Oct. 30, 2009 (PR Newswire) -- RALEIGH, N.C., Oct. 30 /PRNewswire-FirstCall/ --
Highlights:
Third Quarter 2009
-- Reports third-quarter GAAP earnings of $0.88 per share, compared to
$1.18 per share for the same period last year, primarily driven lower by
a litigation verdict related to discontinued operations
-- Reports third-quarter ongoing earnings of $342 million, or $1.22 per
share, compared to $306 million, or $1.17 per share, for the same period
last year
Year-to-date 2009
-- Reports GAAP earnings for the first nine months of 2009 of $2.16 per
share, compared to $2.77 per share for the same period last year,
primarily driven lower by a litigation verdict related to discontinued
operations
-- Reports ongoing earnings for the first nine months of 2009 of $704
million, or $2.53 per share, compared to $653 million, or $2.50 per
share, for the same period last year
-- Reaffirms 2009 ongoing earnings guidance of $2.95 to $3.15 per share
Progress Energy (NYSE: PGN) announced third-quarter GAAP earnings of $247 million, or $0.88 per share, compared with GAAP earnings of $309 million, or $1.18 per share, for the same period last year. Current period results include a charge of $101 million, net of tax, or $0.36 per share, to discontinued operations related to a litigation verdict. Third-quarter ongoing earnings were $342 million, or $1.22 per share, compared to $306 million, or $1.17 per share, for the same period last year. The significant drivers in ongoing earnings per share were increased revenues for interim and limited base rate relief, favorable returns on nuclear and environmental investments and O&M cost management, partially offset by lower retail growth and usage and share dilution. (See the discussion later in this release for a reconciliation of ongoing earnings per share to GAAP earnings per share.)
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"We remain on track to achieve our financial goals for the year," said Bill Johnson, chairman, president and CEO. "Against the backdrop of the ongoing economic recession, our company performed well operationally and financially during the third quarter. Our focus on continuous business excellence, cost management and operational efficiency helped to offset lower energy sales in our utilities."
Progress Energy reaffirms its 2009 ongoing earnings guidance range of $2.95 to $3.15 per share. The ongoing earnings guidance excludes the impact, if any, from discontinued operations, CVO mark-to-market adjustment, potential impairments and plant retirement charges. 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 3-6 for detailed third-quarter and year-to-date earnings variance analyses for the Progress Energy Carolinas (PEC), Progress Energy Florida (PEF) and Corporate and Other Businesses segments.
RECENT DEVELOPMENTS
Financial and Regulatory
-- Florida Public Service Commission (FPSC) delayed the decision on PEF's
rate case revenue requirement and rate design until January 11 and
January 28, 2010, respectively.
-- Received approval from the FPSC for PEF's proposed 2010 cost recovery
for new nuclear plant construction at Levy County and nuclear uprate at
Crystal River Unit 3.
-- Filed petitions with the FPSC for proposed 2010 cost recovery in Florida
through the following clauses: fuel, capacity, environmental and energy
conservation.
-- Filed petition with the North Carolinas Utilities Commission (NCUC) to
decrease the fuel component of customer rates and adjust the components
of energy-efficiency programs and renewable energy resources, resulting
in a slight net reduction in customer bills, effective December 2009.
-- Requested the NCUC delay implementation of the statewide poultry power
requirement of Senate Bill 3 by one year to 2012 and cut the ultimate
requirement by a third to 300,000 megawatt-hours per year.
-- Recorded a charge of $101 million, net of tax, related to a litigation
verdict in a breach-of-contract lawsuit with U.S. Global related to
ownership interests in certain of our now discontinued synthetic fuels
facilities. The Company intends to file post-trial motions and is
evaluating grounds for appeal.
-- Awarded $36 million in a breach-of-contract lawsuit against global
engineering, consulting and construction firm Black & Veatch and 12 firm
partners. In the event PEF recovers damages, it is not expected to
impact net income, given anticipated regulatory and accounting
treatment.
State-of-the-Art Power Plants
-- Received approval from the NCUC to build a new, 950-megawatt (MW)
combined-cycle natural gas plant in Wayne County, N.C., to replace the
neighboring 397-MW coal-fired Lee Plant. The project represents a total
investment of approximately $900 million and will substantially reduce
overall emissions beginning in early 2013.
-- Received site certification approval from Florida's Siting Board,
comprised of the governor and Cabinet, to build two nuclear power plant
units in Levy County.
Alternative Energy and Energy Efficiency
-- Awarded $200 million matching Smart Grid grant from the Department of
Energy through the American Recovery and Reinvestment Act.
-- Placed online a 650-kilowatt solar array, owned and operated by Carolina
Solar Energy, near Roxboro, N.C., from which PEC will purchase the
electricity under a 20-year solar power contract.
-- Signed agreement with MP2 Capital to purchase the energy produced by a
new 2.3-MW solar photovoltaic array in Laurinburg, N.C.
-- Signed multiple contracts for solar power through our SunSense
Commercial PV program totaling approximately 1 MW of electricity, which
brings the total amount of solar-generated electricity scheduled to be
purchased by PEC to more than 9 MW.
-- Announced partnership with Ford and General Motors to participate in
early vehicle demonstrations and assess changes in the demand on the
electric grid from the use of plug-in electric vehicles as part of the
auto companies' $60 million grant from the American Recovery and
Reinvestment Act.
-- Joined Edison Electric Institute members in a pledge to accelerate
adoption of plug-in electric vehicles by aggressive action in five focus
areas: charging infrastructure, customer service, customer education,
incentives and conversion of utility fleets.
Awards, Honors and Recognitions
-- Named to the Dow Jones Sustainability North America Index for the fifth
year in a row as an industry leader in managing economic, environmental
and social issues.
-- Named one of the Top Utilities in Economic Development by Site Selection
magazine for the seventh time in the last eight years.
-- Received award from the Project Management Institute for contributions
by Progress Energy's Project Management Center of Excellence in
developing a method to evaluate and rank projects so that appropriate
resources, requirements and governance are applied.
-- Received GovernanceMetrics International's highest rating for
best-in-class corporate governance standards.
-- Named to Newsweek's List of Top 500 Green Companies in the U.S.
Press releases regarding various announcements are available on the company's Web site at www.progress-energy.com/aboutus/news.
THIRD-QUARTER 2009 BUSINESS HIGHLIGHTS
Below are the third-quarter and year-to-date 2009 earnings variance analyses for the company's segments. See the reconciliation tables on pages 6-7 and on pages S-1 and S-2 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 topics.
QUARTER-OVER-QUARTER ONGOING EPS VARIANCE ANALYSIS
Progress Energy Carolinas
-- Reported third-quarter ongoing earnings per share of $0.76, compared
with $0.78 for the same period last year; GAAP earnings per share of
$0.74, compared with $0.77 for the same period last year.
-- Reported primary quarter-over-quarter ongoing earnings per share
favorability of:
-- $0.06 O&M primarily due to targeted cost reductions, lower net
nuclear plant outage and maintenance costs and the impact of changes
to an environmental reserve
-- $0.01 other margin
-- $0.01 wholesale revenues
-- $0.01 depreciation and amortization
-- $0.01 interest expense
-- Reported primary quarter-over-quarter ongoing earnings per share
unfavorability of:
-- $(0.05) retail growth and usage
-- $(0.02) income taxes primarily due to impact of changes in tax
estimates
-- $(0.05) share dilution primarily due to Progress Energy's issuance
of 14.4 million shares of common stock in January 2009
-- 13,000 net increase in the average number of customers for the three
months ended September 30, 2009, compared to the same period in 2008
Progress Energy Florida
-- Reported third-quarter ongoing earnings per share of $0.60, compared
with $0.53 for the same period last year; GAAP earnings per share of
$0.63, compared with $0.55 for the same period last year.
-- Reported primary quarter-over-quarter ongoing earnings per share
favorability of:
-- $0.09 retail rates primarily due to impact of interim and limited
base rate relief
-- $0.08 other margin primarily due to the net impact of returns on
nuclear and environmental cost-recovery clause assets
-- $0.02 weather
-- $0.01 O&M
-- $0.01 interest expense
-- Reported primary quarter-over-quarter ongoing earnings per share
unfavorability of:
-- $(0.03) retail growth and usage
-- $(0.03) depreciation and amortization primarily due to impact of
depreciable asset base increases
-- $(0.02) AFUDC equity primarily due to placing the repowered Bartow
Plant in service in June 2009
-- $(0.01) other
-- $(0.01) income taxes
-- $(0.04) share dilution primarily due to Progress Energy's issuance
of 14.4 million shares of common stock in January 2009
-- 8,000 net decrease in the average number of customers for the three
months ended September 30, 2009, compared to the same period in 2008
Corporate and Other Businesses (includes primarily Holding Company Debt and Discontinued Operations)
-- Reported third-quarter ongoing after-tax expenses of $0.14 per share,
compared with after-tax expenses of $0.14 per share for the same period
last year; GAAP after-tax expenses of $0.49 per share, compared with
after-tax expenses of $0.14 per share for the same period last year.
-- Reported primary quarter-over-quarter ongoing after-tax expenses per
share favorability of:
-- $0.02 income taxes primarily due to impact of changes in tax
estimates
-- $0.01 share dilution
-- Reported primary quarter-over-quarter ongoing after-tax expenses per
share unfavorability of:
-- $(0.02) interest expense primarily due to higher average debt
outstanding at the Parent
-- $(0.01) other
YEAR-OVER-YEAR ONGOING EPS VARIANCE ANALYSIS
Progress Energy Carolinas
-- Reported year-to-date ongoing earnings per share of $1.56, compared with
$1.65 for the same period last year; GAAP earnings per share of $1.54,
compared with $1.64 for the same period last year.
-- Reported primary year-over-year ongoing earnings per share favorability
of:
-- $0.06 depreciation and amortization primarily due to depreciation
associated with accelerated cost-recovery program for nuclear
generating assets and Clean Smokestacks Act amortization recognized
during 2008, partially offset by impact of depreciable asset base
increases
-- $0.05 weather
-- $0.03 O&M primarily due to targeted cost reductions and lower
emission allowance expense, partially offset by higher net plant
outage and maintenance costs
-- $0.02 AFUDC equity primarily due to increased eligible construction
project costs
-- $0.02 interest expense primarily due to lower interest rates on
variable rate debt, partially offset by higher average debt
outstanding
-- Reported primary year-over-year ongoing earnings per share
unfavorability of:
-- $(0.10) retail growth and usage, primarily in the industrial sector
-- $(0.03) other operating primarily due to prior-year gain on land
sales
-- $(0.02) other primarily due to losses on balanced billing program
and lower interest income
-- $(0.01) wholesale revenues
-- $(0.11) share dilution primarily due to Progress Energy's issuance
of 14.4 million shares of common stock in January 2009
-- 15,000 net increase in the average number of customers for the nine
months ended September 30, 2009, compared to the same period in 2008
Progress Energy Florida
-- Reported year-to-date ongoing earnings per share of $1.37, compared with
$1.26 for the same period last year; GAAP earnings per share of $1.38,
compared with $1.29 for the same period last year.
-- Reported primary year-over-year ongoing earnings per share favorability
of:
-- $0.15 other margin primarily due to the net impact of returns on
nuclear and environmental cost-recovery clause assets
-- $0.11 retail rates primarily due to impact of interim and limited
base rate relief
-- $0.06 weather
-- $0.06 AFUDC equity primarily due to increased eligible construction
project costs
-- $0.03 wholesale revenues primarily due to increased capacity charges
from new and amended contracts
-- $0.03 income taxes primarily due to deduction related to nuclear
decommissioning trust funds
-- $0.01 O&M
-- Reported primary year-over-year ongoing earnings per share
unfavorability of:
-- $(0.10) retail growth and usage
-- $(0.08) interest expense primarily due to higher average debt
outstanding
-- $(0.04) depreciation and amortization primarily due to impact of
depreciable asset base increases
-- $(0.03) other operating primarily due to regulatory disallowance of
fuel costs and prior-year gain on land sales
-- $(0.09) share dilution primarily due to Progress Energy's issuance
of 14.4 million shares of common stock in January 2009
-- 8,000 net decrease in the average number of customers for the nine
months ended September 30, 2009, compared to the same period in 2008
Corporate and Other Businesses (includes primarily Holding Company Debt and Discontinued Operations)
-- Reported year-to-date ongoing after-tax expenses of $0.40 per share,
compared with after-tax expenses of $0.41 per share for the same period
last year; GAAP after-tax expenses of $0.76 per share, compared with
after-tax expenses of $0.16 per share for the same period last year.
-- Reported primary year-over-year ongoing after-tax expenses per share
favorability of:
-- $0.01 other
-- $0.03 share dilution primarily due to Progress Energy's issuance of
14.4 million shares of common stock in January 2009
-- Reported primary year-over-year ongoing after-tax expenses per share
unfavorability of:
-- $(0.03) interest expense primarily due to higher average debt
outstanding at the Parent
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 Nine months ended
September 30 September 30
------------------ -----------------
2009 2008* 2009 2008*
---- ----- ---- -----
Ongoing earnings per share $1.22 $1.17 $2.53 $2.50
Tax levelization 0.02 0.01 (0.02) 0.03
Discontinued operations (0.36) - (0.37) 0.25
CVO mark-to-market 0.01 - 0.04 (0.01)
Impairment - - (0.01) -
Plant retirement charge (0.01) - (0.01) -
----- --- ----- ---
Reported GAAP earnings per
share $0.88 $1.18 $2.16 $2.77
===== ===== ===== =====
Shares outstanding (millions) 280 262 279 261
=== === === ===
* Previously reported 2008 earnings per share have 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 increased 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 does not consider this adjustment to be representative of the company's ongoing earnings.
Discontinued Operations
The company has reduced its business risk by exiting nonregulated businesses to focus on the core operations of the utilities. The company recorded the impact of a verdict to pay damages in a breach-of-contract lawsuit related to ownership interests in certain of our synthetic fuels facilities that decreased earnings per share by $0.36 for the quarter. See page S-4 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 $0.01 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 this adjustment to be representative of the company's ongoing earnings.
Impairment
The company has recorded impairments of certain investments of its Affordable Housing portfolio. The impairments had no impact on earnings for the quarter or for the same period last year. Management does not consider this adjustment to be representative of the company's ongoing earnings.
Plant Retirement Charge
The company recognized a charge for the impact of PEC's decision to construct a new natural gas plant to replace certain coal-fired generating units, with resulting reduced emissions for compliance with the Clean Smokestacks Act's 2013 emission targets. The charge decreased earnings per share by $0.01 for the quarter.
