Progress Energy Inc. said Friday that Bill Cavanaugh, the primary architect of the 2000 takeover of Florida Progress Corp., will retire as chief executive March 1. He will be succeeded by president and chief operating officer Robert B. McGehee.
Cavanaugh, 65, will step down as chairman in May, when the company's board will select a new chairman. The change in leadership at Progress had been anticipated, and industry experts said they don't anticipate any sudden changes in strategy at the Raleigh, N.C., utility.
McGehee, 60, had been Cavanaugh's heir apparent. Since joining the company, which was known as Carolina Power & Light, in 1997, McGehee has assumed expanding managerial duties. In December, he was given the added responsibility of overseeing Progress' unregulated businesses.
McGehee and Cavanaugh have known each other since 1984, when McGehee was chairman of a Jackson, Miss., law firm and Cavanaugh was an executive with Entergy Corp., based in Jackson. Both are veterans of the U.S. Navy's nuclear submarine program, as is Progress Energy Florida president and chief executive Bill Habermeyer.
The March 1 date means Cavanaugh will be able to step down close to the retirement date in February he had originally set for himself. In September 2002, Progress' board asked Cavanaugh to delay his retirement by a year to February 2005. At the time, the energy industry faced ballooning problems in wholesale power markets and continued nervousness following the collapse of energy trader Enron Corp.
But now that Wall Street jitters have calmed, and with McGehee already overseeing all aspects of Progress' business, Cavanaugh said in an interview Friday that "it just made sense for me to step down and let him start running the company."
McGehee said he will spend the next few months assuring employees, investors and Wall Street analysts of a smooth transition. When asked Friday how his strategic vision for Progress might differ from that of Cavanaugh, he demurred, saying "that will develop over time."
He acknowledged that the company needs to make more headway in reducing its debt. Ratings agencies have expressed concern that the company hasn't cut it as much as expected since the merger.
But McGehee made it clear that he has no plans for dramatic changes, noting that he already had a central role in guiding the company. "I think if I thought something needed to be changed, I would have already started on it," he said.
Roger Conrad, editor of the investment newsletter Utility Forecaster out of McLean, Va., said Progress' decision not to invest as heavily in wholesale power as other utilities means that it hasn't had to make radical adjustments in its business plan.
"I think they might run things a little more conservatively, but they were already moving in that direction anyway," Conrad said. "It's been a pretty steady outfit, and I think that's what people will expect it to continue to be."
McGehee and Cavanaugh's personal styles are similar, according to Harvey Schmidt, a former president of the Greater Tampa Chamber of Commerce who is now president and chief executive of the Greater Raleigh Chamber of Commerce.
"I think part of the reason why management would be comfortable with Bob in that leadership role is because the growth and development of the company has really been a partnership between Mr. Cavanaugh and Mr. McGehee," Schmidt said.
Cavanaugh said he plans to travel and spend more time with his family at their beach house near Wilmington, N.C. He added that he also hopes to stay active in the nuclear power industry, although he said he wasn't yet sure in what capacity.
Nuclear power should be part of efforts by the United States to diversify its sources of energy, Cavanaugh said. But he added that an expansion of nuclear power generation would require a national energy policy and further progress in opening a national nuclear-waste repository in Nevada's Yucca Mountain. He also said that in order for nuclear power to be cost-competitive with natural gas, it must receive some sort of tax credit "for not destroying the environment."
Cavanaugh said his proudest accomplishments at Progress included the performance of the company's nuclear power plants, which produced more electricity in 2003 than ever before, and CP&L's acquisition of Florida Progress.
The deal raised the company's profile among investors, while subsequent problems at other utility companies, including cross-state rival Duke Energy of Charlotte, have further enhanced Progress' image as a relatively stable player in the industry.
"I really applaud the employees in Florida and the Carolinas for how they made the integration of Florida Progress and Carolina Power & Light come together," Cavanaugh said.
Progress' shares close Friday at $43.82, down 38 cents amid a general decline in utility stocks.
_ Louis Hau can be reached at hausptimes.com or (813) 226-3404
ROBERT B. McGEHEE
Born: Canton, Miss.
Education: U.S. Naval Academy, class of 1966; law degree, University of Texas at Austin, 1973.
Military experience: U.S. Navy, 1966-1971, served as a lieutenant on a nuclear submarine.
Previous work experience: attorney and later chairman of Wise Carter Child & Caraway, Jackson, Miss., 1974-1997.
At Progress Energy: Joined predecessor CP&L in 1997; served as president of Progress Energy Service Co., and president and chief operating officer of Progress Energy Inc.