Progress Energy (PGN)

Q1 2011 Earnings Call

May 05, 2011 10:00 am ET

Executives

William Johnson - Chairman, Chief Executive Officer, President and Chairman of Executive Committee

Mark Mulhern - Chief Financial Officer, Senior Vice President of Finance and Director

Bryan Kimzey -

Analysts

Marc de Croisset - FBR Capital Markets & Co.

Michael Worms - BMO Capital Markets U.S.

Unknown Analyst -

Brian Chin - Citigroup Inc

Presentation

Operator

Good morning to each of you, and welcome to the Progress Energy's First Quarter 2011 Earnings Conference Call. For opening remarks and introductions, I'll now turn the conference call over to Bryan Kimzey of Progress Energy. Please go ahead.

Bryan Kimzey

Thank you, Lacey. Good morning, and welcome to everyone. Joining me this morning are Bill Johnson, Chairman, President and Chief Executive Officer; Mark Mulhern, Chief Financial Officer; and other members of our senior management team. We are currently being webcast from our Investor Relations page at progress-energy.com. I direct your attention to our website, where we have included a set of slides which accompany our speakers' prepared remarks this morning. These slides can be found at progress-energy.com/webcast.

Today, we will be making forward-looking statements as well as reviewing historical information. There are numerous factors that may cause future or actual results to differ materially from these statements, and we outline these in our earnings release, Form 10-K, 10-Q and other SEC filings, as well as the risk factor discussion also found in our Forms 10-K and 10-Q. For your information, we plan to file our Form 10-Q early next week.

This morning, following opening comments from Bill and Mark, we will open the phone lines to address your questions. Now I'll turn the call over to Bill Johnson.

William Johnson

Thank you, Bryan. Good morning, everyone. We're glad you've joined the call this morning, and we appreciate your interest in Progress Energy. As Slide 3 indicates, I'll provide highlights of first quarter financial results, an update on filings associated with our proposed merger with Duke Energy, an update on our nuclear fleet, especially our Crystal River unit, and some information on the impact of 2 rules recently proposed by the EPA. Then I'll Mark to provide some more detail on the numbers behind our financial results.

So let's start with ongoing earnings on Slide 4. For the first quarter, we reported ongoing earnings of $202 million compared to $213 million for the same quarter a year ago. On a per share basis, we're down $0.06 for the first quarter in 2010, principally due to more normal weather conditions this year compared to last. As you'll recall, last year's first quarter had $0.18 of favorable weather. So we had a strong quarter this year when you consider the return of normal weather. The economy in our service areas continued to show some modest recovery, particularly in the industrial sector. As Mark will address in more detail in a moment, growth in usage by class were mixed, as has been noted in several other recent calls.

So today, we're affirming our 2011 ongoing earnings guidance range of $3 to $3.20 per share, which we announced earlier this year. Weather was a significant contributor last year, especially in Florida. We were able to offset the loss of weather-related sales this year with additional use of cost of removal amortization in Florida. And Mark will discuss the quarter earnings drivers in a few minutes.

Let me turn to a few comments on our pending merger with Duke Energy. Over the past several weeks, Duke Energy and Progress Energy have made a number of merger-related filings. As shown on the scorecard of Slide 5, we have now filed with all the state and federal agencies except the FCC. So we're making good progress in the regulatory filings.

The North Carolina Utilities Commission recently set a schedule for review. Our testimony and additional supporting materials are due to be filed May 20 with evidentiary hearings beginning September 20.

We made our initial Hart-Scott-Rodino filing with the Department of Justice in late March, and a 30-day review period has expired. No additional request for information were received, so our obligations under the Act have been satisfied. And we'll update the scorecard as we move through the merger approval process. It's on our website and also on Duke's.

Let me turn your attention to Slide 6 now. Given all that's going on both here and in Japan, I want to spend a few minutes on our nuclear fleet, which is shown on this slide.

As a reminder, we have 5 reactors at 4 sites across our system. The Brunswick site is a 2-unit plant located near Wilmington, North Carolina. Several weeks ago, Unit 2 returned to service after successfully completing a refueling outage that included significant equipment additions and repairs. This the only refueling outage scheduled for our nuclear fleet this year. Unit 1 is currently on a 361-day run since its last refueling outage, so almost a full year of nonstop operation.

The Harris unit near Raleigh continues its strong operating performance following its refueling outage last fall, which included replacing an electric generator and completing significant work on the cooling tower and fire protection modifications. The generator replacement, including tower work, are part of the power upgrade, a 5-year project that eventually will add 60 to 70 additional megawatts from that plant. These projects, along with others, are designed to ensure Harris will operate as a safe and reliable source of energy for decades to come.

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