Updated from 6:02 p.m. EDT

Duke's

(DUK) - Get Report

disgraced ruler has been toppled from his throne.

After six years at the helm -- the final two under fire -- CEO Richard Priory is passing the crown to a former colleague.

Paul Anderson, who briefly served as Duke's president and operating chief after a big merger in 1997, has been tapped to serve as Duke's turnaround CEO. Anderson already has been credited with rebuilding PanEnergy, the company that merged with Duke, and a foreign natural resources group.

"I'm very excited about coming home to Duke Energy," Anderson during a conference call with reporters late Tuesday. "I still believe it's the best energy company out there. I'm confident Duke has the resources ... to lead the energy industry out of the

current slump."

Anderson has spent the past five years rebuilding BHP Bilton, an Australian company that ranks as the largest diversified natural resources group in the world. He declined to offer a turnaround plan yet for Duke -- saying he needs a few months to study the company first -- but he did pledge to focus on strengthening the balance sheet and the company's portfolio of assets, as he has done at other troubled firms in the past.

"I've been away for five years," he reminded. "I don't know the current situation nearly well enough to comment" on specifics.

Starting at the Top

Anderson did point to his own strategy at BHP as a possible road map, however.

There, Anderson began his reign by meeting extensively with other members of senior management before launching major changes. He hinted that management itself may be subject to change.

"It's very difficult to come into an organization and not make some changes" to personnel," he said. "But

the changes will be thought out, and they'll be done without a lot of trauma."

News of Anderson's own appointment came just one day after

TheStreet.com

raised the possibility of a looming shake-up in Duke's executive suite. Before then,

TheStreet.com

began noting Priory's unusual absence from recent public events. It went on to report that Priory -- and, to an even greater extent, CFO Robert Brace -- had become huge liabilities in the eyes of some investors.

Darkness on the Edge of Town

Meanwhile, Duke kept its employees in the dark about the coming change. Questioned by a worker about Priory's absence from the company's latest conference call -- which according to many accounts was mishandled by Brace and President Fred Fowler -- Duke offered only a vague response.

"Since being named president and chief operating officer last year, Fred Fowler regularly shares employee meetings and other communication opportunities with Rick Priory," management replied. "This was one of those instances."

Duke went on to defend senior management -- and Brace in particular -- as recently as last week.

As it turns out, Priory had apparently been planning to step down for a while. Anderson told reporters Tuesday that Duke's board first approached him about taking over "some time back" and began negotiating seriously with him at least a month ago.

Still, Duke continued to publicly support senior management -- andBrace in particular -- as recently as last week.

"Robert Brace has played a leading role in developing and executing on

Duke's plans, and is a key part of the Duke Energy senior management team that is committed to achieving future growth," Duke said in response to questions raised by

TheStreet.com

about Brace's performance.

Clock's Ticking

Although Brace remains employed, some Duke insiders believe his time is about to run out. Brace's contract could expire as early as year's end, when Priory himself will be packing up to leave. Priory is officially retiring Nov. 1 at the relatively young age of 56. But he has agreed to assist the new CEO during a transition period scheduled to end early next year.

Some insiders believe both Priory and Brace could hit the door simultaneously. And they point to Priory's management picks -- particularly Brace and former merchant energy leader Harvey Padewar -- as major failures that helped boot him from the company.

The trio, led by Priory, took Duke down a disastrous path that left the company with huge sums of debt instead of the soaring unregulated profits the company had expected. For months, Duke has been in "survival mode" as it scrambles to rebuild its balance sheet and its tattered reputation.

With profits falling and regulators probing, Duke faces clear hurdles as Anderson takes the reins.

"We must ... reassure the regulators that we value our franchise and appreciate the attendant obligations," Anderson acknowledged. "Our challenge is to regain the confidence of our employees, our investors, our customers and the communities in which we operate."

But Anderson views Duke's situation as manageable. Unlike the market in general, he still has faith in the unregulated businesses that have landed Duke in hot water. He also supports the dividend that makes Duke so attractive to some. Although he stopped short of promising that the rich dividend will continue -- saying he needs to evaluate the company first -- he pointed out that BHP planned to cuts its dividend upon his arrival but wound up raising it in the end.

"I need to get the facts around me before I make a definitive comment," he said. But "I feel dividends are pretty important."

He's a Rich Man

Priory, for one, shouldn't need the dividends going forward.

By now, he's a multimillionaire. Just last year -- Duke's worst in recent history -- Priory picked up $5.94 million in total compensation. And he could be entitled to as much as twice his salary and target bonus, as well as other severance perks, when he departs the company.

On Tuesday, Priory offered words of gratitude -- but no apologies -- when announcing his plans to leave.

"I am proud that, thanks to the diligent work of our employees, the business has established a solid foundation for the future," he said. "The energy marketplace has been tough, but I am confident that Duke Energy has the resources -- hard assets, talented people and a respected history -- to lead the industry forward."

Duke shares climbed 10 cents to $18 ahead of Tuesday's news. They fetched more than twice that amount in early 2001.