Duke Energy Corp. (DUK:US)’s board lost confidence in Bill Johnson as its next chief executive officer after he missed deadlines and failed to provide adequate information about a troubled nuclear reactor, the lead director said.
Johnson, the CEO of Progress Energy Inc. before its acquisition by Duke, made the board wait nine weeks after it requested a meeting with the Crystal River nuclear plant’s insurer, Ann Maynard Gray testified to the North Carolina Utilities Commission today. That was a “tipping point,” she said at the hearing in Raleigh.
“For me that was a very, very important part of this and I think some other directors felt that as well,” Gray said. She never spoke to Johnson about her concerns on the delay, which followed “many failed deadlines” for the reactor.
The North Carolina Utilities Commission is holding its third day of hearings on why Duke’s board replaced Johnson hours after the $17.8 billion merger closed on July 2. Yesterday, Johnson told commissioners he was blindsided when the board replaced him with Duke CEO Jim Rogers 18 months after the deal was announced. He said he was fired because he insisted on completing the merger when Duke wanted to back out.
North Carolina’s attorney general is investigating the change and shareholders of Charlotte, North Carolina-based Duke have sued the board.
Duke rose 0.2 percent to $66.27 at 12:51 p.m. in New York. The shares have fallen 5.1 percent since the deal closed.
Johnson met the Duke board twice, including a November 2010 meeting in which he told the directors he “liked to learn, but not to be taught,” Gray said. She took that to mean he didn’t want feedback from the board.
In the six months prior to the merger’s completion, Duke’s board became concerned that Johnson’s leadership style would not be a good fit for the combined utilities, Gray said. He was too “controlling” of information and options for the Crystal River reactor, she said.
The Florida reactor, shut since 2009, was the subject of claims with Nuclear Electric Insurance Ltd.
Johnson said yesterday he kept Duke informed on Crystal River and repeatedly requested meetings with the company’s board. He said Duke had “buyer’s remorse” about the deal and was searching for reasons to end it after a federal regulator demanded more concessions.
Duke’s board views the acquisition as a “good idea,” Gray said. Given the size of the deal, “for us to have a CEO in whom we don’t have confidence because of certain leadership styles was just not the right choice,” she said.
Progress wanted to “complete the deal at any costs,” said Gray. Johnson testified yesterday that the company faced job cuts and spending reductions if it didn’t complete the Duke transaction.
A Progress report on nuclear operations was “inadequate,” Gray said, and the company didn’t deliver a mid-May letter from the insurer raising new issues about Crystal River until May 30, she said.
Asked in February for a face-to-face meeting alongside Rogers with the Crystal River reactor insurer, Johnson instead arranged a conference call in May, Gray said. One day after the call, the board hired outside counsel to advice it on potentially replacing Johnson.
The board was “pretty stunned our request was outstanding” that long, Gray said. “You’d never go radio silent for nine weeks like that.”
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