1. Securing Our Energy Future
Bill Johnson
Chairman, CEO and President
Morgan Stanley
Global Electricity & Energy Conference
April 3, 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. Topic Outline
Overview
Strategic issues
Levy County nuclear project
Summary
Q&A
5. Two High-Performing Electric Utilities
with Strong Growth Prospects
North Carolina
Progress Energy Carolinas
• 12,400 MW capacity
• Over 1.4M customers
South
Carolina
Progress Energy Florida
Florida
• 9,400 MW capacity
• Over 1.7M customers
Service Area
6. Business Model for a “Pure Play”
Regulated Integrated Electric Utility
Sustain Operational Deliver Customer
Excellence Satisfaction
• Safety & environmental • Reliable service
performance Achieve Long-Term • Affordable rates
• Fleet performance Financial Objectives • Customer care
• Cost performance • Annual EPS growth ~ 4 - 5%
• Continue dividend growth
• ~55% debt-to-total cap
• Annual TSR of 8 - 10%
(at constant P/E)
Leverage Growth Maintain Constructive
Prospects Regulation
• Organic growth • Cost recovery
• Rate base expansion • Proactive proceedings
• Balanced approach • Open communications
7. Rate Base Growth
Progress Energy Carolinas¹ Progress Energy Florida²
2008-2010E 2008-2010E
CAGR CAGR
4% 18%
$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 in excess of $813M.
² PEF rate base excludes Levy nuclear cost recovery
8. 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
10. Power Sector’s Challenge
Addressing both
climate change and demand growth
while maintaining
a secure supply, reliable service and
affordable prices
and creating
shareholder value
11. Managing Three Related Issues
Debate has shifted from “why”
U.S. climate
to “what” and “when”
change policy
Traditional least-cost model is
State regulatory
compact changing
Weighing options for needed
Infrastructure
investment new baseload capacity
12. The Case for New Nuclear Gets Stronger
Given a future of carbon controls
and the strong desire for energy security,
adding new nuclear capacity
is the best baseload option.
But must first have political and regulatory support.
13. 2008 – 2010: A Critical Period
1) Get federal rules right on climate change
2) Make right state regulatory adjustments
3) Enable right choices on utility infrastructure
17. Florida Policy Support for New Nuclear
Recognizes need to diversify state’s fuel supply
Concern with fuel supplies during crisis (e.g., Katrina)
Passed nuclear cost-recovery legislation in 2006
Governor Crist focused on carbon reductions
18. Florida Nuclear
Investment Recovery Legislation (2006)
Pre-construction and licensing
Capacity cost recovery clause (CCRC)
Costs are recovered dollar for dollar
During construction
AFUDC is recovered through CCRC
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 57.8% equity)
Project cancellation cost recovery
19. Levy Need Case Filing with Florida PSC
Filed Need Case with PSC 3-11-08
Total cost estimate for Levy 1 & 2: $14B + $3B transmission
(overnight cost ~$4,200/kW for 2 units)
Projected in-service dates: 2016 & 2017
Estimated fuel savings once in service: ~$1B annually
Florida Governor Crist:
“I think this is an investment in Florida’s future that is
important to make.” (St. Petersburg Times, 3-11-08)
20. Other Levy Regulatory Milestones
Next steps on Need Case
PSC hearing – May 21-23, 2008
Expect need determination order – ~ late July 2008
File license application with NRC – 3rd quarter 2008
Cost-recovery docket opened with PSC March 2008
For 2007-2008 costs per 2006 nuclear legislation
PSC hearing – ~ September/October 2008
21. Conditions to Proceed with New Nuclear
Political and regulatory support
Plant design final
Financing arranged
Our financial objectives met
23. 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
25. 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
26. Conclusion
Robust capex program results in considerable rate base
growth – with or without new nuclear
Annual capex, excluding environmental, declines to
~$1.5B before nuclear construction
Capex program, excluding nuclear, can be readily
financed with $200-$300M equity per year
Nuclear pre-construction cost recovery allows for time to
develop our nuclear financing plan
Meanwhile, we will focus on our financial objectives
EPS growth
Dividend growth
Solid credit metrics
29. PEC – NC Recovery Clauses
Clause Description Timeframe Recovery
Recovery of fuel costs,
Fuel portion of purchased Annual filing $ for $
power and reagent costs
Efficiency and Recovery of qualified $ for $ (O&M),
Conservation efficiency and Annual filing
Return on/of capital*
Rider conservation costs
* Subject to final rulemaking related to the 2007 NC Energy Bill.
30. PEC – SC Recovery Clauses
Clause Description Timeframe Recovery
Recovery of fuel costs,
energy portion of
Fuel purchased power, Annual filing $ for $
emissions allowances
and reagent costs
Recovery of financing Return on capital
New Nuclear No more often
costs for pre-construction during construction
Construction than annually
and construction capital period
Note: SC law grants the Commission the authority to establish an efficiency and conservation rider.
31. PEF Recovery Clauses
Clause Description Timeframe Recovery
Recovery of the energy
component (fuel) of
Fuel Annual filing $ for $
purchased power and
fuel costs
Recovery of capacity
$ for $ (O&M);
Capacity portion of purchased Annual filing
Return of/on capital
power; etc.
Recovery of qualified
Environmental $ for $ (O&M);
environmental Annual filing
(ECRC) Return of/on capital
compliance costs
Energy Recovery of efficiency
$ for $ (O&M);
Conservation and conservation Annual filing
Return of/on capital
(ECCR) program costs etc.
32. PGN Projected Capital Expenditures (1)
(in millions)
(2)
2007A 2008E 2009E 2010E
Maintenance Capex
Generation $288 $330 $340 $240
PEC Environmental 340 180 70 80
Transmission 100 230 230 220
Distribution 80 170 180 220
Other 67 130 80 90
Total Maintenance Capex 875 1,040 900 850
Growth Capex
Generation 415 400 470 270
PEF Environmental 295 550 280 50
Transmission 86 80 60 120
Distribution 297 310 320 340
Total Growth Capex 1,093 1,340 1,130 780
Corporate/other 10 20 20 20
Total Capital Spending $1,978 $2,400 $2,050 $1,650
(1) Excludes AFUDC, nuclear fuel, nuclear decommissioning trust funding and potential nuclear construction.
(2) 2007 actuals do not agree with the cash flows presented in the Form 10-K as the amounts herein are
presented on the accrual basis of accounting.
33. Major Capital Projects – PEC
(in millions)
Balance
Capital Expenditures * Recovery
Project Description to Completion
Methodology
2007A 2008E 2009E 2010E Spend Date
Environmental
PEC CSA up to $813M;
Compliance $340 $180 $70 $80 $295 2016
Environmental then rate base
Equipment
Wayne
157 MW CT - $70 $20 - - 2009 Rate base
County
Richmond 600 MW CCGT &
- $80 $265 $140 $70 2011 Rate base
County Transmission
PEC Subtotal $340 $330 $355 $220 $365
% of Total PEC Capital Expenditures 46% 35% 39% 25% N/A
* Excludes AFUDC, nuclear fuel, nuclear decommissioning trust funding and potential nuclear construction.
34. Major Capital Projects – PEF
(in millions)
Capital Expenditures (1) Balance
Recovery
Project Description to Completion
Methodology
2007A 2008E 2009E 2010E Spend Date
PEF Environmental
Environmental cost
Environmental Compliance $295 $550 $285 $40 - 2010
recovery clause
(CR 4&5) Equipment
1,159 MW CCGT (2)
Bartow
$320 $190 $30 - - 2009 Rate base
Repowering & Transmission
Crystal River 3 180 MW Nuclear cost
$36 $60 $100 $65 $85 2011
Nuclear Uprate Nuclear recovery legislation
CR3 Steam
Generator NA $44 $30 $120 - - 2009 Rate base
Replacement
PEF Subtotal $695 $830 $535 $105 $85
% of Total PEF Capital Expenditures 57% 57% 48% 14% N/A
(1) Capital expenditures exclude AFUDC, nuclear fuel, nuclear decommissioning trust funding and potential nuclear
construction.
(2) Replacing 444 MW of oil steam units for a net increase of 715 MW.
35. Projected PGN Cash Flow
(in millions)
2007A (1) 2008E 2009E 2010E
$1,252 (2)
Operating cash flow $1,870 2,140 2,310
Maintenance capex (875) (1,040) (900) (850)
Nuclear fuel and decommissioning trust (259) (310) (340) (320)
Other capex & AFUDC debt (27) (60) (70) (60)
Dividends (627) (640) (650) (670)
Cash flow after dividend and (536) (180) 180 410
before growth capex
Growth capex (1,093) (1,340) (1,130) (780)
Free cash flow before (1,629) (1,520) (950) (370)
potential nuclear construction
Potential nuclear construction (94) (160) (520) (850)
Divestiture proceeds 675 70 - -
Other 146 - - -
Cash flow before financing activities $(902) $(1,610) $(1,470) $(1,220)
(1) 2007 actuals do not agree with the cash flows presented in the Form 10-K as the capex amounts herein are presented on the accrual basis of
accounting.
(2) 2007A operating cash flow was impacted by cash payment for exiting CCO contracts and large tax payment on gain from sale of gas properties.
