President and chief executive officer, RWE
Born: July 26, 1948, in Netherlands.
Education: University of Leiden, degree in physical chemistry, 1971.
Career: Shell, 1971–1996, petroleum engineer; various positions in exploration and production; senior petroleum engineer, Turkey and Norway; technical manager, Norske Shell; director, corporate development, Shell Internationale Petroleum Maatschappij, The Hague; manager, Offshore Business Division, Nederlandse Aardolie Maatschappij; area coordinator, numerous Latin American countries, Shell International Petroleum Company, London; 1996–1998, regional business director, Middle East and Africa, Shell International Exploration and Production, The Hague; 1998–1999, general manager, Nederlandse Aardolie Maatschappij; 1999–2002, member, board of management, Shell Nederland; group managing director, Royal Dutch/Shell Group; RWE, 2003–, president and chief executive officer.
Address: RWE, Opernplatz 1, Essen, 45128 Germany; http://www.rwe.com/en.
■ When Harry J. M. Roels was named president and CEO of RWE in 2003, he took charge of Germany's second-largest utility company, which was underperforming and burdened with debt. His predecessor had gone through a wide-ranging acquisition spree to build a utility company that was involved in electricity, water, recycling and waste management, coal mining, petroleum, natural gas, and related products. Overall, the acquisitions cost approximately $30 billion. According to market analysts, Roels conducted a conservative revolution, cleaning up the utility with efficiency and surprising analysts and stockholders with better-than-expected debt reduction, cost cuts, and dividend growth.
Roels was born in the Netherlands and graduated with a degree in physical chemistry from the University of Leiden in 1971. He joined Shell, now known as Royal Dutch/Shell Group, that same year. He began his career as a petroleum engineer and went on to hold various positions in exploration and production before becoming a senior engineer for petroleum in Turkey and then in Norway. While working in Norway he was promoted to technical manager of Norske Shell. Following this appointment, he became director of corporate development for Shell Internationale Petroleum Maatschappij in The Hague.
Roels's next position was head of the Offshore Business Division of Nederlandse Aardolie Maatschappij, a joint venture between Shell and Exxon. Later he was promoted to area coordinator for several Latin American countries at Shell International Petroleum Company, London. He returned to The Hague in 1996 as regional business director for the Middle East and Africa, working for Shell International Exploration and Production. Roels then took on the responsibilities of serving as general manager of Nederlandse Aardolie Maatschappij and as managing director of Shell Nederland. In 1999 he became a managing director at Royal Dutch Petroleum Company and a member of the board of management of the Royal Dutch/Shell Group.
In January 2002 Roels abruptly announced his retirement from Royal Dutch/Shell after 30 years with the company and just six years before his retirement. He said that he was quitting for personal reasons, and the company offered no further explanation. As reported in Power Economics , however, some industry insiders speculated that Roels quit because he had been passed over for the position of chairman.
With over 30 years of international experience and expertise in the energy field, Roels joined RWE, which was limping along after a mammoth spending spree that included purchasing Thames Water and Innogy of Great Britain and the $4.6 billion acquisition of American Water Works, the largest water company in the United States. Laboring under EUR 25 billion of debt and trying to work with an outdated structure of 13 almost totally independent divisions, the company turned to Roels for leadership and appointed him as president and CEO effective February 1, 2003.
As reported by the Sunday Times in London, some analysts believed that Roels's task as the new CEO of the vast utility business should have sent prospective candidates for the job running in the opposite direction. In April 2003 the company reported a 22 percent drop in full-year net profit, largely because of acquisitions and ongoing weak performances from its noncore divisions, including civil-engineering contractor Hochtief and Heidelberger Druck. But Roels said he relished the challenge, and he set out to overhaul the company. He told the Sunday Times , "I never thought that the job would be easy. RWE had 13 businesses, and the criticism was that we had many people responsible for one customer" (September 28, 2003).
One of Roels's first moves was to replace the company's multiple business units with seven divisions. For example, the company's energy-trading businesses had been spread throughout different parts of RWE, but Roels organized them into one distinct operation. He also emphasized that all divisions and companies had to take the RWE brand name; Thames Water, for example, was renamed RWE Thames. Roels said that the idea was to give RWE customers a single point of contact, while marketing could be carried out on a regional basis. Roels also noted that under his program the global workforce of 138,777 could eventually be cut by as many as ten thousand employees.
Roels began to reorganize the company's investments and expectations as well. For example, he reduced RWE's investment in the American coal business Consol and let the company's environmental-services business, RWE Umwelt, know that he expected improved returns or the business would be changed radically and perhaps even cut loose. By January 2004 analysts were commending Roels for how he had, as the Financial Times noted, "quietly concentrated on cleaning up its existing businesses" (January 7, 2004).
Nevertheless, Roels and RWE continued to pay for past acquisition excesses, which often had hurt the company's overall value. Goodwill charges and interest payments on debt were expected to depress the company's earnings for many years. However, as noted in the Financial Times , "the more than 20 percent rise in operating profits from its core businesses suggests that Mr. Roels has made a decent start—although last year's excellent performance in German electricity might prove difficult to repeat" (January 7, 2004).
Within his first year at RWE, Roels had outperformed analysts' expectations in debt reduction, cost cutting, dividend growth, and integrating the company's electricity, gas, and water businesses into a single entity. Although some analysts still questioned RWE's multiutility approach, they commended Roels for focusing on the company's prime utility businesses by disposing of many of its noncore assets. From November 2003 through February 2004 the company's share price gained 40 percent. The Financial Times noted that Roels went from "value destroyer to crowd pleaser" (February 27, 2004).
According to a February 2004 article in the Financial Times , analysts called Roels a quiet revolutionary who cleaned up RWE with great efficiency. They also noted that his lack of political ties in Germany's industrial heartland helped him; owing no allegiance to any political group or constituency, he was better able to fight off initial resistance to his plans from municipal shareholders.
Roels also focused on changing the corporate culture at RWE. He showed that he had the leadership skills to integrate the company's different cultures and create diverse management teams in the process. Although Germans dominated RWE's top jobs, Roels instituted a new management committee that included non-Germans working alongside top German managers for the first time. He also implemented new programs designed to ferret out employees who showed talent for future leadership. Analysts noted that Roels's management changes were good moves. Bill Alexander, who headed RWE Thames, said in the Sunday Times , "If you look around a room of RWE managers today, they are much younger and more international in their outlook than they used to be" (September 28, 2003).
Roels managed by setting objectives both for the businesses in general and for individuals and management teams. For example, he initiated a scorecard approach that was used throughout the company to rate how the staff was achieving its goals and potential. In terms of his business divisions, Roels noted in the Sunday Times , "Every division has established targets, and one goal we want to achieve is that every unit's returns are above its cost of capital" (September 28, 2003).
Roels reduced RWE's debt to EUR 17.8 billion by the end of 2003, and he was praised by analysts for being ahead of his schedule for cutting the debt, which he first predicted would inch below 20 billion by 2005. Roels continued to cut costs by offloading the company's units that could not be linked with its electricity and water activities. These moves included the sale of RWE Umwelt and approximately half of its stake in the German printing-machinery maker Heidelberger Druckmaschinen. By the end of the first quarter of 2004 RWE, which had become Europe's third-largest utility, reported a quarterly profit that had more than doubled, with net income rising to EUR 925 million, up from EUR 432 million. In addition, operating profit advanced 12 percent to EUR 1.97 billion, beating analysts' forecasts despite a substantial fall in profits at its two British subsidiaries, RWE Innogy and RWE Thames. During the first quarter, RWE shares had the largest percentage gain on the Dow Jones index of 50 European stocks. Market analyst Felix Schleicher was quoted as saying, "RWE has delivered what the market had hoped for" ( Bloomberg.com , May 11, 2004).
See also entries on Royal Dutch/Shell Group and RWE Group in International Directory of Company Histories .
Betts, Paul, "A Very Conservative Revolution at RWE," Financial Times , February 26, 2004.
"Electronics Firms Rue End of Glory Days," Sunday Times (London), September 28, 2003.
"Royal Dutch/Shell Group (People on the Move)," Power Economics , February 2002, p. 3.
"RWE 1st-Quarter Profit Doubles on Asset Sales, Prices," Bloomberg.com , May 11, 2004, http://quote.bloomberg.com/apps/news?pid=10000085&sid=aQFRsRAHEL6M&refer=europe .
"RWE the Lex Column," Financial Times , January 7, 2004.
"RWE the Lex Column," Financial Times , February 27, 2004.