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2010 Annual Report | Notice of Annual Meeting | Proxy Statement
Manage the present. Create the future.
BUILD NEW CONNECTIONS.
2010 Annual Report | Notice of Annual Meeting | Proxy Statement

Table of contents

  • Page 1
    2010 Annual Report | Notice of Annual Meeting | Proxy Statement 2010 Annual Report | Notice of Annual Meeting | Proxy Statement Manage the present. Create the future. BUILD NE W CONNECTIONS.

  • Page 2
    Manage the present. Create the future. BUILD NE W CONNECTIONS.

  • Page 3
    ... through the merger approval process in 2011 and plan how best to integrate the two Progress Energy delivered a 12.6 percent total return to shareholders in 2010 (dividend plus stock-price appreciation for the 12 months) and for the fifth consecutive year achieved ongoing earnings per share in our...

  • Page 4
    ... Progress Energy provided reliable, affordable service to our 3.1 million customers even in a year that had more than its share of severe weather and extreme temperatures. We also were pleased that the Florida Public Service Commission approved a constructive rate settlement that stabilized our base...

  • Page 5
    ... companies' boards of directors in January 2011. This strategic combination, to be known by the Duke Energy corporate name, will have an enterprise value of about $65 billion and a regulated customer base of more than 7 million households and businesses in six states. FINANCIAL HIGHLIGHTS Years...

  • Page 6
    ... officer of the new company. Duke Energy's current chairman, president and chief executive officer, Jim Rogers, will become the executive chairman. integration planning to position the combined Duke-Progress for success. Building new connections Progress Energy has been closely connected to the...

  • Page 7
    ..., and their respective directors, executive officers and certain other members of management and employees may be soliciting proxies from Duke Energy and Progress Energy shareholders in favor of the merger and related matters. Information regarding the persons who may, under the rules of the SEC...

  • Page 8
    ... Nuclear Officer Progress Energy Carolinas, Inc. Progress Energy Florida, Inc. Mark F. Mulhern Senior Vice President and Chief Financial Officer Progress Energy, Inc. Jeffrey J. Lyash Executive Vice President - Energy Supply Progress Energy, Inc. Paula J. Sims Senior Vice President - Corporate...

  • Page 9
    FINANCIAL REPORT

  • Page 10

  • Page 11
    Progress Energy Annual Report 2010 FINANCIAL REPORT Safe Harbor for Forward-Looking Statements ...Management's Discussion and Analysis ...Market Risk Disclosures ...Reports of Management and Independent Registered Public Accounting Firm ...Consolidated Financial Statements Income...Balance Sheets ...

  • Page 12
    ... and estimated capital expenditures; and e) "Other Matters" about the effects of new environmental regulations, changes in the regulatory environment, meeting anticipated demand in our regulated service territories, potential nuclear construction and our synthetic fuels tax credits. Examples...

  • Page 13
    Progress Energy Annual Report 2010 •฀ 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฀...

  • Page 14
    ... are the generation, transmission, distribution and sale of electricity in portions of North Carolina and South Carolina and in portions of Florida, respectively. The "Corporate and Other" segment primarily includes the operations of the Parent, Progress Energy Service Company, LLC (PESC) and...

  • Page 15
    ... an integrated energy company primarily focused on the end-use electricity markets. We own two electric utilities that operate in regulated retail utility markets in North Carolina, South Carolina and Florida and have access to attractive wholesale markets in the eastern United States. The Utilities...

  • Page 16
    ... planning. Integration planning efforts will also focus on savings from the fuel purchasing power and joint dispatch of generating plants of the combined companies. Maintaining constructive relations with regulators, public leaders and the general public is fundamental to our business, which...

  • Page 17
    ... non-GAAP basis. We introduce our results (in millions except per share data) Year ended December 31, 2010 Ongoing Earnings Impairment, net of tax(a) Plant retirement charge, net of tax(a) Change in the tax treatment of the Medicare Part D subsidy Discontinued operations attributable to controlling...

  • Page 18
    ... related to North Carolina Clean Smokestacks Act (Clean Smokestacks Act) amortization฀ expense฀ and฀ depreciation฀ expense฀ associated with the accelerated cost-recovery program for nuclear generating assets; and •฀ favorable฀weather฀at฀the฀Utilities. Progress Energy Carolinas...

  • Page 19
    ... by year follows: (in millions) Customer Class Residential Commercial Industrial Governmental Unbilled Total retail base revenues Wholesale base revenues Total Base Revenues Clause-recoverable regulatory returns Miscellaneous Fuel and other passthrough revenues Total operating revenues 2010 % Change...

  • Page 20
    ... to 2009. This increase was primarily due to the $324 million impact of higher system requirements resulting from favorable weather and the impact of nuclear plant outages on PEC's generation mix, partially offset by $151 million decreased current year fuel costs driven by lower coal and gas prices...

  • Page 21
    ... resulting from increased construction project costs and a $16 million cumulative prior period adjustment charge recorded in 2009 related to certain employee life insurance benefits. The prior period adjustment is not material to 2009 or previously issued financial statements. Management determined...

  • Page 22
    ...by year follows: (in millions) Customer Class Residential Commercial Industrial Governmental Unbilled Total retail base revenues Wholesale base revenues Total Base Revenues Clause-recoverable regulatory returns Miscellaneous Fuel and other pass-through revenues Total operating revenues 2010 % Change...

  • Page 23
    ... million resulting from lower fuel rates, which assumed the Crystal River Unit No. 3 Nuclear Plant (CR3) outage was completed in 2009, partially offset by increased current year fuel and purchased power costs of $189 million and an increase in the recovery of deferred capacity costs of $167 million...

  • Page 24
    ... estimates; $18 million higher Energy Conservation Cost Recovery Clause (ECCR) costs driven by higher deferred expenses due to higher rates, increased energy sales and increased customer usage of load management programs and home improvement incentives; the $11 million prior-year impact of a change...

  • Page 25
    ... AFUDC equity related to lower eligible construction project costs, primarily due to placing the repowered Bartow Plant into service in 2009. Total Interest Charges, Net Total interest charges, net was $258 million for 2010, which represents a $27 million increase compared to 2009. This increase was...

  • Page 26
    ...-Market Progress Energy issued 98.6 million contingent value obligations (CVOs) in connection with the acquisition of Florida Progress Corporation (Florida Progress) in 2000. Each CVO represents the right of the holder to receive contingency payments based on the performance of four synthetic fuels...

  • Page 27
    ... critical accounting policies and estimates with the Audit and Corporate Performance Committee (Audit Committee) of our board of directors. Impact of Utility Regulation Our regulated utilities segments are subject to regulation that sets the prices (rates) we are permitted to charge customers based...

  • Page 28
    ... limited to, cost escalation, changes in technology applicable to nuclear decommissioning and changes in federal, state or local regulations. Changes in PEC's and PEF's nuclear decommissioning site-specific cost estimates or the use of alternative cost escalation or discount rates could be material...

  • Page 29
    ... to estimate the fair value of the utility reporting units. Peer utilities are evaluated based on percentage of revenues generated by regulated utility operations; percentage of revenues generated by electric operations; generation mix, including coal, gas,฀nuclear฀and฀other฀resources...

  • Page 30
    ... increase 2011 pension costs, all other factors remaining constant. Our discount rates are selected based on a plan-by-plan study, which matches our projected benefit payments to a high-quality corporate yield curve. Consistent with general market conditions, our plan assets performed well in 2010...

  • Page 31
    ... basis from year to year. We have historically used a five-year averaging method. When we acquired Florida Progress in 2000, we retained the Florida Progress historical use of fair value to determine market-related value for Florida Progress pension assets. Changes in plan asset performance...

  • Page 32
    ... Parent from year to year. The Parent could change its existing common stock dividend policy based upon these and other business factors. Cash from operations, commercial paper issuance, borrowings under our credit facilities and/or longterm debt financings are expected to fund capital expenditures...

  • Page 33
    ... from year-end 2009; $154 million payment in 2009 due to a verdict in a lawsuit against Progress Energy and a number of our subsidiaries and affiliates previously engaged in coal-based solid synthetic fuels operations (See Note 22D); $56 million net cash receipts for income taxes in 2010 compared...

  • Page 34
    ... financial institutions (See "Credit Facilities and Registration Statements"). 30 •฀ Progress฀ Energy฀ issued฀ approximately฀ 12.2฀ million฀ shares of common stock resulting in approximately $434 million in proceeds from the Progress Energy Investor Plus Plan (IPP) and its employee...

  • Page 35
    ... its IPP and its employee benefit and equity incentive plans. Included in these amounts were approximately 2.5 million shares for proceeds of approximately $100 million issued for the Progress Energy 401(k) Savings & Stock Ownership Plan (401(k)) and the IPP. For 2009, the dividends paid on common...

  • Page 36
    ... operational risks associated with new baseload generation. As discussed in "Other Matters - Nuclear - Potential New Construction," PEF will postpone major capital expenditures for the Levy project until after the NRC issues the COL, which is expected to be in 2013 if the current licensing schedule...

  • Page 37
    ... June 2011; an approximately 950-MW generating facility at a site in Wayne County, N.C., projected to be in service by January 2013; and an approximately 620-MW generating facility at a site in New Hanover County, N.C., projected to be in service by December 2013. PEF Base Rates On June 1, 2010, the...

  • Page 38
    ...and November 30, 2010, the FPSC approved PEF's CCRC residential rate and fuel rate, respectively. PEF Nuclear Cost Recovery PEF is allowed to recover prudently incurred site selection costs, preconstruction costs and the carrying cost on construction cost balances on an annual basis through the CCRC...

  • Page 39
    ... additional liquidity to help meet our working capital requirements. AFUDC - borrowed funds represents the debt costs of capital funds necessary to finance the construction of new regulated plant assets. Actual (in millions) Regulated capital expenditures Nuclear fuel expenditures AFUDC - borrowed...

  • Page 40
    ... New Construction"). The forecasted capital expenditures presented in the previous table reflect the announced schedule shift. Additionally, in light of the schedule shifts in the Levy project, PEF may incur fees and charges related to the disposition of outstanding purchase orders on long lead time...

  • Page 41
    ..., including indemnifications made in connection with sales of businesses, and for timely payment of obligations in support of our nonwholly owned synthetic fuels operations as discussed in Note 22C. CREDIT RATING MATTERS Our credit ratings reflect the current views of the rating agencies, and no...

  • Page 42
    ...the COL, we cannot currently predict the timing of when those obligations will be satisfied or the magnitude of any change. Additionally, in light of the schedule shifts in the Levy nuclear project, PEF may incur fees and charges related to the disposition of outstanding purchase orders on long lead...

  • Page 43
    Progress Energy Annual Report 2010 OTHER MATTERS Regulatory Environment The Utilities' operations in North Carolina, South Carolina and Florida are regulated by the NCUC, the SCPSC and the FPSC, respectively. The Utilities are also subject to regulation by the FERC, the NRC and other federal and ...

  • Page 44
    ... generation resources, energy-efficiency initiatives and economic purchased power to meet this increased need. At this time, no definitive decisions have been made to construct or when to construct our proposed new nuclear plants (See "Nuclear - Potential New Construction") or to acquire new...

  • Page 45
    ... Energy Annual Report 2010 Mayo and Asheville coal-fired plants in North Carolina, which have state-of-the-art emission controls. Emissions of NOx, sulfur dioxide (SO2), mercury and other pollutants have been reduced significantly at these sites. In฀recent฀years,฀the฀federal฀government...

  • Page 46
    ... based on the termination circumstances. We executed an amendment to the EPC agreement in 2010 due to the schedule shifts previously discussed. Additionally, in light of the schedule shifts in the Levy nuclear project, PEF may incur fees and charges related to the disposition of outstanding purchase...

  • Page 47
    Progress Energy Annual Report 2010 We believe that we are in substantial compliance with those environmental regulations currently applicable to our business and operations and believe we have all necessary permits to conduct such operations. Environmental laws and regulations frequently change and...

  • Page 48
    ... a preferred option. Under both options, the EPA may leave in place a regulatory exemption for approved beneficial uses of coal combustion residuals that are recycled. A final rule is expected in late 2011 or 2012. Compliance plans and estimated costs to meet the requirements of new regulations will...

  • Page 49
    ... standard for power plants by November 16, 2011. In addition, North Carolina adopted a state-specific requirement. The North Carolina mercury rule contains a requirement that all coal-fired units in the state install mercury controls by December 31, 2017, and requires compliance plan applications to...

  • Page 50
    ... asking the federal government to force fossil fuel-fired power plants in 13 other states, including South Carolina, to reduce their NOx and SO2 emissions. The state of North Carolina contends these out-of-state emissions interfere with North Carolina's ability to meet National Ambient Air฀Quality...

  • Page 51
    ... basis and annual average will be eliminated under the new rule. The new 1-hour standard is a significant increase in the stringency of the standard and increases the risk of nonattainment, especially near uncontrolled coal-fired facilities. In addition, for the first time the EPA plans to use...

  • Page 52
    ... plan to meet the anticipated demand in the Utilities' service territories and provides a solid basis for slowing and reducing CO2 emissions by focusing on energy efficiency, alternative energy and a state-of-the-art power system. There are ongoing efforts to reach a new international climate change...

  • Page 53
    ... and a 20-year carry forward period. Total Section 29/45K credits generated under the synthetic fuels tax credit program (including those generated by Florida Progress prior to our acquisition) were $1.891 billion, $1.055 billion of which has been used through December 31, 2010, to offset regular...

  • Page 54
    .... Based on our variable rate long-term debt balances at December 31, 2010, a 100 basis point change in interest rates would result in an annual pre-tax interest expense change of approximately $9 million. We had no outstanding short-term debt at December 31, 2010. From time to time, we use interest...

  • Page 55
    ... fund certain costs of decommissioning their nuclear plants. These funds are primarily invested in stocks, bonds and cash equivalents, which are exposed to price fluctuations in equity markets and to changes in interest rates. At December 31, 2010 and December 31, 2009, the fair value of these funds...

  • Page 56
    ... gas, coal, fuel oil, electricity and other energy-related products marketed and purchased as a result of our ownership of energy-related assets. Our exposure to these fluctuations is significantly limited by the cost-based regulation of the Utilities. Each state commission allows electric utilities...

  • Page 57
    ...internal control over financial reporting. Management reviewed the results of its assessment with the Audit and Corporate Performance Committee (Audit Committee) of the board of directors. Based on our assessment, management determined that, at December 31, 2010, Progress Energy maintained effective...

  • Page 58
    ... Company Accounting Oversight Board (United States), the consolidated financial statements as of and for the year ended December 31, 2010 of the Company, and our report dated February 28, 2011, expressed an unqualified opinion on those consolidated financial statements. Raleigh, North Carolina...

  • Page 59
    ... Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit...

  • Page 60
    ... STATEMENTS OF INCOME (in millions except per share data) Years ended December 31 Operating revenues Operating expenses Fuel used in electric generation Purchased power Operation and maintenance Depreciation,฀amortization฀and฀accretion Taxes other than on income Other Total operating...

  • Page 61
    ... Energy Annual Report 2010 CONSOLIDATED BALANCE SHEETS (in millions) ASSETS Utility plant Utility plant in service Accumulated depreciation Utility plant in service, net Other utility plant, net Construction work in progress Nuclear฀fuel,฀net฀of฀amortization Total utility plant, net Current...

  • Page 62
    ...Deferred income taxes and investment tax credits, net Deferred fuel (credit) cost Allowance for equity funds used during construction Loss (gain) on sales of assets Pension, postretirement and other employee benefits Other adjustments to net income Cash (used) provided by changes in operating assets...

  • Page 63
    Progress Energy Annual Report 2010 CONSOLIDATED STATEMENTS OF CHANGES IN TOTAL EQUITY (in millions except per share data) Balance, December 31, 2007 Net income Other comprehensive loss Issuance of shares Allocation of ESOP shares Stock-based compensation expense Dividends ($2.465 per share) ...

  • Page 64
    ...(Corporate and Other) that do not separately meet the quantitative disclosure requirements as a reportable business segment. 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...

  • Page 65
    ...purchased power costs through surcharges on customer rates.฀ These฀ deferred฀ fuel฀ costs฀ are฀ recognized฀ in฀ revenues and fuel expenses as they are billable to customers. EXCISE TAXES The Utilities collect from customers certain excise taxes levied by the state or local government...

  • Page 66
    ... asset retirement obligations (AROs) are charged to a regulatory liability. Allowance for funds used during construction (AFUDC) represents the estimated costs of capital funds necessary to finance the construction of new regulated assets. As prescribed in the regulatory uniform system of accounts...

  • Page 67
    Progress Energy Annual Report 2010 ASSET RETIREMENT OBLIGATIONS AROs are legal obligations associated with the retirement of certain tangible long-lived assets. The present values of retirement costs for which we have a legal obligation are recorded as liabilities with an equivalent amount added to...

  • Page 68
    ...and liabilities differ. Investment tax credits related to regulated operations have been deferred฀ and฀ are฀ being฀ amortized฀ over฀ the฀ estimated฀ service life of the related properties. Credits for the production and sale of synthetic fuels are deferred credits to฀ the฀ extent...

  • Page 69
    ... a VIE, addressed how often this assessment should be performed, required all existing arrangements with VIEs to be evaluated, and was adopted through a cumulative effect of change in accounting principle adjustment. This guidance A. Terminals Operations and Synthetic Fuels Businesses Prior to 2008...

  • Page 70
    ... generating facilities in North Carolina that do not have scrubbers. These facilities total approximately 1,500 megawatts (MW) at four sites. During the fourth quarter of 2010, Progress Energy reclassified, for all periods, the net carrying value of the four facilities from utility plant in service...

  • Page 71
    ... net carrying value in rate base after retirement. AFUDC represents the estimated costs of capital funds necessary to finance the construction of new regulated assets. As prescribed in the regulatory uniform systems of accounts, AFUDC is charged to the cost of the plant for certain projects in...

  • Page 72
    ... in Harris. In the tables above, construction work in process for Crystal River Unit 3 Nuclear Plant (CR3) is not reduced by the accelerated recovery of qualifying project costs under the FPSC nuclear cost-recovery rule (see Note 7C). C. Asset Retirement Obligations At December 31, 2010 and 2009...

  • Page 73
    Progress Energy Annual Report 2010 The NCUC requires that PEC update its cost estimate for nuclear decommissioning every five years. PEC received a new site-specific estimate of decommissioning costs for Robinson Nuclear Plant (Robinson) Unit No. 2, Brunswick Nuclear Plant (Brunswick) Units No. 1 ...

  • Page 74
    ... table presents the changes to the AROs during the years ended December 31. Revisions to prior estimates of the regulated ARO are primarily related to the updated cost estimates for nuclear decommissioning and asbestos described above. (in millions) Asset retirement obligations at January 1, 2009...

  • Page 75
    Progress Energy Annual Report 2010 5. RECEIVABLES Income taxes receivable and interest income receivables are not included in receivables. These amounts are included in prepayments and other current assets or shown separately on the Consolidated Balance Sheets. At December 31 receivables were ...

  • Page 76
    ... 7B and 7C) Nuclear deferral (Notes 7C) Total current regulatory assets Deferred fuel cost - long-term Nuclear deferral (Note 7C)(a) Deferred impact of ARO (Note 4C)(b) Income taxes recoverable through future rates Loss on reacquired debt(d) Postretirement benefits (Note 16) (e) (c) 2010 $169 7 176...

  • Page 77
    ... 1, 2010, and decreased residential electric bills by $2.73 per 1,000 kWh for fuel cost recovery. PEC also filed with the SCPSC for an increase in the DSM and EE rate effective July 1, 2010, which was approved on a provisional basis on June 30, 2010, pending review by the South Carolina Office of...

  • Page 78
    ... adjustments approved on January 11, 2010, in PEF's base rate case and will be used for all purposes except for nuclear recoveries with original need petitions submitted on or before December 31, 2010, as permitted by FPSC regulations. FUEL COST RECOVERY On November 1, 2010, PEF filed a request with...

  • Page 79
    ... into account cost, potential carbon regulation, fossil fuel price volatility and the benefits of fuel diversification, we consider Levy to be PEF's preferred baseload generation option. Along with the FPSC's annual prudence reviews, we will continue to evaluate the project on an ongoing basis based...

  • Page 80
    ... of the 2009 deferral in 2011, as well as the estimated true-up of 2010 costs associated with the Levy and CR3 uprate projects. This resulted in a decrease in the nuclear cost-recovery charge of $1.46 per 1,000 kWh for residential customers, beginning with the first January 2011 billing cycle. The...

  • Page 81
    ...We periodically issue shares of common stock through the Progress Energy 401(k) Savings & Stock Ownership Plan (401(k)), the Progress Energy Investor Plus Plan (IPP) and other benefit plans. There are various provisions limiting the use of retained earnings for the payment of dividends under certain...

  • Page 82
    ... of Florida Progress Corporation, which is an ESOP plan that covers bargaining unit employees of PEF. Total matching cost for both plans was approximately $43 million, $41 million and $38 million for the years ended December 31, 2010, 2009 and 2008, respectively. OTHER STOCK-BASED COMPENSATION PLANS...

  • Page 83
    Progress Energy Annual Report 2010 use total shareholder return and earnings growth as two equally weighted performance measures. The outcome of the performance measures can result in an increase or decrease from the target number of performance shares granted. We distribute common stock shares to ...

  • Page 84
    ... by vote of the Utilities' respective board of directors at any time, and do not have any preemptive rights. All classes of preferred stock have a liquidation preference equal to $100 per share plus any accumulated unpaid dividends except for PEF's 4.75%, $100 par value class, which does not have...

  • Page 85
    ... were used to repay the outstanding balance of PEF's notes payable to affiliated companies, to repay the maturity of PEF's $300 million 4.50% First Mortgage Bonds due June 1, 2010, and for general corporate purposes. At December 31, 2010 and 2009, we had committed lines of credit used to support our...

  • Page 86
    ...3, 2011. On October 15, 2010, PEC and PEF each entered into new $750 million, three-year RCAs with a syndication of 22 financial institutions. The RCAs are used to provide liquidity support for PEC's and PEF's issuances of commercial paper and other short-term obligations, and for general corporate...

  • Page 87
    ... payment of dividends, so long as no shares of preferred stock are outstanding. At December 31, 2010, the Parent had no shares of preferred stock outstanding. See Note 25 for information regarding restrictions on dividends relative to the Progress Energy and Duke Energy Agreement and Plan of Merger...

  • Page 88
    ... 31, 2010 and 2009, $166 million and $152 million, respectively, of investments in company-owned life insurance were held in Progress Energy's trusts. B. Impairment of Investments We evaluate declines in value of investments under the criteria of GAAP. Declines in fair value to below the cost basis...

  • Page 89
    ...market values are accounted (in millions) 2010 Common stock equity Preferred stock and other equity Corporate debt U.S. state and municipal debt U.S. and foreign government debt Money market funds and other Total 2009 Common stock equity Preferred stock and other equity Corporate debt U.S. state and...

  • Page 90
    ... tables set forth, by level within the fair value hierarchy, our financial assets and liabilities accounted for at fair value on a recurring basis as of December 31, 2010 and 2009. Financial assets and liabilities are classified in their entirety based on the lowest level of input significant to the...

  • Page 91
    Progress Energy Annual Report 2010 (in millions) 2010 Assets Nuclear decommissioning trust funds Common stock equity Preferred stock and other equity Corporate debt U.S. state and municipal debt U.S. and foreign government debt Money market funds and other Total nuclear decommissioning trust funds ...

  • Page 92
    ...-sale debt securities used to fund certain employee benefit costs. We issued Contingent Value Obligations (CVOs) in connection with the acquisition of Florida Progress Corporation (Florida Progress), as discussed in Note 15. The CVOs are derivatives recorded at fair value based on quoted prices from...

  • Page 93
    ... 2010 $39 2009 $41 2008 $(26) 14. INCOME TAXES We provide deferred income taxes for temporary differences between book and tax carrying amounts of assets and liabilities. Investment tax credits related to regulated operations have been deferred and are being฀ amortized฀ over฀ the฀ estimated...

  • Page 94
    ...proposed merger between Progress Energy and Duke Energy Corporation (Duke Energy) (See Note 25), can impact the timing of the utilization฀of฀tax฀credit฀carry฀forwards฀and฀net฀operating฀ loss carry forwards. Income tax expense applicable to continuing operations for the years ended...

  • Page 95
    ... VALUE OBLIGATIONS In connection with the acquisition of Florida Progress during 2000, the Parent issued 98.6 million CVOs. Each CVO represents the right of the holder to receive contingent payments based on the performance of four coal-based solid synthetic fuels limited liability companies...

  • Page 96
    ... life insurance benefits, for retired employees who meet specified criteria. We use a measurement date of December 31 for our pension and OPEB plans. COSTS OF BENEFIT PLANS Prior฀ service฀ costs฀ and฀ benefits฀ are฀ amortized฀ on฀ a฀ straight-line basis over the average remaining...

  • Page 97
    ... between the fair value of the plan assets and the benefit obligation as of the end of the fiscal year. Reconciliations of the changes in benefit obligations and the funded status as of December 31, 2010 and 2009 are presented in the table below, followed by related supplementary information. 93

  • Page 98
    ...L S TAT E M E N T S Pension Benefits (in millions) Projected benefit obligation at January 1 Service cost Interest cost Settlements Benefit payments Plan amendment Actuarial loss (gain) Obligation at December 31 Fair value of plan assets at December 31 Funded status 2010 $2,422 48 140 - (129) 1 127...

  • Page 99
    Progress Energy Annual Report 2010 The rates of increase in future compensation include the effects of cost of living adjustments and promotions. Our primary defined benefit retirement plan for nonbargaining employees is a "cash balance" pension plan. Therefore, we use the traditional unit credit ...

  • Page 100
    ... Domestic equity securities Private equity securities Corporate bonds U.S. state and municipal debt U.S. and foreign government debt Commingled funds Hedge funds Timber investments Interest rate swaps and other investments Fair value of plan assets 2009 Assets Cash and cash equivalents Domestic...

  • Page 101
    ...31, 2010. B. Florida Progress Acquisition During 2000, we completed our acquisition of Florida Progress. Florida Progress' pension and OPEB liabilities, assets and net periodic costs are reflected in the above information as appropriate. Certain of Florida Progress' nonbargaining unit benefit plans...

  • Page 102
    ...in commodity prices and interest rates. Such instruments contain credit risk if the counterparty fails to perform under฀the฀contract.฀We฀minimize฀such฀risk฀by฀performing฀ credit and financial reviews using a combination of financial analysis and publicly available credit ratings of...

  • Page 103
    Progress Energy Annual Report 2010 that in the next twelve months losses of $7 million, net of tax, primarily related to terminated hedges, will be reclassified to interest expense. The actual amounts that will be reclassified to earnings may vary from the expected amounts as a result of changes in...

  • Page 104
    ...CVOs in connection with the acquisition of Florida Progress during 2000 (See Note 15). (c) In 2003, PEC recorded a $ 38 million pre-tax ($23 million after-tax) fair value loss transition adjustment pursuant to the adoption of new accounting฀guidance฀for฀derivatives.฀The฀related฀liability...

  • Page 105
    ... electricity in portions of North Carolina and South Carolina and in portions of Florida, respectively. These electric operations also distribute and sell electricity to other utilities, primarily on the east coast of the United States. In addition to the reportable operating segments, the Corporate...

  • Page 106
    ...segments. All intersegment transactions are at cost. (in millions) At and for the year ended December 31, 2010 Revenues Unaffiliated Intersegment Total revenues Depreciation, amortization and accretion Interest income Total interest charges, net Income tax expense (benefit)(a) Ongoing Earnings (loss...

  • Page 107
    ... law change be accounted for in the period of enactment rather than the affected tax year. Additionally, management has determined that impairments, charges (and฀ subsequent฀ adjustments,฀ if฀ any)฀ recognized฀ for฀ the retirement of generating units prior to the end of their estimated...

  • Page 108
    ... a preferred option. Under both options, the EPA may leave in place a regulatory exemption for approved beneficial uses of coal combustion residues that are recycled. A final rule is expected in late 2011 or 2012. Compliance plans and estimated costs to meet the requirements of new regulations will...

  • Page 109
    Progress Energy Annual Report 2010 In addition to the Utilities' sites discussed under "PEC" and "PEF" below, we incurred indemnity obligations related to certain pre-closing liabilities of divested subsidiaries, including certain environmental matters (See discussion under Guarantees in Note 22C)....

  • Page 110
    ...service in December 2009. Under an agreement with the FDEP, PEF will retire Crystal River Units No. 1 and No. 2 (CR1 and CR2) as coal-fired units and operate emission control equipment at CR4 and CR5. CR1 and CR2 will be retired after the second proposed nuclear unit at Levy completes its first fuel...

  • Page 111
    ...$3,511 Other purchase obligations PEF signed an engineering, procurement and construction (EPC) agreement on December 31, 2008, with Westinghouse Electric Company LLC and Stone & Webster, Inc. for two approximately 1,100-MW Westinghouse AP1000 nuclear units planned for construction at Levy. Due to...

  • Page 112
    ... costs associated with these agreements are not currently included in fuel commitments. CONSTRUCTION OBLIGATIONS We have purchase obligations related to various capital construction projects. Our total payments under these contracts were $703 million, $818 million and $1.018 billion for 2010, 2009...

  • Page 113
    ...the COL, we cannot currently predict the timing of when those obligations will be satisfied or the magnitude of any change. Additionally, in light of the schedule shifts in the Levy nuclear project, PEF may incur fees and charges related to the disposition of outstanding purchase orders on long lead...

  • Page 114
    ..., including plant related to purchased power agreements, at December 31 consisted of: (in millions) Buildings Less:฀Accumulated฀amortization Total 2010 $267 (46) $221 2009 $267 (37) $230 In 2003, we entered into an operating lease for a building for which minimum annual rental payments are...

  • Page 115
    Progress Energy Annual Report 2010 thereafter. PEC's rents received are contingent upon usage and totaled $33 million, $34 million, $33 million for 2010, 2009 and 2008, respectively. PEF's rents received are based on a fixed minimum rental where price varies by type of equipment or contingent usage...

  • Page 116
    ... into consent agreements with the EPA resolving all issues and requiring de minimus payment of penalties and performance. FLORIDA NUCLEAR COST RECOVERY On February 8, 2010, a lawsuit was filed against PEF in state circuit court in Sumter County, Fla., alleging that the Florida nuclear cost-recovery...

  • Page 117
    ... Consolidating Statements of Income, Balance Sheets and Cash Flows as required by Rule 3-10 of Regulation S-X. In September 2005, we issued our guarantee of certain payments of two wholly owned indirect subsidiaries, FPC Capital I (the Trust) and Florida Progress Funding Corporation (Funding Corp...

  • Page 118
    ... STATEMENT OF INCOME Year ended December 31, 2010 (in millions) Operating revenues Operating revenues Affiliate revenues Total operating revenues Operating expenses Fuel used in electric generation Purchased power Operation and maintenance Depreciation,฀amortization฀and฀accretion Taxes...

  • Page 119
    Progress Energy Annual Report 2010 CONDENSED CONSOLIDATING STATEMENT OF INCOME Year ended December 31, 2009 (in millions) Operating revenues Operating revenues Affiliate revenues Total operating revenues Operating expenses Fuel used in electric generation Purchased power Operation and maintenance ...

  • Page 120
    ... STATEMENT OF INCOME Year ended December 31, 2008 (in millions) Operating revenues Operating revenues Affiliate revenues Total operating revenues Operating expenses Fuel used in electric generation Purchased power Operation and maintenance Depreciation,฀amortization฀and฀accretion Taxes...

  • Page 121
    Progress Energy Annual Report 2010 CONDENSED CONSOLIDATING BALANCE SHEET December 31, 2010 (in millions) ASSETS Utility plant, net Current assets Cash and cash equivalents Receivables, net Notes receivable from affiliated companies Regulatory assets Derivative collateral posted Income taxes ...

  • Page 122
    ... December 31, 2009 (in millions) ASSETS Utility plant, net Current assets Cash and cash equivalents Receivables, net Notes receivable from affiliated companies Regulatory assets Derivative collateral posted Income taxes receivable Prepayments and other current assets Total current assets Deferred...

  • Page 123
    Progress Energy Annual Report 2010 CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS Year ended December 31, 2010 (in millions) Net cash provided by operating activities Investing activities Gross property additions Nuclear fuel additions Purchases of available-for-sale securities and other ...

  • Page 124
    ... TAT E M E N T S CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS Year ended December 31, 2009 (in millions) Net cash provided by operating activities Investing activities Gross property additions Nuclear fuel additions Proceeds from sales of assets to affiliated companies Purchases of available-for...

  • Page 125
    ... Energy Annual Report 2010 CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS Year ended December 31, 2008 (in millions) Net cash (used) provided by operating activities Investing activities Gross property additions Nuclear fuel additions Proceeds from sales of assets to affiliated companies Purchases...

  • Page 126
    ... interests, net of tax, primarily related to a jury delivering a verdict in a lawsuit against Progress Energy and a number of our subsidiaries and affiliates previously engaged in coal-based solid synthetic fuels operations. In฀the฀fourth฀quarter฀of฀2009,฀we฀recognized฀$25฀million...

  • Page 127
    ...the prior approval of Duke Energy, increase our quarterly common stock dividend of $0.62 per share. Certain substantial changes in ownership of Progress Energy, including the Merger, can impact the timing of the utilization฀of฀tax฀credit฀carry฀forwards฀and฀net฀operating฀ loss carry...

  • Page 128
    ...fixed charges Number of common shareholders of record Book value per common share Dividends declared per common share Energy supply (millions of kilowatt-hours) Generated Steam Nuclear Combustion turbines/combined cycle Hydro Purchased Total energy supply (Company share) Jointly owned share(b) Total...

  • Page 129
    ... change in tax treatment to be representative of the company's fundamental core earnings. CVO Mark-to-Market In connection with the acquisition of Florida Progress Corporation, Progress Energy issued 98.6 million CVOs. Each CVO represents the right of the holder to receive contingent payments based...

  • Page 130
    ... REPORTED GAAP EARNINGS PER SHARE (UNAUDITED) valuation allowance, which more than offset the change in estimate. Management does not believe this net valuation allowance is representative of the company's fundamental core earnings. Discontinued Operations The company has reduced its business risk...

  • Page 131
    ... its peer companies are primarily rate-of- return regulated, operate in the full range of the value chain, and typically have requirements to serve all customers under state utility regulations. The companies similar to us from a business model perspective that are Electric Power, DPL, Duke Energy...

  • Page 132
    ...Street Raleigh, NC 27601-1849 Securities Analyst Inquiries Securities analysts, portfolio managers and representatives of financial institutions seeking information about Progress Energy should contact Robert F. Drennan, Jr., vice president, Investor Relations, at the corporate headquarters address...

  • Page 133
    NOTICE OF ANNUAL MEETING AND PROXY STATEMENT

  • Page 134

  • Page 135
    ...South Street, Raleigh, North Carolina. As described in the accompanying Notice of Annual Meeting of Shareholders and Proxy Statement, the matters scheduled to be acted upon at the meeting for Progress Energy, Inc. are the election of directors; an advisory (nonbinding) vote on executive compensation...

  • Page 136
    ... IS IMPORTANT Your vote is important. To ensure your representation at the Annual Meeting, please vote your shares as promptly as possible. In addition to voting in person, shareholders of record may VOTE VIA A TOLL-FREE TELEPHONE NUMBER OR OVER THE INTERNET, as instructed in the materials. If you...

  • Page 137
    ... of record at the close of business on March 4, 2011, are entitled to attend the meeting and to vote. The stock transfer books will remain open. By order of the Board of Directors JOHN R. MCARTHUR Executive Vice President, General Counsel and Corporate Secretary Raleigh, North Carolina March 31...

  • Page 138
    ...Annual Meeting and Voting Information ...1 Proposal 1-Election of Directors ...4 Principal Shareholders ...11 Management Ownership of Common Stock ...11 Changes in Control ...13 Transactions with Related Persons ...13 Section 16(a) Beneficial Ownership Reporting Compliance...14 Corporate Governance...

  • Page 139
    ... by the Board of Directors (at times referred to as the "Board") of proxies to be used at the Annual Meeting of Shareholders. That meeting will be held at 10:00 a.m. on May 11, 2011, at the Progress Energy Center for the Performing Arts, 2 East South Street, Raleigh, North Carolina. (For directions...

  • Page 140
    ... the Internet. You should address any written notices of proxy revocation to: Progress Energy, Inc., P.O. Box 1551, Raleigh, North Carolina 27602-1551, Attention: Corporate Secretary. All shares represented by effective proxies received by the Company at or before the Annual Meeting, and not revoked...

  • Page 141
    ... business at the meeting but not for determining the number of shares voted "FOR," "AGAINST" or "ABSTAINING" from such nonroutine matters. At the 2011 Annual Meeting of Shareholders, the following three nonroutine matters will be presented for a vote: the election of 14 directors of the Company...

  • Page 142
    ... the decision about how frequently the Company will conduct future votes on executive compensation in a Current Report on Form 8-K within 150 calendar days of our Annual Meeting, but no later than October 3, 2011. A copy of these Forms 8-K may be obtained without charge by any of the means outlined...

  • Page 143
    ... (Carolina Power & Light Company d/b/a Progress Energy Carolinas, Inc. ("PEC") and Florida Power Corporation d/b/a Progress Energy Florida, Inc. ("PEF"), which are noted below, are wholly owned subsidiaries of the Company.) Information concerning the number of shares of our Common Stock beneficially...

  • Page 144
    ... and business development issues facing companies in the State of Florida. Mr. Baker's executive experience and service on the boards of other public companies have prepared him to respond to financial and operational challenges and have enhanced his ability to work effectively with other directors...

  • Page 145
    ... 1992, including Group President for Energy Delivery, President and Chief Executive Officer for Progress Energy Service Company, LLC and General Counsel and Corporate Secretary for Progress Energy. Before joining Progress Energy, Mr. Johnson was a partner with the Raleigh, N.C., law office of Hunton...

  • Page 146
    ... the Board's Audit and Corporate Performance Committee, the Nuclear Project Oversight Committee and the Operations and Nuclear Oversight Committee. Other public directorships in past five years: Premiere Global Services, Inc. (2007 to present) State Farm Mutual Automobile Insurance Co. (June 2010 to...

  • Page 147
    ... served as President and Chief Executive Officer of Westinghouse Electric Co., a supplier of nuclear fuel, nuclear services and advanced nuclear plant designs to utilities operating nuclear power plants. Mr. Pryor's former service as chief executive officer of a multi-billion dollar company provides...

  • Page 148
    ... assets to the Board as the Company executes its plans to optimize its balanced solution strategy for meeting customer needs and complying with public policies while creating long-term value in a challenging economy and a changing business environment. Mr. Saladrigas has served as a director of the...

  • Page 149
    ... a Schedule 13G filed by State Street Corporation on February 11, 2011.) MANAGEMENT OWNERSHIP OF COMMON STOCK The following table describes the beneficial ownership of our Common Stock as of February 28, 2011, of (i) all current directors and nominees for director, (ii) each executive officer named...

  • Page 150
    ... Stock Unit Plan as of February 28, 2011. A unit of Common Stock does not represent an equity interest in the Company, and possesses no voting rights, but is equal in economic value at all times to one share of Common Stock. Directors' Deferred Compensation Plan Non-Employee Director Stock Unit Plan...

  • Page 151
    ..., from the Federal Energy Regulatory Commission, the Federal Communications Commission, the Nuclear Regulatory Commission, the North Carolina Utilities Commission, the Kentucky Public Service Commission, the South Carolina Public Service Commission, the Florida Public Service Commission, the Indiana...

  • Page 152
    ... applicable to our directors and executive officers with respect to the Company's 2010 fiscal year were met, except as previously disclosed in our 2010 Annual Meeting Proxy Statement, dated March 31, 2010, as filed with the SEC. CORPORATE GOVERNANCE GUIDELINES AND CODE OF ETHICS The Board...

  • Page 153
    ... companies that purchase electric energy from PEF. These transactions involve the rendering of services by public utilities at rates fixed in conformity with governmental authorities. Mr. Baker currently serves as a director of Wells Fargo & Company and is a former director of Wachovia Corporation...

  • Page 154
    ... 2010 Annual Meeting of Shareholders, attended that meeting. BOARD COMMITTEES The Board of Directors appoints from its members an Executive Committee, an Audit and Corporate Performance Committee, a Governance Committee, a Finance Committee, a Nuclear Project Oversight Committee, an Operations and...

  • Page 155
    ... and investments, pension funds and financing plans. The Finance Committee also monitors our risk management activities and financial position and recommends changes to our dividend policy and proposed budget. The Finance Committee held four meetings in 2010. Nuclear Project Oversight Committee...

  • Page 156
    ... our business strategy and compensation philosophy. John R. McArthur, our Executive Vice President, General Counsel and Corporate Secretary, serves as management's liaison to the Compensation Committee. William D. Johnson, our Chief Executive Officer, is responsible for conducting annual performance...

  • Page 157
    ...mission and operations; appreciation of the business and social environment in which we operate; an understanding of our responsibilities to shareholders, employees, customers and the communities we serve; and service on other boards of directors that would not detract from service on our Board. 19

  • Page 158
    ... Executive Vice President, General Counsel and Corporate Secretary, Progress Energy, Inc., P.O. Box 1551, Raleigh, North Carolina 27602-1551. We screen mail addressed to the Board, the Governance Committee or any specified individual director for security purposes and to ensure that the mail relates...

  • Page 159
    ...misalignment between compensation and performance plans and the interests of the Company's shareholders. Our risk management structure is designed to enable the Board to stay informed about and understand the key risks facing the Company, how those risks relate to the Company's business and strategy...

  • Page 160
    ... and performance for our shareholders that are sustainable and consistent with prudent risk-taking and based on sound corporate governance practices; and Providing market competitive levels of target (i.e., opportunity) compensation. • Highlights of the 2010 executive compensation program are...

  • Page 161
    ...customers to provide safe, reliable and competitively priced electric service. The Company reported ongoing earnings for 2010 of $889 million, or $3.06 per share, compared to $846 million, or $3.03 per share in 2009. Our named executive officers' (NEOs) target (i.e., opportunity) total compensation...

  • Page 162
    ...proposed merger with Duke Energy Corporation, he will not receive a tax gross-up for any of his excise tax obligation (as disclosed below on page 38). • For 2010, the Company's NEOs were William D. Johnson, Chairman, President and Chief Executive Officer; Mark F. Mulhern, Senior Vice President...

  • Page 163
    ...the change in the intrinsic value of the Company over time and therefore to determine how successful the Company is in its fundamental business. The executive officers receive restricted stock units that generally have a three-year vesting period so that their upside potential and downside risk are...

  • Page 164
    ... that compensation plans are aligned with our business strategy and meet the principles described above. John R. McArthur, our Executive Vice President, serves as management's liaison to the Committee. William D. Johnson, our Chief Executive Officer, is responsible for conducting annual performance...

  • Page 165
    ... nondeductible compensation. The Company received shareholder approval of the Progress Energy 2009 Executive Incentive Plan (the "EIP"), an annual cash incentive plan for the Company's named executive officers, at its 2009 Annual Meeting of Shareholders. The MICP and EIP were designed to work...

  • Page 166
    ... included in the Company's 2010 Proxy Statement that proposed the Committee adopt a policy requiring senior executives to retain no less than 75% of net after-tax shares acquired through equity compensation programs until the year following termination of employment through retirement or otherwise...

  • Page 167
    ... Variable compensation Restricted Stock/Restricted based on target levels. Stock Units Service-based vesting. Supplemental Senior Formula-based Executive Retirement Plan compensation, based on salary, annual incentives and eligible years of service. Management Change-InDefines Company's Control Plan...

  • Page 168
    ... each year. The Committee meets in executive session with the compensation consultant to review and establish the Chief Executive Officer's base salary. 2. ANNUAL INCENTIVE We sponsor the MICP, an annual cash incentive plan, in which our executives, managers and supervisors participate. The Company...

  • Page 169
    Progress Energy Proxy Statement Each year, the Committee establishes, based on the recommendations of the CEO, the threshold, target and outstanding levels for the performance measures applicable to the named executive officers. The 2010 MICP performance measures were ongoing earnings per share (...

  • Page 170
    ... Company long enough for the restricted stock units to vest. The table below shows the 2010 long-term incentive targets for the NEOs' positions. Long-Term Incentive Award Target1 Performance Shares Target Award Position2 2010 Chief Executive Officer 233% Executive Vice President 117% Chief Financial...

  • Page 171
    ...are reinvested in additional shares that are only paid on earned performance shares at the end of each three-year performance cycle. To determine the number of shares granted at the beginning of each performance cycle, the Company divides the target award value by the closing stock price on the last...

  • Page 172
    ...2009 Performance Share Sub-Plan (the "2009 PSSP") The 2009 PSSP uses two equally weighted performance measures: relative total shareholder return (TSR) and earnings growth. TSR, unlike the previously discussed TBR, is based on the conventional metric of annual share price appreciation and dividends...

  • Page 173
    ...receive a grant of service-based RSUs in the first quarter of each year which are subject to a three-year graded vesting schedule. The size of each grant is based on the executive officer's target award percentage and is determined by using the closing price of the Company's common stock on the last...

  • Page 174
    .... Eligible pay includes base salary and annual incentive. (For those executives who became SERP participants on or after January 1, 2009, the target benefit percentage is 2.25% rather than 4% per year of service. None of the named executive officers for 2010 is subject to the new benefit percentage...

  • Page 175
    ... of the CIC Plan benefits as it relates to our NEOs: Tier I Chief Executive Officer, Chief Operating Officer, Presidents and Executive Vice Presidents 300% of base salary and annual incentive1 Coverage up to 36 months Full gross-up of excise tax Tier II Senior Vice Presidents 200% of base salary and...

  • Page 176
    ...management, and may be currently funded. To date, no such trust has been funded with respect to any of our NEOs. Application of the CIC Plan and Other Compensation Related Consequences of the Proposed Merger with Duke Energy On January 8, 2011, Duke Energy Corporation ("Duke Energy") and the Company...

  • Page 177
    ...the merger, outstanding options to purchase shares of Company common stock and outstanding awards of restricted stock, restricted stock units, phantom shares and performance shares will be converted into equity or equity-based awards in respect of a number of shares of Duke Energy common stock equal...

  • Page 178
    ...of the "Discussion of Summary Compensation Table and Grants of Plan-Based Awards Table" on page 52 of this Proxy Statement. The Committee provides employment agreements to the named executive officers because it believes that such agreements are important for the Company to be competitive and retain...

  • Page 179
    ... work more efficiently and, in the case of the tax and financial planning services, help them to optimize the value received from all of the compensation and benefits programs offered. The costs of these benefits constitute only a small percentage of each named executive officer's total compensation...

  • Page 180
    ... Florida's annual filings for fuel and purchased power, environmental projects, conservation programs and new nuclear generation, including approval to collect, subject to refund, replacement power costs related to the Crystal River 3 Nuclear Plant outage; Received approval from the North Carolina...

  • Page 181
    ... resulted in the execution of the Merger Agreement with Duke Energy. The Committee also considered the Company's challenges in the nuclear business unit, including higher than budgeted utility non-fuel O&M related to unplanned nuclear outages at the Robinson Nuclear Plant. The Committee recognized...

  • Page 182
    ..., O&M expense management, and long-term workforce planning; supporting a successful rate settlement for PEF requiring adaptation of the Company's financial plan to absorb no new cash revenue during the settlement period; and negotiating and executing the Merger Agreement with Duke Energy. The...

  • Page 183
    ... costs and incentives in North Carolina and South Carolina; and negotiating and executing the Merger Agreement with Duke Energy. With respect to long-term compensation, in 2010 each of the other named executive officers received annual grants of restricted stock units and performance shares...

  • Page 184
    ... Y S TAT E M E N T IV. COMPENSATION COMMITTEE REPORT The Committee has reviewed and discussed this CD&A with management as required by Item 402(b) of Regulation S-K. Based on such review and discussions, the Committee recommended to the Company's Board of Directors that the CD&A be included in this...

  • Page 185
    ... than the expense related to equity awards for financial statement reporting purposes in accordance with ASC Topic 718. Fair value of stock awards granted in 2010 and the maximum potential payout for the performance shares granted in 2010 are based on the March 16, 2010 closing stock price of $39.44...

  • Page 186
    ... the Progress Energy 401(k) Savings & Stock Ownership Plan; deferred credits under Management Deferred Compensation Plan (MDCP); perquisites; the Company's payment of the FICA tax on the non-qualified retirement accrual and the tax gross-up on the imputed income of that tax payment; and dividends...

  • Page 187
    ...$5,781 2,489 1,242 $65,145 24,012 11,058 * Executives' spouses may travel on the Company's aircraft only to accompany executives on "business-related" events that spouses are requested to attend. 7 Mr. Johnson did not receive additional compensation for his service on the Board of Directors. 49

  • Page 188
    ... Vice President and Chief Financial Officer Jeffrey J. Lyash, Executive Vice President - Energy Supply Lloyd M. Yates, President and Chief Executive Officer, PEC John R. McArthur, Executive Vice President, General Counsel and Corporate Secretary Grant Date (b) MICP 3/4/11 Restricted Stock Units...

  • Page 189
    ... March 16, 2010, based on closing price of $39.44 per share, times the shares granted in column (i). Market value of PSSP granted on March 16, 2010, based on closing stock price on March 16, 2010, of $39.44 times target number of shares in column (g). The 2010 PSSP grant payout is expected to be 100...

  • Page 190
    ... of service credit to our post-employment health and welfare plans as discussed below, the employment agreements do not affect the compensation, benefits or incentive targets payable to the applicable officers. With respect to Mr. Johnson, the Employment Agreement specifies that the years of service...

  • Page 191
    Progress Energy Proxy Statement OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END Option Awards1 Stock Awards Name (a) William D. Johnson, Chairman, President and Chief Executive Officer Mark F. Mulhern, Senior Vice President and Chief Financial Officer Jeffrey J. Lyash, Executive Vice President - ...

  • Page 192
    ... or units of stock that have not vested is based on a December 31, 2010, closing price of $43.48 per share. 4 The 2008 grant vests on January 1, 2011; the 2009 grant vests on January 1, 2012; and the 2010 grant vests on January 1, 2013. Performance share value for the 2009 annual grant is expected...

  • Page 193
    ... Vice President - Energy Supply Lloyd M. Yates, President and Chief Executive Officer, PEC John R. McArthur, Executive Vice President, General Counsel and Corporate Secretary 1 Reflects the number of restricted stock shares, restricted stock units, and performance shares that vested in 2010...

  • Page 194
    ...T PENSION BENEFITS TABLE Number of Present Years Value of Payments Credited Accumulated During Last Service Benefit1 Fiscal Year Plan Name b) (c) (d) (e) Progress Energy Pension Plan 18.3 $528,633 $0 Supplemental Senior Executive Retirement Plan 25.32 $8,287,8713 $0 Progress Energy Pension Plan 14...

  • Page 195
    Progress Energy Proxy Statement NONQUALIFIED DEFERRED COMPENSATION The table below shows the nonqualified deferred compensation for each of the named executive officers. Information regarding details of the deferred compensation plans currently in effect can be found under the heading "Deferred ...

  • Page 196
    ...31, 2010 balances under the following deferred compensation plans: Management Incentive Compensation Plan, Performance Share Sub-Plan, Management Deferred Compensation Plan, and Deferred Compensation Plan for Key Management Employees. Balances for named executive offices under each deferral plan are...

  • Page 197
    ... / Performance Stock Tax (paid in MDCP and Units Shares Unit Options Gross2010) MICP Vesting Vesting Dividends Vesting Perquisite ups (b)2 (c)3 (d)4 (e)5 (f)6 (g)7 (h)8 (i)9 Name and Position William D. Johnson, Chairman, President and Chief Executive Officer Mark F. Mulhern, Senior Vice President...

  • Page 198
    ... on January 1, 2010. The value of the 2007 performance share units were calculated using the closing stock price for Progress Energy Common Stock on the business day prior to when distribution occurred. Reflects dividends and dividend equivalents paid as the result of outstanding restricted stock or...

  • Page 199
    ... the Annual Cash Incentive Compensation Plan provisions of the Management Change-in-Control Plan, calculated as 85% times $990,000. In the event of early retirement, death or disability, Mr. Johnson would receive a pro-rata incentive award for the period worked during the year. For December 31, 2010...

  • Page 200
    ...2009 and 2010 performance grants, a pro-rata payment would be made based upon the target value of the award and time in the plan. 5 Amounts shown for restricted stock units are based on a December 31, 2010, closing price of $43.48 per share. For a detailed description of outstanding restricted stock...

  • Page 201
    ... the Annual Cash Incentive Compensation Plan provisions of the Management Change-in-Control Plan, calculated as 55% times $450,000. In the event of death or disability, Mr. Mulhern would receive a pro-rata incentive award for the period worked during the year. For December 31, 2010, this is based on...

  • Page 202
    ... of employer Medicare tax related to the excise tax payment. See "Management Change-in-Control Plan - Application of the CIC Plan and Other Compensation Related Consequences of the Proposed Merger with Duke Energy" on pages 38 through 39 above for a discussion regarding "involuntary" or "good reason...

  • Page 203
    ... the Annual Cash Incentive Compensation Plan provisions of the Management Change-in-Control Plan, calculated as 55% times $453,000. In the event of death or disability, Mr. Lyash would receive a pro-rata incentive award for the period worked during the year. For December 31, 2010, this is based on...

  • Page 204
    ... of employer Medicare tax related to the excise tax payment. See "Management Change-in-Control Plan - Application of the CIC Plan and Other Compensation Related Consequences of the Proposed Merger with Duke Energy" on pages 38 through 39 above for a discussion regarding "involuntary" or "good reason...

  • Page 205
    ... the Annual Cash Incentive Compensation Plan provisions of the Management Change-in-Control Plan, calculated as 55% times $448,000. In the event of death or disability, Mr. Yates would receive a pro-rata incentive award for the period worked during the year. For December 31, 2010 this is based on...

  • Page 206
    ... of employer Medicare tax related to the excise tax payment. See "Management Change-in-Control Plan - Application of the CIC Plan and Other Compensation Related Consequences of the Proposed Merger with Duke Energy" on pages 38 through 39 above for a discussion regarding "involuntary" or "good reason...

  • Page 207
    ...the Annual Cash Incentive Compensation Plan provisions of the Management Change-in-Control Plan, calculated as 55% times $488,000. In the event of death or disability, Mr. McArthur would receive a pro-rata incentive award for the period worked during the year. For December 31, 2010, this is based on...

  • Page 208
    ... employer Medicare tax related to the excise tax payment. 11 See "Management Change-in-Control Plan - Application of the CIC Plan and Other Compensation Related Consequences of the Proposed Merger with Duke Energy" on pages 38 through 39 above for a discussion regarding "involuntary" or "good reason...

  • Page 209
    ... Topic 718, the fair value of the Director Plan is re-measured at each financial statement date. The grant date fair value for each stock unit granted to each director on January 4, 2010 was $40.93. The numbers of stock units outstanding in the Non-Employee Director Stock Unit Plan as of December 31...

  • Page 210
    ... column. The numbers of stock units outstanding in the NonEmployee Director Deferred Compensation Plan as of December 31, 2010 for each Director listed above are in the table below. Non-Employee Director Non-Employee Director Stock Unit Plan Deferred Compensation Plan Dividend Reinvestments Dividend...

  • Page 211
    ...Non-Employee Director Deferred Compensation Plan. Any deferred fees are deemed to be invested in a number of units of Common Stock of the Company, but participating Directors receive no equity interest or voting rights in any shares of the Common Stock. The number of units credited to the account of...

  • Page 212
    ...to vote. The number of units is adjusted from time to time to reflect the payment of dividends with respect to the Common Stock of the Company. Effective January 1, 2007, a Director shall be fully vested at all times in the stock units credited to his or her account. OTHER COMPENSATION Directors are...

  • Page 213
    Progress Energy Proxy Statement EQUITY COMPENSATION PLAN INFORMATION as of December 31, 2010 (c) Number of (a) securities Number of remaining available securities to for future issuance be issued upon (b) under equity exercise of Weighted-average compensation plans outstanding exercise price of (...

  • Page 214
    ... shareholder return for 2010 and annualized total shareholder return for the three-years ending December 31, 2010 that were between the median of the total shareholder returns of the Company's Benchmarking and Performance Share Sub-Plan Peer Group. Our Chief Executive Officer's total compensation...

  • Page 215
    Progress Energy Proxy Statement Payments under the Management Incentive Compensation Plan and the Performance Share Sub-Plan are based on the achievement of multiple performance factors that we believe drive shareholder value. We continue to strongly believe in a pay-for-performance culture. ...

  • Page 216
    ... outcome of the vote into account when making future decisions about the Company's executive compensation policies and procedures. THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE, ON AN ADVISORY BASIS, FOR THE OPTION OF "1 YEAR" AS THE FREQUENCY WITH WHICH SHAREHOLDERS ARE PROVIDED AN ADVISORY...

  • Page 217
    Progress Energy Proxy Statement REPORT OF THE AUDIT AND CORPORATE PERFORMANCE COMMITTEE The Audit and Corporate Performance Committee of the Company's Board of Directors (the "Audit Committee") has reviewed and discussed the audited financial statements of the Company for the fiscal year ended ...

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    ... or other amendment to the engagement letter or any other agreement between the Company and Deloitte relating to the service and (b) any compensation arrangement or other agreement, such as a referral agreement, a referral fee or fee-sharing arrangement, between Deloitte and any person (other than...

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    Progress Energy Proxy Statement Audit fees include fees billed for services rendered in connection with (i) the audits of our annual financial statements and those of our SEC reporting subsidiaries (Carolina Power & Light Company and Florida Power Corporation); (ii) the audit of the effectiveness ...

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    ...FIRM The Audit and Corporate Performance Committee of our Board of Directors (the "Audit Committee") has selected Deloitte & Touche LLP ("Deloitte & Touche") as our independent registered public accounting firm for the fiscal year ending December 31, 2011, and has directed that management submit the...

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    ... statement for our 2012 Annual Meeting must be received no later than December 2, 2011, at our principal executive offices, addressed to the attention of: John R. McArthur Executive Vice President, General Counsel and Corporate Secretary Progress Energy, Inc. P.O. Box 1551 Raleigh, North Carolina...

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    ...exhibit to our Quarterly Report on Form 10-Q for the quarter ended June 30, 2006, and is available at the SEC's website at www.sec.gov. OTHER BUSINESS The Board of Directors does not intend to bring any business before the meeting other than that stated in this Proxy Statement. The Board knows of no...

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    ..., a "Related Person" means: 1. any person who is, or at any time since the beginning of the Company's last fiscal year was, a director or executive officer (i.e. members of the Senior Management Committee and the Controller) of the Company, Progress Energy Carolinas, Inc., or Progress Energy Florida...

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    ..., at each calendar year's first regularly scheduled Committee meeting, management shall recommend Related Person Transactions to be entered into by the Company for that calendar year, including the proposed aggregate value of such transactions if applicable. After review, the Committee shall...

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    ... Board and any material Related Person Transaction shall be disclosed to the full Board of Directors. The material features of this Policy shall be disclosed in the Company's annual report on Form 10-K or in the Company's proxy statement, as required by applicable laws, rules and regulations. A-3

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    P R O X Y S TAT E M E N T Directions to Progress Energy's 2011 Annual Shareholders' Meeting Progress Energy Center for the Performing Arts 2 E. South Street, Raleigh, North Carolina Public Parking 002CS-61034

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    ...: Audit and Corporate Performance; Finance. James B. Hyler, Jr. Retired Vice Chairman and Chief Operating Officer, First Citizens Bank. Raleigh, N.C. Elected to the board in 2008 and sits on the following committees: Finance; Organization and Compensation. Theresa M. Stone Executive Vice President...

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    Progress Energy, Inc. P.O. Box 1551 Raleigh, N.C. 27602-1551 progress-energy.com PGN - 002CSI1107