Progress Energy Call Insights: Crystal River, Duke

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On Thursday, Progress Energy, Inc. (NYSE:PGN) reported its first quarter earnings and discussed the following topics in its earnings conference call. Here’s what the C-suite revealed.

Crystal River

Jonathan Arnold – Deutsche Bank: Can I just start on Crystal River, if I remember right, it either was a sort of an element in the settlement which there were two parts depending on whether you started repairs before the end of this year or not. You obviously talked about feeling like you’re close to having an engineering study complete. How do you feel about making that year-end timing on starting repair?

A Closer Look: Progress Energy Earnings Cheat Sheet>>

William D. Johnson – Chairman, President and CEO: Well, given what we know today, Jonathan, I feel fairly confident that we will start this by the end of the year. If the decision is to repair, like I said earlier that we are going to proceed down this path with NEIL, with the engineering and then with the new combined board, but I think there’s plenty of time to get started by the end of the year.

Jonathan Arnold – Deutsche Bank: In the past you’ve said that it was hard conceive of a scenario where it would not make sense to repair. Can you just update on your view of that statement?

William D. Johnson – Chairman, President and CEO: I think what I’ve said in the past is that if you assume reasonable repair costs and coverage, the best thing for the customer there is to repair it over the long-term. There’s a lot of customer benefit to this, but still we have some work to do on that engineering plan and the coverage decision before we can actually say what it is we are going to do.

Jonathan Arnold – Deutsche Bank: Maybe just on another area, I was looking at the Slide 13 with the retail sales numbers, you mentioned something about weather normalization having been not perfect maybe last year, but how do you manage to have all the segments negative in the Carolinas and that the retail total would be 0.5% positive?

Mark F. Mulhern – SVP and CFO: That’s a good question, Jonathan. We’ve asked as well. We have something called unbilled revenue effectively, which has to do with the timing of when we actually build the customer and when service is delivered that contributes to that. That is a common thing throughout this sector.

Jonathan Arnold – Deutsche Bank: So, the billings are sort of better than what you’re showing in the segments effectively?

Jeffrey M. Stone – Chief Accounting Officer and Controller: This is Jeff Stone, the Corporate Controller. What you see on the charts are the billed revenue number. When we record unbilled which is again a standard accounting practice across the utility industry, because it’s an estimate, we don’t allocate it across the classes. So, the total retail is probably a more accurate picture of what truly has gone on, on a calendar basis for the Company.

Jonathan Arnold – Deutsche Bank: And that 0.5% is that sort of including the additional day from the Leap Year or have you sort of ex that out?

Mark F. Mulhern – SVP and CFO: It is. No, it’s in there.

Jonathan Arnold – Deutsche Bank: So, it would have been sort of down a little (after the balance)?

Mark F. Mulhern – SVP and CFO: I think that’s correct.

Merger

Dan Eggers – Credit Suisse: I guess, just can we talk a little bit about with the merger, the joint dispatch savings at $650 million with the drop in power prices and commodity prices. There have been some talks that that was going to be a little harder to achieve. You feel pretty confident about that. Can you just kind of share a little more how you guys are seeing that kind of benefit in a lower price environment?

William D. Johnson – Chairman, President and CEO: Dan, I don’t think we want to talk too much about this until we have public the agreement we’ll reach with the Duke (NYSE:DUK) staffs in the Carolinas and obviously, some things have changed, coal burn is down, gas burn is up. But there are a lot of elements that go into fuel, transportation and all kinds of things and we still think this is achievable but I would wait until we have the settlement agreement public before we talk about that anymore.

Dan Eggers – Credit Suisse: Yeah, I guess, those kind of as far the settlement agreement goes, where is your level of confidence that you guys can have that done before there is a final resolution (on FERC to do). There is one has to happen before the other or they going to be treated relatively independently?

William D. Johnson – Chairman, President and CEO: I think they’re treated relatively independently, the FERC – we would hope sometime before June 8. The Carolinas we would expect probably before then or at least to have the settlement agreement public. There is still a process that follows that where I think they would get comments and the Commission would have to take some action, but I think the settlement itself will be pretty quickly here.

Dan Eggers – Credit Suisse: From a party perspective, in addition to the staffs, who else should we be looking for as far as ideal signatories that help with the process?

William D. Johnson – Chairman, President and CEO: The usual suspects, Dan.

Dan Eggers – Credit Suisse: Then just on (indiscernible) to make sure I have this (correctly) in my head. The three in the first half of this year, how does that quarterly compare to what happened last year from refueling (indiscernible) quarter through the rest of this year?

Mark F. Mulhern – SVP and CFO: Dan, we had one outage last year, I think it was in the first half of the year, so it would have been and this is probably comparable to the first quarter this year. So, I think one versus two this year to last and in the first half of the year we will have three versus one. So, we’ll be done with our outages in the first half of the year, so no planned outages in the second half of 2012.

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