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Akins Discusses AEP’s First Quarter Financial Results with Cramer on ‘Mad Money’

by on May 4, 2016
    AEP CEO Nick Akins (right) discusses AEP’s first quarter financial results with Jim Cramer.

Nick Akins, AEP chairman, president and chief executive officer, spoke with Jim Cramer of “Mad Money with Jim Cramer” on CNBC April 29 following AEP’s 2016 first-quarter earnings report.

View the entire segment.

Cramer noted that the mild winter had a major impact on AEP’s first quarter earnings and asked if the company was still following its 2016 strategic plan or if the first quarter meant anything substantial for the company’s earnings potential moving into the future.

“Actually it went according to plan. For the first quarter, we were 2 cents off (earnings estimates) but remember, our weather impact was 11 cents,” Akins answered. “We had the sixth warmest winter in over 30 years, compared against the second coldest winter in the last 30 years in 2015. So when you look at the weather impact, it was substantial. Now we’re through with the winter, we’re moving into the summer and it’s still going according to plan. That’s why we left (earnings) guidance the same, and that’s why we reconfirmed our 4 to 6 percent earnings growth rate.”

Cramer also asked for clarification on AEP’s revenues in the Midwest and in the company’s “oil and gas” territories, and wondered what it means for the market.

“It certainly means the economy is changing dramatically. We have our Midwest territory and our South Central territory,” Akins explained. “The Midwest is actually growing faster than the U.S. economy now, and when you look at the South Central region, it has been heavily impacted by the job losses created by oil and gas, even though electric load for oil and gas continues to increase at 9 percent.”

Are companies starting to take advantage of plentiful low-cost natural gas prices and building facilities in AEP’s territory?

“Oh sure, car manufacturing, leisure and hospitality, other manufacturing and chemical manufacturing continue to improve because they are taking advantage of lower energy prices,” Akins said. “That’s a way for us to have a diversity of load that makes a lot of sense.”

Cramer also mentioned the April 28 order in which the Federal Energy Regulatory Commission (FERC) asserted its authority concerning the AEP Ohio Power Purchase Agreement (PPA) that the Public Utilities Commission of Ohio had approved in March. He asked if the ruling would have an impact on AEP’s dividend going forward or if the impact would be minimal on future earnings.

“We had been working on Ohio and its ability to continue to invest in long-term generation, so we offered up an arrangement which was approved by the Ohio commission, but the Federal Energy Regulatory Commission had concerns about it because it tended to move into federal jurisdictions,” Akins said. “In order to avoid a federal jurisdictional dispute, we made the case yesterday (April 28) that AEP is moving forward to be that premium regulated utility. Our foundation is built upon transmission, distribution infrastructure and regulated generation, so in Ohio, we’re going through a strategic process associated with the unregulated generation because that provides volatility, and our investors aren’t interested in volatility, they really want that constant dividend and earnings growth. So we’re looking at the disposition of those assets.”

So will the ruling affect AEP’s dividend?

“I don’t think that’s the case,” Akins answered. “We have a view of consistency across the board from an earnings and dividend perspective. Our dividend policy has not changed…our board really wants it consistent with our earnings growth, and we continue to see that earnings growth.”

 

From → News From AEP

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