A Remarkable Corporate Turnaround: The “Take-Private” of Talen Energy with CEO Ralph Alexander and CFO Alex Hernandez

Leadership Lyceum: A CEO's Virtual Mentor

A Remarkable Corporate Turnaround:

The “Take-Private” of Talen Energy with CEO Ralph Alexander and CFO Alex Hernandez

A CEO’s Virtual Mentor® Episode 22

Welcome to Episode 22 and May 2019, which marks Lyceum’s three-year anniversary of publishing A CEO's Virtual Mentor®.

Today I'm joined by Talen Energy’s CEO, Ralph Alexander, and CFO, Alex Hernandez. We'll be discussing the remarkable turnaround of Talen Energy that Ralph and Alex have been leading.

Talen Energy in its privately-held form today is unique and its evolution to its current state illustrates the range of leadership approaches available for a company in a “take-private” setting. There's a definite before, middle, and beyond to the take private transformation. Talen is still in the early stage of the “beyond” era. The red-letter date of the take-private was December 6th, 2016. And to set context, we have to back up a little bit. About a year and a half before the take-private, Talen Energy was formed when Pennsylvania Power & Light, or PPL, spun off their power generation assets and combined them with those belonging to private equity group Riverstone. The company was listed on the New York Stock Exchange on June 1st, 2015, with initial ownership being 65% PPL and 35% Riverstone.

That company, which Ralph and Alex refer to as “Talen 1.0,” had about 15,000 megawatts of capacity split across fuel sources, with about 43% from natural gas, 40% from coal, and 15% from nuclear (from the company’s one nuclear facility, Susquehanna). Those assets sold into two major wholesale markets in ERCOT and PJM, plus a small amount in New England. Talen generated a proforma of $4.3 billion in 2014 revenues.

On December 6th, 2016, Riverstone purchased the remaining 65% of Talen, making Talen a privately-held company, and appointed Ralph and Alex to lead the company. They faced the massive task of sorting out what the company had and planning what they would do with it.

Our interview covers a lot of ground and addresses an array of business leadership questions, including:

• What are the expectations and requirements that a private equity owner has for a company and a management team?
• What historical decisions prior to new ownership of a company led to lackluster performance?
• What were the strategic views embedded in the private equity investor’s thesis about a company?
• Why invest more deeply in a company that is suffering from lackluster performance? Can new management and their decisions have a marked impact?
• How does a new leader ferry the costs out of and efficiencies into a business after acquisition?
• Does private ownership provide benefits for a company?
• What does a productive, strategic partnership between a CEO and a CFO look like?
• What is the role of a “strategic” CFO?
• Is good leadership universal? Is a management team and its profitable approach transportable to other sectors?

We would like to express our special thanks to the clients of Lyceum Leadership Consulting that enable us to bring you this podcast.

Thanks for listening. We can’t improve without your feedback – write us through our website www.LeadershipLyceum.com and subscribe wherever you listen to your podcasts.

Informative and Helpful Links

Talen Energy's Website - https://www.talenenergy.com/

Riverstone's Website - https://www.riverstonellc.com/

Economic dispatch of power generation resources explained by the EIA - https://www.eia.gov/todayinenergy/detail.php?id=7590

Program Guide Episode 22

A Remarkable Corporate Turnaround:

The “Take-Private” of Talen Energy with CEO Ralph Alexander and CFO Alex Hernandez

0:00 Introduction to Talen Energy and CEO Ralph Alexander and CFO Alex Hernandez

4:00 Expectations and requirements that Riverstone had for the company and the management team.

7:11 Historical decisions prior to new ownership of the company that led to lackluster performance.

9:17 Break 1

9:35 Why invest more deeply in a company that is suffering from lackluster performance? Can new management and their decisions have a marked impact?

12:32 How does a leader lead the costs out and the efficiencies into the business through others?

20:11 Break 2

20:30 Does private ownership provide benefits for a company?

26:04 Break 3

26:32 What does a productive, strategic partnership between a CEO and a CFO look like?

30:24 What is the role of a “strategic” CFO?

34:29 Break 4

34:49 What is the next chapter for Talen Energy?

39:00 Break 5

39:24 Is good leadership universal? Is a management team and its approach profitability transportable to other sectors?

44:52 Closing comments and coming attractions

Biographies of Guests

Mr. Ralph Alexander

Ralph Alexander was appointed President and CEO of Talen Energy on December 6, 2016. He was previously a Partner with Riverstone Holdings, LLC.

For nearly 25 years, Mr. Alexander served in various positions with subsidiaries and affiliates of BP plc, one of the world's largest oil and gas companies. From June 2004 until December 2006, he served as Chief Executive Officer of Innovene, BP's $20 billion olefins and derivatives subsidiary.

From 2001 until June 2004, he served as Chief Executive Officer of BP's Gas, Power and Renewables, and Solar segment and was a member of the BP Group Executive Committee. Prior to that, Mr. Alexander served as a Group Vice President in BP's Exploration and Production segment and BP's Refinery and Marketing segment. He held responsibilities for various regions of the world, including North America, Russia, the Caspian, Africa, and Latin America. Prior to these positions, Mr. Alexander held various positions in the upstream, downstream, and finance groups of BP.

Mr. Alexander currently serves on the boards of Enviva Partners, LP, Talen Energy Corporation, and CHI St. Luke’s Health. He has previously served on the boards of Foster Wheeler, Stein Mart, Inc., Amyris, and Anglo-American plc. In addition, Mr. Alexander is currently Chairman Emeritus of the Board of NYU School of Engineering and a Trustee for New York University.

He received an M.S. in Nuclear Engineering from Brooklyn Polytech (now NYU School of Engineering - Polytechnic) and holds an M.S. in Management Science from Stanford University.

Mr. Alejandro (Alex) Hernandez

Alex Hernandez was appointed Chief Financial Officer (CFO) of Talen Energy on December 6, 2016. Before that appointment, Mr. Hernandez was a Senior Advisor at Riverstone Holdings, LLC, where he focused on the power sector and on the acquisition of Talen Energy.

​Prior to joining Riverstone, Mr. Hernandez was CFO of Terraform Power until November 2015. Mr. Hernandez was formerly Managing Director in the Investment Banking Division of Goldman Sachs, with a primary focus on coverage of North American companies in the merchant power, utilities, and renewable energy sectors, providing strategic and capital markets advice to management teams and boards of directors.

​Mr. Hernandez currently serves as a Roundtable member of the James A. Baker III Institute for Public Policy at Rice University.

Mr. Hernandez received a B.A. in Economics from Rice University, a B.S.C. from the London School of Economics, and an MBA from Columbia University.

Your host Thomas B. Linquist is the Founder and Managing Partner of Lyceum Leadership Consulting and Lyceum Leadership Productions. Over his 14 years in management and leadership consulting he has served a wide array of industrial clients. This includes leadership assessment and search for chief executive officers, chief financial officers, chief operating officers and boards of directors. He holds an MBA from the University of Chicago and over his 28-year career has served in a variety of roles: as an engineer with Shell Oil Company, a banker with ABN AMRO Bank, and as treasurer was the youngest corporate officer in the 150+ year history at Peoples Energy Company in Chicago. He is an expert on hiring and promotion decisions and leadership development. Over the course of his search career, he has interviewed thousands of leaders.

Thanks for listening. We can’t improve without your feedback – write us through our website www.LeadershipLyceum.com and subscribe wherever you listen to your podcasts.

Please rate us and spread the word among your fellow executives and board colleagues.

Program Disclaimer

The only purpose of the podcast is to educate, inform and entertain. The information shared is based on the collection of experiences of each of the guests interviewed and should not be considered or substituted for professional advice. Guests who speak in this podcast express their own opinions, experience and conclusions, and neither The Leadership Lyceum LLC nor any company providing financial support endorses or opposes any particular content, recommendation or methodology discussed in this podcast.

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This podcast Leadership Lyceum: A CEO’s Virtual Mentor has been a production of The Leadership Lyceum LLC. Copyright 2019. All rights reserved.