Progress Energy (PGN) Q1 2012 Earnings Call May 03, 2012 11:00 am ET Executives Beau Pratt - William D. Johnson - Chairman, Chief Executive Officer, President and Chairman of Executive Committee Mark F. Mulhern - Chief Financial Officer and Senior Vice President of Finance Jeffrey M. Stone - Chief Accounting Officer and Controller Analysts Jonathan P. Arnold - Deutsche Bank AG, Research Division Dan Eggers - Crédit Suisse AG, Research Division Michael J. Lapides - Goldman Sachs Group Inc., Research Division James D. von Riesemann - UBS Investment Bank, Research Division Andrew Levi Travis Miller - Morningstar Inc., Research Division James L. Dobson - Wunderlich Securities Inc., Research Division Unknown Analyst Presentation Operator
This morning, following the 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 D. Johnson Thanks, Beau, and good morning, everyone. Thanks for joining us on the call this morning. As you know, we released our first quarter financial results this morning, and as you've heard from other companies over the last 2 weeks, the incredibly mild weather was a major factor in the quarter for us as well. As shown on Slide 3, I'll open with a few comments on earnings, and then update you on recent progress with the merger. I'll also provide a regulatory and operational update and comment on our corporate focus areas. Then Mark will provide more details on the financial results. So now, turn to Slide 4 for the first quarter ongoing earnings. For the quarter, we reported ongoing earnings of $143 million compared to $202 million for the same quarter a year ago. Our earnings were down sharply for the same quarter last year, driven primarily by 2 things: the extremely mild weather this winter in the Carolinas and higher O&M costs. As Mark will discuss in more detail, the O&M costs were higher mainly because of the additional planned major outage in our nuclear fleet in the quarter and the investments we're making in the nuclear fleet to improve performance and resilience in the future. Today, we are affirming our 2012 stand-alone guidance range of $3.10 to $3.25 per share of ongoing earnings. Now in the first quarter, we did not produce the earnings we have projected, but we are just $0.05 per share behind our year-to-date budget. And in a moment, Mark will provide more perspective on this point. We are pursuing a regulatory initiative in the Carolinas to levelize the cost of multiple nuclear outages in a year to better match those expenses to the benefits customers receive. In addition, the regulatory flexibility we have around cost of removal in Florida provides optionality to help overcome this slow start to the year.
Now before updating you on where we stand on the merger approvals, I want to remind you the benefits of the Duke Energy, Progress Energy merger for our customers and our investors. Despite short-term challenges in the business landscape, the case we first articulated early last year remains extremely compelling.Slide 5 summarizes the benefits of the merger. The financial strength that comes with greater scale and diversity, the best practices we can leverage, the fuel and joint dispatch savings and other efficiencies that will help us offset some of the rising costs per customers, and finally, the stronger prospects for short and long-term earnings and dividend growth. The strategic rationale for this merger remains strong, and we continue working together with Duke to make it happen. As you know, 2 large utility mergers have closed so far this year, and the last one took 18 months, which will be about the same length of time as ours when we closed in early July. Turning to Slide 6, you'll see the status of the various federal and state approvals for the merger. Last week, we cleared the 30-day review period for our updated Hart-Scott-Rodino filing with the Department of Justice. We're working in parallel on the approvals from the 3 remaining agencies and expect to wrap those up within the next 2 months. And we're making good progress to that end. As described on Slide 7, we filed a new mitigation plan in March with the FERC in response to their December order. The plan consists of new and upgraded transmission to increase the power import capability into the Duke and Progress control areas. We identified 7 specific projects to address the FERC's competitive market concerns, and we estimate it will take about $110 million in 3 years to complete these projects. Read the rest of this transcript for free on seekingalpha.com