Charlotte, N.C., July 18, 2012 – Duke Energy suffered from buyer’s remorse a year into its merger with Progress Energy, according to the testimony of Bill Johnson, the former CEO of both companies.
Johnson was replaced by Duke Energy CEO Jim Rogers within hours of the merger’s official completion. The fallout from the CEO shakeup was followed by the resignation of several high-level executives.
Johnson testified at a hearing called by the North Carolina Utilities Commission to look into Rogers’ replacement of Johnson following Duke’s $18 billion takeover of Progress Energy. Duke’s official line is that the CEO swap was arrived at by mutual agreement.
Rogers testified to the same group of regulators that his board lost confidence in Johnson’s management style, which he called “autocratic.” Roberts also said his board was concerned that Johnson’s people would try to impose their company’s culture onto Duke Energy.
Johnson said these characterizations of his management style were part of a scheme to fire him.
According to Johnson, Duke executives wanted to renegotiate the original merger deal in the wake of changes made by the Federal Energy Regulatory Commission to the North Carolina and South Carolina wholesale power markets. Progress Energy resisted going along with this deal unless Duke was willing to pay the $675 million fee for breaking the original deal.
“It was very apparent to me that the Duke management had had a change of heart when they started looking at what the mitigation plan for FERC would cost,” Johnson said.
Progress responded by hiring lawyers to make sure the deal with through, and the company had a motivation to do so. The utility might have faced financial hardships if the Duke deal had fallen through, Johnson said.
In the end, the companies did merge, but Johnson was out within a few hours of the deal’s completion – with a $45 million severance package that resulted in some unflattering headlines for the company.
“They wanted the merger, then they didn’t want it, then they couldn’t get out of it, then they didn’t want to be stuck with me as the person who dragged them to it,” Johnson said.
Duke’s board never told regulators about their planned ouster of Johnson, which has left regulators wondering why they were not told. FERC had the authority to stop the merger by taking back its earlier approval.
The merger, completed July 2, was first announced in January 2011, and creates one of the largest utilities in the U.S. with 7.1 million customers.
The new company, known as Duke Energy, controls assets in North Carolina, South Carolina, Florida, Indiana, Kentucky and Ohio from its headquarters in Charlotte, N.C. The utility owns or controls about 57,000 MW in generation capacity.