Duke, Progress complete merger; Progress CEO out
Duke Energy Corp. and Progress Energy Inc. said Tuesday they had completed their merger now valued at about $32 billion to form the nation's largest electric company. But the normally routine event came with a twist.
Bill Johnson, who was tapped to lead the combined company as president and chief executive, has decided to leave by "mutual agreement," the companies said.
Duke CEO Jim Rogers, who was expected to be executive chairman, has instead been named CEO of the new company.
"This is day one and we're all one group of employees," Rogers said in an interview. "They see what I see which is a belief in the long-term proposition of this combination. We put together the largest utility in this country. We see tremendous opportunities. We have a deep bench of capable people that can deliver."
Whether it was Johnson or the company's board that had a last-minute change of heart is unclear. But as late as Monday, Duke staffers were describing Johnson as the pending CEO and scheduling post-merger interviews for him as the top manager.
The company declined to answer questions about the switch.
"We are not going to address any questions with regard to the board's deliberations. Bill resigned by mutual agreement with the board," Ann Maynard Gray, lead director of Charlotte-based Duke Energy's board of directors, said in an interview.
Rogers said he spoke early Tuesday with about 60 of the combined company's top executives to keep them on board with the new leadership. Some of those executives coming over from Progress Energy likely had developed links to Johnson and may have expected that relationship to help them advance in the new company.
"It is very strange. We were not expecting that, so I don't know what to say," Bernstein Research analyst Francois Broquin said. "No one had any answer on what were the circumstances behind the change."
Rogers has twice before been the CEO leading his company through a merger, first when PSI Energy became part of Ohio-based Cinergy in 1988 and again when Cinergy merged with Duke Energy in 2006.
Duke won federal approval for the merger announced in January 2011 on June 8. The North Carolina Utilities Commission voted in favor of the deal last week. South Carolina's Public Service Commission approved an agreement Monday.
The combined company will serve about more than 7 million customers in North Carolina, Kentucky, Ohio, Indiana, Florida and South Carolina. Duke Energy's more than $100 billion in assets include power plants in Central America and South America and a growing portfolio of wind and solar renewable energy projects in the U.S.
Experts said the new company will be able to borrow money more cheaply, and it will use fewer coal-burning power plants in favor of ones that use natural gas. It's also expected to keep power prices stable. Regulators saw the deal as the best possible in an environment of energy industry consolidation.
Rogers said on a conference call with analysts that his top focus would be realizing the promised savings from the merger, followed by coping with the costs of a shutdown at Progress Energy's Crystal River nuclear plant in Florida. Crystal River has been down for repairs since 2009 and isn't expected to operate again until 2014. Raleigh-based Progress Energy had proposed building two new nuclear power reactors at the site.
Among the benefits Rogers stressed was that adding Progress Energy's regulated markets in the Carolinas and Florida increases the new company's percentage of revenues from regulated electricity sales, a business in which profits are controlled by state regulators but largely assured. About 85 to 90 percent of the combined company's revenues will come from its regulated business, compared to about 75 percent for Duke Energy before the merger, a spokesman said.
Duke Energy said it continues to project 2012 earnings at between $4.20 and $4.35 per share after accounting for a reverse stock split giving shareholders one share in the expanded company for every three shares they now own.
The price for each share tripled after the reverse split and the combined company's stock closed Tuesday at $68.69 per share.