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CEO Reins to Change Hands at Valero

Posted on: Tuesday, 1 November 2005, 15:02 CST

By Vicki Vaughan, San Antonio Express-News

Nov. 1--Bill Greehey, who built Valero Energy Corp. from a one-plant San Antonio company into North America's biggest refiner, announced Monday that he will step down as chief executive officer at year's end.

During the past five years, Valero stockholders have seen their shares' value grow fivefold -- at a time the Standard & Poor's 500 index lost 7 percent and technology stocks went bust.

"Bill Greehey has achieved every milestone that any chief executive could ask for," said Fadel Gheit, an analyst with Oppenheimer & Co. in New York.

Bill Klesse, 59, now Valero's chief operating officer and a 37-year industry veteran, will succeed Greehey on Jan. 1.

Greg King, 45, will continue as president but with an expanded role.

Greehey, who will remain as Valero's chairman, said it's the right time for a transition.

"I'm confident that this is a great time for this succession," said Greehey, 69. "All great companies have a plan for succession."

Greehey will remain involved by being a "visible advocate" for Valero and the refining industry and by helping develop strategic plans for both Valero and Valero LP, a pipeline company.

"You knew this day would come eventually, but I didn't anticipate it this soon," said analyst Jeff Dietert with Simmons & Co. International in Houston. "Bill Greehey has been a visionary and done a terrific job."

"It's a very good transition and the time is right," Gheit said. "And Klesse is a guy who knows the operation very well; he proved himself under Bill's watch. I think he earned it."

Valero has grown from being a company with just one refinery and 700 employees to No. 15 on Fortune magazine's list of the country's 500 largest corporations.

It now has 18 refineries and 22,000 workers. For 2005, it has been named one of Fortune's "Most Admired Companies."

Valero hasn't been free of critics, however.

This year, Valero and another refiner consented to spend a combined $700 million to add pollution controls to refineries as part of a settlement with the federal government.

Valero also agreed to pay a fine of $5.5 million and spend an additional $5.5 million on projects to further reduce emissions.

In the years that he has guided Valero, Greehey has won as reputation as a frank and aggressive oil executive who isn't afraid to take chances.

Greehey retired once before, stepping down in 1996 as CEO but keeping the chairman's title. After just five months, however, he took over as CEO again after a plan to make Valero into more of a pipeline company ran into trouble.

Greehey, Dietert said, bought refineries on the cheap when the industry's profits were slim, including sophisticated plants that can maximize profits by refining the heaviest grades of crude oil. That strategy has paid off handsomely.

Valero said Monday that its third-quarter profit almost doubled to $858 million compared with $431 million in the same quarter in 2004.

In his current job, Klesse is head of Valero's marketing and refining, the core of the company's operations. He has now been elected vice chairman of the board.

Klesse "understands the business very well; there are very few who have such a broad perspective," said Jean Gaulin, who headed Ultramar Diamond Shamrock as chairman and CEO before Valero acquired it in 2001. "I think Bill Klesse can step in and take it to the next level."

Klesse, a former Ultramar Diamond Shamrock executive, said he and Greehey "have many of the same values." With Greehey's continued involvement, Klesse said, the company will continue to grow and give generously to charities.

King is a former partner at the Houston law firm of Bracewell & Giuliani who joined Valero in 1993.

He has held several key management positions and now has oversight of Valero's finance, administrative and legal divisions. From that role, the company said in a statement, he has been instrumental in Valero's growth.

With Klesse and King, analysts said they don't expect a shake-up similar to that of 1996.

"I don't want to see a sequel to the sequel," analyst Gheit said. "But you could hear it in his tone of voice -- Greehey is ready to enjoy retirement and all the charitable things he's involved in."

Greehey has won kudos from San Antonio leaders who say the company is a leader in corporate giving and volunteerism. Valero employees consistently are among the top donors to the United Way.

Greehey said he plans to stay active in his role as a corporate giver. He'll remain chairman of the Valero Foundation as well as his own nonprofit organization, the Greehey Family Foundation.

The latter, he said, "has been kind of quiet, but we do give money out of it."

Asked if he would ever return as CEO, Greehey said, "God, I hope not. I'm 69 years old."

In any case, he said, there's no need.

"We've got a great organization, and Bill Klesse has terrific people working for him; the strategy of the company has been laid out."

WILLIAM R. KLESSE

Age: 59

New job: Chief Executive Officer at Valero Energy Corp., effective Jan. 1, 2006.

Career: Native of Chatham, N.J. Began as junior process engineer with Diamond Shamrock in 1969. After Ultramar Diamond Shamrock was acquired by Valero in 2001, became executive vice president of refining and commercial operations. Appointed Valero's executive vice president and chief operating officer in 2003.

Education: Bachelor's in chemical engineering at the University of Dayton; master's in finance, West Texas A&M University.

Hobbies: Snow-skiing, jogging, golf and tennis.

BILL GREEHEY

Age: 69

Title: Chairman, Valero Energy Corp.

Career: Born in Fort Dodge, Iowa; former PriceWaterhouse and Exxon accountant. Named head of Valero after it was spun off from Coastal Corp.'s natural gas subsidiary, LoVaca Gathering Co. Has overseen Valero's growth into North America's largest refining company, recognized this year by Fortune magazine as one of America's Most Admired Companies and by Forbes as one of the 'Best-Managed Companies in America.'

Education: Accounting degree, St. Mary's University.

Personal: Devotes free time to charitable causes and to entertaining his grandchildren at a beach house and at his ranch south of town.

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VLO,

Source: San Antonio Express-News

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