Progress Energy Announces Strong First Quarter Results
Quarterly highlights:
- Reports ongoing earnings of $0.79 per share, GAAP earnings of $0.89
per share
- Announces acquisition of 195 billion cubic feet (Bcf) of natural gas
reserves
- Agrees to acquisition of full-requirements power supply agreement with
Jackson Electric Membership Corporation
RALEIGH, N.C. (April 23, 2003) - Progress Energy [NYSE: PGN] today reported
ongoing earnings of $184.9 million, or $0.79 per share, for the first quarter of
2003 compared with ongoing earnings of $154.9 million, or $0.73 per share, for
the first quarter of 2002. Reported GAAP consolidated net income was $208.2
million, or $0.89 per share, for the quarter compared with consolidated net
income of $132.5 million, or $0.62 per share, for the first quarter of 2002. See
the table that follows for a reconciliation of ongoing earnings per share to
GAAP earnings per share.
"Progress Energy posted strong results in the first quarter thanks to continued
growth in our core utility operations," said William Cavanaugh, chairman and
CEO, Progress Energy. "The regions we serve in the Southeast United States have
strong growth fundamentals. With most of our earnings derived from our two major
utilities, we remain confident we will continue to deliver positive results for
our shareholders and meet our year-end earnings target.
"While our utilities are doing quite well, the rest of our company is not
standing still. We took steps in the first quarter that will yield positive
benefits for many years. Specifically, we acquired more natural gas reserves at
favorable prices, and we agreed to acquire a long-term, full-requirements
contract with a reputable and growing load-serving utility. We are making
excellent headway in implementing our strategy for disciplined participation in
the competitive wholesale energy business," Cavanaugh said.
A number of factors drove the $0.06 per share increase in ongoing quarterly
earnings, including favorable weather, customer growth and usage, increased
sales to other utilities and a decrease in interest expense. These items were
partially offset by the rate reduction in Florida, dilution from share
issuances, lower synthetic fuel production and higher O&M costs, primarily due
to storm costs and a decreased pension credit.
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Progress Energy, Inc.
Reconciliation of Ongoing Earnings to Reported GAAP Earnings
March 31, 2003
Q1 2003 Q1 2002
------------------- -----------------
Ongoing earnings $ 0.79 $ 0.73
One-time retroactive revenue impact - (0.10)
Intra-period tax allocation 0.04 (0.10)
CVO mark-to-market 0.01 0.05
NCNG discontinued operations 0.05 0.04
------------------- -----------------
Reported GAAP earnings $ 0.89 $ 0.62
=================== =================
Shares outstanding (000s) 233,438 212,979
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SIGNIFICANT DEVELOPMENTS
Wholesale Energy Contract Acquisition in Georgia
On March 21, 2003, Progress Energy announced that Progress Ventures had
entered into a definitive agreement with Williams Energy Marketing and Trading
to acquire a full-requirements power supply agreement with Jackson Electric
Membership Corporation in Georgia for $188 million. This transaction is expected
to close in the second quarter and results in contractual coverage for a
majority of Progress Ventures' power generation assets in Georgia. The complete
press release regarding this transaction is available on the company's Web site
at http://www.corporate-ir.net/ireye/ir_site.zhtml?ticker=PGN&script=
410&layout=0&item_id=393120.
Natural Gas Reserves Acquisition
On February 24, 2003, Progress Energy announced that its subsidiary,
Progress Fuels Corp., had entered into three independent transactions to acquire
approximately 162 producing natural gas wells with proven reserves of 195
billion cubic feet (Bcf) for $148 million. This transaction closed during the
first quarter of 2003. The primary property in the acquisition will be referred
to as Progress Fuels North Texas Gas. The complete press release regarding this
announcement is available on the company's Web site at http://www.corporate-
ir.net/ireye/ir_site.zhtml?ticker=PGN&script=410&layout=0&item_id=385370.
Moody's Investors Service Ratings Actions
On February 7, 2003, Moody's Investors Service announced that Progress
Energy, Inc.'s senior unsecured debt rating was being lowered to Baa2 from Baa1,
and the outlook of the rating was being changed from negative to stable. In
changing the outlook to stable, Moody's noted that the company issued
approximately $600 million of common stock in November 2002 to support its
balance sheet and is executing a modest nonregulated generation strategy.
Moody's also changed the outlook of Florida Power Corporation, which is now
doing business as Progress Energy Florida, Inc. (A1 senior secured) and Progress
Capital Holdings (A3 senior unsecured) to negative. The complete press release
regarding this announcement is available on the company's Web site at
http://www.corporate-ir.net/ireye/ir_site.zhtml?ticker=PGN&script=410&layout=
0&item_id=380263.
2
Credit Facility Renewal
On April 1, 2003, Progress Energy Florida entered into a new $200 million,
364-day credit agreement and a new $200 million, three-year credit agreement,
replacing its prior credit facilities (which had been a $90 million, 364-day
facility and a $200 million, five-year facility). Also on April 1, 2003,
Carolina Power & Light Company, which is now doing business as Progress Energy
Carolinas, Inc., reduced the size of its existing 364-day facility from $285
million to $165 million.
Brunswick Plant Completes Refueling Outage and Power Uprate
Progress Energy's Brunswick Nuclear Plant Unit 2 completed a successful
refueling outage on April 6, 2003, when the unit was returned to service. During
the outage, the first of two phases of an extended power uprate project was
completed, which is expected to add approximately 70 additional megawatts of
electricity at the plant. The complete press release regarding this announcement
is available on the company's Web site at http://www.progress-
energy.com/aboutus/news/article.asp?id=5902.
LINE OF BUSINESS FINANCIAL INFORMATION
Progress Energy Carolinas
Progress Energy Carolinas electric energy operations contributed net income
of $134.6 million for the quarter compared with $85.5 million for the same
period last year. Factors contributing to the quarter's results were favorable
weather, increased revenues from customer growth and usage, increased sales to
other utilities and a decrease in interest charges. In addition, a $5.5 million
tax benefit allocation from the holding company to Progress Energy Carolinas and
a favorable reallocation of service company charges of $11.1 million after tax
positively impacted the current quarter results. Details on the tax benefit and
service company reallocations are included in the "Corporate" section of this
release. These factors were partially offset by higher O&M expenses from the
February 2003 ice storms.
Progress Energy Florida
Progress Energy Florida electric energy operations contributed net income
of $70.8 million for the quarter compared with $57.7 million for the same period
last year. Factors contributing to the quarter's results were favorable weather
and increased revenues from customer growth and usage. In addition, a $3.4
million tax benefit allocation from the holding company to Progress Energy
Florida and a favorable reallocation of service company charges of $2.4 million
after tax positively impacted the current quarter results. Details on the tax
benefit and service company reallocations are included in the "Corporate"
section of this release. The prior year earnings also include the impact of the
rate case settlement that included a one-time retroactive refund to customers of
$21.0 million after tax. These favorable factors were partially offset by the
rate reduction from the rate case settlement and higher O&M expenses, primarily
due to a decreased pension credit.
3
Electric Utility Kilowatt Hour Sales by Class
- --------------------------------------------------------------------------------------------------
Progress Energy Carolinas Sales Progress Energy Florida Sales
For the Quarter Ended March 31, 2003 For the Quarter Ended March 31, 2003
- --------------------------------------------------------------------------------------------------
Customer Class 2003 Sales (in % Change from Customer Class 2003 Sales % Change from
billions of (in billions
kWh) 2002 of kWh) 2002
- ---------------------------------------------------------------------------------------------------
Residential 4.6 15.1% Residential 4.6 12.1%
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Commercial 3.0 6.9 Commercial 2.4 (0.6)
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Industrial 3.0 0.6 Industrial 0.9 3.8
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Government 0.3 5.6 Government 0.7 5.8
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Wholesale 4.6 38.6 Wholesale 1.3 30.3
- ---------------------------------------------------------------------------------------------------
Unbilled (0.4) - Unbilled - -
- ---------------------------------------------------------------------------------------------------
Total 15.1 13.8% Total 9.9 9.6%
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Progress Ventures
The Progress Ventures operations are: Progress Fuels, which includes
natural gas exploration and production, coal mining, and synthetic fuels
production; and Competitive Commercial Operations, which includes nonregulated
generation and energy marketing and trading activities on behalf of its
nonregulated plants. The Progress Ventures business unit had net income of $35.1
million for the quarter compared with $39.5 million for the same period last
year.
Progress Fuels generated net income of $26.6 million for the quarter
compared to $41.6 million for the same period last year. The difference was
primarily due to a reduction in synthetic fuel sales and a reallocation of
service company charges of $4.7 million after tax. Details on the service
company reallocations are included in the "Corporate" section of this release.
Earnings from gas operations increased over the prior year due to the
acquisition of Westchester Gas Company in April 2002. Synthetic fuels operations
generated net income of $25.4 million for the current year compared to $38.8
million for the same period last year. Total synthetic fuel sales were 2.0
million tons for the quarter compared with 3.0 million tons for the same period
last year. Total synthetic fuel sales decreased in the current year primarily
due to an internal change in the production schedule for 2003. The company
anticipates total synthetic fuel production of 12 to 13 million tons for the
year.
Competitive Commercial Operations contributed net income of $8.5 million
for the quarter compared to a net loss of $2.1 million for the same period last
year. The current quarter results include a contract termination payment
received for a tolling agreement on one of its nonregulated units. The increase
is also due to additional plants in operation in the current quarter, partially
offset by a reallocation of service company charges of $2.8 million after tax.
Details on the service company reallocations are included in the "Corporate"
section of this release.
4
Other Diversified
NCNG
The sale of North Carolina Natural Gas (NCNG) to Piedmont Natural Gas is
expected to close during the summer 2003. The operations of NCNG are included in
discontinued operations in the accompanying financial statements. NCNG had
discontinued earnings of $11.3 million for the quarter compared with $8.5
million for the same period in the prior year. The earnings for 2003 were
positively impacted by the elimination of depreciation on assets of discontinued
operations.
Progress Rail
Progress Rail reported a net loss of $3.4 million for the quarter, compared
to a net loss of $0.7 million for the same period in the prior year. The
earnings decrease was primarily related to a reallocation of service company
charges of $3.4 million after tax in the first quarter of 2003. Details on the
service company reallocations are included in the "Corporate" section of this
release.
Progress Telecom
Progress Telecom, including Caronet's operations, recorded net income of
$0.4 million for the quarter, compared to a net loss of $3.9 million for the
same period in the prior year. Progress Telecom contributed positive net income
in the quarter due to lower operating costs, a reduction in depreciation expense
and a favorable reallocation of service company charges of $0.8 million after
tax in the first quarter of 2003. Details on the service company reallocations
are included in the "Corporate" section of this release.
Corporate
Corporate results, which primarily include interest expense on holding
company debt, posted an operating loss of $52.4 million for the quarter,
compared with an operating loss of $43.2 million for the same period in the
prior year. Negatively impacting this quarter's results was a $9.1 million tax
benefit allocation from the holding company to the profitable subsidiary
companies. Guidance in an SEC order under the Public Utility Holding Company Act
states that Progress Energy, Inc.'s tax benefit not related to acquisition
interest expense is to be allocated to the profitable subsidiary companies. This
allocation has no impact on consolidated tax expense; however, it does decrease
the tax expense of the profitable subsidiaries.
In addition, a reallocation of service company charges of $3.5 million
after tax negatively impacted this quarter's results. The SEC completed its
initial audit of Progress Energy Service Company's cost allocation process in
March 2003. The SEC routinely audits new holding company systems within the
first two years of their formation. As a result of this audit, the SEC directed
the company to change its allocation methodology for assigning service company
costs to Progress Energy's subsidiaries. Upon completion of the audit, Progress
Energy changed its allocation methodology and recorded reallocation adjustments
to reflect this new method. These reallocation adjustments were recorded in the
first quarter of 2003 and include a cumulative adjustment for years 2001 and
2002. The new methods will be applied in 2003 and going forward. These
reallocation entries have no impact on consolidated earnings. Please see the
accompanying table for a detail of these reallocation charges by the various
business units. The attached link details how this reallocation will impact the
2003 segment earnings projections outlined at the Progress Energy 2003 Analyst
Meeting http://www.progress-energy.com/investors/news/webcasts/index.asp.
5
ONGOING EARNINGS ADJUSTMENTS
Progress Energy's management uses ongoing earnings per share to evaluate
the operations of the company and to establish incentive goals for management
and employee programs. Management believes this presentation is appropriate and
enables investors to compare more accurately the company's ongoing financial
performance over the periods presented. Reconciling adjustments from GAAP
earnings to ongoing earnings are as follows:
Intra-period Tax Allocation
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 tax credits generated from synthetic fuel
operations reduce Progress Energy's overall effective tax rate. The company's
synthetic fuel sales are not subject to seasonal fluctuation to the same extent
as the electric utility earnings. The company projects the effective tax rate
for the year and then, based upon projected operating income for each quarter,
raises or lowers the credits recorded in that quarter to reflect the projected
tax rate. On the other hand, operating losses incurred to produce the tax
credits are included in the current quarter. The resulting tax adjustment
increased earnings per share by $0.04 for the current quarter and decreased
earnings per share by $0.10 for the same period in the prior year. Since this
adjustment varies by quarter but has no impact on the company's annual earnings,
management believes this adjustment is not representative of the company's
quarterly earnings.
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 to
receive contingent payments based on after-tax cash flows above certain levels
of four synthetic fuel facilities purchased by subsidiaries of Florida Progress
Corporation in October 1999. The CVOs are debt instruments and, under GAAP, are
valued at market value. Unrealized gains and losses from changes in market value
are recognized in earnings each quarter. The CVO mark-to-market increased
earnings per share $0.01 for the quarter compared with an increase in earnings
per share of $0.05 for the same period in the prior year. Since changes in the
market value of the CVOs do not affect the company's underlying obligation,
management does not consider the adjustment a component of ongoing earnings.
Progress Energy Florida One-time Retroactive Refund
The one-time retroactive rate refund under the Progress Energy Florida rate
settlement in March 2002 was related to funds collected during the period
between March 13, 2001, when the prior rate agreement in Florida expired, and
March 27, 2002, the date the parties entered into the settlement agreement. Due
to the non-recurring nature of the refund, management believes it is not
representative of the 2002 operations of Progress Energy Florida.
NCNG Discontinued Operations
The operations of NCNG are reported as discontinued operations due to its
pending sale, and therefore management does not believe this activity is
representative of the ongoing operations of the company.
6
* * * *
This earnings announcement, as well as a package of detailed financial
information, is available on the company's Web site at www.progress-energy.com/.
Progress Energy's conference call with the investment community will be held on
April 23, 2003, at 10 a.m. ET (7 a.m. PT) and will be hosted by Peter Scott,
executive vice president and chief financial officer. Investors, media and the
public may listen to the conference call by dialing 719-457-2621, confirmation
code 792346. Should you encounter problems, please contact Tammy Blankenship at
919-546-2233. A playback of the call will be available from 1 p.m. ET April 23
through midnight May 7, 2003. To listen to the recorded call, dial 719-457-0820
and enter confirmation code 792346.
A Webcast of the live conference call will be available at
http://www.progress-energy.com/. The Webcast will be available in Windows Media
and RealPlayer streaming-media formats. The Webcast will be archived on the site
for those unable to listen in real time.
Members of the media are invited to listen to the conference call and then
participate in a media-only question and answer session with Peter Scott
starting at 11 a.m. ET. To participate in this session, please dial
719-457-2707, confirmation code 439547.
Progress Energy (NYSE: PGN), headquartered in Raleigh, N.C., is a Fortune 250
diversified energy company with more than 21,900 megawatts of generation
capacity and $8 billion in annual revenues. The company's holdings include two
electric utilities serving more than 2.8 million customers in North Carolina,
South Carolina and Florida. Progress Energy also includes nonregulated
operations covering generation, energy marketing, natural gas exploration, fuel
extraction, rail services and broadband capacity. For more information about
Progress Energy, visit the company's Web site at www.progress-energy.com.
This document contains forward-looking statements within the meaning of the safe
harbor provisions of the Private Securities Litigation Reform Act of 1995. The
forward-looking statements involve estimates, projections, goals, forecasts,
assumptions, risk and uncertainties that could cause actual results 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 in this document include, but are not limited to, the following: the impact
of fluid and complex government laws and regulations, including those relating
to the environment; the impact of recent events in the energy markets that have
increased the level of public and regulatory scrutiny in the energy industry and
in the capital markets; deregulation or restructuring in the electric industry
that may result in increased competition and unrecovered (stranded) costs; the
uncertainty regarding the timing, creation and structure of regional
transmission organizations; weather conditions that directly influence the
demand for electricity and natural gas; recurring seasonal fluctuations in
demand for electricity and natural gas; fluctuations in the price of energy
commodities and purchased power; economic fluctuations and the corresponding
impact on our commercial and industrial customers; the ability of our
7
subsidiaries to pay upstream dividends or distributions to us; the impact on our
facilities and our businesses from a terrorist attack; the inherent risks
associated with the operation of nuclear facilities, including environmental,
health, regulatory and financial risks; the ability to successfully access
capital markets on favorable terms; the impact that increases in our leverage
may have on us; our ability to maintain our current credit ratings; the impact
of derivative contracts used in the normal course of our business; our continued
ability to use Section 29 tax credits related to our coal and synthetic fuels
businesses; the continued depressed state of the telecommunications industry and
our ability to realize future returns from Progress Telecommunications Corp. and
Caronet, Inc.; our ability to successfully integrate newly acquired assets,
properties or businesses into our operations as quickly or as profitably as
expected; our ability to successfully complete the sale of North Carolina
Natural Gas and apply the proceeds therefrom to reduce outstanding indebtedness;
our ability to manage the risks involved with the construction and operation of
our nonregulated plants, including construction delays, dependence on third
parties and related counter-party risks, and a lack of operating history; our
ability to manage the risks associated with our energy marketing and trading
operations; and unanticipated changes in operating expenses and capital
expenditures. Many of these risks similarly impact our subsidiaries.
These and other risk factors are detailed from time to time in our SEC reports.
All such factors are difficult to predict, contain uncertainties that may
materially affect actual results, and may be beyond our ability to control or
estimate precisely.
# # #
Contacts:
Investor Relations, Bob Drennan, 919-546-7474
Corporate Communications, Keith Poston, 919-546-6189, or toll-free
877-641-NEWS (6397)
8
PROGRESS ENERGY, INC.
UNAUDITED CONSOLIDATED INTERIM FINANCIAL INFORMATION
STATEMENTS OF INCOME
Three Months Ended
March 31
(In thousands except per share amounts) 2003 2002
- ------------------------------------------------------------------------------------------------
Operating Revenues
Utility $1,653,887 $1,497,923
Diversified business 362,117 289,379
- ------------------------------------------------------------------------------------------------
Total Operating Revenues 2,016,004 1,787,302
Operating Expenses
Utility
Fuel used in electric generation 411,622 370,588
Purchased power 202,742 181,273
Other operation and maintenance 334,313 328,438
Depreciation and amortization 220,088 211,888
Taxes other than on income 102,832 95,922
Diversified Business
Cost of sales 306,941 300,525
Depreciation and amortization 28,268 27,335
Other 50,258 29,352
- ------------------------------------------------------------------------------------------------
Total Operating Expenses 1,657,064 1,545,321
- ------------------------------------------------------------------------------------------------
Operating Income 358,940 241,981
- ------------------------------------------------------------------------------------------------
Other Income (Expense)
Interest income 2,767 1,952
Other, net (2,450) 6,058
- ------------------------------------------------------------------------------------------------
Total Other Income (Expense) 317 8,010
- ------------------------------------------------------------------------------------------------
Income before Interest Charges and Income Taxes 359,257 249,991
- ------------------------------------------------------------------------------------------------
Interest Charges
Net interest charges 156,248 170,168
Allowance for borrowed funds used during construction (2,886) (3,553)
- ------------------------------------------------------------------------------------------------
Total Interest Charges, Net 153,362 166,615
- ------------------------------------------------------------------------------------------------
Income before Income Taxes 205,895 83,376
Income Taxes 9,029 (40,686)
- ------------------------------------------------------------------------------------------------
Income from Continuing Operations 196,866 124,062
- ------------------------------------------------------------------------------------------------
Discontinued Operations, Net of Tax 11,290 8,465
- ------------------------------------------------------------------------------------------------
Net Income $208,156 $132,527
- ------------------------------------------------------------------------------------------------
Average Common Shares Outstanding 233,438 212,979
Basic Earnings per Common Share
Income from Continuing Operations $0.84 $0.58
Discontinued Operations, Net of Tax $0.05 $0.04
Net Income $0.89 $0.62
- ------------------------------------------------------------------------------------------------
Diluted Earnings per Common Share
Income from Continuing Operations $0.84 $0.58
Discontinued Operations, Net of Tax $0.05 $0.04
Net Income $0.89 $0.62
- ------------------------------------------------------------------------------------------------
Dividends Declared per Common Share $0.560 $0.545
- ------------------------------------------------------------------------------------------------
This financial information should be read in conjunction with the
Company's 2002 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.
BALANCE SHEETS March 31 December 31
(In thousands) 2003 2002
- ----------------------------------------------------------------------------------------------------
ASSETS
Utility Plant
Utility plant in service $20,803,671 $20,152,787
Accumulated depreciation (9,866,434) (10,480,880)
- ----------------------------------------------------------------------------------------------------
Utility plant in service, net 10,937,237 9,671,907
Held for future use 15,109 15,109
Construction work in progress 826,674 752,336
Nuclear fuel, net of amortization 254,771 216,882
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Total Utility Plant, Net 12,033,791 10,656,234
- ----------------------------------------------------------------------------------------------------
Current Assets
Cash and cash equivalents 35,487 61,358
Accounts receivable 780,655 737,369
Unbilled accounts receivable 187,451 225,011
Inventory 844,919 875,485
Deferred fuel cost 229,522 183,518
Assets of discontinued operations 494,485 490,429
Prepayments and other current assets 255,233 283,036
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Total Current Assets 2,827,752 2,856,206
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Deferred Debits and Other Assets
Regulatory assets 658,828 393,215
Nuclear decommissioning trust funds 788,766 796,844
Diversified business property, net 2,074,373 1,884,271
Miscellaneous other property and investments 472,642 463,776
Goodwill, net 3,719,327 3,719,327
Prepaid pension assets 58,669 60,169
Other assets and deferred debits 538,744 522,662
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Total Deferred Debits and Other Assets 8,311,349 7,840,264
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Total Assets $23,172,892 $21,352,704
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CAPITALIZATION AND LIABILITIES
Capitalization
Common stock (without par value, authorized 500,000,000, $5,007,203 $4,929,104
issued and outstanding 239,816,121 and
237,992,513 shares, respectively)
Unearned ESOP common stock (90,890) (101,560)
Accumulated other comprehensive loss (238,290) (237,762)
Retained earnings 2,163,431 2,087,227
- ----------------------------------------------------------------------------------------------------
Total Common Stock Equity 6,841,454 6,677,009
Preferred stock of subsidiary - redemption not required 92,831 92,831
Long-term debt, net 10,097,948 9,747,293
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Total Capitalization 17,032,233 16,517,133
- ----------------------------------------------------------------------------------------------------
Current Liabilities
Current portion of long-term debt 380,164 275,397
Accounts payable 718,814 756,287
Interest accrued 162,817 220,400
Dividends declared 133,475 132,232
Short-term obligations 489,675 694,850
Customer deposits 159,780 158,214
Liabilities of discontinued operations 117,471 124,767
Other current liabilities 368,474 372,161
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Total Current Liabilities 2,530,670 2,734,308
- ----------------------------------------------------------------------------------------------------
Deferred Credits and Other Liabilities
Accumulated deferred income taxes 901,258 932,813
Accumulated deferred investment tax credits 202,160 206,221
Regulatory liabilities 451,769 119,766
Asset retirement obligation 1,209,587 -
Other liabilities and deferred credits 845,215 842,463
- ----------------------------------------------------------------------------------------------------
Total Deferred Credits and Other Liabilities 3,609,989 2,101,263
- ----------------------------------------------------------------------------------------------------
Total Capitalization and Liabilities $23,172,892 $21,352,704
- ----------------------------------------------------------------------------------------------------
Progress Energy, Inc.
SUPPLEMENTAL DATA Three Months Ended
March 31
2003 2002
- --------------------------------------------------------------------------------
Operating Revenues (in thousands)
Utility
Retail $1,344,132 $1,260,810
Wholesale 280,723 194,945
Unbilled (31,673) (3,259)
Miscellaneous revenue 60,705 45,427
- --------------------------------------------------------------------------------
Total Electric 1,653,887 1,497,923
Diversified businesses 362,117 289,379
- --------------------------------------------------------------------------------
Total Operating Revenues $2,016,004 $1,787,302
- --------------------------------------------------------------------------------
Energy Sales
Electric (millions of kWh)
Retail
Residential 9,140 8,045
Commercial 5,425 5,246
Industrial 3,921 3,869
Other retail 999 946
- --------------------------------------------------------------------------------
Total Retail 19,485 18,106
Unbilled (425) (156)
Wholesale 5,895 4,311
- --------------------------------------------------------------------------------
Total Electric 24,955 22,261
- --------------------------------------------------------------------------------
Energy Supply (millions of kWh)
Generated - steam 12,982 11,414
nuclear 7,612 7,228
hydro 254 139
combustion turbines 1,732 1,585
Purchased 3,446 2,993
- --------------------------------------------------------------------------------
Total Energy Supply (Company Share) 26,026 23,359
- --------------------------------------------------------------------------------
Impact of Weather
Progress Energy Carolinas
Heating Degree Days - Actual 1,777 1,552
- Normal 1,658 1,652
Cooling Degree Days - Actual 10 24
- Normal 11 9
Impact of weather compared to normal on EPS $0.03 ($0.01)
- --------------------------------------------------------------------------------
Progress Energy Florida
Heating Degree Days - Actual 461 367
- Normal 370 380
Cooling Degree Days - Actual 69 0
- Normal 28 28
Impact of weather compared to normal on EPS $0.02 $0.00
- --------------------------------------------------------------------------------
Detail of Income Taxes (in thousands)
Income tax expense (credit) - current $15,698 ($47,445)
deferred (2,608) 12,194
investment tax credit (4,061) (5,435)
- --------------------------------------------------------------------------------
Total Income Tax Expense $9,029 ($40,686)
- --------------------------------------------------------------------------------
FINANCIAL STATISTICS
Ratio of earnings to fixed charges 1.8 1.4
Return on average common stock equity 9.4 % 8.8 %
Book value per common share $29.15 $28.30
Capitalization
Common stock equity 38.2 % 34.8 %
Preferred stock of subsidiary-redemption not required 0.5 0.5
Total debt 61.3 64.7
- --------------------------------------------------------------------------------
Total Capitalization 100.0 % 100.0 %
- --------------------------------------------------------------------------------
Progress Energy, Inc.
Earnings Variance Analysis
First Quarter 2003 vs 2002
Regulated Utilities
Progress Other
($ per share) Carolinas Florida Ventures Businesses Consolidated
2002 GAAP earnings 0.40 0.27 0.18 (0.23) 0.62
NCNG discontinued operations (0.04) A (0.04)
CVOs (0.05) B (0.05)
Retroactive rate refund 0.10 C 0.10
Intra-period tax allocation 0.10 D 0.10
------------------------------------------------------------------
2002 Ongoing earnings 0.40 0.37 0.18 (0.22) 0.73
------------------------------------------------------------------
Weather - retail 0.04 0.03 0.07
Other retail - growth and usage 0.03 0.04 0.07
Wholesale 0.08 (0.02) E 0.06
Rate reduction impact (0.10) F (0.10)
Other margin 0.01 0.02 0.03
O&M - other (0.01) (0.03) 0.01 G (0.03)
Storm costs (0.03) H (0.03)
Service Company allocations - current 0.01 0.01 (0.01) (0.01) I 0.00
Service Company allocations - prior years 0.04 (0.02) (0.02) I 0.00
Depreciation 0.01 (0.01) J 0.00
Other income and expense (0.01) (0.01) 0.01 (0.01)
Interest charges 0.03 0.01 K 0.04
Net diversified business 0.02 0.02 L 0.04
Tax benefit allocation 0.03 0.02 (0.05) M 0.00
Share dilution (0.06) (0.03) (0.01) 0.02 N (0.08)
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2003 Ongoing earnings 0.57 0.30 0.15 (0.23) 0.79
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NCNG discontinued operations 0.05 A 0.05
CVOs 0.01 B 0.01
Intra-period tax allocation 0.04 D 0.04
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2003 GAAP earnings 0.57 0.30 0.15 (0.13) 0.89
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Other includes Progress Telecom, Progress Rail, other small subsidiaries, Holding Company interest expense,
CVO mark-to-market, intra-period tax allocations, purchase accounting transactions and corporate eliminations.
A - NCNG is being sold to Piedmont Natural Gas.
B - Impact of change in market value of outstanding CVOs.
C - Impact of $35M ($21M after tax) retroactive rate refund related to
Florida's rate case settlement in 2002.
D - Intra-period income tax allocation impact, related to cyclical nature of
energy demand/earnings and timing of synthetic fuel tax credits.
E - Carolinas wholesale increase driven by sales to other utilities due to
favorable weather in Northeast United States.
F - Impact of 9.25% rate reduction effective May 2002.
G - Florida - lower pension credit.
H - Carolinas - ice storm costs of $10.4M in February 2003.
I - Reallocation of Service Company costs in accordance with an SEC PUHCA audit.
J - Carolinas - Clean Air amortization in 2003 ($20M) vs accelerated nuclear
amortization in 2002 ($25M).
K - Carolinas - decline in average debt outstanding and lower average interest
rates.
L - Positive impact of Westchester gas operations and increased competitive
commercial operations, partially offset by decrease in synthetic fuel
production. Other - decrease in Progress Telecom depreciation.
M - Allocation of tax favorability from Holding Company to profitable
subsidiaries.
N - Primarily impact of purchase of Westchester Gas in April 2002 (2.5M shares),
issuance in November 2002 (14.7M shares) and 2003 issuances under Investor
Plus and Employee Benefit programs (1.8M shares).
Progress Energy, Inc.
2003 Earnings Impact of Service Company Reallocation
($ in millions, after tax) 1st Quarter 2003 Impact Full Year 2003 Impact
- --------------------------------------------------------------------------------------------------------------------------
2001-2002 2001-2002
Retroactive 2003 Q1 Retroactive 2003 Q1
Line of Business Reallocation Reallocation Total Reallocation Reallocation Total
- --------------------------------------------------------------------------------------------------------------------------
Progress Energy Carolinas $10 $1 $11 $10 $6 $16
Progress Energy Florida 1 1 2 1 5 6
Progress Fuels (4) (1) (5) (4) (4) (8)
Competitive Commercial Operations (2) (1) (3) (2) (3) (5)
Holding Company (3) (1) (4) (3) (3) (6)
Rail (3) 0 (3) (3) (3) (6)
PTC 1 0 1 1 1 2
- --------------------------------------------------------------------------------------------------------------------------
Total* $0 $0 $0 $0 $0 $0
- --------------------------------------------------------------------------------------------------------------------------
*Totals may not foot due to rounding