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FPL chief paves the way for profit, renewable energy

Lew Hay ThumbnailWhen Lewis Hay was a student 30 years ago at what is now the Tepper School, most utilities were A-rated or better — though he never imagined he’d be working for one.

But when he stood in front of an auditorium filled with MBA students as part of the W.L. Mellon Speaker Series, it was as the chairman and chief executive officer of the largest renewable energy company in the United States, and one of just three that still maintain that A rating.

“It’s not just having the resources. You have to deploy those resources with discipline,” said Hay, MSIA 1982, who heads FPL Group — the utility once known as Florida Power & Light.

Hay credits the education he received at the Tepper School with preparing him to take the helm of a business that is operating in a time of unprecedented uncertainty.

“It’s a little bit of a boot camp,” Hay said of the Tepper School, though he added, “without question, you get the depth of knowledge … but you also get the breadth.”

In other words, the school prepares students to not only perform a robust analysis of complex business problems, but also helps them acquire the softer skill sets that are essential to implementing identified solutions.

By most measures, FPL’s business profile is something to envy: $44.8 billion in total assets, $21.9 billion in market capitalization, and $16.4 billion in operating revenue. If every utility in the United States shared FPL’s levels, emissions could be reduced by half — the equivalent of removing 80 percent of the nation’s cars from the road.

Hay said FPL has proven that it’s possible to keep costs down while reducing emissions, which he described as a core element of the company’s strategy. In addition to being the country’s third-largest operator of nuclear power plants, FPL also looks to wind farms, solar energy, and other renewable sources to keep the lights on.

“There’s no magic to what we’ve done,” said Hay. “We have a culture of continuous improvement.”

That includes benchmarking against the industry’s best as part of a commitment to operational excellence, training all employees in Six Sigma, and using a strategic focus that identifies a goal and works backwards to define the steps necessary to reach that goal.

The company has had its share of disaster management challenges, too. From 2004 to 2005, “we were pummeled with hurricanes,” Hay said, displaying photographs of devastation wrought by one 2004 storm.

“Hurricanes are a major logistical nightmare,” he said. Not only do customers quickly lose patience when they lack power, the employees themselves often have to evacuate, and the utility is required to bring in thousands of emergency workers to help restore electricity.

“When people talk about integrating an acquisition, I tell them it’s nothing compared to this,” said Hay.

He also spoke of how capital-intensive the electricity industry can be, which necessitates financial discipline. A commitment to renewable energy means sinking money into nuclear plants and wind farms — not a decision to be entered lightly.

“It’s not a case study anymore, when you decide to spend $2 billion,” he said.

Most of FPL’s wind farms are on lands with dual uses, such as cattle ranches. That means the company is able to get free options on the land.

“If you don’t learn anything else at this school: Options are good, and free options are great,” Hay quipped, earning laughter from the crowd.

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Mark D. Burd

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Tepper School of Business
Carnegie Mellon University
5000 Forbes Ave.
Pittsburgh, Pa. 15213-3890

Tel: 412-268-3486
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