- The Washington Times - Wednesday, June 19, 2002


Power conglomerate AES Corp. elected a new president and chief executive officer yesterday after its founder resigned, citing a "crisis of confidence" in the electric industry.

The new president and CEO, Paul Hanrahan, had been one of four chief operating officers at the Arlington-based company.

Dennis Bakke co-founded AES in 1981. The company grew quickly and was renowned for its uniquely decentralized corporate structure, which allowed midlevel managers flung across the globe the authority to make billion-dollar decisions. It also lists "fun" as one of its four core values, along with integrity, fairness and social responsibility.

But AES, along with other power companies, has suffered recently and its stock price has dropped 90 percent in the last year. The company's problems were particularly acute because of its heavy presence in South America. That region historically has generated 40 percent of AES' revenue, but regulatory, political and monetary issues in the region have spooked many investors.

Mr. Bakke, who will remain on the company's board of directors as an emeritus chief executive, said yesterday that "different times require different leaders."

"The entire power sector has undergone a crisis of confidence, and investors are demanding change. Although AES has grown a great deal during my tenure, it became clear to me that this is a time for a new CEO," Mr. Bakke said.

While many energy companies have experienced crises in the last year, the AES situation is unique. The company does not trade energy, like Enron, and has not suffered sharp effects of the California energy crisis.

"The problem area for AES is South America," said company spokesman Lew Phelps.

Last year, for instance, 10 percent of the company's revenue came from its subsidiary in Venezuela, where the economy has been shaken over political and monetary issues.

Brazil presents an even more serious problem because of a regulatory structure that makes it difficult for foreign businesses to operate successfully there, Mr. Phelps said.

"It has nothing to do with AES, except for its decision to enter those markets," Mr. Phelps said.

Mr. Phelps said Mr. Hanrahan has alerted employees that the company may tighten its corporate structure, consolidating decisions on procurement and other issues.

Mr. Hanrahan said his immediate priorities include "vigorous strengthening of the AES balance sheet, improving liquidity, reducing operating expenses and resolving our significant issues in South America in a way that is most beneficial for AES shareholders."

The company has at least partial ownership of about 180 power plants in 31 countries on six continents. It also distributes electricity to 19 million customers, of whom 16 million are in Latin America.

The company, with 38,000 employees, earned $273 million on revenue of $9.3 billion in 2001.

AES shares closed yesterday at $5.02 a share, down 6 cents. Yesterday's announcement came after the close of trading.

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