VARIABLE INTEREST ENTITIES AND EQUITY METHOD INVESTMENTS

3 Months Ended

Mar. 31, 2026

Variable Interest Entities and Equity Method Investments [Abstract]

VARIABLE INTEREST ENTITIES AND EQUITY METHOD INVESTMENTS

VARIABLE INTEREST ENTITIES AND EQUITY METHOD INVESTMENTS

The disclosures in this note apply to all Registrants unless indicated otherwise.

The accounting guidance for “Variable Interest Entities” is a consolidation model that considers if a company has a variable interest in a VIE.  A VIE is a legal entity that possesses any of the following conditions: the entity’s equity at risk is not sufficient to permit the legal entity to finance its activities without additional subordinated financial support, equity owners are unable to direct the activities that most significantly impact the legal entity’s economic performance (or they possess disproportionate voting rights in relation to the economic interest in the legal entity), or the equity owners lack the obligation to absorb the legal entity’s expected losses or the right to receive the legal entity’s expected residual returns. Entities are required to consolidate a VIE when it is determined that they have a controlling financial interest in a VIE and therefore, are the primary beneficiary of that VIE, as defined by the accounting guidance for “Variable Interest Entities.” In determining whether AEP is the primary beneficiary of a VIE, management considers whether AEP has the power to direct the most significant activities of the VIE and is obligated to absorb losses or receive the expected residual returns that are significant to the VIE. Management believes that significant assumptions and judgments were applied consistently.

AEP holds ownership interests in businesses with varying ownership structures. Partnership interests and other variable interests are evaluated to determine if each entity is a VIE, and if so, whether or not the VIE should be consolidated into AEP’s financial statements. AEP has not provided material financial or other support that was not previously contractually required to any of its consolidated VIEs. AEP’s interests in non-consolidated VIEs are accounted for under the equity method of accounting.

Consolidated Variable Interest Entities

The 2025 Annual Report includes a detailed discussion of AEP’s and Registrant Subsidiaries’ other consolidated VIEs. The balances below represent the assets and liabilities of consolidated VIEs. These balances include intercompany transactions that are eliminated upon consolidation.

	March 31, 2026
	Consolidated VIEs
	SWEPCo Sabine		I&M DCC Fuel		AEP Texas Restoration Funding			APCo Appalachian Consumer Rate Relief Funding			SWEPCo Storm Recovery Funding		KPCo Cost Recovery Funding			AEP Credit		Protected Cell of EIS		Transource Energy
	(in millions)
ASSETS
Current Assets	$	5	$	108	$	10		$	12		$	10	$	9		$	1,247	$	236	$	37
Net Property, Plant and Equipment	—		195		—			—			—		—			—		—		672
Other Noncurrent Assets	74		97		93		(a)	71		(b)	311		458		(c)	11		—		9
Total Assets	$	79	$	400	$	103		$	83		$	321	$	467		$	1,258	$	236	$	718
LIABILITIES AND EQUITY
Current Liabilities	$	14	$	108	$	31		$	30		$	19	$	16		$	1,182	$	77	$	33
Noncurrent Liabilities	65		292		71			51			300		449			—		108		316
Equity	—		—		1			2			2		2			76		51		369
Total Liabilities and Equity	$	79	$	400	$	103		$	83		$	321	$	467		$	1,258	$	236	$	718

(a)Includes an intercompany item eliminated in consolidation of $4 million.

(b)Includes an intercompany item eliminated in consolidation of $1 million.

(c)Includes an intercompany item eliminated in consolidation of $16 million.

	December 31, 2025
	Consolidated VIEs
	SWEPCo Sabine		I&M DCC Fuel		AEP Texas Restoration Funding			APCo Appalachian Consumer Rate Relief Funding			SWEPCo Storm Recovery Funding		KPCo Cost Recovery Funding			AEP Credit		Protected Cell of EIS		Transource Energy
	(in millions)
ASSETS
Current Assets	$	1	$	118	$	18		$	18		$	17	$	24		$	1,232	$	223	$	45
Net Property, Plant and Equipment	—		227		—			—			—		—			—		—		658
Other Noncurrent Assets	80		118		98		(a)	79		(b)	312		462		(c)	10		—		4
Total Assets	$	81	$	463	$	116		$	97		$	329	$	486		$	1,242	$	223	$	707
LIABILITIES AND EQUITY
Current Liabilities	$	15	$	118	$	31		$	31		$	23	$	30		$	1,176	$	56	$	50
Noncurrent Liabilities	66		345		84			64			304		454			1		102		298
Equity	—		—		1			2			2		2			65		65		359
Total Liabilities and Equity	$	81	$	463	$	116		$	97		$	329	$	486		$	1,242	$	223	$	707

(a)Includes an intercompany item eliminated in consolidation of $4 million.

(b)Includes an intercompany item eliminated in consolidation of $1 million.

(c)Includes an intercompany item eliminated in consolidation of $16 million.

Non-Consolidated Significant Variable Interests

OVEC (Applies to AEP and OPCo)

In November 2025 and December 2025, OPCo filed applications with the PUCO and FERC, respectively, to transfer its 4.3% ownership in OVEC to Parent and its 19.93% OVEC power participation entitlement to AGR. Upon completion of the transaction, Parent will remain responsible for the financial and other obligations of AGR under the intercompany power agreement. In December 2025 and April 2026, the PUCO approved the application and the FERC authorized the transaction, respectively. The transaction is expected to be completed in the second quarter of 2026.

The 2025 Annual Report includes a detailed discussion of AEP’s and Registrant Subsidiaries’ other significant variable interests in non-consolidated VIEs.

Equity Method Investment in Unconsolidated Entities

Gigawatt AI (Applies to AEP)

In August 2025, AEP and Gigawatt AI, Inc. (GWAI), a privately held company, entered into a new commercial arrangement. GWAI is focused on developing AI-centric operating systems and applications that optimize utility operations and infrastructure. AEP initially invested $100 million for a 10% ownership interest in the common stock and received a warrant for the option to acquire an additional 5% of GWAI’s common stock for $50 million. In January and April 2026, AEP made two additional $25 million investments, each for an incremental 2.5% interest in GWAI’s common stock because of GWAI’s achievement of performance-based milestones. As a result, as of April 2026, AEP holds 15% of GWAI’s common stock with a cumulative investment of $150 million. Contingent upon GWAI’s future achievement of remaining defined performance-based milestones, AEP will invest up to an additional $50 million for up to an additional 5% of GWAI’s common stock.

In connection with AEP’s equity interest, AEP was granted the right to designate one of the three members of GWAI’s board of directors. The board position is currently held by an officer of AEP and therefore the investment is a related-party transaction. AEP’s board participation provides AEP with direct influence over GWAI’s governance and oversight, while GWAI’s founders retain all other equity interests and board representation. AEP also acquired a perpetual software license for software developed by GWAI.

The equity interest is accounted for as an equity method investment due to AEP’s ability to exercise significant influence over certain GWAI policies. As of March 31, 2026, AEP’s carrying value of the investment in GWAI was $125 million, which is recognized in Deferred Charges and Other Noncurrent Assets on the balance sheet. AEP’s proportionate share of GWAI’s losses was immaterial for the three months ended March 31, 2026.

The common stock warrant meets the definition of a derivative instrument and is therefore required to be carried at fair value on a recurring basis. The fair value of the common stock warrant and AEP’s acquired perpetual software license were immaterial as of March 31, 2026.

The 2025 Annual Report includes a detailed discussion of AEP’s and Registrant Subsidiaries’ other equity method investments.