Raleigh, N.C. — 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."
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.
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.