Former Chairman, President & Chief Executive Officer, American Electric Power
American Electric Power CEO: Electric vehicles | Mad Money | CNBC
Jim Cramer sits down with American Electric Power CEO Nick Akins to find out if it’s time to plug into a utility player like American Electric Power, even with so many unknowns in this market.
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About Nicholas Akins
In a September 2018 interview, Akins discussed American Electric Power's response to Hurricane Florence, comparing it to past storms such as Sandy and Harvey. He said the industry had made progress since Sandy by establishing regional response networks, deploying technology to track employees and contractors, and coordinating with government agencies including the Department of Energy and FEMA. He noted that Florence's flooding presented challenges similar to Harvey, and that some customers could be without power for weeks due to the need for water to recede before restoration. In a May 2019 interview, Akins reiterated the company's target of five to seven percent earnings growth, supported by a capital forecast extended to 2021. He described the cancelled Windcatcher project as a disappointment but said the company would focus on smaller renewable investments and transmission projects that carry less risk for investors. Akins also characterized electric vehicles as a growth channel for the utility industry and announced plans to build charging stations in Ohio. He contrasted the risk profile of large central-station
Transcript (16 segments)
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Jim Cramer0:05
Earlier this week we checked in with one of our favorite technicians, Carly Garner, who argued that investors have gotten way too negative on US Treasury bonds. She thinks we could be poised for a major rally in bond prices, and when bond prices go up, their yields go down. If that happens, it could be huge for a whole host of high-yielding stocks that tend to be held back by higher rates. Just think about the utilities like American Electric Power. AEP supports about a 3.5% yield. Ever since bond yields started cooling off earlier this summer, AEP's been able to mount a nice rally, and I wouldn't be surprised if it's got more room to run. This company owns the largest power transmission network in the United States, along with some major power generation assets. Lately, they've also been embracing renewables. When AEP reported three weeks ago, the company delivered a significant top and bottom line beat. Without rising interest rates to hold the stock back, you know what? This could be a big winner. So let's check in with Nick Akins. He's the Chairman and CEO of American Electric Power. Learn more about the quarter and where the company's headed. Nick Akins, welcome back to Mad Money.
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Nicholas Akins0:59
Great to be with you again, Jim.
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Jim Cramer1:02
All right, so Nick, you're still going straight forward. You think the 5 to 7% earnings growth is in the cards. How can you be so confident?
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Nicholas Akins1:10
Absolutely. The investment plan that our company has will continue to grow. We're at a 5 to 7% growth rate. Our capital forecast, matter of fact, this last quarter we extended the capital forecast to 2021 to really show the markets that we were intent on that 5 to 7% growth rate. So as you said, the ability for us to invest in transmission, the ability to invest in the changing energy environment related to the way we provide our services is really a very positive aspect of our business.
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Jim Cramer1:44
Now, when we spoke last couple times, you talked about Windcatcher and how that could be helpful in growing numbers. What the heck happened here? Because, you know, we both thought it was a pretty inventive way to make money and also no carbon.
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Nicholas Akins2:00
Absolutely. We felt like it was a great project, but on the outset we said, you know, our commissions have to approve these projects, and certainly it was a unique project, a large investment in western Oklahoma. We were disappointing the outcome, but at the same time, we have a firm foundation for our company with the capital investments that we can make regardless of Windcatcher. Now we'll focus on smaller investments of renewables to replace that, but certainly it's one of those aspects of the business that we'll have projects, we'll have opportunities. Some will go, some won't go, but it's all built around a firm foundation of being able to be selective about those projects we move forward with.
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Jim Cramer2:40
Did you reconcile your trying the whole time to reduce your carbon footprint since I've met you with what happened with Windcatcher?
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Nicholas Akins2:51
Yeah, so Windcatcher was one of those where we were getting out ahead of our resource plans. We file individual resource plans in all the jurisdictions, in 11 jurisdictions that we serve, state jurisdictions, and certainly there's small capacity that you build, small wind farms and solar and so forth during those plans. Well, this was a unique opportunity to get out ahead in many of those aspects. But that being said, you know, the risk parameters around this project became such that we had to really quantify those risks. And it was great for customers, but we also wanted to make sure it was great for investors. So we go through the project, go through the approvals, the project doesn't move forward, but we still continue with our resource plans of smaller projects that they'll fill the gap.
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Jim Cramer3:36
All right, so talking about your area, where are the strongest markets? Where is the big growth?
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Nicholas Akins3:46
Yeah, certainly we have big markets in Texas and in the Midwest. Certainly the states that we serve in the south-central part of the US along with the Midwest states, the energy economy is certainly substantial. So we're growing, matter of fact, we're growing higher than the GDP of the country. Certainly our income growth continues to be there, job creation continues to be there, residential, commercial, and industrial load in particular continues to improve. So the fundamentals of the area of the country that we serve are very positive and continue to be so.
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Jim Cramer4:24
Close attention to Southern. I can't, you know, pile on Southern, that's not fair, but I can't issue the Vogtle nuclear power. We just saw another bump up in how much this twin power nuclear power, I don't know why, Enterprise, Southern was trying to do, and are we ever going to build another nuclear power plant? It seems like you could bankrupt anybody.
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Nicholas Akins4:46
I think you have to really think about in today's environment where technology is going, certainly where natural gas prices are. It's a significant, significant challenge to build a large central station generation facility and take on that amount of risk. Obviously, hats off to Southern for, you know, moving that process forward relative to nuclear, but at the same time, when we look at it from an investment thesis, we have the largest transmission system, multiple sets of projects, certainly projects that are emerging on the distribution side relative to distributed energy resources and the infrastructure associated with it. The magnitude of the small projects add up to much less risk for investors. So when we look at the future in terms of investment with distributed energy resources, where technology is going, certainly from a transmission standpoint, those are investments that we can make that minimize risk not only to our customers but to our shareholders as well.
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Jim Cramer5:42
Do you think it'll ever be impactful in our collective power grid when we go, let's say, tip more toward electric cars, which I know are incredibly popular in the country?
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Nicholas Akins5:52
Oh, absolutely. You know, we see it as a further channel growth, sales channel growth for the utility industry. And when you look at electric vehicles, which we announced today, charging stations to be built around the Ohio area, that's a major effort on our part to ensure that the infrastructure is there to support electric vehicles. And certainly we sell the electricity to electric vehicles, but also it really is an avenue for transportation to make sure there's accessibility to everyone without having to go to a gas station, for example.
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Jim Cramer6:25
Well, look, I'm glad that Windcatcher cancellation didn't make you skip a beat because, you know, we recommend you because people want income, and it sounds like a solid situation. As always, want to thank Nick Akins. Nick is the Chairman, President, and CEO of American Electric Power. Remains my favorite utility to buy. Yeah, back at you, booyah!
Jim Cramer here from there, buddy. Thanks for watching. See me, see you on YouTube. Click here to subscribe and get the jump on my exclusives with CEOs, plus market news, investing advice, and a whole lot more.