Power to the People

Oscar Prieto had no idea how much his life was about to change. It was May 1996. Prieto, a relative newcomer to AES Corp., an independent producer of electrical power, was visiting its headquarters in Arlington, Virginia. He was meeting with a bunch of his colleagues when Thomas Tribone, a senior executive, interrupted.

"I've got fourteen people from France and some guys from Houston coming in to talk about buying a business in Rio de Janeiro," Tribone announced. "We've only got two AES people. Could one of you show up?" Prieto raised his hand and walked to a conference room down the hall. "I sat in the back and didn't pay much attention," he recalls.

The executives had gathered to discuss the privatization of Light Servicios de Electricidade (known as "Light"), one of Brazil's largest public utilities. Brazil's government had launched a massive sale of public assets. The French delegation - executives from Electricite de France (EdF), that country's giant national utility - along with representatives of Houston Light & Power, was considering a bid on the soon-to-be-auctioned Light. The group saw AES as a potential partner.

Prieto was puzzled. Why would AES be interested? His small company (which then had about 1,100 employees) was focused on the power-generation side of the business - building, buying, and operating plants, and selling the electricity from them to wholesale customers. Light was a massive public utility with more than 11,000 employees and a sprawling distribution system that served more than 2.7 million retail customers in Rio de Janeiro.

After the meeting, Tribone asked Prieto if he would like to play a lead role in this potential acquisition - a $1.7 billion deal that would cost AES about $400 million. "But Tom, we're not in the distribution business," Prieto said. "And I've never done this before."

Prieto, a chemical engineer, had worked for AES for just two years. It was his first job in the power industry: He had been hired to turn around a struggling 650-megawatt power plant in his native Argentina - the company's first joint venture in Latin America.

"You've been through a very difficult partnership," Tribone said. "You know what makes them work."

Prieto, then 43, soon left for Paris to negotiate an agreement with EdF: "I said to myself, What the hell am I doing? I'm handling such a huge, huge job all alone."

But Prieto got the job done. He moved to Rio de Janeiro and became one of Light's four directors. Then the job got really interesting. In short order, AES completed a string of deals: It signed a joint-venture agreement to buy CEMIG - an even-larger Brazilian utility, with more than 4 million customers. It broke ground on a new power plant in Uruguaiana, near Brazil's southern border. It took over the company that supplied electricity for Buenos Aires. And last October, it won a bid to distribute electricity to 800,000 customers in southern Brazil.

Today, 18 months after that fateful meeting in Arlington, Oscar Prieto works out of a 15th-floor office overlooking downtown Rio. He is a director of a major Brazilian company and a key figure in AES's rapid expansion in South America. He helicopters from one far-flung plant to another and oversees hundreds of millions of dollars in construction projects. His division has a combined customer base of 8 million homes and businesses.

"That's what happens when you raise your hand around here," Prieto says with a smile.

At most companies, Oscar Prieto's personal odyssey would be a fairy tale - far too much new responsibility, far too early in his tenure. At AES, it is standard operating procedure.

"God made us all a certain way," says Dennis Bakke, 52, AES's cofounder and CEO. "We're all creative, capable of making decisions, trustworthy, able to learn, and perhaps most important, fallible. We all want to be part of a community and to use our skills to make a difference in the world." Adds Roger Sant, 66, AES's cofounder and chairman: "If Dennis and I had to lead everything, we couldn't have grown as much as we have. People would bring deals for us to approve, and we would have a huge bottleneck. We've shifted to giving advice rather than giving approval. And we've moved ahead much faster than we would have otherwise."

Simple insights - but they have profound consequences for how AES operates. Lots of companies talk about pushing responsibility out from headquarters. Few companies push as hard or as far as AES. Just five years ago, it had fewer than 600 employees. Today it has nearly 6,000 employees (or more than 31,000, if you count those working in its joint ventures). Yet it has never established corporate departments for human resources, operations, purchasing, or legal affairs. Its headquarters staff includes fewer than 30 people.