Exhibit 99.1
Progress Energy announces 2009 first-quarter results;
on track for full-year 2009 earnings guidance
Highlights:
| ¨ | Reports first-quarter GAAP earnings of $0.66 per share, compared to $0.80 per share for the same period last year, with prior-year results including gains from the divestiture of non-utility businesses |
| ¨ | Reports first-quarter ongoing earnings of $0.66 per share, compared to $0.56 per share for the same period last year |
| ¨ | On track for 2009 ongoing earnings guidance of $2.95 to $3.15 per share |
RALEIGH, N.C. (May 5, 2009) – Progress Energy [NYSE: PGN] announced first-quarter GAAP earnings of $182 million, or $0.66 per share, compared with GAAP earnings of $209 million, or $0.80 per share, for the same period last year. First-quarter ongoing earnings were $182 million, or $0.66 per share, compared to $148 million, or $0.56 per share, last year. The significant drivers in ongoing earnings per share were increased wholesale revenues, favorable AFUDC equity and a return to normal weather, which were partially offset by share dilution, increased interest expense and lower retail growth and usage. (See the discussion later in this release for a reconciliation of ongoing earnings per share to GAAP earnings per share.)
“In the midst of this economic slowdown, we delivered solid financial results in the first quarter by living within our means and aggressively managing our business,” said Bill Johnson, chairman, president and CEO. “Strong residential sales in the Carolinas and favorable wholesale contracts were able to offset continued retail weakness in Florida and lower industrial demand.
“We continue to secure the energy future for our customers by investing in our two utilities and working constructively with policymakers and regulators. We recently completed the first phase of the Clean Smokestacks Act emission reductions at our fossil plants in the Carolinas, and we are continuing environmental and efficiency upgrades at our Crystal River Plant in Florida. In addition, we expect to complete the repowering of our Bartow Plant from oil to natural gas in June. Meanwhile, at both utilities, we are making good progress in a wide array of energy-efficiency and renewable-energy initiatives.
“In addition, we successfully raised $1.9 billion in the capital markets and made several important regulatory filings, which should position us well to execute our plan in these challenging economic times,” Johnson said.
Progress Energy affirms its 2009 ongoing earnings guidance range of $2.95 to $3.15 per share. The ongoing earnings guidance excludes the impact, if any, from CVO mark-to-market adjustment, potential impairments and discontinued operations. Progress Energy is not able to provide a corresponding GAAP equivalent for the 2009 earnings guidance due to the uncertain nature and amount of these adjustments.
See pages 3-4 for a detailed first-quarter earnings variance analysis for the Progress Energy Carolinas (PEC), Progress Energy Florida (PEF) and Corporate and Other Businesses segments.
RECENT DEVELOPMENTS
Financial and Regulatory
| · | Issued $750 million of senior unsecured notes at the holding company on March 19, 2009, comprised of $300 million 5-year notes at 6.05% and $450 million 10-year notes at 7.05%. |
| · | Announced plans to shift the construction schedule for the Levy County nuclear project, which will move the commercial operation dates by a minimum of 20 months. |
| · | Filed 2010 nuclear cost-recovery estimates with the Florida Public Service Commission, seeking approval to spread certain costs over five years. |
| · | Received approval from the FPSC to decrease 2009 customer bills by $404 million, or approximately 11 percent, through reduced fuel cost projections and deferred nuclear pre-construction cost recovery, with new rates effective April 2009. |
| · | Filed petitions with the FPSC for a 2010 base rate increase of approximately $499 million, including proposals for a portion of the rate increase, approximately $76 million, to be effective starting in July 2009. |
| · | Filed a petition with the FPSC for expedited approval of the following accounting orders, which will not affect PEF’s rates: |
| - | Deferral of $52.5 million in 2009 pension expenses |
| - | Authorization to charge $33.1 million in estimated 2009 storm hardening expenses against the Storm Damage Reserve |
State-of-the-Art Power Plants
| · | Began outage at the 720-megawatt, coal-fired Crystal River Unit 5, to improve the unit’s operational efficiency and install environmental control equipment that will reduce nitrogen oxide emissions by more than 90 percent. |
| · | Placed in service the last environmental compliance project under the first phase of the Clean Smokestacks Act emission reductions, which included projects at PEC’s Asheville, Lee, Mayo and Roxboro plants. |
| · | Selected BE&K Construction Company, a division of KBR, Inc., as provider of general construction services for a 600-megawatt, natural gas-fueled power plant to be built at PEC’s Richmond County Energy Complex. This plant is expected to be placed in service in mid-2011. |
Alternative Energy & Energy Efficiency
| · | Placed online a 1.2-megawatt solar array, owned and operated by SunEdison, at PEC’s Sutton Plant in eastern North Carolina. PEC will purchase the electricity from SunEdison under a 20-year solar power agreement. |
| · | Achieved 1-megawatt total capacity milestone for solar photovoltaic generation systems across PEF’s service territory. |
| · | Announced plans to purchase renewable energy output from a new 50-megawatt biomass-fueled cogeneration plant developed by Peregrine Energy Corporation at Sonoco’s Hartsville, S.C. manufacturing complex, scheduled to begin operation in 2012. |
| · | Announced agreement with Carolina Solar Energy to purchase the energy produced by a new 650-kilowatt solar photovoltaic plant near Roxboro, N.C., scheduled to begin operation later this year. |
| · | Received approval from the NCUC for several energy-efficiency programs: |
| - | Energy Efficiency for Business – available to commercial, industrial and government customers for both new construction and retrofit applications |
| - | Residential Home Energy Improvement Program – offers customers a variety of incentives for energy-efficiency improvements to existing homes |
| - | Residential Solar Water Heating Pilot – up to 150 customers will be offered a $1,000 incentive to participate in the study |
Awards, Honors & Recognitions
| · | Received EEI emergency-assistance award, recognizing the largest off-system deployment in the company’s history in response to Hurricane Ike. Progress Energy has earned seven EEI storm-response awards, receiving the emergency-response award five times and the emergency-assistance award twice. |
Press releases regarding various announcements are available on the company’s Web site at www.progress-energy.com/aboutus/news.
FIRST-QUARTER 2009 BUSINESS HIGHLIGHTS
Below are the first-quarter 2009 highlights for the company’s business units. See the reconciliation tables on pages 5-6 and on page S-1 of the supplemental data for a reconciliation of ongoing earnings per share to GAAP earnings per share. Also see the attached supplemental data schedules for additional information on PEC and PEF electric revenues, energy sales, energy supply, weather impacts and other information.
Progress Energy Carolinas
| · | Reported first-quarter ongoing earnings per share of $0.47, compared with $0.46 for the same period last year; GAAP earnings per share of $0.46, compared with $0.47 for the same period last year. |
| · | Reported primary quarter-over-quarter ongoing earnings per share favorability of: |
| § | $0.03 weather due to prior-year unfavorability |
| § | $0.02 wholesale revenues primarily due to higher transmission revenues resulting from the Open Access Transmission Tariff rates that went into effect on July 1, 2008 |
| § | $0.02 AFUDC equity primarily due to increased eligible construction project costs |
| § | $0.02 depreciation and amortization primarily due to lower Clean Smokestacks Act amortization, partially offset by the impact of depreciable asset base increases. PEC has ceased recording Clean Smokestacks Act amortization in accordance with a regulatory order. |
| § | $0.02 income taxes primarily due to the deduction related to nuclear decommissioning trust funds |
| · | Reported primary quarter-over-quarter ongoing earnings per share unfavorability of: |
| § | $(0.02) other retail margin |
| § | $(0.02) O&M primarily due to higher nuclear plant outage and maintenance costs |
| § | $(0.02) other primarily due to seasonal losses on a balanced billing program, lower interest income and investment losses |
| § | $(0.01) retail growth and usage |
| · | 18,000 net increase in the average number of customers for the three months ended March 31, 2009, compared to the same period in 2008 |
Progress Energy Florida
| · | Reported first-quarter ongoing earnings per share of $0.33, compared with $0.26 for the same period last year; GAAP earnings per share of $0.32, compared with $0.26 for the same period last year. |
| · | Reported primary quarter-over-quarter ongoing earnings per share favorability of: |
| § | $0.04 weather due to prior-year unfavorability |
| § | $0.04 wholesale revenues primarily due to new and amended contracts that were not in effect in first quarter 2008 |
| § | $0.04 AFUDC equity primarily due to increased eligible construction project costs |
| § | $0.04 income taxes primarily due to the deduction related to nuclear decommissioning trust funds |
| § | $0.02 other retail margin |
| · | Reported primary quarter-over-quarter ongoing earnings per share unfavorability of: |
| § | $(0.04) interest expense primarily due to higher average debt outstanding |
| § | $(0.02) retail growth and usage |
| § | $(0.01) depreciation and amortization |
| · | 8,000 net decrease in the average number of customers for the three months ended March 31, 2009, compared to the same period in 2008 |
Corporate and Other Businesses (includes primarily Holding Company Debt)
| · | Reported first-quarter ongoing after-tax expenses of $0.14 per share compared with ongoing after-tax expenses of $0.16 per share for the same period last year; GAAP after-tax expenses of $0.12 per share, compared with after-tax income of $0.07 per share for the same period last year. |
| · | Reported primary quarter-over-quarter ongoing after-tax expenses per share favorability of: |
| § | $0.03 other primarily due to lower workers’ compensation expense, investment gains of certain employee benefit trusts resulting from market conditions and higher interest income. |
| · | Reported primary quarter-over-quarter ongoing after-tax expenses per share unfavorability of: |
| § | $(0.02) income taxes primarily due to the impact on the Corporate tax position resulting from the deductions taken by the Utilities related to nuclear decommissioning trust funds |
ONGOING EARNINGS ADJUSTMENTS
Progress Energy’s management uses ongoing earnings per share to evaluate the operations of the company and to establish goals for management and employees. Management believes this presentation is appropriate and enables investors to more accurately compare the company’s ongoing financial performance over the periods presented. Ongoing earnings as presented here may not be comparable to similarly titled measures used by other companies. The following table provides a reconciliation of ongoing earnings per share to reported GAAP earnings per share.
Progress Energy, Inc.
Reconciliation of Ongoing Earnings per Share to Reported GAAP Earnings per Share
| | | Three months ended March 31 | |
| | | 2009 | | | | 2008 | * |
| Ongoing earnings per share | | $ | 0.66 | | | $ | 0.56 | |
| Tax levelization | | | (0.02 | ) | | | 0.01 | |
| Discontinued operations | | | − | | | | 0.23 | |
| CVO mark-to-market | | | 0.02 | | | | − | |
| Reported GAAP earnings per share | | $ | 0.66 | | | $ | 0.80 | |
Shares outstanding (millions) | | | 277 | | | | 260 | |
| | | | | | | | | |
* Previously reported first quarter 2008 earnings per share has been restated to reflect the adoption of new accounting guidance that changed the calculation of the number of average common shares outstanding.
Reconciling adjustments from ongoing earnings to GAAP earnings are as follows:
Tax Levelization
Generally accepted accounting principles require companies to apply an effective tax rate to interim periods that is consistent with a company’s estimated annual tax rate. The company projects the effective tax rate for the year and, then, based upon projected operating income for each quarter, raises or lowers the tax expense recorded in that quarter to reflect the projected tax rate. The resulting tax adjustment decreased earnings per share by $0.02 for the quarter and increased earnings per share by $0.01 for the same period last year, but has no impact on the company’s annual earnings. Because this adjustment varies by quarter but has no impact on annual earnings, management believes this adjustment is not representative of the company’s ongoing quarterly earnings.
Discontinued Operations
The company has reduced its business risk by exiting nonregulated businesses to focus on the core operations of the utilities. The discontinued operations of these nonregulated businesses had no impact on earnings for the quarter and increased earnings per share by $0.23 for the same period last year. See page S-3 of the supplemental data for further information on the impact of discontinued operations. Due to disposition of these assets, management does not view this activity as representative of the ongoing operations of the company.
Contingent Value Obligation (CVO) Mark-to-Market
In connection with the acquisition of Florida Progress Corporation, Progress Energy issued 98.6 million CVOs. Each CVO represents the right of the holder to receive contingent payments based on net after-tax cash flows above certain levels of four synthetic fuels facilities purchased by subsidiaries of Florida Progress Corporation in October 1999. The CVO liability is valued at fair value, and unrealized gains and losses from changes in fair value are recognized in earnings each quarter. The CVO mark-to-market increased earnings per share by $0.02 for the quarter and had no impact on
earnings for the same period last year. Progress Energy is unable to predict the changes in the fair value of the CVOs, and management does not consider the adjustment to be a component of ongoing earnings.
* * * *
Progress Energy’s conference call with the investment community will be held May 5, 2009, at 10 a.m. ET (7 a.m. PT). Investors, media and the public may listen to the conference call by dialing 913-312-1524, confirmation code 4790789. If you encounter problems, please contact Investor Relations at (919) 546-6057. A playback of the call will be available from 1 p.m. EST May 5 through midnight May 19. To listen to the recorded call, dial 719-457-0820 and enter confirmation code 4790789.
A webcast of the live conference call will be available at www.progress-energy.com/webcast. The webcast will be available in Windows Media format. The webcast will be archived on the site for at least 30 days following the call for those unable to listen in real time. The webcast will include audio of the conference call and a slide presentation referred to by management during the call. The slide presentation will be available for download beginning at 9:30 a.m. ET today at www.progress-energy.com/webcast.
Progress Energy (NYSE: PGN), headquartered in Raleigh, N.C., is a Fortune 500 energy company with more than 21,000 megawatts of generation capacity and $9 billion in annual revenues. Progress Energy includes two major electric utilities that serve approximately 3.1 million customers in the Carolinas and Florida. The company has earned the Edison Electric Institute's Edison Award, the industry's highest honor, in recognition of its operational excellence, and was the first utility to receive the prestigious J.D. Power and Associates Founder's Award for customer service. The company is pursuing a balanced strategy for a secure energy future, which includes aggressive energy-efficiency programs, investments in renewable energy technologies and a state-of-the-art electricity system. Progress Energy celebrated a century of service in 2008. Visit the company's Web site at www.progress-energy.com.
Caution Regarding Forward-Looking Information:
This release 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.
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 ability to meet 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 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 and potential construction 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 O&M and large construction projects; the ability of our subsidiaries to pay upstream dividends or distributions to Progress Energy; the duration and severity of the current financial market distress that began in the third quarter of 2008; the ability to successfully access capital markets on favorable terms; the stability of commercial credit markets and our access to short- 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; the investment performance of the assets of our pension and benefit plans and resulting impact on future funding requirements; the impact of goodwill impairments; 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 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.
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.
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Contacts: Corporate Communications – (919) 546-6189 or toll-free (877) 641-NEWS (6397)
The Unaudited Condensed Consolidated Interim Financial Statements should be read in conjunction with the Company’s Annual Report to shareholders. These statements have been prepared for the purpose of providing information concerning the Company and not in connection with any sale, offer for sale, or solicitation of an offer to buy any securities.
Progress Energy, Inc.
Progress Energy, Inc.
A - Adjusted O&M excludes certain expenses that are recovered through cost-recovery clauses which have no material impact on earnings, as well as certain non-recurring items. Management believes this presentation is appropriate and enables investors to more accurately compare the company's O&M expense over the periods presented. Adjusted O&M as presented here may not be comparable to similarly titled measures used by other companies. The preceeding table provides a reconciliation of reported GAAP O&M to Adjusted O&M.
