Edgar Filing: CAROLINA POWER & LIGHT CO

form10q_q22010.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2010

o TRANSITION REPORT PURSUANT TO SECTION 13 OR

15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to .

Commission File Number	Exact name of registrants as specified in their charters, states of incorporation, addresses of principal executive offices, and telephone numbers	I.R.S. Employer Identification Number


1-15929	Progress Energy, Inc. 410 South Wilmington Street Raleigh, North Carolina 27601-1748 Telephone: (919) 546-6111 State of Incorporation: North Carolina	56-2155481

1-3382	Carolina Power & Light Company d/b/a Progress Energy Carolinas, Inc. 410 South Wilmington Street Raleigh, North Carolina 27601-1748 Telephone: (919) 546-6111 State of Incorporation: North Carolina	56-0165465

1-3274	Florida Power Corporation d/b/a Progress Energy Florida, Inc. 299 First Avenue North St. Petersburg, Florida 33701 Telephone: (727) 820-5151 State of Incorporation: Florida	59-0247770

NONE

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether each registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrants were required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Progress Energy, Inc. (Progress Energy)	Yes	x	No	o
Carolina Power & Light Company (PEC)	Yes	x	No	o
Florida Power Corporation (PEF)	Yes	o	No	x

Indicate by check mark whether each registrant has submitted electronically and posted to its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrants were required to submit and post such files).

Progress Energy	Yes	x	No	o
PEC	Yes	o	No	o
PEF	Yes	o	No	o

Indicate by check mark whether each registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Progress Energy	Large accelerated filer	x	Accelerated filer	o
	Non-accelerated filer	o	Smaller reporting company	o

PEC	Large accelerated filer	o	Accelerated filer	o
	Non-accelerated filer	x	Smaller reporting company	o

PEF	Large accelerated filer	o	Accelerated filer	o
	Non-accelerated filer	x	Smaller reporting company	o

Indicate by check mark whether each registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Progress Energy	Yes	o	No	x
PEC	Yes	o	No	x
PEF	Yes	o	No	x

At August 2, 2010, each registrant had the following shares of common stock outstanding:

Registrant	Description	Shares
Progress Energy	Common Stock (Without Par Value)	292,581,000

PEC	Common Stock (Without Par Value)	159,608,055 (all of which were held directly by Progress Energy, Inc.)

PEF	Common Stock (Without Par Value)	100 (all of which were held indirectly by Progress Energy, Inc.)

This combined Form 10-Q is filed separately by three registrants: Progress Energy, PEC and PEF (collectively, the Progress Registrants). Information contained herein relating to any individual registrant is filed by such registrant solely on its own behalf. Each registrant makes no representation as to information relating exclusively to the other registrants.

PEF meets the conditions set forth in General Instruction H(1)(a) and (b) of Form 10-Q and is therefore filing this form with the reduced disclosure format.

TABLE OF CONTENTS
GLOSSARY OF TERMS		2

SAFE HARBOR FOR FORWARD-LOOKING STATEMENTS		5

PART I. FINANCIAL INFORMATION

ITEM 1.	FINANCIAL STATEMENTS	6

	Unaudited Condensed Interim Financial Statements:

	Progress Energy, Inc. (Progress Energy)
	Unaudited Condensed Consolidated Statements of Income	6
	Unaudited Condensed Consolidated Balance Sheets	7
	Unaudited Condensed Consolidated Statements of Cash Flows	8

	Carolina Power & Light Company d/b/a Progress Energy Carolinas, Inc. (PEC)
	Unaudited Condensed Consolidated Statements of Income	9
	Unaudited Condensed Consolidated Balance Sheets	10
	Unaudited Condensed Consolidated Statements of Cash Flows	11

	Florida Power Corporation d/b/a Progress Energy Florida, Inc. (PEF)
	Unaudited Condensed Statements of Income	12
	Unaudited Condensed Balance Sheets	13
	Unaudited Condensed Statements of Cash Flows	14

	Combined Notes to Unaudited Condensed Interim Financial Statements for Progress Energy, Inc., Carolina Power & Light Company d/b/a Progress Energy Carolinas, Inc. and Florida Power Corporation d/b/a Progress Energy Florida, Inc.	15

ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	66

ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	109

ITEM 4.	CONTROLS AND PROCEDURES	113

ITEM 4T.	CONTROLS AND PROCEDURES	113

PART II. OTHER INFORMATION

ITEM 1.	LEGAL PROCEEDINGS	114

ITEM 1A.	RISK FACTORS	114

ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	114

ITEM 5.	OTHER INFORMATION	115

ITEM 6.	EXHIBITS	116

SIGNATURES		117

GLOSSARY OF TERMS

We use the words “Progress Energy,” “we,” “us” or “our” with respect to certain information to indicate that such information relates to Progress Energy, Inc. and its subsidiaries on a consolidated basis. When appropriate, the parent holding company or the subsidiaries of Progress Energy are specifically identified on an unconsolidated basis as we discuss their various business activities.

The following abbreviations, acronyms or initialisms are used by the Progress Registrants:

TERM	DEFINITION

2009 Form 10-K	Progress Registrants’ annual report on Form 10-K for the fiscal year ended December 31, 2009
401(k)	Progress Energy 401(k) Savings & Stock Ownership Plan
AFUDC	Allowance for funds used during construction
ARO	Asset retirement obligation
ASLB	Atomic Safety and Licensing Board
Asset Purchase Agreement	Agreement by and among Global, Earthco and certain affiliates, and the Progress Affiliates as amended on August 23, 2000
ASC	FASB Accounting Standards Codification
ASU	Accounting Standards Update
Audit Committee	Audit and Corporate Performance Committee of Progress Energy’s board of directors
BART	Best Available Retrofit Technology
Base Revenues	Non-GAAP measure defined as operating revenues excluding clause recoverable regulatory returns, miscellaneous revenues and fuel and other pass-through revenues
Brunswick	PEC’s Brunswick Nuclear Plant
Btu	British thermal unit
CAA	Clean Air Act
CAIR	Clean Air Interstate Rule
CAMR	Clean Air Mercury Rule
CAVR	Clean Air Visibility Rule
CCRC	Capacity Cost-Recovery Clause
CERCLA or Superfund	Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended
Ceredo	Ceredo Synfuel LLC
CIGFUR	Carolina Industrial Group for Fair Utility Rates II
Clean Smokestacks Act	North Carolina Clean Smokestacks Act
the Code	Internal Revenue Code
CO2	Carbon dioxide
COL	Combined license
Corporate and Other	Corporate and Other segment primarily includes the Parent, Progress Energy Service Company and miscellaneous other nonregulated businesses
CR1 and CR2	PEF’s Crystal River Units No. 1 and No. 2 coal-fired steam turbines
CR3	PEF’s Crystal River Unit No. 3 Nuclear Plant
CR4 and CR5	PEF’s Crystal River Units No. 4 and No. 5 coal-fired steam turbines
CUCA	Carolina Utility Customer Association
CVO	Contingent value obligation
D.C. Court of Appeals	U.S. Court of Appeals for the District of Columbia Circuit
DOE	United States Department of Energy
DSM	Demand-side management
Earthco	Four coal-based solid synthetic fuels limited liability companies of which three were wholly owned
ECCR	Energy Conservation Cost Recovery Clause
ECRC	Environmental Cost Recovery Clause

EE	Energy efficiency
EIP	Equity Incentive Plan
EPACT	Energy Policy Act of 2005
EPC	Engineering, procurement and construction
ESOP	Employee Stock Ownership Plan
FASB	Financial Accounting Standards Board
FDEP	Florida Department of Environmental Protection
FERC	Federal Energy Regulatory Commission
FGT	Florida Gas Transmission Company, LLC
Fitch	Fitch Ratings
the Florida Global Case	U.S. Global, LLC v. Progress Energy, Inc. et al
Florida Progress	Florida Progress Corporation
FPSC	Florida Public Service Commission
FRCC	Florida Reliability Coordinating Council
Funding Corp.	Florida Progress Funding Corporation, a wholly owned subsidiary of Florida Progress
GAAP	Accounting principles generally accepted in the United States of America
GHG	Greenhouse gas
Global	U.S. Global, LLC
GridSouth	GridSouth Transco, LLC
GWh	Gigawatt-hours
Harris	PEC’s Shearon Harris Nuclear Plant
IPP	Progress Energy Investor Plus Plan
kV	Kilovolt
kVA	Kilovolt-ampere
kWh	Kilowatt-hours
Levy	PEF’s proposed nuclear plant in Levy County, Fla.
LIBOR	London Inter Bank Offered Rate
MACT	Maximum achievable control technology
MD&A	Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in PART I, Item 2 of this Form 10-Q
Medicare Act	Medicare Prescription Drug, Improvement and Modernization Act of 2003
MGP	Manufactured gas plant
MW	Megawatts
MWh	Megawatt-hours
Moody’s	Moody’s Investors Service, Inc.
NAAQS	National Ambient Air Quality Standards
NC REPS	North Carolina Renewable Energy and Energy Efficiency Portfolio Standard
NCUC	North Carolina Utilities Commission
NDT	Nuclear decommissioning trust
NEIL	Nuclear Electric Insurance Limited
NERC	North American Electric Reliability Corporation
North Carolina Global Case	Progress Synfuel Holdings, Inc. et al. v. U.S. Global, LLC
the Notes Guarantee	Florida Progress’ full and unconditional guarantee of the Subordinated Notes
NOx	Nitrogen oxides
NRC	United States Nuclear Regulatory Commission
O&M	Operation and maintenance expense
OATT	Open Access Transmission Tariff
OCI	Other comprehensive income
Ongoing Earnings	Non-GAAP financial measure defined as GAAP net income attributable to controlling interests after excluding discontinued operations and the effects of certain identified gains and charges
OPC	Florida’s Office of Public Counsel

OPEB	Postretirement benefits other than pensions
the Parent	Progress Energy, Inc. holding company on an unconsolidated basis
PEC	Carolina Power & Light Company d/b/a Progress Energy Carolinas, Inc.
PEF	Florida Power Corporation d/b/a Progress Energy Florida, Inc.
PESC	Progress Energy Service Company, LLC
Power Agency	North Carolina Eastern Municipal Power Agency
PPACA	Patient Protection and Affordable Care Act and the related Health Care and Education Reconciliation Act
Preferred Securities	7.10% Cumulative Quarterly Income Preferred Securities due 2039, Series A issued by the Trust
Preferred Securities Guarantee	Florida Progress’ guarantee of all distributions related to the Preferred Securities
Progress Affiliates	Five affiliated coal-based solid synthetic fuels facilities
Progress Energy	Progress Energy, Inc. and subsidiaries on a consolidated basis
Progress Registrants	The reporting registrants within the Progress Energy consolidated group. Collectively, Progress Energy, Inc., PEC and PEF
Progress Fuels	Progress Fuels Corporation, formerly Electric Fuels Corporation
PRP	Potentially responsible party, as defined in CERCLA
PSSP	Performance Share Sub-Plan
PUHCA 2005	Public Utility Holding Company Act of 2005
PVI	Progress Energy Ventures, Inc., formerly referred to as Progress Ventures, Inc.
QF	Qualifying facility
RCA	Revolving credit agreement
Reagents	Commodities such as ammonia and limestone used in emissions control technologies
REPS	Renewable energy portfolio standard
RDS	Retiree Drug Subsidy related to benefits under Medicare Part D
Robinson	PEC’s Robinson Nuclear Plant
ROE	Return on equity
RSU	Restricted stock unit
RTO	Regional transmission organization
SCPSC	Public Service Commission of South Carolina
Section 29	Section 29 of the Code
Section 29/45K	General business tax credits earned after December 31, 2005 for synthetic fuels production in accordance with Section 29
Section 316(b)	Section 316(b) of the Clean Water Act
(See Note/s “#”)	For all sections, this is a cross-reference to the Combined Notes to the Financial Statements contained in PART I, Item I of this Form 10-Q
SERC	SERC Reliability Corporation
S&P	Standard & Poor’s Rating Services
SNG	Southern Natural Gas Company
SO2	Sulfur dioxide
Subordinated Notes	7.10% Junior Subordinated Deferrable Interest Notes due 2039 issued by Funding Corp.
Tax Agreement	Intercompany Income Tax Allocation Agreement
Terminals	Coal terminals and docks in West Virginia and Kentucky, which were sold on March 7, 2008
the Trust	FPC Capital I
the Utilities	Collectively, PEC and PEF
VIE	Variable interest entity
Ward	Ward Transformer site located in Raleigh, N.C.
Ward OU1	Operable unit for stream segments downstream from the Ward site
Ward OU2	Operable unit for further investigation at the Ward facility and certain adjacent areas

SAFE HARBOR FOR FORWARD-LOOKING STATEMENTS

In this combined report, each of the Progress Registrants makes forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. The matters discussed throughout this combined Form 10-Q that are not historical facts are forward looking and, accordingly, 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 report and speaks only as of the date on which such statement is made, and the Progress Registrants 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.

In addition, examples of forward-looking statements discussed in this Form 10-Q include, but are not limited to, statements made in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” (MD&A) including, but not limited to, statements under the sub-heading “Results of Operations” about trends and uncertainties; “Liquidity and Capital Resources” about operating cash flows, future liquidity requirements and estimated capital expenditures and “Other Matters” about goodwill, changes in the regulatory environment, meeting anticipated demand in our regulated service territories, potential nuclear construction, the effects of new environmental regulations, and our synthetic fuel tax credits.

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 energy policy; our ability to recover eligible costs and earn an adequate return on investment through the regulatory process; the ability to successfully operate electric generating facilities and deliver electricity to customers; the impact on our facilities and businesses from a terrorist attack; the ability to meet the anticipated future need for additional baseload generation and associated transmission facilities in our regulated service territories and the accompanying regulatory and financial risks; our ability to meet current and future renewable energy requirements; the inherent risks associated with the operation and potential construction of nuclear facilities, including environmental, health, safety, regulatory and financial risks; the financial resources and capital needed to comply with environmental laws and regulations; risks associated with climate change; weather and drought conditions that directly influence the production, delivery and demand for electricity; recurring seasonal fluctuations in 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; fluctuations in the price of energy commodities and purchased power and our ability to recover such costs through the regulatory process; the Progress Registrants’ ability to control costs, including operations and maintenance expense (O&M) and large construction projects; the ability of our subsidiaries to pay upstream dividends or distributions to Progress Energy, Inc. holding company (the Parent); current economic conditions; the ability to successfully access capital markets on favorable terms; the stability of commercial credit markets and our access to short- and long-term credit; the impact that increases in leverage or reductions in cash flow may have on each of the Progress Registrants; the Progress Registrants’ ability to maintain their current credit ratings and the impacts in the event their credit ratings are downgraded; the investment performance of our nuclear decommissioning trust (NDT) funds; the investment performance of the assets of our pension and benefit plans and resulting impact on future funding requirements; the impact of potential goodwill impairments; our ability to fully utilize tax credits generated from the previous production and sale of qualifying synthetic fuels under Internal Revenue Code Section 29/45K (Section 29/45K); and the outcome of any ongoing or future litigation or similar disputes and the impact of any such outcome or related settlements. Many of these risks similarly impact our nonreporting subsidiaries.

These and other risk factors are detailed from time to time in the Progress Registrants’ filings with the SEC. Many, but not all, of the factors that may impact actual results are discussed in the Risk Factors section in the Progress Registrants’ annual report on Form 10-K for the fiscal year ended December 31, 2009 (2009 Form 10-K), which was filed with the SEC on February 26, 2010, and is updated for material changes, if any, in this Form 10-Q and in our other SEC filings. Before purchasing securities of the Progress Registrants, you should carefully consider the risks and other information in the documents the Progress Registrants file with the SEC from time to time. Each of the described risks could result in a decrease in the value of the securities of the Progress Registrants and your investment therein.

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

PROGRESS ENERGY, INC.
UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
June 30, 2010

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS of INCOME
	Three months ended June 30,						Six months ended June 30,
(in millions except per share data)	2010			2009			2010			2009
Operating revenues	$	2,372		$	2,312		$	4,907		$	4,754
Operating expenses
Fuel used in electric generation		743			826			1,639			1,780
Purchased power		315			257			578			474
Operation and maintenance		505			484			985			937
Depreciation, amortization and accretion		233			226			479			506
Taxes other than on income		133			130			287			273
Other		3			10			5			12
Total operating expenses		1,932			1,933			3,973			3,982
Operating income		440			379			934			772
Other income
Interest income		1			2			3			6
Allowance for equity funds used during construction		25			36			46			75
Other, net		5			13			-			12
Total other income, net		31			51			49			93
Interest charges
Interest charges		199			181			390			360
Allowance for borrowed funds used during construction		(7	)		(12	)		(16	)		(24	)
Total interest charges, net		192			169			374			336
Income from continuing operations before income tax		279			261			609			529
Income tax expense		98			86			237			171
Income from continuing operations before cumulative effect of change in accounting principle		181			175			372			358
Discontinued operations, net of tax		(1	)		(1	)		-			(1	)
Cumulative effect of change in accounting principle, net of tax		-			-			(2	)		-
Net income		180			174			370			357
Net income attributable to noncontrolling interests, net of tax		-			-			-			(1	)
Net income attributable to controlling interests	$	180		$	174		$	370		$	356
Average common shares outstanding – basic		290			280			287			278
Basic and diluted earnings per common share
Income from continuing operations attributable to controlling interests, net of tax	$	0.62		$	0.62		$	1.29		$	1.28
Discontinued operations attributable to controlling interests, net of tax		-			-			-			-
Net income attributable to controlling interests	$	0.62		$	0.62		$	1.29		$	1.28
Dividends declared per common share	$	0.620		$	0.620		$	1.240		$	1.240
Amounts attributable to controlling interests
Income from continuing operations, net of tax	$	181		$	175		$	370		$	357
Discontinued operations, net of tax		(1	)		(1	)		-			(1	)
Net income attributable to controlling interests	$	180		$	174		$	370		$	356

See Notes to Progress Energy, Inc. Unaudited Condensed Consolidated Interim Financial Statements.

PROGRESS ENERGY, INC.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(in millions)	June 30, 2010			December 31, 2009
ASSETS
Utility plant
Utility plant in service	$	29,728		$	28,918
Accumulated depreciation		(11,777	)		(11,576	)
Utility plant in service, net		17,951			17,342
Held for future use		48			47
Construction work in progress		1,914			1,790
Nuclear fuel, net of amortization		599			554
Total utility plant, net		20,512			19,733
Current assets
Cash and cash equivalents		690			725
Receivables, net		999			800
Inventory		1,237			1,325
Regulatory assets		324			142
Derivative collateral posted		194			146
Income taxes receivable		21			145
Prepayments and other current assets		195			248
Total current assets		3,660			3,531
Deferred debits and other assets
Regulatory assets		2,211			2,179
Nuclear decommissioning trust funds		1,341			1,367
Miscellaneous other property and investments		437			438
Goodwill		3,655			3,655
Other assets and deferred debits		321			333
Total deferred debits and other assets		7,965			7,972
Total assets	$	32,137		$	31,236
CAPITALIZATION AND LIABILITIES
Common stock equity
Common stock without par value, 500 million shares authorized, 293 million and 281 million shares issued and outstanding, respectively	$	7,304		$	6,873
Unearned ESOP shares (- and 1 million shares, respectively)		-			(12	)
Accumulated other comprehensive loss		(131	)		(87	)
Retained earnings		2,684			2,675
Total common stock equity		9,857			9,449
Noncontrolling interests		2			6
Total equity		9,859			9,455
Preferred stock of subsidiaries		93			93
Long-term debt, affiliate		272			272
Long-term debt, net		11,664			11,779
Total capitalization		21,888			21,599
Current liabilities
Current portion of long-term debt		705			406
Short-term debt		-			140
Accounts payable		954			835
Interest accrued		209			206
Dividends declared		182			175
Customer deposits		316			300
Derivative liabilities		250			190
Accrued compensation and other benefits		100			167
Other current liabilities		387			239
Total current liabilities		3,103			2,658
Deferred credits and other liabilities
Noncurrent income tax liabilities		1,288			1,196
Accumulated deferred investment tax credits		113			117
Regulatory liabilities		2,479			2,510
Asset retirement obligations		1,200			1,170
Accrued pension and other benefits		1,330			1,339
Derivative liabilities		324			240
Other liabilities and deferred credits		412			407
Total deferred credits and other liabilities		7,146			6,979
Commitments and contingencies (Notes 12 and 13)
Total capitalization and liabilities	$	32,137		$	31,236

See Notes to Progress Energy, Inc. Unaudited Condensed Consolidated Interim Financial Statements.

PROGRESS ENERGY, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS of CASH FLOWS
(in millions)
Six months ended June 30	2010			2009
Operating activities
Net income	$	370		$	357
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation, amortization and accretion		555			576
Deferred income taxes and investment tax credits, net		117			13
Deferred fuel (credit) cost		(137	)		129
Allowance for equity funds used during construction		(46	)		(75	)
Other adjustments to net income		136			118
Cash (used) provided by changes in operating assets and liabilities
Receivables		(126	)		(36	)
Inventory		87			(118	)
Derivative collateral posted		(40	)		47
Other assets		(13	)		41
Income taxes, net		152			110
Accounts payable		110			(30	)
Other liabilities		(6	)		(37	)
Net cash provided by operating activities		1,159			1,095
Investing activities
Gross property additions		(1,116	)		(1,172	)
Nuclear fuel additions		(119	)		(60	)
Purchases of available-for-sale securities and other investments		(3,815	)		(982	)
Proceeds from available-for-sale securities and other investments		3,792			960
Other investing activities		14			(3	)
Net cash used by investing activities		(1,244	)		(1,257	)
Financing activities
Issuance of common stock, net		405			545
Dividends paid on common stock		(354	)		(347	)
Payments of short-term debt with original maturities greater than 90 days		-			(129	)
Net decrease in short-term debt		(140	)		(521	)
Proceeds from issuance of long-term debt, net		591			1,337
Retirement of long-term debt		(400	)		(400	)
Other financing activities		(52	)		(51	)
Net cash provided by financing activities		50			434
Net (decrease) increase in cash and cash equivalents		(35	)		272
Cash and cash equivalents at beginning of period		725			180
Cash and cash equivalents at end of period	$	690		$	452
Supplemental disclosures
Significant noncash transactions
Accrued property additions	$	274		$	301

See Notes to Progress Energy, Inc. Unaudited Condensed Consolidated Interim Financial Statements.

CAROLINA POWER & LIGHT COMPANY
d/b/a PROGRESS ENERGY CAROLINAS, INC.
UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
June 30, 2010

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS of INCOME
	Three months ended June 30,						Six months ended June 30,
(in millions)	2010			2009			2010			2009
Operating revenues	$	1,117		$	1,076		$	2,380		$	2,254
Operating expenses
Fuel used in electric generation		375			383			858			825
Purchased power		76			57			126			114
Operation and maintenance		300			283			585			542
Depreciation, amortization and accretion		120			118			238			235
Taxes other than on income		51			51			111			105
Other		(1	)		2			-			2
Total operating expenses		921			894			1,918			1,823
Operating income		196			182			462			431
Other income (expense)
Interest income		1			1			2			3
Allowance for equity funds used during construction		15			7			28			16
Other, net		4			4			(3	)		(3	)
Total other income, net		20			12			27			16
Interest charges
Interest charges		53			52			103			109
Allowance for borrowed funds used during construction		(5	)		(3	)		(9	)		(6	)
Total interest charges, net		48			49			94			103
Income before income tax		168			145			395			344
Income tax expense		57			51			146			122
Income before cumulative effect of change in accounting principle		111			94			249			222
Cumulative effect of change in accounting principle, net of tax		-			-			(2	)		-
Net income		111			94			247			222
Net loss attributable to noncontrolling interests, net of tax		1			1			3			1
Net income attributable to controlling interests		112			95			250			223
Preferred stock dividend requirement		-			-			(1	)		(1	)
Net income available to parent	$	112		$	95		$	249		$	222

See Notes to Progress Energy Carolinas, Inc. Unaudited Condensed Consolidated Interim Financial Statements.

CAROLINA POWER & LIGHT COMPANY d/b/a PROGRESS ENERGY CAROLINAS, INC.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(in millions)	June 30, 2010			December 31, 2009
ASSETS
Utility plant
Utility plant in service	$	16,553		$	16,297
Accumulated depreciation		(7,631	)		(7,520	)
Utility plant in service, net		8,922			8,777
Held for future use		12			11
Construction work in progress		1,060			702
Nuclear fuel, net of amortization		430			396
Total utility plant, net		10,424			9,886
Current assets
Cash and cash equivalents		206			35
Receivables, net		508			442
Receivables from affiliated companies		15			33
Notes receivable from affiliated companies		2			204
Inventory		591			677
Deferred fuel cost		101			88
Income taxes receivable		26			38
Prepayments and other current assets		61			61
Total current assets		1,510			1,578
Deferred debits and other assets
Regulatory assets		894			873
Nuclear decommissioning trust funds		859			871
Miscellaneous other property and investments		187			199
Other assets and deferred debits		92			95
Total deferred debits and other assets		2,032			2,038
Total assets	$	13,966		$	13,502
CAPITALIZATION AND LIABILITIES
Common stock equity
Common stock without par value, 200 million shares authorized, 160 million shares issued and outstanding	$	2,125		$	2,108
Unearned ESOP shares		-			(12	)
Accumulated other comprehensive loss		(41	)		(27	)
Retained earnings		2,785			2,588
Total common stock equity		4,869			4,657
Noncontrolling interests		-			3
Total equity		4,869			4,660
Preferred stock		59			59
Long-term debt, net		3,688			3,703
Total capitalization		8,616			8,422
Current liabilities
Current portion of long-term debt		6			6
Accounts payable		426			355
Payables to affiliated companies		87			72
Interest accrued		72			70
Customer deposits		101			95
Derivative liabilities		48			29
Accrued compensation and other benefits		53			86
Other current liabilities		122			50
Total current liabilities		915			763
Deferred credits and other liabilities
Noncurrent income tax liabilities		1,327			1,258
Accumulated deferred investment tax credits		107			110
Regulatory liabilities		1,307			1,293
Asset retirement obligations		822			801
Accrued pension and other benefits		703			708
Other liabilities and deferred credits		169			147
Total deferred credits and other liabilities		4,435			4,317
Commitments and contingencies (Notes 12 and 13)
Total capitalization and liabilities	$	13,966		$	13,502

See Notes to Progress Energy Carolinas, Inc. Unaudited Condensed Consolidated Interim Financial Statements.

CAROLINA POWER & LIGHT COMPANY d/b/a PROGRESS ENERGY CAROLINAS, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS of CASH FLOWS
(in millions)
Six months ended June 30	2010			2009
Operating activities
Net income	$	247		$	222
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation, amortization and accretion		294			286
Deferred income taxes and investment tax credits, net		55			10
Deferred fuel cost		21			92
Allowance for equity funds used during construction		(28	)		(16	)
Other adjustments to net income		47			52
Cash (used) provided by changes in operating assets and liabilities
Receivables		(39	)		42
Receivables from affiliated companies		18			13
Inventory		85			(60	)
Other assets		(18	)		32
Income taxes, net		12			63
Accounts payable		20			(43	)
Payables to affiliated companies		15			(24	)
Other liabilities		(12	)		(23	)
Net cash provided by operating activities		717			646
Investing activities
Gross property additions		(580	)		(402	)
Nuclear fuel additions		(106	)		(42	)
Purchases of available-for-sale securities and other investments		(252	)		(517	)
Proceeds from available-for-sale securities and other investments		227			492
Changes in advances to affiliated companies		202			(75	)
Net cash used by investing activities		(509	)		(544	)
Financing activities
Dividends paid on preferred stock		(1	)		(1	)
Dividends paid to parent		(50	)		(200	)
Net decrease in short-term debt		-			(110	)
Proceeds from issuance of long-term debt, net		-			595
Retirement of long-term debt		-			(400	)
Contributions from parent		14			15
Other financing activities		-			(1	)
Net cash used by financing activities		(37	)		(102	)
Net increase in cash and cash equivalents		171			-
Cash and cash equivalents at beginning of period		35			18
Cash and cash equivalents at end of period	$	206		$	18
Supplemental disclosures
Significant noncash transactions
Accrued property additions	$	158		$	128

See Notes to Progress Energy Carolinas, Inc. Unaudited Condensed Consolidated Interim Financial Statements.

FLORIDA POWER CORPORATION
d/b/a PROGRESS ENERGY FLORIDA, INC.
UNAUDITED CONDENSED INTERIM FINANCIAL STATEMENTS
June 30, 2010

UNAUDITED CONDENSED STATEMENTS of INCOME
	Three months ended June 30,						Six months ended June 30,
(in millions)	2010			2009			2010			2009
Operating revenues	$	1,252		$	1,234		$	2,522		$	2,496
Operating expenses
Fuel used in electric generation		368			443			781			955
Purchased power		239			200			452			360
Operation and maintenance		208			204			413			406
Depreciation, amortization and accretion		110			105			234			265
Taxes other than on income		83			80			176			168
Other		-			7			-			7
Total operating expenses		1,008			1,039			2,056			2,161
Operating income		244			195			466			335
Other income
Interest income		1			-			1			1
Allowance for equity funds used during construction		10			29			18			59
Other, net		1			7			3			7
Total other income, net		12			36			22			67
Interest charges
Interest charges		70			64			134			131
Allowance for borrowed funds used during construction		(2	)		(9	)		(7	)		(18	)
Total interest charges, net		68			55			127			113
Income before income tax		188			176			361			289
Income tax expense		69			57			140			81
Net income		119			119			221			208
Preferred stock dividend requirement		-			-			(1	)		(1	)
Net income available to parent	$	119		$	119		$	220		$	207

See Notes to Progress Energy Florida, Inc. Unaudited Condensed Interim Financial Statements.

FLORIDA POWER CORPORATION d/b/a PROGRESS ENERGY FLORIDA, INC.
UNAUDITED CONDENSED BALANCE SHEETS
(in millions)	June 30, 2010			December 31, 2009
ASSETS
Utility plant
Utility plant in service	$	12,993		$	12,438
Accumulated depreciation		(4,075	)		(3,987	)
Utility plant in service, net		8,918			8,451
Held for future use		36			36
Construction work in progress		854			1,088
Nuclear fuel, net of amortization		169			158
Total utility plant, net		9,977			9,733
Current assets
Cash and cash equivalents		113			17
Receivables, net		488			356
Receivables from affiliated companies		6			8
Inventory		647			648
Regulatory assets		223			54
Derivative collateral posted		174			139
Deferred tax assets		78			115
Prepayments and other current assets		18			80
Total current assets		1,747			1,417
Deferred debits and other assets
Regulatory assets		1,317			1,307
Nuclear decommissioning trust funds		482			496
Miscellaneous other property and investments		43			42
Other assets and deferred debits		127			105
Total deferred debits and other assets		1,969			1,950
Total assets	$	13,693		$	13,100
CAPITALIZATION AND LIABILITIES
Common stock equity
Common stock without par value, 60 million shares authorized, 100 shares issued and outstanding	$	1,747		$	1,744
Accumulated other comprehensive (loss) income		(7	)		3
Retained earnings		2,912			2,743
Total common stock equity		4,652			4,490
Preferred stock		34			34
Long-term debt, net		4,481			3,883
Total capitalization		9,167			8,407
Current liabilities
Current portion of long-term debt		-			300
Notes payable to affiliated companies		7			221
Accounts payable		509			451
Payables to affiliated companies		56			62
Interest accrued		76			72
Customer deposits		215			205
Derivative liabilities		179			161
Accrued compensation and other benefits		29			53
Other current liabilities		247			89
Total current liabilities		1,318			1,614
Deferred credits and other liabilities
Noncurrent income tax liabilities		877			767
Regulatory liabilities		1,060			1,103
Asset retirement obligations		378			369
Accrued pension and other benefits		389			395
Capital lease obligations		204			208
Derivative liabilities		223			174
Other liabilities and deferred credits		77			63
Total deferred credits and other liabilities		3,208			3,079
Commitments and contingencies (Notes 12 and 13)
Total capitalization and liabilities	$	13,693		$	13,100

See Notes to Progress Energy Florida, Inc. Unaudited Condensed Interim Financial Statements.

FLORIDA POWER CORPORATION d/b/a PROGRESS ENERGY FLORIDA, INC.
UNAUDITED CONDENSED STATEMENTS of CASH FLOWS
(in millions)
Six months ended June 30	2010			2009
Operating activities
Net income	$	221		$	208
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation, amortization and accretion		244			280
Deferred income taxes and investment tax credits, net		138			(41	)
Deferred fuel (credit) cost		(158	)		37
Allowance for equity funds used during construction		(18	)		(59	)
Other adjustments to net income		62			47
Cash (used) provided by changes in operating assets and liabilities
Receivables		(87	)		(76	)
Receivables from affiliated companies		2			8
Inventory		1			(58	)
Derivative collateral posted		(27	)		38
Other assets		(10	)		22
Income taxes, net		122			16
Accounts payable		98			16
Payables to affiliated companies		(6	)		(7	)
Other liabilities		28			14
Net cash provided by operating activities		610			445
Investing activities
Gross property additions		(543	)		(770	)
Nuclear fuel additions		(13	)		(18	)
Purchases of available-for-sale securities and other investments		(3,505	)		(415	)
Proceeds from available-for-sale securities and other investments		3,508			420
Other investing activities		15			(4	)
Net cash used by investing activities		(538	)		(787	)
Financing activities
Dividends paid on preferred stock		(1	)		(1	)
Dividends paid to parent		(50	)		-
Net decrease in short-term debt		-			(371	)
Proceeds from issuance of long-term debt, net		591			-
Retirement of long-term debt		(300	)		-
Changes in advances from affiliated companies		(214	)		406
Contributions from parent		-			310
Other financing activities		(2	)		(2	)
Net cash provided by financing activities		24			342
Net increase in cash and cash equivalents		96			-
Cash and cash equivalents at beginning of period		17			19
Cash and cash equivalents at end of period	$	113		$	19
Supplemental disclosures
Significant noncash transactions
Accrued property additions	$	113		$	172

See Notes to Progress Energy Florida, Inc. Unaudited Condensed Interim Financial Statements.

PROGRESS ENERGY, INC.

CAROLINA POWER & LIGHT COMPANY d/b/a/ PROGRESS ENERGY CAROLINAS, INC.

FLORIDA POWER CORPORATION d/b/a PROGRESS ENERGY FLORIDA, INC.

COMBINED NOTES TO UNAUDITED CONDENSED INTERIM FINANCIAL STATEMENTS

INDEX TO APPLICABLE COMBINED NOTES TO UNAUDITED CONDENSED INTERIM FINANCIAL STATEMENTS BY REGISTRANT

Each of the following combined notes to the unaudited condensed interim financial statements of the Progress Registrants are applicable to Progress Energy, Inc. but not to each of PEC and PEF. The following table sets forth which notes are applicable to each of PEC and PEF. The notes that are not listed below for PEC or PEF are not, and shall not be deemed to be, part of PEC’s or PEF’s financial statements contained herein.

Registrant	Applicable Notes

PEC	1 through 9 and 11 through 13

PEF	1 through 9 and 11 through 13

PROGRESS ENERGY, INC.

CAROLINA POWER & LIGHT COMPANY d/b/a PROGRESS ENERGY CAROLINAS, INC.

FLORIDA POWER CORPORATION d/b/a PROGRESS ENERGY FLORIDA, INC.

COMBINED NOTES TO UNAUDITED INTERIM FINANCIAL STATEMENTS

1.	ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

A.	ORGANIZATION

In this report, Progress Energy, which includes Progress Energy, Inc. holding company (the Parent) and its regulated and nonregulated subsidiaries on a consolidated basis, is at times referred to as “we,” “us” or “our.” When discussing Progress Energy’s financial information, it necessarily includes the results of Carolina Power & Light Company d/b/a Progress Energy Carolinas, Inc. (PEC) and Florida Power Corporation d/b/a Progress Energy Florida, Inc. (PEF) (collectively, the Utilities). The term “Progress Registrants” refers to each of the three separate registrants: Progress Energy, PEC and PEF. The information in these combined notes relates to each of the Progress Registrants as noted in the Index to Applicable Combined Notes to Unaudited Condensed Interim Financial Statements by Registrant. However, neither of the Utilities makes any representation as to information related solely to Progress Energy or the subsidiaries of Progress Energy other than itself.

PROGRESS ENERGY

The Parent is a holding company headquartered in Raleigh, N.C. As such, we are subject to regulation by the Federal Energy Regulatory Commission (FERC) under the regulatory provisions of the Public Utility Holding Company Act of 2005 (PUHCA 2005).

Our reportable segments are PEC and PEF, both of which are primarily engaged in the generation, transmission, distribution and sale of electricity. The Corporate and Other segment primarily includes amounts applicable to the activities of the Parent and Progress Energy Service Company, LLC (PESC) and other miscellaneous nonregulated businesses (Corporate and Other) that do not separately meet the quantitative disclosure requirements as a reportable business segment. See Note 10 for further information about our segments.

PEC

PEC is a regulated public utility primarily engaged in the generation, transmission, distribution and sale of electricity in portions of North Carolina and South Carolina. PEC’s subsidiaries are involved in insignificant nonregulated business activities. PEC is subject to the regulatory jurisdiction of the North Carolina Utilities Commission (NCUC), Public Service Commission of South Carolina (SCPSC), the United States Nuclear Regulatory Commission (NRC) and the FERC.

PEF

PEF is a regulated public utility primarily engaged in the generation, transmission, distribution and sale of electricity in west central Florida. PEF is subject to the regulatory jurisdiction of the Florida Public Service Commission (FPSC), the NRC and the FERC.

B.	BASIS OF PRESENTATION

These financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) for interim financial information and with the instructions to Form 10-Q and Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for annual financial statements. The December 31, 2009 condensed balance sheet data was derived from audited financial statements but does not include all disclosures required by GAAP. Because the accompanying interim financial statements do not include all of the information and footnotes required by GAAP for annual financial statements, they should be read in conjunction with the audited financial statements and notes thereto included in the Progress Registrants’ annual report on Form 10-K for the fiscal year ended December 31, 2009 (2009 Form 10-K).

The Utilities collect from customers certain excise taxes levied by the state or local government upon the customers. The Utilities account for sales and use tax on a net basis and gross receipts tax, franchise taxes and other excise taxes on a gross basis.

The amount of gross receipts tax, franchise taxes and other excise taxes included in electric operating revenues and taxes other than on income in the statements of income were as follows:


	Three months ended June 30,				Six months ended June 30,
(in millions)	2010		2009		2010		2009
Progress Energy	$	81	$	77	$	164	$	156
PEC		27		26		57		52
PEF		54		51		107		104

The amounts included in these financial statements are unaudited but, in the opinion of management, reflect all adjustments necessary to fairly present the Progress Registrants’ financial position and results of operations for the interim periods. Unless otherwise noted, all adjustments are normal and recurring in nature. Due to seasonal weather variations, the impact of regulatory orders received, and the timing of outages of electric generating units, especially nuclear-fueled units, the results of operations for interim periods are not necessarily indicative of amounts expected for the entire year or future periods.

In preparing financial statements that conform to GAAP, management must make estimates and assumptions that affect the reported amounts of assets and liabilities, the reported amounts of revenues and expenses and the disclosure of contingent assets and liabilities at the date of the financial statements. Actual results could differ from those estimates.

Certain amounts for 2009 have been reclassified to conform to the 2010 presentation.

C.	CONSOLIDATION OF VARIABLE INTEREST ENTITIES

We consolidate all voting interest entities in which we own a majority voting interest and all variable interest entities (VIEs) for which we are the primary beneficiary. We determine whether we are the primary beneficiary of a VIE through a qualitative analysis that identifies which variable interest holder has the controlling financial interest in the VIE. The variable interest holder who has both of the following has the controlling financial interest and is the primary beneficiary: (1) the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance and (2) the obligation to absorb losses of, or the right to receive benefits from, the VIE that could potentially be significant to the VIE. In performing our analysis, we consider all relevant facts and circumstances, including: the design and activities of the VIE, the terms of the contracts the VIE has entered into, the nature of the VIE’s variable interests issued and how they were negotiated with or marketed to potential investors, and which parties participated significantly in the design or redesign of the entity.

In June 2009, the Financial Accounting Standards Board (FASB) issued new guidance which made significant changes to the model for determining who should consolidate a VIE and addressed how often this assessment should be performed. The guidance was effective for us on January 1, 2010 (see Note 2). As a result of the adoption, we and PEC deconsolidated two limited partnerships that qualify for federal affordable housing and historic tax credits under Section 42 of the Internal Revenue Code (the Code) and recognized a $(2) million cumulative effect adjustment during the six months ended June 30, 2010.

PROGRESS ENERGY

Progress Energy, through its subsidiary PEC, is the managing member and primary beneficiary of, and consolidates a limited partnership which qualifies for federal affordable housing and historic tax credits under Section 42 of the Code. Our variable interests are debt and equity investments in the VIE. There were no changes to our assessment