By some estimates, utilities companies around the world will, over the next 15 to 20 years, spend up to $2 trillion building out their infrastructures. The money will go to improving transportation and delivery systems, making energy use more efficient and enhancing safety and security. A good deal of the capital needed will be raised by Jeffrey Holzschuh, the veteran banker who chairs Morgan Stanley’s global power and utility group and stands in the upper echelon of Wall Street rainmakers.
Recent Holzschuh assignments include advising private equity giants Kohlberg Kravis Roberts & Co. and TPG on their $45 billion purchase of Dallas-based TXU Corp. and helping Italian utility Enel on its $53 billion acquisition of Spain’s Endesa. “On average, European utilities are four to five times larger than those in the U.S., and the only way for them to expand is outside of their home countries and in many instances outside of Europe,” Holzschuh says.
Patience and diplomacy are a must: Deals in the utilities sector are frequently complicated by politics. That’s what happened when Holzschuh represented Newark, New Jersey–based Public Service Enterprise Group in its planned sale to Chicago’s Exelon Corp., a nearly $18 billion deal that would have created the nation’s biggest utility. After 19 months Exelon pulled the plug in September 2006, saying New Jersey officials sought too many price concessions and power plant sales. And when Holzschuh advised Baltimore-based Constellation Energy Group on its proposed $12.4 billion sale to Florida’s FPL Group, opposition from Maryland legislators led Constellation to call things off.
Mayo Shattuck III, Constellation’s president and CEO, credits Holzschuh with seeing early on that the deal was in trouble and suggesting the parties go their separate ways. Shattuck says the decision saved Constellation lots of time and money.
Holzschuh accepts such outcomes as one of the costs of doing business. “If you’re batting .750, that’s pretty good,” he says.
Sports metaphors come naturally to Holzschuh, 47, who is the son of former Baltimore Colts tight end and defensive tackle Richard Holzschuh. The 6-foot-6 banker was himself an accomplished athlete, playing forward for the Niagara College basketball team. He brings an intense competitive spirit to his deal making — and to his golf.
“He’s a big guy with a giant arc of a swing, and so it goes a mile,” says Shattuck. “I’ve played with him on one occasion with Vijay Singh and on another with Phil Mickelson, and they’re impressed. There aren’t many amateur golfers with his swing power.”
Holzschuh started his career as a generalist at E.F. Hutton & Co., before joining Morgan Stanley in 1983. Along the way his business has changed: Once U.S.-based and half M&A advisory, it’s now global, with M&A work closer to 25 percent of the mix.
Another change is the growing importance Morgan Stanley has given to energy conservation. Holzschuh chairs the company’s environmental committee and spearheaded its investment in Santa Barbara, California–based NGEN Partners, a venture capital firm that invests in clean technologies.
Owing to turnover at full-service investment banks, Holzschuh has gained a stature exceeding that of his peers, says Shattuck, the former global head of investment banking for Deutsche Bank. “He clearly stands out as the dean of the industry among full-service firms,” Shattuck says.
Holzschuh’s status prompted Akron, Ohio–based FirstEnergy Corp. to invite him to speak at its annual board of directors’ retreat in November. “He’s one of our strategic resources who we depend on and look to for advice,” says FirstEnergy president and CEO Anthony Alexander.
Holzschuh represents so many large utilities that, were he in almost any other industry, he wouldn’t be able to avoid conflicts of interest, Shattuck says. But because utilities are so highly regulated, many of his clients can’t compete with one another. In any case, his lips are sealed. “Jeff has never told me about what my competitors are doing,” says John Rowe, CEO of Exelon. “So I assume he doesn’t tell anybody what I’m thinking about either.”
