Akins appears on CNBC’s ‘Mad Money’ program

AEP President and CEO Nick Akins appeared on CNBC-TV’s “Mad Money w/Jim Cramer” April 26 to discuss the company’s first-quarter earnings results, continued pressure from the Environmental Protection Agency, technological innovations and more.

Jim Cramer (left) , host of CNBC-TV’s “Mad Money” show, discusses renewables and environmental concerns with AEP CEO Nick Akins.

 View the video of this Mad Money segment.

Cramer’s first question concerned renewables and how AEP responds to those who ask, “Why don’t you help clean up the environment and use all windmills, solar and sawgrass to generate electricity?”

“Clearly, the answer is we’ve got a massive amount of investment that’s been made over the last 106 years. Now, all that investment is not still there, but it is the most heavily capitalized industry in the country,” Akins responded. “When you spend that kind of money, you are spending long-term activities that really support the energy economy in the future. To make changes too quickly can have a dramatic impact, not only on the costs utilities have to charge their customers and the impacts on the economy, but it takes time to make those investments because they’re long lead-time projects that you have to achieve.”

Cramer also noted that coal is an important business to the communities across the country that are supported by the mining and use of coal as fuel.

“Oh, absolutely, coal is indigenous in many parts of our footprint,” Akins said, “and that’s why we maintain there needs to be a balanced energy portfolio.” Akins added that controlled coal units can help limit the impact on the environment while providing essential support to local economies through taxes, continued employment, etc.

“At the same time,” said Cramer, “you’ve managed to cut back on a lot of greenhouse gases in the last three years. Your cuts may not have been as lightning fast as they want in Washington, but a pretty quick pace.”

“Actually, we have been able to reduce our greenhouse emissions almost to the Waxman-Markey type of limitations — which was 17 percent,” Akins said. “We’ve reduced our greenhouse gases primarily because of the additional use of natural gas in our footprint, and with the economy where it is, we have been able to achieve lower greenhouse gas emissions. So we are quite pleased with the progress we’ve made in that regard.”

Cramer also acknowledged that AEP is the only company to have an ultra-supercritical coal plant online and operating in the U.S. (the John W. Turk, Jr. Plant in Arkansas), and he asked how AEP was able to bring that technology to the market when other companies have stumbled.

“We have a 106-year history of innovation. We had the first supercritical unit, and now we have the first ultra-supercritical unit,” Akins answered. “For your viewers, that just means we are burning coal at a much higher temperature, achieving greater efficiency, and reducing emissions as a result. That means 10 percent less coal, 10 percent less emissions. The ultra-supercritical unit turns out to be a big benefit for our customers in the end.”

Cramer noted that, as the price of natural gas continues to creep upward, utilities like AEP have begun to switch back to burning more coal and less gas.

“Yes, now we have a gas-to-coal switching occurring because gas prices have increased beyond that $3.50 per million Btu range,” Akins said. “Gas is now in the $4.15 (per million Btu) range, so you will see that switching occur.

“The great thing about that is — with the addition of a natural gas generation and having fully controlled coal units — we have been able to go back and forth (as prices fluctuate), ensuring that we have fuel flexibility to do that,” Akins added.

Cramer said that, despite the technological advances and price fluctuations, many at the state and federal levels don’t want utilities to move back toward coal, which traps a company like AEP in the middle.

“Yes, we are caught in the middle on that, but, really, we are looking at coal units to be much more efficient in the future, being fully compliant and ensuring we are able to use and minimize the amount of resources for coal,” Akins said. “In 2007, we were using about 80 million tons of coal a year. This year, we’ll probably use about 54 million tons of coal, so a dramatic impact, but it still has to be there and be a part of our economy.”