Progress Energy Announces 2007 First-quarter Results; Sees Benefit From Restructuring

RALEIGH, N.C., May 7 /PRNewswire-FirstCall/ -- Progress Energy announced first-quarter net income of $275 million, or $1.08 per share, compared with net income of $45 million or $0.18 per share, for the same period last year. The favorable year-over-year variance in GAAP net income is due primarily to the impact of discontinued Competitive Commercial Operations (CCO) including unrealized mark-to-market gains in 2007 and a goodwill impairment recorded in 2006. First-quarter ongoing earnings were $204 million or $0.80 per share, compared to $126 million or $0.50 per share, last year. The favorable year-over-year variance in ongoing earnings is due primarily to synthetic fuel operating results, lower income taxes, growth and usage and reduced interest expense. (See the discussion later in this release for a reconciliation of GAAP earnings per share to ongoing earnings per share.)

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"We are off to a good start in 2007," said Bob McGehee, chairman and chief executive officer of Progress Energy. "Our utilities are performing well operationally and financially. We are also in the final stages of divesting our Progress Ventures business, which will allow us to concentrate our capital and our attention on serving the energy needs of our high growth service territories.

"Our primary focus now is on meeting the energy needs of our customers in a balanced manner. Conservation, demand side management, renewables and new generation all have a role to play. You will see us being active in all of these areas over the next several years. Our revenue growth and strong balance sheet will support the substantial investments we will be making."

Core ongoing earnings, which exclude the ongoing earnings from the company's coal and synthetic fuel operations, were $0.61 per share, compared with $0.46 per share last year. The company benefited from lower income taxes, growth and usage and lower interest expense as a result of reducing holding company debt.

Non-core ongoing earnings were $0.19 per share, compared with earnings of $0.04 per share last year, primarily due to increased synthetic fuel sales and unrealized mark-to-market gains on oil hedge instruments to protect synthetic fuels earnings. Also impacting non-core earnings was the recording of an 18 percent reserve of 2007 synthetic fuel tax credits as a result of high oil prices.

2007 ONGOING EARNINGS GUIDANCE

"Based on our solid first-quarter business results, we are confident in reaffirming our 2007 core ongoing earnings guidance of $2.70 to $2.90 per share," McGehee said. The 2007 core ongoing earnings guidance excludes any impacts from the CVO mark-to-market adjustment, potential impairments, coal and synthetic fuel operations and discontinued operations of other businesses. Progress Energy is not able to provide a corresponding GAAP equivalent for the 2007 earnings guidance figures due to the uncertain nature and amount of these adjustments.

"Non-core ongoing earnings associated primarily with synthetic fuels are expected to be between $0.30 and $0.40 per share, with oil prices and production levels the primary determining factors. 2007 will be the final year of synthetic fuels production," McGehee said. "The company expects to have approximately $800 million deferred tax credits when the program concludes at the end of this year."

RECENT DEVELOPMENTS -- Announced the sale of the remainder of our Progress Ventures' CCO assets (the company expects to close the two transactions this summer). -- Legislation enacted in South Carolina supportive of new baseload construction and environmental cost recovery. -- Set new winter peak-demand record at Progress Energy Carolinas of 12,133 MW, surpassing the previous winter record of 12,004 MW set in 2005. -- Achieved top-quartile ranking among energy providers in the latest business customer satisfaction survey from J.D. Power & Associates. -- Completed installation of scrubber at Roxboro Unit 2 plant and Selective Catalytic Reduction system at Asheville plant. -- Completed nuclear refueling outage at Brunswick Unit 2. -- Awarded supplier diversity award by DiversityBusiness.com for being one of the top 50 corporate and organizational buyers of diversity products in the U.S. in the technology, manufacturing, food service and professional services sectors. -- Awarded innovative energy-efficiency program by Southeastern Electric Exchange for the company's work in the Neighborhood Energy Saver program. -- Launched Community Energy Saving Program in Raleigh, N.C. aimed at improving energy efficiency and reducing energy costs for customers. -- Announced agreement to purchase power generated from hog waste by the North Carolina Pork Council as part of a pilot project to determine whether producing electricity from hog waste is economical and feasible.

Press releases regarding various announcements are available on the company's Web site at: http://www.progress-energy.com/aboutus/news.

FIRST-QUARTER 2007 BUSINESS HIGHLIGHTS

Below are the first-quarter 2007 highlights for the company's business units. See the reconciliation table on page S-1 of the supplemental data for a reconciliation of GAAP earnings per share to ongoing earnings per share. Also see the attached supplemental data schedules for additional information on Progress Energy Carolinas and Progress Energy Florida electric revenues, energy sales, energy supply, weather impacts and other information.

Progress Energy Carolinas -- Reported ongoing earnings per share of $0.48, compared with $0.35 for the same period last year; GAAP earnings per share of $0.48, compared with $0.34 for the same period last year. -- Reported primary ongoing earnings per share favorability in Q1-2007 over Q1-2006 of: - $0.05 lower environmental remediation expenses - $0.04 higher growth and usage - $0.03 lower income taxes - $0.02 favorable weather -- Reported primary ongoing earnings per share unfavorability in Q1-2007 over Q1-2006 of: - $(0.01) lower wholesale margins as a result of lower gains on forward sales of excess generation. -- Added 28,000 customers (net) during the last 12 months. Progress Energy Florida -- Reported ongoing earnings per share of $0.24, compared with $0.21 for the same period last year; GAAP earnings per share of $0.24, compared with $0.21 for the same period last year. -- Reported primary ongoing earnings per share favorability in Q1-2007 over Q1-2006 of: - $0.02 increased wholesale sales - $0.02 lower income taxes -- Reported primary ongoing earnings per share unfavorability in Q1-2007 over Q1-2006 of: - $(0.01) increased depreciation expense -- Added 31,000 customers (net) during the last 12 months. Corporate and Other Businesses (includes primarily Holding Company Debt) -- Reported ongoing after-tax expenses of $0.11 per share compared with ongoing after-tax expenses of $0.10 per share for the same period last year; GAAP after-tax expenses of $0.07 per share, compared with after- tax expense of $0.18 per share for the same period last year. -- Reported primary ongoing earnings per share favorability in Q1-2007 over Q1-2006 of: - $0.04 lower interest expense primarily as a result of reducing holding company debt in 2006 - $0.01 other (net) -- Reported primary ongoing earnings per share unfavorability in Q1-2007 over Q1-2006 of: - $(0.06) prior-year gain on the sale of Level 3 stock received as part of the sale of Progress Telecom Non-Core Operations (Coal and Synthetic Fuels) -- Reported ongoing earnings per share of $0.19, compared with ongoing earnings of $0.04 per share for the same period last year; GAAP earnings of $0.21 per share, compared with a loss of $0.03 per share for the same period last year. -- Reported primary ongoing earnings per share favorability in Q1-2007 over Q1-2006 of: - $0.07 increased synthetic fuels sales of 2.1 million tons, up from 1.2 million tons in 2006 - $0.07 unrealized mark-to-market gains on oil derivative contracts - $0.01 other (net) -- Recorded an 18 percent reserve against the value of the tax credits associated with 2007 production due to credit phase out related to estimated oil prices. SALE OF CEREDO SYNTHETIC FUEL INTEREST

In March 2007 Progress Energy disposed of its 100 percent ownership interest in Ceredo Synfuel LLC, the largest of the company's four Earthco synthetic fuel plants. The company will continue to operate on behalf of the buyer. The company expects to receive proceeds of approximately $65 million in 2007. The company does not currently plan to sell the remaining three Earthco facilities. As a result of this transaction, the company's synthetic fuel operations are expected to be cash flow neutral excluding the impact of the oil hedge entered into earlier this year.

ONGOING EARNINGS ADJUSTMENTS

Progress Energy's management uses ongoing earnings per share to evaluate the operations of the company and to establish goals for management and employees. Management believes this presentation is appropriate and enables investors to more accurately compare the company's ongoing financial performance over the periods presented. Ongoing earnings as presented here may not be comparable to similarly titled measures used by other companies. The following table provides a reconciliation of ongoing earnings per share to reported GAAP earnings per share.

Progress Energy, Inc. Reconciliation of Ongoing Earnings per Share to Reported GAAP Earnings per Share Three months ended March 31 2007 2006* Core Non-core Total Core Non-core Total Ongoing earnings per share $0.61 $0.19 $0.80 $0.46 $0.04 $0.50 Intraperiod tax allocation 0.03 - 0.03 (0.06) - (0.06) CVO mark-to- market 0.01 - 0.01 (0.10) - (0.10) Discontinued operations 0.22 (0.01) 0.21 (0.09) (0.07) (0.16) Derivative contracts mark-to-market - 0.04 0.04 - - - Impairment - (0.01) (0.01) - - - Reported GAAP earnings per share $0.87 $0.21 $1.08 $0.21 $(0.03) $0.18 Shares outstanding (millions) 254 249 * Previously reported 2006 results have been restated to reflect discontinued operations. See page S-3 for further detail.

Reconciling adjustments from GAAP earnings to ongoing earnings as they relate to the current year and quarter and information included in the Supplemental Data schedules are as follows:

Intraperiod Tax Allocation

Generally accepted accounting principles require companies to apply an effective tax rate to interim periods that is consistent with a company's estimated annual tax rate. The tax credits generated from synthetic fuel operations reduce Progress Energy's overall effective tax rate. The company's synthetic fuel sales are not subject to seasonal fluctuations to the same extent as the electric utility earnings. The company projects the effective tax rate for the year and then, based upon projected operating income for each quarter, raises or lowers the tax expense recorded in that quarter to reflect the projected tax rate. On the other hand, operating losses incurred to produce the tax credits are included in the current quarter. The resulting tax adjustment increased earnings per share by $0.03 for the quarter. An immaterial effective tax rate adjustment was also recorded for Progress Energy Carolinas and Progress Energy Florida this quarter. Because this adjustment varies by quarter but has no impact on annual earnings, management believes this adjustment is not representative of the company's ongoing quarterly earnings.

Contingent Value Obligation (CVO) Mark-to-Market

In connection with the acquisition of Florida Progress Corporation, Progress Energy issued 98.6 million CVOs. Each CVO represents the right of the holder to receive contingent payments based on after-tax cash flows above certain levels of four synthetic fuel facilities purchased by subsidiaries of Florida Progress Corporation in October 1999. The CVOs are debt instruments and, under GAAP, are valued at market value. Unrealized gains and losses from changes in market value are recognized in earnings each quarter. The CVO mark- to-market increased earnings per share by $0.01 for the quarter. Progress Energy is unable to predict the changes in the market value of the CVOs and, since these changes do not affect the company's underlying obligation, management does not consider the adjustment to be a component of ongoing earnings.

Derivative Contracts Mark-to-Market

On March 30, 2007, we disposed of our 100 percent ownership interest in Ceredo to an unrelated third-party buyer. We will continue to consolidate Ceredo in accordance with Financial Accounting Standards Board Interpretation No. 46R, "Consolidation of Variable Interest Entities - An Interpretation of ARB No. 51" (FIN 46R), but we anticipate recording a 100 percent minority interest so there will be no net earnings impact. Future operating results and tax credits generated by Ceredo will be excluded from our Coal and Synthetic Fuels segment. A portion of the derivative contracts entered into in January 2007 to hedge economically a portion of our 2007 synthetic fuels cash flow exposure to the risk of rising oil prices were entered into by Ceredo and contributed an unrealized after-tax mark-to-market gain of $0.04 per share for the three months ended March 31, 2007. Future mark-to-market changes on the Ceredo portion of the derivative contracts will also be excluded from our Coal and Synthetic Fuels segment. Due to the Ceredo disposal, management does not believe the mark-to-market adjustment recorded for the three months ended March 31, 2007 is representative of the ongoing operations of the company.

Impairment Related to the Write-Off of State Net Operating Losses

We evaluated previously recorded state net operating losses for potential impairment during the first quarter of 2007. Based upon the results of this evaluation, we impaired state net operating losses by recording a valuation allowance of $0.01 per share in the Coal and Synthetic Fuels segment. Management does not believe this impairment is representative of the ongoing earnings of the company.

Coal Mine Discontinued Operations

On Nov. 14, 2005, our board of directors approved a plan to divest of our coal mining operations. As a result, we have classified the coal mining operations as discontinued operations in the accompanying financial statements for all periods presented. On April 6, 2006, we signed an agreement to sell certain net assets of the coal mining business for $23 million and the sale closed on May 1, 2006. The remaining coal mining operations are expected to be sold in 2007. Discontinued coal mining operations decreased earnings per share by $0.01 for the quarter.

Due to our commitment to dispose of these assets, management does not view this activity as representative of the ongoing operations of the company.

Winchester Energy (Natural Gas Operations) Discontinued Operations

On Oct. 2, 2006, we completed the sale of Winchester Energy. Discontinued Winchester Energy operations decreased earnings by $0.01 per share for the quarter.

Due to the sale, the operations of Winchester Energy are reported as discontinued operations in the accompanying financial statements; therefore, management does not believe this activity is representative of the ongoing operations of the company.

CCO Discontinued Operations

On March 12, 2007, the company entered into agreements to sell nearly all of Progress Ventures, Inc.'s Competitive Commercial Operations physical and commercial assets, which include approximately 1,900 megawatts of power generation facilities in Georgia, as well as forward gas and power contracts, gas transportation, storage and structured power and other contracts, including the full requirements contracts with 16 Georgia Electric Membership Cooperatives. We expect to complete the disposition plan in 2007. As a result of the disposition plan, we recorded an after-tax estimated loss on the sale of $226 million in December 2006. Based on the terms of the final agreement, during the quarter ended March 31, 2007, we reversed $16 million after tax of the loss recorded in 2006. Discontinued CCO operations increased earnings per share by $0.23 for the quarter.

Due to our commitment to dispose of these assets, management does not view this activity as representative of the ongoing operations of the company.

* * * *

This earnings announcement, as well as a package of detailed financial information, is available on the company's Web site at http://www.progress-energy.com/.

Progress Energy's conference call with the investment community will be held May 7, 2007, at 2 p.m. ET (11 a.m. PT). Investors, media and the public may listen to the conference call by dialing (913) 981-4905, confirmation code 7045636. If you encounter problems, please contact Amy Finelli at (919) 546- 2233. A playback of the call will be available from 5 p.m. ET May 7 through midnight on May 21, 2007. To listen to the recorded call, dial (719) 457-0820 and enter confirmation code 7045636.

A webcast of the live conference call will be available at http://www.progress-energy.com/. The webcast will be available in Windows Media format. The webcast will be archived on the site for at least 30 days following the call for those unable to listen in real time.

Members of the media are invited to listen to the conference call and then participate in a media-only question and answer session with Peter Scott starting at 3 p.m. ET. To participate in this session, please dial (913) 981-5507, confirmation code 8010943.

Progress Energy, headquartered in Raleigh, N.C., is a Fortune 250 diversified energy company with more than 23,000 megawatts of generation capacity and $10 billion in annual revenues. The company's holdings include two electric utilities serving approximately 3.1 million customers in North Carolina, South Carolina and Florida. Progress Energy's nonregulated operations include energy marketing. Progress Energy is the 2006 recipient of the Edison Electric Institute's Edison Award, the industry's highest honor, in recognition of its operational excellence. The company also is the first utility to receive the prestigious J.D. Power and Associates Founder's Award for dedication, commitment and sustained improvement in customer service. For more information about Progress Energy, visit the company's Web site at http://www.progress-energy.com/.

Caution Regarding Forward-Looking Information:

This release contains forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. The matters discussed in this document involve estimates, projections, goals, forecasts, assumptions, risks and uncertainties that could cause actual results or outcomes to differ materially from those expressed in the forward- looking statements.

Any forward-looking statement is based on information current as of the date of this document and speaks only as of the date on which such statement is made, and we undertake no obligation to update any forward-looking statement or statements to reflect events or circumstances after the date on which such statement is made.

Examples of factors that you should consider with respect to any forward- looking statements made throughout this document include, but are not limited to, the following: the impact of fluid and complex laws and regulations, including those relating to the environment and the Energy Policy Act of 2005; the financial resources and capital needed to comply with environmental laws and our ability to recover eligible costs under cost-recovery clauses; weather conditions that directly influence the production, delivery and demand for electricity; the ability to recover in a timely manner, if at all, costs associated with future significant weather events through the regulatory process; recurring seasonal fluctuations in demand for electricity; fluctuations in the price of energy commodities and purchased power and our ability to recover such costs through the regulatory process; economic fluctuations and the corresponding impact on our commercial and industrial customers; the ability of our subsidiaries to pay upstream dividends or distributions to the Parent; the impact on our facilities and businesses from a terrorist attack; the inherent risks associated with the operation of nuclear facilities, including environmental, health, regulatory and financial risks; the anticipated future need for additional baseload generation and associated transmission facilities in our regulated service territories and the accompanying regulatory and financial risks; the ability to successfully access capital markets on favorable terms; the Progress Registrants' ability to maintain their current credit ratings and the impact on the Progress Registrants' financial condition and ability to meet their cash and other financial obligations in the event their credit ratings are downgraded; the impact that increases in leverage may have on each of the Progress Registrants; the impact of derivative contracts used in the normal course of business; the investment performance of our pension and benefit plans; the Progress Registrants' ability to control costs, including pension and benefit expense, and achieve our cost-management targets for 2008; our ability to generate and utilize tax credits from the production and sale of qualifying synthetic fuels under Internal Revenue Code Section 29/45K (Section 29/45K); the impact that future crude oil prices may have on our earnings from our coal-based solid synthetic fuels businesses; the execution of our announced transactions to dispose of our Competitive Commercial Operations (CCO) business and additional resulting charges to income, which could exceed $300 million after-tax; our ability to manage the risks involved with the CCO business, including dependence on third parties and related counterparty risks, until completion of our divestiture transactions; the outcome of any ongoing or future litigation or similar disputes and the impact of any such outcome or related settlements; and unanticipated changes in operating expenses and capital expenditures. Many of these risks similarly impact our nonreporting subsidiaries.

These and other risk factors are detailed from time to time in our filings with the United States Securities and Exchange Commission (SEC). All such factors are difficult to predict, contain uncertainties that may materially affect actual results and may be beyond our control. New factors emerge from time to time, and it is not possible for management to predict all such factors, nor can it assess the effect of each such factor on us.

PROGRESS ENERGY, INC. CONSOLIDATED INTERIM FINANCIAL STATEMENTS March 31, 2007 UNAUDITED CONSOLIDATED STATEMENTS of INCOME Three months ended March 31 (in millions except per share data) 2007 2006 Operating revenues Electric $2,068 $1,985 Diversified business 266 238 Total operating revenues 2,334 2,223 Operating expenses Utility Fuel used in electric generation 736 690 Purchased power 221 229 Operation and maintenance 420 416 Depreciation and amortization 219 228 Taxes other than on income 124 119 Other (1) (2) Diversified business Cost of sales 244 256 Depreciation and amortization 2 9 Gain on the sales of assets (16) (4) Other 18 14 Total operating expenses 1,967 1,955 Operating income 367 268 Other income (expense) Interest income 8 17 Other, net 9 (2) Total other income 17 15 Interest charges Net interest charges 144 165 Allowance for borrowed funds used during construction (3) (2) Total interest charges, net 141 163 Income from continuing operations before income tax and minority interest 243 120 Income tax expense 19 29 Income from continuing operations before minority interest 224 91 Minority interest in subsidiaries' income, net of tax 4 6 Income from continuing operations 220 85 Discontinued operations, net of tax 55 (40) Net income $275 $45 Average common shares outstanding - basic 254 249 Basic earnings per common share Income from continuing operations $0.87 $0.34 Discontinued operations, net of tax 0.21 (0.16) Net income $1.08 $0.18 Diluted earnings per common share Income from continuing operations $0.87 $0.34 Discontinued operations, net of tax 0.21 (0.16) Net income $1.08 $0.18 Dividends declared per common share $0.610 $0.605 This financial information should be read in conjunction with the Company's Annual Report to shareholders. These statements have been prepared for the purpose of providing information concerning the Company and not in connection with any sale, offer for sale, or solicitation of an offer to buy any securities. PROGRESS ENERGY, INC. UNAUDITED CONSOLIDATED BALANCE SHEETS (in millions) March 31, December 31, 2007 2006 ASSETS Utility plant Utility plant in service $23,865 $23,743 Accumulated depreciation (10,152) (10,064) Utility plant in service, net 13,713 13,679 Held for future use 10 10 Construction work in progress 1,526 1,289 Nuclear fuel, net of amortization 300 267 Total utility plant, net 15,549 15,245 Current assets Cash and cash equivalents 133 265 Short-term investments 1 71 Receivables, net 960 930 Inventory 1,013 969 Deferred fuel cost 189 196 Deferred income taxes 17 159 Assets of discontinued operations 895 887 Derivative assets 112 1 Prepayments and other current assets 68 107 Total current assets 3,388 3,585 Deferred debits and other assets Regulatory assets 1,104 1,231 Nuclear decommissioning trust funds 1,307 1,287 Diversified business property, net 30 31 Miscellaneous other property and investments 456 456 Goodwill 3,655 3,655 Other assets and deferred debits 230 211 Total deferred debits and other assets 6,782 6,871 Total assets $25,719 $25,701 Capitalization and Liabilities Common stock equity Common stock without par value, 500 million shares authorized, 258 and 256 million shares issued and outstanding, respectively $5,882 $5,791 Unearned ESOP shares (2 million shares) (42) (50) Accumulated other comprehensive loss (50) (49) Retained earnings 2,711 2,594 Total common stock equity 8,501 8,286 Preferred stock of subsidiaries - not subject to mandatory redemption 93 93 Minority interest 54 10 Long-term debt, affiliate 271 271 Long-term debt, net 8,512 8,564 Total capitalization 17,431 17,224 Current liabilities Current portion of long-term debt 404 324 Short-term debt 117 - Accounts payable 652 712 Interest accrued 139 171 Dividends declared 157 156 Customer deposits 236 227 Liabilities of discontinued operations 179 189 Income taxes accrued 44 284 Other current liabilities 692 755 Total current liabilities 2,620 2,818 Deferred credits and other liabilities Noncurrent income tax liabilities 270 306 Accumulated deferred investment tax credits 148 151 Regulatory liabilities 2,584 2,543 Asset retirement obligations 1,321 1,306 Accrued pension and other benefits 964 957 Other liabilities and deferred credits 381 396 Total deferred credits and other liabilities 5,668 5,659 Commitments and contingencies Total capitalization and liabilities $25,719 $25,701 PROGRESS ENERGY, INC. UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS (in millions) Three months ended March 31 2007 2006 Operating activities Net income $275 $45 Adjustments to reconcile net income to net cash provided by operating activities: Discontinued operations, net of tax (55) 40 Depreciation and amortization 250 267 Deferred income taxes 106 34 Investment tax credit (3) (3) Tax levelization (8) 16 Deferred fuel cost 108 134 Other adjustments to net income 12 75 Cash provided (used) by changes in operating assets and liabilities: Receivables 59 123 Inventory (36) (60) Prepayments and other current assets (74) (15) Accounts payable (51) (78) Other current liabilities (290) (172) Regulatory assets and liabilities 8 (2) Other liabilities and deferred credits (11) 22 Other assets and deferred debits (21) 16 Net cash provided by operating activities 269 442 Investing activities Gross utility property additions (469) (304) Nuclear fuel additions (61) (52) Proceeds from sales of discontinued operations and other assets, net of cash divested 30 103 Purchases of available-for-sale securities and other investments (192) (538) Proceeds from sales of available-for-sale securities and other investments 252 522 Other investing activities (1) (11) Net cash used by investing activities (441) (280) Financing activities Issuance of common stock 65 28 Proceeds from issuance of long-term debt, net - 397 Net increase in short-term debt 117 79 Retirement of long-term debt - (801) Dividends paid on common stock (155) (151) Other financing activities (33) (60) Net cash used by financing activities (6) (508) Cash provided (used) by discontinued operations Operating activities 47 54 Investing activities (1) (50) Financing activities - - Net decrease in cash and cash equivalents (132) (342) Cash and cash equivalents at beginning of period 265 605 Cash and cash equivalents at end of the period $133 $263 Progress Energy, Inc. SUPPLEMENTAL DATA Page S-1 Unaudited Progress Energy, Inc. Earnings Variances First Quarter 2007 vs. 2006 Regulated Utilities Coal & Former Corporate Synthe- ($ per share) Progress and Other Core tic Consol- Carolinas Florida Ventures Businesses Business Fuels idated 2006 GAAP earnings 0.34 0.21 (0.16) (0.18) 0.21 (0.03) 0.18 Intraperiod tax allocation 0.01 0.05 0.06 A 0.06 Discontinued operations 0.16 (0.07) 0.09 B 0.07 B 0.16 CVO mark-to- market 0.10 0.10 C 0.10 2006 ongoing earnings 0.35 0.21 - (0.10) 0.46 0.04 0.50 Weather - retail 0.02 0.02 0.02 Other retail - growth and usage 0.04 0.04 0.04 Other retail margin 0.01 0.01 0.02 0.02 Wholesale (0.01) 0.02 0.01 D 0.01 O&M 0.02 0.02 E 0.02 Other 0.01 0.01 0.01 Depreciation & Amorti- zation 0.02 (0.01) 0.01 F 0.01 Interest charges 0.04 0.04 G 0.04 Net diversified business (0.05) (0.05)H 0.15 H 0.10 Taxes 0.03 0.02 0.05 I 0.05 Share dilution (0.01) (0.01) (0.02) (0.02) 2007 ongoing earnings 0.48 0.24 - (0.11) 0.61 0.19 0.80 Intraperiod tax allocation 0.03 0.03 A 0.03 Discontinued operations 0.22 0.22 B (0.01)B 0.21 CVO mark-to-market 0.01 0.01 C 0.01 Derivative contracts mark-to-market - 0.04 J 0.04 Impairment - (0.01)K (0.01) 2007 GAAP earnings 0.48 0.24 0.22 (0.07) 0.87 0.21 1.08 Corporate and Other Businesses includes other small subsidiaries, Holding Company interest expense, CVO mark-to-market, intraperiod tax allocations, purchase accounting transactions and corporate eliminations. A - Intraperiod income tax allocation impact, related to cyclical nature of energy demand/earnings and timing of synthetic fuel tax credits. B - Discontinued operations from sales of 1) CCO operations 2) Gas operations 3) Progress Telecom 4) Coal Mining businesses 5) Dixie Fuels and other fuels businesses. C - Corporate and Other - Impact of change in market value of outstanding CVO's. D - Carolinas - Unfavorable primarily due to lower gains on forward sales of excess generation. Florida - Favorable primarily due to increased capacity under contract with a major customer. E - Carolinas - Favorable primarily due to the recording of additional estimated environmental remediation expenses in 2006. F - Carolinas - Favorable primarily due to a decrease in Clean Smokestacks Act amortization partially offset by the impact of increases in depreciable base. Florida - Unfavorable primarily due to the impact of increases in depreciable base. G - Corporate and Other - Favorable primarily due to the $1.7 billion reduction in holding company debt during 2006 partially offset by a decrease in the interest allocated to discontinued operations. H - Corporate and Other - Unfavorable primarily due to the 2006 gain on the sale of Level 3 stock received as part of the Progress Telecom sale. Coal and Synthetic Fuels - Favorable primarily due to increased synthetic fuels production, unrealized mark-to-market gains on derivative contracts, change in estimated tax credit reserve from 47% in 2006 to 18% in 2007, and lower royalty expense and lower depreciation expense due to the second quarter 2006 impairment of synthetic fuel assets. I - Carolinas - Favorable primarily due to changes relating to prior year federal and state income tax returns. Florida - Favorable primarily due to the impact of an increase in AFUDC equity and current year miscellaneous tax adjustments. J - Coal and Synthetic Fuels - Unrealized mark-to-market gains on derivative contracts entered into by Ceredo Synfuel LLC. K - Coal and Synthetic Fuels - Impairment represents the write-off of state net operating loss carry forwards. Progress Energy, Inc. SUPPLEMENTAL DATA - Page S-2 Unaudited Three Months Ended March 31, 2007 Total Progress Utility Statistics Carolinas Florida Energy Operating Revenues (in millions) Retail Residential $424 $491 $915 Commercial 254 247 501 Industrial 165 74 239 Governmental 22 67 89 Provision for retail revenue sharing - - - Total Retail $865 $879 $1,744 Wholesale 194 80 274 Unbilled (25) 8 (17) Miscellaneous revenue 23 44 67 Total Electric $1,057 $1,011 $2,068 Energy Sales (millions of kWh) Retail Residential 4,740 4,155 8,895 Commercial 3,245 2,624 5,869 Industrial 2,821 895 3,716 Governmental 327 748 1,075 Total Retail 11,133 8,422 19,555 Wholesale 3,956 1,170 5,126 Unbilled (343) 190 (153) Total Electric 14,746 9,782 24,528 Energy Supply (millions of kWh) Generated - steam 7,572 4,564 12,136 nuclear 6,124 1,632 7,756 combustion turbines/combined cycle 477 1,787 2,264 hydro 213 - 213 Purchased 911 2,315 3,226 Total Energy Supply (Company Share) 15,297 10,298 25,595 Impact of Weather to Normal on Retail Sales Heating Degree Days - Actual 1,579 293 - Normal 1,637 360 Cooling Degree Days - Actual 29 212 - Normal 12 207 Impact of retail weather to normal on EPS ($0.01) ($0.02) ($0.03) Three Months Ended March 31, 2006 Total Progress Utility Statistics Carolinas Florida Energy Operating Revenues (in millions) Retail Residential $376 $506 $882 Commercial 226 245 471 Industrial 163 83 246 Governmental 20 66 86 Provision for retail revenue sharing - 1 1 Total Retail $785 $901 $1,686 Wholesale 192 69 261 Unbilled (27) 1 (26) Miscellaneous revenue 28 36 64 Total Electric $978 $1,007 $1,985 Energy Sales (millions of kWh) Retail Residential 4,417 4,311 8,728 Commercial 3,052 2,550 5,602 Industrial 2,933 1,006 3,939 Governmental 320 721 1,041 Total Retail 10,722 8,588 19,310 Wholesale 3,958 1,007 4,965 Unbilled (378) (150) (528) Total Electric 14,302 9,445 23,747 Energy Supply (millions of kWh) Generated - steam 7,510 4,352 11,862 nuclear 6,119 1,350 7,469 combustion turbines/combined cycle 230 1,778 2,008 hydro 189 - 189 Purchased 900 2,470 3,370 Total Energy Supply (Company Share) 14,948 9,950 24,898 Impact of Weather to Normal on Retail Sales Heating Degree Days - Actual 1,534 289 - Normal 1,672 360 Cooling Degree Days - Actual 15 211 - Normal 11 207 Impact of retail weather to normal on EPS ($0.03) ($0.03) ($0.06) Percentage Change From March 31, 2006 Utility Statistics Carolinas Florida Operating Revenues (in millions) Retail Residential 12.8 % (3.0)% Commercial 12.4 0.8 Industrial 1.2 (10.8) Governmental 10.0 1.5 Provision for retail revenue sharing - - Total Retail 10.2 (2.4) Wholesale 1.0 15.9 Unbilled - - Miscellaneous revenue (17.9) 22.2 Total Electric 8.1 % 0.4 % Energy Sales (millions of kWh) Retail Residential 7.3 % (3.6)% Commercial 6.3 2.9 Industrial (3.8) (11.0) Governmental 2.2 3.7 Total Retail 3.8 (1.9) Wholesale (0.1) 16.2 Unbilled - - Total Electric 3.1 % 3.6 % Energy Supply (millions of kWh) Generated - steam nuclear combustion turbines/combined cycle hydro Purchased Total Energy Supply (Company Share) Impact of Weather to Normal on Retail Sales Heating Degree Days - Actual 2.9 % 1.4 % - Normal Cooling Degree Days - Actual 93.3 % 0.5 % - Normal Impact of retail weather to normal on EPS Progress Energy, Inc. SUPPLEMENTAL DATA - Page S-3 Unaudited Financial Statistics March 31, 2007 March 31, 2006 Return on average common stock equity (12 months ended) 9.8 % 8.2 % Book value per common share $33.31 $32.05 Capitalization Common stock equity 47.4 % 42.2 % Preferred stock of subsidiary and minority interest 0.8 % 0.8 % Total debt 51.8 % 57.0 % Total Capitalization 100.0 % 100.0 % 2006 Impact of Discontinued Operations Three months ended Three months ended March 31, March 31, (Earnings per share) 2007 2006 Progress Telecom $ - $0.07 Coal Mine Operations (0.01) (0.07) Rowan and DeSoto Plants - (0.01) Gas Operations (0.01) 0.09 CCO Operations 0.23 (0.24) Total $0.21 ($0.16) 2006 Ongoing Earnings - Restated Corporate and Other Core Coal & (Earnings Busi- Busi- Synthetic Consol- per share) Carolinas Florida nesses ness Fuels dated Q1 $0.35 $0.21 ($0.10) $0.46 $0.04 $0.50 Q2 0.29 0.34 (0.14) 0.49 (0.14) 0.35 Q3 0.75 0.52 (0.22) 1.05 0.03 1.08 Q4 0.42 0.24 (0.06) 0.60 0.05 0.65 2006 $1.81 $1.31 ($0.52) $2.60 ($0.02) $2.58