Duke Faces Regulatory Heat After Swapping CEO’s Hours After Its Progress Merger

Duke Energy (NYSE:DUK) had to overcome a lot of issues to get through the Progress Merger, which included coming to terms with regulators in the Carolinas. Although the merger is complete now, several issues still remain. This time much of the attention is focused on the ouster of Progress CEO and several other executives from Progress Energy. The market has not accepted this favorably and the stock has been shaky since. This abrupt management change has stoked concerns about the company’s strategies differing or something else going on behind the scenes about which investors are unaware.

We are in the process of updating our analysis for Duke to account for the Progress acquisition and reverse stock split.

See our complete analysis for Duke Energy here

According to the merger agreement, Progress Energy CEO William Johnson was slated to become Duke CEO post-merger, but just hours after the merger completion Duke’s pre-merger CEO James Rogers was elected for the position. Duke Energy is now facing regulatory scrutiny from North Carolina Utilities Commission (NCUC) relating to the abrupt management change. ^[1]

Duke has previously complied with most of the regulator’s mandates to go ahead with the Progress merger, but it could face troubles when new tariffs in North Carolina are scheduled to be instituted later in the year. The stock recently declined on concerns that regulatory issues could postpone execution of tariff hikes. We believe Duke would immensely benefit from the scale it has attained after the merger, but management issues and the regulatory delays could hurt some of its business activities going forward.

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1. Duke Energy Corp Faces Regulator Scrutiny After CEO Switch-Reuters, reuters.com, July 11, 2012 [↩]