ACQUISITIONS, DISPOSITIONS AND IMPAIRMENTS

12 Months Ended

Dec. 31, 2025

Discontinued Operations and Disposal Groups [Abstract]

ACQUISITIONS, DISPOSITIONS AND IMPAIRMENTS

ACQUISITIONS, DISPOSITIONS AND IMPAIRMENTS

The disclosures in this note apply to AEP unless indicated otherwise.

ACQUISITIONS

Wagon Wheel Wind Facility (Applies to AEP and SWEPCo)

In December 2025, SWEPCo acquired 100% of the equity interests in Wagon Wheel Project, LLC, the owner of the newly constructed Wagon Wheel wind facility located across multiple counties in Oklahoma. This facility, placed in service in December 2025, serves both retail and wholesale customers in Arkansas and Louisiana. SWEPCo’s Louisiana jurisdictional share of the Wagon Wheel revenue requirement, net of PTC benefit, is recoverable through an authorized rider until the amounts are reflected in base rates. Recovery of the Arkansas portion of the Wagon Wheel revenue requirement began in February 2026 through base rates. Regulatory commission approval of the inclusion of the output from Wagon Wheel in retail rates resulted in various capital cost, performance and other guarantees for retail customers which could subject SWEPCo to future regulatory liabilities to retail customers.

The acquisition of Wagon Wheel resulted in the recognition of operating leases for easement and access rights to the land on which the facilities are located, as well as the associated ARO. In accordance with the guidance for “Business Combinations,” management determined that the acquisition represents an asset acquisition. The table below summarizes the impact at acquisition on SWEPCo’s balance sheets:

Plant Name	State	Fuel Type	Net Maximum Capacity (MWs)	Property, Plant and Equipment, Net		Operating Lease Assets		Asset Retirement Obligations
				(in millions)
Wagon Wheel	OK	Wind	598	$	1,272	$	66	$	20

Top Hat Wind Facility (Applies to AEP and APCo)

In November 2025, APCo acquired 100% of the equity interests in Top Hat Wind Energy, LLC, the owner of the newly constructed Top Hat wind facility located in Logan County, Illinois. This facility, placed in service in November 2025, serves both retail and wholesale customers in Virginia and West Virginia. Virginia and West Virginia jurisdictional shares of the Top Hat revenue requirement, net of PTC benefit, is recoverable through existing riders until the amounts are reflected in base rates. The acquisition of Top Hat resulted in the recognition of operating leases for easement and access rights to the land on which the facilities are located, as well as the associated ARO. In accordance with the guidance for “Business Combinations,” management determined the acquisition represents an asset acquisition. The table below summarizes the impact at acquisition on APCo’s balance sheets:

Plant Name	State	Fuel Type	Net Maximum Capacity (MWs)	Property, Plant and Equipment, Net		Operating Lease Assets		Asset Retirement Obligations
				(in millions)
Top Hat	IL	Wind	204	$	562	$	31	$	4

Green Country Power Plant, Pixley Solar Energy Facility, Flat Ridge IV Wind Energy Facility and Flat Ridge V Wind Energy Facility (Applies to AEP and PSO)

In May 2025, PSO acquired 100% of the equity interests in Pixley Solar Energy, LLC, the owner of the newly constructed Pixley solar energy facility in Barber County, Kansas. The Pixley facility, placed in service in May 2025, serves both retail and wholesale customers in Oklahoma. PSO’s revenue requirement is recoverable through an authorized rider until it is incorporated into base rates. Regulatory approval of Pixley’s output in retail rates included capital cost, performance and other guarantees, which may subject PSO to future regulatory liabilities. In June 2025, PSO also acquired 100% of the equity interests in Flat Ridge IV Wind, LLC, the owner of the newly constructed Flat Ridge IV Wind Energy Facility located in Kingman and Harper Counties, Kansas. This facility, also placed in service in June 2025, serves both retail and wholesale customers under similar recovery and regulatory provisions as the Pixley facility. The acquisitions of Pixley and Flat Ridge IV also resulted in the recognition of operating leases for easement and access rights to the land on which the facilities are located, as well as the associated ARO. In accordance with the guidance for “Business Combinations,” management determined the acquisitions of Pixley and Flat Ridge IV represent asset acquisitions.

Additionally, in June 2025, PSO completed the acquisition of 100% of the equity interests in Green Country Energy, LLC, the owner of a combined-cycle natural gas facility located in Jenks, Oklahoma, following approvals from both the FERC and the OCC. The transaction included the acquisition of a previously executed capacity sales agreement between Green Country Energy, LLC, as seller, and SWEPCo, as purchaser. Since July 2025, PSO sells a portion of Green Country’s capacity to SWEPCo, and this arrangement will continue through May 2027, when the agreement ends. The acquisition also resulted in the extinguishment of a previously executed capacity sales agreement between Green Country Energy, LLC, as seller, and PSO, as purchaser. In accordance with the guidance for “Business Combinations,” management determined the acquisition of Green Country represents an asset acquisition. Asset acquisitions are accounted for using a cost accumulation model, with the cost of the acquisition allocated to the acquired assets and assumed liabilities based on their relative fair value. Upon closing of the transaction, PSO recognized Property, Plant and Equipment of $819 million, an intangible liability of $41 million for the fair value of the acquired SWEPCo capacity sales agreement and a regulatory liability of $50 million, reflective of the recognition and subsequent deferral of the gain from PSO’s extinguished capacity sales agreement. The liabilities recognized for the capacity sales agreements will reduce PSO’s revenue requirement to recover its overall investment in Green Country, which is recoverable through a rider authorized by the OCC until it is included in base rates for the depreciable life of the facility. Management elected the income approach for its nonrecurring valuation of both the intangible liability and regulatory liability. Specifically, management applied a discounted cash flow model based on a forward market price assumption.

Furthermore, in August 2025, PSO completed the acquisition of 100% of the equity interests in Flat Ridge V Wind Energy, LLC, the owner of the Flat Ridge V Wind Energy Facility located in Kingman and Harper Counties, Kansas. This facility, placed in service in August 2025, serves both retail and wholesale customers under similar recovery and regulatory provisions as the Flat Ridge IV and Pixley facilities. The acquisition of Flat Ridge V also resulted in the recognition of operating leases for easement and access rights to the land on which the facilities are located, as well as the associated ARO. In accordance with the guidance for “Business Combinations,” management determined the acquisition of Flat Ridge V represents an asset acquisition.

In 2025, PSO expanded its generation portfolio by acquiring four electric generation facilities for an aggregate purchase price of $1.7 billion. The table below summarizes the impact at acquisition on PSO’s balance sheets:

Plant Name	State	Fuel Type	Net Maximum Capacity (MWs)	Property, Plant and Equipment, Net		Operating Lease Assets		Asset Retirement Obligations		Other Liabilities
				(in millions)
Green Country	OK	Natural Gas	904	$	819	$	—	$	—	$	91	(a)
Pixley	KS	Solar	189	380		9		12		—
Flat Ridge IV	KS	Wind	135	305		7		3		—
Flat Ridge V	KS	Wind	153	338		9		4		—
Total			1,381	$	1,842	$	25	$	19	$	91

(a)$50 million included in Regulatory Liabilities and Deferred Investment Tax Credits, $21 million included in Other Current Liabilities and $20 million included in Deferred Credits and Other Noncurrent Liabilities on PSO’s balance sheets.

Diversion Wind Farm (Applies to AEP and SWEPCo)

In December 2024, SWEPCo acquired 100% of the equity interests in Diversion Wind Energy, LLC, the owner of Diversion wind farm. The Diversion wind farm is a newly constructed 201 MW wind facility located in Baylor County, Texas and was placed in service in December 2024. Output from Diversion serves both retail and wholesale customers in Arkansas and Louisiana. SWEPCo’s Louisiana jurisdictional share of the Diversion revenue requirement, net of PTC benefit, is recoverable through an authorized rider until the amounts are reflected in base rates. Recovery of the Arkansas portion of the Diversion revenue requirement is expected to begin in 2026 through base rates. Regulatory commission approval of the inclusion of the output from Diversion in retail rates resulted in various capital cost, performance and other guarantees for retail customers which could subject SWEPCo to future regulatory liabilities to retail customers.

In accordance with the guidance for “Business Combinations,” management determined that the acquisition of the Diversion project represents an asset acquisition. As of December 31, 2024, SWEPCo had approximately $423 million of gross Property, Plant and Equipment, inclusive of capital expenditures after the acquisition, on the balance sheets related to the Diversion project. The acquisition also resulted in the recognition of $20 million of operating leases that provide for easement and access rights to the land that Diversion was built upon and $6 million of ARO.

Rock Falls Wind Facility (Applies to AEP and PSO)

In November 2022, PSO entered into an agreement to acquire the Rock Falls Wind Facility. In February 2023, the FERC approved PSO’s acquisition of the Rock Falls Wind Facility under Section 203 of the Federal Power Act. In March 2023, PSO acquired an ownership interest in the entity that owned Rock Falls during its development and construction for $146 million. In accordance with the guidance for “Business Combinations,” AEP management determined that the acquisition of the Rock Falls Wind Facility represents an asset acquisition. The lease obligations related to Rock Falls were not material at the time of acquisition.

DISPOSITIONS

Noncontrolling Interest in Midwest Transmission Holdings (Applies to AEP and AEPTCo)

In January 2025, AEP announced a partnership whereby a nonaffiliated entity would acquire a 19.9% noncontrolling interest in Midwest Transmission Holdings, a subsidiary of AEPTCo Parent that owns all of the issued and outstanding stock of OHTCo and IMTCo. The partnership was structured pursuant to a contribution agreement between AEPTCo, along with Midwest Transmission Holdings, and Olympus BidCo L.P. (“the Investor”), a special purpose entity controlled by (a) investment funds managed by or affiliated with Kohlberg Kravis Roberts & Co. L.P. and (b) Public Sector Pension Investment Board, whereby the Investor agreed to acquire a 19.9% noncontrolling equity interest in Midwest Transmission Holdings for $2.82 billion. The transaction closed in June 2025. AEP received cash proceeds of approximately $2.78 billion, net of transaction costs. Net proceeds were used to help finance AEP’s capital plan.

Disposition of AEP OnSite Partners (Applies to AEP)

In April 2023, AEP initiated a sales process for its ownership in AEP OnSite Partners. AEP OnSite Partners targeted opportunities in distributed solar, combined heat and power, energy storage, waste heat recovery, energy efficiency, peaking generation and other energy solutions. In May 2024, AEP signed an agreement to sell AEP OnSite Partners to a nonaffiliated third-party. In September 2024, AEP completed the sale and received cash proceeds of approximately $318 million, net of taxes and transaction costs. The proceeds were used to pay down short-term debt.

Disposition of NMRD (Applies to AEP)

In December 2023, AEP and the joint owner signed an agreement to sell NMRD to a nonaffiliated third party and the sale was completed in February 2024. AEP received cash proceeds of approximately $107 million, net of taxes and transaction costs. The transaction did not have a material impact on net income or financial condition.

Disposition of the Competitive Contracted Renewables Portfolio (Applies to AEP)

In February 2022, AEP management announced the initiation of a process to sell all or a portion of AEP Renewables’ competitive contracted renewables portfolio (the portfolio) within the Generation & Marketing segment. In late January 2023, AEP received final bids from interested parties. In February 2023, AEP’s Board of Directors approved management’s plan to sell the portfolio and AEP signed an agreement with a nonaffiliated party.

In August 2023, AEP completed the sale of the entire portfolio to the nonaffiliated party and received cash proceeds of approximately $1.2 billion, net of taxes and transaction costs. AEP recorded a pretax loss of $93 million ($73 million after-tax) for the year ended December 31, 2023 related to the sale.

IMPAIRMENTS

Internal-Use Software Impairment (Applies to all Registrants Except AEPTCo)

In the fourth quarter of 2025, as a result of evaluation of AEP’s strategy and expectations for ongoing advancements in available technologies, including the expanded use of, and potential capabilities for, AI-centric software and other agile software functionality, AEP Management determined that previously selected technology for an in-process software development project to replace a legacy enterprise system was no longer probable of being completed and placed in service. As a result, the guidance for “Internal Use Software” requires the related capitalized costs to be reported at the lower of their carrying amount or fair value, if any, less costs to sell. AEP Management concluded the previously incurred application development costs have a fair value of zero and recognized a charge of $66 million recorded in Asset Impairments and Other Related Charges on the statements of income in the fourth quarter of 2025.

2012 Texas Base Rate Case (Applies to AEP and SWEPCo)

In December 2023, SWEPCo recorded a pretax, non-cash disallowance of $86 million in Asset Impairments and Other Related Charges on the statements of income due to regulatory disallowance of recovery of AFUDC on Turk Plant in the 2012 Texas Base Rate case.

NMRD (Applies to AEP)

In December 2023, as a result of sale negotiations AEP determined a decline in the fair value of AEP’s investment in NMRD was other than temporary. In accordance with the accounting guidance for “Investment - Equity Method and Joint Ventures”, in the fourth quarter of 2023 AEP recorded a pretax other than temporary impairment charge of $19 million which is presented in Equity Earnings (Losses) of Unconsolidated Subsidiaries on AEP’s statement of income. AEP’s determination of fair value utilized the accounting guidance for Fair Value Measurement market approach to valuation and was based on negotiations to sell the investment to a nonaffiliated third-party. The carrying value of the investment in NMRD was not material to AEP as of December 31, 2023.