High Energy

0

Wherever Ted Craver Jr. shows up, he finds major upheaval. In the early 1980s, as he was trying to build a career in international banking, he took a job at Bankers Trust of New York and ended up in Hong Kong just as panic was mounting amid plans for the end of British rule. When he joined First Interstate Bancorp, deregulation of the U.S. banking industry was leading to transformation of the world of finance. As Wells Fargo was battling to take over First Interstate, Craver left to join Edison. That’s when the state’s electric utility industry was thrust into deregulation. As chief financial officer during the energy crisis, Craver and his team desperately tried to keep Edison from bankruptcy. Now, as chief executive of Edison International – one of the nation’s largest utilities with revenue of $13 billion and 18,000 employees worldwide – Craver faces a new challenge: weaning the utility off of fossil fuels and transitioning into the era of renewable energy sources. Craver met with Business Journal at Edison headquarters in Rosemead to discuss how he handled the challenges of his career, and his enthusiasm for hiking, marathons and triathlons.

Question: What are your goals now as chief executive of Edison International?

Answer: First, we have to change our business model. The future now is all about renewable energy. We have to look at new technology and focus on the public policy.

Q: What challenges do you face?

A: The renewable energy resources tend to be in remote locations. Here in California, we need to build something like 10 major transmission lines to get the energy from where it’s generated to where it’s consumed. Building a transmission line takes seven to 10 years, so if we want to have any hope of meeting our renewable energy targets, pacing these transmission lines is crucial. We have to make sure the public policy people understand the disconnect here and the need for expedited siting and permitting.

Q: What’s your other goal?

A: Inside the company, we have to do a first-class job of developing the next generation of leaders. We’re facing a little bit of a demographic age bubble. A lot of the current senior management is close to retirement age and we need to make sure that the people we have coming up through the ranks to replace them are up to the task.

Q: As the head of the region’s largest utility, you have a unique perspective on the local economy. What’s your sense of the state of the local economy?

A: As a utility, we’re a coincident indicator of economic activity. Over the last few months, we haven’t seen that much of a change, certainly nothing to suggest that we would continue to sink as we did early in the year. We seem to have bottomed out.

Q: How did you get started running marathons?

A: I ran cross-country in high school. I always enjoyed it, though I was only moderately good. Also, when I was in my late 30s and early 40s, I got very interested in improving my health; I quit smoking and got interested in running because it was a form of exercise I could do anywhere. I started with some 10ks. I ran my first marathon in 2001 here in Los Angeles.

Q: What was that like?

A: It really was fun to run my first marathon in L.A. The course takes you through all the neighborhoods in my city; it’s almost a celebration of Los Angeles. It’s really quite fun. At one point, around mile 20, I did feel pretty run down. My wife, one of my daughters and my father were right there by the Metro station giving me encouragement.

Q: And you’ve kept it up, haven’t you?

A: The big thing in marathons is qualifying for the Boston Marathon, which I did and I ran the Boston Marathon in 2004. I also started competing in triathlons and I actually won my age group in the L.A. Triathlon in 2007. I’ve really enjoyed running triathlons, especially with my family involved. In one race, I did the swim, my son did the bike and my daughter did the running.

Q: What other activities do you do?

A: I also enjoy backpacking in the Sierra Nevada Mountains. Back in the mid-1990s when I was at First Interstate, I took a monthlong backpacking trip with my son, hiking the John Muir Trail; my son turned 17 during that trip. I’ve also got some friends who climb some of the mountains; I and my kids sometimes go with them. We try to climb one peak in the Sierras each year. I’ve climbed Mount Whitney twice. I also have a small vegetable and herb garden at home; I spend time gardening, but not as much as I used to.

Q: What’s your typical day like?

A: I travel so much that I don’t really have many “typical days,” as you might call them. I’ve been traveling about half the time since I’ve been in this post. I travel to see our employees in the state, around the country and around the world. I’ve traveled frequently to Washington and visited with investors and vendors. I want to make sure that I’m connecting with all the stakeholders. When I’m here, I get in early to get in a workout and then it’s off to meetings. My days seem to be wall-to-wall meetings. I typically wrap up by about 7 p.m.

Q: When you were named CEO of Edison, you became the leader of a Fortune 200 company; was that something you ever dreamed of when you were growing up?

A: My first reaction when John Bryson told me they had selected me was, “Wow! This is amazing!” The second reaction, which followed very quickly, was how much of a responsibility this is. Over time, I sensed this is a real opportunity to do some important things for the company. When I was growing up, I didn’t really think this was something I would be doing. I was more interested in the outdoors or traveling abroad. This was something that just evolved along the way.

Q: You’ve used the phrase “aggressive creativity” to describe how you’ve approached some of your positions. What does that mean? What’s an example?

A: This was a term that I put together when I was heading up Mission Energy Group, the Edison division that builds power-generating facilities. I was trying to get people at Mission thinking about addressing the difficulties with the company’s assets and growing the renewables business. The phrase captures a lot of different concepts. “Aggressive” means a sense of urgency, pushing, of not taking “no” for an answer. “Creativity” means out-of-the-box thinking, innovative thinking. All of this was kid of fitting together: You attack a problem with a sense of urgency and come up with out-of-the-box solutions. I like to think of this as a synonym for being an entrepreneur.

Q: What brought you from Texas to Los Angeles?

A: My father was an antitrust attorney in San Antonio. He took a job at Litton Industries, so we moved out here to California.

Q: Did you plan on a career in banking?

A: I majored in economics and international affairs at USC. With those degrees, there were really two career paths at that time: banking or the Foreign Service. What I really wanted to do was help the development of what were at the time called the “lesser developed countries.”

Q: But you didn’t take that path.

A: I ended up getting a dream job very quickly, even before I graduated, in the economic risk department at Security Pacific Bank. My focus was on international markets, especially the capital markets and foreign exchanges. I finished my senior year at USC by arranging my classes around my work schedule. Then I got my M.B.A. at night while I was on the job.

Q: You then moved over to Bankers Trust of New York. What was the highlight there for you?

A: I was working in the capital markets division. I went to Hong Kong on what was supposed to be a temporary assignment but which turned into two years.

Q: What was that like?

A: On the positive side, it turned out to be a very exciting time to be in Hong Kong. This was the early 1980s and former British Prime Minister Margaret Thatcher was just starting talks with the Chinese government over ending the lease for Hong Kong. People in Hong Kong were terrified about what would happen: Would the Chinese come in and take everything over and kick everyone out? There was a huge run on the currency, and whenever something like that happens, it’s very challenging to be in the international banking business.

Q: And the negative side?

A: My family was back here in California. I had a wife and three young children and for most of those two years, I had a telephone relationship with them. That was very tough.

Q: You returned to Los Angeles with Bankers Trust, and your connections there led you to First Interstate, where you quickly became chief financial officer. What happened there?

A: At that time, deregulation of the banking industry was in full swing and banks were beginning to move into nonbank businesses like investment banking.

Q: What did this mean for you in your CFO position?

A: For First Interstate, it meant new entrants and competitors and a lot of uncertainty. I had to apply discipline to help the bank get through this. This was a key experience for me in my management career, since it was similar to what I later had to contend with at Edison.

Q: Was deregulation your greatest challenge at First Interstate?

A: At first, yes. But then, First Interstate purchased several other banks, and part of my job was to help integrate the acquired banks into the First Interstate operations. And then, Wells Fargo did its hostile takeover, and that put a tremendous amount of stress and uncertainty over everything.

Q: Was the takeover behind your decision to move to Edison?

A: Partly; that was in the background. The immediate reason was my relationship with John Bryson, the Edison CEO who at the time was on the board of First Interstate. John had asked me as CFO of the bank to prepare reports for him on the hostile takeover. As the takeover looked imminent, John asked me if I wanted to stay in L.A. and, if so, would I consider going to Edison. There was an opening at the time for the post of treasurer. I said yes.

Q: This was your first job outside the banking industry. Did you hesitate?

A: No, I didn’t. Coincidentally, the day I accepted the job was Sept. 3, 1996, the same day that then-Gov. Pete Wilson signed AB 1890, the utility deregulation bill. My first major task was to head up the rate reduction unit that the deregulation bill set up and then to figure out how to divest Edison’s excess generation assets. It seems that dealing with the fallout of deregulation of industries and institutions that I join has been a theme throughout my life.

Q: Just a few months after you became CFO of Edison, deregulation imploded the state’s electricity system. What was that like?

A: Yes, June of 2000 was the first month that the cost of procuring energy was higher than the frozen rate we were allowed to charge our customers for using that energy. That was not a good sign and it only got worse from there. By late summer, we were buying energy at 28 cents per kilowatt hour and selling it at 6 cents. We were bleeding $1 billion a month; we were bleeding through our credit lines. Obviously, that couldn’t continue very long.

Q: What did you do?

A: In September, we met off site to talk about the future of the company. We decided to negotiate with Gov. Gray Davis and the Legislature to try to change the law. That didn’t work, so we ultimately had to negotiate a rescue package with the Public Utilities Commission.

Q: What lessons did you learn from this?

A: There’s the old adage: Things are what they are and will be what they will be, so why should we deceive ourselves? The key in a situation like this is early recognition of the problem and being steely-eyed in how you deal with the problem. The earlier you deal with it, the better off you’ll be.

Q: Any other lessons?

A: Yes. In a funny way, you can accomplish more in a crisis than in steady-state periods. You don’t ever want to squander one of those opportunities to effect change and make a difference.

Q: The rescue package didn’t entirely solve Edison’s problems: Edison Mission Group had a serious cash problem when you became CFO.

A: Yes, it was sort of delayed reaction to the deregulation fiasco. With all the problems that the Edison utility was facing, people were concerned that it would take the whole company down, including the unregulated Edison Mission Group. Suddenly, no one wanted to lend to Mission, so our power plant construction halted. What was worse, we had $2 billion in debt coming due and couldn’t refinance it. We were staring at bankruptcy in 2003.

Q: So, what did you do?

A: The decision was to sell Mission’s international assets and use the proceeds to allow us to get a bridge loan so the company could stay afloat. Then I became chief executive of Mission and I had to make the restructured business work. I and my team decided to change strategy completely and focus on renewable energy projects, especially wind power. We figured this was where the future lay.

Q: What’s the best piece of advice you’ve received?

A: My grandfather, who was a chemical engineer, said you can always learn something from everybody. You just have to watch them and learn the tricks of what they do. Everybody has something to offer.

Q: Any other advice?

A: Yes, and rather simple, too. This was from one of the Edison board members right when I accepted the job as chief executive: “Don’t sweat it, just be yourself.”

Theodore ‘Ted’ Craver Jr.

Title: Chairman, Chief Executive and President

Company: Edison International

Born: 1951; San Antonio

Education: Bachelor’s in economics and international affairs, USC; M.B.A., USC

Career Turning Point: Leaving First Interstate Bancorp to join Edison

Most Influential People: Harold Meyerman, former president and chief

executive of First Interstate Bank; John Bryson, former chairman and chief executive of Edison International

Personal: Lives in Pacific Palisades with wife Marian, who is chairwoman of an

Arizona boarding school; they have three grown children

Activities: Runs marathons and triathlons

Previous article Jobless Rate Rises Again
Next article CIM Group to Form Solar Energy Company
Howard Fine
Howard Fine is a 23-year veteran of the Los Angeles Business Journal. He covers stories pertaining to healthcare, biomedicine, energy, engineering, construction, and infrastructure. He has won several awards, including Best Body of Work for a single reporter from the Alliance of Area Business Publishers and Distinguished Journalist of the Year from the Society of Professional Journalists.

No posts to display