Fat cat jibes, run-ins with politicians, bust-ups with the regulator - the National Power boss is rarely out of the headlines. But all he really wants to do, says Andrew Davidson, is get on with the job.
A couple of months ago Keith Henry woke up to find his home had become a national news item. Journalists had spotted a note in National Power's latest annual report which revealed that its chief executive had been paid £120,000 for moving house from Surrey to Berkshire so that he could be a little nearer the company's headquarters in Swindon. As the newspapers pointed out, compensation for the 35-mile trip appeared to be worth around £4,000 a mile, rather a lot considering it came on top of his £500,000 salary for running the privatised utility. The Daily Mail even printed a photo of the new house, just in case those nice people who firebombed the home of United Utilities chairman Sir Desmond Pitcher earlier in the year had trouble identifying it.
No matter how much National Power argued that relocation allowances linked to salary are standard practice in industry, and that anyway around a third of the £120,000 went straight to Black Horse Agencies for finding Henry his new house, the press were not interested. Here was a fat cat who was clearly wallowing in cream, a man whose company obviously makes an easy fortune in a cosy monopoly pumping out the nation's electricity from his filthy old power stations, a man who was previously caught by the Daily Mirror enjoying a family holiday in Bermuda while attending a board meeting there involving a subsidiary company, a man evidently with no shame. How do we find him? Guilty! Guilty! Guilty!
Henry, hunched behind a big desk in his sixth-floor office in the City, sighs. We have only been chatting for a few minutes and already I can tell that he appears distinctly underwhelmed at the prospect of having to discuss his life as chief executive of National Power. Compact and cautious with a broad, determined face, he has the wary look of a boxer who is not quite sure where the next punch is coming from. On the walls behind him, glossy framed photos of power stations and wind farms glint in the morning sunshine. In front of him, through the large picture window that stretches along one wall, a jumble of rooftops runs all the way to the dome of St Paul's Cathedral. It is the perfect view for a spot of contemplative thought about the links between Mammon and morality, but it is also rather exposed to the gaze of others.
Henry, after 20-odd years supervising huge oil and gas extraction projects for the American contractor Brown & Root in almost total anonymity, could be excused for feeling a little culture shock right now. Since replacing John Baker, now chairman, at the top of National Power two-and-a-half years ago, he and his company, Britain's third biggest privatised utility after BT and BG, have rarely been out of the headlines. Fat cat jibes, takeover bid speculation, run-ins with politicians, bust-ups with the regulator (the Office of Electricity Regulation) - you need granite-like resolve for the rollercoaster ride of negative publicity that running a privatised utility now involves. Running Britain's biggest electricity generator, with its £6.3 billion market cap and its massive 930,000 shareholder base, is like sitting in the front seat of the ride: first to get drenched by the press and first to feel the precipitousness of the drop when ministers let you dangle. You would guess that Henry, a man more used to bounding around gas rigs in the North Sea than oiling the wheels of power in Whitehall, must occasionally look out and wonder whether it is all worth the biscuit.
The irony of his situation is that many who know him well think that he is the least likely fat cat you could ever meet: a quiet engineer whose favourite hobby is radio hamming and whose sartorial inelegance is the stuff of company jokes. About the nastiest thing that anyone can say about Henry inside National Power is that he always wears the same jumper. Henry's first attempt at an enthuse-the-troops corporate catchphrase - 'One Company One Team' - has now become known internally as 'One Company One Team One Pullover'. 'I've got lots the same,' says Henry rather grimly, wearing a well-pressed shirt and tie. Where is the famous jumper today?
'I took it off to impress you,' he says. Sometimes, you guess, it's hard being an engineer.
But, as one of his directors dryly puts it, engineers are people who are happier getting on with the job than talking about it. Henry hopes that, now the windfall tax is behind him - National Power will pay the Government around £261 million in two tranches - some of the animosity towards privatised utilities will subside and he can concentrate on winning new business for the company. Despite the perception that National Power, which operates 17 UK plants including Didcot and Drax, is basking in an easy market, the reality, says Henry, is slightly different. His first two-and-a half years have been preoccupied with continuing to reduce the company's UK capacity to please the regulator. Now he needs to fill in the gaps in the balance sheet, the task for which he was originally hired.
There are certainly some pretty big gaps to fill. National Power, like its smaller rival PowerGen, was created out of the old Central Electricity Generating Board in 1991 to sell supplies to the regional electricity companies (RECs). Six years ago it had a 46% market share, 17,000 employees and a lot of relatively old, dirty plant. Now, after pressure from the regulator to sell plant to new competitors and considerable investment (£1.7 billion) in cleaner and more efficient technology, it is down to a 24% market share, 4,300 employees and a much smaller generating capacity (17,000 megawatts in the UK and 7,500 megawatts overseas compared with 30,000 megawatts of UK capacity at the time of privatisation). Under the complex arrangements by which generators bid to sell power to the National Grid each morning, National Power has become just one (albeit the biggest) of 21 potential vendors. That has taken its toll on income, with National Power's 1997 figures showing an 8% drop in pre-tax profit to £740 million before exceptionals, while turnover fell 10% to £3.5 billion in the same period (the good news being a half-a-percent increase in the margin on the back of lower operating costs). Its UK prospects remain flat: next year's planned liberalisation of the retail electricity market will affect RECs far more than wholesalers; however new generators will continue to eat into its margins. If National Power is to prosper, it has to show that it can take up the slack by increasing its options overseas.
Which is where Henry came in. At 52, after half a lifetime working on massive engineering projects for Brown & Root, he has no shortage of international experience, a factor which has clearly helped impress the City. Despite the fall in National Power's UK profits last year, many broking houses still recommend the company's shares as a 'hold' on the back of overseas prospects. Henry, by investing large sums in a relatively small number of high-profile projects abroad - a high-risk strategy which most analysts believe is necessary to compensate for the UK squeeze - appears to be replacing the losses faster than was previously thought possible. 'We have gone from zero profit internationally to £74 million last year and this year we will make around £125 million profit,' he says. He is on record as saying he will be 'amazed' if half the company's profits don't come from abroad by 2006. The company has no choice, he says. 'There's more competition here and frankly the Government seems to want to make life tricky for us in the UK. The regulator would like to see us all split into lots of individual little generators knocking hell out of each other because that's good for competition. The problem is, it doesn't actually do much for Britain. At the end of the day you will probably have lights going out all over the country because people will say: "Sod this for a game".'
There is a doleful weariness to Henry which is perhaps understandable, and not just because he has been clobbered in the press. Like many in his industry, he feels his company has been ill-treated by the politicians. The blocking of National Power's attempt to take over one of the RECs, Southern Electricity, by the previous government's trade and industry secretary Ian Lang, is one scar that clearly has still not healed. The hamstringing of its UK operations by the regulator is another. Henry is in the curious position of actually deriving a public relations benefit from a drop in profits at home, something which, after his experience in the no-nonsense world of slinging up rigs and pipelines, must seem very strange indeed.
He comes from well-seasoned engineering stock - his father, uncle and grandfather were all engineers, and his father worked for Anglo-Persian (now BP) in Iran, where he was brought up. He got his first Meccano set as a Christmas present at only four years of age. Later the political situation in Iran collapsed and he and his mother found themselves caught up in the troubles - attacked by tribesmen while on a picnic. So bad were his mother's injuries, she had to go to Britain for treatment.
Did that have an effect on him? 'It was quite an experience,' he says softly, 'but I don't think it particularly did.' Not surprisingly, the Henry family - he has one elder sister - went back to its roots in Luton and he was sent to Bedford School, where he spent much of his time running the printing and radio clubs. Being an electrical engineer, he says, was his real ambition. In the end he plumped for civil engineering because he thought that he wouldn't need so much maths. 'And ironically,' he says, 'here I am as a civil engineer running an electrical company.' For the first time in the interview Henry smiles.
He took a civil engineering degree at London University and got a masters in foundation engineering at Birmingham, but never lost his interest in radio. His last house and garden, he confides, was bedecked with radio receiver wires. He still has a 70-ft tall mast sitting in pieces in the loft at his new house, waiting to go up. What would the Daily Mail make of that? 'I am not a transmitter, just a listener,' he says. Then he looks as if he rather wishes he hadn't told me. 'It's just a strange hobby,' he says.
After university he worked first for IMEG, building pipelines across the east of Britain, before joining the London office of Brown & Root.
The company, originally founded in Texas 80 years ago to sell support services to oil companies, profited hugely from the North Sea oil boom, providing engineering project management for the likes of BP. Henry started as a fabrication engineer and worked his way round the world building platforms and laying pipelines. Sir Richard Morris, his old boss at Brown & Root and now chairman of UK Nirex, says Henry is one of the most innovative engineers he has ever met. 'He is always looking for different ways of doing things better. He does it all the time, that is his mind-set, and he couples it with a very commercial approach.' By 1990, he was the UK-based chief executive of Brown & Root Ltd, handling business in Europe, the then Soviet Union and China. Then in 1995, after spending 23 years in one company, he jumped into National Power. Why? Because his next move would have been to America, says Henry, and his wife and daughters - the first born in Paris, the second in Singapore - had had enough of ex-pat life. Plus he didn't want to leave his father behind, and heading up a big plc was too good a chance to miss.
Such bluntness is characteristic of Henry. In fact, few in the British oil industry, where Henry was a popular and respected figure, were surprised at his exit from Brown & Root - it was widely supposed that a Brit could never get to the top in Houston. But no one thought he would leave the industry altogether. According to Graham Hearne, chairman of Enterprise Oil, where Henry is a non-executive director, everyone expected Henry to pop up at one of the oil giants. 'But Keith is not just an engineer, he is a very good manager, too. You could just as easily see him running an industrial company,' says Hearne. 'The only part of the job that was going to be a challenge to him was the political and City side of it, but that was one of the reasons it appealed to him. He wanted to learn about that.'
And what an education Henry is getting. Was he surprised at how much controversy his job stirs up? 'I think I underestimated the political dimension,' says Henry cautiously. Would he have taken the job had he known just how much of that he would have to put up with? 'Sure,' he says. 'It doesn't worry me. It irritates me. We get written up as a fat-cat monopoly fixing the prices, but my God, you couldn't have anything further from the truth. I have got to go to a managers' meeting tonight, and the whole mood will be one of fervent competition, of more closures coming, of power stations only running four or five days a month.' Why?
'Because basically gas is coming in to replace coal, and we are largely coal. If someone builds a gas station and can sell electricity cheaper than you, they are going to do it.'
What the industry needs, he continues, is some kind of policy that will give the country a balanced portfolio on fuel. Henry has been banging the drum for coal for over a year now - it's hardly surprising, whisper his rivals, given that half of National Power's plants are coal-fired.
But didn't the last government have a policy? Sure, says Henry, its policy was to have no policy. Someone, he continues, needs to do some serious planning. Gas is a finite resource. It will run out in 35-40 years, and what then? 'The tragedy is that everything will probably be nuclear by about 2050 and what are we doing? We are shutting nuclear stations. Well, thank God I am not a politician. What do we get? We get people coming out with statements like they want 10% of energy to come from renewable resources by 2025.' It's certainly a commendable objective, he says, but where is it going to come from? 'For instance, we are the biggest wind farm company in the country and how much do we produce? 113 megawatts.
That might just cover the buildings you can see from this room. We want to build more but it takes us three to four years to get planning permission and most places say "no thanks".' He throws up his hands as if to say, so what do you do?
By now Henry looks fairly exasperated. Maybe I have caught him on a bad morning. He says he doesn't want to overemphasise the political nature of his job - indeed he asks me afterwards to downplay anything he has said about the Government or the windfall tax, which is now a no-quote zone for the company - but you can tell he is thoroughly needled by it all. Those who know him say that is all part of his honest approach: unlike some of the FTSE-100's wilier bosses, he hasn't learnt to dissemble yet, especially in front of the media. He calls a spade a spade, even if he cannot understand why it makes headlines the day after.
All he wants to do, he says, is get on the road and build up National Power's interests overseas. Already the company is running six power stations in the US, three in China, and one in Portugal. It supplies 30% of the power in Pakistan and 10% of the power in the state of Victoria in Australia.
Some projects are joint ventures, others outright acquisitions. Last year it invested £670 million overseas - and Henry is prepared to spend more.
Huge countries like India (600 million people) and China (1.2 billion people) are desperate for more electricity plants. 'That's the good news.
The bad news,' he adds with a wry smile, 'is that they can't afford it.'
Marketing and managing these projects are huge undertakings, which can run over periods of up to 25 years. Those who work with him say that Henry's expertise in setting these things up, and judging just how viable they are, has been crucial to the company's success. Last year National Power believes that it won around 15% of competitively available world power projects - more, it claims, than any other independent power producer.
'Keith has brought in real expertise,' says Sir Anthony Gill, the former Lucas chief executive and fellow engineer who is a non-executive director at National Power. 'It is not just the business he has won, but the business he has deliberately not won because he thought it would be detrimental to the performance of the company. That nous for what's worth winning is very important.' And he has done this at the same time as coping with the enforced run-down of the UK operation, and fighting off a hostile approach from an American bidder, Southern Electric International of Georgia, in his first year - no mean feat.
Henry agrees that project management is his real strength. 'I can see drawings in three-D and bar charts in my head, I see those more easily than I read balance sheets. I have got a bias towards the practical side of life.' He describes his management style as friendly but competitive.
'I know it sounds corny but I believe in teamwork,' he says. 'I don't just want people presenting papers to their boss, and their boss presenting papers to their boss.' To break down these kinds of divisions, he runs the company through a 'leadership team' of eight senior executives who meet every Monday in his office. Almost anything can be on the agenda.
Leadership is vital, he says. 'Most companies are over-managed and under-led,' he adds.
And yet leadership also makes him a target. Does he understand why others regard him as a fat cat? He scowls. 'I am not a fat cat, I tell you! I have got the house outside Swindon, and a tiny flat in Pimlico, and I sold our summer barn in Devon to buy that. That's all. I drive myself everywhere - I got rid of all the drivers when I arrived here - there is no executive dining-room, no executive plane, no company flats. I fly club class, never first, unless it's a long leg.' He pauses. 'You cannot get rid of 30% of your staff at head office, which was what we did, and still have chauffeur-driven cars and weekends at Glyndebourne and stuff like that. It all went.'
What he wants now, he says, is some recognition of National Power's achievements, in particular that it has become one of Britain's major exporters and is now competing successfully around the world. 'And will we get it? No,' he says, answering his own question. 'When the annual report comes out, the first thing everyone looks at is page 21 to see what my earnings were last year. Pfff!' he says, blowing out his cheeks. 'Hopefully, one day, we can get over all this. We need to get on with life.'
And with that he signals that we have overrun the allotted time. He looks deep in thought as I leave, perhaps pondering the unfairness of how people cannot believe he earns every penny of his £620,000 pay package.
1945: Born 3 March, Iran
Educated at Bedford School, London University and Birmingham University
1967: Trainee, International Management and Engineering Group
1971: Joined Brown & Root UK
1977: Engineering manager, Far East office, Brown & Root
1980-88: Engineering manager, then commercial director, technical director and chief engineer for Brown & Root UK; managing director, Brown & Root Vickers
1989: Managing director, Brown & Root Marine
1990: Chief executive, Brown & Root
1995: Chief executive, National Power
What People Say
'Keith is a guy who isn't fazed by politics or dogma and who tough-mindedly pursues the hard answers. I suspect that he has probably found the media and political spotlight more challenging and significant than he thought when he accepted the job, but he is getting used to it.'
John Baker, chairman, National Power
'He has got a great ability for developing teams, and he has brought real value from his experience of project management and international affairs.'
Sir Anthony Gill, chairman, Docklands Light Railway, and non-executive director, National Power
'Keith is not a natural dissembler, which may be a disadvantage. I should think he hates the press attention. The papers have really had the knife out for him.'
Graham Hearne, chairman of Enterprise Oil, where Henry is a non-executive director
'He comes from a good company, and he has got an understated, cool style that has really impressed the board.'
Sir Alastair Morton, non-executive director, National Power
'He is a very innovative engineer, he is always looking for different ways of doing things better.'
Sir Richard Morris, chairman, United Kingdom Nirex, and former chairman and chief executive, Brown & Root.