Business

Standard & Poor's lowers Duke Energy rating

Posted July 26, 2012

— Standard & Poor's lowered the rating for Duke Energy Corp. Wednesday, citing the utility's lack of transparency in connection with the hiring of a new CEO and the consequences of that decision.

The credit-rating agency said the decision to downgrade Duke from an A- to BBB+ stems from its view that "abrupt leadership changes at the company have heightened regulatory risk in North Carolina and likely in Florida, significantly weakening the company's consolidated 'excellent' business risk profile under our criteria."

Duke Energy Progress Energy logos WRAL.com video archive: Duke-Progress merger under scrutiny

The statement pointed out that the utility is facing two rate-case increases in North Carolina as well as questions about a Florida nuclear power plant which has been out of service since August. 2009.

In response, Duke Chief Financial Officer Lynn Good issued a statement highlighting the company's strength and flexibility. "Following the closing of Duke Energy’s merger with Progress Energy, the new Duke Energy has unmatched financial and operational scope and scale and the strength to manage through a time of transition in the utility industry," she said.

For a year and a half, the North Carolina Utilities Commission had been told the combination of Duke Energy and Progress Energy — serving 7 million electricity customers in North Carolina, South Carolina, Florida, Indiana, Ohio and Kentucky — would be headed by Progress Energy CEO Bill Johnson.

But within hours after the merger closed July 2, Johnson was out and pre-merger Duke Energy CEO Jim Rogers regained his job atop the Charlotte-based company.

S&P said its negative outlook on Duke Energy and its subsidiaries reflects the potential for lower ratings over the next 12 to 18 months if the company fails to deal with increased regulatory risk in North Carolina and Florida and to effectively manage the integration of the two companies.

Duke Energy Standard & Poor's downgrades Duke Energy's credit rating

The move by S&P follows news of a shareholder lawsuit which is using sworn testimony by Duke Energy executives and directors to support claims that investors were misled by a surprise shuffle of top executives.

Duke Energy spokesman Dave Scanzoni said the utility views the federal lawsuit as lacking merit.

The case aims to include anyone who bought Duke Energy stock from the day before North Carolina regulators approved the merger last month to the day before Rogers testified the leadership shakeup had been discussed since May.

Duke Energy director Ann Grey testified to the utilities commission last week that some board members raised doubts last year about keeping the CEO they promised, a reference to Johnson.

Duke stock is down 6 percent since the merger.

26 Comments

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  • robertmm1948 Jul 26, 12:47 p.m.

    The media is missing a very important story regarding the merger. To make the Federal Energy Regulatory Commission (FERC) happy, Duke signed on to pay (not sell) third parties to take power during the summer (during AC months) just to make FERC happy. This was one of the most major promises made to FERC to get the merger approved. FERC wisely assigned a monitor to check up on Duke to see if they are doing what they said they would do. Well, it turns out that Duke has *failed* almost every day since the merger to dump the power (equal to a large power plant) they said they would. Go to the FERC website, http://elibrary.ferc.gov/idmws/docket_search.asp, and search on Docket EC11-60-004, and see for yourself.

  • westernwake1 Jul 26, 12:42 p.m.

    This is painful because it makes Duke's borrowing costs higher (interest rate). Utilities are very dependent on capitial costs and borrow regularly to build new plants, upgrade, etc.

  • gnewsome1 Jul 26, 11:29 a.m.

    No surprise here. Who would expect a high credit rating for a company that is run by a board with no idea of the truth.

  • duster 340 Jul 26, 11:21 a.m.

    Why does the Duke board feel they can run there company the same way Obama runs the USA?

  • floydthebarber Jul 26, 10:50 a.m.

    Downgrade to F+. These liars at Dook energy have no place in North Carolina public services (yes utilities are a public infrastructure!)

  • superman Jul 26, 10:39 a.m.

    I dont like the merger but about 35 million will come from Progress as deferred income. About 7 to 10 million will come from Duke. The rating was based on their lack of leadership as well as the Florida plant. Duke Energy seemed to forget that in their response. Why didnt he respond to the correct issue? As usual DE is evasive and side steps the real issue.

  • immaannoid Jul 26, 10:35 a.m.

    This is great. Duke voted Johnson out because of "loss of confidence" and put a new guy in.

    Now, they confidently have had the rating lowered because of their decisions since the merger.

    Jeez, they sounds to me like the board needs replacement due to "lack of confidence". LOL.

  • maryswilson24 Jul 26, 9:53 a.m.

    .....isn't it obvious, Duke's board believes they are entitled to do as they please. From testimony for some time they were figuring out how to oust Progress's ceo. .....calculated and deliberate act not to disclose to commission or Progress's people. Wonder why???? ....if either had known there would be no merger.

  • m0nky Jul 26, 9:46 a.m.

    "prodigalrn.....birds of a feather flock together....enough said."

    i don't think that means what you think it means.

  • prodigalrn Jul 26, 9:34 a.m.

    prodigalrn.....birds of a feather flock together....enough said.
    beachlvr0804

    I'm not blaming Obama (or Bush, for that matter) for anything. So your meaning with your witty "birds of a feather" comment is lost on me. Good come-back though. Very fourth-grade! Here's a Rush Limbaugh coffee mug as a parting gift!

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