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UPDATE 3-Duke director grew wary of 'controlling' ex-Progress CEO
By Matt Daily
RALEIGH, North Carolina, July 20 (Reuters) - Duke Energy's board grew frustrated with then-Progress Energy Chief Executive William Johnson's lack of transparency about a troubled nuclear power plant in the months before their merger closed, Duke's lead director said on Friday.
Ann Maynard Gray, the Duke director, told the North Carolina Utilities Commission that lack of disclosure about the plant and Johnson's "controlling" management style prompted Duke's board to seek his resignation shortly after Duke completed the $18 billion deal that put him in the CEO job.
"I think the reasons why Bill was asked to resign were unique to his leadership style," Gray testified.
The quick CEO switch that put James Rogers back in the top job has created turmoil over the past two weeks for Duke in North Carolina around the deal that created the nation's largest utility.
After hearing testimony from Rogers, Johnson and members of the Duke board from both companies, the North Carolina Utilities Commission chairman said the panel was not ready to "impose some sort of remedy" and the investigation will continue.
Commission Chairman Edward Finley indicated the NCUC had the power to reconsider its order granting approval of the merger, or to force Duke to re-install Johnson as CEO.
"It's been told to us that we didn't include in our order a requirement that the person who was told to us would be CEO (actually) would be the CEO for some reasonable time," he said.
Gray said regulatory moves to alter the merger order would damage the company, which has promised to deliver $650 million in savings to North Carolina's power consumers in coming years.
Duke again criticized the proceedings, especially Finley's refusal to allow its lawyers to question Johnson.
"The Commission has a responsibility to the State of North Carolina to investigate objectively, and its proceedings so far do not remotely satisfy fundamental fairness that due process compels," Duke lawyer Carter Phillips, a partner at Sidley Austin LLP, said in a statement.
Finley said an evidentiary hearing will likely occur later, but suggested a settlement could resolve the investigation sooner.
"We never rule out settlement as a resolution," Finley said before adjourning the hearing.
Gray testified under oath that Johnson got off to a rocky start even ahead of the companies' announcement that they planned to merge, when he gave a presentation in 2010 and discussed how he liked to operate.
"He did describe himself as an individual who likes to learn but not to be taught. That was an expression that stayed with the board," Gray said.
Gray said she and board member Dan DiMicco, the CEO of steelmaker Nucor, were both concerned about Johnson after that initial meeting.
Gray's testimony largely echoed Rogers' comment to the NCUC that it was Johnson's management style, the issues around Progress's Crystal River nuclear plant and the poor performance of other Progress nuclear plants that eroded the Duke board's confidence in Johnson.
Rogers, who is also Duke's chairman, also testified that it was Gray who first brought board's concerns about Johnson to him in the months ahead of the deal's closing, but that he was excluded from the decision to oust him.
As regulatory approvals dragged on, the Duke board judged information provided by Progress on the status of repairs at the Crystal River plant as lacking.
Duke's board requested that Johnson set up a face-to-face meeting with Rogers and the head of Nuclear Electric Insurance Ltd (NEIL) to discuss a claim Progress filed with NEIL, but it only yielded a telephone call with NEIL nine weeks later. NEIL insures the nuclear operations of electric utilities.
That type of delay to a board request would never have happened inside Duke, she said.
"You'd never go radio silent for nine weeks like that," she said. "I think a number of the Duke directors were stunned."
On Thursday, Johnson testified before the commission that he believed Duke tried to back out of the deal after the Federal Energy Regulatory Commission in December imposed expensive requirements on the companies to reduce their market power.
Duke has denied it sought to scuttle the deal, and said it made every effort to comply with the merger agreement.
Duke director Michael Browning testified Friday he was surprised to hear Johnson's version of events. Even with the unfavorable FERC ruling, "we were always committed to closing the transaction," Browning said.
Marie McKee, a Progress board member who joined the Duke board, testified on Thursday that she felt blindsided by Gray's quick effort to remove Johnson after the deal had closed.
She testified that Gray refused to elaborate on the reasons for Johnson's removal during an hour-long board discussion and would only say the Progress CEO was not a "good fit."
Shares of Duke, which have dropped more than 5 percent since the deal closed, rose 10 cents Friday to close at $66.22 a share.
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