At AEP, we believe sustainability underlies our business strategy and is a key business opportunity. Incorporating sustainability throughout our business enhances our ability to deliver profits to shareholders, meet our obligations to lenders and fulfill our environmental and social commitments. Improving our environmental and social performance, in turn, contributes to our financial well-being.
Our successful execution of financial and operational goals during 2012 was rewarded in the marketplace. AEP shareholders received an 8.22 percent total return, including dividends, which was well above the total shareholder return of negative 0.55 percent for the S&P 500 Electric Utilities Index. AEP’s historical stock-price discount to our peer companies has effectively been eliminated, primarily due to the clarity and risk reduction we have provided our shareholders.
In 2012, we seized the opportunity afforded by low-priced debt capital to redeem all of our long-term, parent-company debt, replacing it with new long-term debt at more attractive rates that will save a projected $30 million a year in both 2013 and 2014. In February 2013, AEP further strengthened its liquidity capacity by closing on a new $1 billion, 27-month term loan agreement that matures May 13, 2015. We are using this to fund maturities of senior notes at Ohio Power through the corporate separation transition period.
We reduced our post-employment benefit liability by $570 million, or 25 percent, through adjustments to our retiree medical benefits. This retirement medical plan was 91 percent funded at year-end.
We made a $200 million discretionary contribution to our qualified pension plan during 2012, which was 92 percent funded at the end of the year. Over the past three years, we have contributed $1.15 billion to our qualified pension fund.
AEP ended 2012 with a strong financial profile and is well positioned to achieve its goal of attaining 4 percent to 6 percent operating earnings growth (from a 2013 earnings base), supported by our regulated operations. These operations also will continue to support the dividend. Including dividends, we forecast a total return opportunity for shareholders of 8 percent to 10 percent.
Execution Remains The Theme In 2013
Investors have more clarity about what to expect from AEP than they did a year ago, but there is still a lot of work to do. While issues around Ohio’s move toward a competitive generation business and the corporate separation of generation assets in Ohio are closer to resolution, we need to finalize the regulatory approvals for these transactions and complete the separation. We also have significant rate activity in our SWEPCo subsidiary in order to get the Turk Plant into rates. We have been successful in doing so in Louisiana and we need to continue to seek similar regulatory support in Texas and perhaps Arkansas as well. The financial promise of our Transmission business and evolving competitive business are reasons for optimism in 2013 and beyond.
The repositioning study that AEP completed last year and began implementing early this year will affect how we are structured and how we operate going forward, and it will help us financially well into the future. The study allows us to streamline processes and increase efficiencies while also capturing sustainable cost savings that will help us achieve earnings growth and reallocate resources to growth areas such as transmission. A Program Management Office was formed to ensure the long-term savings and process improvements identified by the study are attained and to facilitate future savings opportunities that emerge apart from the study. Identified cost savings are allowing AEP to keep its operations and maintenance budget flat from 2012 to 2013, in spite of other increases such as new operations and employee-related costs.