progress energy lehman

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progress energy lehman

  1. 1. Securing our Energy Future Bill Johnson Bill Johnson Chairman, President and CEO Chairman, President and CEO Lehman Brothers Lehman Brothers CEO Energy/Power Conference CEO Energy/Power Conference September 4, 2008 September 4, 2008 1
  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. Major Discussion Topics 1. Strategy overview 2. Near-term outlook 3. Nuclear expansion
  4. 4. Profile of who we are: Two High-Performing Electric Utilities North Carolina Progress Energy Carolinas • 12,400 MW capacity • Over 1.4M customers • 2.2% cust. growth (7-yr CGR) • $4.4B total revenue • $12B total assets South • 5,000 employees • 34,000 sq. mile service area Carolina • 18 plants, 82 units Progress Energy Florida • 9,400 MW capacity Florida • Over 1.7M customers • 2.2% cust. growth (7-yr CGR) • $4.7B total revenue • $13B total assets • 4,000 employees Service Area • 20,000 sq. mile service area • 14 plants, 65 units
  5. 5. Strategy Overview
  6. 6. Reaffirm core strategic focus: Regulated Electric Utility Business Achieve financial objectives Progress Energy Carolinas while excelling in fundamentals PGN Leverage prospects for growth Adapt to new energy landscape Progress Energy Florida and changing business model Integrated Energy Company Serving the Carolinas and Florida Foundation Power Power Customer Power Generation Transmission Service Delivery >21,000 MW serving 3.1M customers 6
  7. 7. Power Sector’s Challenge Addressing both climate change and demand growth in new era of rising costs while maintaining a secure supply, reliable service and affordable prices and creating shareholder value
  8. 8. PGN Balanced Solution Strategy
  9. 9. Strategic Agenda and Outcomes Agenda Outcomes 1) Investor confidence to 1) Achieve annual EPS growth enable access to capital of 4-5% 2) Strong financial and 2) Excel in the fundamentals operational foundation for 3) Pursue Balanced Solution growth to secure energy future 3) Positioned for carbon- 4) Confront new energy constrained world realities together 4) Effectively meeting needs 5) Sustain financial strength of customers and flexibility during Levy 5) Ready to adapt to evolving construction business model 9
  10. 10. Near-Term Outlook
  11. 11. Significant Rate Base Growth Even Prior to New Nuclear Progress Energy Carolinas¹ Progress Energy Florida² 2008-2010E 2008-2010E CAGR CAGR 18% 4% $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 Act expenditures in excess of $813M. (2) PEF rate base excludes Levy County nuclear capital expenditures.
  12. 12. Major Near-Term Capital Projects (1) Capital expenditures exclude AFUDC. (2) Replacing 444 MW of oil steam units for a net increase of 715 MW. (3) Company requesting NCUC to permit rate-basing expenditures above $569M.
  13. 13. Regulatory Update Florida Carolinas • No general rate case • Current rate settlement expected near-term expires end of 2009 • Clean Smokestacks update • Aug. 29 – Filed annual fuel, nuclear and environmental • Sept. 16 – NCUC hearing costs with FPSC on annual fuel case (Nov. 4-6 hearing) • Sept. 17 – NCUC hearing: • Sept. 11-12 – FPSC - REPS cost recovery hearing on nuclear cost recovery 13
  14. 14. Nuclear Expansion
  15. 15. A Well-Established, High-Performing Nuclear Generation Fleet: 4,323 MW Crystal River (1 PWR unit) Brunswick (2 BWR units) 1977 1975-1977 838 MW (1) 1,875 MW (1) 91.78% 81.67% ownership ownership Robinson (1 PWR unit) Harris (1 PWR unit) 1971 1987 900 MW (1) 710 MW 83.83% 100% ownership ownership (1) Capacities include joint owners’ share.
  16. 16. Strong Case for New Nuclear in U.S. 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, baseload option that can be delivered at scale
  17. 17. Even Stronger Nuclear Case in Florida Progress Energy Florida Increasing nuclear share: • reduces fuel costs Purchased Oil/Gas 32% • reduces price volatility 23% • helps address carbon challenge • strengthens fuel supply security Nuclear 14% Coal 31% Generation Output Mix in 2007 Output
  18. 18. Supportive Florida Legislation 2006: Nuclear Investment Recovery Pre-construction and licensing Capacity cost recovery clause (CCRC) Costs are recovered dollar for dollar During construction 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 ROE and capital structure based on last approved (currently 11.75% ROE on 57.8% equity) Project cancellation cost recovery
  19. 19. Levy Nuclear Project in Florida Location Technology # of units Capacity (MW) In Service Levy County, Westinghouse Unit 1: 2016 2 ~2,200 total Florida AP1000 Unit 2: 2017 • 8 miles NE of our Crystal River Energy Complex • Negotiating joint ownership with multiple parties (1) • Negotiating engineering, procurement & construction (EPC) agreement with Westinghouse and Shaw • Site prep & pre-construction begin ~2010; safety-related construction begins 2012 (1) Confidentiality obligations preclude us from discussing this further until19 negotiations are completed. the
  20. 20. Regulatory Timeline for Levy Project Mar. May June July Aug. Sept. Oct. April 2008 2010 2012 Need Case Filed Hearing Vote Order Cost Recovery Filed Hearing Order Site Certification Filed (15 - 18 month review) Issued Combined License Filed (3 - 4 year review) Issued 20
  21. 21. Conclusion
  22. 22. Business Model for a “Pure Play” Regulated Integrated Electric Utility Sustain Operational Deliver Customer Deliver Customer Sustain Operational Excellence Satisfaction Satisfaction Excellence • Safety & environmental • Reliable and • Safety & environmental • Reliable and performance responsive service Achieve Long-Term performance responsive service Financial Objectives • Fleet performance • Affordable rates • Fleet performance • Affordable rates • Cost performance • Corporate citizenship • Cost performance • Corporate citizenship • Annual EPS growth ~ 4 - 5% • Annual EPS growth ~ 4 - 5% • Continue dividend growth • Continue dividend growth • Preserve investment-grade • Preserve investment-grade credit rating credit rating • Annual TSR of 8 - 10% • Annual TSR of 8 - 10% (at constant P/E) Leverage Growth Maintain Constructive (at constant P/E) Leverage Growth Maintain Constructive Prospects Regulation Prospects Regulation • Organic growth • Cost recovery • Organic growth • Cost recovery • Rate base expansion • Proactive proceedings • Rate base expansion • Proactive proceedings • Balanced approach • Open communications • Balanced approach • Open communications
  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 A solid, low-risk, long-term holding
  24. 24. Q&A

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