CHARLOTTE, N.C. — Duke Energy and Piedmont Natural Gas announced Monday morning that the boards of directors of both companies have unanimously approved an agreement for Duke to acquire Piedmont for roughly $4.9 billion in cash.
"We look forward to welcoming Piedmont's employees and one million customers in the Carolinas and Tennessee to Duke Energy," Lynn Good, president and CEO of Duke Energy, said. "This combination provides us with a growing natural gas platform, benefitting our customers, communities and investors."
"This is an exciting moment for Piedmont Natural Gas, its shareholders, customers and employees," Tom Skains, chairman, president and CEO of Piedmont Natural Gas, said. "The strategic combination of our two companies will deliver compelling value to our shareholders, greatly expand our platform for future growth, enhance our ability to provide excellence in customer service and give our employees more opportunities in one of the largest energy companies in the United States."
Piedmont will retain its name, operate as a business unit of Duke Energy and maintain its presence and its headquarters in southeast Charlotte.
Duke Energy will add one member of Piedmont’s board of directors to its board after the transaction is closed. An existing member of Piedmont’s management team will lead Duke Energy’s natural gas operations in the Carolinas, Tennessee, Ohio and Kentucky, and report to Good.
Piedmont Natural Gas began operations in 1951 in Charlotte and Duke Energy was founded in the city in 1904.
Duke Energy and Piedmont also are key partners in the $5 billion Atlantic Coast Pipeline that will be the first major natural gas pipeline to serve Eastern North Carolina.
Upon transaction closing, Piedmont shareholders will receive $60 in cash for each share of Piedmont Natural Gas common stock, which represents an approximate 40 percent premium to Piedmont’s Oct. 23, 2015 closing stock price.
Duke Energy will also assume approximately $1.8 billion in Piedmont Natural Gas existing net debt, representing a total enterprise value of approximately $6.7 billion.
The companies are targeting a closing by the end of 2016 and will continue to operate as separate entities until the transaction is completed.
Duke Energy-Piedmont merger: Will your bill go up?
Duke Energy plans to buy Piedmont Natural Gas. That would affect millions of customers in multiple states.
The big question: Will your bill go up? The short answer: Don't hit the panic button yet.
In North Carolina, no matter how big Duke gets, it can't raise rates on its own. It needs the N.C. Utilities Commission's OK, just like Duke and Piedmont would if they stay separate.
For example, when SCANA and PSNC merged roughly 16 years ago, the commission said yes, but with conditions:
Six months after the merger, rates had to go down; 18 months in, rates had to go down again; and there couldn't be an increase for five years.
SCANA and PSNC had its first increase six years in.
Atlanta-based Southern Company is in the process of acquiring AGL Resources. That would impact nine million customers in nine states. That hasn't been finalized yet, so it doesn't provide much by way of example.
Like North Carolina, Georgia has a commission that must approve mergers and rate hikes.
A consumer watchdog group there, Georgia Watch, released a paper which may hit home for residents in the Charlotte area.
"Consumer advocates advised consumers to be skeptical of any talk of lower prices. From the standpoint of mergers and acquisitions, generally, they're not done to benefit the consumer, but rather to increase the profits for shareholder," said Liz Coyle, executive director of consumer advocacy group Georgia Watch. "It'll be up to the Georgia Public Service Commission, which regulates both AGL Resources and Georgia Power, to make sure none of the costs of the merger, including the acquisition premium, get passed along in the form of higher rates for the state's energy consumers."
You don't just think about your bills. You probably worry about service.
Sometimes, after mergers, companies can be so focused on the transition and cutting costs, service suffers.
New Jersey studied the issue of utility mergers and acquisitions and found, "Increased pressure to cut costs following a merger can encourage management to sacrifice the well-being of the utility and diminish service quality and reliability. A merger creates the potential for the diversion of management attention from utility operations to merger-related activities."
WSOC
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