Recent years have seen fundamental changes in the supply and competitive landscape of the North American natural gas market. In response to high natural gas prices that prevailed during most of...
Reflections from The Room Where It Happened
Leadership Lyceum Podcast Summary
“No one really knows how the game is played / The art of the trade / How the sausage gets made
We just assume that it happens / But no one else is in / The room where it happens.”
– Lin-Manuel Miranda, “The Room Where It Happens” from the Broadway musical “Hamilton”
Our foursome gathered on a crisp autumn day in our nation’s capital. I could barely contain my exuberance at being joined by two recently retired utility CEOs and a highly regarded member of both of their boards.
These were McKinsey & Co. Director Emeritus Dr. Les Silverman, former Lead Independent Director of Pepco Holdings Inc. (PHI), and Independent Director of Columbia Pipeline Group (CPG). And Bob Skaggs, former CEO of NiSource, and then CEO of CPG. And Joe Rigby, former CEO of PHI.
As a board member for both companies, Les Silverman was at the vertex of notable mergers and acquisitions transactions that took place under the leadership of each of these CEOs over the last two years.
At NiSource, Bob Skaggs presided over the separation of the gas storage and transmission assets from the regulated utility. He led CPG’s spinoff from NiSource into a standalone publicly traded company in July 2015, and the subsequent sale of CPG to TransCanada one year later.
Joe Rigby led the sale of PHI, or simply Pepco, to Exelon.
The NiSource – CPG transaction unfolded in a relatively smooth and speedy manner. The Pepco acquisition could only be described as epic and protracted.
Much has been written about the legal, financial, strategic, and operational details of these transactions. The complex human and social interactions that lead to these monumental decisions usually go unexamined.
Notwithstanding the perfect golf weather that day, we were not there to golf. My fabulous foursome gathered in the Pepco offices in Washington, in one of the rooms where it happened several months after the completion of their transactions. To reflect on the deliberations and perspectives of the executives and one of the non-executive directors who made it all happen.
Bob Skaggs: At NiSource, the company was comprised of a significant, large, multistate utility, but we also had a large natural gas pipeline company and a midstream company that were just beginning to grow.
Over the course of several years, management and the board asked ourselves, does that combination of assets make sense? Do the risk profiles match up? Are the businesses compatible? What are the financing requirements as both companies began to grow?
There were certainly strong points of view initially that the companies belonged together and that there was strength because they were in different parts of the energy industry. But as both companies’ growth accelerated and the demands for capital began to increase dramatically – and the risk profiles diverged as pipeline companies became quasi-unregulated – the management, the board and our