Duke Energy announced a stock-based compensation package for its new CEO, Paul M. Anderson, and said it lined up a buyer, Norsk Hydro Energy B.V., for its Dutch gas marketing business. The sale, which is expected to net Duke about $80 million, is subject to approval by the European Commission.
Anderson, 58, who replaced Richard Priory as CEO on Nov. 1, will receive a stock-based salary that is tied directly to the performance of the company. He will not receive a cash salary or severance upon retirement. The agreement extends through Jan. 1, 2007, and requires Anderson to hold until that date all shares of Duke Energy stock that he receives.
The three-year package includes the following: 285,000 shares of common stock that vest over time; 360,000 performance shares that vest at the rate of 120,000 shares each year beginning in early 2005 if financial and company goals, established annually by the board of directors, are achieved — any year that the goals are not achieved, Anderson forfeits the performance shares for that year; and a one-time stock option grant of 1.1 million shares, granted on Nov. 17 with a strike price of $17.45. The agreement prohibits him from exercising options before Jan. 1, 2007.
Given Wednesday’s stock price of $17.50 the total current value of the 645,000 shares is about $11.3 million. Anderson has elected to defer receipt of common stock equivalent shares, as well as any performance shares, until the completion of his employment.
Anderson was president and COO of Duke following its 1997 merger with PanEnergy, where he was CEO. He left Duke in 1998 to lead mining company BHP Billiton Ltd., which he help turn around by unloading poorly performing assets and streamlining management. He retired from BHP Billiton last year.
Anderson will have to use all of his experience to guide Duke Energy through the troubled waters of the domestic energy industry. Like the rest of its peers, Duke has been rocked by the downfall of the merchant energy business, the oversupply of domestic power generation, energy trading scandals and investigations, and pressure to unload diverse unregulated operations and refocus on the regulated utility and pipeline business.
The sale of its Dutch gas marketing operation is the beginning of Duke’s complete exit from European energy marketing.
“The proposed sale is consistent with Duke Energy’s plan to sell non-core businesses and reduce its risk profile,” said Richard K. McGee, president of Duke Energy International (DEI). “As a result of this sale, we will also commence the wind-up of our remaining European marketing operations, which we expect to complete next year.”
Duke said the carrying value of the Dutch gas marketing business was $60 million as of Sept. 30, and the anticipated net sales proceeds are $80 million. The anticipated gain from the sale will be recorded at the time of closing, which is expected to occur in fourth quarter. Duke Energy expects to incur expenses of $40 million through next year related to the wind-down of its remaining European marketing operations.
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