A guidance raise that counted for nothing

American Electric Power, the Columbus, Ohio company that generates and delivers electricity to five and a half million customers across 11 states, told investors on 30 July that large industrial load under contract through 2030 had reached 69 gigawatts. That was six gigawatts more than a quarter earlier. The same morning it raised 2026 operating earnings guidance to a range of $6.25 to $6.55 a share, from $6.15 to $6.45, and reaffirmed a five-year capital plan of $78bn — roughly double the plan of four years ago — implying 11% annual growth in rate base, the asset pile regulators allow it to earn a return on.

The stock fell 4.9% over the month to 21 August.

It was not alone, and the company it kept is the point.

The control group owns no data centers

Duke Energy, CMS Energy and DTE Energy each have junior subordinated notes listed in $25 denominations — "baby bonds," bought largely by retail investors for the coupon. They pay a fixed rate. They have no claim on a single megawatt of hyperscaler load. Over the same 30 days, Duke's fell 3.4%, CMS Energy's 3.8% and DTE's 3.9%.

Dominion Energy fell 3.9% over that stretch. NextEra fell 3.9%. American Electric Power fell 4.9%. The equities of the three utilities most exposed to artificial-intelligence power demand in America delivered, to within about a point, what a fixed coupon delivered. Behind it, the 30-year Treasury yield topped 5.33% on 18 August, its highest since June 2007, on a widening federal deficit and sticky inflation. Every utility is valued against that yield, because the dividend is the competing product.

Stretch the window and the picture inverts. Over twelve months Dominion returned 9.6%, American Electric Power 9.7% and NextEra 11.0%, while the three baby bonds lost between 9.8% and 11.4%. That is roughly 20 points of spread — the market's price for load growth. Over the last month, that spread was zero.

What actually happened at the businesses

Dominion, the regulated monopoly serving about 3.6m electric customers in Virginia and the Carolinas, sits on top of the densest concentration of data centers on earth in Loudoun County. Its contracted book across all stages reached 53.8 gigawatts by July, with roughly 12 gigawatts under signed electric service agreements — binding contracts, up from 10.4 gigawatts in May. Virginia segment operating earnings rose 22% to $670m.

Dominion's reported profit looks nothing like that: GAAP net income fell 55% to $340m on $704m of impairments, chiefly on non-regulated renewable natural gas plants. Its trailing price-to-earnings ratio therefore rose to 23.04x from 18.58x in May while the stock went nowhere — the multiple expanded because the earnings shrank. Construction risk is still live: the 2.6-gigawatt Coastal Virginia Offshore Wind project, 81% complete, saw its estimate rise nearly $300m to about $11.7bn.

Dominion is no longer an independent read in any case. On 15 May it agreed to an all-stock combination with NextEra at a fixed 0.8138 NextEra shares apiece. Dominion's discount to that ratio has narrowed from 6.8% in May to 2.3%. Its relative firmness is arbitrage convergence, not Virginia.

NextEra — Florida Power & Light plus the largest US developer of contracted clean generation — grew second-quarter revenue 12.4% to $7.53bn, added 3.6 gigawatts to a 35.1-gigawatt backlog, and raised its expectation for large load at the Florida utility to 8 gigawatts by 2032 from 6. Each gigawatt is worth roughly $2bn of capital spending earning a regulated return. Erste Group nonetheless cut it to Hold in June on financing costs, not demand.

The one fundamental crack

American Electric Power owns close to 90% of the nation's 765-kilovolt transmission — the highest-voltage backbone, and the reason hyperscalers negotiate with it rather than around it. It has collected $2bn of cash and collateral from customers backing 45 gigawatts of Texas load, which is real money against non-binding intent.

That 45 gigawatts is now frozen. On 3 August Governor Greg Abbott ordered an audit of data-center projects before further interconnections advance, and ERCOT suspended the classification notices due on 7 August, with the review expected to take months. The grid operator is fielding some 474 gigawatts of requests, about 90% of them data centers — more than five times its record peak demand. AEP's $78bn plan assumed only 13 gigawatts in Texas; scaling to 45 implies roughly three times the incremental Texas spending. Morgan Stanley and Truist trimmed price targets in mid-August.

At 18.96x forward earnings and 13.83x trailing enterprise value to EBITDA, AEP is the cheapest of the three — Dominion is 15.20x and NextEra 15.92x on that measure — against a targeted earnings growth rate above 9%. NextEra, on its own 2026 adjusted guidance of $3.92 to $4.02, prices near 21x for 8%-plus growth.

The setup

Where it stands — Load growth kept compounding through July; for one month the shares were paid a bond's return for it. Would confirm — Long yields ease while contracted load and capex guidance keep rising at the next quarterly reports. Would invalidate — AEP's contracted large-load figure falls below 69 gigawatts, or Texas customers withdraw collateral. Watch next — ERCOT's data-center audit conclusion, and NextEra and Dominion shareholder votes expected early September. Valuation — AEP at 20.78x trailing and 18.96x forward, versus 20.58x trailing in May; NextEra near 21x on guidance.