By Triangle Business Journal
The new Duke Energy would be the largest utility in the nation, based on power capacity and customers. The company's territory would include 7.1 million customers in six regulated service territories: North Carolina, South Carolina, Florida, Indiana and Kentucky.The company headquarters would remain in Charlotte, though the company says in a news release that it "will maintain substantial operations in Raleigh." Duke says the deal would add to its earnings in the first year after the deal closes. The deal would put more than 80 percent of North Carolinaâ¿¿s generation capacity in the hands of one utility. Duke would far outstrip every other utility in the Carolinas. The concentration in the Carolinas would allow the combined company to save significant money on employee costs. The companies say they do expect layoffs in the merger. They say they have not yet determined how many jobs will be eliminated. â¿¿We currently anticipate that positions will not be eliminated until the merger is approved, which we expect to take about a year, and reductions will be phased in over several years,â¿ the companies say on a website set up to answer questions about the merger. Duke eliminated almost 1,500 jobs when it bought Cinergy Corp. in 2005. The new company can also make more efficient use of the of the power fleet in the Carolinas. Johnson will join Rogers on the board, which will have 11 members named by Duke and seven members named by Progress. â¿¿Our industry is entering a building phase where we must invest in an array of new technologies to reduce our environmental footprints and become more efficient,â¿ Rogers says in a prepared statement. â¿¿By merging our companies, we can do that more economically for our customers, improve shareholder value and continue to grow,â¿ he says. â¿¿Combining Duke Energy and Progress Energy creates a utility with greater financial strength and enhanced ability to meet our challenges head-on.â¿
Johnson says the deal â¿¿makes clear strategic sense and creates exceptional value for our shareholders.â¿ It will â¿¿save money for customers by combining our fuel purchasing power and the dispatch of our generating plants.â¿Both boards have approved the merger. The companies must get approval from state regulators in North and South Carolina, the Federal Energy Regulatory Commission and must clear federal antitrust reviews. Shareholders must also approve. Among the main benefits to Duke in the deal is finding a successor to Rogers, who is 63 years old and faces retirement in two years. One of the most likely candidates, Jim Turner, resigned last month over questionable emails he sent to regulators that were uncovered in an ethics scandal in Indiana. The emails revealed no direct evidence of undue influence or criminal wrongdoing. But they raised questions about overly friendly relationships between the regulators and the company. Progress CEO Johnson is 56 years old and has been running the Raleigh company for a little more than three years. Rogers has been involved in major acquisitions before, most recently in 2005 with Duke Energy's $9 billion acquisition of Cinergy Corp. In the past, he has always been the chief executive of the acquired company and became CEO of the merged business. The Public Staff of the N.C. Utilities Commission estimates the two companies produce about 83 percent of the power sold in North Carolina. The only other significant power producer in North Carolina is Dominion Resources, which serves a relatively small number of customers in northeastern North Carolina. Such market concentration could be an issue in regulatory approval. But it is in many ways less of an issue for utilities than for other businesses. In the Carolinas and Florida, utilities are regulated monopolies within their service area, and so do not compete with each other.
And in the Carolinas, the fact that state utility regulators know both companies well and have good relations with them, could make the merger process easier.It could be more of an issue for the Federal Energy Regulatory Commission and either the U.S. Justice Department or Federal Trade Commission, whichever of the two undertake the anti-trust review of a proposed deal. The two companies can compete for wholesale customers â¿¿ mostly municipalities with their own utilities and membership coops. So questions could be raised in the Carolinas market on those grounds. But many states are dominated by a single utility. Dominion is really the only significant power producer in Virginia. The massive Southern Co. is essentially the power company for Georgia, Alabama and Mississippi. Copyright 2011 American City Business Journals http://www.bizjournals.com/triangle/news/2011/01/10/duke-energy-to-buy-progress-energy.html?ana=thestreet