Wade Hensel

Illustration by J.R. Smith – Photo by Kris Kathmann

Columnist George Will turns to Wade Hensel and asks about Gov. Tim Pawlenty’s recent job performance and Wade is so nervous his knees start knocking Morse code. Wade offers his opinion. He is front and center in bright-lights Nashville readying to address 6,000 peers in 2003 as Chairman of $20 billion in assets Cooperative Finance Corporation (CFC), a private organization owned by 800 rural electric cooperatives. George Will, Wade’s keynote speaker, is nervous too yet later coolly delivers his spiel on world events, politics and those lovable Addison Street losers, the Chicago Cubs.

North Mankatoan Wade Hensel is acting precocious, again.

At 29, he becomes one of the youngest general managers ever of a U.S. electric co-op and is named a Valley Industrial Development Corp. (now Greater Mankato Economic Development) board member alongside business leaders twice his age.

At 31, the Minnesota JayCees name him an “Outstanding Young Minnesotan,” impressive, considering Walter Mondale, Dave Durenberger, Tim Penny and Roger Moe also have won.

At 36, he is elected to the Mankato School Board.

At 45, he is elected to CFC’s Board (that’s $20 billion, not million).

At 51, he is chair of CFC, and general manager of not one but two rural electric co-ops (BENCO Electric and Brown County Rural Electrical Association) and president of North Mankato Port Authority and board member of Greater Mankato Economic Development.

So what’s next on his busy agenda today at 52? Word has it that his next position of responsibility entails being faster than a speeding bullet and more powerful than a locomotive. He will leap tall buildings in a single bound. Look! Up in the sky! It’s a bird. It’s a plane. It’s Electric Man!

CONNECT: When people ask for your job title, do you say you’re General Manager of BENCO Electric Cooperative, of Brown County Rural Electrical Association, or both?

HENSEL: In Mankato I say General Manager of BENCO Electric, in Sleepy Eye General Manager of Brown County REA, and when I’m at national association meetings I say both. I’m General Manager of two different companies.

CONNECT: I’ve read in one place that BENCO has a “special relationship” with Brown County REA and in another place that a merger occurred. Which is it?

HENSEL: It was not a merger. When Les Schrupp, former General Manager of Brown County REA, retired, Brown County REA looked to BENCO to share the position of General Manager. They said they weren’t looking for a merger. A strategic planning session took place in 2002 in which both boards determined the “sharing” arrangement was going well enough to contractually extend it through 2009. There was no particular reason 2009 was chosen except to send employees of both companies the message that ours was a long-term relationship requiring everyone to continue working together in various areas.

CONNECT: In what other areas do you work together?

HENSEL: We hold joint staff meetings to share ideas and monthly joint board meetings in which BENCO and Brown alternate hosting. Both boards know everything going on and the staff meeting minutes say Brown/BENCO. The special relationship works.

CONNECT: This “special relationship” sounds like an engagement period before a marriage.

HENSEL: In 1980, BENCO consolidated with Faribault County REC. In 1988, what was then Frost Benco merged with Wells Electric. So we’ve gone through a consolidation and a merger. Currently, there are other shared management relationships like ours in the industry. We’re not planning to merge, although the discussion has come up.

CONNECT: In other words, a merger could happen, but yet it may not.

HENSEL: That’s right. There has to be a good reason to merge. You just don’t do it for its own sake. Merging would take a huge effort and it must make financial sense.

CONNECT: The size of both operations? the number of employees in each?

HENSEL: BENCO has 12,000 customer/members and 35 employees. Brown County REA has 3,500 customer/members and 16 employees. BENCO does about $20 million in annual revenues and Brown County REA about $8 million. We’ll be at $30 million combined soon.

CONNECT: Your biggest customer?

HENSEL: Taylor Corporation is BENCO’s. An ethanol plant is Brown County’s.

CONNECT: The National Rural Electric Cooperative Association (NRECA), of which you are a member, lobbies to protect the interests of rural cooperatives such as yours. They lobby for a number of issues, such as RUS, PMAs, electric deregulation, and the special co-op tax status. Could you explain each?

HENSEL: Starting with RUS, that stands for Rural Utility Service. We get our financing from two sources: RUS, which is our public debt financing source; and the $20 billion in assets Cooperative Financing Corporation (CFC), which is our private financing source.

Last week in Washington I was with 2,500 other NRECA members lobbying on several of these issues, including the rural electric loan program, which is part of RUS, which is part of the USDA. BENCO and Brown County borrow money from the RUS program. At BENCO and Brown County we try to keep our equity at 50 percent. So we borrow about 50 percent of our capital needs and generate the rest from our own membership internally.

Last week we visited with Gil Gutknecht, Mark Dayton, Collin Peterson, and Mark Kennedy. Other Minnesotans in our delegation visited other Minnesota Congressional members, such as Norm Coleman. Gil was chairing a committee when he left that meeting to spend perhaps 20 minutes with us. Collin Peterson and Mark Kennedy each gave us about 30 minutes. Sen. Dayton had breakfast with us and spoke, so we had a little more than 30 minutes with him. We worked the issues well to make sure they understood them. We have national lobbyists, but we were there to reinforce their work. We try not to take too much of their time.

CONNECT: Is there a danger of RUS going by the wayside?

HENSEL: Politically, NRECA and rural electric co-ops have a strong presence in Washington because we are perceived as being in business for the right reasons, i.e., providing rural people with good electric service at reasonable rates. Although pushed back and forth a bit depending on the administration or party, we really do have a solid support base inside both parties. But we don’t take that support for granted because we understand how important it is.

CONNECT: PMAs?

HENSEL: That’s a power marketing administration. BENCO doesn’t receive any hydroelectric power from the Western Area Power Authority (WAPA), a PMA along the Missouri River, but Brown County REA does. WAPA helps keep Brown County rates low and is an important part of our wholesale power supply. We lobby Congress to maintain our contracts and supplies. BENCO uses Great River Energy of Elk River (generating plants in North Dakota) as its only supplier of energy while Brown County REA uses WAPA and Great River Energy.

CONNECT: Electric deregulation?

HENSEL: A few years back that issue was hot. However, since then we’ve seen the bad fruits of deregulation occurring in other states. Practically speaking, deregulation doesn’t work well.

Power suppliers often must invest millions and billions in generating plants, transmission lines, and distribution lines. In order to receive financing for those projects and power supply contracts—for the system to work—the industry needs much more stability than what deregulation creates. Personally, I think the supply of electricity is too important to leave it up to folks like Enron and others, who have their own self-interest at heart instead of serving members or customers. Electricity is too important. Just look at the blackout last summer: Companies preparing for deregulation often cut staff, don’t invest in transmission lines, don’t do things they should. You saw what happened in California, too. As for electric co-ops, the only reason they exist is to provide the best service at the lowest possible cost consistent with sound business management.

CONNECT: What would happen to your residential rates if a larger power company under deregulation cherry-picked one of your choice manufacturing customers, say, Taylor Corporation?

HENSEL: BENCO is an energy distributor, not a generator. We buy energy from Great River Energy of Elk River, a cooperative of which we are one of 29 owners. Under deregulation a customer could buy that energy from anyone, but we would still be the distributor, meaning we would be the ones getting that energy to your door using our poles, lines, and transformers. We could still charge customers for those “hardware” services. Under a deregulation scenario, our supplier Great River Energy would be the one at risk, not BENCO Electric Cooperative or Brown County REA.

Deregulation doesn’t work well. Generating plants cost a billion dollars to build. Finance companies won’t provide the backing for that size of an investment without the certainty of a stable customer base. They just won’t do it.

CONNECT: You’re saying the stability of the system might be at jeopardy?

HENSEL: Yes, and we’ve seen instability happen in California and Montana.

CONNECT: Discuss the co-op’s special tax status.

HENSEL: I would change that phrasing. (Laughter.) Rural electric cooperatives are nonprofits and operate under the IRS tax code as such. Profit is not our goal. What we try to secure through our lobbying efforts is financing. There isn’t much talk in Washington of changing our industry’s tax status. It’s not a big issue.

Each year we generate enough revenue to meet our expenses and help us build our plant. We use what is left to pay back capital credits to our customer/members that helped build the system in prior years. We don’t have external stockholders.

CONNECT: You are a nonprofit. Yet you also own part of Heartland Security Services, a new business in this region that competes with for-profit companies in providing home security systems and farm monitoring systems for confinement facilities. Some people competing with you in that industry believe your nonprofit status gives you an unfair advantage. Your reaction?

HENSEL: Heartland Security Services is a for-profit business owned by 10 nonprofit electric cooperatives. So BENCO is a 10 percent owner. A person could say the seed money for this for-profit business came from nonprofits. It’s a for-profit business that unfortunately hasn’t turned a profit yet, but it is only a few years old. We expect it to cash flow this year and make money in 2005.

CONNECT: Couldn’t you and other cooperatives start businesses in other industries?

HENSEL: We have looked at services our rural members might find useful and thankfully haven’t followed through on several of them. A number of cooperatives are involved in the propane business. We talked it over, but decided it didn’t fit our area. But another industry we have entered has been a huge success: the Cooperative Television Association.

Here’s the story how that venture began. Over ten years ago I was home on a Sunday night by the fireplace at 9:00. A co-op member called and wanted to know if I was familiar with what was going on at Watonwan Television Improvement Association. I said I didn’t know anything about it. He said “something” not good was going on, and that we should take the business over, which included their UHF television business and their Godahl tower, near St. James.

The next morning I called neighboring co-op general managers Tom Malone, Rick Burud and Les Schrupp to ask them if they knew the situation. Apparently, the business had suffered an embezzlement of funds. We agreed that to serve our customers we should buy this UHF television rebroadcasting business. Other companies were wanting to purchase it, too.

In short, we took it over and added $1.5 million in improvements, such as updating the transmitters, adding towers in Frost and Jackson, adding channels (eight now), increasing wattage, and raising the height of the antenna. And we have paid off the debt. The business has become challenging because of recent changes and mandates involving digital television. And we deal with the FCC, a world removed from our electric regulatory body.

When I was a kid growing up in northern Minnesota, REA General Manager Hubert Evensen of Big Fork put up a similar tower so we could receive two channels. If people didn’t pay enough to cover the costs, he would have the screen go black as a reminder for us to pay. We haven’t had to do that here. Payment for receiving signals from the tower is voluntary, four dollars monthly. Enough people pay to keep the signal going. However, not everyone who should be paying is paying.

If necessary we could scramble the channels, thereby forcing people to pay. I’m opposed to it. For one, our goal at BENCO and Brown County REA (and co-ops in St. James and Jackson) isn’t to make money in this venture. We just want to make television available for our rural customers. If not making enough from voluntary payments to cover costs, we could begin scrolling a message across the bottom of the screen to remind people to pay or we could put a blank screen up until we received enough.

Or we could spend $1 million to begin scrambling the signal. That means we’d be spending $1 million of our customers’ money in order to force them to pay us back. That sort of “investment” doesn’t make financial sense. We’re not trying to compete with cable TV. We offer basic channels, and quite frankly our UHF signal is not crisp or clear as cable.

As for our Frost tower, there is no way that tower would have been built by anyone other than our group. It just wouldn’t have happened. It couldn’t have happened. It doesn’t make economic sense. But it does serve our customer base and we can use the towers for other purposes.

CONNECT: On to another topic: Your businesses are based in a rural area where lots of crops are grown, lots of manure is made, wind is readily available, and lots of trees could be grown. Have you researched the possibilities of generating electricity from alternative and renewable sources?

HENSEL: We’ve looked. But contractually we must buy all our power from Great River Energy. One fellow member of that co-op does have a methane digester to generate power. Others will likely follow their lead. I just heard recently that a power supplier in Wisconsin has entered into a contract to utilize more methane digesters. Great River Energy is looking into it, too.

But Great River Energy is more interested in wind generation. BENCO and Brown County REA just approved Great River Energy’s deal to purchase 100 megawatts of wind generation annually. Rather than each company investing in alternative sources separately, we prefer it be done as a group to minimize risk.

CONNECT: Some 20 years ago you were on the original board of what is now Greater Mankato Economic Development. Louise Dickmeyer is its Interim Director. What happens if she wins her race for state representative? What will that do to GMED?

HENSEL: When hearing Louise was running, I didn’t consider that a problem. She’s Interim Director and for my knowledge isn’t planning on applying for a permanent position. We’re in the process of finding a permanent director. This wasn’t even an issue.

CONNECT: So she was definitely hired as Interim and nothing else?

HENSEL: That’s right. Now I’m not on the selection committee for GMED. So I’m just telling you what I heard. Lou told me a while ago that being a permanent director was not her intention. This was before she announced running for the state legislature.

CONNECT: What do GMED board members talk about behind closed doors? JOBZ?

HENSEL: The JOBZ program is mentioned only in passing at GMED meetings. We spend more time talking about visits with current employers to encourage and facilitate retention and expansion, and responding to prospects sent to us by the state, our website, or from local contacts. We also communicate with business-owning MSU grads, asking them to bring their companies home. We’re always working with the two cities. And right now, because of Brian Fazio’s tragic death, the main issue on our agenda is just replacing Brian.

CONNECT: In 1983, you were named one of 10 “Outstanding Young Minnesotans” by the Minnesota JayCees. Dave Durenberger, Mark Dayton, Walter Mondale, Roger Moe and Tim Penny all won the same award in other years. Have you considered running for political office?

HENSEL: I’ve served on the Mankato school board, and won and lost elections for it. Winning felt better. I’ve thought about running for office, but if I did I’d run locally rather than statewide. I’ve considered running for Mayor of North Mankato, but the timing hasn’t been right.

CONNECT: North Mankato Port Authority has taken it on the chin the last few years. You are its President. Two questions, and here’s the first: referring to the grocery store on Commerce Drive, was it right for you to become involved in retail development in North Mankato?

HENSEL: We’ve provided many low-interest loans for retail, mostly on Commerce Drive. Nearly everyone would say this program has been successful. Where we had our biggest downfall was when we invested in the actual grocery store building.

Back when we did, I saw that the people involved in that grocery store project were investing a lot of their own money, which to me inferred that they knew what they were doing. I also thought the building would retain its value if problems arose. That was my logic; I’m just telling you what I was thinking. But it didn’t work out. The Port Authority lost a significant amount of money in the building’s sale.

Two things: as a North Mankato hilltop resident, I knew that people up there wanted a grocery store. There was no doubt about that in my mind. Now we certainly didn’t plan on losing money. What can you say? What I am thankful for is that we have a grocery store now, and hopefully the owner’s occupancy costs will allow her to keep the store going. It’s an important part of our community.

CONNECT: Tell me the good the Port Authority has accomplished.

HENSEL: In the early ‘90s we created North Port Industrial Park, which at the time I thought was a much bigger risk than building the grocery store, especially given the economy then. We purchased 40 acres and built a multimillion dollar, 100,000 square foot building that was only half pre-leased. Kaye Corporation and others are there today. Now that was risk. I was nervous about it. But it turned out wonderfully.

Today, North Mankato has about $100 million worth of property that was developed with the help in some degree of North Mankato Port Authority. Thousands and thousands of jobs have been created. Also consider the taxes generated and the housing built for the employees. Economic development is risky. Not every project will work. That said, we’re going to look more closely now at anything retail-related.

CONNECT: Have you had retail success stories?

HENSEL: There are a number of businesses, primarily on Commerce Drive, that have received a level of assistance through North Mankato Port Authority. Our assistance might have been just getting the land ready or offering low interest supplemental loans—gap financing, usually under $50,000. The only two buildings we’ve constructed were the North Port Industrial building and the grocery store.

CONNECT: Highway 14 runs right by the industrial park. What would its completion accomplish for this region?

HENSEL: A completed, four-lane Highway 14 would greatly enhance our opportunities for economic development by improving access to I-35. And a new road would be safer. Friends of mine have died on that highway. I work in Mankato and Sleepy Eye, and frankly I avoid Highway 14 by taking Highway 68 and county roads. A completed Highway 14 also would offer better access to Rochester and its medical facilities.

CONNECT: You used to be chair of Cooperative Financing Corporation. What is that?

HENSEL: As I’ve said briefly before, Cooperative Finance Corporation (CFC) is a national private lender providing debt financing to electric co-ops to supplement the federal government’s RUS financing program. CFC is owned by BENCO, Brown County and perhaps 800 other cooperatives. Just like owning part of an electric supplier, Great River Energy, we also own part of our own financing company, CFC.

In the mid-’90s, I asked my BENCO board for permission to run for the seat representing North Dakota, South Dakota and Minnesota on CFC’s board. They said yes, and in a close election I was elected. CFC is a co-op with more than $20 billion in assets, $35 billion in loans outstanding, and more than $1 billion annually in revenue. My last year, 2003, I served as board chair.

It was a phenomenal experience seeing the dealing of billion dollar bonds on Wall Street and in Europe, and how financing is acquired and done nationally. We were using bond dollars primarily to loan to rural electric co-ops investing in poles, wires, and transformers. As a side note, I also served on the board and was an officer of Rural Telephone Financing Corporation, a CFC subsidiary, providing financing for rural telephone companies. I know we provided financing for HickoryTech and Midwest Wireless among others.

CONNECT: Were you intimidated when first taking the CFC board position? A $20 billion in assets corporation is rather large.

HENSEL: Yes. Absolutely intimidated. The board meetings were in a Washington D.C. suburb, Herndon, Virginia. It helped a bit going in that I knew the CEO, who’d been a field representative for CFC in Minnesota ten years prior. The scope of the business was beyond my imagination. Going in, I didn’t know the vernacular. I had a tough time early on even understanding their discussions on interest rates, swaps, not taking currency risks. You had to pay attention. It was a whole different world. I’ve tried to bring some of that knowledge back for use in making decisions here.

CONNECT: How did you get up to speed on that board?

HENSEL: Our board packets were three inches thick. I read and read and read. Our CFO at CFC, Steve Lilly, who I greatly respect—I listened to every word he said and asked questions. I was on the board six years from 1997-2003 and was 2003 chair.

What an experience to speak in front of 6,000 people in 2003. I was shaking in my boots. Newspaper columnist George Will was the featured speaking at our annual meeting that year in Nashville. George Will and I had a conversation while seated in the back of the hall waiting for the meeting to begin. I told him I was from Mankato, Minnesota. He seemed to have heard of it. He asked about our new governor, Tim Pawlenty, and how he was doing. I think he was a little nervous himself. He said he wasn’t used to speaking in front of 6,000 people. He was personable. In speaking, he talked of politics, global events, baseball, and tied it together.

CONNECT: What skills did you take from that experience as chair?

HENSEL: I learned a great deal about financing, portfolio and debt financing management, and public speaking—though no matter how many times I speak in front of a crowd I’m still uncomfortable and nervous. I also gained a broader perspective on the world. However, I couldn’t have done all that without the help of a great staff back home and the board allowing my involvement. I also could not have done it without the support of my wife, Mary Jo, and my family. I became CFC chair at the same time we were starting our special relationship with Brown County REA. Now I wonder how I found the time to do everything.

CONNECT: You were also on the board of RTFC. I’ve heard a digital divide exists between cities and rural areas. What role does RTFC play if any in bridging the gap?

HENSEL: RTFC for the most part lends to incumbent exchange carriers. They don’t lend much for wireless, although they have. Near the end of my board term, bond rating agencies didn’t like us investing too much in wireless or competitive local exchange carriers.

I don’t know if RTFC will conquer that digital divide as much as other efforts being made. There is money available through RUS. Also, BENCO and Brown County REA have looked into providing Internet in rural areas, but decided against it because we weren’t sure of the technology or the risk. Right now Midwest Wireless has small, unlicensed microwave systems that work. Other groups will be offering satellite Internet service. Slowly, that digital gap is being bridged.

CONNECT: Anything we missed?

HENSEL: One last thing: I’ve had the pleasure of being on MRCI’s board, too. MRCI does a wonderful job providing people with disabilities employment opportunities—I have a great deal of respect for MRCI.

Phone His Home

I have my name in the phone book. My home phone number is on my business card. Every co-op member knows at least one of our employees, so we’re not some anonymous company. I ran into a member I hadn’t seen in five years at a store Tuesday. I said, “Missed you at the annual meeting this year.” We had almost 1,500 people there. He said, “You noticed I wasn’t there?” Co-ops are different. We’re closer to our customers. —Wade Hensel

The Medium Is The Message

BENCO and Brown County REA, and other rural electric cooperatives, offer voluntary-payment UHF television service including KEYC-TV Mankato at towers in Godahl, Frost and Jackson; “CTV Plus” scrambled channels for a fee including CNN, ESPN, Fox Sports North, Discovery, and WTBS; and a movie channel, Showtime.

Rollin’ On The River

North Mankato Port Authority (NMPA) was created by the Legislature in 1985 as an economic development resource for the City of North Mankato. Two board members are Council members and five are volunteers appointed by the Council to six-year terms. The State jumpstarted NMPA with a 1988 grant of $500,000 that was later loaned to Sween Corporation to help it choose North Mankato. In 2002, a similar-sized State grant aided Capstone Press. Both Sween (now Coloplast) and Capstone Press had to meet job creation and salary level requirements.

Repaid loans, State grants, and funds from industrial park development create money for new NMPA loans. Projects assisted since 1986 now have a market value of more than $100 million and in 2003 contributed $1.42 million in real estate taxes.

Companies assisted in some fashion by NMPA include:

Alliance Pipeline, C&N Sales, Capstone Press, Carlson Craft Commercial, Culver’s Restaurant, Coloplast (Sween), Corporate Graphics, James Tower, Kaye Corporation, Label Works, Lindsay Window, Mankato Business Products, Masterpiece Studios, MBA Computer Services, Palmer Bus Service, Peter Pan Preschool, Precision Press, Royal Lube, UPS.

Source: North Mankato Port Authority

Getting To Know You: Wade Hensel

Born: December 28, 1951

High School: Big Fork High School (Minnesota)

College: University of Minnesota-Duluth, ‘74, political science

Personal: Married 29 years to Mary Jo, children Katie, Bill, and Brooke

Current Organizations: North Mankato Port Authority, President; Greater Mankato Economic Development, Board

© 2004 Connect Business Magazine. All Rights Reserved.