracted and highly predictable cash flows. A good example of this is the recently announced fuel cell project in Wyoming, supported by a 20-year take-or-pay PPA with Google. The new AEP infrastructure business brings together our contracted generation assets, legacy PPAs and other infrastructure investments under a single reporting segment. Going forward, we expect this business to move towards projects backed by high-quality, long-term contracts. Turning to Slide 14. The most important takeaway from today's update is that we are entering the next chapter of AEP's growth story with greater confidence in both the magnitude and durability of our long-term growth opportunity. Historically, we have provided only the prompt year of earnings guidance. Today, we are providing more visibility into our expected financial performance with guidance ranges for both 2027 and 2028. That confidence goes well beyond the near term. We're now increasing our expected annual operating EPS growth rate to 9% to 11% through 2031, up from our prior 7% to 9% range. We're also increasing our expected 5-year operating earnings CAGR to greater than 10% through 2031. The breadth and durability of opportunities across our portfolio provide confidence that our growth extends well beyond the 5-year plan. Accordingly, we are also projecting a 10% operating earnings CAGR through 2033 based on the original 2026 guidance midpoint. Today's update represents a meaningful step change in AEP's growth profile. We're growing faster and with greater visibility than ever before, further underscoring AEP's position as one of the premier high-growth companies in the utility sector. And we're doing this while maintaining a focus on improved reliability and affordability. Please turn to Slides 15 through 17. As Bill highlighted, we're excited to introduce our $100 billion 5-year capital plan through 2021, one of the largest investment programs in the utility industry. With this new capital plan, we expect rate base to increase from $87 billion in 2026 to $162 billion by 2031, nearly doubling over the next 5 years. That translates into a rate base CAGR of more than 13%, up from 11% in our prior 2026 through 2030 capital plan. This expected step-up in growth becomes particularly visible beginning in 2028 and 2029, as large generation and transmission projects are placed into service. Transmission remains one of AEP's most attractive investment opportunities, reflecting the scale and strategic advantage of operating the nation's largest transmission business. Our transmission capital plan increased to $37 billion through 2031 and now includes the Piketon project in Ohio. We expect transmission rate base to nearly double over the next 5 years approaching $70 billion by 2031. Moving to generation. Our updated plan incorporates $36 billion of investment through 2031. Regulated gas generation represents the largest opportunity, increasing by $7 billion versus the prior 5-year capital plan. The rationale is simple: Contracted customer demand is growing faster than the operating output of our existing fleet, creating a clear durable need for new baseload dispatchable generation. Importantly, these generation investments are supported by fully executed take-or-pay ESAs within the VI us, providing a higher degree of confidence in the underlying demand. They also benefit from constructive regulatory and cost recovery frameworks such as Oklahoma's generation pre-approval mechanism, which allows for concurrent rider and construction work in progress recovery. Finally, distribution investment increased to $22 billion over the next 5 years focused on grid modernization, reliability, resiliency and infrastructure replacement. These are foundational investments required to strengthen the system and efficiently serve customers. Just as important is the quality of investment recovery. Roughly 90% of planned utility investments is expected to be recovered through reduced lag mechanisms, including riders, trackers and 4 test year rate cases. These constructive frameworks provide greater cash flow and earnings visibility while supporting more timely recovery of invested capital. Taken together, this $100 billion 5-year capital plan reflects a significant expansion of our investment opportunity, supported by contracted customer demand, highly visible transmission investments and essential distribution infrastructure needs. Turning to Slide 18. We now have 84 gigawatts of incremental contracted load through 2031. This represents a 15 gigawatt increase from the 69 gigawatt contracted load we outlined on our second quarter earnings call. This step change is driven by the addition of Piketon and other ESAs signed since late July. In total, we now have 35 gigawatts of incremental contracted load backed by firm take-or-pay ESAs. That leaves only 3 gigawatts not under take-or-pay ESAs in PJM and SPP, which we anticipate will be converted in the near term. And in our thought, our entire 46 gigawatts of contracted load is backed by fully executed SP6 compliant letters of agreement. Tying it back to the new financial outlook. The contracted load we have signed in PJM and SBP is largely reflected in the capital plan. For AEP Texas, we continue to see significant investment opportunities. However, we're taking a measured approach to how we add capital to the plan as the batch process and broader transmission planning continues. Therefore, most of our Texas plan reflects system reliability and resiliency, while only a portion of the transmission buildout required in Texas is incorporated, which includes the recently approved Howard [indiscernible] line. As these processes evolve, we expect additional capital opportunities to be secured in Texas. We also anticipate incremental generation investment opportunities given strong customer demand as well as continued growth in organic and competitive transmission. Taken together, these upside opportunities provide a long runway for future capital investment and earnings growth. Turning to Slide 19. Our expanded capital plan was supported by strong operating cash flow and a disciplined financing strategy. As noted on the slide, we expect to generate approximately $55 billion of cash from operations over the 5-year forecast period. That strong and growing cash flow represents a significant source of funding for our investment program, supporting more than half of our $100 billion capital plan. In addition, we remain committed to returning capital to our shareholders through consistent dividend growth. A key differentiator of our financing plan is the relatively modest incremental equity requirement. Because we have been forward leaning in issuing equity over the last few years, we have created significant financing flexibility and expect to fund growth with meaningfully less equity than the industry norm of 30% to 40%. Specifically, we have added $22 billion to our capital plan while increasing equity funding by only $5.2 billion. That means 24% of the incremental investment is expected to be funded through new accretive growth equity. It is also worth noting that $2.5 billion of the incremental equity assumption relates to marketed growth equity over the next 2 years of the plan. Simply put, we are funding a significantly larger investment opportunity with only modest equity needs to maximize shareholder value. We're entering this period from a position of financial strength with both Moody's and S&P FFO to debt currently within our 14% to 15% target range and well above the 13% downgrade threshold, reflecting meaningful progress we have made over the last several years. Combined with our strong operating cash flow, this positions us well to execute our plan, while maintaining our strong balance sheet. Please turn to Slide 20, where I will conclude with a brief summary of what you heard today: First, you heard that the business is performing exceptionally well. Our strong third quarter results reflects the benefits of disciplined execution, constructive regulatory outcomes, growing customer demand and continued investment across the business. In fact, the strength we're seeing across the company gives us the confidence to deliver 2026 operating earnings at or above the high end of the guidance range. Second, you heard that we continue to expand our investment opportunity. Our new $100 billion 5-year capital plan drives our expectation for rate base to nearly double to $162 billion by 2031. Third, you heard that our new update reflects a meaningful uplift in AEP's growth profile. We're raising our expected annual operating EPS growth rate to 9% to 11% for 2027 through 2031 as well as increasing our expected long-term operating earnings per share CAGR to more than 10% over the same period. Also, given the robust growth we are seeing across our portfolio, we expect this growth to continue well into the next decade as we project a 10% operating earnings CAGR through 2033 based off of the 2026 original guidance midpoint. Lastly, you heard that we remain committed to balancing growth with affordability. Through large low tariffs, customer-funded infrastructure arrangements and other innovative structures, we are working to have new growth help fund needed investments while also delivering meaningful affordability benefits for existing customers. Fully executed take-or-pay ESAs in the vertically integrated utilities are now expected to generate up to $21 billion in fixed cost offsets increased from our previously announced $16 billion for existing residential customers over the life of the contracts. When you step back, the investment thesis is straightforward. AEP is one of the largest and most visible growth opportunities in the utility sector, supported by durable capital plans constructive regulatory frameworks, strong execution capabilities and a disciplined financial strategy. We believe these advantages position us to deliver top-tier growth generate 12% to 14% annual total shareholder return through 2031 and create meaningful long-term value for our customers and shareholders. With that, I will now ask the operator to please open the line for your questions.

[Operator Instructions] Your first question comes from Shar Pourreza with Wells Fargo.

Big congrats on these results. So Bill, just $100 billion CapEx is obviously fairly large. You're now guiding to a 10-plus percent CAGR through '31. Can you just help better frame what could dictate that plus. So does Texas get you over 10% or extend the 10% runway, and then why I assume the CAGR steps down to 10% through '33, just given this robust plan? Is it the law of large numbers or just being conservative in the near term?

Yes. And I really appreciate the question. Obviously, we see a really substantial pipeline of potential investment opportunities out there that's in excess of the capital plan we just discussed. Really particularly in transmission and generation. And directly to your point, on the transmission side, additional 765 kV in Texas. We've got projects emerging from SPP's integrated transmission plan. We've got the competitive RFPs that we're very active in and then, of course, continued organic growth across the system. And then on the generation side, the combination of really super robust load growth and future plant retirements that we have coming up, creates a significant and really visible need for new gas plants. And so taken together, our long-term investment pipeline really remains exceptionally robust well into the next decade. And so in working with Trevor and the team here and given this visibility along with our focus on ensuring we execute on this, I'm really confident in our ability to deliver the 10% EPS CAGR through 2033. And obviously, as time goes on, we'll continue to refine that. And so we want to make sure we underpromise and overdeliver. And so I'm excited about giving you visibility out that far, and I'm really confident on where we sit.

And then just the 300 basis points of lag between rate base and the EPS CAGR. I mean, obviously, financing is key part of it. Can you just give us a sense around the timing of equity, any equity needed in '26? I mean, I have to imagine sort of the cash flow profile that comes with these large load customers kind of further helps you'd be more flexible, especially if they're paying some upfront. So just kind of curious on timing of equity.

Yes, Shar, this is Trevor. I'll take that one. Look, I think one of the things we've done, and we mentioned it in the prepared remarks is we have been very forward leaning in the equity and we're sitting on over $5 billion of equity forwards right now in support of this capital plan. And so by doing that, that's given us a great deal of flexibility. What we're looking at right now is continuing to have the ATM option open to us. And then we kind of layered in that $2.5 billion. At some point that we'll do over the next 2 years in support of this plan. But what we'll probably see us do it brings some of that equity forward that went out all the way to '28, we'll utilize those equity forwards. And then at some point over the next 2 years, we will either go to the market and do either a block equity or equity-linked securities or continue to run the ATM. When you looked at us this last year, we said we would do $1 billion of ATM, and we got that $1 billion done well before the end of the third quarter. So there's a lot of opportunity for us to get that equity in multiple different structures. And again, I think we've been very conservative in ensuring that the equity we do issue is done in a very shareholder-friendly way. So it's given us a great deal of flexibility with how proactive we've been.

Your next question comes from the line of Steve Fleishman with Wolfe Research.

So just first of all, on the generation builds in Indiana and at APCO. Are those going to be in the regulated businesses? Or are those being considered for kind of the Genco structure still?

So we continue to view the Genco concept really favorably and are actively evaluating where it can create the most value for customers. We're also completing a detailed assessment of which jurisdictions would be best suited for for a Genco structure from a regulatory perspective. We're making sure that we're socializing this with our regulators and our state policy makers, but really, given the urgency of meeting the growing customer demand, our focus right now has been on securing the load and moving forward with generation investments that we need to support that growth in the vertically integrated utilities and the financial plan that we laid out today also preserves that flexibility. And so should the Genco structure emerges a viable pathway in any given state, particularly West Virginia and Indiana, we could ultimately look to house a portion of the planned or future gas plants in that framework. And so continuing to work at continuing to socialize and making sure that we've got the proper regulatory and other support in the states where we view these as most interesting.

Okay. Great. And then maybe just on the -- I think if I saw right of your 84 gigawatts of load that you've got locked up. I think there's only 35 of that kind of baked into your plan. Is that correct?

Yes, Steve. So what you've seen us do is we grew the amount of contracted load from 69 to 84. A majority of that is really the Piketon project, which represents 9 gigs and then there's an additional 2 gigs in Ohio and 2 gigs in APCO and there's a gig in PSO. So what we're seeing is strong growth there. But what you're really looking at, and I think what the crux of your question is, is as we look at Texas, what is really kind of in the plan related to the 45 gigs or the 46 gigs that we have under LOAs. And generally, what we're seeing there.

That is the question.

Yes, yes. And so what we're seeing there is the opportunity to continue to invest in Texas. Right now, what we're seeing is most of that is really the Texas Capital plan is $17 billion, and it's been designed and focused around enhancing system reliability and resiliency, so there's really incremental investment to expand around ERCOT 765 system, such as the Panhandle RPG initiative and that spend is not included in the plan. And so I would say what you're looking at is probably a fairly conservative capital plan in Texas, especially as it relates to the incremental LOAs that we've got associated with Texas.

Your next question comes from the line of Julien Dumoulin-Smith with Jefferies.

Got to echo the comments made thus far, really quite an impressive outcome here altogether. You really did deliver, as you say, high quality. With that said, actually, let me just pick it up where Steve left it off there, right? First off, how do you think about recutting that Texas conversation against Batch 0 versus Batch 1 in as much as it would appear that some of that upside you were just alluding to in terms of what's in versus not in the plan could indeed fold in as you look at these Batch 1 filings as soon as next year and that could be within the 5 years, certainly within the 7-year window. Do you want to talk a little bit about the timing of when some of this other load could get -- start to firm up, if you get what I'm saying. I don't want to get too ahead of myself. But at the same time, I want to make sure I'm hearing you right and how you're describing it.

Yes. Thanks, Julien. With regards to the timing of Batch 0, our understanding is that ERCOT expects to file its data center audit report on December 10, which will then be discussed during the PUCT open meeting that following week. ERCOT on originally planned to complete the Batch 0 process in April. So while this is being delayed, we don't expect it to be really pushed out materially further. And then, of course, I want to reiterate that our sign load in ERCOT is real. We've collected over $2 billion of cash or collateral just for Texas. And of the 45 gigawatts, we submitted as part of that Batch 0 filing, 16 gigawatts were categorized as baseload in the remaining 29 gigawatts as study load. So the conditional load classifications that ERCOT communicated in early September are really generally consistent with our filings. So we feel very strong and good about that. However, we do view these classifications as being more sort of administrative in nature as they work through the overall process. And clearly, we'll have more clarity in the coming months. But our customers, as we've had our discussions with them, they remain very committed to connecting to our system, and we continue to be very excited about our business opportunities in Texas.

Excellent. And then just in terms of more substantive EPS question, you've got this 10% number in the later years. Your last year, if you think about that role for because you obviously provide some more discrete rate base numbers, if you think about rolling forward 2030 to '31, for instance, you've got like a 7% growth in that final year. How do you think about what's baked into rate base in what you're showing here versus what's kind of baked into your EPS numbers and commitments here for the 9 to 11 or 10 or however you want to characterize it in the later years.

Yes. Julien, this is [indiscernible]. So look, what we wanted to do with this was really provide a look just a little bit beyond the 5-year plan. And so what we did is rolled out that 7-year look on that 10%. What I don't want people to assume is that we're walking down or stepping back from what we're seeing is robust growth across the system. We really just haven't put the capital into those years and the associated financing. But I think you've seen us continue to show that this capital plan has a long runway for increased growth and we're very confident about sustaining that 10% over the long-term period. And when you get 7 years out into the plan and still being able to say we're growing at a 10% CAGR. Yes, you may be right, if you actually run the calculation that you see a slight drop off. But what I'm saying is that we don't even have a lot of these incremental growth opportunities baked into the plan at this point yet. So this, I would say, is really a conservative look around the corner and we feel very, very good about where things are going, especially within the historical 5-year window. And then in the 7-year window, as we continue to update that, I think you'll see that continue to show strong robust growth like we're seeing in that '29, '30 and '31 time frame.

Yes, indeed. And are there any lumpy items that you'd be looking out for those final years as you think you turned around the corner here that could move the needle? You've made some pretty big moves here of late. I'm just curious if there's anything that stands out that you'd be watching here as you think about lumping into that, call it, that '31 rate base?

Yes. I would say, Julien, what you would want to watch for is the continuation of the build-out in Texas. I think we've been fairly conservative in the Texas Capital plan, especially around 765 build-out. I think you can also take a look at the generation needs as we lean into the incremental generation opportunities across the VIUs. And so from that perspective, both transmission and generation are going to be big projects coming in and incremental projects as we continue to roll out the capital plan in subsequent years. And then we also, on the transmission side, also have the competitive transmission projects. And you've seen us pretty active in MISO with the projects that we announced up in Wisconsin. And so I think this will be a very much a continuation of the under-promised [indiscernible] deliver mantra that this management team is doing.

Your next question comes from the line of Nick Amicucci with Evercore ISI.

I do want to just say congrats to Darcy, and thanks for all the help over the years. But I do want to just ask on the $37 billion for transmission, $17 billion is RTO driven $11 billion reliability and $9 billion individual customers. Just as we think about the RTO piece in particular, how much of that has been awarded versus pending regional planning or competitive bids?

Nick, it's Kate here. So when we put that into the plan, that has already gone through a regional transmission planning process. So that is work that has already been identified and the needs identified whether it's an SPMS or PJM. So all of that's been through the process. The majority of that is now ready to construct, and we continue to work through the final stages of the regulatory process on the other items in there. But I want to reiterate all of that has been through kind of the regional needs process. That doesn't include any of the upside that Bill talked about that we may see in the future as these planning processes continue.

Perfect. Makes sense. Then just as we think about kind of the new segment, AEP infrastructure. I guess with the fuel cell project, I mean, not targeted to come into service until 2028. Just I guess, what's driving the [ 26% ] accretion in from contracted assets versus maybe retail and wholesale?