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Duke Energy, Progress Forming Largest Utility in U.S.

While the deal would also reduce Duke's portfolio exposure to the de-regulated market -- an advantage if prices remain where they are today -- the management teams at Duke and Progress Energy are betting on the deal being a strategic positive in terms of driving cost savings in the Carolinas and Florida.

More M&A in the utility sector isn't unlikely. "Duke Energy CEO Jim Rogers has said throughout his career that there is consolidation opportunity in the sector, and he's made it a career strategy to consolidate, and we will see further consolidation," Morningstar's Miller said.

"I wouldn't be surprised to see more deals given the level of growth investment required, from improving wire infrastructure to improving transmission grids, adding smart grid and, at the level of generation, converting the fleet from older emissions-intensive coal plants to cleaner burning more efficient plants," the Morningstar analyst said.

-- Written by Eric Rosenbaum from New York.

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