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Progress Energy focuses on the basics

Progress Energy's obsession to shed businesses that do not generate electricity reminds me of the tourist from northern Canada who arrives here swaddled in layers of cold-weather gear.

By Robert Trigaux, Times Business Editor
Published February 17, 2008

Progress Energy's obsession to shed businesses that do not generate electricity reminds me of the tourist from northern Canada who arrives here swaddled in layers of cold-weather gear.

He can't wait to strip down to the basics.

So it is with Progress Energy, which supplies electricity to west-central Florida. After owning and divesting businesses as far flung and, yes, bizarre as telecommunications, railcar repair and producing "synthetic" fuel, the company at last is about to achieve its corporate karma: simply selling electricity in the fast-growing Southeast.

Progress Energy executives call this strategy a "pure play." It's a phrase they started using in earnest a year or so ago to become known for one thing and doing that one thing well.

Bill Johnson, recently named CEO in Raleigh, N.C., of Progress Energy which owns Progress Energy Florida in St. Petersburg repeated the "pure play" mantra Thursday when announcing the company's 2007 financial performance. Earnings were smaller, in part, because of the selloff of so many affiliates last year.

"Upon the closing of the coal mine and river terminals sale agreement, we will become the nation's largest pure-play regulated electric utility, with a clear, achievable strategy for long-term success," Johnson said.

Translation: We're putting all of our eggs in one basket - generating electricity - because we've not had much luck running so many different businesses. More to the point, investors seem wary of companies that muddy their message by doing many unrelated things.

It can be downright funny to watch companies and CEOs over many years. What's "in" or "out" among corporate strategies can be as whimsical as the new look in spring fashions.

Pure play! What beats telling investors we do one thing well?

Diversification! What's safer for investors than not putting all of our eggs in one basket?

Many sideline businesses sold off by Progress Energy were inherited when Carolina Power & Light swooped in nearly nine years ago and bought St. Petersburg's "diversified" Florida Progress Corp., parent of the electric utility Florida Power.

Back in 1999, the North Carolina power company was looking to expand and looked longingly at Florida as the hot growth state. Hot, indeed. People and businesses were pouring into the Sunshine State, all hungry for electricity to run their air conditioners and appliances.

How times change. Now it is North Carolina - more than Florida - that is the boom state. As Progress Energy chief financial officer Peter Scott told analysts last week, North Carolina in 2007 was second only to Texas with an annual net population migration into the state of 136,000 people. Florida ranked No. 4 last year with net positive migration of 123,000. Still, two strong markets for electricity.

Scott cited some weakness in parts of Florida served by Progress Energy because of the 12- to 18-month glut of housing that is for sale and - the ultimate curse for a utility - sits empty, using virtually no electricity.

"We hope this has worked down to a normal level of about nine months by year-end," said Scott, "and that we began to convert unoccupied homes into full time energy consumers."

Let the pure play begin.

Robert Trigaux can be reached at trigaux@sptimes.com.

[Last modified February 15, 2008, 19:46:53]