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TRANSCRIPT
Barclays Capital CEO Energy-Power Conference
Sheraton New York Hotel & Towers
September 7, 2011
CAUTION REGARDING FORWARD-LOOKING INFORMATION
This document contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are typically identified by words or phrases such as “may,” “will,” “should,” “anticipate,” “estimate,” “expect,” “project,” “intend,” “plan,” “believe,” “target,” “forecast,” and other words and terms of similar meaning. Forward-looking statements involve estimates, expectations, projections, goals, forecasts, assumptions, risks and uncertainties. Progress Energy and Duke Energy caution readers that any forward-looking statement is not a guarantee of future performance and that actual results could differ materially from those contained in the forward-looking statement. Such forward-looking statements include, but are not limited to, statements about the benefits of the proposed merger involving Duke Energy and Progress Energy, including future financial and operating results, Progress Energy’s or Duke Energy’s plans, objectives, expectations and intentions, the expected timing of completion of the transaction, and other statements that are not historical facts. Important factors that could cause actual results to differ materially from those indicated by such forward-looking statements include risks and uncertainties relating to: the risk that Progress Energy or Duke Energy may be unable to obtain governmental and regulatory approvals required for the merger or required governmental and regulatory approvals may delay the mergerregulatory approvals required for the merger, or required governmental and regulatory approvals may delay the merger or result in the imposition of conditions that could cause the parties to abandon the merger; the risk that a condition to closing of the merger may not be satisfied; the timing to consummate the proposed merger; the risk that the businesses will not be integrated successfully; the risk that the cost savings and any other synergies from the transaction may not be fully realized or may take longer to realize than expected; disruption from the transaction making it more difficult to maintain relationships with customers, employees or suppliers; the diversion of management time on merger-related issues; general worldwide economic conditions and related uncertainties; the effect of changes in governmental regulations; and other factors discussed or referred to in the “Risk Factors” section of each of Progress Energy’s and Duke Energy’s most recent Annual Report on Form 10-K filed with the Securities and Exchange Commission (SEC). gy p g ( )These risks, as well as other risks associated with the merger, are more fully discussed in the joint proxy statement/prospectus that is included in the Registration Statement on Form S-4 that was filed by Duke Energy with the SEC in connection with the merger. Additional risks and uncertainties are identified and discussed in Progress Energy’s and Duke Energy’s reports filed with the SEC and available at the SEC’s website at www.sec.gov. Each forward-looking statement speaks only as of the date of the particular statement and neither Progress Energy nor Duke Energy undertakes any obligation to update or revise its forward-looking statements, whether as a result of new information, future events or otherwise.
ADDITIONAL INFORMATION AND WHERE TO FIND IT
In connection with the proposed merger between Duke Energy and Progress Energy, Duke Energy filed with the SEC a Registration Statement on Form S-4 that includes a joint proxy statement of Duke Energy and Progress Energy and that also constitutes a prospectus of Duke Energy. The Registration Statement was declared effective by the SEC on July 7, 2011. Duke Energy and Progress Energy mailed the definitive joint proxy statement/prospectus to their respective shareholders on or about July 11, 2011. Duke Energy and Progress Energy urge investors and shareholders to read the Registration Statement, including the joint proxy statement/prospectus that is a part of the Registration Statement as well as other relevant documents filed with the SEC because they containof the Registration Statement, as well as other relevant documents filed with the SEC, because they contain important information. You may obtain copies of all documents filed with the SEC regarding this transaction, free of charge, at the SEC’s website (www.sec.gov). You may also obtain these documents, free of charge, from Duke Energy’s website (www.duke-energy.com) under the heading “Investors” and then under the heading “Financials/SEC Filings.” You may also obtain these documents, free of charge, from Progress Energy’s website (www.progress-energy.com) under the tab “Our Company” by clicking on “Investor Relations,” then by clicking on “Corporate Profile” and then by clicking on “SEC Filings.”
For questions or comments contact:
Bob DrennanVice President, Investor RelationsTel: 1-919-546-7474Email: [email protected]
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Major Discussion TopicsDuke Energy merger update
N l d tNuclear update
Fleet modernization
Hurricane Irene restoration
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Duke EnergyMerger Update
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Strategic Creates largest U.S. utilitySubstantial diversified regulated business mix
Strategic Combination with Duke Energy
Benefits Substantial, diversified regulated business mixUnmatched financial and operational scale
Investor Benefits
Earnings accretive in year one1
Long-term earnings growth target of 4-6 percent1Maintain Duke Energy dividend policyContinued balance sheet strength
Customer Benefits
1 Based upon adjusted diluted earnings per share
Ability to create meaningful operational efficiencies for regulated electric customers over time
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Status of Merger Filings (as of September 6, 2011)
Stakeholder Progress on Key Milestones Filed Approved
Shareholder • Received shareholder approvals on August 23, 2011
Department of Justice(DOJ)
The parties have met their obligations under the Hart-Scott-Rodino Act, which is no longer a bar to closing the transaction
Waiting Period Expired
Federal Communications Commission (FCC)
Received approval of Assignment of Authorization filings on July 27, 2011
Federal Energy Regulatory Commission (FERC)
Filed merger approval application and related filings on April 4, 2011Intervention period expired June 3, 2011
Nuclear Regulatory Commission (NRC)
Filed for indirect transfer of Progress Energy licenses on March 30, 2011
2011
North CarolinaFiled merger approval application on April 4, 2011NC Public Staff filed settlement agreement on September 2, 2011Signed settlement on September 6, 2011 with SC ORS, a party to the NC proceedingHearing scheduled for September 20, 2011
South CarolinaSubmitted merger-related filing on April 25, 2011Hearing scheduled for October 26, 2011
KentuckyReceived order conditionally approving merger-related application on August 2, 2011Filed for revision and clarification of a merger condition on August 19, 2011
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North Carolina Settlement Agreements
Entered into settlement agreements in North Carolina merger applicationNC Public StaffSC Office of Regulatory Staff (ORS)
Terms and conditionsGuarantee $650 million of fuel cost savings for customers over first five years (2012-2016)Continued community financial support for four years(NC - $16.5 million per year; SC - $2.7 million per year)Funding for low-income energy assistance and workforce development (NC - $15 million; SC - $3.75 million)Direct merger-related expenses will not be recovered from customers; recovery of employee severance costs can be requested separatelyemployee severance costs can be requested separately
NC procedural schedule9/07/11 – Intervenor testimony9/14/11 – Duke/Progress rebuttal testimony9/20/11 – Evidentiary hearings begin
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Constructive agreements that are good for our customers and communities.
Note: Subject to approval from the North Carolina Utilities Commission.
Nuclear Update
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$165
PEC Nuclear PerformanceFleet capacity factor – 95.2% through JulyRobinson
Major Construction Projects¹ ($M)
PEC Nuclear Update
$165$95 $65 $40
$165
$5 $30
Nuclear Uprates
Dry Fuel Storage
Part 73 Security
Fire Protection
Spent as of 6/30/11 Estimated expenditures to complete project
Nuclear UpratesRobinson 21 MW scheduled for June 2012
Robinson• NRC completed inspections during 1st and 2nd quarters,
which recognized the marked improvement
• Continued progress with improvement plan
Nuclear outages• Completed Brunswick 2 refueling and maintenance
outage in 1st half 2011
• No remaining planned nuclear outages in 2nd half 2011
Post-Fukushima ResponseNRC T k F t d th t U S l l t
1 Project costs net of joint owners and includes AFUDC.2 Harris uprate capacity shown includes joint owner’s 16.17% share.
Robinson – 21 MW scheduled for June 2012Harris – 60 MW
2scheduled for July 2015
Dry Fuel StorageRobinson – completed in November 2005Brunswick 1 & 2 – completed in December 2010
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NRC Task Force reported that U.S. nuclear plants are safeProgress Energy conducted detailed inspections of nuclear facilities to assess ability to respond to disastersProgress Energy will continue to implement future initiatives to learn and improve
Crystal River Unit 3 Nuclear OutagePlan to replace concrete in remaining containment structure walls
Targeting return to service in 2014
NEIL insurance coverage under review
Florida PSCCosts recoverable subject to prudence reviewg g
Preliminary cost estimate of $900M-$1.3B
As of June 30, 2011
$150
$200
$250
$203 ($103)
($54)
Repair Costs
$300
$400
$500
$396
($115)
($162)
Replacement Power Costs
Costs recoverable, subject to prudence reviewPrudence review under way
($M) ($M)
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NEIL: Nuclear Electric Insurance Limited, a mutual insurance companyInsurance coverage limits per event are as follows:• Property damage - $2.25 billion (following $10M deductible)• Replacement power - $490 million (following 12-week deductible)
$-
$50
$100
Spentto
Date
NEILProceedsReceived
NEILInsuranceReceivable
Balance forBase RateRecovery
($54)
$46
$-
$100
$200
Spentto
Date
NEILProceedsReceived
NEILInsuranceReceivable
Balancefor ClauseRecovery
$119
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CR3 Prudence Review
Divided into three phasesDocket Organization Phase 1 Schedule
10/10/11 Utility testimony and pPhase 1
All decisions and activities leading up to Oct-09 delamination eventReady for hearing
Phase 2Decision to repair rather than decommission CR3
y yexhibits
2/10/12 Intervenor testimony and exhibits
3/12/12 Staff testimony and exhibits, if any
4/12/12 Rebuttal testimony and exhibits
5/14/12 Prehearing statementsdecommission CR3Not ready for hearing
Phase 3Repair decisions and events subsequent to Oct-09Not ready for hearing
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5/23/12 Prehearing conference
5/31/12 Discovery deadline
6/11/12 Hearings begin
6/15/12 Hearings end
7/20/12 Briefs due
Fleet Modernization
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Cross-State Air Pollution Rule (CSAPR)States Covered
SO2Annual
NOx Annual
NOx Ozone
Trading Programs
State Assurance Limits (or Caps) begin in 2012, which will limit interstate trading
For SO2, states can only trade allowances within their “Group”
South Carolina can only trade SO2allowances with 6 other Group 2 states
SO2 Trading Programs
NC Group 1
SC Group 2
FL removed removed
allowances with 6 other Group 2 states
NOx allowances (annual & ozone-season) can be traded with any state within the program
Group 1 states (NC) have an additional reduction in allocations starting in 2014 for both NOx and SO2 – called Phase II
Allocations for retired units end 4 years after shutdown vs. 6 years in proposal
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Progress Energy Generation Fleet Affected by Proposed EPA Rules
Progress Energy
EGU MACT RuleProgress Energy
Cooling Water Intake Rule
18%
55%
27%
Coal- & Oil-Fired Capacity(8,902 Net MW)
11%
30%
24%
15%
20%
Steam Capacity(14,255 Net MW) 1
Announced Retirements
Well Controlled Coal(SCR & Scrubbed)Other Coal & OilAffected by the Rule
Announced RetirementsUnits with Closed-Cycle CoolingNuclear with Once-Through CoolingScrubbed Coal with Once-Through CoolingOther Fossil with Once-Through Cooling
1. Includes capacity under construction.
2. Some closed-loop systems may not meet EPA’s new definitions for “closed-cycle recirculating systems” listed in the proposed rule.
2
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Scrubber & SCR Installation CompleteNorth Carolina
Clean Smokestacks Act $1.1 billion
Asheville2 units 376 MW
Mayo1 unit 727 MW
Roxboro4 units 2,417 MW
Crystal River 4 & 51,422 MW
FloridaCAIR $1.2 billion
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Carolinas Coal-to-GasFleet Modernization
Sutton RepoweringLee Repowering Sutton RepoweringLee Repowering• Replacing 391 MW coal-fired Lee Plant with
920 MW CCGT• Project broke ground in September 2010• Announced agreement with Piedmont
Natural Gas for gas supply• Expected in-service in January 2013
• Replacing 590 MW coal-fired plant with 625 MW CCGT
• Project broke ground in May 2011• Announced agreement with Piedmont Natural
Gas for gas supply• Expected in-service in December 2013
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Coal- & Oil-Fired Generation StatusFloridaCarolinas
C l & Oil3,520 MW SO2 / NOx Controls 1,422 MW
Coal & OilCapacity
(MW) *
1,467 MW Announced Retirements -
177 MW Future Investment Opportunities 2,011 MW
5,164 MW Total Coal & Oil Fleet 3,433 MW
Purchased6%
Oil/Gas8%
H d
As of December 31, 2010
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Hydro1%
Coal47%
Nuclear38%
~12,600 MW
Oil/Gas 54%
Coal26%
Purchased20%
~10,000 MW
Generation *(kWh)
* Includes jointly-owned capacity.
Hurricane Irene Restoration
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Hurricane Irene Restoration
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Conclusion
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In ConclusionRemain focused on the fundamentals
Successfully manage Crystal River 3 projectSuccessfully manage Crystal River 3 project
Continue fleet modernization program
Obtain merger approvals; complete integration activities
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Appendix
Item SlidesFixed Income Support 21 – 28
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Fixed Income Support
Richmond County CCGT – North Carolina635 MW combined-cycle gas-fired plantPlaced in-service in June 2011
Major Construction Projects¹ ($M)
Major Capital Projects
$555
$405
$15 $370
$410
$165
Placed in service in June 2011
Lee CCGT – North Carolina920 MW combined-cycle gas-fired plant Project broke ground in September 2010Expected in-service in January 2013
Sutton CCGT – North Carolina625 MW combined-cycle gas-fired plant Project broke ground in May 2011 $405
$190 $155
Richmond County
Lee Sutton Smart Grid
Spent as of 6/30/11 Estimated expenditures to complete project
1 Project costs include direct capital, AFUDC and the cost of all transmission additions and upgrades necessary to integrate the generator into the system.
Project broke ground in May 2011Expected in-service in December 2013
Smart Grid – Carolinas & FloridaAccepted $200M grant from the DOE in April 2010 ($100M each for PEC and PEF)Leverages already-planned investments of $320M ($200M for PEC and $120M for PEF)
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2008A 2009A 2010A 2011E 2012E 2013EMaintenance Capex
Generation $298 $463 $626 $520 $530 $575
($ in millions)
Projected Capital Expenditures (1)
PEC Environmental 114 37 23 20 15 25
Transmission 211 112 91 100 95 115
Distribution 94 121 173 140 150 155
Other 74 87 94 90 85 75
Total Maintenance Capex 791 820 1,007 870 875 945
Growth Capex
Generation 373 428 487 580 400 230
PEF Environmental 564 301 131 10 0 0
Transmission 108 191 229 205 245 250
Distribution 268 218 221 270 270 330
Total Growth Capex 1,313 1,138 1,068 1,065 915 810
Corporate/other 22 7 10 30 30 30
Total Capital before Potential New Nuclear 2,126 1,965 2,085 1,965 1,820 1,785
New nuclear development 168 291 104 50-100 50-100 200-300
Total Capital Spending $2,294 $2,256 $2,189 $2,015-$2,065 $1,870-$1,920 $1,985 -$2,085
Total PEC (excluding new nuclear) 736 822 1,173 1,285 1,110 925
Total PEF (excluding new nuclear) 1,368 1,136 902 650 680 830
(1) Excludes AFUDC, nuclear fuel and nuclear decommissioning trust funding.
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2010A 2011E
Adjusted cash flow 2,726 2,635
($ in millions)
Projected Cash Flow
PEF cost of removal amortization (pre-tax) (60) (235)
Pension fund contributions (pre-tax) (1) (129) (350)
Operating cash flow 2,537 2,050
Nuclear fuel and decommissioning trust (271) (255)
Maintenance & corporate/other capex (1,017) (900)
AFUDC debt (32) (25)
Common dividends (717) (730)( ) ( )
Free cash flow before growth capex 500 140
Growth capex (1,068) (1,065)
New nuclear development (1) (104) (75)
Free cash flow $(672) $(1,000)
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1) Midpoint of range.
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Progress Energy, Inc.Issued $500M 4.40% Senior Notes on January 21, 2011
2011 Financing Plan
$ y ,Redeemed $700M maturity on March 1, 2011Minimal equity issuance
Progress Energy CarolinasLong-term debt issuance of $300-500M
Progress Energy FloridaRedeemed $300M maturity on July 15, 2011Issued $300M 3.10% First Mortgage Bonds on August 18, 2011
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Strong liquidity position( f J 30 2011)
Strong liquidity position( f J 30 2011)
Strong Liquidity Position with Manageable Near-Term Debt Maturities
($ in millions)
Manageable near-term debt maturities( f J 30 2011)
Manageable near-term debt maturities( f J 30 2011)
$500$425
PGN PEC PEF
(as of June 30, 2011)(as of June 30, 2011)
$950
$52 $1,684
$1,978 ($314)$0
($32) $830
(as of June 30, 2011)(as of June 30, 2011)
$450 $405$300 (a)
2011 2012 2013Total credit facilities
Drawn CP outstanding
Letters of Credit
Cash & cash equivalents
Total liquidity
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(a) On July 15, 2011, PEF paid at maturity $300 million of its 6.65% First Mortgage Bonds with proceeds from commercial paper borrowings.
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Capitalization and Short-Term Debt($ in millions)
As of June 30, 2011
PGN Consol. % PEC % PEF %
Short-term Debt (a) 314$ 1.4% 201$ 2.2% 73$ 0.8%Current Portion of Long-term Debt 750 3.2% - 0.0% 300 3.2%Capital Lease Obligations 217 0.9% 13 0.1% 204 2.1%Long-term Debt
Long-term Debt, affiliate (b) 273 1.2% - 0.0% - 0.0%Long-term Debt, net 11,418 49.4% 3,693 40.5% 4,182 44.0%
Total Debt 12,972$ 56.1% 3,907$ 42.9% 4,759$ 50.1%Preferred Stock of Subsidiaries 93 0.4% 59 0.6% 34 0.4%Noncontrolling Interests 3 0 0% - 0 0% - 0 0%Noncontrolling Interests 3 0.0% 0.0% 0.0%Common Stock Equity 10,046 43.5% 5,150 56.5% 4,703 49.5%
Total Capitalization and Short-term Debt 23,114$ 100.0% 9,116$ 100.0% 9,496$ 100.0%
(a) Includes short-term debt and notes payable to affiliated companies.(b) Represents 7.10% Junior Subordinated Deferrable Interest Notes due 2039 issued by Florida Progress Funding Corporation, a wholly owned subsidiary,
to FPC Capital I, a wholly owned trust, in connection with the issuance of 7.10% Cumulative Quarterly Income Preferred Securities due 2039, Series A by FPC Capital I.
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Credit RatingsProgress Energy Moody’s S&P (1) Fitch (2)
Outlook Stable Watch Positive StableCorporate Credit Rating BBB+ BBB
As of September 6, 2011
Corporate Credit Rating -- BBB+ BBBSenior Unsecured Debt Baa2 BBB BBBCommercial Paper P-2 A-2 F2Progress Energy CarolinasOutlook Stable Watch Positive StableCorporate Credit Rating A3 BBB+ A-Commercial Paper P-2 A-2 F1Senior Secured Debt A1 A A+Senior Unsecured Debt A3 BBB+ APreferred Stock Baa2 BBB- BBB+Progress Energy FloridaOutlook Stable Watch Positive Negative
(1) On January 10, 2011, S&P placed the corporate credit and issue ratings of Progress Energy and its subsidiaries on CreditWatch with positive implications.
(2) On July 1, 2011, Fitch affirmed the ratings of Progress Energy and PEC with stable outlooks and affirmed the ratings of PEF with a negative outlook.
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gCorporate Credit Rating Baa1 BBB+ BBB+Commercial Paper P-2 A-2 F2Senior Secured Debt A2 A ASenior Unsecured Debt Baa1 BBB+ A-Preferred Stock Baa3 BBB- BBB
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