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Report - Allegheny CEO got $6.3 million bonus

October 07, 2003|by JULIE E. GREENE

julieg@herald-mail.com

The new chairman of Allegheny Energy Inc. received a $6.3 million signing bonus to lure him to take the reins of the financially troubled energy utility, according to a filing with the U.S. Securities and Exchange Commission.

The bonus also was to compensate Paul J. Evanson "for the significant financial and other benefits he will forfeit" by leaving his job as president of Florida Power & Light Co. (FPL), according to Allegheny's 2002 annual report, which was filed late on Sept. 25.

Allegheny officials announced on June 9 that Evanson would become chairman, president and chief executive officer of the company on June 16, succeeding Alan J. Noia. Noia announced his retirement on March 6 and ended his seven-year tenure on April 18.

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Evanson's base salary will be at least $900,000 a year, according to the annual report. His salary will increase on each anniversary of his start date, reflecting at a minimum the increase in the Consumer Price Index - U.S. City Average Index, the report states.

Evanson has a five-year contract.

Evanson can double or triple his annual salary through incentive compensation, the report states.

Because Evanson started in June of this year, he could earn a bonus of up to $1.05 million for calendar year 2003, the report states.

Evanson also gets stock options, which increase based on factors such as the performance of the company's common stock and how often the company pays cash dividends to stockholders, the report states.

Last December, Allegheny officials announced the suspension of the company's quarterly dividend for shareholders of common stock for the first time in at least 54 years.

Energy analyst Christopher Ellinghaus said Evanson's signing bonus is not unusual.

"Whenever you leave someplace, you leave money on the table," said Ellinghaus, who is with Williams Capital in New York.

"I have no idea what his compensation was at FPL. I would imagine that the kind of contingent compensation he would have gotten at FPL certainly would be in the millions of dollars," Ellinghaus said.

Because Ellinghaus didn't know what Evanson's compensation package at FPL was, he can't say how much of the $6.3 million signing bonus was an incentive - and not just compensation - to get Evanson to take the Allegheny job.

"He was at a pretty good job, so they would have had to induce him somehow," Ellinghaus said.

Ellinghaus said Evanson's annual base salary was on the low side, with many people in such a position making more than $1 million.

However, Noia's salary was reported to be $800,000 in 2002, according to the annual report.

Evanson's fringe benefits include a country club and dining club membership, and use of a company car, the annual report states.

Upon termination of his employment, Evanson will be paid $66,667 for each month he is employed with Allegheny to compensate him for the pension benefits he no longer will accrue at FPL, the annual report states.

For his first year as president of Allegheny, the company will reimburse Evanson for the cost and income taxes incurred for the temporary living costs and expenses he and his family have so he can perform his job responsibilities, and for travel to his home on weekends, the report states.

The compensation information in the annual report also covers what happens if Evanson's contract is terminated by the company or by him.

Evanson can terminate the contract for "good reason," which includes requiring him to relocate to a principal office more than 50 miles from Hagerstown or Monroeville, Pa., the report states.

Last week, Ellinghaus issued a report on Allegheny, in which he noted the possibility that Allegheny will move its corporate headquarters from Downsville Pike southwest of Hagerstown to Pittsburgh next year.

Monroeville is east of Pittsburgh. Allegheny's energy trading subsidiary, Allegheny Energy Supply Co., leases offices in Monroeville, according to the annual report.

Allegheny's West Penn Power Co. owns a corporate center in Greensburg, Pa., which is southeast of Pittsburgh.

An Allegheny Energy spokesman could not be reached for comment on Monday concerning Evanson's contract and the possible relocation of the corporate headquarters.

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