Leadership Series. Vol 4: Issue 10

Transcription

1 Boyden s Leadership Series presents discussions with business and thought leaders from organisations across the globe. The series focuses on topical issues that offer executives, political leaders and the media insight into current trends in business and talent management in the global marketplace. This issue features António Mexia, CEO of EDP-Energias de Portugal, SA, one of Europe s biggest energy operators with presence in Portugal, Spain, France, Belgium, Poland, Romania, United States and Brazil, among others. Mr Mexia discusses energy demand and opportunities in developing markets, partnerships in China and Brazil, lower cost of renewables, energising teams and why great talent supersedes a bad crisis. António Mexia Mr Mexia has been the Chief Executive Officer of EDP and Chairman of the Company s Board since March Prior to joining EDP, he held several important positions in the energy sector in Portugal and also as a member of the Portuguese government. From 2004 to 2005, he served as the Minister of Public Works, Transportation and Communications in Portugal s 16th Constitutional Government. From 2001 to 2004, he was the Executive Chairman of Galp Energia, which he first joined as Vice- Chairman of the Board of Directors in He has also served as the Board Chairman of Petrogal, Gás de Portugal, Transgás and Transgás-Atlântico. In 1990, Mr Mexia joined Banco Espírito Santo de Investimentos and served as a Director in charge of the equity capital markets and project finance divisions until Prior to his career in finance, he was an Assistant to Portugal s Secretary of State for Foreign Trade and also served as Vice-Chairman of the Board of Directors of ICEP (the Portuguese Institute for Foreign Trade). Mr Mexia has held several leadership roles in industry and trade associations - as Chairman of the Portuguese Energy Association (APE) from 1999 to 2002, member of the Trilateral Commission from 1992 to 1998, Vice-Chairman of the Portuguese Industrial Association (AIP) and Chairman of the General Supervisory Board of Ambelis. He was also a Government representative to the EU working group for the trans-european network development. In January 2008 he was appointed as member of the General and Supervisory Board of Banco Comercial Português, SA, having been previously a member of the Superior Board of this bank. Mr Mexia received a degree in Economics from Université de Genève (Switzerland), where he was also Assistant Lecturer in the Department of Economics. He was a postgraduate lecturer in European Studies at Universidade Católica. He also served as a member of the governing boards of Universidade Nova de Lisboa and of Universidade Católica, where he was Director until the mid-1990s. Boyden: As the Spanish economy continues to struggle, are you concerned that the current negative market sentiment on Spain will put additional pressure on Portugal? Why or why not? Mexia: There are two parts to the recovery actions by countries themselves and decisions made at the European level. Portugal is doing what it can do. It has sharply improved its external deficit and is slowly making headways on its budget. Portugal has

2 p. 2 also recognized that having credibility and access to the capital markets is very important and recently successfully extended maturities for its sovereign debt. This indicates market confidence in the country s medium-term outlook. Portugal s recovery is also linked to what happens at the European level. It s very difficult to have a common currency in Europe where the joint budget is a fraction of the budget in the other countries. There will be a tradeoff among countries for the new future of Europe and some countries will lose sovereignty in exchange of mitigating some of the risks to the system. Boyden: What has been the impact on EDP? Mexia: We anticipated our future needs and have diversified our market and regulatory risks. Today EDP is 60 per cent Iberian with 40 per cent of our operations in Portugal and 20 per cent in Spain. We have been growing well in Brazil. Today we are in 13 countries, with 30 different nationalities working in our company. With an eye to the future of energy supply, we have transformed ourselves into the third largest renewable energy player in the world. EDP was the first Portuguese company to tackle the bond markets by successfully issuing bonds eighteen months after the Portuguese bailout. The market demand was ten times the offer we made, which is a good sign. However, we are not completely out of the woods, which put additional pressure on us to continue seeking operational efficiencies. The markets are expecting the worst but I think we are already past the bottom. We anticipate that 2013 will be better. Boyden: The Internal Energy Agency estimates that the global demand for energy is expected to increase by one-third by What investments is EDP making to help service these energy needs? Mexia: What you will see in the future is not only energy demand that is driven mainly by Asia, China, India, and the Middle East but also a rise in demand for electricity globally. By 2050, we expect electricity to represent 50 per cent of all energy demand, up from 20 per cent today. We need a cleaner energy world. As a company, EDP is betting mainly on water, wind and is now starting solar projects. Three quarters of our generation capacity in 2015 will be CO2 free. Today more than two-thirds is already CO2 free. We are leaders in Europe, the US and also in Brazil in this regard. In terms of traditional sources of energy, we are also focusing on gas, basically in Iberia. More generally, our key focus is on water and wind globally. We see our role as a leader in the energy world and are making new innovations that are important for our energy efficiency and service to customers. Boyden: Are EDP s strategic partnerships in Brazil and with China s Three Gorges (CTG) Corp. strong examples of your growth outside Portugal? Mexia: CTG is a new and important partner for us as it gives us additional muscle and opens up an important

3 p. 3 market in terms of access to funds. It adds to our already strong, diversified shareholder base, which includes investors from Abu Dhabi, Algeria and Spain, in addition to Portugal. With these partners, we are also less dependent on country risk perception, which factors into our lower cost of debt and better rating than the Portuguese sovereign. Our partnerships also give us visibility in different markets and create new options for growth. We are strengthening our venture in Brazil, where we are the fourth largest private company in terms of distribution, with over three million clients, and have been growing for the last 10 years in a very competitive market. We are also approaching projects in the rest of Latin America and also in the African market. Access to funding and having local partners in these projects is critical. This is also a time for us to create new optionality for the medium term in areas where energy demand is growing Latin America, Africa and the Sino- Asian market. Boyden: What do you see as opportunities and challenges in Brazil? Mexia: The reason why you have fewer problems with the green energy supply in Brazil right now is because growth has been slower than we expected. Brazil is very dependent on the hydro market which makes the system quite vulnerable to dry periods. We are tackling mid-sized generation in Brazil and also want to secure opportunities in the thermal market which is an alternative to renewable energy. We are also betting a lot on wind energy. In the last national energy auction in Brazil, the price for wind was cheaper than that for gas in terms of megawatt hours produced. We also have a 40 per cent load factor in Brazil compared to 25 per cent in Europe. Boyden: What are your thoughts on growth of renewable energy sources, such as hydro, wind and solar, as viable alternative sources of energy to fossil fuels? Mexia: Globally, the demand for additional capacity has been slightly lower over the past three to four years, especially in Europe and the US. This is not the case in Asia, South America and South Africa where there is excess demand that must be tackled by new additions. The growth of new renewables, namely wind and solar, together with gas, will vary across geographies. People are also starting to get over the misperception that renewables are an expensive solution that must be subsidized. Renewables can contribute to a stable and downward trend on energy prices especially in the US and in Europe together with shale gas, which for the moment has created almost a miracle of low energy prices. Boyden: What are the biggest business challenges to creation and distribution of renewable energy today (e.g., cost of production/ capital investments, grid infrastructure needs, efficiency)? Mexia: A lot depends on the market. In new markets like Brazil, it s about having the infrastructure in place because the energy resource, such

4 p. 4 as wind, is far from the grid. In US and Europe, it s more about visibility into the rules of the game. In general, governments tend to be sympathetic and helpful to the energy sector whenever they need us build new energy infrastructure. When these new additions are not needed, as it was the case in Europe recently, governments typically tend to look to utilities as a source of funding and new taxes. We need to have a clear and long-term vision about what is needed from the energy sector, otherwise we will always be penalizing the consumer in the long run. Stability and visibility into energy policy is important given the long-term nature of our business. Coordination is also key to building a common policy. For example, there are fewer connections of energy between Spain and France than there are between Portugal and Spain. Division into small regional markets in Europe prevents coordination on common policy. Boyden: How do EDP s sustainability initiatives help to provide solutions to some of these business challenges, while also improving social conditions in the locations in which the Company operates? Mexia: EDP is the biggest corporate foundation in Portugal and also has social initiatives in Spain and Brazil. We have been a worldwide leader for the last three years in the Dow Jones Sustainability Index. The Index tracks the performance of the world s leading companies in terms of economic, environmental and social criteria. In the last few years we have always been number one for the social criterion. As a global utility with more than eleven million clients, we have a big impact on people s lives and therefore need to understand how we interact with different communities. This is a key aspect of our involvement with all stakeholders, not only shareholders and clients, but everyone else. Boyden: Can you give us an example of one of EDP s initiatives? Mexia: We have been working in Kenya with the UNHCR, the UN s refugee agency, and the Clinton Global Initiative, where we have created the first refugee camp powered by renewable energy. This project has changed the lives of 7,000 people in a country where EDP does not have clients or shareholders. It represents a benchmark for other projects of its kind. The impact has been tremendous. Energy has to do with access to water, cooking, safety, schooling, hospitals, and even gender equality. We have increased female participation in schools from zero to 20 per cent by only charging solar lamps in the schools and decreased assaults on women by creating street lighting at night. Angola and Mozambique are already in execution but we are just scratching the surface of a global challenge - providing energy to 1.5 billion people who currently don t have access. At EDP, we want to lead by example. We are bringing together other stakeholders and suppliers of materials and also creating capabilities in terms of management of local facilities. Our actions not only make good business sense but also help change our internal culture as employees see what

5 p. 5 we are doing as a company. It is a key element to making us more open and efficient, with a shared global vision. Boyden: What do you consider to be the most important characteristics of a successful management team leading a global business? Mexia: A successful team should have a shared vision and values, but also be flexible enough to respond to very specific needs. As the slogan says, Think global and act local. Whenever you put different nationalities around the table, you bring new ways to solve a problem. Shared vision, shared values and an enormous appreciation of diversity and insight are all important. Boyden: How would you describe your leadership style? Mexia: I like to energise people, which is a Welch approach (former General Electric CEO Jack Welch). To do this, you need to listen, respect, lead by example and make sure you are professional and approachable. Boyden: How are you energising your team? Mexia: Typically to energise people I like to mix freedom with responsibility - letting my team strike the first ball and then adding accountability. You should share victories and celebrations and not spend a lot of time looking for scapegoats in defeat. In football, the players that score the goals are just as important as the coach. Today, we speak too much about the coach and not enough about players. I prefer to share the victory with the players. At EDP, we have systems of spot bonuses which compensate employees that excel in different areas. This is an unexpected reward in addition to the recognition of good performance. Employee satisfaction is important for productivity. If you believe in something then it s easier to feel happier at work. We allow people to allocate a set number of company hours to volunteer work. We also involve their families in their work lives as part of the overall EDP family. Boyden: What is your approach to management recruiting? Has the European crisis altered your priorities/ approach in this regard? Mexia: The importance of talent has not changed with the crisis. I like people with good lenses, wide angle and focus at the same time. In today s economy, we need people who are more global, bring a good mixture of skills and have a world view in business, art and science. If anything I am giving importance to people with new training such as philosophy or to people who know how to write and can teach others to be more open and attentive. Boyden: How can young professionals differentiate themselves in an increasingly globalized market for talent? Mexia: I am quoting Woody Allen when I say what makes people different is courage. Courage is the difference in making a good first impression. Young professionals should provide less automatic answers in interview situations. Typically courage, honesty and global expertise are all key.

6 p. 6 I always ask people what they are reading, what music they listen to and where they spent their last vacation. You can also tell a lot about a person from their shoes. Boyden: What are the best ways to motivate and nurture emerging leaders? Mexia: Giving young people access to good executive training programs, which they believe will improve their chances, is important. It is critical that our managers are given exposure to other international markets outside of Portugal. I also like to test the limits of my team - that they are courted by other companies and then willing to stay at EDP because they find freedom, support, responsibility and the opportunity to improve. Boyden: What are you passions outside the office? Mexia: I like music. I have always liked traveling to new cities and visiting new hotels and restaurants. Now that I m getting old, I also like nature more than I did ten years ago. In the next five years, I will eventually become a bird watcher. Companies play a decisive role in creating momentum where we can advance change and help create a society that depends less on political leadership and is also more open. The CEOs from top global companies that I met are truly incorporating global behaviour and sustainable focus into their vision, much more so than five or ten years ago. We also addressed the question of co-mingling businesses from different sectors, for example in energy and telecommunications. Whenever you mix technologies you create small revolutions and new approaches. We would like to thank Fernando Neves de Almeida of Boyden Portugal for making this edition of Boyden s Leadership Series possible. The views and opinions expressed here do not necessarily represent the views of Boyden; only those of Mr Mexia. For Fernando Neves de Almeida s insight into Recruiting for the Next Generation, please continue to the Boyden View section. Boyden: You recently attended the Clinton Global Initiative s 2012 Annual Meeting. What was your biggest takeaway from that meeting? Mexia: The biggest takeaway in these global meetings is that people are in a very different mood from the European mood. In fast-growing emerging economies we are talking about growth and new opportunities.

7 p. 7 The Boyden View- Recruiting for the Next Generation Fernando Neves de Almeida Fernando Neves de Almeida is Managing Director of Boyden Portugal What do you consider to be the most important trends in the European and global energy sectors today? Many aspects of the energy sector are confronted with great changes today. In the last few years, we have witnessed the emergence of new energy sources such as solar, wind and biofuels, which are increasingly likely to become competitive and create change. This holds true not only for business models, but also for questions related to geopolitics. What is having the greatest impact on executive hiring in energy? The paradigm shifts in the energy sector require leaders who are more open to change. They must also possess the creativity that is necessary to generate competitive advantages, whether it is at the commercial level or at the level of production and distribution. The opportunities that lie ahead in the next 20 years will be greater than those that have occurred over the last 100 years. sector, it is necessary to find people with experience in more competitive markets such as telecommunications, banking, etc. In the production sector, for example, we already see a major focus on candidates with greater experience in alternative energy. Has there been a pickup in cross-border recruitment into Europe or sending European management to other global regions? In a way yes, but it s no more in energy than in other sectors of the economy. We live in a global business world and human capital mobility is becoming more and more a reality. How has recruiting in energy shifted in recent times? As a result of greater competition in the areas of commercialisation within the