American Electrical Energy (AEP) and Calpine Corp. individually introduced important management reshuffles on Feb. 27, marking new chapters for the facility giants.
Investor-owned utility AEP, with fast effectiveness, eliminated AEP Chair, President, and CEO Julie Sloat, appointing Benjamin G.S. Fowke III, an AEP Board of Administrators member and the previous chairman and CEO of Xcel Power, as the corporate’s interim CEO and president. The choice comes two weeks after activist investor Icahn Capital secured two seats on the AEP Board.
Calpine, an built-in aggressive energy firm, stated its Board chosen Andrew Novotny, Calpine’s present president and chief working officer, to succeed Thad Hill as its CEO. The transition shall be efficient on Oct. 1, 2024. “Hill, who has served as CEO for 10 years, will assume the position of Government Chairman of the Board,” the corporate famous.
AEP’s Abrupt CEO Ouster
AEP, in a press release on Tuesday, stated its Board decided the management reshuffle “based mostly on discussions with Sloat.” The choice “was not a results of any disagreement with Sloat relating to AEP’s operations, insurance policies or monetary efficiency, and was not made for trigger or associated to any moral or compliance concern,” it famous.
“After thorough deliberation and discussions with Julie, the Board decided now could be the correct time to make this management transition to greatest place AEP for the longer term,” stated Sara Martinez Tucker, the AEP Board’s lead director, who on Tuesday was appointed to function its chair. “The corporate has made nice progress managing our portfolio and supporting the wants of consumers and communities. With this stable basis, we proceed to be well-positioned to execute our capital plan and improve grid reliability and resiliency for patrons whereas advancing our ongoing era fleet transformation,” Tucker stated.
Sloat changed AEP’s long-serving chairman, president, and CEO, Nick Akins, in January 2023 as the primary girl and solely the seventh CEO within the firm’s 116-year historical past. Her appointment marked a notable govt evolution for the general public utility holding firm, which is within the midst of a historic transformation right into a extra agile and customer-focused supplier of power options.
The management adjustments introduced on Tuesday comply with an AEP settlement with Icahn Capital introduced on Feb. 12 so as to add two new Board members: Hunter Gary, senior managing director at Icahn Enterprises, and Hank Linginfelter, a retired Southern Co. Gasoline govt vp. AEP additionally stated Icahn Capital portfolio supervisor Andrew Teno will attend future board conferences as a non-voting observer.
Icahn holds an estimated 5.3 million shares in AEP, comprising about 1%. It’s unclear how a lot the settlement influenced Sloat’s removing. The measure, nonetheless, underscores rising impacts from investor activism. In November 2023, NRG Power changed its long-serving and influential president and CEO, Mauricio Gutierrez, in a shift partly influenced by activist investor agency Elliott Funding Administration.
FTI Consulting in its December 2023 Activism Vulnerability Report, urged utilities are among the many prime 3 industries most weak to shareholder activism. Whereas utilities have traditionally been considered “as a comparatively steady” fairness funding, rising gas prices, provide chain issues, and rising inflation and rates of interest have challenged the business, the agency has famous.
Nonetheless, Fowke, now AEP’s interim CEO, throughout an earnings name on Feb. 27, urged Sloat’s removing was “in the most effective curiosity of AEP and its stakeholders.” Fowke, who joined the AEP board in February 2022 after his retirement from Xcel Power, additionally urged the appointment could also be momentary till the board identifies a everlasting successor.
“Concerning Icahn Capital, our latest settlement happened from a mixture of a constructive dialogue between AEP and the Icahn groups,” he stated. “Like us, the Icahn group believes AEP shares are undervalued, and there’s significant upside potential for our traders. The addition to AEP’s board will convey a contemporary perspective as we proceed to execute on strategic priorities and improve worth for our stakeholders.”
Derisking Is a Precedence
Fowke famous AEP grappled with a difficult 2023, although he lauded AEP’s enterprise mannequin, “robust” asset base, and “high quality of its management group and board.” He urged the corporate’s earnings mirrored these attributes. “For 14 years in a row, AEP has met or exceeded earnings steering, and 2023 isn’t any exception,” he stated.
The Columbus, Ohio-headquartered firm, nonetheless, has launched into a collection of initiatives to simplify and derisk its portfolio, which includes 40,000 miles of transmission traces—the nation’s largest transmission system—225,000 miles of distribution traces and 29 GW of producing capability in 11 states. Final 12 months, the corporate accomplished the sale of its 1.3-GW unregulated renewables portfolio, and on Tuesday, it accomplished the sale of its 50% curiosity in New Mexico Renewable Growth, LLC (NMRD) to Exus North America Holdings.
The corporate, nonetheless, has confronted regulatory hurdles to finish different deliberate divestments. In April 2023, it terminated a $2.9 billion deal to shed its Kentucky-based property after it was rejected by regulators. After the Public Utility Fee of Texas denied a part of AEP’s $2.2 billion petition to accumulate 999 MW of renewable initiatives in Arkansas, Louisiana, and Texas, AEP “put the venture again on monitor with Arkansas and Louisiana finally stepping as much as transfer ahead with the total venture,” Fowkes stated.
In the meantime, although the corporate in April 2023 additionally launched the sale of its pursuits in two non-core transmission joint ventures, Prairie Wind Transmission, and Pioneer Transmission, in February, “AEP administration decided it will retain its possession of its funding in Pioneer Transmission, LLC and Prairie Wind Transmission, LLC,” in response to the corporate’s newly printed 10-Ok report.
Calpine Appoints New CEO: Andrew Novotny
Calpine’s appointment of Andrew Novotny as its new CEO additionally marks an evolution for the aggressive energy firm.
“Since going non-public in 2018, in a deal led by Power Capital Companions together with the Canadian Pension Plan Funding Board and Entry Industries, Calpine has loved a time of economic success and progress,” the corporate famous on Tuesday.
When Thad Hill turned CEO in 2014, the corporate was one of many largest U.S. unbiased energy producers, holding a 28 GW fleet comprising 93 energy crops. Right this moment, Calpine has a extra numerous fleet of 78 operational energy crops, a mixed 26.7 GW, in 22 states, Canada, and Mexico. Most are pure fuel–fired energy crops, however Calpine additionally leads the nation’s era of geothermal energy, and it has a rising fleet of battery storage and carbon seize and sequestration initiatives. Underneath Thad Hill’s decade-long management, the corporate has additionally expanded its wholesale and retail customer-facing companies.
“Novotny joined Calpine in 2012 and has served as Calpine’s President since Might 2023, when he expanded his position because the Firm’s Chief Working Officer, a place he has held since January 2021,” Calpine famous. “In his new position, Novotny will proceed to be answerable for the Firm’s operations and can assume the opposite duties usually carried out by CEOs.”
—Sonal Patel is a POWER senior affiliate editor (@sonalcpatel, @POWERmagazine).