Rafael Miranda Robredo
1949–

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Chief executive officer, Endesa

Nationality: Spanish.

Born: 1949, in Burgos, Spain.

Education: Comillas University, BS, 1973; E.O.I., MS.

Career: Tudor, 1973–1984, group technical director; Campofrio, 1984–1987, vice chief executive officer; Endesa, 1987–1997, managing director; 1997–, chief executive officer.

Address: Endesa, Ribera de Loira 60, 28042 Madrid, Spain; http://www.endesa.es.

■ In 1997 Rafael Miranda Robredo became CEO of Spain's state-owned Empresa Nacional de Electricidad (Endesa), the country's largest electric company. An industrial engineer by training, Miranda joined Endesa in 1987 as managing director after stints with several other Spanish companies. After a decade as managing director, Miranda became CEO, leading Endesa through a period of government deregulation of the electricity sector in Spain. He implemented sweeping changes at the company and greatly increased its presence internationally.

EARLY CAREER

Miranda was born in Burgos, Spain. He graduated with a degree in industrial engineering from Comillas University in 1973. He later earned a master's degree in management science from the industrial organization institute E.O.I. Miranda's first job was with Tudor, a manufacturer of electrical batteries. At Tudor, Miranda served as group technical director. After more than a decade at Tudor, in 1984 he moved on to work at Campofrio, where he was responsible for the industrial division. In 1987 Miranda joined Endesa as managing director, a post he held until becoming CEO in 1997.

PRIVATIZATION AND LIBERALIZATION

With the deregulation of the electricity sector in Spain in 1998, Miranda had to make Endesa fit for competition. He told the Financial Times that "with liberalization, the business will change dramatically" (September 23, 1997). Before liberalization the government heavily regulated the electric industry in Spain and guaranteed large profits for companies such as Endesa. Top management rarely worried about marketing or customer satisfaction. Layoffs of workers were exceedingly rare.

With the 1998 deregulation, Endesa would have to face real competition for markets and customers for the first time. The government also planned to privatize the state-owned electric company. Furthermore, the government no longer guaranteed a minimum profit, and customers were free to select their electricity provider. To make matters worse for Miranda, the government reduced electricity rates between 1997 and 1999. Facing such circumstances, Miranda told the Wall Street Journal that "nothing will ever be the same. We are faced with the task of remaking Endesa in a competitive environment" (October 6, 1997).

In response to the government's liberalization of the electricity market in Spain, Miranda announced to the Financial Times that "corporate efficiency and shareholder value are now our twin priorities" (May 12, 1998). Miranda implemented a three-pronged strategy to deal with deregulation. First he sought diversification by moving beyond the electric industry. For example, Endesa purchased the Spanish telephone company Retevisón. Miranda also moved Endesa into other areas, such as water management, that held the promise of high growth. Second he planned international expansion, particularly into Latin America. Third he looked for ways to cut costs by eliminating jobs and reducing operational and maintenance costs. Thus between February and October 1997 Miranda cut some eight hundred jobs at Endesa, mostly through early retirements. In May 1998 he announced that he planned to cut the company's labor force of about 25,000 by 36 percent over the next four years in anticipation of privatization. In another cost-saving move, in 1998 Miranda streamlined Endesa's seven electricity generation distribution units into a single organization in order to eliminate duplicated costs.

Business analysts largely approved of Miranda's changes at Endesa, and most issued "buy" recommendations for the company's stock. Nicolás Fernández of Ibersecurities told the Wall Street Journal that "after 2000, diversification and cost-cutting should kick in to boost profits" (November 12, 1998). Merrill Lynch informed the same newspaper that "management actions to accelerate cost-cutting and share buybacks more than offset worries about Latin American devaluations and any retail-share overhang" (November 12, 1998). At the same time, some government officials worried that Miranda's moves would actually strengthen Endesa's dominance of the electricity market rather than open it up to competition as they had hoped.

LATIN AMERICAN EXPANSION

Like many Spanish firms during the 1990s, Endesa sought to expand its presence in Latin America. Miranda argued that Spanish companies had an advantage in Latin America, telling the Financial Times , "Latin Americans are different from the Spanish, but we come from the same roots. We understand the idiosyncrasies of the countries there" (September 23, 1997). Such an attitude was a reflection of Miranda's overall belief that foreign investment was a key component to maintaining Endesa's leadership in the Spanish electricity sector. Because the government planned to privatize the company, profitable foreign expansion was a major selling point to investors, and Latin America seemed a logical place for Miranda to start. While electricity demand in Spain was growing by about 2 percent every year, in Latin America demand was increasing by 8 percent annually. In late 1997 Endesa announced that it would even transfer its international division to Latin America. Miranda told the Financial Times , "That's where the assets are. The executives can be close to the problems and the opportunities" (September 23, 1997).

Endesa's most significant Latin American acquisition came in August 1997, when Miranda negotiated the purchase of 26 percent of Enersis, a Chilean electric company and the largest utility in Latin America. Endesa also led a consortium that acquired the two main electric companies in Colombia in September 1997. In addition, the company had a presence in Brazil, Argentina, and Peru.

However, economic problems in Latin America hurt Endesa's expansion into the region. Miranda largely downplayed the economic crises in Latin America, pointing to the fact that the region accounted for only 6 or 7 percent of Endesa's total profits. In addition, he argued that Latin American electric companies were largely unaffected by the economic woes. Despite such claims, Endesa was hurt by Enersis's large debt. This situation had a negative effect on Endesa's credit rating, led to a one-third drop in the company's share value, and forced a reduction of Miranda's investment plan.

Miranda faced another sort of problem in Chile. Spain attempted to extradite the former Chilean dictator Augusto Pinochet for human rights violations against Spanish citizens residing in Chile. However, many Chilean business leaders opposed Spanish interference in Chilean politics. Endesa and Miranda became scapegoats for the actions of Spain. Some former shareholders of Enersis even brought a criminal suit against Miranda. The Endesa CEO, however, brushed the suit aside as having no legal basis.

FAILED MERGER

In 2000 Miranda attempted to forge a merger between Endesa and Iberdrola, Spain's other leading electric company. Miranda argued that the merger of the two electric giants would create a strong Spanish power firm capable of competing with companies from the rest of Europe and the United States. He told the Financial Times that "the merger will allow us to be a global player" (October 20, 2000).

However, for the deal to succeed, Miranda would have to overcome Spain's antitrust laws. He claimed that the merger would aid rather than hinder competition in the Spanish power sector. He informed the Financial Times that "what we seek is a balance, or trade off between forging a stronger, more efficient Endesa as a result of the takeover, and injecting more competition into the domestic electricity market" (October 20, 2000). While the new company would initially control some 80 percent of the electricity market in Spain, it would eventually divest itself of some assets, allowing new players to compete. To this end Miranda proposed that thermal and hydroelectric plants be sold off in the form of three new companies by 2003. He believed that only this sort of sale would lead to approval of the merger by the government competition commission. He went so far as to admit that Endesa would even have to rid itself of some valuable assets, telling the Financial Times , "We won't be able to get rid of unwanted assets and keep the best because we simply won't be allowed to do so" (October 20, 2000). Furthermore, he hoped to divest through asset swaps with other European companies in order to gain access into such countries as France, Italy, and Germany.

In early 2001 Spain's competition commission delivered a confidential, nonbinding report on the merger. Then, citing the conditions imposed by the government on Endesa's takeover of Iberdrola, Miranda called off the merger. He argued that these conditions would have made it virtually impossible to create shareholder value for the new company. While he would have preferred the merger, Miranda announced a new strategy for Endesa that included continued cost-cutting, asset sales, and geographic expansion. He said that he planned to cut Endesa's costs by 35 percent. In addition, the company would sell assets in order to raise additional capital. This capital could then be used to expand Endesa's presence in Europe. Such European expansion marked a shift in focus for the company. In the late 1990s Endesa had largely focused on Latin America. However, deregulation and liberalization of electricity markets in European countries made expansion attractive. Miranda reported to the Wall Street Journal that "it's the moment to make the jump to Europe" (March 15, 2001). By expanding, Miranda hoped to follow the German and French models of creating large and powerful electric companies that were capable of growing and diversifying.

Several obstacles blocked Miranda's new plan. First a power crisis in California made European governments more cautious about opening up their energy markets. Second, at the European Union Summit in Stockholm, Sweden, in March 2001, France refused to agree to a concrete timetable for the full liberalization of its energy sector. Endesa was able to acquire 30 percent of SNET, a small French power group. However, Miranda met stiff resistance to his attempts to buy stakes in Dutch utility companies.

Slow European expansion and problems in Latin American markets led to economic problems for Miranda and Endesa. The company suffered double-digit declines in 2002 and in the first quarter of 2003. However, by the second quarter of 2003 Endesa was once again turning a profit. The turnaround was largely a result of the resolution of debt issues at Enersis in Chile. Miranda negotiated for months with banks before he finally succeeded in extending the maturity of Enersis's debt, which in turn restored investors' confidence in Endesa.

See also entries on Campofrio Alimentacion S.A. and ENDESA S.A. in International Directory of Company Histories .

sources for further information

Burns, Tom, "Endesa to Cut Labour Force by 36 Percent over Four Years," Financial Times , May 12, 1998.

——, "Endesa Looks for European Benefits," Financial Times , January 12, 2001.

Burns, Tom, and Leslie Crawford, "Power Merger Chiefs on the Defense," Financial Times , October 20, 2000.

"Endesa Builds Latin America Presence," Financial Times , September 23, 1997.

Schafer, Thilo, "Expansion Plans Facing New Obstacles," Financial Times , April 20, 2001.

Vitzhum, Carlta, "After Scrapping Merger, Endesa Charts a New Course for Growth," Wall Street Journal , March 15, 2001.

——, "Endesa Hangs Its Hopes on Restructuring: Spanish Utility Grapples with Latin Woes, Sliding Electric Rates," Wall Street Journal , November 12, 1998.

——, "Spain's Endesa Pitches $7 Billion Offering: Electric Utility, Facing Deregulation, Expands Overseas," Wall Street Journal , October 6, 1997.

—Ronald Young



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