News and Notes

AEP Abruptly Replaces CEO, Calpine Unveils Leadership Transition

American Electric Power (AEP) and Calpine Corp. separately announced significant leadership reshuffles on Feb. 27, marking new chapters for the power giants.

Investor-owned utility AEP, with immediate effectiveness, removed AEP Chair, President, and CEO Julie Sloat, appointing Benjamin G.S. Fowke III, an AEP Board of Directors member and the former chairman and CEO of Xcel Energy, as the company’s interim CEO and president. The decision comes two weeks after activist investor Icahn Capital secured two seats on the AEP Board.

Calpine, an integrated competitive power company, said its Board selected Andrew Novotny, Calpine’s current president and chief operating officer, to succeed Thad Hill as its CEO. The transition will be effective on Oct. 1, 2024. “Hill, who has served as CEO for 10 years, will assume the role of Executive Chairman of the Board,” the company noted.

AEP’s Abrupt CEO Ouster

AEP, in a statement on Tuesday, said its Board determined the leadership reshuffle “based on discussions with Sloat.” The decision “was not a result of any disagreement with Sloat regarding AEP’s operations, policies or financial performance, and was not made for cause or related to any ethical or compliance concern,” it noted.

“After thorough deliberation and discussions with Julie, the Board determined now is the right time to make this leadership transition to best position AEP for the future,” said Sara Martinez Tucker, the AEP Board’s lead director, who was appointed as its chair on Tuesday. “The company has made great progress managing our portfolio and supporting the needs of customers and communities. With this solid foundation, we continue to be well-positioned to execute our capital plan and enhance grid reliability and resiliency for customers while advancing our ongoing generation fleet transformation,” Tucker said.

Sloat replaced AEP’s long-serving chairman, president, and CEO, Nick Akins, in January 2023 as the first woman and only the seventh CEO in the company’s 116-year history. Her appointment marked a notable executive evolution for the public utility holding company, which is in the midst of a historic transformation into a more agile and customer-focused provider of energy solutions.

The leadership changes announced on Tuesday follow an AEP agreement with Icahn Capital announced on Feb. 12 to add two new Board members: Hunter Gary, senior managing director at Icahn Enterprises, and Hank Linginfelter, a retired Southern Co. Gas executive vice president. AEP also said Icahn Capital portfolio manager Andrew Teno will attend future board meetings as a non-voting observer.

Icahn holds an estimated 5.3 million shares in AEP, comprising about 1%. It is unclear how much the agreement influenced Sloat’s removal. The measure, however, points to the growing impacts of shareholder activism. In November 2023, NRG Energy replaced its long-serving and influential president and CEO, Mauricio Gutierrez, in a shift partly influenced by activist investor firm Elliott Investment Management.

FTI Consulting in its December 2023 Activism Vulnerability Report, suggested utilities are among the top 3 industries most vulnerable to shareholder activism. While utilities have historically been viewed “as a relatively stable” equity investment, rising fuel costs, supply chain problems, and rising inflation and interest rates have challenged the industry, the firm has noted.

However, Fowke, now AEP’s interim CEO, during an earnings call on Feb. 27, suggested Sloat’s removal was “in the best interest of AEP and its stakeholders.” Fowke, who joined the AEP board in February 2022 after his retirement from Xcel Energy, also suggested the appointment may be temporary until the board identifies a permanent successor.

Regarding Icahn Capital, our recent agreement came about from a combination of a constructive dialogue between AEP and the Icahn teams,” he said. “Like us, the Icahn team believes AEP shares are undervalued, and there’s meaningful upside potential for our investors. The addition to AEP’s board will bring a fresh perspective as we continue to execute on strategic priorities and enhance value for our stakeholders.”

Derisking Is a Priority

Fowke noted AEP grappled with a challenging 2023, though he lauded AEP’s business model, “strong” asset base, and “quality of its leadership team and board.” He suggested the company’s earnings reflected these attributes. “For 14 years in a row, AEP has met or exceeded earnings guidance, and 2023 is no exception,” he said. 

The Columbus, Ohio-headquartered company, however, has embarked on a series of initiatives to simplify and derisk its portfolio, which comprises 40,000 miles of transmission lines—the nation’s largest transmission system—225,000 miles of distribution lines and 29 GW of generating capacity in 11 states. Last year, the company completed the sale of its 1.3-GW unregulated renewables portfolio. On Tuesday, it completed the sale of its 50% interest in New Mexico Renewable Development, LLC (NMRD) to Exus North America Holdings.

The company, however, has faced regulatory hurdles to complete other planned divestments. In April 2023, it terminated a $2.9 billion deal to shed its Kentucky-based assets after regulators rejected it. After the Public Utilities Commission of Texas denied part of AEP’s $2.2 billion petition to acquire 999 MW of renewable projects in Arkansas, Louisiana, and Texas, AEP “put the project back on track with Arkansas and Louisiana ultimately stepping up to move forward with the full project,” Fowkes said.

Meanwhile, though the company in April 2023 also launched the sale of its interests in two non-core transmission joint ventures, Prairie Wind Transmission and Pioneer Transmission, in February, “AEP management determined it would retain its ownership of its investment in Pioneer Transmission, LLC and Prairie Wind Transmission, LLC,” according to the company’s newly published 10-K report.

Calpine Appoints New CEO: Andrew Novotny

Calpine’s appointment of Andrew Novotny as its new CEO also marks an evolution for the competitive power company.

“Since going private in 2018, in a deal led by Energy Capital Partners along with the Canadian Pension Plan Investment Board and Access Industries, Calpine has enjoyed a time of financial success and growth,” the company noted on Tuesday.

When Thad Hill became CEO in 2014, the company was one of the largest independent power producers in the U.S., holding a 28 GW fleet comprising 93 power plants. Today, Calpine has a more diverse fleet of 78 operational power plants, a combined 26.7 GW, in 22 states, Canada, and Mexico. Most are natural gas–fired power plants, but Calpine also leads the nation’s generation of geothermal power, and it has a growing fleet of battery storage and carbon capture and sequestration projects. Under  Thad Hill’s decade-long leadership, the company has also expanded its wholesale and retail customer-facing businesses.

“Novotny joined Calpine in 2012 and has served as Calpine’s President since May 2023, when he expanded his role as the Company’s Chief Operating Officer, a position he has held since January 2021,” Calpine noted. “In his new role, Novotny will continue to be responsible for the Company’s operations and will assume the other duties customarily carried out by CEOs.”

Sonal Patel is a POWER senior associate editor (@sonalcpatel@POWERmagazine).

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