American Electric Power’s leadership on Feb. 27 added further color to its board’s decision the day before to remove Julie Sloat as CEO and replace her with former Xcel Energy CEO Ben Fowke on an interim basis.
In his scripted remarks to financial analysts during the company’s quarterly conference call, Fowke said the decision was not an easy one, but “in the best interest of AEP and its stakeholders to do so.”
Fowke and other AEP executives appeared to indicate they were unhappy with several regulatory outcomes. They pointed to the disallowance of recovering some deferred fuel costs in West Virginia and the probable disallowance of certain capitalized costs associated with a Louisiana power plant as a hit to earnings.
One analyst pressed Fowke over the earnings presentation’s “leaning” on AEP’s successes and growth rate capital expenditure numbers ($43 billion over five years). “What do you see is broken?” the analyst asked.
“I don’t think I would use the word ‘broken.’ I think there’s areas where we can do better,” Fowke said. “We also recognize that we can do better on getting constructive regulatory outcomes. So strategically, our priorities remain the same. We’re going to look at the people, the process and the planning that goes into that those constructive outcomes, and we’re going to do it through the lens of what’s important to our local leaders and stakeholders … and then you get into that virtuous circle where invested capital now is good for customers in the community.”
Fowke said more than once that the leadership decision was made by the full board. “You need the full board to make a decision to remove the CEO,” he said.
AEP recently increased the board’s size by adding two directors after entering into an agreement with activist investor Icahn Capital. The board also invited Icahn to place a portfolio manager as a nonvoting observer during its meetings.
“The additional board members came after discussions with the Icahn team and AEP team,” Fowke said. “We actually welcome their perspective. They share the opinion, as we do, that AEP shares are undervalued, and we want to work together to unleash shareholder value.”
In the Feb. 26 press release announcing the leadership change, AEP said the board had determined after discussions with Sloat that it was “time to identify a new CEO to lead the company’s next chapter.” The company said the decision was not a result of any disagreement with Sloat over AEP’s operations, policies or financial performance and “was not made for cause or related to any ethical or compliance concern.”
AEP will conduct an external search for its next CEO. Fowke said AEP will be an “attractive destination” and that he expects the candidate list to be a long one.
“I think it’s going to be great to pick from that talent. Ideally, you get somebody that is a seasoned executive in the utility industry and is well known in the investor community,” he said, adding that it would be ideal if the next CEO has multijurisdictional experience.
Fowke retired from Xcel in August 2021 after more than a decade as its CEO. He joined the AEP board in February 2022.
Sloat, a 23-year AEP veteran, replaced Nick Akins as CEO in January 2023.
The company reported year-end earnings of $2.21 billion ($4.26/share), a drop from 2022’s performance of $2.31 billion ($4.51/share). Fourth-quarter earnings were also down, at $336.2 million ($0.64/share), a drop from the same quarter the year prior of $384.3 million ($0.75/share).
After saying in its earnings announcement that it made “positive progress” toward the $9.4 billion in regulated renewables in its five-year capital forecast, AEP issued another release about the sale of its 50% interest in New Mexico Renewable Development’s solar assets. The transaction will net the company about $104 million in cash after tax, transaction fees and other adjustments.
The company’s share price closed at $80.77 on Feb. 26 but shot up to $83.39 in after-hours trading following the CEO change’s announcement.
It closed at $84.07 on Feb. 27, a 4.1% gain on the day.
