Progress Energy (PGN)

Q2 2011 Earnings Call

August 04, 2011 10:00 am ET

Executives

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

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

Bryan Kimzey -

Analysts

Dan Eggers - Crédit Suisse AG

Jonathan Arnold - Deutsche Bank AG

Mark Sigal - Canaccord Genuity

Gordon Howald - East Shore Partners, Inc.

Greg Gordon - ISI Group Inc.

James von Riesemann - UBS Investment Bank

Raymond Leung - Goldman Sachs Group Inc.

Presentation

Operator

Good morning and welcome to Progress Energy's second quarter 2011 earnings conference call. [Operator Instructions] For opening remarks and introductions, I will now turn the call over to Bryan Kimzey of Progress Energy. Please go ahead.

Bryan Kimzey

Thank you, Kelly. Good morning and welcome, to everyone to. 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/webcast where we have also included a set of slides which accompany our speakers' prepared remarks this morning.

Today, we will be making forward-looking statements, as well as reviewing historical information. There are numerous factors that may cause future 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

Thanks, Brian. Good morning, everyone. Thanks for being on the call. I know it's a crowded earnings calendar for you today so we'll dive right in. Slide 3 indicates -- I'll provide highlights of the second quarter and year-to-date financial results along with an update on our proposed merger with Duke Energy. I'll also update you on our nuclear fleet and comment on the NRC's Near-term Task Force recommendations, as well as the EPA rules on our major capital projects. Then Mark Mulhern will provide more detail on our financial results.

So let's start with ongoing earnings on Slide 4. For the second quarter, we reported ongoing earnings of $211 million, compared to $181 million for the same quarter a year ago. On a per-share basis, we're up $0.08 from the second quarter 2010. Primary drivers of the gain were lower depreciation and amortization expense in Florida and increased costs in other margins. And these were partially offset by unfavorable retail growth in usage in the Carolinas and lower wholesale revenues in Florida.

Based on our performance for the first half of the year and our expectations for the remainder of the year, we are reaffirming our previously announced 2011 ongoing earning guidance range of $3 to $3.20 per share. On the merger front, we continue making good progress towards closing the merger transaction with Duke Energy by the end of the year. Earlier this week, the Kentucky Public Service Commission conditionally approved the merger. As you can see on Slide 5, we have now filed with all of the required state and federal agencies and are moving to the approval steps with each agency. We filed our testimony in North Carolina on May 20, and are now responding to data request from the intervening parties. The hearing in Raleigh starts on September 20.

In South Carolina, the discovery process has begun and we're responding to data request. The final date for parties to file for intervention is August 8, and we'll be filing our testimony in South Carolina in the near future. The commission there has not yet set a hearing date. Meanwhile, we'll hold a special merger vote meeting of our shareholders on August 23. Likewise, Duke Energy will hold a similar meeting with its shareholders on the same day.

Now if you turn to Slide 6, which provides information about our nuclear units in the Carolinas. Through July, these reactors had a 95.2% capacity factor and that includes 1 plant refueling outage. The Robinson plant continues to demonstrate solid performance following the atypical performance of last year. The plant has been online for more than 258 consecutive days since returning to service. This last quarter, the NRC completed 2 in-depth special inspections at Robinson. And the feedback was positive and reflected the marked improvement in the plant's performance. The plant is still executing on its improvement plan and we will continue our management focus to ensure it reaches and sustains the desired operating performance I know they are capable of achieving.

On this slide, we have provided a listing of several major construction projects at the plants. I highlight these projects to show efforts completed are under way to improve the plants. Now as you know, the NRC's Near-term Task Force recently reported on its assessment of U.S. nuclear operations following the Fukushima accident. The headline is that the nuclear plants in this country are safe, but we should incorporate the lessons learned from the March event at Fukushima. The NRC has not yet determined its specific response and what the timing will be for any new requirements. At progress energy, we've conducted detailed inspections and reviews at each of our nuclear facilities to ensure we can effectively respond to extreme challenges of all sorts. And in some cases we've already strengthened our processes to incorporate these lessons learned. We recognize that maintain the highest levels of safety and security, we must continually adapt and improve our practices. Along with the other nuclear operators, we will continue to support industry initiatives that evolve as we learn more about Fukushima. We believe a systematic analysis of root causes needs to be completed and thoroughly reviewed before the enactment of new rules and regulations.

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