Summoning his inner rocker, American Electric Power CEO Nick Akins said last week he is looking forward to the company’s fully regulated future, one without merchant plants, capacity markets and auctions.
A drummer in his spare time, Akins told financial analysts at an earnings call Thursday that AEP’s outlook reminds him of how he felt at this year’s Rock and Roll Hall of Fame Induction Ceremony in New York.
“The ceremony was outstanding, as usual — much like AEP’s performance in recent years — but there was still an overhang for me, because as a Journey fan [lead singer] Steve Perry spoke but didn’t sing with the band at the ceremony,” said Akins, who sits on the Rock and Roll Hall of Fame and Museum’s board of trustees.
“I can tell you today that we feel at AEP very good about where we stand as a company today, with no real overhanging issues to cloud our view of where this company is going,” he said. “It’s as if Steve Perry, in fact, did sing once again with Journey. Don’t stop believing in AEP.” (See AEP’s Akins Optimistic over Regulated Future.)
Investors haven’t, pushing AEP’s stock price from its $67.44/share open Thursday to close at $67.83/share Friday, despite missing analysts’ expectations for the first quarter.
AEP reported first-quarter earnings of $592 million ($1.20/share), up from $501 million ($1.02/share) in Q1 2016. Operating earnings came in at 96 cents/share, missing Wall Street’s expectations of 97 to 98 cents.
The Columbus, Ohio-based company attributed its drop in sales — to $3.9 billion from $4 billion — to its service territory’s third-warmest temperatures in 40 years.
AEP did realize a $127 million profit through the earlier-than-expected sale of four merchant plants to Lightstone, a joint venture between The Blackstone Group and ArcLight Capital Partners. The plants include three fired by natural gas, with 2,533 MW of capacity, and the giant 2,665-MW Gen. James M. Gavin coal plant.
The company is plowing the transaction’s proceeds back into its regulated business, transmission and AEP Renewables. Akins said AEP’s affiliates are on pace to invest $300 million to $350 million in contracted renewables; the company has an investment goal of $1 billion over the next three years.
“Our progress has been consistent with our message of using a disciplined approach to methodically [reduce the] risk of merchant generation and augmenting … earnings from contracted renewables,” he said.
AEP hopes to complete its strategic review of its merchant fleet this year, Akins said. He said the company has given its consent to Dayton Power and Light to retire its 603-MW share of a 2,317-MW coal plant due to close in 2018 and sell its 330-MW share of the 1,300-MW coal-fired William H. Zimmer Power Station to Dynegy in exchange for the latter’s 312-MW share of Conesville Unit 4.
That will reduce the company’s competitive generation business to its ownership stake in Conesville Power Station’s four units (1,695 MW) and one of the Cardinal Power Station’s three units (595 MW). The plants burn coal and oil.
AEP reaffirmed its earnings guidance range of $3.55 to $3.75/share.
Entergy Reports Another Bad Quarter
Entergy on Wednesday reported a first-quarter profit of $82.6 million ($0.46/share), far off the prior year’s earnings of $230 million ($1.28/share). The drop came on the heels of an 80% fall in 2016’s fourth-quarter earnings. (See Entergy Beats Expectations Despite 80% Drop in Earnings.)
The results included a $230.9 million charge for the costs of winding down Entergy Wholesale Commodities and its five nuclear units.
CFO Drew Marsh told analysts the company expects “pretty strong cash flow” for the next few periods because it won’t be paying for refueling outages at two of the nuclear plants.
“Are we making any progress? I would say, absolutely,” Marsh said. “Internally, we’ve been scrubbing the numbers down hard, so we would hope to show you some specific progress over the balance of the year.”
CEO Leo Denault announced Entergy Louisiana recently signed a contract with a Calpine subsidiary to build a 360-MW gas peaking plant in Bogalusa, La. Entergy will operate the plant, which is expected to be completed in 2021.
Xcel Energy Says 1st Q Earnings ‘In Line’
Despite matching 2016 first-quarter performance, Xcel Energy CEO Ben Fowke said Thursday his company survived warmer temperatures with “first-quarter earnings … generally in line with our internal plan.”
Xcel reported first-quarter earnings of $239 million ($0.47/share), virtually unchanged from the year prior of $241 million ($0.47/share). That fell short of the Zacks consensus estimate of 50 cents/share.
Fowke was unperturbed, saying that by keeping its operating costs flat for the year, the company will be on track to meet its earnings guidance of $2.25 to $2.35/share.
He also noted Xcel was named by the American Wind Energy Association as the No. 1 utility wind provider for the 12th straight year. The company has proposed adding almost 3,400 MW of new wind to its system as part of its “steel-for-fuel” strategy.
NextEra Sees More Fossil, Nuke Retirements
NextEra Energy officials said they continue to see a bright future for renewable energy and darker days for traditional power sources.
Speaking during the company’s April 21 conference call with financial analysts, NextEra CFO John Ketchum said “improved wind and solar economics” and low natural gas prices will “continue to lead to additional retirements of coal, nuclear and less fuel-efficient oil- and gas-fired generation units, creating significant opportunities for renewables growth going forward.”
NextEra Energy Resources, the company’s wholesale electricity supplier, owns and operates about 16,500 MW of wind and solar capacity. Ketchum said the company had signed contracts for 413 MW of new wind generation and 208 MW of solar energy during the first quarter.
“Customer origination activity continues to be largely driven by economics,” he said. “Based upon continued equipment efficiency improvements and cost declines, Energy Resources can offer wind [power purchase agreements] at very competitive prices.”
The company reported first-quarter earnings of $1.58 billion ($3.37/share), compared to $653 million ($1.41/share) a year earlier. Adjusted to exclude the effects of non-qualifying hedges, the net effect of “other than temporary” impairments, operating results from its Spain solar project and merger-related expenses, Q1 earnings were $820 million ($1.75/share) versus $732 million ($1.59/share) in Q1 2016.
– Tom Kleckner
