Reuters reported that Duke Energy has agreed to buy Progress Energy Inc for USD 13.7 billion in stock, creating the largest US power company if it wins approval from regulators in North and South Carolina.

The transaction would create an industry giant with about 7.1 million electricity customers in North Carolina, South Carolina, Florida, Indiana, Kentucky and Ohio, and 57,000 MWs of generating capacity.

Duke's offer was a modest 6.4% premium over the last 20 trading days and the deal would be accretive to Duke's earnings in the first year after completion. Duke is currently the third largest US utility and would become both the largest in market value and generating capacity if the purchase is completed. That could create a hurdle for regulators, who have blocked or created roadblocks in other acquisitions in recent years.

But analysts said the deal stood a good chance of winning approval.

Mr Nathan Judge, an analyst with Atlantic Equities in London, said that "As long as there is assurance and protections in place that will both prove the financial strength of the company and benefit the consumers, then regulators will approve it."

Mr Jim Rogers CEO & chairman of Duke told Reuters that the new company would see savings in the Carolinas of USD 600 million to USD 800 million over five years due to the benefits of combining their fuel costs and delivery systems.

That savings would be passed on to customers there, but the companies said it was too early to estimate what the overall cost savings of the link up would be. Still, the deal would likely allow the combined company to increase its dividend.

Mr Rogers said that "It really enhances our ability to grow the dividend going forward. Our plans are to grow the dividend at slightly less than the growth in our earnings."

Mr Rogers said that the industry could be set for a new wave of consolidation as companies seek growth in their balance sheets to finance ever increasing costs expected in the coming years.

(Sourced from www.reuters.com)