new CEO, same great culture

Kathleen Davis, associate editor

This month EL&P speaks with Bob McGehee, the new CEO of Progress Energy, about his plans for the company and his views of the industry.

KD: What is your vision of the future for Progress Energy?
BM: Right now, we’re in a transition period. We completed a large merger three years ago with Florida Progress, a company about the size of Carolina Power & Light Company. So, we’ve been focusing these last few years-and will continue to focus for at least another two years-on strengthening our balance sheet. We want to focus on getting cash flow positive and getting our debt reduced from this acquisition. We’re limiting our spending and our capital, but we have very good resources. We have about 24,000 MW of generation, both regulated and unregulated.

We feel that we have assets in place to grow net income in the 3-6 percent range each year. And, after this year, we want to begin growing earnings per share. We issued some equity over the last few years; so we’re flat this year in earnings. But, beginning in 2005, we can transition into some good earnings/share growth. For the next few years we will continue to grow into our assets and focus on execution. After that, we’ll be looking at opportunities to grow net income, possibly greater than 6 percent, depending on the environment and economy.

KD: Cash flow positive is the ultimate goal?
BM: We’re well positioned this year to be positive.

KD: What’s first on your agenda for change or defining a new direction?
BM: One thing about our company is that we’ve had a good strategy over the last few years, unlike a lot of companies. We have stable management; we focus on our core. We did not get overextended. We’ve had this management group and a strategy in place for a number of years, which I was certainly a large part of crafting. So, I do not foresee any directional changes in our strategy.

I think that’s one thing we do well: succession planning. When our board was working on succession, they picked me. They picked someone who was very familiar with the strategy and what we were trying to accomplish. The short answer is that I do not plan any significant directional changes, but certainly there will be changes as we go along.

KD: So, you weren’t put in to change the direction of Progress Energy, but more to keep the current direction going forward?
BM: It was certainly not to put in “change.” We are a good company with a good strategy. To the extent that it needs changing, I will make those changes, of course. But, it wasn’t like some of the other companies out there that have been on hard times and brought in somebody from the outside and said, “Let’s turn this thing around.” We are certainly not in that type of a situation.

KD: What is the one thing you’re most proud of as you start this opportunity?
BM: Our employees and our culture of focusing on excellence in everything we do are the things I’m most proud of in this company. When I’m out with employees, you can see they are excited about their jobs; they’re excited about the prospects of the company. And, that is certainly something that makes it fun to come to work and is a great source of pride for me.

KD: Is that unusual compared to other companies?
BM: Well, I’m prejudice, but I think so. Actually, I was in an employee meeting yesterday. Someone who had just joined the company a few months ago approached me, and the first thing he wanted to tell me was that he could not believe the difference between Progress and the place he had worked previously.

KD: I’m sure you were very proud of that.
BM: I was.

KD: How long have you been with Progress Energy?
BM: I’ve been here seven years. I came in May of 1997. I started off as general counsel of the company, then quickly moved to the head of our service company. I became chief operating officer and, as of March 1, CEO.

KD: Was the positive atmosphere there before, or did you help build it?
BM: I think that over the 10 or 12 years that Bill Cavanaugh was here as CEO, it has improved every year. And I helped contribute to that. I think for us to be successful, it will have to continue every year in the future. It is not something that can remain stagnant.

KD: Because the employees are the backbone of your company.
BM: Yes.

KD: What’s the best advice someone gave you when they found out you were coming into this position, and why have you found that advice so helpful?
BM: I have gotten a lot of advice that I haven’t tested under fire yet. A couple of board members told me that it is important to be your own man, put your own mark on the company and set your own direction.

KD: What advice would you give other execs working in the industry?
BM: I would say that the industry should be closely watched. I’ve been involved in it for 30 years in various positions. I’ve watched it change from a fairly boring, routine, regulated electric utility business to, what I think, is one of the most exciting statements of industry in our country. There’s a lot going on. I would certainly advise anyone that wants a fulfilling and rewarding job, that this is a good industry to look at.

As for advice: Focus on the job you’re in. I have found, from my own experience, that if you’re always looking to the next job or “where I should be” rather than “where I am,” you cannot be successful. If you take where you are and do your job, then your future will take care of itself.
Also, learn as much about this business as possible-both inside and outside your job.

KD: How do you continue your industry education?
BM: We have a very open company. There are always opportunities to go out with line crews, go out to power plants, visit our trading floors. So, there are a lot of opportunities there for me to visit with people and be involved in other parts of the business. First-hand experience is invaluable.

KD: What’s your favorite thing about working at Progress Energy?
BM: It’s a very exciting place. We have a very close-knit management team and company. It’s very collaborative. We enjoy the work; we have a good time. We know the value of fun. So, it’s the people and attitude. There’s also a lot of enthusiasm when I go out into the field, and I think that’s very rewarding.

Some weeks I’m out visiting plant sites a couple days week. It is a very important part of my job. Not only do I learn a lot, it helps me understand the culture. Employees like to see the CEO and other senior management interested in what they’re doing and that these executives are friendly, supportive, regular people.

KD: Anything about Progress Energy that the industry doesn’t know?
BM: No, not really. We’re an open book, a little traditional. I think that if you look back over the last few years, companies got very excited about the prospects of the unregulated side of the business, particularly marketing and trading, and expanding into merchant plants. They saw a lot of potential there. We were little bit more cautious. We did not overextend ourselves, and our strategy proved itself in the end. I think we will carry that forward into the future.

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You look at some of these new CEOs coming in-whether it’s TXU or AEP or Duke Energy or whomever-you know they are all telling the investment community, “Hey, we’re ‘back to basics’ guys.” I find this satisfying, as we never strayed from the basics.

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