President, chief executive officer, and chairman, FPL Energy
Born: In Pennsylvania.
Education: Lehigh University, bachelor's degree; Carnegie Mellon University, MBA.
Family: Married Sherry (maiden name unknown); children: three.
Career: U.S. Steel, management trainee; Mercer Management Consulting, consultant and head of strategic practice; U.S. Foodservice Corporation, chief financial officer; FPL Group, 1999, chief financial officer; 1999–2000, president, FPL Energy; 2001–2002, president and chief executive officer; 2002–, president, chief executive officer, and chairman.
Address: FPL Group, 700 Universe Boulevard, Juno Beach, Florida 33408; http://www.fplgroup.com.
■ After just six months as the chief financial officer (CFO) of FPL, in an industry in which he had no prior experience, Lewis Hay III was chosen president of FPL Group's subsidiary FPL Energy. Eighteen months later he was appointed president and chief executive officer (CEO) of the entire FPL Group, Florida's largest public-utility holding company. Hay's 10-year career as a management consultant with Mercer Management Consultants as well as his position as CFO of U.S. Foodservice, which he led through 20 successful acquisitions, placed him in good stead to take over the reins of FPL. Rather than being thought of as a consultant or food-service industry executive, he said: "Maybe a better way of characterizing me is as a strategist and possibly a change agent" ( Florida Trend , June 2003).
Although Hay studied electrical engineering at Lehigh University and was at the top of his class, he did not relish the thought of looking at blueprints all day and decided to take a management-trainee position with U.S. Steel. Later he took a position with a consulting firm that became known as Mercer Management Consultants, heading up strategic planning for the firm. Sara Lee was one company for which Hay consulted, and its president, John McKinnon, recalled him as being "just terribly bright and willing to work a monstrous amount of time to get things done" ( Florida Trend , June 2003). Hay, in turn, credited his experiences with the likes of McKinnon and other Fortune 500 company executives for the breadth and depth of knowledge he took into his future career.
Hay left Mercer and became CFO of U.S. Foodservice, into which he invested a considerable amount of his own money. The $1 billion company was spun off from Sara Lee in 1989 in a leveraged buyout, and Hay's management abilities significantly enhanced its performance. He built it into a $6-billion company headquartered in Columbia, Maryland, that supplied food services to restaurants and cafeterias. Through more than 20 acquisitions and by promoting internal growth, Hay headed up the process of taking the company public in 1994. He gained a reputation for his intelligence and abilities to successfully strategize and build revenue, and in 1999 he was recruited to FPL, whose CEO, James Broadhead, was also an engineer and energy outsider. Just six months after becoming CFO with the holding company, Hay became president of FPL's fast-growing independent-power business, FPL Energy. The unregulated, high-growth subsidiary operated power plants across the United States and was the nation's leader in wind-energy generation. It also constructed power plants in less-regulated states, including wind, solar, natural gas, and hydroelectric plants.
Broadhead was impressed with how quickly Hay improved the subsidiary's structure and the way in which his enthusiasism captured the spirit of those who worked for him. Under Hay's direction, EPL Energy outperformed its 20 to 30 percent annual growth target for megawatt output. At the same time Hay was functioning as interim CFO while the company searched to fill the vacant post. In 2001 Broadhead suddenly announced his retirement following his failed and extremely costly $16.8 billion merger attempt with Entergy Corporation and the furor surrounding $62 million in bonuses he shared with six other top executives in a package that was preapproved by shareholders. Broadhead recommended Hay as his successor, and the 13-member board unanimously approved the recommendation. Thus, less than two years into his career with the company, Hay was elected president and CEO of FPL; he became chairman as well the following year.
Broadhead spoke highly of Hay. "Lew has a drive to do better," he said. "He just wants to improve everything. He has the willingness to make difficult decisions. If it requires changing the company, if it means doing things differently … I just don't have the slightest doubt he will do it" ( Florida Trend , June 2003). Hay was praised for the discipline he employed during his first year with the company, which analysts said was evident in that the company suffered no scandals like those faced by Enron and other utilities in the same era. Even in light of the shattered confidence of analysts and investors alike that caused credit ratings and share prices of many other utility companies to plummet, FPL's ratings remained relatively stable.
In an article for South Florida Business Journal , John T. Fakler noted that Hay intended to improve the company's profits through the installation of generating capacity and improved operations. "It's very important in my mind that we continue to show earnings growth at FPL Energy in particular," Hay commented (June 22, 2001). Perhaps that is because he was already anticipating a possible deregulation of Florida's utility companies following an interim report by the governor's commission calling for such deregulation. In some states deregulation had caused local utilities to sell off power plants to buyers from around the nation, but Hay indicated that he would like to see FPL's deregulated utility, FPL Energy, take over Florida Power & Light's plants in the state. Fakler noted that Walter L. Revell, former secretary of the Florida Department of Transportation and chair of the Energy 2020 Study Commission, said he was looking forward to working with Hay. "I've been advised that he's a very strong executive, and know of several [FPL] board members who have expressed confidence in him," said Revell.
At the time, Hay was not seeking to make acquisitions, although he indicated he would consider adding nuclear power to Florida Power & Light's capacity if a good deal came along. "We will not rule out nuclear, though no new plants are being built in this country," he commented. "But there are a number of utilities that might make sense for our company—if we would get an acceptable return [on investment]" ( South Florida Business Journal , June 22, 2001). In 2002 Hay utilized his acquisition skills with the purchase of a controlling interest in Seabrook Station nuclear-power plant in New Hampshire, a plant that was beset with antinuclear protests. The deal led to a 20 percent increase in FPL's total wattage generation. While Hay was cautious to avoid another costly and failed merger attempt, he was optimistic about the possibility of well-planned deals for the future. His company had a substantial balance sheet, and with the prevalence of overcapacity in the utility marketplace, he anticipated many companies would be selling their assets at a discount. He felt FPL was well positioned to capitalize on the consolidation that the industry was beginning to experience. "While waiting," wrote Vogel, "he took a cleaver to new projects, postponing some and cancelling others, cutting FPL's commitment to buy gas turbines to seven from thirty-two. The company is no longer pursuing projects near Sacramento, Calif.; Everett, Wash.; and Bellingham, Mass." ( Florida Trends , June 2003).
Fakler noted that although Florida was not an optimum state for producing wind energy, Hay contended that wind energy would become an important power generator for them. "It always seems like there's a nice breeze [in Florida]," commented Hay. "We have sophisticated studies as to what makes a good prospect for wind generation." Although FPL Group owned the two biggest solar facilities in the world, both of which were bought out of bankruptcies for pennies on the dollar, Hay had no immediate intention to invest time and effort into them. "It does give us a lot of expertise about solar, and enough knowledge to tell us that we cannot get a satisfactory return." He commented that the previous 15 years had taught his company to "stick to its knitting and build its strengths," the major strength being operating power-generating stations. His strategy going forward was to build on those strengths while lowering costs, growing with the market, and developing FPL Energy. "It's an area where we still see lots of opportunities," he said ( South Florida Business Journal , June 22, 2001). He indicated that, regardless of the failed Entergy merger attempt, the company was in a strong position to consider future consolidations.
By 2004 FPL Group had a presence in 26 states, annual revenues upwards of $9 billion, and a national reputation as an efficient, high-quality, customer-driven organization. Florida Power & Light was the largest investor-owned electricity-utility company in Florida, serving the state with below-average rates, and FPL Energy's business was growing rapidly throughout the country.
See also entry on FPL Group, Inc. in International Directory of Company Histories .
Fakler, John T., "New FPL Energizer: CEO's Goal to Keep Going and Going," South Florida Business Journal , June 22, 2001.
Vogel, Mile, "Hay's Way," Florida Trend , June 2003, p. 86.
—Marie L. Thompson