0
Securing Our Energy Future


             Bill Johnson
      Chairman, CEO and President

             Morgan Stanley
  Gl...
Caution Regarding
Forward-Looking Statements

This presentation includes information that is forward-looking in
nature. Ma...
Topic Outline
    Overview


    Strategic issues


    Levy County nuclear project


    Summary


    Q&A

Overview
Two High-Performing Electric Utilities
with Strong Growth Prospects
                North Carolina


                     ...
Business Model for a “Pure Play”
  Regulated Integrated Electric Utility
 Sustain Operational                             ...
Rate Base Growth
                             Progress Energy Carolinas¹                                                  ...
Value Proposition:
A Superior Risk-Adjusted Return
    Attractive dividend yield with growth commitment


    Long-term e...
Strategic Issues
Power Sector’s Challenge

                 Addressing both
       climate change and demand growth

                 while...
Managing Three Related Issues

                    Debate has shifted from “why”
   U.S. climate
                    to “w...
The Case for New Nuclear Gets Stronger

Given a future of carbon controls
  and the strong desire for energy security,
  a...
2008 – 2010: A Critical Period


    1) Get federal rules right on climate change


    2) Make right state regulatory adj...
PGN Balanced Solution Strategy
Levy County
Project Overview
Announced Levy County Site in 2006
Florida Policy Support for New Nuclear
    Recognizes need to diversify state’s fuel supply


    Concern with fuel suppl...
Florida Nuclear
Investment Recovery Legislation (2006)
    Pre-construction and licensing

      Capacity cost recovery ...
Levy Need Case Filing with Florida PSC

    Filed Need Case with PSC 3-11-08


    Total cost estimate for Levy 1 & 2: $1...
Other Levy Regulatory Milestones

    Next steps on Need Case


      PSC hearing – May 21-23, 2008

      Expect need ...
Conditions to Proceed with New Nuclear
    Political and regulatory support


    Plant design final


    Financing arr...
Summary
Value Proposition:
A Superior Risk-Adjusted Return
    Attractive dividend yield with growth commitment


    Long-term e...
Continuous Stock Price and
              Dividend Growth
                      1980-1993 stock prices adjusted for 1993 2-...
Value Proposition:
A Superior Risk-Adjusted Return
    Attractive dividend yield with growth commitment


    Long-term e...
Conclusion
    Robust capex program results in considerable rate base

    growth – with or without new nuclear
    Annua...
Q&A
Appendix
PEC – NC Recovery Clauses

          Clause                            Description             Timeframe           Recover...
PEC – SC Recovery Clauses

          Clause                            Description                             Timeframe  ...
PEF Recovery Clauses
  Clause            Description          Timeframe           Recovery
                Recovery of the...
PGN Projected Capital Expenditures (1)
  (in millions)
                                                                   ...
Major Capital Projects – PEC
 (in millions)

                                                                             ...
Major Capital Projects – PEF
           (in millions)



                                                             Capi...
Projected PGN Cash Flow
            (in millions)
                                                                        ...
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Transcript of "progress energy 4/3/08"

  1. 1. Securing Our Energy Future Bill Johnson Chairman, CEO and President Morgan Stanley Global Electricity & Energy Conference April 3, 2008
  2. 2. Caution Regarding Forward-Looking Statements This presentation includes information that is forward-looking in nature. Many factors could cause the actual results to be materially different than the forward-looking information provided. These factors are discussed in more detail in the Company’s most recent Form 10-K and Form 10-Qs.
  3. 3. Topic Outline Overview  Strategic issues  Levy County nuclear project  Summary  Q&A 
  4. 4. Overview
  5. 5. Two High-Performing Electric Utilities with Strong Growth Prospects North Carolina Progress Energy Carolinas • 12,400 MW capacity • Over 1.4M customers South Carolina Progress Energy Florida Florida • 9,400 MW capacity • Over 1.7M customers Service Area
  6. 6. Business Model for a “Pure Play” Regulated Integrated Electric Utility Sustain Operational Deliver Customer Excellence Satisfaction • Safety & environmental • Reliable service performance Achieve Long-Term • Affordable rates • Fleet performance Financial Objectives • Customer care • Cost performance • Annual EPS growth ~ 4 - 5% • Continue dividend growth • ~55% debt-to-total cap • Annual TSR of 8 - 10% (at constant P/E) Leverage Growth Maintain Constructive Prospects Regulation • Organic growth • Cost recovery • Rate base expansion • Proactive proceedings • Balanced approach • Open communications
  7. 7. Rate Base Growth Progress Energy Carolinas¹ Progress Energy Florida² 2008-2010E 2008-2010E CAGR CAGR 4% 18% $9,000 $9,000 2001-2007 CAGR Retail Rate Base (x 1M) Retail Rate Base (x 1M) $8,000 $8,000 5.0% $7,000 $7,000 2001-2007 CAGR $6,000 $6,000 4.1% $5,000 $5,000 $4,000 $4,000 $3,000 $3,000 $2,000 $2,000 $1,000 $1,000 $0 $0 2001 2002 2003 2004 2005 2006 2007 2008E 2009E 2010E 2001 2002 2003 2004 2005 2006 2007 2008E 2009E 2010E Retail rate base Clause-related ¹ PEC rate base includes Clean Smokestacks in excess of $813M. ² PEF rate base excludes Levy nuclear cost recovery
  8. 8. Value Proposition: A Superior Risk-Adjusted Return Attractive dividend yield with growth commitment  Long-term earnings growth supported by sales and rate  base growth Clear business model with successful execution history  Balance sheet and credit metrics support strategy  A solid, low-risk, long-term holding
  9. 9. Strategic Issues
  10. 10. Power Sector’s Challenge Addressing both climate change and demand growth while maintaining a secure supply, reliable service and affordable prices and creating shareholder value
  11. 11. Managing Three Related Issues Debate has shifted from “why” U.S. climate to “what” and “when” change policy Traditional least-cost model is State regulatory compact changing Weighing options for needed Infrastructure investment new baseload capacity
  12. 12. The Case for New Nuclear Gets Stronger Given a future of carbon controls and the strong desire for energy security, adding new nuclear capacity is the best baseload option. But must first have political and regulatory support.
  13. 13. 2008 – 2010: A Critical Period 1) Get federal rules right on climate change 2) Make right state regulatory adjustments 3) Enable right choices on utility infrastructure
  14. 14. PGN Balanced Solution Strategy
  15. 15. Levy County Project Overview
  16. 16. Announced Levy County Site in 2006
  17. 17. Florida Policy Support for New Nuclear Recognizes need to diversify state’s fuel supply  Concern with fuel supplies during crisis (e.g., Katrina)  Passed nuclear cost-recovery legislation in 2006  Governor Crist focused on carbon reductions 
  18. 18. Florida Nuclear Investment Recovery Legislation (2006) Pre-construction and licensing   Capacity cost recovery clause (CCRC)  Costs are recovered dollar for dollar During construction   AFUDC is recovered through CCRC  Annual prudence reviews Completion   Base rate adjustment at in-service for capital costs  ROE and capital structure based on last approved (currently 11.75% ROE on 57.8% equity) Project cancellation cost recovery 
  19. 19. Levy Need Case Filing with Florida PSC Filed Need Case with PSC 3-11-08  Total cost estimate for Levy 1 & 2: $14B + $3B transmission  (overnight cost ~$4,200/kW for 2 units) Projected in-service dates: 2016 & 2017  Estimated fuel savings once in service: ~$1B annually  Florida Governor Crist:  “I think this is an investment in Florida’s future that is  important to make.” (St. Petersburg Times, 3-11-08)
  20. 20. Other Levy Regulatory Milestones Next steps on Need Case   PSC hearing – May 21-23, 2008  Expect need determination order – ~ late July 2008 File license application with NRC – 3rd quarter 2008  Cost-recovery docket opened with PSC March 2008   For 2007-2008 costs per 2006 nuclear legislation  PSC hearing – ~ September/October 2008
  21. 21. Conditions to Proceed with New Nuclear Political and regulatory support  Plant design final  Financing arranged  Our financial objectives met 
  22. 22. Summary
  23. 23. Value Proposition: A Superior Risk-Adjusted Return Attractive dividend yield with growth commitment  Long-term earnings growth supported by sales and rate  base growth Clear business model with successful execution history  Balance sheet and credit metrics support strategy 
  24. 24. Continuous Stock Price and Dividend Growth 1980-1993 stock prices adjusted for 1993 2-for-1 split 1980-1993 stock prices adjusted for 1993 2-for-1 split Stock Price $3.00 $2.50 $2.00 Dividend $1.50 $1.00 $0.50 $0.00 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
  25. 25. Value Proposition: A Superior Risk-Adjusted Return Attractive dividend yield with growth commitment  Long-term earnings growth supported by sales and rate  base growth Clear business model with successful execution history  Balance sheet and credit metrics support strategy  A solid, low-risk, long-term holding
  26. 26. Conclusion Robust capex program results in considerable rate base  growth – with or without new nuclear Annual capex, excluding environmental, declines to  ~$1.5B before nuclear construction Capex program, excluding nuclear, can be readily  financed with $200-$300M equity per year Nuclear pre-construction cost recovery allows for time to  develop our nuclear financing plan Meanwhile, we will focus on our financial objectives   EPS growth  Dividend growth  Solid credit metrics
  27. 27. Q&A
  28. 28. Appendix
  29. 29. PEC – NC Recovery Clauses Clause Description Timeframe Recovery Recovery of fuel costs, Fuel portion of purchased Annual filing $ for $ power and reagent costs Efficiency and Recovery of qualified $ for $ (O&M), Conservation efficiency and Annual filing Return on/of capital* Rider conservation costs * Subject to final rulemaking related to the 2007 NC Energy Bill.
  30. 30. PEC – SC Recovery Clauses Clause Description Timeframe Recovery Recovery of fuel costs, energy portion of Fuel purchased power, Annual filing $ for $ emissions allowances and reagent costs Recovery of financing Return on capital New Nuclear No more often costs for pre-construction during construction Construction than annually and construction capital period Note: SC law grants the Commission the authority to establish an efficiency and conservation rider.
  31. 31. PEF Recovery Clauses Clause Description Timeframe Recovery Recovery of the energy component (fuel) of Fuel Annual filing $ for $ purchased power and fuel costs Recovery of capacity $ for $ (O&M); Capacity portion of purchased Annual filing Return of/on capital power; etc. Recovery of qualified Environmental $ for $ (O&M); environmental Annual filing (ECRC) Return of/on capital compliance costs Energy Recovery of efficiency $ for $ (O&M); Conservation and conservation Annual filing Return of/on capital (ECCR) program costs etc.
  32. 32. PGN Projected Capital Expenditures (1) (in millions) (2) 2007A 2008E 2009E 2010E Maintenance Capex Generation $288 $330 $340 $240 PEC Environmental 340 180 70 80 Transmission 100 230 230 220 Distribution 80 170 180 220 Other 67 130 80 90 Total Maintenance Capex 875 1,040 900 850 Growth Capex Generation 415 400 470 270 PEF Environmental 295 550 280 50 Transmission 86 80 60 120 Distribution 297 310 320 340 Total Growth Capex 1,093 1,340 1,130 780 Corporate/other 10 20 20 20 Total Capital Spending $1,978 $2,400 $2,050 $1,650 (1) Excludes AFUDC, nuclear fuel, nuclear decommissioning trust funding and potential nuclear construction. (2) 2007 actuals do not agree with the cash flows presented in the Form 10-K as the amounts herein are presented on the accrual basis of accounting.
  33. 33. Major Capital Projects – PEC (in millions) Balance Capital Expenditures * Recovery Project Description to Completion Methodology 2007A 2008E 2009E 2010E Spend Date Environmental PEC CSA up to $813M; Compliance $340 $180 $70 $80 $295 2016 Environmental then rate base Equipment Wayne 157 MW CT - $70 $20 - - 2009 Rate base County Richmond 600 MW CCGT & - $80 $265 $140 $70 2011 Rate base County Transmission PEC Subtotal $340 $330 $355 $220 $365 % of Total PEC Capital Expenditures 46% 35% 39% 25% N/A * Excludes AFUDC, nuclear fuel, nuclear decommissioning trust funding and potential nuclear construction.
  34. 34. Major Capital Projects – PEF (in millions) Capital Expenditures (1) Balance Recovery Project Description to Completion Methodology 2007A 2008E 2009E 2010E Spend Date PEF Environmental Environmental cost Environmental Compliance $295 $550 $285 $40 - 2010 recovery clause (CR 4&5) Equipment 1,159 MW CCGT (2) Bartow $320 $190 $30 - - 2009 Rate base Repowering & Transmission Crystal River 3 180 MW Nuclear cost $36 $60 $100 $65 $85 2011 Nuclear Uprate Nuclear recovery legislation CR3 Steam Generator NA $44 $30 $120 - - 2009 Rate base Replacement PEF Subtotal $695 $830 $535 $105 $85 % of Total PEF Capital Expenditures 57% 57% 48% 14% N/A (1) Capital expenditures exclude AFUDC, nuclear fuel, nuclear decommissioning trust funding and potential nuclear construction. (2) Replacing 444 MW of oil steam units for a net increase of 715 MW.
  35. 35. Projected PGN Cash Flow (in millions) 2007A (1) 2008E 2009E 2010E $1,252 (2) Operating cash flow $1,870 2,140 2,310 Maintenance capex (875) (1,040) (900) (850) Nuclear fuel and decommissioning trust (259) (310) (340) (320) Other capex & AFUDC debt (27) (60) (70) (60) Dividends (627) (640) (650) (670) Cash flow after dividend and (536) (180) 180 410 before growth capex Growth capex (1,093) (1,340) (1,130) (780) Free cash flow before (1,629) (1,520) (950) (370) potential nuclear construction Potential nuclear construction (94) (160) (520) (850) Divestiture proceeds 675 70 - - Other 146 - - - Cash flow before financing activities $(902) $(1,610) $(1,470) $(1,220) (1) 2007 actuals do not agree with the cash flows presented in the Form 10-K as the capex amounts herein are presented on the accrual basis of accounting. (2) 2007A operating cash flow was impacted by cash payment for exiting CCO contracts and large tax payment on gain from sale of gas properties.
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