progress energy i2

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progress energy i2

  1. 1. EEI Financial Conference Phoenix, Arizona November 10-11, 2008
  2. 2. Safe Harbor for Forward-Looking Information This document contains forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. The matters discussed in this document involve estimates, projections, goals, forecasts, assumptions, risks and uncertainties that could cause actual results or outcomes to differ materially from those expressed in the forward-looking statements. Any forward-looking statement is based on information current as of the date of this document and speaks only as of the date on which such statement is made, and we undertake no obligation to update any forward-looking statement or statements to reflect events or circumstances after the date on which such statement is made. Examples of factors that you should consider with respect to any forward-looking statements made throughout this document include, but are not limited to, the following: the impact of fluid and complex laws and regulations, including those relating to the environment and the Energy Policy Act of 2005; the anticipated future need for additional baseload generation and associated transmission facilities in our regulated service territories and the accompanying regulatory and financial risks; the financial resources and capital needed to comply with environmental laws and renewable energy portfolio standards and our ability to recover related eligible p py gy p y g costs under cost-recovery clauses or base rates; our ability to meet current and future renewable energy requirements; the inherent risks associated with the operation of nuclear facilities, including environmental, health, regulatory and financial risks; the impact on our facilities and businesses from a terrorist attack; weather and drought conditions that directly influence the production, delivery and demand for electricity; recurring seasonal fluctuations in demand for electricity; the ability to recover in a timely manner, if at all, costs associated with future significant weather events through the regulatory process; economic fluctuations and the corresponding impact on our customers, including downturns in the housing and consumer credit markets; fluctuations in the price of energy commodities and purchased power and our ability to recover such costs through the regulatory process; our ability to control costs, including operation and maintenance expense (O&M) and large construction projects; the ability of our subsidiaries to pay upstream dividends or distributions to Progress Energy; the length and severity of the current financial market distress that began in September 2008; the ability to successfully access capital markets on favorable terms; the stability of commercial credit markets and our access to short-term and long-term credit; the impact that increases in leverage may have on us; our ability to maintain our current credit ratings and the impact on our financial condition and ability to meet our cash and other financial obligations in the event our credit ratings are downgraded; our ability to fully utilize tax credits generated from the previous production and sale of qualifying synthetic fuels under Internal Revenue Code Section 29/45K; the investment performance of our nuclear decommissioning trust funds and the assets of our pension and benefit plans; the outcome of any ongoing or future litigation or similar disputes and the impact of any such outcome or related settlements; and unanticipated changes in operating expenses and capital expenditures. Many of these risks similarly impact our nonreporting subsidiaries. These and other risk factors are detailed from time to time in our filings with the United States Securities and Exchange Commission. All such f t C ii h factors are diffi lt t predict, contain uncertainties th t may materially affect actual results and may b b difficult to di t ti t i ti that t i ll ff t t l lt d be beyond our control. N d t l New f t factors emerge from time to time, and it is not possible for management to predict all such factors, nor can management assess the effect of each such factor on us. These and other risk factors are detailed from time to time in our filings with the United States Securities and Exchange Commission (SEC). All such factors are difficult to predict, contain uncertainties that may materially affect actual results and may be beyond our control. New factors emerge from time to time, and it is not possible for management to predict all such factors, nor can management assess the effect of each such factor on us. For questions or comments contact: Bob Drennan Bryan Kimzey Vice President, Investor Relations Lead Analyst, Investor Relations Tel: 919-546-7474 Tel: 919-546-6931 Email: bob.drennan@pgnmail.com Email: bryan.kimzey@pgnmail.com
  3. 3. Major Discussion Topics j p 1. Company overview 2. Financial update 3. Regulatory update g yp 4. Growth strategy 5. 5 Nuclear expansion
  4. 4. Company Overview
  5. 5. Profile of who we are: Two High-Performing Electric Utilities g g North Carolina Progress Energy Carolinas • 12,400 MW capacity 12 400 • Over 1.4M customers • 2.2% cust. growth (7-yr CGR) (7- • $4.4B total revenue • $12B total assets • 5,000 employees South • 34,000 sq. mile service area Carolina • 18 plants, 82 units Progress Energy Florida • 9,400 MW capacity Florida • ~1.7M customers • 2.2% cust. growth (7-yr CGR) 2 2% t th (7- • $4.7B total revenue • $13B total assets • 4,000 employees Service Area • 20,000 sq. mile service area q • 14 plants, 65 units
  6. 6. Strategic Focus g ● An integrated energy company focused on end-use electricity markets What ●CCore b i businesses: P Progress E Energy Carolinas and Progress Energy Florida ● High growth regulated markets in the Carolinas and Florida Where ● Access to attractive wholesale markets ● 80% regulated retail g Target Mix T t Mi ● 20% wholesale ● Buy-and-hold stock ● Good value with modest business risk, low volatility Investment Thesis and dividend growth The l Th largest pure-play regulated electric utility in the U.S. t l l t d l t i tilit i th U S
  7. 7. Financial Update
  8. 8. Our Long-Term Financial Objectives g j • Achieve our 4-5% EPS growth objective • Preserve an investment grade credit rating • Maintain dividend growth • Keep rate increases reasonable to customers • Fund Levy and capital investments in the rest of the business
  9. 9. Financial Update: Challenges/Opportunities • Weaker than expected Florida revenues mitigated by Wholesale Wh l l Cost management • Regulatory depreciation/amortization at PEC Received Clean Smokestacks order from NCUC on 9/5/2008 $27M of Harris depreciation by end of 2009 • 2009-2010 capital expenditure program under review
  10. 10. Liquidity Overview * q y (in millions) PGN Revolving Credit Facilities Debt Maturity Profile Program Term Amount Expiration Issue 2009 2010 2011 2012 Progress Energy 5-Year $1,130 5/3/12 PGN $ -$ 100 $ 700 $ 450 Progress Energy PEC 400 6 - 500 5-Year 450 6/28/11 Carolinas PEF - 300 300 - Progress Energy 450 Florida 5-Year 3/28/11 Total $ 400 $ 406 $ 1,000 $ 950 $2,030 * * As of September 30, 2008.
  11. 11. Strong Liquidity Position gq y As of September 30, 2008 ($ in millions) Credit Facilities CP / LCs Cash on Total Expiration Commitment Drawn Outstanding Available Hand Liquidity 2012 $1,130 $1 130 -* $526 $604 $35 $638 PGN 2011 450 - - 450 145 595 PEC 2011 450 - - 450 223 673 PEF Total $2,030 - $526 $1,504 $403 $1,907 * Recently borrowed $ $600 million under Progress Energy’s revolving credit agreement to reduce rollover risk in the commercial paper markets. Near-Term Maturity Planned debt issuance by February 2009 at PEC to refinance $400M maturity on March 1, 2009 Approximately $1.9 billion of total liquidity 11
  12. 12. Credit Facilities Consortium * $ in millions Bank Total J.P. Morgan Chase g $ 225.0 Bank Tokyo-Mitsubishi 200.0 Barclays Capital 190.5 Bank of America 190.0 Citigroup 180.0 180 0 Wachovia 175.5 Royal Bank of Scotland 169.0 Bank of New York Mellon 120.0 SunTrust 115.0 115 0 Morgan Stanley 100.0 Goldman Sachs 100.0 Deutsche Bank 95.0 UBS 80.0 80 0 BNP Paribas 50.0 BB&T 25.0 First Tennessee 15.0 Total $ 2,030.0 * * As of September 30, 2008.
  13. 13. Current Credit Ratings * g Moody’s Standard & Fitch Progress Energy Investors Poor’s Ratings Outlook Stable Stable Stable Corporate Credit Rating -- BBB+ BBB Senior Unsecured Debt Baa2 BBB BBB Commercial Paper P-2 A-2 F-2 Progress Energy Carolinas Corporate Credit R ti C t C dit Rating A3 BBB+ BBB A- A Commercial Paper P-2 A-2 F-1 Senior Secured Debt A2 A- A+ Senior Unsecured Debt A3 BBB+ A Preferred Stock Baa2 BBB- A- Progress Energy Florida Corporate Credit Rating A3 BBB+ A- Commercial Paper P-2 A-2 F-1 Senior Secured Debt A2 A- A+ Senior Unsecured Debt A3 BBB+ A Preferred Stock Pf dS k Baa2 B2 BBB- BBB A- A FPC Capital I Preferred Stock** Baa2 BBB- -- Progress Capital Holdings Senior Unsecured Debt*** Debt Baa1 BBB -- * As of November 5, 2008. ** Guaranteed by Progress Energy, Inc. and Florida Progress Corporation. *** Guaranteed by Florida Progress Corporation.
  14. 14. Regulatory Update
  15. 15. Carolinas Cost Recovery Filings y g • South Carolina fuel filing PSC approved $39M increase Effective July 1 2008 1, • North Carolina fuel filing Reached a proposed settlement with interveners for $275M increase Represents a 3-year recovery ( ith i t R t 3 (with interest) of ~$200M deferred fuel t) f $200M d f df l balance at July 31, 2008, plus projected fuel costs Hearing held Sept 16; awaiting order; rates effective Dec 1, 2008 • North Carolina REPS cost recovery Filed for ~$12M actual and projected incremental cost of compliance Avoided costs will flow through fuel clause proceedings Hearing held Sept 17; awaiting order; rates effective Dec 1, 2008 • North Carolina DSM/EE rider and DSDR* program Filed for ~$42M actual and projected cost recovery Rates ff ti Dec 1, R t effective D 1 2008 (h i scheduled f D 17 2008) (hearing h d l d for Dec 17, * Distribution System Demand Response.
  16. 16. NC Clean Smokestacks Update p $1.5B-$1.6B: current estimate of total costs ~$700M remaining expenditures $813M: original estimate of $229M balance compliance costs into rate base $15M amortization in Q1-08 $584M: cumulative amortization to date $569M – 70% of original estimate amortized by y 12/31/07 Received favorable order from NCUC on Sept 5: PEC allowed to accrue AFUDC above $813M; eliminates any further accelerated amortization
  17. 17. Florida Cost Recovery Filings y g • Storm damage reserve ended July 31 • 2008 mid-year fuel cost adjustment $213M request for full recovery from Aug-Dec ’08 FPSC approved half for recovery Aug Dec ’08; Aug-Dec 08; remaining half in ’09 • 2009 cost recovery filings on Aug 29 y g g Levy nuclear Approved on Oct 14; CR3 uprate rates effective Jan 1, 2009 Fuel Capacity Hearings held Nov 4-6; Environmental rates effective Jan 1, 2009 Energy conservation
  18. 18. Florida Environmental Cost Recovery y • Environmental Cost Recovery Clause (ECRC) Annual ECRC filing Accrue AFUDC based on existing rate settlement Return of Return-of and return-on capital invested when return on placed-in service Dollar-for-dollar recovery of Related R l t d O&M expenses • Emission allowances • • E ti t d t t l spend of $1.2B th Estimated total d f $1 2B through 2010 h Crystal River 4 & 5 $745M spent through September 30 2008 30,
  19. 19. Growth Strategy
  20. 20. Significant Rate Base Growth Even Prior to New Nuclear e o e uc ea Progress Energy Carolinas¹ Progress Energy Florida² 2008 2010E 2008-2010E 2008 2010E 2008-2010E CAGR CAGR 18% 5% $9,000 $9,000 2001-2007 CAGR M) $8,000 $8 000 Retail Rate Base (x 1M) $8,000 $8 000 5.0% 5 0% Retail Rate Base (x 1M $7,000 $7,000 2001-2007 CAGR $6,000 $6,000 4.1% B $5,000 $5 000 $5,000 $5 000 $4,000 $4,000 $3,000 $3,000 $, $2,000 $2,000 R R $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 t base R t il rate b Clause-related Cl ltd (1) PEC rate base includes Clean Smokestacks Act expenditures in excess of $584M. (2) PEF rate base excludes Levy County nuclear capital expenditures.
  21. 21. CapEx Driving Earnings Growth – On Track p g g Total Cumulative Spent Expected Major Generation Projects Project CapEx through 9/30/08 Completion Date Carolinas Clean Smokestacks $1.5-1.6B $986M 2013 Wayne County CT W C t $90M $17M $1 M Jun-09 J 09 Richmond County CCGT $600M $45M Jun-11 (incl Transmission) Florida Environmental $1.2B $745M May-10 Bartow Repowering p g $690M $602M Jun-09 J 09 (incl Transmission) CR3 Nuclear Uprate $365M $73M Dec-11 CR3 Steam Generator $245M $110M Dec-09 D 09 Replacement Note: Total project capital expenditures based on current estimates and exclude AFUDC. 21
  22. 22. Allowance for Funds Used During Construction (AFUDC) ( ) PEC capital projects lasting more than Carolinas one month are forecast to earn 8-9% 8- AFUDC rate. ($15M in 2007 growing to ~$35M in 2008) PEF capital projects greater than $45 Florida million and lasting more than one year earn an 8.848% AFUDC rate. * ($53M in 2007 growing to ~$125M in 2008) * PEF has a base level of CWIP embedded in its rate base.
  23. 23. Nuclear Expansion
  24. 24. A Well-Established, High-Performing Well- High- Nuclear Generation Fleet: 4,323 MW , Brunswick (2 BWR units) Crystal River (1 PWR unit) 1975-1977 1977 838 MW (1) 1,875 MW (1) 91.78% 81.67% ownership ownership Harris (1 PWR unit) Robinson (1 PWR unit) 1987 1971 900 MW (1) 710 MW 83.83% 100% ownership ownership o es p (1) Facilities are jointly owned. The capacities shown include joint owners’ share.
  25. 25. Strong Case for New Nuclear in U.S. g y Federal climate policy expected in 2009-2010 Need for new baseload generating capacity Need for fuel diversity and energy security Nuclear is the only proven carbon-free, yp , baseload option that can be delivered at scale
  26. 26. Even Stronger Nuclear Case in Florida g Progress Energy Florida Increasing nuclear share: • reduces fuel costs Purchased • reduces price volatility Oil/Gas 32% 23% • helps address carbon challenge • strengthens fuel supply security Nuclear Coal 14% 31% Generation Output Mix in 2007
  27. 27. Supportive Florida Legislation 2006: Nuclear Investment Recovery • Pre-construction and licensing Capacity cost recovery clause (CCRC) Costs are recovered dollar for dollar • During construction g AFUDC is recovered through CCRC 8.848% AFUDC rate is locked until commercial operation Annual prudence reviews • Completion Base rate adjustment at in service for capital costs in-service ROE and capital structure based on last approved (currently 11.75% ROE on 57.83% common equity) • P j t cancellation cost recovery Project ll ti t
  28. 28. Levy Nuclear Project in Florida y j Location Technology # of units Capacity (MW) In Service Levy County County, Westinghouse Unit 1: 2016 2 ~2,200 t t l 2 200 total Florida AP1000 Unit 2: 2017 • 8 miles NE of our Crystal River Energy C Complex • Negotiating joint ownership with multiple parties (1) • Negotiating engineering, procurement & construction (EPC) agreement with Westinghouse and Shaw • Site prep & pre-construction begin ~2010/11; safety- related construction begins 2012/13 (1) Confidentiality obligations preclude us from discussing this further until the negotiations are completed.
  29. 29. Regulatory Timeline for Levy Project g y y j Mar. May y June July y Aug. g Sept. p Oct. April p 2008 2010 2012/13 Need Case Filed Hearing Vote Order Cost Recovery Filed Hearing Order Site Certification Filed (18 month review) Issued Combined License Filed (3 - 4 year review) Issued
  30. 30. Conclusion
  31. 31. Value Proposition: A Superior Risk-Adjusted Return Risk Adjusted • 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 pp gy A solid, low-risk, long-term h ldi lid l ikl t holding
  32. 32. 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 • Corporate citizenship • C t performance Cost f • Annual EPS growth ~ 4 - 5% • Continue dividend growth • Preserve investment-grade credit rating di i • 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
  33. 33. Appendix
  34. 34. NC Recovery Clauses y 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.
  35. 35. 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.
  36. 36. FL Recovery Clauses y Clause Description Timeframe Recovery Recovery of the energy component (fuel) of Fuel Annual filing $ for $ purchased power and fuel costs Nuclear cost recovery $ for $ (O&M); Capacity Annual filing Recovery of capacity Return of/on capital portion of purchased 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.
  37. 37. For more information about visit our Web site at www.progress-energy.com and click on the “Investors” tab.

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