Duke Energy chief executive Jim Rogers traces the roots of a state investigation into the Duke-Progress Energy merger to differences in how regulators viewed the $32 billion deal.
In his first interview on the settlement that ended the probe in December, Rogers said the merger was worthwhile despite an 18-month approval process and forced management changes at Duke.
“The birthing process of the creation of the largest utility in the country has been quite difficult,” he said Wednesday. “I think the baby is going to be beautiful.”
The N.C. Utilities Commission reacted swiftly when Duke’s board elevated former Progress CEO Bill Johnson to lead the combined companies, as planned, then abruptly fired him.
At the heart of that reaction, Rogers said, was regulators’ perception that, with Johnson in charge, the smaller Progress would have been on equal footing in the combination with the larger Duke.
“Sometimes in life you get sideways, and we got sideways with the commission because they saw this as a merger of equals,” he said. “We saw this as an acquisition. They saw (the investigation) as an opportunity to rebalance what they thought was a merger of equals.”
There’s evidence to back up that view. The commission staff, in recommending the case be settled Dec. 3, wrote that it would “restore the balance between Duke and Progress in the merged company as originally represented before Bill Johnson’s termination and the departure of other key Progress executives.”
Rogers said he personally negotiated the settlement terms with commission Chairman Edward Finley, after Duke’s board vetted them, and with the help of current Duke and former Progress director James Hyler. Both he and Finley wanted to resolve the issue, he said.
The settlement specified that Rogers, who will turn 66 in September, leave Duke when his contract expires at the end of 2013, and urged that a search committee find his replacement by mid-year. It also ordered Duke to shift three other top executives to new positions.
In testimony before the commission, Rogers and Duke directors said management differences with Johnson, Progress’ poor financial performance and problems at its nuclear plants led to Johnson’s ouster. “We basically had a fixer-upper on our hands,” Rogers said Wednesday.
But Rogers said Duke didn’t try to get out of the deal because it would run the risk of lawsuits and couldn’t prove a “material adverse event” or “burdensome regulatory conditions” as required.
Despite all that, he said, the merger produced a bigger and stronger Duke.
“I think over the next five to 10 years, as good as we are today we’re going to be even better as a consequence of this,” he said. “I’d do it again. I might not do it exactly the same way, but I’d do it again.”
Duke’s stock rose the day after the settlement, Rogers said, boosting its value to investors by $1 billion.
Rogers credited his 29,000 employees with staying focused despite the turmoil. Duke’s stock outperformed an industry index in 2012, its nuclear fleet hit performance milestones and 11 of the 21 analysts who cover the company have recommended that investors buy its stock.
“They demonstrated perseverance, resilience and the ability to steadfastly focus on the goals,” he said. “Last year was a great tribute to the people of this company, to live through that.”
Rogers said he has had no further contact with Johnson, who was hired last year to head the Tennessee Valley Authority.
After a quarter-century as an energy CEO, Rogers is writing a book, mulling his legacy and considering options that could include a job in public service as he starts his last year at Duke.
The book, still untitled, will blend Rogers’ experience with expert interviews on how the energy industry might evolve in coming years and how it will address environmental challenges.
Rogers considers himself a steward of his stockholders’ money – total returns of the three companies he’s led since 1988 rank No. 2 among U.S. utilities, according to Duke’s calculations.
He touts investments in renewable energy and reductions in power plant emissions, in part as utilities turn to cleaner-burning natural gas. And he credits Duke with embracing coal gasification technology at its new Edwardsport plant in Indiana, which is $1 billion over budget but will sharply reduce emissions.
“I always use the expression, the pioneers get the arrows, the settlers get the land,” Rogers said. “And in some instances I’ve been a pioneer.”
He will advise Duke’s board on hiring a new chief executive and said he continues to raise money for the Democratic National Convention host committee, for which Duke guaranteed a $10 million line of credit. The committee borrowed $7.9 million from the credit line, to be repaid by Feb. 28.
“We’ll see how that goes, but at the end of the day we’ll do our best to get our money back,” he said. “But if we don’t, it’s just a contribution we’re making I think for the greater good of our community.”
Rogers said he and his wife Mary Anne plan to stay in Charlotte after leaving Duke. He said he’s open to public service – he’s been rumored to be a candidate to replace Energy Secretary Steven Chu – but said he’s also interested in helping bring electricity to Third World countries.
“I view that I’m in a transition mode. I don’t know what my mission will be,” he said.
“I’m very intrigued by the idea of playing a role in bringing electricity. I also think that serving my country might be a good thing to do, it depends on the role.
“… I’ve been working full-time since I was 19 years old – my great-grandfather lived to be 104 – and I think I’ll work another 10 or 20 years.”
Henderson: 704-358-5051 Twitter: @bhender