American Electric Power Company, Inc.

Capital structure and performance · Credit rating and cost of capital

Downgrades in AEP's credit ratings could negatively affect its ability to access capital. The credit ratings agencies periodically review AEP's capital structure and the quality and stability of earnings and cash flows. Any negative ratings actions could constrain the capital available to AEP and could limit access to funding for operations.

Market and investment · Trading and market making activities

Commodity trading and marketing activities are subject to inherent risks which can be reduced and controlled but not eliminated. AEP routinely has open trading positions in the market, resulting from the management of AEP's trading portfolio. To the extent open trading positions exist, fluctuating commodity prices can improve or diminish financial results.

Capital structure and performance · Dividend policy and capital allocation

AEP and AEPTCo are holding companies and have no operations of their own. Their ability to meet their financial obligations associated with their indebtedness and to pay dividends is primarily dependent on the earnings and cash flows of their operating subsidiaries.

Market and investment · Investment portfolio performance

Volatility in the securities markets, interest rates, and other factors could substantially increase defined benefit pension and other postretirement plan costs. Changes in actuarial assumptions and differences between the assumptions and actual values could increase pension and other postretirement expense.

Capital structure and performance · Credit rating and cost of capital

Downgrades in AEP's credit ratings could negatively affect its ability to access capital. Any negative ratings actions could constrain the capital available to AEP and could limit access to funding for operations. If AEP's ability to access capital becomes significantly constrained, AEP's interest costs will likely increase.

Innovation and product development · Product development and randd investment risks

AEP may be unable to procure or construct generation capacity when needed or to recover the costs of such generation capacity. AEP's ability to acquire, retrofit and/or construct power generation facilities in a timely manner and within budget is contingent upon many variables and subject to substantial risks.

Digital transformation and innovation · Technology obsolescence and evolution

Changes in regulatory policies and advances in batteries or energy storage, wind turbines and photovoltaic solar cells are reducing costs of new technology to levels that are making them competitive with some central station electricity production and delivery. These developments can challenge AEP's competitive ability to maintain relatively low cost, efficient and reliable operations.

Cybersecurity and data protection · Data breaches and cyber attacks

Physical attacks or hostile cyber intrusions could severely impair operations, lead to the disclosure of confidential information and damage AEP's reputation. Threat actors, including sophisticated nation-state actors and criminal groups, exploit potential vulnerabilities in the electric utility industry, grid infrastructure and other energy infrastructures.

Digital transformation and innovation · Artificial intelligence and automation

Advancements in artificial intelligence and other emerging technologies may require significant changes to the size, skills, and composition of AEP's workforce, and the inability to adapt to these evolving talent needs could exacerbate existing workforce challenges and adversely affect AEP's operations and financial performance.

Natural and catastrophic events · Natural disasters and extreme weather

Severe weather and weather-related events impact AEP's service territories, primarily when thunderstorms, tornadoes, hurricanes, fires, floods and snow or ice storms occur. To the extent the frequency and intensity of extreme weather events and storms increase, AEP's cost of providing service will increase.

Economic and market conditions · Consumer spending and confidence

AEP's results of operations and cash flows may be negatively affected by a lack of growth or slower growth in the number of customers, a decline in customer demand or a recession. Customer growth and customer usage are affected by economic and demographic conditions, population changes, job and income growth, housing starts, new business formation and the overall level of economic activity.

Corporate governance · Shareholder rights and activism

Shareholder activism could result in substantial costs and divert management's and the AEP Board's attention and resources from AEP's business. AEP may be required to incur significant fees and other expenses related to activist shareholder matters, including for third-party advisors.

Reputation and brand · Brand damage and negative publicity

The AEP regulated utility businesses have large customer and stakeholder bases and could be subject to public criticism or adverse publicity focused on issues including the operation and maintenance of their assets and infrastructure, their preparedness for major storms or other extreme weather events, or the quality of their service or the reasonableness of the cost of their service.

Human capital and workforce · Talent acquisition and retention

Failure to attract and retain an appropriately qualified workforce and management could harm results of operations. Certain events, such as an aging workforce without appropriate replacements, mismatch of skillset or complement to future needs, or unavailability of contract resources may lead to operating challenges and increased costs.

Core operations · Safety incidents and operational accidents

The generation, transmission and distribution of electricity are dangerous and involve inherent risks of damage to private property and injury to AEP's workforce and the general public. Electricity poses hazards for AEP's workforce and the general public in the event that either comes in contact with electrical current or equipment.

Core operations · Operational disruption and business continuity

AEP's financial performance may be adversely affected if AEP is unable to successfully operate facilities or perform certain corporate functions. Performance is highly dependent on the successful operation of generation, transmission and/or distribution facilities. Operating these facilities involves many risks, including operator error, breakdown or failure of equipment or processes, labor disputes, and supply chain disruptions.

Project and contract management · Project execution and delivery risks

AEP's business and capital investment plans for the construction of new projects, including providing service to new data centers and other large load customers, involve execution risks that could adversely affect AEP's financial performance. These risks include delays, supply chain disruption and the unavailability of materials, cost overruns, inflation, the cost and availability of capital, labor disputes or shortages.

Human capital and workforce · Key personnel dependence and succession

Difficulties in sustaining leadership continuity could negatively impact AEP's business and financial condition. The ability to maintain strong leadership relies on effective succession planning, and gaps in preparing or transitioning individuals into critical roles may impact performance.

Legal and litigation · Litigation and legal proceedings

Adverse outcomes in AEP's material legal proceedings could materially and adversely affect AEP's results of operations and financial condition. AEP is involved in legal proceedings, claims and litigation arising out of its business operations.

Industry regulation · Licensing and permits

AEP faces risks related to project siting, financing, construction, permitting, governmental approvals and the negotiation of project development agreements. Should AEP be unsuccessful in obtaining necessary licenses or permits on acceptable terms or resolving third-party challenges to such licenses or permits, it could reduce future net income and cash flows and impact financial condition.