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Duke Energy Corp, which closed its $18 billion buyout of Progress Energy this week, said Progress Chief Executive Bill Johnson had resigned and would not be taking the top job at the combined company as had been planned.
Duke CEO Jim Rogers, 64, has become president and CEO of the combined entity, while remaining chairman, the company said on Tuesday. Rogers said in an interview that he had been officially notified of his new role after board deliberations on Monday afternoon.
"I have done two combinations before. The first focus must be on bringing the companies together and empowering the leaders to move forward, capture the synergies and make sure at the same time we continue to provide affordable and reliable service," Rogers said.
Duke said Johnson's resignation was by "mutual agreement." Johnson, 58, could not be reached for comment.
The company and its lead director, Ann Maynard Gray, declined to give any further background about Johnson's resignation.
Johnson would be given a severance payment of $7.4 million, which is three times his annual base salary and annual cash bonus as of July 3, Duke said in a filing with the U.S. Securities and Exchange Commission.
He would also receive $1.4 million in cash as his target annual cash bonus for 2012, the company said in the filing.
In exchange, Johnson is expected to release all of his claims against the company.
Total severance payments associated with the Progress buyout, including a voluntary separation program, a potential involuntary severance plan and payments payable to Johnson, are estimated to be between $225 million and $275 million, Duke said in the filing.
Johnson sent a brief email to employees on Tuesday that did not give further details on his resignation. In the message, he said he believes the potential of the deal "remains compelling."
"It certainly caught me by surprise," said a person who sat on Progress' board until its recent acquisition.
"Bill has been a fantastic CEO of Progress Energy. I think it's a real loss he won't become CEO of Duke Energy," said the former Progress director, who spoke on the condition of anonymity.
The deal, which was announced in January 2011, creates the largest U.S. power company, with 57,000 megawatts of generating capacity and 7.1 million electricity customers in North Carolina, South Carolina, Florida, Indiana, Kentucky and Ohio. It also becomes the second largest U.S. operator of nuclear power plants.
The original plan had been for Rogers to serve as executive chairman of the combined company, while Johnson would have been president and CEO. When the deal was announced, Rogers joked that the two executives would settle arguments by arm wrestling.
"It's not easy for CEOs of big companies to get along together - they are not known for having small egos," said Paul Patterson, an analyst at Glenrock Associates. "Any time you see a situation in which you expect two CEOs to have an active role at the same company, you've got to scratch your head and wonder whether it is going to work out."
The company's shares closed down 1.6 percent at $68.69 on the New York Stock Exchange on Tuesday.
Rogers has an unusually high profile for a utility executive. Duke's website touts him as a "CEO statesman," and he makes frequent media appearances in places as diverse as "60 Minutes" and "The Colbert Report."
He has testified more than 20 times before U.S. congressional committees and is known as one of the first major U.S. utility executives to have backed federal climate change legislation.
He has been involved in three major transactions in his more than 23 years as a CEO and has ended up in charge of the company after each deal.
Rogers said he will remain CEO for "as long as the board wants me to stay."
The deal closed on Monday after receiving clearance in the Carolinas and by federal regulators. Rogers said he was contacting the company's key regulators to discuss the management changes.
A South Carolina regulator said the last-minute leadership change would have make little difference in the outcome of the process.
"We're confident that the commitments that have been made to South Carolina will be honored by Mr. Rogers as well as they would have been under Mr. Johnson," said Dukes Scott, executive director of the South Carolina Office of Regulatory Staff.
Gray, Duke's lead director, said Johnson had been "instrumental in helping us close the merger with Progress Energy, and we wish him well in his future endeavors."
At least one analyst expressed concern Duke could lose senior Progress executives, many of whom are loyal to Johnson.
Rogers said on the conference call that he had contacted Progress executives on Monday night "and talked through where we're going in the future and how we have to pull together."
"My expectation is that all will lead and make this a great success," Rogers said.
One of Johnson's unfinished tasks that will be left to Rogers will be to decide the fate of Progress' damaged Crystal River nuclear reactor in Florida.
The 860-megawatt reactor has been shut since 2009 when workers discovered a gap in its concrete containment dome. A second hole in the concrete containment building was later discovered, and Progress officials have said the unit won't restart until 2014 at the earliest.
Progress' Florida utility has been expected to announce this month whether it will repair the damaged reactor or shut it down. The cost of the difficult repair has been estimated at between $900 million and $1.3 billion.
(Additional reporting by Eileen O'Grady in Houston, Scott DiSavino in New York and Krishna N. Das in Bangalore; Editing by Gerald E. McCormick, Maureen Bavdek, Dale Hudson, Marguerita Choy, Phil Berlowitz and Steve Orlofsky)