John Rowe, the man that Fortune Magazine once called “Mr. Nuke” in a May 15, 2006 article titled Meet Mr. Nuke and I have a few things in common. We were both given a copy of Richard Halliburton’s Book of Marvels, a two volume set of travel books that divided the world into two areas, the Occident and the Orient. We both keep the books in our libraries. We each had two parents who were influenced by the Great Depression, though my parents were children in the 1930s while his were adults trying to make their way. We also both believe in hard work and early hours. The similarities pretty much stop there.
Rowe grew up on a Wisconsin dairy farm, attended a one room school house, went to the University of Wisconsin and became a lawyer. Here is a quote from the lede of the Fortune story mentioned above: “he’s no stolid ex-seafaring engineer–he’s a brainy, maverick, Midwestern lawyer.” In contrast, I grew up in the South Florida suburbs, attended large public schools, went to the Naval Academy and became a “stolid ex-seafaring engineer”. I have never even considered the possibility of working as a lawyer.
Aside: I was the Engineer Officer on a submarine, made 11 deployments during two sea tours and several ocean sailing trips. I have a BS in English and an MS in Systems Technology; I do not claim to hold an accredited degree in engineering. End Aside.
Unlike Rowe, I do not go to work in a three room suite on the 54th floor overlooking the Chicago skyline. I usually spend a few hours working each morning in my home office and then drive to my day job where I arrive before 7:00. My currently assigned space is a relatively small cubicle on the sixth floor of a building that looks over a residential area of Arlington, VA, just south of the Pentagon.
I call myself “Atomic Rod”. I am spending my free time spreading the word that nuclear energy can be the life-altering resource that makes the world a better place for everyone. Fortune Magazine calls John Rowe “Mr. Nuke”, but he spends much of his time persuading recipients of political contributions in the government to establish a “cap and trade” system so that his investments in nuclear facilities that someone else built will bring in more cash.
Here is an excerpt from a December 31, 2009 article in Forbes titled Exelon’s Carbon Advantage, by Jonathan Fahey.
Rowe hasn’t been able to grow by acquisition, either. Three times since 2003 Exelon has tried to acquire a smaller rival, and three times Rowe has been unable to close the deal. “The conundrums are real,” Rowe acknowledges. “There’s nothing that’s going to drive Exelon’s profit in the next couple of years wildly. It just isn’t going to happen.”
Except, of course, carbon legislation. And because of that, the company views spending on lobbying for legislation almost like a capital expense. William Von Hoene, a cowboy-boot-wearing former criminal defender who heads the finance and legal departments for Exelon and is a possible successor to Rowe, thinks of carbon legislation as Exelon’s big growth opportunity. “It’s an investment we are making that will result in substantial shareholder value,” he says.
So lately Rowe spends more time wearing out shoe leather in Washington than he does gazing at the sparkling lights of downtown Chicago. He has emerged as a lobbyist for cap and trade, a scheme that would limit carbon emissions to the amount spelled out in tradable carbon permits. If such a scheme is enacted, utilities without the need to buy permits will be at a competitive advantage to utilities that need to have them.
Plenty of people have been taught that it is the company CEO’s job to maximize near-term profits for his company – even if those profits come from a scheme that raises costs for everyone else. I find that kind of business/political activity to be highly distasteful; perhaps that is one of the reasons that my endeavor as a private businessman resulted in frustration and eventually led me to go back into the service.
I spent a few years running a small manufacturing business and clearly remember times when I had to explain to people who worked for me why their paychecks had so many deductions taken out. I do not like to see tax money directed to benefit people who gaze down on the rest of us from office suites lined with books, antiques and other treasures picked up during international travel expeditions. (Since Rowe is the CEO of a regional midwestern US utility, there is very little likelihood that he was traveling for business reasons.)
It is frustrating that Rowe is a rich Republican who is frequently quoted by people on the left who are opposed to new nuclear power plants because he has claimed that the plants are too expensive and he has made it clear that his company has no interest in building any new plants. As the leader of a utility that owns 17 operating and two shutdown but intact nuclear power plants, he is seen by many as someone with a strong vested interest in nuclear technology.
For people who have a shallow understanding of how commodity businesses work, his public reluctance to build new plants provides evidence that no one should be interested in new plants. Here is a quote from a 2008 document published by Amory Lovins, the long time anti-nuclear activist and two-time college dropout, titled The Nuclear Illusion:
In 2005, the Chairman of Dominion, an applicant for early nuclear site approval, told The New York Times, “We aren’t going to build a nuclear plant any- time soon. Stanford [sic] & Poor’s and Moody’s would have a heart attack. And my chief financial officer would, too.” Chairman John Rowe at Exelon, the nation’s largest nuclear operator, ex-pressed similar skepticism.
Note: It should be Standard and Poor’s, but I copied and pasted right out of the Lovins authored document.
That last sentence was footnoted with the following comment:
Exelon is still often claimed to be about to order a new nuclear plant, and has also sought an advance site license (a relatively cheap way of keeping options open), but in a panel at the ACEE Energy Efficiency Finance Forum, 12 Apr 2007, Chairman Rowe confirmed that within his firm, “nobody I would trust with a capital budget” could give him a plausible case that a new nuclear plant would be economically competitive.
That statement should be understood to be coming from a particular market perspective. It would not make sense for a company that sells 130 billion kilowatt hours per year of emission-free electricity to encourage the construction of additional capacity to produce more of that same relatively scarce commodity. Here is a quote from the Forbes article that might make it easier to understand why:
But Exelon is a commodity company: Its profits depend on power prices. Prices are set at the margin, and in this industry the marginal energy comes from natural gas, which is cheap now. When gas prices were at $14 per million Btu Exelon’s shares traded at $92. Now, with prices at $5, Exelon trades at $50.
Gas prices may stay low for a while. Imaginative drilling techniques have recently created a bountiful supply of gas from U.S. shale formations. Subsidized wind energy could put another competitor at Exelon’s doorstep. No one really needs that extra capacity now, but many states and perhaps soon the federal government are mandating greater use of renewable power. Wind power has its weak point (a tendency to be more plentiful at night), but that weakness is counteracted by pairing it with quick-start gas plants, not with sluggish nukes.
That segment has to be read carefully and critically – what if there was additional nuclear capacity added instead of new gas or intermittent wind? How would prices move for the 130 billion kilowatt hours that Exelon is selling? At 10 cents per kilowatt hour, the company would bring in $13 billion in revenue; at 8 cents, the revenue would fall to $10.4 billion, but the cost to produce that 130 billion kilowatt hours would not change. All of the difference would come out of the profit number.
Every penny that comes off of the price of electricity reduces Exelon’s annual profits by $1.3 billion. Notice the difference in stock price between summer 2008, when natural gas was expensive, and now when it is not as expensive. Exelon has about 660 million shares outstanding. The company was valued at $92 x 660 million = $60.7 billion. Now it is $50 x 660 million = $33 billion but it has the same assets and is producing roughly the same amount of its commodity product. Mr. Rowe’s personal wealth also suffered with the drop in natural gas prices.
The people that I serve and care about are not the same people that Rowe serves. I like nuclear technology because it offers human society the opportunity to break our addiction to fossil fuels. I care about carbon dioxide and other polluting emissions because they have a widespread, negative impact on the ability of the earth’s atmosphere to support our current standard of living, not because I think I can collect more money for the same effort if someone puts a price on carbon dioxide emissions.
I have a self-assigned task (mission?) of spreading information about nuclear technology. I believe that it is an incredible gift to humanity. According to the May 2006 Fortune article titled Meet Mr. Nuke Rowe’s attitude is completely different. “Nuclear is not a cause; it is a business,” he told shareholders recently.”
One of my major regrets for the first decade of the 21st century is that Corbin McNeill, a fellow “ex-seafaring engineer”, accepted a buyout from Exelon due to family health issues. For the first 18 months that Exelon existed after the merger of Unicom (Rowe) and PECO (McNeill), McNeill and Rowe shared the CEO position. Exelon was improving Unicom’s nuclear operations in an effort led by the team that McNeill had built at PECO, but it was also looking forward to additional growth opportunities. It was investing in the PBMR project and establishing the groundwork for building new nuclear plants. While he was the Exelon CEO, McNeill was a true leader who wanted to make the world a better place; I still have a hard time understanding why he would turn his company over to a lawyer focused on short term profits.
“Mr. Nuke” and “Atomic Rod” look at the world through different lenses. My guess is that Mr. Nuke’s view is a rarified one that only a very few people share. However, it is a common enough perspective in the business world that the Forbes article titled Exelon’s Carbon Advantage is featured in a special issue titled “America’s Best Companies”. Maybe I really should give up on my goal of building a business – I cannot seem to adjust myself to that view of the world.