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The combined company will depend on borrowing for its plant updates. The need for lower borrowing costs was also behind Exelon Corp.'s $7.9 billion takeover of Constellation Energy Group earlier this year, said Phil Adams, a senior bond analyst at Gimme Credit LLC, which provides the financial industry with independent research into corporate bond borrowing. "We have a very fragmented utilities industry in this country and when you're making multi-billion-dollar capital decisions for assets that are expected to be used for the next 35 to 40 years, bigger is better. It helps your access to capital markets," Adams said. There are significant challenges facing the combined company, Adams said. They include coping with the costs of a shutdown at Progress Energy's Crystal River nuclear plant in Florida, $1.3 billion in cost overruns at a Duke coal-gasification plant in Indiana, and Ohio's deregulated market, Adams said. The merger announced in January 2011 has been approved by a series of state and federal agencies, the most significant coming earlier this month when the Federal Energy Regulatory Commission gave its blessing. The FERC twice rejected the merger because of concerns it would reduce competition for wholesale electricity in the Carolinas. Duke Energy says it plans a reverse stock split once it completes its Progress purchase, giving shareholders one share in the expanded company for every three shares they now own. The stock price for each share will triple, so that the overall value of the shares remains the same. Shares of Duke Energy Corp. rose 2 cents to $23.08 Friday. Progress Energy Inc. stock fell 1 cent to $60.17.
[Associated
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