Not all the fireworks this week were at Fourth of July shows. The relatively low-key merger between Duke Energy and Progress Energy blew up into a big story – and an embarrassment for the new Duke Energy, now the largest U.S. utility. North Carolina utility regulators need to ask, and soon, what really happened when Progress CEO Bill Johnson of Raleigh was unexpectedly forced out of the combined company he had been slated to run.
From the moment of that announcement early Tuesday – Johnson, 58, officially headed the new Duke Energy for all of 20 minutes following formal completion of the merger – it was clear that his departure was far from routine. Though billed as a resignation, Johnson’s exit, it now appears, was an outright ouster by the board of directors of the newly combined company.
That board has a majority of members affiliated with Charlotte-based Duke; ex-Progress Energy directors are in the minority. More and more, this looks like a boardroom coup, although it’s unclear who orchestrated it or why. The big gainer, at least in the short term, is Duke CEO Jim Rogers, who was going to become executive chairman. Now Rogers, 64, is completely in charge.
Beyond personalities and places on the organizational chart, however, the change at the top has significance for the merger approval process that the two utilities successfully navigated. That’s why the N.C. Utilities Commission needs to step in and order a hearing.
There will be plenty to discuss. On-the-record reporting by The N&O’s John Murawski and David Ranii reveals that at least some former Progress directors are hugely upset, saying they were “misled” and speaking of “corporate deceit.” One even said that “I do not believe that a single director of Progress would have voted for this transaction” if they’d known that Rogers, not Johnson, would lead the post-merger company.
Indeed, it was written into the merger agreement that Johnson would be CEO. Business being business, the Progress folks may have been naive to expect things would work out in practice as they were on paper. Maybe this was a case of unmet expectations rather than fraud or deceit.
Right now, though, it’s just as reasonable to conclude that the pre-merger Duke arranged things on the surface so that its acquisition of Progress could jump the regulatory hurdles. Then Duke struck, to the possible disadvantage of former Progress employees and even customers (will Duke honor the plan to retain a sizable Raleigh presence?).
Shed no tears for Johnson in all this. The Wall Street Journal says his exit package could total as much as $44 million, with some of that coming out of the hides of North Carolina electric customers. Meanwhile, Standard & Poor’s has put the new Duke on a watch list for a possible credit rating downgrade. All the more reason for the Utilities Commission to get everything out in the open – and to prove to the public that no matter how big it is, Duke Energy is still a regulated utility.
