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 T i Key Topics

2009 Earnings Drivers Capital Expenditures Cash Flows Cash Flows Financing Plans

Di id d P li

Dividend Policy

2

Business Model for a “Pure Play” Regulated I t t d El t i Utilit

Sustain Operational Deliver Customer

Integrated Electric Utility

p Excellence

• Safety & environmental

performance Fleet performance

Achieve Long-Term

Satisfaction

• Reliable service
• Affordable rates
• Fleet performance
• Cost performance

Financial Objectives

• Annual EPS growth ~ 4 - 5%
• Continue dividend growth
• Corporate citizenship

Leverage Growth Prospects Maintain Constructive Regulation

• Maintain investment-grade

credit rating

• Annual TSR of 8 - 10%

Prospects

• Organic growth
• Rate base expansion
• Balanced approach

Regulation

• Cost recovery
• Proactive proceedings
• Open communications

(at constant P/E)

• Balanced approach
• Open communications

3

PGN O i E i

Midpoint Actual Actual Actual

• f Plan

($ in millions, except EPS)

PGN Ongoing Earnings

Actual Actual Actual

• f Plan

2006 2007 2008 2009 PEC 454 $ 498 $ 531 $ 581 $ PEF 326 315 383 419 PEF 326 315 383 419 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

• 11 5%

9 6% 2 3% Growth 11.5% 9.6% 2.3% Average Shares 250 256 260 280 Di id d P t R ti 99% 90% 83% 81% Dividend Payout Ratio 99% 90% 83% 81%

4

* See appendix for reconciliation of ongoing EPS to reported GAAP EPS.

2009 O i E i Sh 2009 Ongoing Earnings per Share

$0.13 ($0.22) $4.00 $2.98 $0.07 $0.21 $0.09 $0.07 $0.07 $0.03 $0.13 ($0.22) ($0.20) ($0.14) ($0.04) $3.05 $3.00 $3.50 $2.00 $2.50 s per Share $1 00 $1.50 Earnings $0.50 $1.00

5

$0.00

2008 Ongoing EPS * Weather Increased Investment Wholesale Revenues Transmission Revenues Depreciation & Amortization Retail Growth Rate Relief and/or O&M Dilution Interest Expense Pension Expense Other 2009 Ongoing EPS Guidance

* See appendix for reconciliation of ongoing EPS to reported GAAP EPS.

2009 E i D i 2009 Earnings Drivers

• Retail & wholesale sales; OATT
• Constructive legislative & regulatory recovery
• Florida rate filings

Margin Growth C t M t

• Continuous Business Excellence (CBE)

Targeting minimal O&M growth

• Carolinas regulatory amortizations ceased

R t b th f dditi

Cost Management Depreciation &

• Targeting minimal O&M growth
• Pension expense
• Rate base growth from new additions

Amortization AFUDC

• Construction work in progress
• Environmental spending
• Financing utility growth
• Effective tax planning

Interest & Taxes

• Planned new generation & transmission

6

R t B G th

Progress Energy Florida (2) Progress Energy Carolinas (1)

Rate Base Growth

$9,000 $9,000

2008-2011E CAGR

6%

2008-2011E CAGR

17%

$6,000 $7,000 $8,000 $6,000 $7,000 $8,000

(x 1M)

2001-2008 CAGR 4.0% 2001-2008 CAGR 5.6%

1M)

$3,000 $4,000 $5,000 $3,000 $4,000 $5,000

l Rate Base ( Rate Base (x 1

$0 $1,000 $2,000

2001 2002 2003 2004 2005 2006 2007 2008 2009E 2010E 2011E

$0 $1,000 $2,000

2001 2002 2003 2004 2005 2006 2007 2008E 2009E 2010E 2011E

Retai Retail R

2001 2002 2003 2004 2005 2006 2007 2008 2009E 2010E 2011E 2001 2002 2003 2004 2005 2006 2007 2008E 2009E 2010E 2011E

Retail rate base Clause-related (3) 7

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. 3. Represents ECRC (CAIR at CR 4 & 5), CR3 Nuclear Uprate and ECCR.

C E D i i E i G th CapEx Driving Earnings Growth

M j C it l P j t Total Project C E Cumulative Spent th h 12/31/08 Expected C l ti D t

Recovery Methodolog

($ in millions)

Major Capital Projects CapEx through 12/31/08 Completion Date

Methodology

Carolinas

Clean Smokestacks $1,500–1,600M $ 1,007M 2013 Amortized $584M; balance in Rate Base Wayne County CT 90M 69M June 2009 Rate Base Richmond County CCGT (incl Transmission) 600M 68M June 2011 Rate Base DSM/EE Rider Smart Grid (DSDR) 210M 9M

• Dec. 2012

DSM/EE Rider (pending approval)

Florida

Environmental $ 1,200M $ 847M May 2010 Environmental Cost Recovery Clause y Recovery Clause Bartow Repowering (incl Transmission) 690M 653M June 2009 Rate Base CR3 Nuclear Uprate 365M 97M

• Dec. 2011

Nuclear cost recovery legislation CR3 Steam Generator Replacement 245M 123M

• Dec. 2009

Rate Base

Note: Total project capital expenditures based on current estimates and exclude AFUDC. DSDR = Distribution System Demand Response

8

2009 M i G th C li 2009 Margin Growth - Carolinas

• 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;

ff / / f rates effective 12/01/08 subject to true-up upon final order

• 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 M i G th Fl id 2009 Margin Growth - Florida

• 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

10

* On February 18, 2009, PEF filed a request with the FPSC to defer until 2010 the recovery of $200M of Levy nuclear preconstruction costs.

R l t R M h i

($ in millions)

Progress Energy Florida Progress Energy Carolinas

Regulatory Recovery Mechanisms

g gy g gy

$5,000 $6,000 Excise taxes Fuel clause $5,000 $6,000 $4,000 Capacity cost recovery clause (CCRC) Storm cost recovery clause Energy conservation $4,000

Fuel Fuel

$2,000 $3,000 Energy conservation cost recovery (ECCR) DSM / EE / REPS clause Nuclear cost recovery clause (NCRC) $2,000 $3,000

Base

$ $1,000 recovery clause (NCRC) Environmental cost recovery clause (ECRC) Transmission & other ancillary revenue $0 $1,000

Base Base

11

$0 2005A 2006A 2007A 2008A 2009E Retail & wholesale base revenue $0 2005A 2006A 2007A 2008A 2009E

Fl id B R t R li f i 2009

Limited rate relief

Florida Base Rate Relief in 2009

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

A i d

Accounting orders Pension expense deferral Storm hardening

12

O&M C t M t

Continuous Business Excellence (CBE)

O&M Cost Management

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

2008 O&M C t M t 2008 O&M Cost Management

AdjustedO&MReconciliation

(1)

(Unaudited)

Adjusted O&M Reconciliation (in millions) 2008 2007 Growth Reported GAAP O&M $1,820 $1,842

• 1.2%

Adjustments C li 1 030 1 024 Years ended Dec. 31 Carolinas 1,030 1,024 O&M recoverable through clauses (23) (6) Timing of nuclear outages

• (26)

Estimated environmental remediation expenses (6) 1 Florida 813 834 St d (66) (47) Storm damage reserve (66) (47) Energy conservation cost recovery clause (ECCR) (69) (69) Environmental cost recovery clause (ECRC) (31) (55) Sales and use tax audit adjustments 5 (7) Severance associated with Energy Delivery restructuring (5)

• (2)
• 1. Adjusted O&M excludes certain expenses that are recovered through cost-recovery clauses which have no material impact on earnings, as

well as certain non-recurring items. Management believes this presentation is appropriate and enables investors to more accurately compare the company's O&M expense over the periods presented. Adjusted O&M as presented here may not be comparable to similarly titled measures used by other companies. 2 The 6¢ favorable YTD O&M EPS variance presented in the 2008 year end earnings release on page S 2 excludes the impact from O&M

Adjusted O&M

(2)

$1,625 $1,633

• 0.5%

14

• 2. The 6¢ favorable YTD O&M EPS variance presented in the 2008 year-end earnings release on page S-2 excludes the impact from O&M

costs recoverable through clauses which have no material impact on earnings.

P i C t Pension Cost

• 32% return on plan assets in 2008

p

Assumptions:

6.30% discount rate 8.75% prospective annual return on plan assets

Funding status

g

~$220M pre-tax contribution in 2009

Pension expense

p

2008 2009

PGN

$10.5M $70-75M

15

Note: FAS 87 Method – PEC: 5-year average PEF: Fair Value

D i ti & A ti ti

($ in millions)

Progress Energy Florida Progress Energy Carolinas

Depreciation & Amortization

$500 $600 Other Storm cost deferral amortization $500 $600

g gy g gy

$400 GridSouth amortization Nuclear recovery amortization $400 $200 $300 amortization Harris nuclear depreciation Clean Smokestacks $200 $300

(1) (2)

$100 Act amortization Nuclear decommissioning cost provision $ $100

(3)

$0 2005A 2006A 2007A 2008A 2009E Depreciation of utility plant

16

$0 2005A 2006A 2007A 2008A 2009E

1. Clean Smokestacks Act amortization ceased, effective September 5, 2008. 2. Harris nuclear depreciation minimum completed in North Carolina in 4th quarter 2008 and terminated in South Carolina, effective October 22, 2008. 3. Due to offsetting regulatory accounting entries, this has no impact on net income.

Allowance for Funds U d D i C t ti (AFUDC)

($ in millions)

Progress Energy Florida (2) Progress Energy Carolinas (1)

Used During Construction (AFUDC)

$120 $140

g gy g gy

$120 $140 $80 $100 AFUDC - Debt AFUDC - Equity(3) $80 $100 $40 $60 $40 $60 $ $20 $ 0 $20 $40 $0 2005A 2006A 2007A 2008A 2009E

17

1. PEC capital projects lasting more than one month are forecast to earn 8-9% AFUDC rate. 2. PEF capital projects greater than $45 million and lasting more than one year earn an 8.848% AFUDC rate. PEF has a base level of CWIP embedded in its rate base. 3. AFUDC equity is excluded from the calculation of income tax expense.

$0 2005A 2006A 2007A 2008A 2009E

I t t & T Interest & Taxes

Interest Expense

• Higher interest costs are part of a balanced

financing plan to fund significant rate base growth

Taxes Other

g g

• Higher property taxes due to

than FIT

increased capital investment ~34% effective income tax rate currently

Income Taxes

• Lower current income tax due to accelerated

tax depreciation including bonus depreciation

• Federal taxes paid at the AMT rate due to

$800M th ti f l t dit f d

18

$800M synthetic fuels tax credit carry forward

D li i EPS C it t Delivering on our EPS Commitments

(Unaudited)

$2.98 $2.95 - $3.15 $2.72 $2 44 $2.44

2006 Ongoing EPS * 2007 Ongoing EPS * 2008 Ongoing EPS * 2009 Ongoing EPS Ongoing EPS Ongoing EPS Ongoing EPS Ongoing EPS Guidance

19

* See appendix for reconciliation of ongoing EPS to reported GAAP EPS.

P j t d C it l E dit

(1)

2008A 2009E 2010E 2011E

Maintenance Capex

($ in millions)

Projected Capital Expenditures (1)

p Generation $298 $400 $340 $380 PEC Environmental 114 80 150 120 Transmission 211 240 240 270 Distribution 94 100 60 110 Other 74 50 120 100 Total Maintenance Capex 791 870 910 980 Growth Capex Generation 373 440 420 210 PEF Environmental 564 290 80

• Transmission

108 80 120 70 PEC/PEF Smart Grid 8 50 100 90 Distribution 260 220 230 260 Total Growth Capex 1,313 1,080 950 630 Corporate/other 22 30 30 30 Total Capital before Potential New Nuclear 2,126 1,980 1,890 1,640 Potential New Nuclear 168 260-560 460-660 750-950 Total Capital Spending $ 2,294 $ 2,240-2,540 $ 2,350-2,550 $ 2,390-2,590

(1) Excludes AFUDC, nuclear fuel and nuclear decommissioning trust funding.

20

P j t d C h Fl

2008A 2009E

($ in millions)

Projected Cash Flow

Adjusted operating cash flow $2,076 $2,090 Fuel-related timing differences

(fuel inventory, deferred fuel, derivative collateral)

(823) 450 Pension fund contribution (pre-tax) (35) (220) Pension fund contribution (pre-tax) (35) (220) GAAP operating cash flow $1,218 $2,320 Capital expenditures before t ti l l (2,126) (1,980) potential new nuclear Potential new nuclear (168) (260) Nuclear fuel and decommissioning trust (271) (310) AFUDC debt (40) (40) Common dividends (642) (690) Free cash flow $(2,029) $(960) 21

2009 Fi i Pl

Progress Energy, Inc.

2009 Financing Plan

Equity issuance ~$525M net proceeds raised in Jan-09 Long-term debt issuance

Progress Energy Carolinas

$600M 10-yr FMB issued @ 5.30% in Jan-09

• Proceeds to retire $400M maturity on March 1, 2009

y ,

Progress Energy Florida

Strengthen capital structure

22

Strong Liquidity Position with Minimal N T R fi i Ri k

Strong liquidity position

Near-Term Refinancing Risk

Manageable near-term debt maturities

$2,030 $600

PGN PEC PEF

($ in millions)

$1,403 $550 $523 $300 $1,000 $700 $300 $400 $406 $400 Total credit facilities Drawn CP

• utstanding

Equity issuance Total liquidity

1 As of Dec. 31, 2008, adjusted for net proceeds from January 2009 equity issuance

after exercising the over-allotment option.

$100 $400 $6

2009 2010 2011

1 2 In January 2009, PEC prefunded this maturity with a 10-year, 5.30% $600M FMB.

2

Credit facility Amount Expiration

PGN $1,130 2012 PEC $450 2011 PEF $450 2011

23

L C t N l Fi i Levy County Nuclear Financing

Joint ownership Securitization of preconstruction costs Other investors Other investors DOE loan guarantee (if program changes)

Ti t d l

Time to develop

24

S t i bl Di id d G th

$3.00

Sustainable Dividend Growth

$2.50

• 250 consecutive quarters of dividend payments
• Increased dividend 50 out of the last 55 years
• Increased dividend 21 consecutive years

$1.50 $2.00

• Almost 900% dividend growth since public listing

*

$1.00 $0 00 $0.50

* *

$0.00 1947 1949 1951 1953 1955 1957 1959 1961 1963 1965 1967 1969 1971 1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007

25

* Split-adjusted for 2-for-1 stock splits in 1954, 1964 and 1993.

Appendix

C it li ti d Sh t T D bt Capitalization and Short-Term Debt

($ in millions)

Notes: (a) At December 31, 2008, the Parent had $600 million t t di d l i dit t (RCA)

As of 12/31/2008 % Short‐term Debt (a) 1,050 $ 5.1%

• utstanding under a revolving credit agreement (RCA)

and our commercial paper balance was approximately $550 million. We classified $100 million of the $600 million outstanding under the Parent’s RCA as long- term debt. Settlement of a portion of this obligation did not require the use of working capital in 2009 as $100

Current Portion of Long‐term Debt (b) ‐ 0.0% Long‐term Debt Long‐term Debt, affiliate (c ) 272 1.3% Long‐term Debt, net 10,387 50.7% T l D b ( )(d) 11 709 $ 57 1%

million of the proceeds from the January 12, 2009 equity issuance was used to reduce RCA borrowings. (b) On January 15, 2009, PEC issued $600 million of First Mortgage Bonds, 5.30% Series due 2019. A portion of the proceeds will be used to repay the maturity of PEC’s $400 million 5.95% Senior Notes,

Total Debt (a)(d) 11,709 $ 57.1% Preferred Stock of Subsidiaries 93 0.5% Minority Interest 6 0.0% Common Stock Equity (e) 8,687 42.4% Total Capitalization and Short term Debt 20 495 $ 100 0%

due March 1, 2009. Therefore, $400 million has been reclassified from Current Portion of Long-Term Debt to Long-Term Debt, net. (c) Represents 7.10% Junior Subordinated Deferrable Interest Notes due 2039 issued by a wholly owned subsidiary to an affiliated trust in connection with the

Total Capitalization and Short‐term Debt 20,495 $ 100.0%

y issuance of 7.10% Cumulative Quarterly Income Preferred Securities due 2039, Series A by Florida Progress Corporation, a wholly owned subsidiary. (d) As of December 31, 2008, approximately $8.4 billion

• f our total debt was issued by our subsidiaries.

(e) On January 12 2009 the Parent issued 14 4 million

27

(e) On January 12, 2009, the Parent issued 14.4 million shares of common stock at a public offering price of $37.50 per share. Net proceeds from this offering were $523 million.

St bl C dit R ti

*

Stable Credit Ratings*

Progress Energy Moody’s Investors Standard & Poor’s Fitch Ratings g gy g Outlook Stable Stable Stable Corporate Credit Rating

• BBB+

BBB Senior Unsecured Debt Baa2 BBB BBB Commercial Paper P-2 A-2 F-2 Progress Energy Carolinas Progress Energy Carolinas Corporate Credit Rating A3 BBB+ A- Commercial Paper P-2 A-2 F-1 Senior Secured Debt A2 A- A+ Senior Unsecured Debt A3 BBB+ A Preferred Stock Baa2 BBB- A- Progress Energy Florida Corporate Credit Rating A3 BBB+ A- Commercial Paper P-2 A-2 F-1 Senior Secured Debt A2 A- A+ Senior Unsecured Debt A3 BBB+ A

O

Preferred Stock Baa2 BBB- A- FPC Capital I Preferred Stock** Baa2 BBB- A- 28

Objective: Maintain investment-grade credit ratings

* As of February 27, 2009 ** Guaranteed by Progress Energy, Inc. and Florida Progress Corporation.

Reconciliation of O i t GAAP E i *

Progress Energy, Inc.

Ongoing to GAAP Earnings *

(Unaudited)

Progress Energy, Inc. Reconciliation of Ongoing Earnings per Share to Reported GAAP Earnings per Share

Three Months Ended December 31 Years Ended December 31 2008 2007 2008 2007 2006 Ongoing earnings per share $0.47 $0.40 $2.98 $2.72 $2.44 Tax levelization (0.03) (0.03)

• Discontinued operations

(0.03) 0.03 0.22 (0.74) 0.08 CVO mark-to-market 0.01

• (0.01)

(0.10) ( ) ( ) Valuation allowance (0.01)

• (0.01)
• Loss on debt redemption
• (0.14)

Reported GAAP earnings per share $0.41 $0.40 $3.19 $1.97 $2.28 Shares outstanding (millions) 262 257 260 256 250 * Previously reported 2007 and 2006 results have been restated to reflect discontinued operations.

29

O i E i Adj t t 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. 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 decreased earnings per share by $0.03 for the quarter and for the same period last year, and has no impact on the company’s annual earnings. Because this adjustment varies by quarter but has no impact on annual earnings, management believes this adjustment is not representative of the company’s ongoing quarterly earnings. a age e t be e es t s adjust e t s

• t ep ese tat e o t e co

pa y s o go g qua te y ea gs Discontinued Operations The company has reduced its business risk by exiting nonregulated businesses to focus on the core operations of the utilities. The discontinued operations of these nonregulated businesses decreased earnings per share by $0.03 for the quarter and increased earnings per share $0.03 for the same period last year. 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 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 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 per share 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 the adjustment to be a component of
• ngoing earnings.

Valuation Allowance Related to Net Operating Loss Carry Forward Progress Energ pre io sl recorded a deferred ta asset for a state net operating loss carr for ard pon the sale of Progress Energ Vent res Inc ’s Progress Energy previously recorded a deferred tax asset for a state net operating loss carry forward upon the sale of Progress Energy Ventures Inc.’s nonregulated generation facilities and energy marketing and trading operations. In the fourth quarter of 2008, the company recorded an additional deferred tax asset related to the state net operating loss carry forward due to a change in estimate based on 2007 tax return filings. The company also evaluated the total state net operating loss carry forward for potential impairment and partially impaired it by recording a valuation allowance, which more than offset the change in

• estimate. The net impact resulted in decreased earnings per share for the quarter by $0.01. Management does not believe this net valuation allowance is

representative of the ongoing operations of the company. Loss on Debt Redemption O N 2 2006 P E d d h i di $3 0 illi i i l f i 6 0 % S i N d A il 1 200 d h i On Nov. 27, 2006, Progress Energy redeemed the entire outstanding $350 million principal amount of its 6.05% Senior Notes due April 15, 2007, and the entire

• utstanding $400 million principal amount of its 5.85% Senior Notes due Oct. 30, 2008. On Dec. 6, 2006, Progress Energy repurchased, pursuant to a tender
• ffer, $550 million, or approximately 44 percent, of the aggregate principal amount of its 7.10% Senior Notes due March 1, 2011. The company recognized a

total pre-tax loss of $59 million in conjunction with these redemptions. The loss on the redemptions decreased earnings per share for the fourth quarter of 2006 by $0.14. This loss is of a non-recurring nature and is not representative of the ongoing operations of the company.

30