By Jamie Smith Hopkins, The Baltimore Sun
5:31 PM PDT, March 15, 2013
Mayo A. Shattuck III, who coordinated the sale of two Baltimore institutions to out-of-state concerns and ran the region's power company for a volatile decade, has retired from the parent of Baltimore Gas and Electric Co.
Chicago-based Exelon Corp. didn't announce his retirement so much as mention in passing — in a hefty securities filing Thursday — that Feb. 28 was his last day as an employee. But Shattuck, 58, isn't cutting ties with the company.
Previously executive chairman, he is now non-executive chairman of Exelon's board. The move will trigger a lump-sum payment in August of his pension— valued in December at $63 million — and will likely mean fewer responsibilities, though Shattuck said he anticipates an active involvement.
The time was right for a change, he said in a wide-ranging interview Friday. A year after Exelon acquired Baltimore's Constellation Energy Group for $7.9 billion, the integration has gone "tremendously well," he said.
"I've been working for 33 straight years without taking much of a break, so I do look forward to not being totally absorbed in day-to-day matters," he said. "But on the other hand, I love this company, and I intend to remain as chairman for the foreseeable future."
Shattuck has been praised and criticized — the latter, loudly, in local circles — for his tenure at two major Baltimore companies.
He ran Constellation and helped lead the Alex. Brown investment bank during periods of rapid change in those industries, then sold both firms. During his tenure as Constellation's CEO, the company grew into an energy powerhouse, nearly went bankrupt during the financial crisis and clawed back from the brink.
For years, he was the region's top-paid chief of a public company — his compensation package was valued at more than $17 million in 2011 and about $8 million for his nine months with Exelon in 2012. He was the man locals cursed when their electric and gas rates spiked. And the man they blamed when Baltimore's last Fortune 500 company — Constellation — became a subsidiary.
"There's no question that the citizens of Baltimore would say the decisions he made were not in our best interests," said Mac Nachlas, a Baltimore civic activist. "I'm not sorry to see him leaving. Maybe he can go work for somebody like the Grand Prix and get them out of town so we don't have to pay for that anymore."
But A.B. "Buzzy" Krongard, CEO at Alex. Brown when Shattuck was president, sees the sale of that company — the nation's oldest investment house — as the right decision at a time of industry consolidation. Bankers Trust New York bought Alex. Brown in 1997; the next year, it agreed to sell itself to Deutsche Bank.
"The industry was changing so much — capital became the name of the game," said Krongard, who described his former second-in-command as "very bright, very personable" and very good at the job. "We couldn't remain the way we were."
After working for Bankers Trust and Deutsche Bank, Shattuck joined Constellation at a difficult moment in its history.
It was late 2001, and Constellation had just given up on a yearlong plan to split into two companies — after it had already begun the separation. CEO Christian H. Poindexter, blaming economic uncertainty for the switch, stepped aside as the board brought in Shattuck.
The next 10 years proved "a wild ride" for the company, said Travis Miller, director of utilities research for Morningstar. Two attempted mergers before the one that took. Energy deregulation. Rate hikes. A huge uptick in revenue before the 2008 swoon.
As the company expanded its reach by selling power across the country, revenue soared from $3.7 billion in 2001 to more than $21 billion in 2007. It built a sophisticated energy-trading operation under Shattuck's leadership that would have astonished the founders of BGE, the nation's oldest energy utility.
Then came 2008. The entire financial industry nearly collapsed. Credit seized up.
Constellation's stock price, above $100 a share at the beginning of 2008, sank as low as $13 in intraday trading that fall as investors braced for a liquidity crisis at a company that couldn't function without credit.
State Sen. James C. Rosapepe, a Constellation critic, blamed Shattuck's investment-banking mindset for that near-downfall.
"He … tried to turn BGE effectively into an investment bank," said Rosapepe, who represents parts of Anne Arundel and Prince George's counties. "When Enron blew up, they tried to take over the energy derivatives trading business. And … like so many models in financial speculation in the last 15 years, they didn't work."
Constellation agreed to sell itself to Warren Buffett's MidAmerican Energy Holdings to hold off the dogs in 2008. Then it reversed course, striking a deal to stay independent and instead sell half its nuclear-power business to Electricite de France.
That wasn't necessarily the company's biggest drama during Shattuck's tenure — or even the biggest involving a merger. In 2006, amid widespread customer and political outrage over spiking electricity rates, Constellation called off an attempt to sell itself to the parent of Florida Power & Light.
BGE bills were set to rise 72 percent, which Constellation attributed to the hike in energy prices following Hurricane Katrina and the end of a six-year freeze on residential electricity rates. The announcement set off a furious debate about energy deregulation — already in motion before Shattuck took over — and prompted the General Assembly to temporarily limit the increase to 15 percent.
Given the ups and downs, electric utility analyst Paul Fremont said Shattuck had a "mixed record" at Constellation. He pointed to Shattuck's deal-cutting to get the company out of trouble as an example of a positive for shareholders.
Fremont, with Jefferies & Co., doesn't think Shattuck is being forced out of Exelon.
"I … have not heard of any pressure for him to make that decision," he said.
Shattuck said he didn't get any. He said he's looking forward to not working 80-hour weeks, spending more time on philanthropy — including his family's minority scholarship program — and figuring out the next steps.
"I don't know exactly what yet," he said.
Shattuck isn't walking away with severance or change-in-control payments related to the merger, according to Exelon filings. Retirement makes him eligible for payouts from his deferred compensation, for accelerated vesting of unvested equity awards and for his pension.
The value of the equity awards and deferred compensation was unclear Friday. Exelon did not disclose the value of Shattuck's pension when he retired, but it was $63 million in December, according to a U.S. Securities and Exchange Commission filing.
Exelon said Friday that Shattuck participated in Constellation's executive pension plan, which was in place before he joined the Baltimore company.
Musing over the last decade and a half in the Friday interview, Shattuck said it is his view that both Constellation and Alex. Brown needed to hook up with sizable suitors.
"Both of these businesses are nationally competitive," he said. "All the smaller to midsized investment banks went through similar transactions. … [And] it has been a very tough environment for the merchant power companies — both Constellation and Exelon are much stronger together than they would have been apart."
When Maryland's Public Service Commission approved the merger with Exelon, members expressed misgivings about a deregulated, publicly traded company running a regulated utility — something set in motion many years before.
"It is not obvious to us that tying our regulated utility companies to this business model will be good in the long run for ratepayers or regulated utilities," commissioners wrote. "Having watched major financial institutions become 'too big to fail,' we wonder too if further consolidation in the electricity sector could expose BGE to a wider range of unregulated business risks."
Shattuck said he believes the merger does benefit BGE customers. He said BGE and Exelon's other utilities — ComEd in Illinois and PECO in Pennsylvania — are learning from each other about the best ways to restore electricity after storms, upgrade the power grid and the like.
"I really feel confident that the BGE customers are going to benefit from that over the course of time," he said.
Mayo A. Shattuck III
Title: Non-executive chairman of Exelon Corp.
Background: CEO of Baltimore's Constellation Energy Group for 10 years before selling the company to Exelon; president of Alex. Brown, the Baltimore investment house, before helping to sell it to Bankers Trust New York
Other activities: Member of various boards, including Johns Hopkins Medicine, Gap and Capital One; co-chairman of the Center for Strategic & International Commission on Nuclear Policy in the United States
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