Financial Update Mark Mulhern Chief Financial Officer Progress - PowerPoint PPT Presentation

Financial Update Mark Mulhern Chief Financial Officer Progress Energy Inc Progress Energy, Inc.

K Key Topics T i � 2009 Earnings Drivers � Capital Expenditures � Cash Flows � Cash Flows � Financing Plans � Dividend Policy Di id d P li 2

Business Model for a “Pure Play” Regulated Integrated Electric Utility I t t d El t i Utilit Sustain Operational p Deliver Customer Excellence Satisfaction • Safety & environmental • Reliable service performance Achieve Long-Term • Affordable rates • Fleet performance Fleet performance Financial Objectives • Corporate citizenship • Cost performance • Annual EPS growth ~ 4 - 5% • Continue dividend growth • Maintain investment-grade credit rating Leverage Growth Maintain Constructive • Annual TSR of 8 - 10% Prospects Prospects Regulation Regulation (at constant P/E) • Organic growth • Cost recovery • Rate base expansion • Proactive proceedings • Balanced approach • Balanced approach • Open communications • Open communications 3

PGN Ongoing Earnings PGN O i E i Midpoint ($ in millions, except EPS) Actual Actual Actual Actual Actual Actual of Plan of Plan 2006 2007 2008 2009 PEC $ 454 $ 498 $ 531 $ 581 PEF PEF 326 326 315 315 383 383 419 419 Parent Company/Other (169) (118) (138) (147) Total Ongoing Earnings $ 611 $ 695 $ 776 $ 853 Ongoing EPS * $ 2.44 $ 2.72 $ 2.98 $ 3.05 Growth Growth - 11 5% 11.5% 9.6% 9 6% 2 3% 2.3% Average Shares 250 256 260 280 Dividend Payout Ratio Di id d P t R ti 99% 99% 90% 90% 83% 83% 81% 81% 4 * See appendix for reconciliation of ongoing EPS to reported GAAP EPS.

2009 O 2009 Ongoing Earnings per Share i E i Sh $4.00 $0.13 $0.13 ($0.22) ($0.22) $0.03 $0.07 ($0.20) $0.07 $3.50 $0.09 $0.21 ($0.14) ($0.04) $0.07 $3.05 $2.98 $3.00 $2.50 s per Share $2.00 Earnings $1.50 $1.00 $1 00 $0.50 $0.00 2008 Weather Increased Wholesale Transmission Depreciation & Retail Growth Rate Relief Dilution Interest Pension Other 2009 Ongoing EPS * Investment Revenues Revenues Amortization and/or Expense Expense Ongoing EPS O&M Guidance 5 * See appendix for reconciliation of ongoing EPS to reported GAAP EPS.

2009 E 2009 Earnings Drivers i D i Retail & wholesale sales; OATT � Constructive legislative & regulatory recovery Margin Growth � Florida rate filings � Continuous Business Excellence (CBE) � Targeting minimal O&M growth Targeting minimal O&M growth Cost Management C t M t � Pension expense � Carolinas regulatory amortizations ceased Depreciation & � Rate base growth from new additions R t b th f dditi Amortization � Construction work in progress � Environmental spending AFUDC � Planned new generation & transmission � Financing utility growth Interest & � Effective tax planning Taxes � 6

Rate Base Growth R t B G th Progress Energy Carolinas (1) Progress Energy Florida (2) 2008-2011E 2008-2011E CAGR CAGR 6% 17% $9,000 $9,000 2001-2008 CAGR $8,000 $8,000 4.0% $7,000 $7,000 (x 1M) 2001-2008 CAGR 5.6% 1M) $6,000 $6,000 Rate Base (x 1 l Rate Base ( $5,000 $5,000 $4,000 $4,000 $3,000 $3,000 Retail R Retai $2,000 $2,000 $1,000 $1,000 $0 $0 2001 2001 2002 2002 2003 2003 2004 2004 2005 2005 2006 2006 2007 2008E 2009E 2010E 2011E 2007 2008E 2009E 2010E 2011E 2001 2001 2002 2002 2003 2003 2004 2004 2005 2005 2006 2006 2007 2007 2008 2008 2009E 2010E 2011E 2009E 2010E 2011E Retail rate base Clause-related (3) 1. 2008 decrease primarily due to 1/3 of Clean Smokestacks expenditures being reallocated to wholesale segment and pension/OPEB reserves offsetting rate base. 2. PEF rate base excludes Levy County nuclear capital expenditures. 7 3. Represents ECRC (CAIR at CR 4 & 5), CR3 Nuclear Uprate and ECCR.

C CapEx Driving Earnings Growth E D i i E i G th ($ in millions) Recovery Total Project Cumulative Spent Expected Methodology Methodolog Major Capital Projects M j C it l P j t C CapEx E th through 12/31/08 h 12/31/08 C Completion Date l ti D t Carolinas Amortized $584M; Clean Smokestacks $1,500–1,600M $ 1,007M 2013 balance in Rate Base Wayne County CT 90M 69M June 2009 Rate Base Richmond County CCGT 600M 68M June 2011 Rate Base (incl Transmission) DSM/EE Rider DSM/EE Rider Smart Grid (DSDR) 210M 9M Dec. 2012 (pending approval) Florida Environmental Cost Environmental $ 1,200M $ 847M May 2010 y Recovery Clause Recovery Clause Bartow Repowering 690M 653M June 2009 Rate Base (incl Transmission) Nuclear cost recovery CR3 Nuclear Uprate 365M 97M Dec. 2011 legislation CR3 Steam Generator 245M 123M Dec. 2009 Rate Base Replacement Note: Total project capital expenditures based on current estimates and exclude AFUDC. DSDR = Distribution System Demand Response 8

2009 Margin Growth - Carolinas 2009 M i G th C li Retail sales growth ~1% � Wholesale growth � Increased sales under long-term contract � Modest increase in excess generation sales � Revised OATT formula rate with FERC authorized 10.8% ROE; � increase effective for all wholesale customers 7/01/08 REPS clause (Docket #: E-2 Sub 930) � Approved 11/14/08; effective 12/01/08 � Premium recoverable through clause Premium recoverable through clause � � Avoided cost recovered through fuel clause � DSM / EE clause (Docket #: E-2 Sub 931) � Settlement agreement filed with NCUC on 12/09/08; � rates effective 12/01/08 subject to true-up upon final order ff / / f Revenue requirement � All program and measure costs, plus a potential return in NC - Net lost revenues for three years - Performance incentives Performance incentives - Last base rate case in 1988 � 9

2009 Margin Growth - Florida 2009 M i G th Fl id Retail sales decline ~(1%) � Wholesale growth � Full-year benefit from new and amended long-term contracts � Incremental long-term contracts since 2008 � Revised OATT formula rate with FERC authorized 10.8% ROE effective 1/01/08; � all wholesale customers transition to revised rates by 2011 all wholesale customers transition to revised rates by 2011 Environmental cost recovery clause ( Docket #: 080007-EI) � $93M revenue increase in ECRC in 2009 � CR5 CAIR in-service dates: SCR (May-09); FGD (Dec-09) ( y ) ( ) � Nuclear cost recovery clause ( Docket #: 080009-EI) � CR3 uprate project � $24M carrying costs on construction costs - Levy nuclear cost recovery clause Levy nuclear cost recovery clause* � � $ 38M site selection - $357M preconstruction and carrying charges - $395M total 2009 Levy nuclear cost recovery - Request for base rate relief in 2009 Request for base rate relief in 2009 � � * On February 18, 2009, PEF filed a request with the FPSC to defer until 2010 the recovery of $200M of Levy nuclear preconstruction costs. 10

R Regulatory Recovery Mechanisms l t R M h i ($ in millions) Progress Energy Carolinas g gy Progress Energy Florida g gy $6,000 $6,000 Excise taxes Fuel clause $5,000 $5,000 Capacity cost recovery clause (CCRC) $4,000 $4,000 Storm cost recovery clause Fuel Fuel Energy conservation Energy conservation $3,000 cost recovery (ECCR) $3,000 DSM / EE / REPS clause $2,000 $2,000 Nuclear cost Base Base recovery clause (NCRC) recovery clause (NCRC) Environmental cost Base $1,000 $1,000 recovery clause (ECRC) Transmission & other ancillary revenue $0 $0 $ $0 Retail & wholesale 2005A 2006A 2007A 2008A 2009E 2005A 2006A 2007A 2008A 2009E base revenue 11

Fl Florida Base Rate Relief in 2009 id B R t R li f i 2009 � Limited rate relief � Bartow repowering in-service in June 2009 � Need base rate relief on a limited basis, since base rate recovery does not begin until 2010 � Section 366.076, Florida Statutes, as well as Section 7 of PEF’s 2005 rate stipulation agreement � Interim rate relief � Florida retail regulated ROE currently under 10% � Current base rate stipulation and settlement agreement has a 10% ROE floor � Accounting orders A i d � Pension expense deferral � Storm hardening 12

O&M C O&M Cost Management t M t � Continuous Business Excellence (CBE) � Lean Six Sigma and Kaizen philosophy � 3% - 5% annual sustainable efficiency and productivity gains Streamlining work processes - Taking advantage of new technology - Eliminating waste and low-value activities - � Workforce reductions � Eliminated 300 positions (~150 employees) in Energy Delivery Florida � Eliminated layer of management at Energy Delivery Carolinas and Florida � Streamlined external relations functions in Carolinas and Florida � Expense reductions � Significant belt-tightening efforts � Targeting reduction in 2009 budgets 13