SOLAR POWERED.

Bill Cavanaugh brightens Carolina Power & Light's prospects by buying a utility in the Sunshine State.

Bill Cavanaugh has just returned to Raleigh from Wilmington, where he had breakfast with a group of linemen working 16-hour days to restore power to Eastern North Carolina. "These will have to go to the cleaners," grumbles the chairman, president and CEO of Carolina Power & Light Co., leaning forward in his chair and pinching the rumpled crease of his blue trousers just below the knee. A downpour had caught him hustling to the meeting.

It had been his third trip down east in the 12 days since Hurricane Floyd struck -- twice to Wilmington and once to Goldsboro, New Bern and Florence, S.C. He spent parts of two other days visiting customer-service centers and repair crews around the Triangle. "We've had linemen working from boats. We even found an airboat, one of those with the big fan in the back. We bought every set of waders and a bunch of johnboats at Neuse Sports Shop in Kinston. We've brought in a fleet of helicopters, 11 or 12 of them."

For the bragging rights it won his employees, Floyd had cost CP&L $63 million by mid-October, at what was supposed to be a time of celebration. It came three weeks after the company announced its biggest deal ever, the $5.3 billion acquisition of Florida Progress Corp., a St. Petersburg, Fla., electric utility. Between Floyd and Hurricane Dennis -- which brushed the coast only five days after the announcement, went out to sea, then came back -- Cavanaugh hadn't had a day off, much less time for toasting. His only fete: a dinner in New York with a handful of CP&L and Florida Progress top executives the night before the merger was announced. And he nearly canceled that because he was bushed after two months of negotiations.

But Cavanaugh, 60, has reason to revel. With this acquisition, he made good the vow he'd been making since becoming CEO in 1996 (he became chairman in May): He intended to transform CP&L into a "superregional" power producer and distributor, one that could survive, even thrive, in the coming age of deregulation. "This is a new company," he says. "This is not an electric utility of the old school."

Upon his arrival in 1992 as president and chief operating officer, Cavanaugh whipped CP&L's nuclear plants into shape. "He took our Brunswick plants from the cellar to the penthouse," says board member Roddy Jones, a Raleigh builder. Then he shored up the balance sheet, lopping off more than 2,000 jobs and earning a reputation as a CEO with high expectations and little time for those who couldn't meet them. In July 1999, he bought Fayetteville-based North Carolina Natural Gas Corp., ensuring CP&L a cleaner, less controversial source of fuel than nuclear power or coal for new generating plants. Now comes the Florida Progress deal. Assuming it is approved -- four federal regulators will get a crack at it -- it will create a company with 2.7 million customers in the Carolinas and Florida, up from CP&L's pre-merger total of 1.4 million, and nearly $7 billion in revenue, up from $3.1 billion. Its 18,500 megawatts of power-production capacity will make it the country's ninth-largest electric company. Combined, the two companies employ 17,250, though 1,200 jobs -- 7% -- will be cut as part of the merger.

Folks at CP&L won't say it, but Cavanaugh's record is, in some ways, a repudiation of his predecessor. That man, for his part, sees similarities between them: It's the times that have changed. "When I ran the company," Sherwood Smith says, "the focus was physical growth, construction, rate proceedings. That's changed to the challenge of being the best operating system and to facing deregulation."

Before Cavanaugh, CP&L was old Elvis, a flabby, predictable performer, generating power the way the King slurred his way through his hits: It wasn't always pretty, but it got the job done. The company delivered juice to much of the Triangle and the eastern part of the state, as well as a swath of mountain counties. But it had problems with its nuclear plants -- its two Brunswick County reactors made the U.S. Nuclear Regulatory Commission's list of the nations' worst-performing units -- and its rates were higher than Charlotte-based Duke Power Co. (now Duke Energy Corp.), its cross-state rival. Cavanaugh has remade the fat man into that lean, loose-limbed boy, twitching with ambition, who walked into the Memphis studio of Sun Records in 1953. When Elvis cut his first song, he was ready to storm the South. With the Florida Progress deal, Cavanaugh hopes, so is CP&L.

His flat accent -- he almost sounds Midwestern -- betrays none of his native New Orleans or the 23 years he spent working in the Deep South for New Orleans-based Entergy Corp. He grew up in a Catholic family, the son of an office-supply-store owner, and was schooled by Jesuit priests. They demanded five years of Latin and two of Greek, which he claims accounts for his logical mind-set as much as his later training as an engineer. He stayed home for college, studying mechanical engineering at Tulane University. Ask how being an engineer shapes his CEO style, and Cavanaugh responds, "I'd be hard-pressed to call me an engineer anymore. It's been so long since I practiced that I'm not sure anybody would want to put me to work."

The answer is a dodge. At CP&L, Cavanaugh has been the exacting problem solver that engineers are trained to be. "I think he perceives it as a negative when people ask about that, like they're saying he's robotic," a CP&L staffer says. A robot, he's not, but he is a naturally reserved man whose ambition has demanded that he adapt to a public role.

After graduating from Tulane in 1961, he joined the Navy, where he learned to split atoms to make power, working with the father of the nuclear submarine, Adm. Hyman Rickover. The submarine service "is the smallest in the Navy, and they go through the toughest exams," says Pat Pexton, military-affairs editor for National Journal magazine. Submariners spend months in cramped quarters deep under water, often playing cat-and-mouse with the other side's subs. The work calls for an even temper and instills the sort of confidence that would convince a young officer that he might one day be a CEO.

After eight years in the Navy came Entergy, where Cavanaugh moved up just as he does everything -- methodically, with maximum preparation and minimum flash. The company made him president and CEO of its Mississippi Power & Light Co. in 1984. In 1990, he became president and CEO of Entergy Operations. In the fall of 1991, he took a three-month sabbatical at Harvard University, which gave him time to reflect on whether he wanted to stay at Entergy. He decided he did. He had dreamed of being CEO of an investor-owned utility. He figured he had a chance there. If he didn't make it, so be it.

After he got back, he and his wife started making plans for staying put. The four kids were grown, and Alyce wanted to sell their big house. They bought a lot on a lake north of Jackson, Miss., where they were living, and hired an architect. They even ordered a power boat. Then, one Saturday morning in June 1992, he got a call from Sherwood Smith, CP&L's chairman, president and CEO. Alyce took it. Cavanaugh was out mowing and edging the little grass island in the middle of their cul-de-sac. She came out and handed him the message. Why would Smith, whom he knew only in passing from industry meetings, be calling? Had there been a big nuclear accident somewhere? Another Chernobyl? A Three Mile Island?

"Would it be possible for you and I to get together?" Smith asked a few minutes later, when Cavanaugh reached him at his office. "I'd like to talk to you, and I'd like it to be someplace other than Raleigh or Jackson."

"I'll have to get back to you Monday," Cavanaugh replied. He wasn't being coy. The day before, Entergy had cut a merger deal, and he didn't know where he'd be that next week. The negotiations were secret, so he couldn't tell that to Smith. A week and a half later, they met in New Orleans. Smith didn't mess around. "I'd like for you to consider coming to North Carolina and potentially succeeding me as CEO of Carolina Power & Light."

When the phone rang seven years later in the office of Dick Korpan, chairman, president and CEO of Florida Progress, it was Cavanaugh on the other end. With his executive team, he'd been eyeing possible acquisitions around the South. Florida Progress was on the list.

It had a strong market -- like North Carolina, Florida is booming -- with a geographic barrier to competition. Out-of-state companies have a hard time sending power into Florida because the state is a peninsula, which limits transmission lines into it. Both companies had nuclear plants. Cavanaugh, like everybody in the industry, knew Korpan was willing to talk. In 1998, Korpan's company had negotiated five months with Glasgow-based Scottish Power PLC, only to see the deal die.

The call lasted two minutes. Korpan had been expecting to hear from Cavanaugh. He, too, had noticed how compatible the companies seemed. They decided to get together in St. Petersburg. The meeting was about finding out if they could get along, making sure their corporate cultures didn't clash. Call it foreplay. As in life, so it is in mergers: You don't jump straight into bed.

On July 7, Cavanaugh, Bob McGehee, CP&L's executive vice president and general counsel, CFO Glenn Harder and Bonnie Hancock, vice president for strategic planning, flew in CP&L's leased Cessna jet to St. Petersburg and caught a cab downtown. They met Korpan and his team at the Renaissance Vinoy Resort, which overlooks the St. Petersburg Yacht Club. It's about five blocks from Florida Progress' downtown headquarters. Korpan didn't want them coming there: If anyone recognized Cavanaugh, it would start another round of the rumors that had plagued Florida Progress since the Scottish Power deal collapsed.

At the Vinoy, Korpan had reserved a small conference room. Cavanaugh kicked off the meeting, which started at 2:30 p.m., laying out his plans for CP&L. By the time dinner was served at 5 p.m., they had agreed to hire investment bankers to explore a merger. "We picked the first week of August as the time when we'd make a call on whether we were going forward," McGehee says. "Neither of us wanted it to drag on." Nobody wanted to replay the Scottish Power fiasco. For the next three weeks, the bankers did their work.

Otherwise, little formal negotiation occurred, but Cavanaugh and Korpan did confer informally on the phone. "We kept the lawyers and the financial guys out of it," Cavanaugh says. Korpan, who is 57, told Cavanaugh he didn't want an executive position with CP&L. He planned to retire, though he did want to remain on the board. That would make doing a deal easier. "In a negotiation, social issues" -- such as who gets which job -- "trade against price," McGehee explains. "They wanted a clean deal. They were willing to concede the social issues to get the best price possible."

On Thursday, Aug. 5, the top executives of both companies met again. Korpan remained skittish about having them in St. Petersburg, and Cavanaugh didn't want rumors starting in Raleigh, so they chose Atlanta, securing a little conference room at Fulton County Airport. Cavanaugh brought McGehee and Harder; Korpan, only his CFO, Ed Moneypenny. After everyone was seated, Cavanaugh looked across the table and made official the offering price he and Korpan already had quietly agreed to: $5.3 billion -- $54 dollars a share. It would represent a 21% premium over Florida Progress' stock price the trading day before the deal was announced.

Then Cavanaugh laid down an ambitious schedule for hammering out the formal merger agreement: "We've got to get it done in two weeks." Any longer, and they would risk leaks, which could move both companies' stocks, making it even harder to close the deal.

By the next day, a draft, which CP&L's lawyers had already been working on, was ready. On Tuesday, the 10th, a team of CP&L lawyers, including McGehee, flew to New York. Korpan didn't want any more disruptions in St. Petersburg. His employees were tense enough about the company's future. The final stage of face-to face negotiations would be conducted at the midtown offices of the New York law firm Florida Progress had hired, LeBoeuf, Lamb, Greene & MacRae.

"Their lawyers gave us this little conference room at the back of their offices to work out of," says Bill Johnson, a senior vice president and head of CP&L's legal department. "The air conditioning didn't work in there, and to get into it, you had to walk through a room full of banker boxes. We negotiated in there, and between the heat and the lawyers, it'd get pretty tense." Poring over documents, a question would arise, and they'd call in a lawyer or executive from the other side.

Late that first week, the lawyers started quibbling over the makeup of the board and how much charitable giving CP&L would do in St. Petersburg. Johnson called Cavanaugh in Raleigh. "Why don't you just let me handle that with Dick Korpan," Cavanaugh said. He drafted a letter documenting what he and Korpan had agreed to on a handshake, showed it first to McGehee, his closest adviser, then sent it to Korpan, who made a few small changes and returned it. Cavanaugh incorporated the changes, signed the letter and sent it again. Problem solved. Florida Progress would have four of the 14 seats on the board, and CP&L would give $2.5 million a year for three years to charities in the 32 counties that Florida Progress serves.

"Cavanaugh's very direct, a no-nonsense executive," Korpan says. "I like dealing with people like that." While the lawyers and investment bankers were wrestling with wording, the two CEOs kept talking and, in one instance, even quietly met again. On Aug. 12, Korpan and his wife, Pat, touched down at Raleigh-Durham International Airport on their way to New York, where Korpan had a meeting. Cavanaugh met them at the hangar. The executives huddled for two hours in the small, spare conference room there, while, in the lounge, Pat Korpan read Soul Harvest, a novel based on the prophecies in Revelation.

On Wednesday, Aug. 18, the final agreement was ready. They had met Cavanaugh's two-week deadline. Next they had to present the agreement to the two companies' boards and prepare for the public announcement. The challenge now was keeping it quiet. Throughout the negotiations, in every draft document and even conversations, the executives, lawyers and bankers had used code names for the companies -- "Charlie" for CP&L and "Ray," after baseball's Tampa Bay Devil Rays, for Florida Progress -- to preserve secrecy. But now, they'd have to inform dozens of people within the companies.

At CP&L, for example, a team of graphic artists would design life-size cardboard cutouts of two workers -- one male, one female; one black, one white; both crowned with hard hats, one with CP&L's logo, the other with Florida Progress'. They would stand in the lobby the morning of the announcement. Everyone had to sign confidentiality agreements, but somehow word of a deal always seems to leak out.

The secret lasted a day. On Thursday evening, CP&L spokesman Mark Stinneford's pager buzzed as he was sitting in the stands of Durham Bulls Athletic Park, watching a baseball game. The caller was a reporter from Bloomberg Business News wire service, threatening to break the story and seeking comment. Stinneford referred the reporter to a senior spokesman, Mike Hughes, who said CP&L never commented on market rumors. But the call sent a pang of worry through both companies. Would Bloomberg go with the story without confirmation from the companies? If so, could it move the stock enough to force a change in the terms of the deal? Who leaked it, violating the confidentiality agreements?

When the market closed at 4 p.m. Friday, Bloomberg still hadn't broken the story. It didn't come until 5:23 p.m., while the CP&L board was being briefed one last time before casting its final vote Sunday. The news was out, but with the official announcement scheduled for Monday morning, it could no longer affect the deal.

On Sunday, Cavanaugh and his team, all of whom had come home for the weekend, headed back to New York. The companies had reserved a ballroom at the Waldorf. Together, they polished the press release. Then staff and consultants peppered Cavanaugh and Korpan with the sorts of questions they could expect from analysts and reporters the next day.

At 5 p.m., Cavanaugh convened his board via telephone for the final vote. It was unanimous, as the vote of the Florida Progress board had been the day before. At 6 p.m., also by phone, he officially informed and took questions from his 35 department heads. After that, he wanted to crash in his hotel room, but he had agreed to join the others for dinner at Gramercy Tavern. He changed from casual clothes to a suit and trudged downstairs.

At dinner, Korpan made the effort worthwhile. After the eight executives' glasses were filled with champagne, Korpan lifted his, looked at Cavanaugh, then around the table, and said: "I propose a drink to the future of the new superregional of the Southeast."

The official announcement went out at 7 a.m. the next day. In New York, the analyst conference began at 10:30 a.m., with 100 analysts crowded around and dozens more linked by phone. After that came a telephone conference with the press, interviews with The Wall Street Journal, the financial wires and the companies' hometown newspapers. Analysts such as Ed Tirello of Deutsche Bank Alex. Brown like the deal but think Cavanaugh will need to buy more companies to compete with the likes of Duke.

In the afternoon, Cavanaugh and Korpan hustled over to CNBC's studio for live interviews. The anchor segued into the segment by announcing the merger of Florida Progress and California Power and Light. Cavanaugh corrected her, but throughout the interview she kept saying it, "California Power ... California ..." By the end, she was finally getting it right, but the mix-up was a humbling reminder. Even on the biggest day of CP&L's corporate life, the company was still not a name in New York.

The glitzy part of the deal is done, but CP&L still needs to sell regulators on its benefits to investors, ratepayers and, when it comes to nuclear safety, the public at large. For that, Cavanaugh has set another ambitious deadline. He wants it completed in 12 months, even though approval of electric-utility mergers has dragged on more than two years.

Once that's done, expect more mergers. Cavanaugh has made his intentions plain: "Any company that wants to be around for the future needs to grow, and we've said we want to be a major energy presence in the Southeast, so that means that we will look for opportunities," he says.

He won't reveal whom he's interested in, but Tirello says he'll have to buy TECO Energy Inc., a Tampa gas and electric utility, and SCANA Corp., a Columbia, S.C., electric utility. TECO's market abuts Florida Progress', as SCANA's does CP&L's. What's more, a SCANA deal would be a twofer: In February, it announced plans to buy Public Service Company of North Carolina Inc. for $900 million, beating out CP&L. "The TECO merger will go smoothly," Tirello predicts. "But SCANA will be a problem. The CEO there thinks they can go it alone, but they don't have the capital or the people."

Cavanaugh also needs to continue to chip away at the remaining disparity between his company's rates and Duke's. At the end of 1998, CP&L's average cost per kilowatt hour for all North Carolina customers was 5.69 cents, compared with 5.58 for Duke, according to the N.C. Utilities Commission.

A smaller, but nagging, concern is the performance of two CP&L subsidiaries that represent efforts to diversify. Strategic Resource Solutions, which does energy consulting, and Interpath Communications, which provides Internet service and Web consulting for small and medium-size businesses, lost money in the quarter ended Sept. 30 and were expected to lose a total of $43 million in 1999. CP&L has said it may sell Interpath.

In an effort to move SRS to profitability, the company sold SRS' Parke Industries division, which makes lighting equipment, in July. The move seemed to pay off, with SRS recording monthly profits in September and October. For the 12 months ended Sept. 30, CP&L's net income was $364.4 million -- $2.47 a share -- compared with $422.0 million and $2.91 a share for the prior 12 months, with the drop largely due to Hurricane Floyd.

Cavanaugh also is looking for a new name and image for his company. He wants something catchy, something bold and less stodgy than the no-longer-accurate Carolina Power & Light. Something those New Yorkers won't forget.