American Electric Power Co. Inc. is cutting certain operations expenses and shifting capital spending to offset the impacts of the COVID-19 pandemic, but the company sought to reassure investors that it will move forward with the planned $2 billion North Central Wind projects in Oklahoma.

"We already know we're going forward with the project," AEP Chairman, President and CEO Nicholas Akins said May 6 on the company's first-quarter 2020 earnings call. "The question is what size?"

The Arkansas Public Service Commission on May 5 became the latest jurisdiction to approve its portion of the projects, Akins said. The approval includes a "flex-up option" that allows the jurisdiction to increase its megawatt allocation. (Arkansas PSC Docket No. 19-035-U)

This follows approvals earlier in the year by the Oklahoma Corporation Commission and the Federal Energy Regulatory Commission.

In July 2019, AEP announced plans to acquire three wind projects in Oklahoma from developer Invenergy LLC. The nearly $2 billion deal involves the acquisition of the planned 999-MW Traverse Wind Energy Center, the 199-MW Sundance Wind Project and the 287-MW Maverick Wind Project by AEP subsidiaries Public Service Co. of Oklahoma and Southwestern Electric Power Co.

"With approvals in Oklahoma, Arkansas and FERC under our belt, the project has what it needs to go forward at 846 MW of a 1,485-MW project," the CEO added. "Of course, the project can move forward with even more savings for customers and the full $2 billion investment opportunity if either the [Louisiana Public Service Commission] approves with the flex-up option or the [Louisiana Public Service Commission] and the Public Utility Commission of Texas approves their portion of the full project."

AEP in February said it will likely issue equity and could sell assets to fund the projects.

"The main message is all the options that were available to us before are still on the table and still being considered," AEP Executive Vice President and CFO Brian Tierney said on the call.

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AEP on May 6 reported first-quarter 2020 operating earnings of $504.2 million, or $1.02 per share, down from $584.8 million, or $1.19 per share, a year ago.

Based on unfavorable weather in the first quarter and updated load forecast, AEP expects to be in the lower half of its existing 2020 operating EPS guidance range of $4.25 to $4.45.

While AEP expects residential sales for 2020 to increase 3% versus 2019 levels, the company is forecasting a 5.6% decline in commercial load growth and an 8% decline in industrial sales.

"These retail forecasts lead us to expect an overall decline in sales of 3.4%," Tierney said. "This updated load would impact our prior forecast negatively by 15 cents per share."

"The net result of load, weather and [operations and maintenance, or O&M] reductions would have a negative 9 cents per share impact for the year, leaving us inside but in the lower half of the original operating earnings guidance range," the CFO added.

AEP said weather normalized retail load in April was down 4.3% compared to April 2019 with a 6% increase in residential sales, 7.7% decline in commercial sales and 10% drop in industrial load.

In response to its revised full-year load projections, AEP management said it is cutting its planned O&M expense by $100 million and "shifting $500 million of our planned 2020 capital spending to future years to support our credit metrics."

The utility said shifting its capital spending allows it to reaffirm its 5% to 7% long-term operating earnings growth rate. AEP maintained its five-year $33 billion capital spending forecast through 2024.

Tierney also provided a breakdown of how certain economic changes could impact the company's financial outlook.

"On the positive side, a sharp V-shaped recovery that is more dramatic than the gradual recovery from the second-quarter low point we have assumed would improve results," Tierney said, adding "mitigation of coronavirus infection rates" that allows the economy to reopen sooner than assumed would help results.

"A greater increase in residential sales and an improvement in commercial and industrial sales would further improve our outlook," the CFO said, noting if the mild winter "carried forward into a warmer-than-normal summer" that would also be a positive earnings driver.

"A prolonged U-shaped or dramatic L-shaped recovery would be more negative than our assumptions," Tierney said. "Increased coronavirus infection rates could lead to weaker economic conditions for longer periods than we have assumed, potentially impairing our outlook for the year. In addition, continued mild weather and/or O&M expenses beyond our control, like for storms, could negatively impact the outlook for 2020."

AEP said it had more than $2.8 billion in net available liquidity at the end of the first quarter.