Akins discusses earnings, utility issues on ‘Mad Money’ program

AEP CEO Nick Akins appeared on CNBC-TV’s “Mad Money w/Jim Cramer” program July 23.

Nick Akins, AEP chairman, president and chief executive officer, appeared on CNBC-TV’s “Mad Money w/Jim Cramer” program July 23 to discuss AEP’s strong second-quarter earnings report, the prospect of future dividend increases, coal’s continued struggles and more.

View the video segment.

With higher treasury yields and some financial turmoil across the country, the question remains as to whether or not investors will move back into the “safe” haven of utility stocks. Cramer noted that, in other sectors, a robust earnings report would move a company’s stock up significantly. That was not true for AEP following its second-quarter earnings announcement July 23. “Are utility investors just different?” Cramer asked.

“That’s true,” said Akins. “A lot of our investors are long-term investors, and for us to continue to invest and beat the market really says a lot about the foundational elements we’ve provided during this year. It’s a good year — a great year — for us, so we will continue plodding along to ensure that we continue with those revenues for our investors. That’s clearly a positive for us.”

But, if the company is making a lot of money, is it reasonable to assume that stock dividend increases are more likely than decreases?

“That’s true,” Akins agreed. “Our board and our management are focused on earnings improvement, and our dividend continues to track our earnings improvement. Typically our board evaluates that in October and will continue to do so.”

Turning to coal and its many struggles, what does the country’s current aversion to coal mean for the U.S. and American Electric Power?

“I think it’s a particular challenge. Coal needs to remain a part of the portfolio but there is a massive change going on in terms of rebalancing that portfolio, particularly in light of shale gas activities, the advent of renewables and other technologies that are forming,” Akins noted, “so we need to balance the (generation) fleet to build the security of our energy supply, but coal needs to stay there, as well.”

Will there ever be another new coal plant built in this country?

“I don’t really see that happening because, at this point, you have to have some form of carbon capture and storage in place, and it’s very, very expensive,” Akins answered. “And with natural gas there, that’s certainly going to be the fuel of choice for central station generation.”

Akins also noted that renewables continue to expand in utility portfolios, but since their power is “intermittent,” they must be backed up by some sort of central station generation, such as coal, natural gas or nuclear.

Finally, Akins said the continued improvement in the economy provides hope for utilities in the near- and longer-term future.

“The overall economy is starting to improve and all three of our load sectors were up — commercial, industrial and residential,” Akins noted. “And when you look at oil and gas, we cover a large portion of the shale gas activity in this country, and even though (oil and gas) rig counts may be going down, the overall usage of electricity is going up in those regions.”