When Charlotte, N.C., power provider Duke Energy Corp. announced it would buy Cinergy Corp. of Cincinnati in 2005 for $9 billion in stock and $4.9 billion in debt assumption, utility followers scratched their heads.

The deal had some strategic value -- it added assets in the Midwest to Duke's in the Carolinas -- but much less than the long-rumored combination of Cinergy with Dayton, Ohio, utility DPL Inc. Also, estimated cost savings of $400 million paled next to the $1.08 billion premium, meaning shareholders would have to wait five years or more to see the rewards. To top it off, the sale price seemed high at 16 times net earnings and 12 times Ebitda.

Duke officials declined comment, but according to most observers, the company isn't much better off for making the $13.9 billion acquisition.

Nor did it do much for investors. Duke's stock closed recently at $15.40 per share, up only 37 cents over its $15.03 share price on April 3, 2006, the day the deal was completed.

The post-deal Duke seemed to be more formidable -- a $36 billion market capitalization, $27 billion in annual revenue, $1.9 billion in annual net income, 5.4 million retail customers and $70 billion in assets. It's now the fifth-largest power generator in the U.S. and the top gas company in North America.

"The Cinergy merger was a very good thing to do," says Roger Conrad, editor of the newsletter Utility Forecaster in Falls Church, Va. "It reshaped the company."

But did it? Even before the deal was completed, Duke CEO Jim Rogers started selling off noncore assets, announcing in January 2006 that the company had agreed to unload its fleet of wholesale power generation assets outside the Midwest to a unit of LS Power Equity Partners for $1.6 billion. And ever since the Cinergy deal was closed, he's continued wheeling and dealing.

For example, he has divested Cinergy's energy trading business, sold off interests in hydroelectric power plants in Latin America and a 480-megawatt natural gas-fired peaking generating plant near Brownsville, Tenn., and spun off Duke's natural gas distribution business into a publicly traded company called Spectra Energy Corp.

In the meantime, he's been accumulating assets in the nuclear, wind and biomass parts of the energy industry.

In other words, while Cinergy may have fortified Duke, it didn't complete it. As Rogers himself recently acknowledged at the World Economic Forum in Davos, Switzerland, the U.S. power industry could have a wave of consolidation, and "we're always looking for opportunities to strengthen our position."

Witness Duke's acquisition, along with North Carolina Electric Membership Corp., of an ownership interest in unit 1 of the Catawba Nuclear Station in York County, S.C. Or the stake it bought in the 500-megawatt William States Lee III nuclear power project in Cherokee County, S.C.

Similarly, Rogers has expanded into wind by buying Catamount Energy Corp. and Tierra Energy. Duke now has more than 5,000 megawatts of wind energy under development and 500 megawatts in operating assets. "They're on the forefront of alternative energy," Conrad says. "They seem to be one of the more proactive ones out there."

Observers think Duke's next step will be to buy a major renewable energy player or a more traditional rival.

Karl Miller, founder of power plant operator MMC Energy Inc. and now a consultant, suggests it's almost imperative Duke do one or two large deals within 12 to 18 months.

"Except for the utility merger with Cinergy, they really don't have much of a market presence in merchant energy anymore, at least that anyone feels is credible on a U.S. basis," he says. "They have been piddling with renewables, as have all utilities to check the box on having some alternative strategy to roll out to investors. I suspect they will gather their courage to do a deal that would put them back on the map."