Duke, Progress say can meet regulators' terms for merger
WILMINGTON, NC. (Reuters) - Duke Energy Corp (DUK.N) and Progress Energy Inc (PGN.N) are confident they can meet conditions set by federal regulators and close their proposed merger by the end of the year, the companies said on Monday.
A ruling late on Friday by the Federal Energy Regulatory Commission (FERC) conditionally authorized the proposed merger, a $13.7 billion deal that will create the United States' largest electric utility.
In a joint statement, the two companies said they planned to file detailed measures within about two weeks to address the FERC's concerns about the adverse effect the combined company could have on the power markets in North and South Carolina.
Progress Energy spokesman Mike Hughes said the companies expect to respond well ahead of FERC's 60-day deadline "to keep the process moving" so the merger can be closed by year-end.
Analysts said they were skeptical about what they called the companies' "positive spin" on the FERC ruling. The ruling concurred with eastern North Carolina municipal utilities which contend the two companies already have too much market control over wholesale power supplies to local utilities.
The merger, these utilities told FERC, would consolidate that market power and leave the new Duke with unfair market dominance.
Calling FERC's conditions "potentially troublesome," Gimme Credit analyst Philip Adams said possible solutions to this might include selling power plants, building additional transmission lines, or turning over control of their transmission system to an independent system operator.
Independent transmission control is "possibly FERC's ulterior motive," Adams said.
Adams said anything proposed will almost certainly change the economics of the merger, and might require additional hearings before the utilities commission in North Carolina, which concluded its hearings on the merger on September 22.
In January, Duke proposed buying Progress Energy for $13.7 billion in cash, in addition to assuming more than $12 billion in debt.
The companies say the merger will create the largest U.S. electric utility with more than 7.1 million electric customers in six states -- North Carolina, South Carolina, Florida, Indiana, Ohio and Kentucky-- and the largest regulated nuclear fleet in the country. The merged company will retain the Duke Energy name.
The companies pointed out that FERC's order did not identify any concerns about market dominance in the combined company's service areas outside the Carolinas.
(Editing by Pascal Fletcher and Andrea Evans)