Thursday, January 24, 2019

AEP: ‘Halfway There’ to Wind Catcher Approval

Buoyed by recent positive developments, American Electric Power (AEP) CEO Nick Akins had several reasons Thursday to proclaim the company “in better shape than in the first quarter of last year.”

Not even falling pennies short of the Zacks Consensus Estimate for first-quarter earnings could dampen his mood. AEP posted earnings of $473.2 million and $0.96/share, similar to 2017’s first quarter ($474.3 million, $0.96/share) but missing the Zacks estimate of $1.00/share.

Paraphrasing Jon Bon Jovi, one of the Rock and Roll Hall of Fame’s newest inductees, Akins, who sits on the Hall’s board of directors, told analysts during a conference call, “This phrase will stick with you the rest of the day: We’re halfway there, living on a prayer, take our hand and we’ll make it, we swear.

“So, enjoy the ride with American Electric Power.”

Just this week alone, AEP saw FERC approve a settlement reducing the base return on equity for its PJM transmission companies to 9.85% (See “AEP ROE Reduced to 9.85% in Settlement” in Company Briefs.) and its Public Service Company of Oklahoma (PSO) subsidiary reach a settlement with several consumer groups over its Wind Catcher project.

AEP’s Wind Catcher site | Invenergy

“Wind Catcher is finally feeling some tail winds,” Akins said, referring to the massive 2-GW, $4.5 billion wind farm in the Oklahoma Panhandle. “We have accomplished settlements in Arkansas, Louisiana and now Oklahoma … that provides the framework for the various commissions to bless this significant project and its benefits for our customers.”

Akins said AEP is working to add other parties in Oklahoma to the settlement, including Oklahoma Corporation Commission staff. The state’s attorney general, Michael Hunter, opposes the project, saying PSO did not follow a competitive bidding process and doesn’t need the generation.

Akins admitted AEP is not likely to get Hunter “on board” but said the outreach will continue. He said the company is also continuing efforts to reach a settlement in Texas and hopes to have regulatory approvals in May and June.

“I think [the project] is framed up pretty well because a lot of work’s been done in the background,” Akins said. “As far as I’m concerned, we’re in a very good place.”

During AEP’s annual stockholder meeting Tuesday, Akins said the Columbus, Ohio-based company plans to invest $17.7 billion in capital ($12.8 billion in wires infrastructure, $1.7 billion in renewable energy) over the next three years. That capex does not include Wind Catcher.

AEP’s share price closed at $69.77/share Thursday, up 1.1% from its open.

Xcel Expects Approval of Texas Wind Farm

Xcel Energy CEO Ben Fowke said Thursday he expects the Texas Public Utility Commission to approve its Southwestern Public Service (SPS) subsidiary’s request to build a 478-MW wind farm in West Texas.

The commissioners appeared to be grappling with approving the company’s request during their April 13 open meeting. They questioned SPS and parties to a unanimous settlement on the proposal about the legal justification for a project when there is no apparent need for the capacity and asked for more information. (See Texas Regulators Seek More Details on SPS Wind Project.)

The commissioners asked for more information before Friday’s open meeting.

| GE Renewables

Asked by an analyst during Xcel’s quarterly earnings call what he expects from the PUC, Fowke said, “We’re expecting approval.

“We think the project’s driving tremendous benefits for consumers,” he said. “There were some questions asked [by the PUC], and they’ve been answered. You can always have more discussion, but our thought is it will be approved.”

The company’s proposal has been endorsed by PUC staff, who are also part of the settlement between the utility and various consumer groups.

SPS announced last year it intends to build 1.23 GW of wind generation through a pair of wind farms in Texas and New Mexico and a long-term contract from another facility as part of parent Xcel’s multistate investment in wind. Xcel said the projects will save the region’s customers about $2.8 billion over a 30-year period.

New Mexico’s Public Regulation Commission has already approved the facility.

Minneapolis-based Xcel reported first-quarter earnings of $291 million, or $0.57/share, up from $239 million and $0.47/share a year ago. That beat analysts’ projections of $0.51/share.

Fowke borrowed lyrics from Minnesota rockers Prince (“sometimes it snows in April”) and Bob Dylan (“ … trees, bent over backwards in a hurricane breeze”) to illustrate recent severe weather that drove up profits.

Xcel’s share price gained 71 cents Thursday, finishing at $46.53/share after opening at $45.67/share.

— Tom Kleckner