Aquila Inc. CEO Robert K. Green, who led the company’s entry into the energy merchant business, has resigned from all of his executive positions as well as the board of directors. Chairman Richard C. Green Jr., Aquila’s founder, chairman and Robert Green’s brother, has assumed the CEO duties. Since June, Aquila has reduced its workforce at its headquarters in Kansas City, as well as in Houston and London, and will return to its historic roots as an energy distribution network and generation business (see Daily GPI, Aug. 7).

Robert Green will continue to work with the company over the next 18 months, and his separation arrangement has a value, inclusive of compensation during the 18-month period, of approximately $7.6 million. The company said that “market realities demanded a strategic repositioning of the company and its recent decision to substantially reduce the scale and scope of its business. That reduction now, in turn, requires a smaller executive staff.”

Robert Green’s resignation follows that of other top executives from other energy merchant companies, including Dynegy Inc.’s Chairman Chuck Watson and CFO Rob Doty, AES Corp. CEO Dennis Bakke, CMS Energy Chairman William T. McCormick Jr., and NRG’s Chairman David H. Peterson and CFO Leonard A. Bluhm. Top trading executives at many of the energy merchant companies also have resigned.

The mutual agreement between Robert Green and the board of directors included a separation agreement that he negotiated with the board’s Compensation Committee. The committee consists of three independent outside directors and was assisted by independent outside compensation consultants and legal counsel, which advised the board on the “range of competitive market best practices with respect to severance arrangements for CEOs.”

Robert Green’s severance package consists of three times his base salary plus a bonus. “In consideration of his resignation and the termination of his existing employment agreement (under which more generous separation benefits would have been payable upon certain events), as well as his willingness to enter into five-year non-compete and non-solicitation covenants, Bob Green will receive a separation package consisting primarily of three times his base salary plus average annual incentive value paid over the past three years,” the company said in a statement.

Also included are “customary benefits such as medical coverage and administrative support. For the next 18 months while he continues to provide services to the company, Bob Green will be compensated and will receive continued basic benefits such as insurance and medical coverage. The company will also provide an offsite office for Bob Green’s use and administrative support during this period.”

In a statement, Robert Green said, “My appointment to CEO in January 2002 came as our energy trading and risk management, merchant generation and international operations were increasing the size and complexity of our business. Following our decision to reposition the business, both strategically and financially, a much smaller executive team is required. I strongly support [Richard Green’s] return to leadership of the company as CEO. He has the knowledge and experience to serve our shareholders’ interests well.”

Richard Green founded UtiliCorp United (which became Aquila Inc. last year) in 1985 from Missouri Public Service Co. “Our decision in 2001 to pursue an energy merchant strategy was founded on our strength as one of the country’s leading wholesale energy marketers,” said Richard Green. “We were poised to follow a strategy capable of delivering double-digit earnings growth for our shareholders. The recent collapse of the energy merchant market,” he said, “was the result of misguided behavior on the part of a few industry players, yet we all suffered from the resulting fallout. I respect Bob for his courage and the swift action he took in response to the market’s nearly overnight loss of confidence in the merchant sector, followed by virtual abandonment.”

Robert Green was elected president of the company in 1996 and as COO, he led the integration of its domestic and international growth strategies. He played a key role in building Aquila’s international businesses. In 2001 he was named chairman of the company’s energy merchant subsidiary, which included operations in the United Kingdom and parts of Europe, as the company prepared for an initial public offering of that business. He joined Aquila in 1988 and was president of its Missouri Public Service division before being named executive vice president of the company and a director in 1993.

“As we’ve resized our global workforce to reflect our change in strategic direction, it was necessary to re-examine our staffing needs at the executive level,” said Richard Green. “It’s regrettable to lose such tremendous talent. Bob has contributed significantly to Aquila’s growth and profitability over the years. His presence will be missed.”

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