- The Washington Times - Monday, February 12, 2001

AES Corp., the largest independent electricity generator in the nation, reported strong profits for the past year, but was hurt by the power crisis in California.

Dennis W. Bakke, president and chief executive officer of AES, says if all had gone his way California and his company would have been spared the current electricity shortage and rolling blackouts.

"We were trying [to generate electricity there], we have the plants and the demand was very high," Mr. Bakke says. "But we were trapped."

The Arlington-based company owns four plants generating approximately 4,100 megawatts of power in southern California.

One of its facilities, located near Los Angeles and comprising three plants, had reached its pollution emissions limit by the summer, so it stood idle. When the energy crisis began, some environmental groups approached AES, asking the company to run the plants so the state would have enough power. But then, Mr. Bakke says, other groups fought to uphold the restrictions and a tug-of-war ensued.

Ultimately, the plants had technical problems, causing an $11 million loss. AES also had to pay $17 million in environmental fines.

Mr. Bakke says electricity deregulation did not cause California's power crisis. He cited Argentina as an example where the government stopped supervising power generation, distribution and supply, and several years later "prices have plummeted and consumers have done great."

"So it's not deregulation, but whether you do it well," Mr. Bakke says. "And in California they didn't do it right."

Building a powerhouse

Despite the problems in California, Mr. Bakke, 55, runs a company that, with $641 million in profits and $6.7 billion in sales, made Standard & Poor's list of the nation's 100 largest companies.

AES entered the 21st century with operations in 32 nations. Its power generation capability last year was about 64,000 net megawatts. By comparison, during the same time local electricity provider Pepco at its peak generated just over 6,000 megawatts.

Mr. Bakke and Roger Sant, cofounder and chairman, went into business in 1981, at a time when the United States began co-generating electricity and utilities throughout Europe were privatizing. These changes offered new market opportunities for companies like AES.

"Society gives us the right to exist in order to do something wonderful," Mr. Bakke says from his Rosslyn office that looks out to the Potomac River, sounding more like a philosopher than a CEO. "That's why we're around."

"Our purpose … is to serve the world, to meet the needs for safe and reasonably priced electricity," he adds.

Mr. Bakke's surroundings suggest power and elegance. His office is simple, with the more noticeable items being a freestanding globe, a bronze statue of Jesus washing St. Peter's feet and a signed picture of Mother Teresa.

He has strong religious beliefs, cultivated during a childhood spent looking up to his minister father. His parents were Norwegian immigrants living in the mountains of Washington state, and two of his brothers also became ministers.

Mr. Bakke attended Puget Sound Christian College in Washington state on a football scholarship and went on to Harvard for his MBA.

He came to Washington during the Vietnam War to work for the government. Two years later, while at the Office of Management and Budget, Mr. Bakke began to study about energy conservation. By the time the oil crisis began in the early 1970s, Mr. Bakke decided to join the field.

He joined an energy think tank affiliated with Carnegie Mellon University in 1976. Here he met Mr. Sant and the two wrote a book on energy productivity. In 1981 they set out to raise $3 million to start AES.

"The company almost went under about 20 times in those first few years," says Mr. Bakke, recalling that Mr. Sant and he were only able to raise $1 million because no one in the field thought they had enough experience.

In its early days AES was made up of six groups, based on geographic location. Each group acted independently of the other, making its own rules and decisions.

Now Mr. Bakke says he has only one decision a year to make: "I decide how to divide the world up. It's always a big decision."

A different culture

Since AES was started, the company's founders have zealously disregarded corporate culture. As a result, during its 19 years AES has never developed departments or appointed heads to financing, purchasing, operations, public relations or even human resources.

This highly independent environment creates situations where mechanical engineers and coal handlers make multimillion-dollar deals. Outsiders find themselves furious at times, calling Mr. Bakke or Mr. Sant to override certain workers only to be referred right back to them.

"What makes them different from other people in the trade is that at the same time that the company had more business, the decision-making chain was very decentralized," says Justin Craib-Cox, an industry analyst with Morningstar in Chicago.

The founders of AES have enjoyed the luxury of sitting back and watching their 53,000 workers build the company. Because it employs locals on all seven continents where it operates, AES' work force is so ethnically mixed that English is the first language of only about 10 percent of its employees.

And the company continues to expand. Last year it had 16 division; by next year Mr. Bakke expects that there will be 19.

"It was not in our mind that we'd be an international company when we started," notes Mr. Bakke. "At the time we merely struggled to take the business under way."

Britain was the first overseas market AES entered in the late 1980s when the island country was deregulating electricity.

At the time at home the opportunities were not abundant, and AES was struggling to win a part of the Texas market. Then the Iron Curtain fell in 1989 and opened dozens of small Eastern European nations in search of power companies that would buy and update their obsolete nuclear power plants.

"We figured, if we can do it [in Britain], we can do it in other places. So people started making trips," Mr. Bakke says. "One of our guys went to Pakistan to visit his family and next thing he started our business there."

By 1996, AES had plants throughout Europe and Asia. Then it aggressively began buying facilities in South America. Now the target is Africa.

A family man

While growing his business, Mr. Bakke also started a family. He married and built a spacious home in Arlington.

As the years passed, the Bakkes had five children, none of whom works for AES. But their 18-year-old son might work at a plant in California or Hawaii for the summer before going to Princeton this year.

Mr. Bakke and his wife have donated millions of dollars to the Capitol Hill church where they met as well as to various charities. They also started a school in Arlington and a foundation, which this year will give 700 to 800 grants to Christian ministries throughout the nation.

Mr. Bakke also coaches football.

"What's interesting about Dennis Bakke in particular is that if you look at the FCC filing for last year, he didn't receive any cash income from the company; he elected to get it all in stock options," says Mr. Craib-Cox. "That sends a very strong signal to Wall Street that this is a person who is very concerned with the viability of the company."

SELF-PORTRAIT

Dennis Bakke, president and CEO of AES Corp.

Age: 55

Education: MBA, Harvard University; B.A. Puget Sound Christian College.

My favorite spots around the world: "Sri Lanka, in a real strange sort of way, like Vietnam, even though it's a hard place," he says. "Panama and Argentina are beautiful. Kazakhstan. Georgia is very interesting, but it's a hard place to live and work. Northern Ireland. Italy. India."

Last book I read: "Mystery of Capital," by Hernando de Soto.

Last concert I attended: Son's jazz concert at St. Stephen & St. Agnes School in Alexandria.

Last movie I saw: "Remember the Titans"

Favorite pastimes: Coaching youth football and playing golf

How to contact me: www.aesc.com

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