Duke deal with Progress would create $14 billion utility 

The two firms have a combined total of six Westinghouse AP1000 reactor license applications pending with the NRC

Duke Energy announced Jan 10 it plans to buy Progress Energy for $13.7 billion in a deal that will create America’s largest utility with the largest fleet of commercially operational nuclear reactors in the country.

The new company, to be called Duke Energy, will have a combined value of $65 billion and about 57 GWe of domestic generating capacity from a diversified mix of coal, nuclear, natural gas, oil and renewable resources. About 16% of the generating capacity of the combined firm would come from nuclear energy. It would become the largest regulated single fleet of nuclear reactors in the U.S. See charts below.

Duke Energy operates the Catawba, McGuire and Oconee nuclear plants, which between them have seven nuclear units. Progress Energy operates the Brunswick, Crystal River, Harris and Robinson nuclear plants, with a total of five reactor units.

Six reactors all waiting

The NRC lists six Westinghouse AP1000 reactors with pending license applications for the two companies. At Progress they are Levy County, FL, 1 & 2; and Shearon Harris, NC, 2 & 3. At Duke it is the William States Lee III plant in SC. The pace on all six combined construction and operating license applications has ground to a halt while the two firms grapple with the implications of diminished electricity demand due to the ongoing deep recession in the U.S.

The combined company would serve over seven million customers. The combined rate base could make the difference in obtaining funding for the new reactor projects planned by both companies. Both firms, but especially Progress, have worried about the "bet the company" costs associated with new reactors. Recent unofficial estimates for the twin reactors at Levy County put the combined cost, plus infrastructure improvements to the Florida grid, as $14 billion.

In recent months, Duke has been exploring postponing construction of the William States Lee III reactor. Instead, the firm is looking into buying a 500 MW slice of Scana's V.C. Summer Station. Like the planned Duke power station, the Scana site references two 1,100 MW Westinghouse AP1000 reactors.

Duke has also announced plans to assess the opportunity of building a 1,600 MW Areva EPR at Piketon, OH. It would be part of an Areva "Clean Energy Park" that could include co-located biomass and wind energy projects.

Regulatory maze ahead

Work on regulatory approvals will mobilize an army of lawyers. The list of agencies with something to say about the proposed merger include the Federal Energy Regulatory Agency, Nuclear Regulatory Commission, and the public utility commissions of North Carolina, South Carolina, and seven other states. The target date for completion of the massive merger is by this time next year.

The Wall Street Journal reported Jan 10 that while being a regulated utility is a plus when it comes to raising money, it can be a curse when saving it. The WSJ pointed out that the public utilities commissions in North and South Carolina may seek to pass savings from the merger on to rate payers. This approach by regulators reportedly ended plans for Exelon to acquire Public Service Enterprise Group in New Jersey.

If the merger of the two companies goes through as expected, Duke shareholders will own 63% of the combined firm and Progress shareholders will own the minority stake of 37% A key aspect of the deal is that Duke will assume just over $12 billion in debt from Progress.

According to a joint press release from the two firms, the merger will create more predictable earnings and cash flows to support dividend payments to stockholders. Additional benefits touted by the firms in their media packets include combined fuel purchasing cost savings and a shift over time from coal to gas which will result in fewer CO2 emissions.

The merger by the numbers

                 Ownership by Technology (percent)

                Generating Capacity by Technology (percent)

                 Company Profiles

Link: Web page for merger press materials

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