Poindexter judged a success despite two major failures

Constellation emerged in good shape after failed efforts to merge, split up

July 24, 2002|By Robert Little and Dan Thanh Dang | Robert Little and Dan Thanh Dang,SUN STAFF

During his 10 years as the head of Baltimore's energy utility, Christian H. Poindexter presided over two of the company's most conspicuous failures.

And yet, upon hearing yesterday that Poindexter will retire as chairman of Constellation Energy Group, most industry observers summed up his tenure the same way: well done.

By calling off a proposed merger with Potomac Electric Power Co. five years ago, then spending more than $355 million to cancel a plan to split up the company last year, Poindexter leaves a utility that is, in many regards, much like it was in 1992 when he became chief executive of what was then Baltimore Gas and Electric Co.

Poindexter will remain a director on the board and head two important committees.

Such continuity can be considered a success given that Constellation is moving forward largely intact with a solid management team in an industry that has been shaken by bankruptcies, investigations of dubious energy pricing practices and aggressive forays into new businesses,

"The world has changed completely for the electricity business in the last few years, and holding on to what you have, in this environment, is really an achievement," said Lester B. Lave, co-director of the Carnegie Mellon Electricity Industry Center. "BGE emerged from the last few years relatively unscathed."

Though Constellation's stock price has been battered over the past couple of years, the company - with Poindexter as chairman and Mayo A. Shattuck III as chief executive officer - has avoided the kinds of scandals that have beset other energy companies recently.

In April, Constellation reached a $2.5 million settlement with California, avoiding a state lawsuit that alleged Constellation overcharged it for electricity.

More recently, Constellation reported that it did not engage in sham energy trades to inflate revenue and was cleared of price-manipulation charges in Texas.

Shattuck took over in October, when Constellation canceled its plan to split in two.

Since then, the company has pursued a more conservative strategy, looking to cut expenses, to increase profits by 10 percent over the next several years, to develop a stronger balance sheet and to rebuild investor confidence in the 186-year-old utility.

Wall Street has applauded the company for returning to basics.

"I think Shattuck is completely competent," said Ronald S. Tanner, an energy analyst with Legg Mason Wood Walker. "Chris is still chairman of the board's executive committee. I don't think it changes his influence on the company at all. It just determines which seat he will be in."

Poindexter leaves a varied imprint on the industry that he entered 35 years ago, fresh from a tour at the Navy's nuclear power school under the leadership of Adm. Hyman Rickover.

He is credited with restoring the efficiency and the reputation of the Calvert Cliff's nuclear power plant, where he got his first job with BGE in 1967. Poindexter remains one of the nation's authorities on commercial nuclear power, and will continue to serve on the nuclear committee of Constellation's board of directors.

He piloted Constellation into the once-novel field of energy trading, striking a deal with Goldman, Sachs & Co. that rocketed the company into eighth place among wholesale power marketers in the country in 2000.

"Today, energy trading has a bad name, but it wasn't that way for most of the last five years," said John Sodergreen, publisher of the Scudder Publishing Group, an Annapolis company that produces five energy-industry newsletters. "He took chances and took risks and got out front in that business, and it paid off.

"At a time when simply surviving on your own without being acquired or without going bankrupt is a challenge, I think he can be proud of what he's done."

Poindexter also has won praise for stepping down as CEO last year, bowing to investment banker Shattuck as investors were clamoring for clearer earnings reports and tighter forecasts, and the kind of assurances that only a Wall Street insider could offer.

"It was Chris' idea to put Mayo Shattuck in control," said Douglas L. Becker, CEO of Sylvan Learning Systems Inc. and a Constellation board member. "The board was excited and even surprised that he would come up with this plan. But everyone has come to believe this was the right approach for the company.

"Now, Chris obviously feels he can reduce his activity in the company with the confidence that the company is in exceptional hands."

As much as anything, Poindexter's tenure is marked by intensive efforts first to merge the company, then to split it apart - and then walk away when both plans turned sour.

The Pepco merger was scuttled largely by regulators. The plan to spin off an unregulated power-generation company fell victim to a floundering market. Both decisions, analysts say, took the nerve of someone willing to admit he had been beaten, however expensively.

"The decision to pull back from the split had to be an extremely wrenching one, and it probably cost the company not just a lot of money, but also a lot of good people who were slated to become executives," said Diane L. Borska, an energy consultant in Boston. "But given the timing, it was the prudent thing to do."

An April 18 proxy statement filed with the Securities and Exchange Commission shows that Poindexter will collect a $3,297,000 lump sum, payment in addition to his regular pension benefits, because he "agreed to continue working despite his eligibility for a voluntary special early retirement program."

Because of last year's stumbles, the board sliced Poindexter's pay by 37 percent after the energy company abandoned its plan to split and paid Goldman Sachs Group Inc. $355 million to end a business partnership.

Poindexter, who was CEO until November, earned a little more than $1.1 million in salary and bonus last year, compared with $1.7 million in 2000.

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