Akins Discusses Earnings Report on ‘Mad Money with Jim Cramer’ Program

AEP CEO Nick Akins (right) appeared on CNBC’s “Mad Money with Jim Cramer” program April 27 to discuss a number of issues related to AEP and the energy industry.

Nick Akins, AEP chairman, president and chief executive officer, appeared on CNBC’s “Mad Money with Jim Cramer” program April 27 and discussed first quarter earnings results and the company’s strategy for the future.

View the video.

Cramer opened the interview by questioning those who are saying that business is weak in this country. He asked Akins what he is seeing in the energy industry.

“Even though load continues to be pretty much the same, when you look at the underlying fundamentals, you’re seeing oil and gas activity pick up, you’re seeing mining activity pick up and automotive activity is in there, as well,” Akins said. “Primary metals are picking up, as well, and it’s been awhile since we’ve seen that, so the underlying fundamentals are beginning to progress very positively and we’re watching them very closely.”

Turning to President Trump’s plan to put more Americans back to work, particularly in coal mining and other industries, Cramer asked what that might mean specifically for U.S. utility companies, which tend to be scrutinized for polluting the environment.

“I think you are going to see a work force issue where you are moving from one skill set to another,” Akins answered. “The effect of the Trump administration’s focus will be to continue the operation of fully-controlled coal units. I think you will continue to see those operate, but at the same time you are seeing a massive shift to a more balanced energy portfolio, so you are going to see natural gas continue to pick up — which emits about half the carbon as coal — as well as renewables and other types of applications on the grid that are related to big data analytics. And of course transmission, which is a key optimizer. So you’re going to see all those resources continue to branch out, and they will reduce carbon emissions significantly.”

Cramer also noted that AEP doesn’t base it’s key strategic investment decisions on which administration currently occupies the White House.

“You’re right, Jim,” Akins acknowledged. “We’re a long-term business, but really the context of those decisions today are made upon, ‘OK, what are those capital investments that need to be made relative to coal?’ And if they are large capital investments, you are evaluating that against other options, and those other options are cheaper at this point in time. So the movement is toward a re-balancing that is less coal and more of other types of resources.”

With a strong balance sheet and solid strategic plan, has AEP considered any types of merger or acquisition to further strengthen it’s position in the industry?

“I think we have a higher threshold, and our threshold is internally driven,” Akins replied. “We’re spending $6 billion in capital every year, and our next three-year plan is $17.3 billion, and $9 billion of that is on transmission. We have the largest transmission system in the country, so from an indigenous growth perspective, to invest at 11 percent ROE (return on equity) in transmission is much better than making an acquisition unless it’s truly strategic and really makes sense for our shareholders — without having to pay a premium and that kind of thing.

“That being said, we’re obviously very focused and continue to be engaged from an M&A (merger and acquisition) standpoint to understand what’s going on in the industry and how it maps to the strategy we have going forward,” he added, “and we’ll continue to look at those kinds of options.”