Duke Energy is hoping that a $26 billion merger with Progress Energy will help it to bolster its finances and resources ahead of a new phase of investment in the US electricity industry.
The two US utilities have agreed an all-stock deal that will create the largest utility in the USA with an enterprise value of $65 billion and the largest regulated nuclear fleet in the country.
The merger is the latest in a string of consolidations in the US utility industry, which is under pressure to invest in infrastructure but also facing a fall in income due to the economic recession and low energy prices.
“Our industry is entering a building phase where we must invest in an array of new technologies to reduce our environmental footprints and become more efficient,” said Jim Rogers, chairman, president and chief executive officer of Duke Energy. “By merging our companies, we can do that more economically for our customers, improve shareholder value and continue to grow.
“Combining Duke Energy and Progress Energy creates a utility with greater financial strength and enhanced ability to meet our challenges head-on,” Rogers continued.
If regulators give their approval, the newly-merged company will be known as Duke Energy and will serve around 7.1 million electric customers in six states with 57 GW of generating capacity based on coal, nuclear, natural gas, oil and renewables. It will be able to save $600-800 million in fuel costs alone over the first five years, according to Rogers.
Duke Energy shareholders will own 63 per cent of the new company and Progress Energy shareholders 37 per cent, according to Duke. Progress CEO Bill Johnson will be President and Chief Executive.
In November last year, PPL Corp. bought Louisville Gas and Electric and Kentucky Utilities from Germany's E.On. Also last year, First Energy Corp. agreed to buy Allegheny Energy and Northeast Utilities agreed to buy NStar, although those deals have yet to be completed.
Progress and Duke are aiming to close the deal by the end of 2011.
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