[CP&L logo] [Florida Progress Corporation logo]
CAROLINA POWER & LIGHT AND FLORIDA PROGRESS
AGREE TO $17 BILLION COMBINATION
Creates Ninth-Largest Energy Utility
Company Focused on High Growth Southeast Region
Raleigh, NC and St. Petersburg, FL (August 23, 1999) - Carolina Power & Light
Company ("CP&L") [NYSE: CPL] and Florida Progress Corporation [NYSE: FPC] today
announced that their boards of directors have unanimously approved a definitive
agreement to combine the two companies.
Under the terms of the agreement, Florida Progress shareholders will receive
$54.00 per Florida Progress common share in a combination of cash and a new CP&L
holding company's common stock. The total value of the transaction is
approximately $5.3 billion. Florida Progress shareholders will have the right
to elect cash or stock subject to proration if the elections exceed 65 percent
in cash or 35 percent in stock. The stock component of the consideration is
subject to a collar if the average price of the new CP&L holding company's stock
for the 20-day period ending five days prior to closing is greater than $45.39
or less than $37.13. Both the cash and stock components will be taxable to
Florida Progress shareholders.
The combined company will have a total enterprise value of approximately $17
billion ($8.0 billion in equity; $9.1 billion in net debt and preferred stock).
The combination is expected to be accounted for as a purchase and is anticipated
to be accretive in the first full year after closing. Thereafter, CP&L expects
the combined company to have annual growth in earnings per share of 7 to 8
percent.
This combination creates the nation's ninth-largest energy utility based on
generating capacity of more than 18,500 megawatts. The combined company will
have total revenues of $6.7 billion (based on 1998) and 2.5 million electricity
customers in a 50,000-square-mile retail service area. The company will have a
powerful presence in the Southeastern electric and natural gas markets, and will
be dedicated to expanding the region's electric generation capacity and
delivering reliable, competitively priced energy throughout its high-growth
service area.
Mr. William Cavanaugh, chairman, president and chief executive officer of CP&L,
said, "The acquisition of Florida Progress represents a major step toward
fulfilling our strategic plan of becoming a leading energy provider in the
Southeast. Like the Carolinas, Florida is one of the highest-growth areas in
the country. The predominantly residential base of Florida Power (Florida
Progress' primary subsidiary) is an excellent complement to our mix of more
commercial and industrial customers. The complementary growth in both CP&L and
Florida Power territories and the wholesale market in the Southeast will enhance
our plans to add more gas-fired generating capacity and will increase our siting
options as well as the markets for our product. With our recent acquisition of
North Carolina Natural Gas Corp., this combination with Florida Progress will
enhance our competitive position in the generation, power marketing and delivery
of energy services in the best area of the country to be in the energy
business."
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"Florida Progress employees, like our own, bring considerable expertise and
experience to the larger company," Mr. Cavanaugh said. "The expanded diversity
of employee talents and skills will position us for leadership in the evolving
energy services industry. We will build on that talent and on both companies'
tradition of community service and delivering superior performance for customers
and shareholders."
Mr. Richard Korpan, chairman, president and chief executive officer of Florida
Progress, said, "This transaction provides shareholders with a premium that
recognizes the value inherent in our Florida franchise and our diversified
operations. The combination creates a larger, stronger company well-positioned
to leverage our joint capabilities for the benefit of our customers, while
delivering real - and increasing - value to our shareholders. Our two companies
are a great strategic fit, sharing complementary visions of how to provide our
markets with reliable energy and excellent service. Indeed, the combined
company will grow its generation, allowing it to meet future energy needs
throughout the Southeast.
"Looking to that future, Florida Progress employees will help create an
organization poised for continued growth. As a leading Southeast regional
service provider, the company will continue to play an important role throughout
Florida. Furthermore, CP&L's commitment to a continued presence in our service
area ensures that we enter our second 100 years with even greater ability to
serve the energy needs of our customers. As part of that commitment, CP&L will
continue the active community support that has been a hallmark of Florida
Progress' corporate citizenship for a century," Mr. Korpan added.
This announcement is the latest and most significant development in CP&L's
regional energy strategy, which continues to build momentum in 1999. This
summer, CP&L added 325 MW of electric generation part of a planned 7,000 MW of
generation additions over the next decade to meet growing retail needs and
increase sales in the competitive wholesale market. CP&L also acquired North
Carolina Natural Gas Corp. in July and is developing natural gas pipeline
expansion plans to fuel CP&L's planned power plants.
The combined company's non-utility businesses represent a strong platform to
supplement utility earnings growth. CP&L's non-utility subsidiaries primarily
include Interpath Communications, Inc., a network-based applications service
provider that operates a 2,000 fiber optic route mile network and Strategic
Resource Solutions Corp. (SRS) a technology-based energy services company.
Florida Progress' primary non-utility subsidiary is Electric Fuels Corporation
(EFC), which consists of three business segments: coal mining and coal
procurement, marine transportation and rail services. In addition, Florida
Progress owns a 1,100 fiber optic route mile network through its Progress
Telecommunications subsidiary. Non-utility revenues will represent approximately
15 percent of the revenues of the combined company.
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The companies expect annual synergies in excess of $100 million pre-tax, which
will partially offset annual goodwill expense of $83 million and will help
enable the transaction to be accretive in the first full year after closing.
These synergies result primarily from the elimination of duplicate corporate and
administrative programs and operating efficiencies including integration of the
Crystal River nuclear site with CP&L's three existing nuclear sites. Revenue
enhancements are also possible from generation expansion and wholesale marketing
opportunities. After the integration is completed, it is anticipated that the
company will have a combined workforce of approximately 16,000 employees,
reflecting a reduction of about 7 percent. The company will use a combination
of attrition and moderation in hiring to reduce the need for employee
separations. All union contracts will be honored.
CP&L expects the new holding company to continue CP&L's current dividend policy
which has resulted in dividend increases for 16 of the last 17 years. CP&L
currently pays an annual dividend of $2.00 per share. It is anticipated that
Florida Progress shareholders who elect stock will receive the CP&L dividend in
effect at the time of the close of the transaction.
William Cavanaugh will be chairman, president and chief executive officer of the
combined company. Richard Korpan will retire as chairman, president and chief
executive officer of Florida Progress at the close of the transaction and join
CP&L's board of directors. The board will have 14 members, 10 of whom will be
designated by CP&L and four of whom will be designated by Florida Progress. The
combined company will be headquartered in Raleigh with Florida Power
headquarters in St. Petersburg.
The transaction is conditioned, among other things, upon the approvals of
shareholders of both companies, Federal Energy Regulatory Commission, the
Securities and Exchange Commission (SEC), Nuclear Regulatory Commission and the
completion of state regulatory procedures. While there is no formal state
approval for this transaction in Florida, the companies will continue their
practice of constructively working with state regulators regarding their ongoing
jurisdiction over Florida Power. CP&L is in the process of creating a holding
company and anticipates registering as a utility holding company with the SEC
under the Public Utility Holding Company Act (PUHCA) of 1935 prior to the
transaction closing. It is anticipated that regulatory procedures could be
completed within 12 months. Upon closing of the transaction, the new holding
company will issue the common stock consideration to the former Florida Progress
shareholders. CP&L and Florida Power will continue as principal subsidiaries of
the holding company.
Merrill Lynch & Co. acted as financial advisor and provided a fairness opinion
to CP&L. Salomon Smith Barney acted as financial advisor and provided a
fairness opinion to Florida Progress.
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Florida Progress is a Fortune 500 diversified utility holding company with
assets of $6.3 billion. Its principal subsidiary is Florida Power, one of the
nation's leading electric utilities committed to serving its 1.3 million
customers in Florida with competitively priced energy, excellent reliability,
and outstanding customer service. Diversified operations include rail services,
marine operations and coal mining.
Headquartered in Raleigh, CP&L provides electricity and energy services to 1.2
million customers in the Carolinas and provides natural gas distribution and
service, through a wholly owned subsidiary, to about 178,000 customers in
eastern and southern North Carolina.
This press release contains forward-looking statements within the meaning of the
safe harbor provisions of the Securities Exchange Act of 1934. The forward-
looking statements are subject to various risks and uncertainties. Discussion
of factors that could cause actual results to differ materially from
management's projections, forecasts, estimates and expectations may include
factors that are beyond the companies' ability to control or estimate precisely,
such as estimates of future market conditions, the behavior of other market
participants and the actions of Federal and state regulators. Other factors
include, but are not limited to, actions in the financial markets, weather
conditions, economic conditions in the two companies' service territories,
fluctuations in energy-related commodity prices, conversion activity, other
marketing efforts and other uncertainties. Other risk factors are detailed from
time to time in the two companies' SEC reports.
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Contacts for CP&L: Contacts for Florida Progress:
Media: Media:
Mike Hughes Cheryl Krauss
Phone: (919) 546-6189 Phone: (727) 820-5282
Investors: Investors:
Bob Drennan Greg Beuris
Phone: (919) 546-7474 Phone: (727) 820-5734