Executive pay and Public Companies and Indianapolis Power & Light and Leadership Transition and Energy & Environment and SEC and Utilities

SEC filing: Ex-IPL chief Murtlow qualified for large payout

November 12, 2011

Indianapolis Power & Light chief Ann Murtlow left the utility this spring under terms of a separation agreement that would have entitled her to at least $404,410, according to documents the utility filed Nov. 3 with the Securities and Exchange Commission.

Murtlow surprised many in March when, at age 49, she announced she was taking a break from her 29-year career in the utility industry.

Murtlow Murtlow

She cited a desire to spend more time with family and as a board member of numerous community organizations in the area. Murtlow, one of few women in such a high post in the utility industry, came to Indianapolis in 2002, shortly after Virginia-based AES Corp. acquired IPALCO, the holding company of IPL. She was president and CEO of IPL and had been an officer of AES.

Her departure payout was buried in a prospectus IPL issued as part of a $400 million exchange of senior secured notes.

According to the filing, Murtlow and the utility struck a separation agreement earlier this year that would entitle her to receive pay and benefits consistent with the AES Corp. severance plan.

Severance agreements are typically triggered by involuntary termination, but AES said that wasn’t the case with Murtlow.

“Ms. Murtlow’s decision to leave the company was voluntary,” AES spokesman Lucas Bushman said in an e-mailed response.

The SEC filing said another officer who left of his own accord, former IPL Chief Financial Officer Kirk Michael, “did not receive any severance payments or benefits in connection with his termination of employment” in 2010.

The separation package paid to Murtlow was per a previously established AES severance plan, under which Murtlow would receive salary continuation “equal to one times” her annual base salary, which in 2010 was $404,410, according to the filing.

Murtlow would also receive health care coverage for at least a year and a payment equal to a pro-rata portion of her bonus, “provided that applicable performance conditions are met.”

According to the IPALCO filing, her bonus in 2010 included annual incentive plan awards of $370,000.

The filing stops short of detailing exactly how much Murtlow received on her way out the door, however.

AES’ severance plan, as it applied to Murtlow, could be triggered by a couple of events.

The reasons for termination can be “due to a reduction-in-force, the permanent elimination of a position, the restructuring or reorganization of a business unit, division, department or other business segment.”

Or, it can be triggered by “a termination by mutual consent due to unsatisfactory job performance.”

Bushman reiterated that Murtlow left IPL and AES voluntarily. In other words, she was not fired but received benefits consistent with the AES severance plan as if she were terminated.

Murtlow’s total compensation in her last full year with the company, in 2010, was $1.19 million. That included stock awards and a total of $583,000 under the non-equity incentive pay.

Early this year, Murtlow was named CEO of the year among large electric utilities by Electric Light & Power.

Among Murtlow’s tasks was to make sure IPL maximized its returns to AES, which received a dividend from IPL last year of $73.2 million.

That compares with $70.9 million in 2009 and $71.6 million in 2008.

IPL’s frequent foe in regulatory proceedings, Citizens Action Coalition, has long alleged the utility was over-earning at the expense of ratepayers.

“They’re nothing more than a cash cow for AES at the moment,” said Kerwin Olson, CAC’s executive director.

Murtlow faced a number of challenges during her term at IPL. When she arrived in 2002, former IPL shareholders were in an uproar. They’d just exchanged their IPL shares for those of AES, but those AES shares soon nose-dived. Many a retiree’s nest egg was, at least temporarily, smashed.

Meanwhile, a series of underground transformer explosions downtown in the last few years ignited concerns of whether a leaner IPL was spending enough to maintain its infrastructure. In 2005, former IPL executive Dwane Ingalls was fired after alleging IPL was sending dividends to AES at the expense of infrastructure upkeep.

In 2009, the Environmental Protection Agency issued IPL a notice of violation regarding environmental upgrades the utility made at its generating plants starting in 1986.

Some of the upgrades did not meet the best available pollution control technology requirements, EPA alleges. IPL has suggested the improvements were of a routine nature and thus best-available technology requirements weren’t applicable. But it continues to discuss the issue with the EPA, and in regulatory filings the utility said the cost of an unsuccessful outcome could be financially material.

Some utilities on the losing end of such cases with EPA have had to pay out tens of millions of dollars, including the $75 million it cost Columbus, Ohio-based American Electric Power under a settlement with EPA.

Murtlow was succeeded as CEO by IPL executive Kenneth Zagzebski.

He receives “the same basic elements of compensation” as Murtlow did, the SEC filing stated, without elaborating.

However, “as Mr. Zagzebski is not an officer of AES, he may not receive the same level or type of compensation received by Ms. Murtlow.”•

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