netrashetty
Netra Shetty
Leadership Style at AES Corporation : AES Corporation (NYSE: AES) is a Fortune 500 company that generates and distributes electrical power. It was founded on January 28, 1981, as Applied Energy Services[3] by Roger Sant from the US Federal Energy Administration and Dennis Bakke from the Office of Management and Budget. It is headquartered in Arlington, Virginia. AES Corporation is one of the world's leading power companies, generating and distributing electric power in 31 countries and employing 27,000 people worldwide.
In 2008, AES Corporation's total revenue was 16.1 Billion, of which $9.11B came from the company's Power Generation division,and $6.99B from Utilities.[4]
In April 2010, AES Wind Generation, a wholly owned subsidiary of AES, acquired UK-based wind developer Your Energy (YEL) and has also signed an agreement to buy a 51% stake in a wind portfolio from 3E, a Polish wind developer. This move will add more than 700MW to AES Wind Generation’s European pipeline.
Sandra O. Moose has been a Director of AES since April 2004, and serves on the Nominating, Governance and Corporate Responsibility Committee and the Finance and Investment Committee of the Board.
Dr. Moose brings substantial executive, strategic, planning, operations, consulting, and corporate governance experience to the Board. Dr. Moose is President of Strategic Advisory Services, and from 1975 to 2003 served as a director and Senior Vice President of The Boston Consulting Group (“BCG”). At BCG, Dr. Moose provided strategic planning, operational effectiveness and related consulting services to global clients in a variety of industries, including consumer and industrial goods, financial services and telecommunications, for over 35 years. Dr. Moose managed BCG’s New York office from 1988-1998 and was chair of the East Coast region, which accounted for approximately 20% of BCG’s overall revenues, from 1994-1999. In addition to her strategic planning expertise, Dr. Moose has been the chair or presiding director of several public companies and several charitable organizations, which has given her extensive expertise in corporate governance.
Dr. Moose is also a member of the boards of directors of Verizon (since November 2005), serving as its presiding director (2000-current), chairperson (since 2005) of the board of trustees of Natixis Advisor Funds (1982-current) and Loomis Sayles Funds (2003-current), and the Alfred P. Sloan Foundation (2000-current). Dr. Moose also served on the board of directors of Rohm and Haas Company (1981-2009) and as its lead director from 1998.
Dr. Moose received her PhD and MA in economics from Harvard University and BA, summa cum laude, in economics from Wheaton College.
n April of 2001 the AES Corporation, Arlington, Virginia, won a bid to purchase 75% control of two large electrical distribution companies in Ukraine, Kievoblenergo and Rivneenergo, for approximately $ 68.9 million. Kievoblenergo was the largest of 20 electrical distribution companies that were going to be sold under Ukraine's privatization program.
AES had originally planned to invest an additional $ 60 million in Kievoblenergo and $ 40-50 million in Rivneenergo over the next five years. AES had some difficulty with the Ukraine government in the fall of 2001 when the government delayed the approval of an increase in electricity tariffs for privitized electric utilities. AES announced at that time there was no way they could go ahead and invest up to $ 100 million more in Ukraine unless electricity tariffs were allowed to be raised.
AES CHANGES LEADERSHIP UNDER WEIGHT OF HEAVY DEBT
By Peter Behr
Washington Post Staff Writer
The Washington Post
Business Section, Page E4
Wednesday, June 19, 2002
AES Corp. yesterday announced the resignation of chief executive Dennis W. Bakke, co-founder of the Arlington-based global energy company whose stock has been battered by economic crises in key South American markets.
Bakke, 55, will be succeeded by Paul T. Hanrahan, 43, a 15-year veteran of the company who was one of four chief operating officers.
Wall Street investors and bondholders have been increasingly insistent on a change in leadership as AES struggled to manage heavy debt commitments in slumping energy markets. AES stock has lost nearly 90 percent of its value in the past year, closing yesterday at $5.02 a share, down 6 cents.
The company, which generates or sells electricity in 32 countries, reported a $313 million loss in the first quarter of this year. It wrote down the value of power plants and other assets in South America, most severely in Brazil, which imposed power rationing after a severe drought last year.
Bakke was the architect and champion of AES's unusual grass-roots operating style that allowed teams of employees to propose and carry out acquisitions and expansion programs with minimal control by a small headquarters staff in Rosslyn.
The approach helped AES through years of breakneck growth, but debt pressures forced a switch to a more disciplined, centralized strategy to refinance loans and cut costs. And some investors found Bakke's brand of corporate idealism -- emphasizing individual responsibility -- too unconventional.
Over the past few months, AES directors considered several moves, including going outside the company for a new CEO. Last week, it accepted Bakke's offer to resign and his suggestion that Hanrahan take over, according to AES director Robert H. Waterman Jr. The selection was made final yesterday.
"Dennis took us through an era of rapid growth and expansion. His instincts go in that direction," said Waterman, a founding director of AES and co-author of the best-selling business book "In Search of Excellence."
"We worked on this very definitely together. In the end, Dennis volunteered to step down," Waterman added.
"The world has changed, especially our industry," Bakke said in an interview. He said he had wrestled with his role at AES since last fall, when the company surprised investors with the magnitude of its losses in South America. "I thought we needed a different kind of leadership," he added.
Bakke, who will remain on the board, was voted a $9 million severance package by the board, payable over the next 15 years. He received no cash compensation as CEO for years, taking his pay in the form of stock options. As of February, he was the company's largest shareholder, with about 6.2 percent of the outstanding stock.
Hanrahan said his top priority will be to generate cash through cost controls, centralized purchasing and asset sales. AES bonds have been selling for about 65 cents on the dollar recently; the company's goal is to bring the price to par over the next year to 18 months. On June 6, Standard & Poor's reduced its rating on AES's corporate credit and senior unsecured debt one notch, to BB-minus, three levels below investment grade.
Last week, AES announced the sale of its AES NewEnergy power retailing company to Baltimore-based Constellation Energy Group Inc. for $240 million.
Excluding asset sales, AES said it expects to generate $1.25 billion in cash this year, enough to support operations, pay $550 million in interest and preferred dividends and retire $448 million in debt maturing in 2002.
Chris Ellinghaus, an analyst at Williams Capital Group, said that forecast is reasonable. The company's ability to manage its debts "looks adequate into 2004."
"We think there will be other asset sales. . . . They've proven pretty deft at handling their finances. I don't think this is a bankruptcy candidate," added Ellinghaus, who has a "buy" recommendation of AES and owns shares of the company personally.
Analysts Mitchell Spiegel and Andrea Cullen at Credit Suisse First Boston reported last week that they see a "downside risk" to AES's debt issues.
. Under the leadership of its two co-founders, Roger Sant and Dennis Bakke, AES had
rejected profit and shareholder wealth as its raison d’être and committed itself to the pursuit of
integrity, fairness, fun, and social responsibility. These principles were embedded in a
management system which the Wall Street Journal referred to as “empowerment gone mad.”
1
Its unique organization was referred to by board member Robert Waterman (of In Search of
Excellence fame) as an “adhocracy.” There were no staff functions or corporate departments;
almost all traditional management functions were devolved to workers at the plant level.
So long as AES was a darling of Wall Street, investors and analysts were happy to accept
AES’s lofty values and its founders’ disdain for profit. But the events of 2001 and early 2002
had changed all that. AES’s values and unique management system which had been so effective
in encouraging employees’ loyalty and commitment, generating initiative and entrepreneurial
drive, and promoting unmatched levels of operational efficiency was now having to come to
terms with a very different environment.
But circumstances in 2002 were much changed. The independent power sector which had
boomed with privatization and deregulation was no longer flush with opportunity and optimism.
The California power crisis, the collapse of Enron, and the problems of power producers in
several emerging market countries had cast a pall over the entire sector. Meanwhile, competition
had greatly intensified within the sector. While AES had been a pioneer of independent power
production, it was now a crowded sector. Competitors for electricity supply contracts included
independent power producers (IPPs) such as AEP, Calpine, and Reliant Resources; traditional
utilities such as Duke Power, Dominion Resources, Consolidated Edison, Electricité de France,
and British Energy; gas companies such as Vectren, Centrica, and Gaz de France; and oil majors
such as BP Amoco, ExxonMobil, and Shell.
In 2008, AES Corporation's total revenue was 16.1 Billion, of which $9.11B came from the company's Power Generation division,and $6.99B from Utilities.[4]
In April 2010, AES Wind Generation, a wholly owned subsidiary of AES, acquired UK-based wind developer Your Energy (YEL) and has also signed an agreement to buy a 51% stake in a wind portfolio from 3E, a Polish wind developer. This move will add more than 700MW to AES Wind Generation’s European pipeline.
Sandra O. Moose has been a Director of AES since April 2004, and serves on the Nominating, Governance and Corporate Responsibility Committee and the Finance and Investment Committee of the Board.
Dr. Moose brings substantial executive, strategic, planning, operations, consulting, and corporate governance experience to the Board. Dr. Moose is President of Strategic Advisory Services, and from 1975 to 2003 served as a director and Senior Vice President of The Boston Consulting Group (“BCG”). At BCG, Dr. Moose provided strategic planning, operational effectiveness and related consulting services to global clients in a variety of industries, including consumer and industrial goods, financial services and telecommunications, for over 35 years. Dr. Moose managed BCG’s New York office from 1988-1998 and was chair of the East Coast region, which accounted for approximately 20% of BCG’s overall revenues, from 1994-1999. In addition to her strategic planning expertise, Dr. Moose has been the chair or presiding director of several public companies and several charitable organizations, which has given her extensive expertise in corporate governance.
Dr. Moose is also a member of the boards of directors of Verizon (since November 2005), serving as its presiding director (2000-current), chairperson (since 2005) of the board of trustees of Natixis Advisor Funds (1982-current) and Loomis Sayles Funds (2003-current), and the Alfred P. Sloan Foundation (2000-current). Dr. Moose also served on the board of directors of Rohm and Haas Company (1981-2009) and as its lead director from 1998.
Dr. Moose received her PhD and MA in economics from Harvard University and BA, summa cum laude, in economics from Wheaton College.
n April of 2001 the AES Corporation, Arlington, Virginia, won a bid to purchase 75% control of two large electrical distribution companies in Ukraine, Kievoblenergo and Rivneenergo, for approximately $ 68.9 million. Kievoblenergo was the largest of 20 electrical distribution companies that were going to be sold under Ukraine's privatization program.
AES had originally planned to invest an additional $ 60 million in Kievoblenergo and $ 40-50 million in Rivneenergo over the next five years. AES had some difficulty with the Ukraine government in the fall of 2001 when the government delayed the approval of an increase in electricity tariffs for privitized electric utilities. AES announced at that time there was no way they could go ahead and invest up to $ 100 million more in Ukraine unless electricity tariffs were allowed to be raised.
AES CHANGES LEADERSHIP UNDER WEIGHT OF HEAVY DEBT
By Peter Behr
Washington Post Staff Writer
The Washington Post
Business Section, Page E4
Wednesday, June 19, 2002
AES Corp. yesterday announced the resignation of chief executive Dennis W. Bakke, co-founder of the Arlington-based global energy company whose stock has been battered by economic crises in key South American markets.
Bakke, 55, will be succeeded by Paul T. Hanrahan, 43, a 15-year veteran of the company who was one of four chief operating officers.
Wall Street investors and bondholders have been increasingly insistent on a change in leadership as AES struggled to manage heavy debt commitments in slumping energy markets. AES stock has lost nearly 90 percent of its value in the past year, closing yesterday at $5.02 a share, down 6 cents.
The company, which generates or sells electricity in 32 countries, reported a $313 million loss in the first quarter of this year. It wrote down the value of power plants and other assets in South America, most severely in Brazil, which imposed power rationing after a severe drought last year.
Bakke was the architect and champion of AES's unusual grass-roots operating style that allowed teams of employees to propose and carry out acquisitions and expansion programs with minimal control by a small headquarters staff in Rosslyn.
The approach helped AES through years of breakneck growth, but debt pressures forced a switch to a more disciplined, centralized strategy to refinance loans and cut costs. And some investors found Bakke's brand of corporate idealism -- emphasizing individual responsibility -- too unconventional.
Over the past few months, AES directors considered several moves, including going outside the company for a new CEO. Last week, it accepted Bakke's offer to resign and his suggestion that Hanrahan take over, according to AES director Robert H. Waterman Jr. The selection was made final yesterday.
"Dennis took us through an era of rapid growth and expansion. His instincts go in that direction," said Waterman, a founding director of AES and co-author of the best-selling business book "In Search of Excellence."
"We worked on this very definitely together. In the end, Dennis volunteered to step down," Waterman added.
"The world has changed, especially our industry," Bakke said in an interview. He said he had wrestled with his role at AES since last fall, when the company surprised investors with the magnitude of its losses in South America. "I thought we needed a different kind of leadership," he added.
Bakke, who will remain on the board, was voted a $9 million severance package by the board, payable over the next 15 years. He received no cash compensation as CEO for years, taking his pay in the form of stock options. As of February, he was the company's largest shareholder, with about 6.2 percent of the outstanding stock.
Hanrahan said his top priority will be to generate cash through cost controls, centralized purchasing and asset sales. AES bonds have been selling for about 65 cents on the dollar recently; the company's goal is to bring the price to par over the next year to 18 months. On June 6, Standard & Poor's reduced its rating on AES's corporate credit and senior unsecured debt one notch, to BB-minus, three levels below investment grade.
Last week, AES announced the sale of its AES NewEnergy power retailing company to Baltimore-based Constellation Energy Group Inc. for $240 million.
Excluding asset sales, AES said it expects to generate $1.25 billion in cash this year, enough to support operations, pay $550 million in interest and preferred dividends and retire $448 million in debt maturing in 2002.
Chris Ellinghaus, an analyst at Williams Capital Group, said that forecast is reasonable. The company's ability to manage its debts "looks adequate into 2004."
"We think there will be other asset sales. . . . They've proven pretty deft at handling their finances. I don't think this is a bankruptcy candidate," added Ellinghaus, who has a "buy" recommendation of AES and owns shares of the company personally.
Analysts Mitchell Spiegel and Andrea Cullen at Credit Suisse First Boston reported last week that they see a "downside risk" to AES's debt issues.
. Under the leadership of its two co-founders, Roger Sant and Dennis Bakke, AES had
rejected profit and shareholder wealth as its raison d’être and committed itself to the pursuit of
integrity, fairness, fun, and social responsibility. These principles were embedded in a
management system which the Wall Street Journal referred to as “empowerment gone mad.”
1
Its unique organization was referred to by board member Robert Waterman (of In Search of
Excellence fame) as an “adhocracy.” There were no staff functions or corporate departments;
almost all traditional management functions were devolved to workers at the plant level.
So long as AES was a darling of Wall Street, investors and analysts were happy to accept
AES’s lofty values and its founders’ disdain for profit. But the events of 2001 and early 2002
had changed all that. AES’s values and unique management system which had been so effective
in encouraging employees’ loyalty and commitment, generating initiative and entrepreneurial
drive, and promoting unmatched levels of operational efficiency was now having to come to
terms with a very different environment.
But circumstances in 2002 were much changed. The independent power sector which had
boomed with privatization and deregulation was no longer flush with opportunity and optimism.
The California power crisis, the collapse of Enron, and the problems of power producers in
several emerging market countries had cast a pall over the entire sector. Meanwhile, competition
had greatly intensified within the sector. While AES had been a pioneer of independent power
production, it was now a crowded sector. Competitors for electricity supply contracts included
independent power producers (IPPs) such as AEP, Calpine, and Reliant Resources; traditional
utilities such as Duke Power, Dominion Resources, Consolidated Edison, Electricité de France,
and British Energy; gas companies such as Vectren, Centrica, and Gaz de France; and oil majors
such as BP Amoco, ExxonMobil, and Shell.
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