Progress' aim: Focus on selling electricity

Progress Energy is in talks to sell coal mines and river terminals in Kentucky and West Virginia as it winds down a strategy to streamline its business.

The electric utility, based in Raleigh, expects to shed its out-of-state subsidiaries by year's end, Chief Financial Officer Peter Scott said Thursday after the company reported strong quarterly financial results boosted by hot summer weather.

The sales will complete a major transformation that frees the company to focus on building multibillion-dollar power plants for the first time in 25 years.

Since buying a Florida electric utility in 2001 and doubling its size, Progress Energy has sold more than $4 billion in assets, including a railway, telecommunications company and natural-gas operations. The company has shed a third of its work force, paring down to 10,600 employees.

"It took us six years from the time that we closed the merger to restructure the company," Scott said. "We're entering ... [a new] phase with a strong balance sheet."

Early next year, the company plans to submit license applications for new nuclear plants in North Carolina and Florida.

Progress Energy also is testing efficiency programs -- such as controlling customer thermostats by remote -- that will be proposed next year. Under a new state law, the utility must use alternative energy sources such as solar power and encourage North Carolina customers to cut energy use.

The company also announced Thursday that a blistering hot summer drove up earnings in the third quarter, helping beat Wall Street analysts' expectations. Core ongoing earnings were $1.21 per share in the third quarter, beating analyst estimates of $1.17. That compared with $1.06 per share during the same three-month period last year.

Third-quarter revenue rose 11 percent to $3.1 billion.

Because customers use more air-conditioning -- and lots of energy -- during summer's heat, the quarter spanning July, August and September is traditionally the company's most important, accounting for about 40 percent of annual earnings.

"There's a strong, positive momentum at Progress Energy," said Bill Johnson, who was named chief executive last month after the death of former CEO Bob McGehee.

Progress Energy also saw operating expenses increase because of scheduled maintenance outages at its Shearon Harris nuclear plant in Wake County, Brunswick nuclear plant near Wilmington and several coal-burning power plants.

The company added 50,000 customers in the Carolinas and Florida during the past year. Because Progress Energy sells retail electricity in noncompetitive markets, its growth depends on new customers moving into its service areas.

Progress Energy, which has 3.1 million customers in the Carolinas and Florida, uses ongoing earnings as the most reliable measure of its financial performance. Next year, it won't have to distinguish between core earnings and noncore earnings, because noncore earnings will be a thing of the past.

The Progress Energy that will emerge will be a relatively simple corporation: a utility that sells retail electricity in the Carolinas and Florida. For investors, that will mean a simplified company whose bottom line is not obscured by arcane accounting.

"When someone buys Progress Energy stock, but you spend most of your time talking about nonutility operations, it's a disincentive to investors," said David Parker, a utility analyst in St. Petersburg, Fla., with Robert W. Baird & Co. "It's good to see Progress Energy become a straightforward company."

Shares closed Thursday at $46.64, down $1.36.