Profile: American Capital's Paul Hanrahan

Paul Hanrahan, CEO of American Capital Infrastructure, comes across as someone who is not afraid to delve into the unknown. Last October, he turned his hand to private equity after spending the last 25 years working around the world for AES Corporation, a company which - over the same period - grew from a modest US start-up to a Fortune 200 energy and infrastructure giant.

Having operated in geographies as disparate as Europe, South America and Asia, Hanrahan fits the pioneer profile, a character trait that arguably can be traced back to his time with the US Navy. Prior to entering the corporate world, Hanrahan graduated from the US Naval Academy in Maryland in 1979 with a masters degree in nuclear engineering. There followed five years at the bottom of the sea, serving aboard the nuclear submarine USS Parche, still the most decorated ship in US Navy history.

"They were fun and interesting times," reflects Hanrahan who had reached the rank of lieutenant before deciding to leave the navy in 1984 to pursue an MBA at Harvard Business School.

Start-up days

From there, he joined AES, which had only been set up five years previously as Applied Energy Solutions by Roger Sant and Dennis Bakke, formerly of the US Federal Energy Administration and the Office of Management & Budget, respectively.

"When I joined AES it had been a start-up company involved in developing green field energy projects and doing acquisitions," says Hanrahan who describes the importance of those early formative years with AES to his current role with American Capital.

AES opened its first power plant in Texas in 1985 and by the time Hanrahan joined this had risen to three. The company was already looking further afield for financing, construction and operational opportunities in the power generation and infrastructure sector.

"I learnt so much in those early years with AES," he says. "We didn't know it at the time but we almost ran it as a private equity shop with a very strong operational emphasis. In fact, a number of us who had worked there went into private equity and have been very successful since."

By the early 1990s, global energy markets were opening up and AES set its sights on Europe. Hanrahan was deployed to the UK and it was there that the company really began to develop a worldwide footprint, taking advantage of a time when more and more utilities were being privatized.

After spending two years in London, working on energy and infrastructure projects both in UK and Central Europe, he made his first foray into Asia, moving over to Hong Kong in 1993 to establish a base for AES. While there he set up the company's first Asian subsidiary, AES China Generating Company.

"Looking at what was going on in other parts of the world, it was a good time to come in because at that time China was looking for capital from foreigners to finance infrastructure projects," says Hanrahan. "It is hard to imagine a time when the country didn't have capital, but back in the early 1990s they needed support to build out their power sector. They hadn't localized the capital to do that on a domestic front and it was an interesting time for us."

After AES China partially floated on NASDAQ in 1994, with the US parent retaining 49% stake in the business, Hanrahan moved the Asian headquarters to Beijing, keeping Hong Kong as a support office. By the time he left China in 1997, AES had around seven power plants with a total capacity of 3,000 megawatts.

"What I brought away with me was a lot of experience in the sector with M&A and privatizations," he observes. "This was especially important given that a lot of other places, such as India, Pakistan, The Middle East and Australia, were starting to move in the same direction."

Hanrahan's next step was working on expanding AES' operations in Latin America and he stayed there until 2001 when he was appointed CEO of the company. A decade on and with retirement looming, he began to consider other opportunities. In came American Capital.

"I was on a number of boards just looking for various opportunities and at the same time American Capital was looking to develop an energy vertical," says Hanrahan. "It was something I was particularly interested in doing, given my experience."

Energy agenda

The rationale for establishing American Capital Infrastructure lay in the fact that around $33 trillion needs to be invested between now and 2035 to meet the world's energy-supply infrastructure needs. The private equity firm is looking at potential investments in power generation facilities, power distribution and transmission networks, energy transportation assets and fuel production opportunities.

American Capital has committed $200 million to support the infrastructure unit's initiatives.

Comparing investment opportunities in China's energy infrastructure sector today compared to when he first entered the country, Hanrahan sees a very different landscape. "The country is much more developed and they have some very capable domestic companies working on projects in the power sector," he says. "What I see in China now is a niche market with select opportunities for infrastructure investors."

Hanrahan points to developments such as the increasing demand for shale gas as creating the next generation of energy and infrastructure opportunities in a country where there is still demand for foreign expertise and capital. "I think what is interesting about China is how you participate in the structure," he explains. "It may be a small window but I think you will find tremendous opportunities." 

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