1. Securing our Energy Future
Mark Mulhern
Mark Mulhern
Senior Vice President and CFO
Senior Vice President and CFO
Merrill Lynch
Merrill Lynch
Power & Gas Leaders Conference
Power & Gas Leaders Conference
September 24, 2008
September 24, 2008
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. Major Discussion Topics
1. Company overview
2. Growth strategy
3. Nuclear expansion
4. Regulatory update
5. Financial update
5. 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 • ~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
8. Significant Rate Base Growth
Even Prior to New Nuclear
Progress Energy Carolinas¹ Progress Energy Florida²
2008-2010E
2008-2010E
CAGR
CAGR
18%
5% $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 $584M.
(2) PEF rate base excludes Levy County nuclear capital expenditures.
9. 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) On September 5, 2008, NCUC authorized PEC to rate-base expenditures above $584M.
10. Allowance for Funds Used During
Construction (AFUDC)
PEC capital projects lasting more than
Carolinas one month are forecast to earn 8-9%
AFUDC rate.
($15M in 2007 growing to ~$35M in 2008)
PEF capital projects greater than $45
Florida million and lasting more than one year
earn an 8.848% AFUDC rate. *
($53M in 2007 growing to ~$125M in 2008)
* PEF has a base level of CWIP embedded in its rate base.
14. 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
15. 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
16. 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 57.83% common equity)
Project cancellation cost recovery
17. 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 ~2010/11; safety-
related construction begins
2012/13
(1) Confidentiality obligations preclude us from discussing this further until the negotiations are completed.
18. Regulatory Timeline for Levy Project
Mar. May June July Aug. Sept. Oct.
April
2008 2010 2012/13
Need Case Filed Hearing Vote Order
Cost Recovery Filed Hearing Order
Site Certification Filed (18 month review) Issued
Combined License Filed (3 - 4 year review) Issued
20. Carolinas Cost Recovery Filings
South Carolina fuel filing
PSC approved $39M increase
Effective July 1, 2008
North Carolina fuel filing
Reached a proposed settlement with interveners for $275M increase
Represents a 3-year recovery (with interest) of ~$200M deferred fuel
balance at July 31, 2008, plus projected fuel costs
Hearing held Sept 16; awaiting order; rates effective Dec 1, 2008
North Carolina REPS cost recovery
Filed for ~$12M actual and projected incremental cost of compliance
Avoided costs will flow through fuel clause proceedings
Hearing held Sept 17; awaiting order; rates effective Dec 1, 2008
North Carolina DSM/EE rider and DSDR* program
Filed for ~$42M actual and projected cost recovery
Rates effective Dec 1, 2008 (hearing scheduled for Dec 17, 2008)
* Distribution System Demand Response.
21. NC Clean Smokestacks Update
$1.5B-$1.6B: current estimate
of total costs
~$700M remaining
expenditures
$813M: original estimate of
$229M balance compliance costs
into rate base
$15M amortization in Q1-08 $584M: cumulative
amortization to date
$569M – 70% of original
estimate amortized by
12/31/07
Received favorable order from NCUC on Sept 5: PEC allowed to accrue
AFUDC above $813M; eliminates any further accelerated amortization
22. Florida Cost Recovery Filings
Storm damage reserve ended July 31
2008 mid-year fuel cost adjustment
$213M request for full recovery from Aug-Dec ’08
FPSC approved half for recovery Aug-Dec ’08;
remaining half in ’09
2009 cost recovery filings on Aug 29
Fuel
Hearings scheduled for Nov 4-6;
Capacity
rates effective Jan 1, 2009
Environmental
Energy conservation
Levy nuclear Hearings held Sept 11-12;
rates effective Jan 1, 2009
CR3 uprate
Current rate settlement expires at end of 2009
23. Florida Environmental Cost Recovery
Environmental Cost Recovery Clause (ECRC)
Annual ECRC filing
Accrue AFUDC based on existing rate settlement
Return-of and return-on capital invested when
placed-in service
Dollar-for-dollar recovery of
Related O&M expenses
Emission allowances
Estimated total spend of $1.2B through 2010
Crystal River 4 & 5
$625M spent through June 30, 2008
25. Our Long-Term Financial Objectives
Achieve our 4-5% EPS growth objective
Preserve an investment grade credit rating
Maintain dividend growth
Keep rate increases reasonable to
customers
Fund Levy and capital investments in the
rest of the business
26. Financial Update:
Challenges/Opportunities
Weaker than expected Florida revenues mitigated by
Wholesale
Cost management
Regulatory depreciation/amortization at PEC
Received Clean Smokestacks order from NCUC
on 9/5/2008
$75M of Harris depreciation by end of 2009
Capital expenditure program for 2008 on track
27. Progress Energy
Average Customer Growth *
* Approximate average net increase in number of customers for respective three-month periods compared to prior year.
28. Long-term Demographics for
Florida are Strong
• Economists say that in spite of
a severe housing slowdown,
Florida should continue growing
and creating new jobs at a FL CAGR = 2.0%
faster rate than the U.S. vs.
economy as a whole – Times US CAGR = 0.8%
Personal Finance Editor
• “We believe above average
growth in population could help
to correct inventory levels in
Florida at a slightly faster rate
than the national average” –
Lehman Brothers
Source: U.S. Census Bureau
US Census projected population study estimates that Florida’s population
is expected to grow 64% vs. the U.S. rate of 23% between 2005 and 2030.
29. Liquidity Overview *
(in millions)
Debt Maturity Profile PGN Revolving Credit Facilities
Program Term Amount Expiration
Issue 2009 2010 2011 2012
Progress Energy 5-Year $1,130 5/3/12
PGN $ -$ 100 $ 700 $ 450
Progress Energy
PEC 400 6 - 500 5-Year 450 6/28/11
Carolinas
PEF - 300 300 - Progress Energy
450 3/28/11
Florida 5-Year
PCH - - - -
$2,030
Total $ 400 $ 406 $ 1,000 $ 950
* * As of September 19, 2008.
30. Credit Facilities Consortium *
$ in millions
Bank Total
J.P. Morgan Chase $ 225.0
Bank Tokyo-Mitsubishi 200.0
Barclays Capital 190.5
Bank of America 190.0
Citigroup 180.0
Wachovia 175.5
Royal Bank of Scotland 169.0
Bank of New York Mellon 120.0
SunTrust 115.0
Morgan Stanley 100.0
Goldman Sachs 100.0
Deutsche Bank 95.0
UBS 80.0
BNP Paribas 50.0
BB&T 25.0
First Tennessee 15.0
Total $ 2,030.0
* * As of September 19, 2008.
32. 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
