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American Electric's Investments and Renewables Fuel Long-Term Growth
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Key Takeaways
American Electric Power plans $36B for transmission and distribution upgrades from 2026 to 2030.
AEP's $72B investment plan supports a 10% rate base CAGR through 2030, with 90% to be recovered.
AEP Texas relies on a few REPs; its two largest providers made up 40% of operating revenues in 2024.
American Electric Power (AEP - Free Report) continues to benefit from its strategic investments, which are strengthening its infrastructure and enabling more efficient customer service. The company is also well positioned to gain from the continued expansion of its renewable energy portfolio.
However, this Zacks Rank #3 (Hold) company faces operational risks from heavy reliance on a few Retail Electric Providers (REPs).
Factors Acting in Favor of AEP
The company’s geographically diversified operations allow it to benefit from revenues generated across multiple states, unlike single-state utility peers. American Electric plans to invest $36 billion in its transmission and distribution business during the 2026-2030 period. These investments will support critical upgrades to AEP’s transmission and distribution infrastructure, enabling the company to serve utility customers more efficiently while strengthening its long-term revenue growth prospects.
The company is currently executing a $72 billion investment plan over the 2026–2030 period across its electricity generation, transmission, and distribution operations, including renewables. This capital plan underpins a projected 10% rate base CAGR through 2030, with nearly 90% of the investment expected to be recovered through reduced regulatory lag mechanisms.
American Electric has been investing steadily to enhance its renewable generation portfolio. During the third quarter of 2025, the company spent $1.7 billion on the acquisition of four power plants, including the Pixley Solar Energy Facility and Flat Ridge IV and V. As of Sept. 30, 2025, the company received regulatory approvals from various state regulatory commissions to acquire approximately 1,826 megawatts (MWs) of owned renewable generation facilities through investments worth $4.5 billion.
Challenges Faced by AEP
AEP Texas relies heavily on a limited number of REPs for its revenues, with its two largest REPs accounting for approximately 40% of operating revenues in 2024. Any payment delay or default by these REPs, stemming from economic or financial stress, could adversely impact AEP Texas’s cash flow, financial condition and operating results. Because regulatory rules limit AEP Texas’s ability to require credit protections from REPs, it remains exposed to nonpayment risks until customers are transferred to another provider or a provider of last resort.
AEP’s Share Price Performance
In the past six months, shares of the company have risen 11.6% compared with the industry’s 7.5% growth.
Ameren’s long-term (three to five years) earnings growth rate is 8.52%. The Zacks Consensus Estimate for AEE’s 2025 earnings per share (EPS) implies an improvement of 8.2% from that recorded in 2024.
AES’ long-term earnings growth rate is 11.17%. The Zacks Consensus Estimate for 2025 EPS calls for an increase of 1.9% from that recorded in 2024.
OGE Energy’s long-term earnings growth rate is 6.97%. The company delivered an average earnings surprise of 10.5% for the last four quarters.
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American Electric's Investments and Renewables Fuel Long-Term Growth
Key Takeaways
American Electric Power (AEP - Free Report) continues to benefit from its strategic investments, which are strengthening its infrastructure and enabling more efficient customer service. The company is also well positioned to gain from the continued expansion of its renewable energy portfolio.
However, this Zacks Rank #3 (Hold) company faces operational risks from heavy reliance on a few Retail Electric Providers (REPs).
Factors Acting in Favor of AEP
The company’s geographically diversified operations allow it to benefit from revenues generated across multiple states, unlike single-state utility peers. American Electric plans to invest $36 billion in its transmission and distribution business during the 2026-2030 period. These investments will support critical upgrades to AEP’s transmission and distribution infrastructure, enabling the company to serve utility customers more efficiently while strengthening its long-term revenue growth prospects.
The company is currently executing a $72 billion investment plan over the 2026–2030 period across its electricity generation, transmission, and distribution operations, including renewables. This capital plan underpins a projected 10% rate base CAGR through 2030, with nearly 90% of the investment expected to be recovered through reduced regulatory lag mechanisms.
American Electric has been investing steadily to enhance its renewable generation portfolio. During the third quarter of 2025, the company spent $1.7 billion on the acquisition of four power plants, including the Pixley Solar Energy Facility and Flat Ridge IV and V. As of Sept. 30, 2025, the company received regulatory approvals from various state regulatory commissions to acquire approximately 1,826 megawatts (MWs) of owned renewable generation facilities through investments worth $4.5 billion.
Challenges Faced by AEP
AEP Texas relies heavily on a limited number of REPs for its revenues, with its two largest REPs accounting for approximately 40% of operating revenues in 2024. Any payment delay or default by these REPs, stemming from economic or financial stress, could adversely impact AEP Texas’s cash flow, financial condition and operating results. Because regulatory rules limit AEP Texas’s ability to require credit protections from REPs, it remains exposed to nonpayment risks until customers are transferred to another provider or a provider of last resort.
AEP’s Share Price Performance
In the past six months, shares of the company have risen 11.6% compared with the industry’s 7.5% growth.
Image Source: Zacks Investment Research
Stocks to Consider
Some better-ranked stocks from the same industry are Ameren (AEE - Free Report) , The AES Corporation (AES - Free Report) and OGE Energy (OGE - Free Report) , each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Ameren’s long-term (three to five years) earnings growth rate is 8.52%. The Zacks Consensus Estimate for AEE’s 2025 earnings per share (EPS) implies an improvement of 8.2% from that recorded in 2024.
AES’ long-term earnings growth rate is 11.17%. The Zacks Consensus Estimate for 2025 EPS calls for an increase of 1.9% from that recorded in 2024.
OGE Energy’s long-term earnings growth rate is 6.97%. The company delivered an average earnings surprise of 10.5% for the last four quarters.