Progress Energy 2009 Annual Report Download - page 171

Progress Energy Proxy Statement
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In 2007, the Committee approved a transition plan designed to bridge the prior long-term incentive plan
to the redesigned long-term incentive plan. Under the transition plan, the Committee awarded interim grants of
performance units to our officers (the “Transitional Grants”). The Transitional Grants were determined using the
same Total Business Return measure as the annual grants described above.
The Transitional Grants included a grant that vested in 2009. The size of the grant awarded to each of
the named executive officers was equal to such officer’s revised PSSP long-term incentive target for 2007. The
transition plan provides that any award from the Transitional Grants vesting in 2009 will be reduced by awards,
if any, from the outstanding 2006 performance share grants vesting in 2009. Based on the performance results
calculated under the terms of the 2006 PSSP, the Company did not make a payment in 2009 in connection with
the performance shares that were issued in 2006. Under the terms of the Transitional Grants, the actual payout
opportunity ranges from 0% to 200% of the grant, based on performance. In 2009, the Committee approved a payout
of 100% of the target value for the Transitional Grant that vested in 2009.
2009 Performance Share Sub-Plan (the “2009 PSSP”)
In early 2009, the Committee, along with its executive compensation consultant, concluded that the PSSP
should be modified to further align it with the prevailing structure of long-term incentive plans of other highly
regulated utility companies and to improve its alignment with the Company’s goals. The 2009 PSSP continues to be
based on a three-year performance period, and performance shares accrue quarterly dividend equivalents, which are
reinvested in additional shares. Shares vest on January 1 following the end of the performance period and are paid
out in Company common stock provided the performance measures have been met.
The modifications to the 2009 PSSP use two equally weighted performance measures: relative total
shareholder return (TSR) and earnings growth. By using a combination of relative (TSR) and absolute (earnings
growth) performance measures, the 2009 PSSP allows the Committee to consider the Company’s performance as
compared to the PSSP Peer Group (as defined below), and management’s achievement of internal goals. TSR is
defined as the appreciation or depreciation in the value of the stock, plus dividends paid during the year, divided
by the closing value of the stock on the last trading day of the preceding year. The relative TSR performance is
calculated using the Company’s three-year annualized TSR ranked against the PSSP Peer Group (as defined below).
This component of the PSSP award is based on the Company’s relative TSR percentile ranking. However, regardless
of the relative ranking, if the Company’s TSR is negative for the performance period, no award above the threshold
can be earned. The table below shows the percent of target awards that may be earned based on the Company’s
relative TSR percentile ranking:
Performance and Award Structure (50%)
Percentile Ranking Percent of Target Award Earned
80th 200%
50th 100%
40th 50%
<40th 0%
The Committee selected a peer group for the PSSP awards comprised of highly regulated companies with
a business strategy similar to ours based on a percentage of regulated earnings (the “PSSP Peer Group”). These
companies have a significant amount of their earnings generated from regulated assets. In addition, the PSSP Peer
Group was selected based on other factors including revenues, market capitalization, enterprise value and percent of
regulated earnings. The table below lists the companies in the PSSP Peer Group.
Alliant Energy Corporation Great Plains Energy, Inc. SCANA Corporation
American Electric Power, Inc. NV Energy, Inc. Southern Company
Consolidated Edison, Inc. PG&E Corporation Westar Energy, Inc.
DPL, Inc. Pinnacle West Capital Corporation Wisconsin Energy Corp.
Duke Energy Corporation Portland General Electric Company Xcel Energy, Inc.