In 2000, David L.
Sokol surprised the energy industry by engineering a reversal of a traditional
strategy to accelerate growth for MidAmerican Energy Holdings Company:
He took the publicly held company private.
It was the second
consecutive year that MidAmerican had set an industry precedent. In 1999,
the company became the first independent power producer to acquire an
investor-owned utility.
In the latest transaction,
Sokol, chairman and CEO of MidAmerican, put his personal fortune upfront
in organizing a small group of investors to buy all the company's shares.
He chose the innovative course of privatization to overcome industrywide
stagnation in market value for utilities during a period of great opportunity.
In doing so, he advanced
the interests of shareholders, employees, customers, and communities.
He created a premier vehicle with a long-term perspective and access to
a vast pool of private capital, freeing MidAmerican from the short-term
pressures of Wall Street and giving it critical stability to lead change.
In addition to Sokol,
the other investors in the group are Walter Scott, Jr., previously MidAmerican's
largest individual shareholder; Gregory E. Abel, the company's president
and chief operating officer; and Berkshire Hathaway, Inc., headed by legendary
investor Warren Buffett.
Buffett's participation
represented a noteworthy endorsement not only of MidAmerican, but also
of the utilities sector itself. It was Berkshire's first foray into utilities.
The purchase - announced Oct. 25, 1999 and closed March 14, 2000 - attracted
new investor attention to the long-neglected sector, where market valuation
has risen steadily since.
Sokol has a history
of leading growth in the industry. When he joined California Energy as
chief executive in February 1991, the company had one customer and owned
and operated one geothermal project. The previous year, the company had
less than $100 million in revenues. By the end of 1999, CalEnergy had
become MidAmerican, and its revenues had grown to $4.1 billion, a 45-fold
increase.
Today, MidAmerican
is a hybrid global energy company, with investments across the energy
chain and 3.3 million electricity and natural-gas customers. MidAmerican
Energy Holdings Company, headquartered in Des Moines, Iowa, is a global
leader in the production of energy from diversified fuel sources including
geothermal, natural gas, hydroelectric, nuclear and coal. MidAmerican
also is blazing a trail in the supply and distribution of energy in the
rapidly deregulating U.S. and U.K. consumer markets. The company has 9,500
employees has approximately 9,700 net megawatts of diversified power generation
under ownership, contract and in operation, construction and advanced
development.
Its U.S. utility
subsidiary, MidAmerican Energy Company, is the largest utility in Iowa
and is strategically located in the middle of several major markets in
the Midwest. It provides service to more than 650,000 electric customers
and 620,000 natural gas customers in a 10,600 square-mile area from Sioux
Falls, South Dakota, to the Quad Cities area of Iowa and Illinois.
The U.K. subsidiary,
Northern Electric plc, distributes electricity in the North East of England
and supplies electricity and gas to more than 2 million customers across
Britain.
MidAmerican's IPP
subsidiary, CalEnergy, is an international leader in the development and
production of energy from diversified fuel sources including geothermal,
natural gas and hydroelectric. CalEnergy and its affiliates have power-producing
operations in the United States, the United Kingdom, Poland, the Philippines
and Australia. CalEnergy operates over 1,300 megawatts of electric power
and steam-producing facilities in the United States and the Philippines.
The company also has another 750 megawatts under construction, as well
as a 30,000-ton a year zinc production facility undergoing testing in
Southern California.
Clearly, growth drives
Sokol. But his vision of creating a global provider of a full range of
energy services is unique for both its simplicity and comprehensiveness.
The energy chain
- from extraction to production to distribution and sales - is volatile
and complex. No one can chart the unfolding of deregulation, environmental
mandates, and Third World development. The only certainties are rapid
change and the continuing emergence of competition.
It is imperative
to have information and expertise all along the energy chain - not only
within the various elements but also in the ways they interlock with each
other. One must be flexible and quick, be alert to change and first to
market.
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