“ We continue to be impressed with Southern Company's ability to deliver solid, relatively low risk EPS (earnings per share) growth year after year, ” wrote Timothy Winter, an analyst for A. G. Edwards & Co., in December 2006.
Bet that news made David Ratcliffe's day. Ratcliffe has been the president and CEO of Southern Company since 2004 when he assumed the top position after serving as president and CEO of Georgia Power from 1999 to 2004. Under his leadership, the company has continued to do its job – produce energy for a growing Southeast, yield shareholder value, nurture a strong stock price and be an admirable civic citizen.
Not bad for someone who didn’t even want to enter the corporate world. Growing up, Ratcliffe's father was a scientist with the state's Coastal Plains Experiment State while his mother was a homemaker. He was raised in the town of Tifton, Ga., and absorbed and embraced the small-town values of church and home. “ I would consider myself a simple man with a strong Christian faith that drives my behavior, ” he says. “ I try to understand what drives and motivates people and to learn from and emulate the good people who have gone before me. ”
While his father was a Phi Beta Kappa graduate with a master's degree from the University of Georgia, Ratcliffe didn’t exactly burn up the academic halls at Valdosta State University. “ I had a lot of fun my first two years, and then I decided I’d try to make good grades, ” he recalls. “ Most of the other folks in biology were trying to get into veterinarian or medical school. I made good grades junior and senior years, but by that time, to get into medical school I would have had to go back and start all over. ”
So, a biology teacher was created.
He joined Georgia Power in 1971 when he asked a friend at a wedding if there were any jobs at the company. There were. He worked on the environmental side of the utility, an experience that surely has come in handy today as the company balances providing energy and getting new sources versus environmental issues. His first job was to make sure the power plants filed the necessary permits and complied with regulatory requirements.
From that point on, memories of Valdosta State University were left in the dust. He served as Southern's vice president of fuel services, president and CEO of Mississippi Power, Southern's senior vice president of external affairs and Georgia Power's chief executive officer, the latter of which was his title before moving over to the top job at Southern Company.
Ratcliffe, an unassuming executive who, up until a few years ago, still cut the grass at his Buckhead home, faces a myriad of challenges. Simply put, Ratcliffe and Southern Company, as well as its four subsidiaries (Georgia Power, Mississippi Power, Gulf Power and Alabama Power) have to generate energy for one of the fasting-growing regions in the country and do it in a cost-effective, yet environmentally sound, way.
Ratcliffe has seen these types of challenges before. “ There are some similarities between our business environment today and what we were experiencing back then when I first came to work at Georgia Power in March 1971, ” he says. “ The company was navigating through a period of rapid growth, trying to meet new generation and transmission needs and complying with new environmental requirements. The pressure of rising costs created severe economic pressure at the same time that the need for rate increases created significant regulatory backlash. ”
“ Today, there is a forecasted need for more than 10,000 additional megawatts of generating capacity over the next 15 years as the population in the Southeast continues to grow and we must add the necessary transmission and distribution lines to meet that demand, ” says Ratcliffe. “ We’v e got to meet the needs of our customers with smart economic and environmental choices, and we have to plan 10-15 years in the future, because power plants and transmission lines aren’t built in a day. ”
Acknowledging the elephant in any CEO's office, Ratcliffe admits “ there are obvious financial challenges to meeting this demand. We are working to install $3.1 billion in environmental upgrades at our plants over the next three years. ”
Members of his board of directors are confident of his leadership skills, though. “ David is engaging and he epitomizes the ‘Southern’ style, which is unquestionable trust, superior performance and total commitment, ” says William G. Smith, Jr., president and CEO of Capital City Bank Group in Tallahassee, Fla. “ He focuses on the long-term which, when you’re thinking about the utility business, is a long business cycle. David focuses on the long-term while providing short-term results He makes the hard decisions, but with a strong moral compass. ”
Jerry St. Pe, retired executive vice president of Litton Industries of Pascagoula, Miss., and Southern Company board member since 1995, says that Ratcliffe is “ ethical, compassionate, humble, extremely effective in engaging people and has a style that, while aggressive, is visionary yet practical. ” “ He is running a business that is thoroughly regulated, responsible to the environment, growing great people and providing value to shareholders. ”
Ratcliffe himself says his leadership style is “ build on relationships that are based on trust, openness and accountability. ” “ I believe it's important to create an environment of candor and feedback, ” he says. Ratcliffe also thinks it's important to “ always maintain the highest levels of integrity, treat everyone like you want to be treated, value the differences of the people in your organization, encourage candor and feedback, be accountable and never stop learning. ”
“ WE’VE GOT TO MEET THE NEEDS OF OUR CUSTOMERS WITH SMART ECONOMIC AND ENVIRONMENTAL CHOICES, AND WE HAVE TO PLAN 10-15 YEARS IN THE FUTURE, BECAUSE POWER PLANTS AND TRANSMISSION LINES AREN’T BUILT IN A DAY. ”
A man of style
Ratcliffe's style has helped him navigate through tough waters. When he came on board, Southern Company had revenues of $11.9 billion with EPS of $2.07. Net income was $1.53 billion. Today, the company has revenues of $13.55 billion; net income of $1.59 billion and EPS of $2.14. In its third quarter 2006 results statement, the company stood firm on its 2007 EPS of $2.30.
One of the largest producers of energy in the Atlanta-based organization, Southern Company has more than 41,000 megawatts of electric generating capacity in the Southeast. It covers more than 120,000 square miles of territory, including the hurricane-ravished Gulf Coast region.
“ We regard Southern Co. as a premier company in the traditional electric utility universe with a growing service territory, good regulatory environment, solid balance sheet and low risk strategy and therefore deserving of a premium valuation to its peers, ” wrote analyst Timothy Winter.
Others agree. Ronald Barone, an analyst with UBS, likes what he sees. “ We believe management could exceed its goal of $300 MM net income by the end of 2007, ” he wrote in October 2006. “ Strong customer and usage growth in the Southeast, significant rate base additions over the next few years and consistent earnings growth in competitive generation underpin the stable growth paradigm at Southern Company. ”
Ratcliffe is quick to point out the company's challenges, including the evolving federal and state policy discussions related to climate change. “ This is a serious global issue that requires a long-term, global approach, ” he says. “ We strongly believe that technology, and not more regulation, is the best way for the United States to do its part in addressing CO2 emissions. ”
He also believes that nuclear energy must play a big role in the future of energy. “ We have made a number of strides with clean coal technologies and renewables; however, nuclear power is currently the only viable, zero-carbon option with the necessary scale to address our needs, ” Ratcliffe notes. “ We’re working with Congress to find solutions to the issues currently. Nuclear waste disposal will also be a priority. ”
In addition, investing in renewable energy is on his “ to-do ” list. “ We have more than 20 projects underway and will invest more than $80 million each year. We are looking at possible equity investments in wind, biomass and solar – and we even own a geothermal project that supplies 15 percent of the power for the island of Hawaii. ”
In his low-key humble way, Ratcliffe sums up his and Southern Company's charge.
“ Striving to maintain affordable electricity, ” he says, “ is a very complex balancing act. ”& amp; amp; amp; amp; lt; /p>