The CEO offers a brighter-than-industry outlook for the utility based in Raleigh, N.C.
By LOUIS HAU
Published May 15, 2003
ASHEVILLE, N.C. - "We're not Enron" was the overriding theme last year at Progress Energy Inc.'s annual shareholders meeting.
This year, Progress chairman and chief executive Bill Cavanaugh's message to shareholders was slightly different: "We're not everyone else."
"Progress Energy is dealing with financial pressures but not the significant ones that others face," Cavanaugh said at the meeting of about 60 shareholders here. "Many in our industry are struggling to recover from a steep downward spiral. Some have been forced to overhaul their basic strategy and slash dividends. Companies have seen their credit ratings drop to junk-bond status."
Cavanaugh cited the company's stable, investment-grade debt rating, the recent 15th consecutive annual increase in its dividend and a stock that continues to outperform utility stock indexes.
Still, Cavanaugh conceded that Progress hadn't escaped unscathed, noting Moody's Investors Service's one-notch downgrade of the company's long-term debt rating in February and the fact that the Raleigh, N.C., utility - the parent of Progress Energy Florida Inc. of St. Petersburg - fell slightly short of its earnings target for 2002.
"Even though we're not batting 1.000, overall we've made solid strategic choices and did not succumb to fleeting strategies (such) as buying foreign utilities or getting too far out on a limb with merchant power plants and energy trading," he said.
Cavanaugh even took a jab at companies such as TECO Energy Inc., which have been badly burned by aggressive investments in wholesale power. While Progress' own more modest wholesale operations "will remain a key part of our balanced, diversified strategy," Cavanaugh noted that "we chose not to bet the farm on the phantom gold rush in deregulated markets."
Shareholders defeated two proposals on corporate governance that were opposed by the company's board. A proposal to require that stock options be expensed attracted a substantial 45 percent of shares voted. Another, which received only 20 percent support, would have tied all future stock option grants to senior executives to the performance of the company's stock compared to that of other utilities.
During a brief question-and-answer session that concluded the 58-minute meeting, a shareholder asked Cavanaugh what he thought of the prospects for an expansion of U.S. nuclear power generation capabilities. Progress operates four nuclear plants, including a generating unit in Crystal River.
Cavanaugh said he doesn't expect any more nuclear power plants to be built in the United States until plant operators receive environmental tax credits for their plants' low emissions. Without that type of credit, a new nuclear plant wouldn't be competitive versus a natural gas plant, he said.
"Unless there's a crisis, I don't think you'll see Congress act," Cavanaugh said.
When another shareholder argued that the radioactive waste produced by nuclear reactors made them unsafe, Cavanaugh responded that "the comment is a common misunderstanding."
After the meeting, Cavanaugh said that, "I know there's a lot of discussion going on (about expanding nuclear power generation), but the question is what will happen, and I can't predict that."
If the United States were to embark on an expansion of nuclear power, the utility industry would be prepared to follow through, Cavanaugh said.
"We've got standardized designs that have already been approved, we know how to build these plants and we know how to operate them," he said. "We're in much better shape to build these plants than we've ever been in the past."
- Louis Hau can be reached at hau@sptimes.com or (813) 226-3404
