Duke-Progress merger being examined after CEO change

RALEIGH, N.C. — The sudden decision to replace the chief executive tapped to run America’s largest electric company has prompted North Carolina’s attorney general and regulators to launch investigations into whether consumers were misled.

Attorney General Roy Cooper on Friday demanded that the new Duke Energy Corp. provide all information and communications from top company officials and directors leading up to and just after the merger that was concluded on Monday. The North Carolina Utilities Commission said it’s launching an investigation and is ordering the new Duke Energy CEO, Jim Rogers, to appear at a hearing Tuesday.

Cooper last year opposed a Duke Energy rate increase, which the Charlotte-based company said it needed to protect its credit rating.

“Now this significant management change within hours after the merger has put the company on credit watch, so we need to get to the bottom of this to make sure we protect consumers,” Cooper said in a statement.

Standard & Poor’s placed its ratings for Duke Energy on watch for a possible downgrade in response to the sudden leadership change. Progress Energy CEO Bill Johnson had been scheduled to lead the combined company as chief executive, but hours after the merger closed Monday, the new company announced he had decided to leave by “mutual agreement.” Instead, Rogers was remaining to run the expanded company.

The company has refused to disclose the reason for the last-minute change.

Duke Energy spokesman Tom Williams said Rogers would appear at Tuesday’s utilities commission hearing and that the company was reviewing Cooper’s request.

State law allows the utilities commission to rescind or alter its prior decision approving the merger. Duke Energy and Raleigh, N.C.-based Progress Energy said in company documents describing their merger and in sworn testimony by Johnson and Rogers that Johnson would be CEO of the combined company.

One stipulation of North Carolina regulators was that shareholders, not rate-payers, would pay the costs associated with the corporate merger. It’s not clear if Johnson’s severance package was included among those merger costs.

Johnson last week signed a three-year employment contract that was supposed to take effect Tuesday. Duke Energy reported in a Securities and Exchange Commission filing this week that Johnson is entitled to severance, bonus and other payments of up to $10.3 million. On Friday, Williams confirmed news reports that Johnson’s combined package, including pensions and stock awards, could be worth nearly $45 million.

The combined company will serve 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 portfolio of wind and solar renewable energy projects in the U.S.

The state investigations come after former Progress Energy board members Alfred Tollison Jr. and John Mullin III said they felt misled about the merger plans.

Mullin wrote the Wall Street Journal on Thursday, stating: “I do not believe that a single director of Progress would have voted for this transaction as structured with the knowledge that the CEO of Duke, Jim Rogers, would remain as the CEO of the combined company.”

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