3F0494-17, Bold Strokes for Progress 1993 Annual Rept Florida Progress Corp

Bold Strokes for Progress 1993 Annual Rept Florida Progress Corp

ML20070N616
Person / Time
Site:	Crystal River
Issue date:	12/31/1993
From:	FLORIDA PROGRESS CORP.
To:
Shared Package
ML20070N491	List: 3F0494-17, Bold Strokes for Progress 1993 Annual Rept Florida Progress Corp ML20070N487 ML20070N636
References
3F0494-17, 3F494-17, NUDOCS 9405090042
Download: ML20070N616 (52)

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Bold StTokes '*" d' --d ~" -

Florida Pmgress is reshaping, For M0 """"8 'ad "**""8

(55 business for the future.

.. We are today, as a corpora-m d experas the tion, a diamond in the rough.

bestesikstBesseetdes - A raw esmondmsytasadessansmesy,bw tale is often told of the leg- Each of our businesses is onlymestumussedesof a manercuner .

endary master cutter who stud- preparing for the multi-faceted cuitutigommegentmesman bandy led a large, and for challenges that tomorrow will men as esmed mpping more than a tinizing bring. The future is demanding acessusy possonedsassiMade. To every groove, surface, we change now. It is requiring asswoapersectcut,meesmondis haki every micmscopic crack. us to make difficult decisions g One full year calculating , meigday.

what precise stmkes would be In 1993, we took bold strokes needed to yield the stdnc's to enhance our future value.

maximum value. Hundreds of 'Ibese stmkes were both strate-

~

/ plaster models were built. Each gic and innovative, and will would help determine the best continue to strengthen our 4 way to divide the stone into corporation.

smaller, individual diamands.

f ,.;

., Strategy is everything in Bold strokes for progress.

And looking ahead, we

. . .. .- cutting a diamond. remain dedicated to buil i

,,,.,, i r After many months of prepa- the long-term value of our M L , . ., y ti/ ration, the cutter was ready. As shareholders' investments.

you might expect, his careful The future will demand  !

i-Q

' Q strokes revealed 12 diamonds no less. ,

YM.

• I of everlasting beauty. >

For us at Florida Progress ' -

Corporation, this story provides

. similarities not so much th

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(Dollars in millions, except per share arna nts)

(in percent) 1993 1992 1992 1993 1988,1993 OPERATING RESULTS Utility revenues $1,957.6 S1,774.1 10.3 5.9 Diversified revenues (continuing) 491.4 321.2 53.0 12.7 Net income 196.6 175.7 11.9 1.8 j DATA PER SHARE Earnings:

Utility $2.06 $ 1.99 3.5 (1.4)

Diversified (continuing) .16 .07 128.6 4.2 Change in accounting .01 -

Consolidated 2.23 2.06 8.3 (1.0)

Dividends 1.95 1.905 2.4 3.2 Book value 20.40 19.85 2.8 3.5 Closing stock price 33% 32X 3.1 7.7 Stock price range 31% 36% 27% . 33M FINANCIAL POSITION Kr DECEMBER 31 Assets $5,638.8 $5,333.0 5.7 5.7 Total capitalization 4,037.2 3,811.9 5.9 6.4 Capitalization structure:

Short-term capital 5.0 % 5.3%

Long term debt 46.2 43.4 Preferred stock 3.7 5.7 Common stock equity 45.1 45.6 OTHER STATISTICS Return on common equity 11.1 % 10.6 %

Dividend yield 5.9 % $.9%

Average common shares outstanding (in millions) 88.3 85.4 3.4 2.9 Employees 7,825 7,301 7.2 (.4)

EARNINGS AND DIVIDENDS PER SHARE AVERAGE ANNLIAL TOTAL RETURNS

• For the penals e M December 31,1993 lllll ell!!!!

1989 1990 1991 4 Dividends 1992 1993

& Earnings g

$ S&P 500 p p

• Includes the reinvestrnent of dividends

l l

FLORIDA PROGRESS C O RP O R ATI O N

-artned in 1982, Florida  ; fff @;

s" j g h y y w W Q +ff%

1

- Progress Corporation is a ^<' + v ma f}$ h

.3 ,-

diversified utility holding

• • L'L 9 '

(k company with annual rev- '^ ' XQt ' 9%,  ;

enues in excess of $2.4 billion

- **~, , , y ^T;;D

~.

and assets of S5.6 billion.

Based in St. Petersburg, Fla.,

e'L -

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e see . ,

the cornpany owns a growing =

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electric utility and certain W .

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select diversified businesses.

lts principalsubsidiaryis ,

Florida Power Corporation, ,

the state's second-largest

^

A clectric utility. Looking ahead Florida Progress will FLORIDA POWER CORPORATlON focus on maintaining Florida An electric utility headquartered in St. Petersburg that provides service to Power's operational and 1.2 million customers in Florida. Incorporated in 1899, Florida Power is financialstrength. The involved in th( generation, purchase, transmission, distribution and sale of Florida Progress diversifica, electricity. It haa a strong tradition of providing quality service at reason-able electric rates Florida Power:

tion strategy calls for invest-ing in businesses that help ## Provides electricit y to about one-third of Florida's population, the company achieve higher + Opciates in one of the nation's fastest-growing states. Florida ranks as carnings and increase total the fourth most populous state in the United States.

returns for shareholders. 4 Provides service in 32 of the state's 67 counties, covering about 20,000 square miles in Central and Northern Florida and along the west coast of the state.

1993 ASSETS, REVENLIES + Serves St. Petersburg and Clearwater as well as the areas surrounding

& EARNINGS Walt Disney World, Orlando, Ocala and Tallahassee.

4 Has a total capacity

$5.6 $2.4 $l97 of moie than Ihllion Billion Million '

A ,A 7,500 mega- 3WME

. Q~' watts of power. ,s tot its balanced y,%

L b

4$

energy mix in 1993 was 45% coal,21% oil,

$ senxe me.i

]; 4 94 CN 18% nuclear and 16% purchased power. N@ ' ,

50 % h h@ '[

no p g $ Has seen retail kilowatt hour sales increase an 2n y I,-

average of 3.2 percent annually during the last M five years.

g /v 0% k Assets Revenues Earnings

& Florida Power & Electric Fuels 4 Mid-Continent Life $ Real Estate

$ Lending and Leasing

+

ELECTRIC FLIELS CORPORATION A coal mining and transportation subsidiary that serves electric utilities, including Florida Power, and industrial companies. Formed in 1976, Electric Fuels has operations in 15 states and is involved in coal mining,

' procurement and transportation; bulk commodities transportation; and rail car and marine repair services. Electric Fuels;

$ Provides Florida Power with about 5 million tons of economical, low-sulfur coal annually.

+ Sells in excess of 6 milhon tons of coal annually to other ~; qdMy utilities and industrial customers.

g p~h;g ~

4 Has increased earnings an average of 14 percent '

annually during the past five years.

$ Operates a diverse transportation network and owns or manages about 400 barges and almost 1,000 rail cars.

AllD-CONTINENT LIFE INSLlRANCE COMPANY ' ~ ' '

A life insurance company headquartered in Oklahoma City that serves 37 states and sells its policies through about 9,000 independent agents. Mid-Continent's principal product is a low-premium death bene-fit policy. All of the company's financial portfolio is in investment grade securities. Founded in 1909, Mid-Continent:

4 Has increased earnings an average of 19 percent annually since it was , e , 4mg.'

acquired by Florida Progress in , *gd # % .

1986. v

• 4 Has $12.8 billion of life insurance 4 , [ '. ; ,

policies outstanding. f" & - ~. .

""?

$ Has achieved success by using a consistent approach to underwnt. . 'n,,

f""% _ i E 3..4 *4 s

ing and maintaining a conservative  ! ' " - ~ ~ "

' " 'Y investment portiolio. [fN[

_._.._,_.p

& Has held an in ,ance rating of A+ - ;;&,7;h_ g iSuperior) for 15 consecutive years -

'"L G irr 7 Y

~ ~ ~ "*M from A.M. Best Company, a nation-ally recognized insurance-rating agency.

OTHER DIVERSIflED OPERATIONS Florida Progress continues to divest the assets of those diversified opera-tions that do not fit into the company's long-range strategic plan. These operations include:

+ A lending and leasing business with assets of about $575 million in commercial aircraft and real estate.

4 A real estate company with investments of about $140 million in office buildings and undeveloped land.

LETTER TO SHAREHOLDERS W hatthemade 1993 a momentousOur bold steps our core utility business took to year 1993 for flNANCIAL us wen RESLlLTS company reported solid earnings growth during the prepare for the future. The nation's electric utility year. Consolidated earnings were $196.6 million in industry is expecting to enter an - -

1993, up from $175.7 million earned in era of unprecedented change. Our -

1992. Earnings per share of common largest unit, Florida power Corpo- . . , .

stock increased to $2.23, a 17-cent ration, is readying its organization #'E increase over 1992. Florida power con-l for a new business environment. .;' - tributed $2.06 a share, compared with During 1993, Florida power .

$1.99 per share from a year ago.

1 announced moves that will im- In 1993, our company reported higher i

prove its ability to compete in a carnings largely because of the im-

changing energy market. These .

proved financial performance at Florida l moves, or bold strokes, were neces- power. Revenues increased at our utili-sary now. Each should contribute ty in 1993 because retail kilowatt-hour to our future success and enhance sales rose by 5.3 percent during the l our company's long term value. It year, compared with 1992 sales. Custo-j is this strategy that symbohzes our .

mer growth and higher customer usage theme for this year's report -Iloid

contributed to the higher energy sales.

Strokes For progress. In November 1993, our utility began ily nearly all rocasures,1993 collecting the third, and final, phase of l

was a good year for Florida progress a 9 percent increase in retail base rates.

I and its shareholders. Unwamnab1y hot weather across the lack s. critch/ictd state of Flon,da in 1993 also resulted in higher operating uvenues for Florida Power.

]

i BOLD STROKES FOR PROGRESS Our contian% uamuct,mations repmted cam-

ings of $14.3 milhon in 1993, up from the $5.5 million 1 9 Began developing long-term strategies for gen- earned in 1992. Earnings per share were 16 cents, com-eration, transmission and distribution that will pared with 7 cents a share in 1992. An acquisition in I allow our electric utility to aggressively com- June of 1993 by our coal mining and transportation unit j pete in an evolving energy market. added about $80 million in revenues and helped boost

+ Established special employee teams to help earnings from our diversified businesses. Also, our life Florida Power identify operational efficiencies insurance company posted higher revenues and in-and improve business procedures, creased earnings for the seventh consecutive year.

+ Focused on cutting expenses to make our utili- partly offsetting our positive earnings growth in ty operations more competitive. 1993 was a 1-percent increase in the federal corporate

+ Implemented a strategy for reducing overall income tax rate. The higher tax rate, and its related I operating costs by selling available summer impact, lowered our consolidated earnings during the year by $6.4 million. Much of that amount, about $3.3 peaking capacity.

million, was related to deferred tax adjustments caused

+ Closed older pmver plants; added newer, more by the new tax rate. Our equipment leasing business efficient generatttm. was one of our units hit hardest by the new tax law.

+ Decided to form a unique energy arrangement with another utility to build a high. efficiency ANOTHER ANNLlAL DIVIDEND INCREASE j generating unit. In November, our company's board of directors in.

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+ Reorganized the distribution side of our utility mased the quarterly cash dividend paid per share to I business to serve customers more cost effec, W unts. This raised the annual dividend rate on our tively. common stock to $1.98 per share. The board's decision marked the 41st consecutive year in which our compa-

+ Strengthened the market position of our coal ny has increased dividends paid per share. We're proud mining and transportation unit by acqmrmg to report that this continuous record ranks among the the assets of a large rail services hrm-top to of the more than 2,000 companies listed on the New York Stock Exchange.

4

UTILITY INDUSTRY FACING the future. During the year, our utili- l ty announced a number of changes

., MORE COMPETITION l designed to streamline the organi:a.

The movement toward increasing tion and prepare it for greater compe-j competition in the electric utility ( tition. Personnel reduction decisions j industry is accelerating the need for are never made casually and are diffi.

power companies to change the way Ic" cult for all involved. But when neces-they manage their businesses. The -

sary, management must make those Nationa! Energy Policy Act of 1992 * '

decisions.

j encourages the formation of a new ,y

energy marketplace. 1' STRATEGIC OUTLOOK 1

2 Although there is uncertainty over . Looking ahead, we will focus on 3'

exactly how much the new energy strengthening our core electric utili-law willimpact electric utilities, ty business. Its steady growth and Florida Power is preparing for change bg future development will remain our now. We are developing new strate-gies that will allow us to compete for [ ,.

top priority. Florida Power will con-tmue improvmg its operations and business in Florida for years to come. f* -

evaluating new business opportuni-l The source of our success will con- nichard Korean ties.

j tinue to be understanding the needs of In this year's report, we have added a series of ques-our customers -and fulfilling them to the best of our tions and answers with senior executives from our J ability. And we are dedicated to doing this better, faster company. We think this feature, which appears in the and more efficiently than other energy providers. section titled Management's Discussion & Analysis.

provides an effective way to discuss our visions for the l 3

TAKING BOLD STROKES TO future as well as corporate strategies and priorities. l REINVENT OUR CORE BUSINESS .

The theme of this report, Bold Strokes For Progress, i In 1993, Florida Power began organizing its business represents the important moves our company made in l more along emerging market segments - generation, 1993. We f rmly believe we are taking the right steps at l transmission and distrtbunon. This will allow our the right time. These steps are necessary to ensure our l l utility to focus on developing continued success and enhance shareholder value in l competitive stratey;ies in each of the future. l these areas as the industry  ;

moves toward expected To you, our shareholders, we express our apprecia-l deregulation. tion for your continued investment and support. We remain committed to build on our past successes and Cost-cutting and reward our shareholders with the best possible invest-restructuring also ment return.

will help Flonda Power continue to offer com-

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Dr. Jack B. Critchfield Chairman and Chief Executive Officer a

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Richard Korpan President and Chief Operating Officer E February 2,1994 fikl

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l BOLD STROKES FOR PROGRESS r

earl > a century ago, Florida Power Comoration IMPROVING COMPETITIVE POSITION

.L began operations by providing energy for 30 St. Retail kilowatt-hour sales at Florida Power have Petersburg street lights. Today, Florida Power supplies increased an average of 3.'2 percent annually over the electricity to 4.4 million people in 32 of Florida's 67 last five years - a rate that exceeded the national aver-counties. In the early years, it served a few sparsely age for the electric utility industry. Looking ahead, populated areas along the state's Gulf Coast. Through increasing energy sales and other operational expansion into Central and Northem Florida, the utili- strengths mean that Florida Power has excellent ty has developed a wide-ranging electric system that growth potential.

covers some 20,000 square miles. But remaining successful demands The forces that have shaped Florida Power are pow- response to change. To maintain its lead-erful, and like the natural forces that shape the dia- ership position in the future, Florida mond, they have made the utility strong. Since 1899, Power is taking bold strokes today.

Florida Power has played a leading role in Florida's In 1993, the utility took steps to growth, supplying the rapidly growing population of lower costs and prepare for what the state with reliable electricity at a reasonable cost. lies ahead. These changes were made This century-old tradition has made Florida Power the with confidence, recognizing that by state's second largest electric utility. controlling costs and staying competitive, in the years to come, selling electricity will continue the utility can provide the state of Florida to be Florida Progress' main business, form- with another 100 years of service.

ing the foundation of its existence. Today, Florida Power supplies electricity to Clearly, the company's primary focr.s approximately one-third of Florida's population. It is to keep Florida Pa ver a mong and serves many of the state's fastest-growing areas. With viable entity, a utility rock-solid a steady influx of new residents, indications are that enough to meet the challenges Florida will maintain its rankmg as the nation's fourth of a changing electric power most populous state wellinto the next century And as industry and a more com- more people and new businesses move to the Sunshine petitive marketplace. State, Florida's economy is expected to continue to improve at a rate that outpaces the national average.

1 s

i FLORIDA POWER: A NATIONAL LEADER

% N db a IN OPERATING EFFICIENCY w.%*g y%( ,b Over the years, Florida Power has enjoyed a reputation

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best for efficient power output. The utility's Crystal

'[l' i River Nuclear Plant also has performed well in recent l 4 years. From 1991 to 1993, the plant completed its best f x WW three-year period of operation since the unit came into

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$W% service in 1977. It averaged an annual operating capaci-

's' ty of 77 percent during this period, compared with the

• industry average of 72 percent.

The competitive outlook fot Florida Power is above average compared with other electric utilities, accord-ing to industry analysts. They cite the utility's opera-tional strengths, along with a manageable construction program and growth potential as the main reasons.

Analysts also believe that Florida's regulatory environ-ment is fair and reasonable when compared with other states. In addition, all four of the nation's maior credit-rating agencies rank Florida Power's senior secured debt as double A minus.

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At a Florida Power generating site in latercession City, Ela., new high efficiency combustion turbines were placed into service during 1993. Addwg unore cost efficient peaking capacity allowed the utility to close two older power plants. INSET: After 43 years of produc-ing electricity for Florida Power customers, the A.W. liiggins steam plant, located on upper Ta npa llay, was shut down in January 1994.

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l l Florida Progress continues to take steps that will ranks among the top 10 of the more than '2,000 compa-  !

I lead to a more focused diversification effort. The com- nies listed on the Ncw York Stock Exchange.

pany is concentrating on a few businesses that have Florida Progress shareholders historically have strong earnings potential and that are expected to pro- enjoyed solid results from investments in the company's vide solid retums on investments. At the heart of this common stock. An attractive dividend yield, increasing strategy are Electric Fuels Corporation, the company's annual dividends and a rising stock price have made the coal mining and transportation subsidiary, and Mid- company popular among investors. In the last 10 years, Continent Life Insurance Company 150th of these units Florida Progress has provided an average annual invest-have built profitable businesses by capitalizing on their ment retum of 17.5 percent. It should be noted that the existing operations, retums of many utilities during this period were consid-ered high by historical standards because of market con-j 41 CONSECLITlVE YEARS ditions and the higher returns on equity authorized by 1 0F DIVIDEND GROWTH state regulators during the 1980s.

The Florida Progress board of directors continues to express confidence in the earnings potential of the A SHIFT IN PERSPECTIVE company's utility business and its diversified opera- FOR LITlLITY INVESTORS j tions. In November 1993, the board increased the quar- As the electric utility industry enters an era of unprece-5 terly cash dividend paid per share by 2.1 percent to 49x dented change, utility investments may be redefined, I too. Greater competition and new regulatory pressures

! cents. Thethe year in which board's companyaction marked has increased dividends the 41stwill consecutive affect U.S. electric companies differently. Some

! paid per share. This continuous financial performance utilities will be hurt by a changing environment; others

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J A computer training facility in St. Petersburg, Fla., assists Florida Power employees in learning mere about the utility's new customer service system. In development since 1992, the new system is scheduled for installation in September 1994 and is designed to improve customer service.

I will benefit and be in a position to strengthen their pate change and take advantage of an evolving industry.

f operations. To prepare for the future, the utility began a company-While the future may hold uncertainty for many of wide analysis of its operations in 1993. It established the nation's power companies, one thing is clear: The a special employee task force to identify areas of the risks and characteristics of utility stocks are changing, company where business processes could be improved.

and an evolving industry will influence the future per. Florida Power is taking a new, broad perspective of formance of utility investments. Those utilities that its business. A comprehensive review of the company j are best positioned to compete are more likely to offer is needed not simply a plan that will lead to across-the-l their shareholders better investment returns. board cuts. A drastic approach could hurt customer Never before have electric companies felt pressure at service and compromise Florida Power's ability to so many levels of their business. The threat of competi. compete in new markets. Instead, the task force was I tion is accelerating the need to change. The passage of directed in 1993 to begin an ongoing process of

! the National Energy Policy Act of 1992 will create a carefully analyzing thousands of work activities, and

! new energy marketplace. It is paving the way for funda. recommending ways the utility can operate more

! mental changes in how electricity is produced, sold and efficiently, now and in the future.

! distributed. Although fullimplications of the new law A series of bold strokes occurred in the fall of 1993 1 won't be felt for several more years, the federal govern- when Florida Power announced it was restructuring f ment wants to see increased competition among several divisions and departments. The utility's power j providers of wholesale electric service. plant divisions, both fossil and nuclear, were stream.

e lined and organizational changes also were made in l REINVENTING THE BLISlNESS 70 such areas as financial services and corporate admin-j STM ON THE CLITTING EDGE istration.

l Florida Power believes it is in a good competitive posi- These changes likely will result in several hundred j tion. The utility also knows it must be ready to antici- positions being trimmed from the work force by the

end of 1994. In early December, Florida Progress also Called " peaking" units, these turbines supply power announced it was offering a voluntary, early retirement during periods of high customer demand.

program to more than 200 employees, most of whom They can produce power quickly, and normally are work at Florida Power. The utility will continue to used only after larger steam generators are operating at examine its business, searching for ways to reduce full capacity, or when other power plants experience costs and improve operations further. unplanned shutdowns. A year ago, the utility placed ORGANIZATIONAL CHANGES TO AIEET four other similar. sized peaking units into service.

AlllLTI-FACETED AtARKET DEAIANDS Because the use of Florida Power's peaking units is New strategies are being developed that will put required only during certain months of the year, the Florida Power in a new, more competitive business utility developed a strategy to market the output of stance. At the core of these new strategies is the move these units during periods of low demand. Since Florida to organize the utility into four main business groups P wer experiences its highest demand for electricity

- generation, transmission, distribution and corporate during the winter months, the utility offered to sell its services. This approach will allow Florida Power to available peaking capacity during the other months of compete aggressively for business in each key operating the year.

group. In September 1993, Florida Power was selected from Most utility industry experts believe battles over a list of 35 bidders to sell summer peaking capacity to new power generation will be fought first. Competition Georgia Power Company, a subsidiary of The Southern is heating up already between utilities and independent Company. Georgia Power, a summer peaking utility, is j companies, known as non-utility generators or NUGs. expected to buy later this decade between 150 and 400 l In some parts of the country, these firms are building megawatts of power from Florida Power's existing capa- I their own power plants and selling the energy to utility city. Florida Power's generation strategy includes con-companies. tinuing efforts to sign similar energy agreements with Utility regulators want electric companies to receive other utilities. The revenues from these energy sales bids from NUGs before building power plants on their will help Florida Power offset some of its annual pro-own. However, NUGs aren't likely to construct any of duction costs and better atilize its facilities year-round.

Florida Power's new baseload plants until at least FORAllNG AN LINPRECEDENTED after the tum of the century. Fhts is because the utility already has received regulatory ENERGY ARRANGEAIENT approval to build two generating units at a F1 rida Power also plans to build jointly with proposed energy complex in Central Georgia Power a 165-megawatt peaking unit near Orlando. By owning the proposed unit )

Florida later this decade.

Significant competitive advan- together, both companies will add low cost tages will be gained by those peaking capacity and share the total c sts of constructing and operating a utilities that can lower the cost of producing power in the future. new facility. Florida Power will own i Today, Florida Power compares two-thirds of the new unit and have full favorably with other Florida investor- .

owned utilities in terms of overall gener- _ ,o ation costs. Several important steps were taken in 1993 to further strengthen Florida Power's competitive position. -

ADDING EFFICIENT CAPACITY TO AIEET FLITLlRE ENERGY l.'EEDS In the fall, four new high. efficiency combustion turbines, capable of f8

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i use of it eight months of the year. Georgia power will Florida. Located primarily on mined out phosphate own one third and control the unit's power output dur. land, the 8,000-acre site in polk County is located cen.

ing four sununer months. Florida Power will manage the trally in the utility's service territory and is near exist.

daily operation and maintenance of the plant. ing transmission lines. The new energy complex will 4 This unique energy arrangement - the first of its be built in phases, with the first generating unit sched. I kind between a Florida utility and an out-of-state uled to be in service by 1998 and the second unit a year l power company - will help minimire costs to cus. later. Each unit will be capable of producing up to '23; tomers of both utilities. The new unit is scheduled to megawatts of power.

be placed into service in 1996. The proposed Polk County units will use a highly Also in 1993, Florida Power announced plans to efficient and economical design in power production. j close two smaller, older,less efficient power plants. Called " combined cycle," the design merges the tech- i nology of combustion turbines with steam-cycle power I With more than 109 years of operation between them, the Turner and Higgins plants were shut down in early production. In addition to higher heat rate efficiencies, 1994. In recent years, the two oil. fired plants operated combined. cycle units have lower capital costs, greater j i only during periods of high customer demand. Both flexibility and lower emissions than conventional coal-plants may be upgraded in the future and retumed to fired units.

l i service, if it would be cost-effective to do so. Natural gas will fuel these new generating units.

Florida Power has signed a long-tems agreement for the NEW POWER PLANT COMPLEX transportation of natural gas through a planned 600 PLANNED IN CENTRAL FLORIDA mile pipeline that will extend from Mississippi to plans are under way at Florida Power to add Central Florida. The new line will be the second more efficient baseload generation. Later maior gas pipeline into the state and will pro.

this decade, the utility will begin buildmg vide Florida Power with more operating -

a new power plant complex in Central flexibility.

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+  !

The utility also plans to use a supply of natural gas by realigning the organization across its from this pipeline to fuel one of its existing power 32-county service territory to better plants near Tarpon Springs, which will be modified to serve the needs of its cus-burn gas as well as oil. llecause natural gas burns clean- tomers. Lowering costs C er thaa 6 oal or oil, fueling the converted plant and the is the " s : *, _4 new Polk County units with gas will allow Florida M Power to efficiently meet tighter emission standards  % k ~:

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h PROTECTING SHAREHOLDER INTERESTS IN A CHANGING BLISINESS h  ;)

pf" b - i Electric utilities are facing a new regulatory environ-ment that promises to change the way access to trans-g $

mission lines is granted and priced. The new federal oblective, but Florida d

energy law grants third parties, including independent p energy producers, access to use a utility's transmission Pmm wants to make i g system to deliver power. In Florida, this practice is sure that these reduc-4

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occurring already. tions will not compro- p mise its ability to continue C

, What concerns Flon.da Power most about "open providing high quality, reli-access - or the right ot outside finns to use utilit'/

able service. In fact, the utility lines -is that a fair pricing structure be established for s developing programs that will the use of its transmission line system. The utility mprove service to customers and wants to protect its investment and its tradition of attract more business.

quahty service to customers.

Florida Power is working toward a more Florida Power believes the pricing debate wd. l be regional approach to customer service. It con-resolved as the mdustry moves toward the formation ot.

tinues to consolidate many "back office" activities, regional transmission groups. Electric utilities will par-neluding credit, billing and meter reading. ily moving ticipate in these groups by coordinating regional net-these duties to a centralized location, Florida Power works to better serve customers in a changing energy can serve its customers more efficiently, particularly market. Each transmission group will set pricing poh.

those who are located in the faster-growing parts of its cies and work closely with state regulators m the siting service area. A.Ithough it recently closed a few of its of new transmission lines.

f eld locations, the utility plans to maintain a network However, it is doubtful that much additional power of about 40 business offices.

will be transmitted, or " wheeled," into Florida or into . .

Florida Power,s service territory in the near future. This All of this streamh. .nmg is designed to lower operat-

. is. becauw nearly all transmission lines connecting mg costs, improve service, attract new business and Flodda Power competitive.

Flanda to other states are operating at or near capacity during peak demand periods. And it could be years before more line capacity into the state is added. Also, DIVERSIFIED BLISINESSES:

public opposition and environmental restrictions have SELECTING THE GEAIS contributed to construction delays for utilities like By retaining only those businesses that have the most Florida Power that are trying to build new transmission promise for stability and profitability, Florida Progress lines in Florida. can achieve its goal of increasing earnings growth and i building shareholder value. This strategy for diversifica-

AiOST UTILITY CUST0AtERS NOT LIKED' tion has %d the company to concentrate on Electric TO SEE AiAJOR CHANGES S00N Fuels Corporation and Mid Continent Life Insurance

It may be well into the future before most people see Company, which are best positioned for steady growth.

maior changes in the way electricity is provided to Electric Fuels, the coal mining and transportation them, utility analysts say. Florida Power's main retail unit of Florida Progress, recently completed a major customers - homes and small businesses - probably expansion into a profitable segment of its business. The won't see drastic changes until after the turn of the 1993 acquisition of the assets of an Alabama. based com-century. llut Florida Power is taking important steps pany boosted the unit's market share in the nation's rail today to get ready for a different industry tomorrow. services business. The move is part of Electric Fuels' in 1993, the utility began restructuring its energy strategy to increase canungs by capitahring on existing distribution department in an effort to remain competi- operations and expanding into related activities. This tive and operate more efficiently. Florida Power started type of vertical integration represents a good strategic fit

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3 j To help serve its new coalmines in the Central Appalachian Afountains, Electric Fuels constructed a $3.htnillion coal preparation plant in Eastern Kentucky. Prep plants owned by the company clean and size raw coal before it is sent to either unit train load-out facilities or river tenninals.

l for Electric Fuels and for a diversified utility-based hold- quality securities. For 15 consecutive years, the compa-ing company such as Florida Progress. ny has held an insurance rating of A+ (Superior) from When Electric Fuels was formed in 1976, its main A.M. Best, a nationally recognized insurance-rating goal was to provide Florida Power with a long-term agency. Fewer than eight percent of the nation's 2,000 supply of high. quality, competitively priced coal. life insurers have achieved this distinction. l Today, Electric fuels is a full service coal mining and Meanwhile, most other diversified operations owned I transportation company with assets of about $400 mil- by Florida Progress are being sold or restructured.

lion. It is involved in coal mining and procurement, rail Florida Progress has reduced its total portfolio of real and water transportation, rail and marine equipment estate and lending and leasing assets from $1.1 billion repair, and transloading services. in 1991 to $715 million at the end of 1993. Efforts will Lower fuel costs reduce electric rates and give a utili- continue to manage prudently the remaining assets and ty distinct competitive advantages. A steady, economi. take advantage of opportunities to sell them at the best cal supply of low sulfur coal from Electric Fuels in the possible price, future will help Florida Power to hold down the price of electricity to its customers. BOLD STROKES TODAY FOR Mid Continent Life Insurance Company also is con. A BRIGITER TOMORROW tinuing on a course of steady, conservative growth, its Florida Progress is a strong company with a solid track strategy is to grow the business by expanding its record. But the forces of change that will alter the way regional office network. Headquartered in Oklahoma we succeed in the future are already on the horizon.

City, Mid Continent plans to add two new regional And the power to meet those challenges is in our offices annually over the next several years. The com- hands.

pany's policies are sold through a network of about Like a diamond cutter, we are carefully, cautiously 1 9,000 independent agents in 37 states. determining the direction of the grain, planning our l Earnings at Mid Continent have increased an aver- strategy and taking the bold strokes necessary to keep age of 19 percent annually since 1986, the year the our company a cut above others in the years to come.

company was acquired by Florida Progress. Mid-Continent has achieved success by using a consistent approach to underwriting, and investing in safe, high-

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MANAGEMENTS DISCUSSION & ANALYSlS The passage of the National Energy and changes at the Federal Energy Regulatory ing costs suchPolicyas income Acttaxes, of environmental 1992 ex-penses and insurance costs. Florida Power expects to Commission are creating a new energy marketplace for earn its authorized return on equity, while maintaining electric utilities. Although the maior implications of the competitive prices. Through anticipated sales growth new law are not likely to be felt for several years, the and cost control, the utility believes it can wait to file a electric utility industry must accept the inevitability of maior retail rate case until its next baseload unit is greater competition and regulatory changes in the future, near completion in 1998.

Management believes Florida Power is in a good com. To provide a perspective on changes in the electric petitive position. Its electric rates compare favorably utility industry and at Florida Power, this year's report with other utilities in the state. It produces cost-efficient features questions and answers from the company's power and its generating units consistently rank among executive officers. Company officers discuss changes in the nation's best in terms of overall efficiency. the risk profile for electric utility investments, Florida Management is committed to streamlining and enhanc. Power's priorities and strategies to enhance its compet-ing operations to keep Florida Power competitive. And itive position and Florida Progress' dividend expecta-Florida Progress is building upon its utility's operations tions for 1994. {

with a focused diversification program. ~ .. ..  ;

The most immediate competitive challenge for the $ ' ~ ~0PERATING RESULTS Ei electric utility industry is to be allowed to build and operate new power plants. Utilities must be able t Florida Progress' 1993 consolidated earnings were ,

construct and operate the umts at pnces competinve $196.6 million, or $2.23 per share, compared with with non utility generators Flon,da Power tradmonally

$175.7 million, or $2.06 per share, for 1992 and $172.1 has been able to construct and operate its new genera ~

million, or $2.13 per share, for 1991. A summary of -

tion needs in a competitive manner. The utility also earnings per share by company is as follows:

has already received regulatory approval to construct its next two baseload units, scheduled for completion in 1998 and 1999. Storida Power plans to compete aggressively in the generation market in Florida. EARNINGS PER SHARE ,

An important competitive threat for many electric 1991 1992 1991 utilities is losing industrial customers to other investor- Morida rower corporation 52.06 sl.99 s2.ca ,

owned utilities or non-utility generators. Florida Electric Fuels Corporation ,17 .14 .10 Power's industrial business represents only about 12 Mid-Continent Life Insurance Co. .10 .09 .09 percent of megawatt-hour sales, which is lower than the Progress credit Corporanon:

7 industry average of 35 percent. And Florida Power's tending and leasing .02 .03 .;0 >

industrial rates are favorable when compared with the Reakstate LOM bl9) LOW Corporate and other (.05) 002; L08) other Florida investor-owned utilities.

Diversified .16 .07 .13 Electric utilities are granted the right to serve cus- continuing operations 2.22 2.06 2.16 tomers in municipal jurisdictions. Increasing competi- Discontinued operations - -

L03) tion may affect new franchise agreements between Change in accounting .01 - -

utilities and municipalities. Typically, a municipality consohdated $2.n $2 06 s2.13 signs a 30-year agreement that allows a utility to pro- ',

vide electric service to residents within a certain juris-diction. In return, the utility adds a franchise fee to each resident's monthly electric bill. These franchise fees are collected by the utility and remitted to the UTILITY municipality. Florida Power currently has 109 fran- In 1993, Florida Power earned $181.5 million, or $2.06 chises. Only three franchises, which account for less per share, compared with $170.2 million, or $1.99 per than 5 percent of total electric revenues, expire during share, in 1992 and $164.1 million, or $2.03 per share, in the 1990s. Florida power is committed to renewing all 1991.

of its existing franchise agreements.

Operating revenues were $1.958 billion in 1993, Florida Power is streamlining operations and cutting compared with $1.774 billion in 1992 and $1.719 bil-costs to improve its competitiveness. These actions lion in 1991. The increased operating revenues and also are expected to allow the utility to offset other ris- higher camings in 1993 were mainly due to the phased.

+

Richard hepan, President and Chief Operating Officer, Horida Progreu Conwation flow Well a utility is positioned to Compete will likely determine a utility's risk profile.

Certainly, good fundamentals will mini-mi:e a company's business risk.

Characteristics like a growing ser-vice territory, cost-efficient genera-tion, solid financials and reasonable regulation can provide a utility with ,

QL As the electric utility industry moves important competitive advantages.

toward a more competitive environment, I see the electric utility industry facing swift '

most experts believe that utility stocks will face regulatory changes within the generation and increasing risks. Ilow do you see the risk profile trarismission side of the business. However, I believe changing for the industry? that changes in the distribution business will occur A: Recent regulatory changes are encouraging greater mme slowly over the next decade. J competition in the utility induse,, and that creates uncer. More than ever before, utility shareholdeis will need to care-tainty as to how these new competitive forces will impact fully examine a company's relative strengths and weaknesses our industry. I believe that, in the future, utility stocks will from a competitive point of view. For the most part, invest-be viewed by the market as riskier investments. ments in high-quality electric utilities should continue to offer lower risk profiles than companies in many other industries.

in mcreases in retail base rates, reflecting the outcome Florida Power currently has a 1994 wholesale base of the utility's 1992 retail rate case. rate proceeding prepared for filing before the Federal In September .1992, the Florida Public Service Com- Energy Regulatory Conunission. The utility is request-mission granted Florida Power an annual revenue ing an increase in annual revenues of approximately increase of $85.8 million. The commission appmved $10 million to recover costs for new generating facili- _-

permanent increases in retail base rates of approximate., ties and higher purchased power costs. Florida Power ly $58 million in November 1992, $9.7 million in April expects to file the 1994 case after reaching a settlement 1993 and SlH.1 million in November 1993. (See Note 10 in principle with its wholesale customers in the first to the Consolidated Financial Statements on page 35.) quarter of 1994.

In December 1993, Flonda Power executed a settle-Fhe new retail rates are based on a 12-percent regu-ment agreement with its wholesale customers for S5.7 latory return on equity. Flon.da Power,s allowed retail regulatory return on equity range is I1 to 13 percent. million in higher annual revenues in its 1993 rate pro- "

Florida I,ower,s retail regulatory return on equity was ceeding. The settlement is expected to be approved by r Engy Mulatory Commission in the tirst 12.1 percent for the year end(d December 31,1993.

quarter of 1994.

New revenues were granted in the approved rate Florida Power reached a settlement with its whole-increase to allow for the recovery of new investment to sale customers in its 1992 rate proceeding, which had -

support customer growth, mereased operations and no significant impact on annual revenues but resulted maintenance costs, and higher depreciation expenses. in a retroactive depreciation adiustment that increased The rate increase also allows Florida Power to recover Florida Power's 1992 fourth-quarter earnings by $5.6 costs for employee benefits in accordance with the new million. ISee Note i on page 28.)

accounting standard for other postrctirement benefits that became effective January 1,1993.

flon.da Power's customer growth rate for 1993 was 2.7 percent, compared with 2 percent in 1992. An The new base rates increased operating revenues by increase of more than 32,000 customers during 1993

$43.4 million and increased earnings by $10.4 million was the principal reason for a 5.3 percent increase in

~

for 1993, after recording new expenses authorized in retail kilowatt-hour sales for the year.

tk raw cam The main reason for the increase in the customer The Florida Public Service Commission has con- growth rate during 1993 was Florida Power's acquisi-ducted proceedings to review the authorized return on tion of the Sebring Utdit es commission electrical dis-common equity for other Florida utilities to reflect a tribution system. The purchase occurred in April 1993, lower cost of capital. While some of these proceedings adding about 12,500 customers to Florida Power's sys-have resulted in a reduction of the authorized return on tem. Florida Power paid $54.million for the system, common equity, the commission has not ordered any which included $23.6 million for the book value of the refunds or lowered customei rates. assets and going-concern value of the system. The

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j S30.4 million difference was used to retire Sebring's conservation programs accounted for $32.3 million of prior debt and will be repaid to Florida Power through a the increase. Florida Power recovers substantially all of j transition rate from Sebring customers over a period of its energy conservation program costs through a clause

! 15 years. Florida Power plans to include the net book similar to the fuel adjustment clause. Also contributing i value of the assets in its next retail rate case. to the increase were postretirement benefits and the

! In addition to customer growth, the higher energy costs associated with an early retirement option sales in 1993 were the result of increased average cus. announced in late 1993. These increases in other utili-tomer usage. During 1993, average residential and com. ty operations and maintenance expenses were partially 4 mercial customer usage was up by 1.7 percent and 1.8 offset by reduced maintenance costs at the Crystal

! percent, respectively, compared with 1992. The prima. River Nuclear Plant that resulted from the timing of

! ry reason for the higher average usage was the warmer. outages, j

than normal summer weather in Florida Power's ser- Florida Power's earnings were lowered by $1.4 mil-vice territory in 1993. lion, or $m a share, for the early retirement costs ree-Fuel and purchased power costs increased by $49.9 ognized in 1993 and Florida Power estimates that 1994 i

million in 1993, compared with 1992. The growth was earnings will be lower by approximately $8 million.

primarily due to higher system requirements and Payroll cost reductions and other lower personnel relat-increased purchased power costs. Florida Power has sev, ed expenses will more than pay back the expenses being eral long term purchased power commitments with recognized for the early retirement option. ]

qualifying facilities that will increase its level of pur- During 1993, the nuclear unit's capacity factor was chased power over the next several years. Since Florida 84.5 percent, which is above the industry average. This Power recovers substantially all fuel and purchased capacity factor was achieved despite the plant complet-power costs through fuel and capacity adjustment claus- ing a mid cycle maintenance outage. Florida Power's es, and defers any adjustments to the following period, share of the expenses for the 53-day outage totaled $9.7 these fluctuations have little impact on net income, milhon. (See Note 9 on page 351 l

! (See Note 11 on page 36 with respect to present and pos- Electric utilities have only recently begun the pro-l sible future impact of these commitmentsl cess of decommissioning large nuclear units. There-j Other utility operations and maintenance expenses fore, estimates of decommissioning costs have been i increased by S64.2 million in 1993. Recoverable energy based on limited experience. As the industry gains

I Allen 1. Keesler. fr., President l l and Chief Execulise officer, 3

i floridd Power Corporation QWhat do you see as Florida Power's most immediate priority?

{

j A: clearly, our first priority is to j further strengthen our utility's l position as a low cost producer of electricity. In 1993, our management focused on streamlining Florida Power's

Q Ilow is Florida power positioned in this operations and cutting costs. Many impor.

increasingly competitive marketplace? tant decisions were made to better prepare our A: I believe that Florida Power is well prepared to cmnpany f r the future j compete in the future. That's because our company Downsizing can be difficult and painful for a company, j will be working from a position of strength. Over the especially for its employees. Florida Power has tried to j years, our company has done a good job managing the busi- take a business-like approach to organizational change.

I ness and controlling expenses. Our costs and electric rates are We've made changes that we think will enhance our long- .

competitive, particularly in Florida. term competitive position. l

} Today, we provide low. cost, reliable electricity to 4.4 million We created a special task force, made up of teams of our own 1

people in Florida. To ensure we stay competitive, we made a employees, to examine our business and look for ways to

number of key moves in 1993. Several parts of our business work more efficiently. Called business process impmvement, I were reorganized in an effort to reduce costs and improve effi. these employee groups have suggested a number of important .

ciencies. changes to get Florida Power ready for a new energy market- l We know that Florida's growing population will make our place state a targeted energy market. As non utility generators look Decisions resulting from these recommendations have been to compete here, Florida Power intends to be a formidable communicated to our employees to help minimize uncertain-competitor. ty and anxiety.

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The 1992 retail rate decision included rcvenues to recover additional depreciation expense, beginning in November 1992, previously ordered by the Florida

. / . Public Service Conunission. The decision included a j 'f

<t -

provision for fossil plant dismantlement costs. These t dismantlement costs totaled $23.9 million in 1993, f*# / E

[-

, $18.2 million in 1992 and $16.6 million in 1991. (See Note 1 on page 28.)

j

a YY M Stock dilution accounted for all of the decline in Florida Power's earnings per share in 1992 and also impacted the 1993 earnings per share amount.

1. T

( The financial return on the utility's conunon equity

, t:. -

was 12.1 percent in 1993, 12.3 percent in 1992 and l'2.9

}

percent in 1991. Although the 1993 utility return was bolstered by the increase in retail electric rates and the Electric fuels strengthened its rail services business in /une 1993 higher energy sales, these increases were offset by high-when it acquired the assets of a large rail car sersices and parts reconditioning firm. er income taxes, and increased costs for insurance and the early retirement option.

additional experience, estimates of decommissioning Several company subsidiaries, including Florida costs may increase. iSee Note 9 on page 34.) Power, have been notified by the U.S. Environmental in November 1992, the U.S. Nuclear Regulatory Protection r\gency that each is or may be a potentially Commission issued its most recent Systematic responsible party for the cleanup costs of several conta.

Assessment of Licensee Performance report for the minated sites. In addition, Florida Power is a defendant nuclear unit. The report gave tavorable ratmgs to the in an action seeking contribution for cleanup costs plant in all seven functional areas. The next perfor- from the prior owners of a former coal gasification mance report for the unit is expected in April 1994. plant site. lSee Note 1I on page 37.)

Joseph H. Rhhardwn, Senior Vice Vresident. Lexal and Adrotnistrative Services, Florida Power Corporatinn p

,in7h Today, Florida power owns the second-g largest network of transmission lines in

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Florida. These lines are costly to j construct and they are becoming i

increasingly more difficult to build because of regulatory delays and new '

environmental concerns. In the years I

%- ahead, our investment in transmission lines will be more valuable to us as the indus-Q1 Ilow is the electric utility industry evolving try evolves into a more competitive business.

and how is Florida Power addressing these change' These facilities may give Florida power an advan.

In its strategic planning? tage over the competition if properly priced.

A: We think that competition will force utilities to view our transmission strategy wdl focus on making sure that the electric power industry as three differem businesses - outside firms pay a fair price for using our lines. We also generation, transmission and distribution. Market demands don't want these transactions to interfere with our ability to

)

are prompting the industry to plan and orgam e along these serve future Florida power customers.

functional lines.

Our distribution network is the direct link to our retail cus-In 1993, Flon.da power began taking steps m th. is direction.

tomers, namely to homes and businesses. Our strategy here is In the generation area of our company, we re developing to lower our distribution costs without compromising the strategies aimed at lowering production costs at our power quality of our service.

plants. We must reduce the cost of generating electricity without compromising safety or operating performance. We'll continue to h>ok for ways to streamline this area of our We're also hioking at ways to cut our fuel and purchased business. Ultimately, though, we remain committed to pro-power costs, which represent about 60 percent of our total viding our customers with the same high.quahty service they ,

operations and maintenance expenses. have grown to expect.

lohn A. Ilancock.

fonnance incentives of about $2.5 million senior Vice President.

incrity Supply . exh year since 1990.

Florida Pass er Corporation Florida Power is working hard to con-j .

g tinue these trends, which will keep us in a strong competitive position going forward. We're also confident

, that we have the abihty and experi-

.. Mv ence to build new generation at competi-tive costs. We've already received approval Qi Mest industry experts believe that compe- to construct later this decade two generating tition for new generation is the first challenge fac- tmits at a proposed energy complex in polk ing electric utilities What is Florida Powet's compet- County.

itive position and how will the utility be affected in the In the meantime, we're developing strategies to aggres-future? sively compete in the generation market within Florida.

I A: Today, Florida Power is a national leader in tenns of gen. And, after the year 2000, Flonda Power expects to compete l erating power efficiently. For 10 consecutive years, our coal- with non-utility generators for the right to build and operate

! and oil fired generating units have placed Florida Power in any new power plants we have planned.

the top to nationally for fossil-fired steam unit efficiency. As we look ahead, we intend to continue examining ways The continuous efficient operation of these units, along with to lower our generation costs and use our capacity more our nuclear plant, has resulted in regulators granting us per- efficiently.

J l

4 DIVE.RSli.IL,D O. PERATION5 Florida Progress also is maintaining a proven growth strategy for its life insurance business, Mid Continent

In 1993, earnings from continuing diversified opera- Lite Insurance Company. With plans to open two new

! tions were S14.3 million, or S.16 per share, compared otfices annually in the next several years, Mid-with $5.5 million, or s.07 per share, in 1992 and $10.4 Continent expects to expand market share through the i

million, or $.13 per share, in 1991. Improved operating development of a regional office network.

I results at the diversified companies in 1993 were par- M d Continent's earnings for 1993 increased to $S.5

! tially offset by the negative impact of the new tederal tax law. Fhe tax law reduced earnings of Florida million, or S.10 per share, from $8 million, or $.09 per

' share, in 1992 and S7.5 million, or S.09 per share, in Progress' diversified operations by S3.6 milhon, or $.04 1991. The annual earnings increases are mainly due to per share, m 1993. Diversified results were lower in Me grows in gemiums, net of related expenses, 1992 as the real estate unit provided for expected losses which is attributable to the expansion of the regional on the sale of real estate.

off ce network; more independent agents marketing Florida Progress continues to expand the energy- Mid-Contment's products; and an increasing market related businesses of Electne Fuels, the company's coal share. Since Florida Progress acquired Mid-Continent mining and transportanon unit. In June 1993, a sub- in 1986, the insurance company's earnings have in-sidiary of Electric f uels acquired the assets of Steel creased an average of 19 percent annually.

Processing Services, Inc., an Alabama based rail car Florida Progress is continuing to withdraw from the repair and parts reconditioning company. The acquisi- lending and leasing business and is selling its real tion increased 1993 revenues for Electric Fuels by estate properties as market conditions allmv. In 1993, i approximately SSO mdlion. The combmed rail services Florida Pmgress merged its primary real estate unit, operations will allow Electric Fuels to better serve the Talquin Corporation, into Progress Credit Corporation,

, needs of its rail industry customers and accelerate the company's lending and leasing unit, to streamline expansion into new markets. administration and reduce overhead.

Earnmgs for Electric Fuels were S14.9 million, or Since announcing its decision to implement an

$.17 per share, in 1993, compared with $12.1 million, orderly liquidation of the investment portfolio and the i or 5.14 per share, in 1992 and $8 million, or S.10 per commercial lending and leasing business in September share, in 1991. In addition to earnings from the former 1991, Florida Progress has reduced its financial assets Steel Processing operations in 1993, improved results by 35 percent, or S314 million. The financial portfolio, from the company's marine operations and higher coal which totaled $373.5 million at the end of 1993, pri-production resulting from newly acquired coal reserves marily contains commercial aircraft loans and leases contributed to the carnings increases in 1992 and 1993. and first mortgage real estate loans. The lending and

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l

leasing unit has experienced dehnquencies in ongoing Since most of Florida Progress' remaining real estate lease and loan payments as well as loan principal properties are located in growth areas, management maturities. Progress Credit has negotiated the restruc. believes the market for its projects should begin to turing of certain transactions and instituted legal reme. recover as the economy improves. The current weak dies and other remedial actions, where appropriate. real estate market will require the company to hold (See Note 5 on page 32.1 these properties, and absorb the related carrying costs, As of the end of 1993, Florida Progress had reserves until economic conditions improve and the properties of $24.5 million for the lending and leasing portfolio. can be sold.

Assuming no further deterioration in the airline and Florida Progress' investments in its real estate port-real estate industries, these reserves are expected to be folio totaled approximately $140 million at December adequate to implement the company's orderly liquida- al,1993. The maiority of this capital was invested in tion strategy. Bamett Tower, Florida Progress' headquarters building, Earnings in 1993 for Florida Progress' conunercial and the Carillon office park, tending and leasing unit were $2.2 million, or $.02 per The increases in the 1993 diversified revenues and share, compared with $4 million, or 5.05 per share, in operating expenses are mainly due to the expansion of 1992 and $8.4 million, or $.10 per share, in 1991. the rail services business at Electric Fuels. These in-The lower income in 1993 is primarily due to the creases were partially offset by reduced operations as a effect of the new tax law, which reduced the lending result of the sale of real estate assets during 1993 and and leasing operations' net eamings by $2.5 million, or the continuing withdrawal from the lending and leas-

$.m per share. This reduction included a deferred tax mg business.

adjustment related to the leveraged equipment leasing The return on equity for continuing diversified oper-business. ations was 5.2 percent in 1993,2 percent in 1992 and In 1993, Florida Progress' real estate unit realized 4.8 percent in 1991. In each year, the diversified losses from continuing operations of $7.4 million, or returns were depressed mainly due to holding real

$.08 per share, compared with losses of $16.7 million, estate properties without any significant sales activity.

or $.19 per share, in 1992 and $6.6 million, or $.08 per Excluding the results from the lending and leasing share, in 1991. and real estate units, which are being divested, the di-During 1993, the real estate operations had lower versified returns were 10.1 percent in 1993,11 percent operating and interest costs, compared with 1992, due in 1992 and 9.9 percent in 1991. The percentage of.

to the sale of some properties in the real estate portfo. equity invested in diversified operations was 16 per-lio and lower interest rates. In April 1993, two life-care cent at the end of 1993 and is likely to remain below facilities were sold to the projects' managing general 20 percent.

partner for $82.8 million, which resulted in a deferred gain of $4.2 million. The company financed the life- INTEREST EXPENSE AND INFLATION care sale through 7 year mortgage loans. In September Interest expense was impacted by lower interest rates and October 1993, the real estate unit sold all of its in both 1992 and 1993, compared with 1991. Interest apartment complexes for a total of $83.9 million, and expense increased in 1993, compared with 1992, recognized an after-tax loss of about $.5 million. despite lower rates, due to higher average debt levels in in 1992, the real estate unit provided for expected 1993.

losses on real estate sales, which reduced eamings by Allowance for funds used during construction

$7.4 million, or $.09 per share. This was the major rea- decreased $3.1 million in 1993, compared with an son for the higher losses in 1992 at the real estate unit. increase of $9.3 million in 1992. During 1992 and 1993, The timing of earnings from an installment sale of several major construction projects were completed at the real estate unit's citrus operations impacted the Florida Power, contributing to the 1993 decrease.

199l results. In 1991, the unit recognized the last in- Even though the inflation rate has been relatively stallment gain of $3.1 million, or $.04 per share, from low in recent years, inflation continues to af fect this sale. Florida Progress by reducing the purchasing power of The sale of the real estate portfolio and the finance the dollar and increasing the cost of replacing assets unit's holdings is expected to result in lower revenues used in the business. This has a negative effect on and interest expense for the company. The impact on Florida Power smce regulators do not generally consid-net income depends on the timing of these sales and er this economic loss when utility rates are set.

the relationship between the returns on the assets sold, However, such losses are partly offset by the economic carrying costs incurred and the interest rates on the gains that result from the repayment of long. term debt associated debt repaid. with inflated dollars.

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company plans to adopt the provisions of Financial ME TAE. Accounting Standard No.114, " Accounting by In August, the Omnibus Budget Reconciliation Act of Creditors for the impairment of a Loan," effective in 1993 was signed into law. The maior provision of the 1995. The adoption of these standards is not expected new tax law affecting the company is the increase in to have a material impact on earnings. (See Note 1 on the maximum corporate income tax rate from 34 per- page 28 and Note 5 on page 32.)

cent to 35 percent. This 1. percent increase in the tax rate, and the related impact on accounting for long- u e: -'

term leveraged leases, lowered Florida Progress' 1993 .

(WDITY AND CAPITAL RESOURCES net earnings by $6.4 million, or S.07 per share. lSee ke- :-- -

Note 7 on page 33.)

Cash from operations has been the primary source of ACCOUNTING STANDARDS capital for Florida Progress over the last five years.

Florida Progress adopted Financial Accounting Standard In May 1991, Florida Progress sold 4.4 million com-No.109, " Accounting for Income Taxes," in 1993. The mon shares through its first underwritten public stock adoption of the standard did not have a significant offering since 1983. The net proceeds totaled SI13.2 impact on earnings in 1993. (See Note 1 on page 28.) million. In a May 1992 public offering, the company Florida Progress also adopted Financial Accounting sold an additional 2.6 million common shares. The net Standard No.106, " Employers' Accounting for proceeds of this offering were $76.5 million. During the Postretirement Benefits Other Than Pensions," in last three years, the company also raised S143.6 million 1993. This standard mandates that an employer's obli. of equity capital through its Progress Plus Stock Plan gation for postretirement benefits must be fully and a predecessor plan. In 1993, about 1.7 million addi-accrued by the date employees attain full eligibility to tional shares were issued through the plan, providing receive these benefits. The company accrued approxi. $57.7 million. In late 1993. Florida Progress filed a shelf mately $19 million in additional annual costs under registration for 4.5 million common shares. The com-the new standard in 1993, but a substantial portion was pany expects to issue a portion of these shares in a 1994 recovered through increased customer base rates at public offering.

Florida Power. (See Note 8 on page 34.} Florida Progress is issuing new equity to strengthen Florida Progress will be required to adopt two new its common equity capital percentage and raise equity financial accounting standards in 1994 - Financial for funding Florida Power's construction program.

Accounting Standard No. I15, " Accounting for Certain Other sources of capital have included proceeds from Investments in Debt and Equity Securities," and the sale of the building products operations and real Financial Accounting Standard No. I12, " Employers' estate properties and the orderly liquidation of the lend-Accounting for Postemployment Benefits." The ing and leasing portfolio.

l I

Percy M. Beard. fr., ,

~

Nu"II[U'b',,#'!// l,"'

norida Power corporation h

74 continuing this trend will help our nuclear unit produce power at a more competitive l

cost. )

' Vk Fmm 1991 to 1993, our nuclear plant operated at its highest level ever. During the past three years, it i has averaged an annual operating capaci.

, ty of about 77 percent.This compares quite favorably with the national average of about 8 !. 72 percent over this same period.

Q1 What is the most important challenge facing plorida Power is pleased with the unit's improved the operation of your nuclear plant? performance but, in the years ahead, we're looking to A: Electric utilities will need to do a better job managing achieve an operating capacity of closer to 87 percent, the costs of operating their nuclear plants. At Florida Power, We've extended operating cycles from 18 to 24 months, and one of our top goals is to lower our nuclear unit's generating . several years ago we instituted mid-cycle maintenance out-costs per megawatt-hour without compromising safety in any ages to reduce unplanned shutdowns.

W8Y' We will continue to work on other ways to improve the in the last couple of years, we've been able to do just that, plant's output and reduce costs while maintaining our high We've increased the energy output of the plant and at the standard of nuclear safety, same time we've been reducing the unit's operatitig costs.

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1 l

David K Kuznna.

Senior Vice President and Chic / financial o//icer. progress establishes its new dividend rate, we Na Io$v*e'rTr"poration j[l strongly consider the market's expectation as well as our company's overall camings potential.

We also take a long tenn view s when we formulate our dividend policy. We carefully examine each of our operating companies, assessing their estimates for sales growth and profitability.

Qi Your company's current dividend payout b- Our most recent review, which occurred in ratio is 87 percent. How does that impact Florida November, indicated that Florida progress can Progress' dividend policy and its objective of main- maintain a dividend growth rate that is comparable taining a competitive dividend growth rate? with other high-quality electric utility stocks. At the A: Our management and our board realize that utility same time, our current camings projections indicate that investors have learned to expect steady, predictable dividend we can continue to lower our dividend payout. Over time, it growth from their investments. Each year, before Florida is our goal to lower the payout to 75 percent.

Florida Progress' common equity, as a percent of Florida Power's subsidiaries currently have 30-percent total capital, was 45.1 percent as of December 31,1993, equity interests in the interstate and intrastate part.

and 45.6 percent in 1992. Short. term capital, as a per- nerships of a gas pipeline project. These investments cent of total capital, was 5 percent in 1993 and 5.3 per- totaled $4.9 million at December 31,1993. Florida cent in 1992. Power has an option to reduce or eliminate its owner-Florida Progress has strengthened its capital struc. ship positions at the end of 1994. (See Note 11 on ture throuxL the sale of common stock, Florida Power page 36.)

first mortgage bonds, real estate properties, and lending in a separate agreement, Florida Power has signed a and leasing assets, when compared with 1990. At 25-year contract for the transportation of natural gas to December 31,1990, common equity was 38.8 percent the utility's Anclote plant nen Tarpon Springs and the of total capital and short. term debt was 18.6 percent of Polk County site through this planned pipeline.

total capital Florida Progress' primary short- and lonX- The Clean Air Act of 1990 requires electric utility term capital requirements result from utility construc- companies to reduce sulfur dioxide emissions in two tion and property additions, dividend payments to phases. Florida Power will not be affected significantly common shareholders, debt repayments and diversified by Phase I, which begins in 1995, and expects to meet property additions. Other capital requirements include Phase II requirements in the year 2000 with minimal business acquisitions and joint venture investments. capital expenditures.

UTILITY In addition to funding its construction commit.

Florida Power's construction expenditures for 1993 ments with cash from operations, Florida Power ac-totaled $426.4 million, consisting primarily of distribu. cesses the capital markets through the issuance of tion and production expenditures. The five-year con. commercial paper, medium-term notes and first mort- 1 struction program includes planned expenditures of gage bonds and receives equity from Florida Progress' S344 million, $378 million, $325 million, S371 million common stock sales. Florida Power's goal is to main-and $354 million for 1994 through 1998. Florida Power tain a capital structure consistent with its double A forecasts that 83 percent of these construction expendi. minus credit rating.

tures will be financed with internally generated funds. In 1992, Florida Power established a $200-million j In December 1991, the Florida Public Service public medium-term note program, providing for the Commission approved the utility's request to construct issuance of either fixed or floating interest rate notes, two gas-fired, combined-cycle generating units in Polk with maturities that may range from nine months to i County, Florida. Construction expenditures of $287 30 years. The program has approximately S170 million l million are planned for this new energy complex in the available for future issuance. )

1994 1998 forecast with most of the expenditures in During 1993, Florida Power repaid $355.5 million of .

the later years. first mortgage bonds and $45.4 million of medium-  !

l Florida Power plans to use natural gas for the first term notes. (See Note 2 on page 29.)

i phase of the new energy complex in Polk County. Florida Power's embedded cost of long-term debt i

I '

O

i declined to 6.8 percent at December 31,1993, com-I pared with 7.5 percent at year-end 1992.

. During 1992, Florida Power purchased and redeemed 4 A .S j 50,000 shares of its Cumulative Preferred Stock, pur-  %

! suant to sinking fund provisions. In 1993, Florida 4F 1 Power redeemed an additional 800,000 shares of its j Cumulative Preferred Stock. (See Note 3 on page 30.)

' 4M .. '

4

[M"~[1 @ DW [

3 Florida Progress contributed $60 million in 1993, -

$121.6 million in 1992 and $100 million in 1991 to 4

. essa sawsmoun#0eanne' Flon.da Power from the proceeds of the holdm.g compa-  %;gp.m_ . e i ny's public stock offerings in May 1992 and May 1991 ,_ .

J sM a and the Progress Plus Stock Plan. These funds were ,

I used to reduce outstanding commercial paper and to ('% ,' ' i further strengthen Florida Power's financial position. M Qu ~o=. %m$ f Q{gA,lgg y .

Florida Power has a $400-million commercial paper g

$)ggj?g{;.; j program that is rated A-l+ by Standard & Poor's and P-l l

.; by Moody's. Flonda Power's interim financing needs are I funded primarily through its commercial paper pro- Ia 'he la5' 'wo rears. almo!' 8600 million in company debt has d

i gram. Florida Power has established 364-day and five-6

,[lll,, "

M"[fio',""h*"" '*""'d F "'"""""""" #

year revolving bank credit facilities, both for $200 mil-tion, which are used to back up commercial paper. ISee Note 2 on page 29.) Progress Capital has established a private $400-mil-a lion medium term note program with maturities that j DIVERSIFIED OPERATIONS may range from nine months to 30 years. As of Decem-Progress Capital Holdings, Inc., is a downstream hokl. ber 31,1993, Progress Capital had issued $174 million l

ing company of Florida Progress used to finance the in medium-term notes, leaving $226 milhon avadable

, activities of the diversified operations, as well as con- fm futum issuance at either hxed or floating interest solidate the collective financial strength of these opera- *-

i i tions. Progress Capital has the benefit of a support Progress Capital also has established two revolving agreement with Florida Progress, which helps to lower bank credit facilities: a 364-day, $100-million facility lj the cost of capital to those individual businesses. and a five-year, $300-million facility. These facilities

} Progress Capital funds diversified operations primari- are used to back up Progress CapitaPs commercial

ly through the issuance of commercial paper and medi- paper pmgram. By changing the term of the commer-

! um-term notes. Progress Capital's commercial paper cial paper backup facility to be primarily long-term and I program is rated A-1 by Standard & Poor's and P-1 by reducing the amount of short-term debt, Progress

! Moody's and its medium term note program is rated A Capital has strengthened its short term liquidity. At i and A2, respectively. December 31,1993, Progress Capital's short term debt l (including current maturities), as a component of total i capital, was 4 percent, compared with 9.2 percent in 1992.

l CAPITAL STRUCTURE (In percentJ In 1993, total diversified capital expenditures werc

! $21.7 million, primarily for the non. regulated opera-30 tions at Electric Fuels. Sales of leases, loans and securi-ties generated net proceeds of $21.5 million, $70.1 mil-

< 80 j lion and $127.9 million in 1993,1992 and 1991, respec-

. 60 tively, primarily due to the planned liquidation of the j finance unit's assets.

~

] 40 In 1994, diversified capital expenditures are expected I to be $25 million, with most of these planned expendi-4 20 tures designated for the non regulated coal and barge

! operations at Electric Fuels. These expenditures are j 0 expected to be financed through cash generated inter-1989 1990 1991' 1992 1993 nally and medium term notes.

o common stock + rreferred stock Florida Progress has off-balance sheet risk related to i

O Long-term Debt + Shon-term Capital i debt of unconsolidated partnerships. (See Note 11 on page 36.)

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REPORTS FROM M AN AGEMENT AND AUDITORS l l

l M ANAGEMENT'S ItEPORT AUDITORS' REPORT To Our Shareholders: To the Shareholders of Florida Progress Corporation: j Management is responsible for the integrity and objec. We have audited the accompanying consolidated bal-tivity of the financial and operating infonnation con- ance sheets of Florida Progress Corporation and sub- l tained in this 1993 Annual Report to Shareholders, sidiaries as of December 31,1993 and 1992, and the including the consolidated financial statements covered related consolidated statements of income, cash flows, l

by the Auditors' Report. These statements were pre- and shareholders' equity for each of the years in the -

pared in accordance with generally accepted accounting three year period ended December 31,1993. These i principles and necessarily include amounts that are financial statements are the responsibility of Florida j based on judgments and estimates by management. progress Corporation's management. Our responsibili- l ty is to express an opinion on these financial state-Florida Progress Corporation maintains internal ments based on our audits.

control systems and related policies and procedures designed to provide reasonable assurance that assets We conducted our audits in accordance with gener- l are safeguarded, that transactions are executed as ally accepted auditing standards. Those standards authorized and are properly recorded and that account- require that we plan and perform the audit to obtain ing records may be relied upon for the preparation of reasonable assurance about whether the financial consolidated financial statements and other financial statements are free of material misstatement. An audit information. These policies and procedures include a includes examining, on a test basis, evidence support-Code of Conduct program intended to ensure employ. ing the amounts and disclosures in the financial state-ees adhere to the highest standards of personal and pro- ments. An audit also includes assessing the accounting fessional integrity. The design, monitoring and revi- principles used and significant estimates made by sion of intemal control systems involve, among other management, as well as evaluating the overall finan- i things, management's judgment with respect to the cial statement presentation. We believe that our audits relative cost and expected benefits of specific control provide a reasonable basis for our opinion.

measures. The company also maintains an internal auditing function that evaluates and formally reports In our opinion, the financial statements refened to on the adequacy and effectiveness of internal controls, above present fairly, in all material respects, the finan-policies and procedures. cial position of Florida Progress Corporation and sub-sidiaries as of December 31,1993 and 1992, and the In addition, the audit committee of the board of results of their operations and their cash flows for each directors, consisting solely of outside directors, meets of the years in the three. year period ended December periodically with management, the internal auditors 31,1993, in conformity with generally accepted and the independent auditors to review matters related accounting principles.

to internal controls, audit results, financial statements and financial reporting. Annually, the audit committee As discussed in Notes I and 8 to the consolidated recommends to the board of directors the selection of financial statements, in 1993, Florida Progress independent auditors. Both the independent auditors Corporation and subsidiaries changed their methods of and the internal auditors periodically meet alone with accountmg for income taxes and postretirement bene.

the audit committee and have free access to the com. fits other than pensions.

mittee at any time.

Ior Management, h *h St. Petersburg, Florida January 24,1994 David R. Kuzma Senior Vice President and Chicf Financial Officer

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CONSO LIDATED FINANCIAL STATE MENTS l

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CONSOUDATED STATEMENTS OF INCOME e4 FLORIDA PROGRESS CORPOR AT10N l

1 i IOR Tile YEARS ENDED DECEMilER 31.1991,1992.md 199l (In Inillions. cxcept pct shdre arnounts) 1991 1991 1991 l REVENUES: l Electric utility $ 1,957.6 $ 1,774.1 $ 1,718.8 Diversified 491.4 321.2 355.9 2,449.0 2,095.3 2,074.7 i

EXPENSES:

l Electric utility:

l Fuel used in generation 460.8 471.9 498.5 l Purchased power 209.5 140.4 104.3 Deferred fuel (11.8) (3.7) 3.8 l

l Other operations 378.0 310.9 282.0 Operations 1,036.5 919.5 888.6 Maintenance 136.8 139.7 134.8 Depreciation 240.2 209.5 206,3 Taxes other than income taxes 152.6 138.3 129.3 1,566.1 1,407.0 1,359.0 Diversified:

Cost of sales 390.1 238.4 238.4 l Other 50.2 45.1 61.9

( 440.3 283.5 300.3 l

INCOMF FROM OPERATIONS 442.6 404.8 415.4 INTEREST EXPENSE AND OTilER:

Interest expense 141.1 134.2 146.1 Allowance for funds used during construction (15.6) (18.7) (9.4)

Preferred dividend requirements of Florida Power 13.4 16.7 16.8 Other expense (income), net (2.5) 8.4 (4.5) l 136.4 140.6 149.0 l

INCOME FROM CONTINUING OPERATIONS

! IlEFORE INCOME TAXES 306.2 264.2 266.4

Income taxes 110.4 88.5 91.9

! INCOME FROM CONTINUING OPERATIONS 195.8 175.7 174.5

! DISCONTINUED OPERATIONS, net of income taxes:

Provision for loss on disposal - -

(2.4) l CUMULATIVE EFFECT OF INCOME TAX ACCOUNTING CilANGE .8 - -

NET INCOME $ 196.6 $ 175.7 $ 172.1 AVERAGE SilARES OF COMMON STOCK OUTSTANDING 88.3 85.4 80.8 EARNINGS PER AVERAGE COMMON SilARE:

Continuing operations $2.22 $2.06 $2.16 i Discontinued operations - -

(.03)

Cumulative effect of accounting change .01 - -

$2.23 $2.06 $2. I3 T$lt dCCornfdflVIHX nrolCS dfC dn inlC$ ldh pdtt Of thC\C {lndnCid! stallinentt i

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CONSOLIDATED BALANCE SHE.ETS A FLORIDA PROGRESS COR POR AT ION DECEMBER 31,1993 and 1992 bilars in mt! lions) 1991 1992 l ASSETS l l

PROPERTY, PLANT AND EQUIPMENT-  !

Electrie utility plant in service and held for future use $5,320.3 $4,853.9 l Less: Accumulated depreciation 1,846.2 1,660.8 l

Accumulated decommissioning for nuclear plant i18.3 102.0 Accumulated dismantlement for fossil plants 68.5 47.1 l 3,287.3 3,044.0 )

Construction work in progress 285.7 333.8 l Nuclear fuel, net of amortization of $299 9 in 1993 and $273.6 in 1992 68.4 641 Net electric utility plant 3,641.4 3,442.0 Other property, net of depreciation of $141 in 1993 and $119.9 in 1992 391.6 393.6 4,033.0 3,835.6 1

CURRENT ASSETS:

Cash and equivalents 9.1 8.1 Accounts receivable, net 242.7 202.1 Current portion of leases and loans receivable 31.3 25.4 Inventories, primarily at average cost:

Fuel 79.5 107.1 Utility materials and supplies 112.2 103.4 Diversified materials 35.8 11.2 Underrecovery of fuel cost 7.1 4.4 Other 41.8 34.6 559.5 496.3 OTilER ASSETS:

Investments:

Leases and loans receivable, net 485.4 529.6 Marketable securities 129.3 119.5 j Joint ventures and partnerships 88.4 91.4 Nuclear plant decommissioning fund 107.7 89.8 Deferred insurance policy acquisition costs 81.5 68.6 Other 154.0 102.2 1,046.3 1,001.1

$5,638.8 $5,333.0 The accornpannng notes are an mtextalpart of these fmancial staternentt l

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- . . _ _ . . .- -- . _ - _ _ _ ~ ~ ._ _ ~ - - . .-

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.I i (Dollars in millions) 1993 1992 l CAPITAL AND LIABILITIES 1 COMMON STOCK EQUITY:

) Common stock without par value,250,000,000 shares authorized, 89,259,572 shares outstanding in 1993 and 87,529,856 in 1992 $ 1,008.3 $ 949.'2 Retained earnings 812.2 788.4 i

1,820.5 1,737.6

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i CUMULATIVE PREFERRED STOCK OF FLORIDA POWER:

Without sinking funds 113.5 133.5 ,

j With sinking funds 35.0 82.5  ;

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I LONG-TERM DEBT 1,866.6 1,656.4 l l

j j TOTAL CAPITAL 3,835.6 3,610.0 i

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l CURRENT LIABILITIES:

2 Accounts payable 149.4 108.9 Customers' deposits 71.5 69.0

. Income taxes payable 42.3 39.6 Accrued interest 45.2 42.2

{ Other 77.4 60.4 385.8 320.1 Notes payable 125.0 2.9 Current portion of long term debt and preferred stock 76.6 149.0 l 587.4 '2'2.0 l

l l DEFERRED CREDITS AND OTHER LIABILITIES:

j Deferred income taxes 756.3 816.7 j Unamortized investment tax credits 119.6 129.0 i j Insurance policy benefit reserves 186.5 140.3 Other 153.4 115.0 1,215.8 1,201.0 COMMITMENTS AND CONTINGENCIES (Note 11)

$5,638.8 $5,333.0 i

j l

h i

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CONSOLIDATED STATEMENTS OF CASH FLOWS A FLORIDA PROGRESS CORPORATION FOR THE YEARS ENDED DECEMBER 31.1993,1992 and 1991 (In millions) 1993 1992 1991 OPERATING ACTIVITIES: )

Income from continuing operations $195.8 $ 175.7 $174.5 l Adjustments for noncash items: l Depreciation and amortization 299.9 268.7 266.3 Deferred income taxes and investment tax credits, net (49.1) (l 7.4) (22.6)

Changes in working capital, net of effects from acquisioon or sale of businesses:

Accounts receivable (26.1) (18.6) (4.7) l Inventories 12.2 (36.8) '21.5 Overrecovery (underrecovery) of fuel cost (2.7) (43.8) 46.4 l Accounts payable 17.7 14.2 17.8  ;

Other 23.4 23.1 13.7 Other operating activities 31.8 8.6 15.6 Cash provided by continuing operations 502.9 373.7 528.5 Loss from discontinued operations - -

(2.4) l Adiustments for noncash items - -

8.7 Cash provided by discontinued operations - -

6.3 502.9 373.7 534.8 ,

INVESTING ACTIVITIES.  ;

property additions (including allowance for borrowed funds used during construction) (462.4) (519.6) (397.6) ]

Proceeds from sales of properties and businesses 35.8 31.5 52.3 l Purchase of leases, loans and securities (128.6) (65.7) (121.1)

Proceeds from sale or collection of leases, loans and securities 150.1 135.8 249.0 Acquisition of businesses j (80.5) (23.0) (5.7)

Investments in joint ventures and partnerships (24.1) (5.3) (11.2)

Distributions from joint ventures and partnerships 26.0 5.0 15.0 Other investing activities (13.5) (15.1) (10.6)

(497.2) (456.41 (229.9)

FINANCING ACTIVITIES:

Issuance of long term debt 385.7 450.3 384.1 Repayment of long term debt (473.2) (315.3) (266.2)

Increase (decrease) in commercial paper with long-term support 154.0 (34.1) 175.1 Redemption of preferred stock (80.5) (5.0) -

Sale of common stock 59.1 137.6 141.1 Dividends paid on common stock (172.3) (163.4} (149.8)

Increase (decrease) in short. term debt 124.2 .2 (578.1)

Other financing activities (1.7) (2.7) {l.1)

(4.7) 67.6 (294.9)

NETINCREASE(DECREASE)IN CASH AND EQUlVALENTS 1.0 (15.1) 10.0 lleginning cash and equivalents 8.1 23.2 13.2 ENDING CASH AND EQUIVALENTS $ 9.1 $ 8.1 $ 23.2 SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORM ATION:

Cash paid during the period for:

Interest (net of amount capitalized) $ 138.1 $ 129.9 $ 147.5 Income taxes (net of refunds) $155.1 $ 91.5 $ 101.5 The accompJnytng notes die an integrdlpart Of these (mancial Statementt

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[ CONSOLIDATED STATEMENTS Of SHARDIOLDERS' EQUITY d4 Fl.ORhDA PROGRESS L'ORPORA

FOR THE YEARS ENDED DECEMBER 31,1993,1992 AND 1991 IDollan in millions except per share amounn)

Cumulative Prefened stock of Florida Power Without With Common Retained Sinking Smkmg Stoc k Earnmgs Funds Funds llalance, December 31,1990 $ 670.5 $753.8 $ 133.5 $ 100.0 Net income 172.1 Common stock issued - 5,381,529 shares 141.1 Cash dividends on common stock ($1.843 per share) (149.8)

Preferred stock reclassified to current - 25,000 shares (2.5) llalance, December 31,1991 S11.6 776.1 133.5 97.5 Net income 175.7 Common stock issued - 4,596,938 shares 137.6 Cash dividends on common stock ($1.905 per share) (163.4)

Preferred stock redeemed or reclassified to current-150,000 shares (15.01 Balance, December 31,1992 949.2 788.4 133.5 82.5 Net income 196.6 Common stock issued - 1,729,716 shares 59.1 Cash dividends on common stock l$1.95 per share) (172.3)

Preferred stock te leemed - 675,000 shares (.5) (20.0) (47.5) llalance, December 31,1993 $ 1,008.3 $812.2 $113.5 $ 35.0 The accompanymx notes are an integralpart of these nuancial statementt NOTES TO CONSOLIDATED FINANCIAL STATEMENTS are designed to permit full recovery of these costs. The (1) SLIAlAIARY Of SIGNIFICANT ACCOLINTING l'OLICIES adjustment factors are based on projected costs for a six- or

(;eneral - Florida Progress Corporation (the Company) is 12 month period. Revenues and expenses are adjusted for an exempt holding company under the Public Utility differences between recoverable fuel, purchased power and Holding Company Act of 19E Its largest subsidiary, rep' conservation costs and amounts included in current rates.

resenting 75% of total assets, is Florida Power Corporation The cumulative foci cost difference is shown on the bal-l Florida Power), a public utility engaged in the generation, ance sheet as overrecovery or underrecovery of fuel costs.

purchase, transmission, distribution and sale of electric Any overrecovery or underrecovery of costs, plus an inter-energy primarily within Florida. est factor, is refunded or billed to customers during the The consolidated financial statements combine the subsequent penod.

financial results of the Company and its maiority-owned The cost of fossil fuel for electric generation is charged operations. All significant intercompany balances and inter-to expense as consumed. The cost of nuclear fuel is amor-company transactions have been eliminated. Investments tized to fuel expense based on the quantity of heat pro-in 20% to 50% owned joint ventures are accounted for duced for the generation of electric energy in relation to using the equity method.

the quantity of heat expected to be produced over the life Utility Plant - Utility plant is stated at the original cost of the nuclear fuel core.

of construction, which includes payroll and related costs such as taxes, pensions and other tringe benetits, general W Income on Finance Leases - The Company uses the finance method for recognizing earned income from and administrative costs and an allowance for funds used finance leases, which are primarily leveraged leases having during construction. Substantially all of the utility plant is W k 6 28 years. Accordingly, earned income, in-pledged as collateral for Flonda Power s hrst mortgage cluding any residual values expected to be recogni:cd, and bonds' the related deferred investment tax credits are amortized as Utility Revenues, Fuel and Purchased Power Expeno - revenues over the term of the transaction to provide an Florida Power accrues the non-fuel portion or base rev- approximate level retum on the positive net investment.

enues for services rendered but unbilled. Residual values are detennined principally on the basis of Revenues include amounts resulting from suel, pur- independent appraisals of the anticipated values of the chased power and conservation adjustment clauses, which leased assets remaining at the expiration of the lease.

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Income Taxes - Financial Accounting Standard No.109, In 1993, Florida Power filed a new depreciation study

" Accounting for income Taxes," was adopted by the with the FPSC. The f3ing includes the results of a site-Company in the first quarter of 1993. The objective of this specific dismantlement study of Florida Power's fossil standard is to recognize the amount of current and de- generating facilities. If the FPSC approves Florida Power's ferred taxes payable and refundable for all events that have recommended change in rates, annual depreciation been recognized in the financial statements or tax retums expense will decrease by $9.7 million on a retail jurisdic-based on enacted tax laws at the date of the financial tional basis, beginning in January 1995.

statements. Florida Power charges maintenance expense with the The Company elected to report the cumulative effect of cost of repairs and minor renewals of property. The plant the change in method of accounting for income taxes in accounts are charged with the cost of renewals and re- i 1993. The impact of the change is an increase in 1993 net placements of property units. Accumulated depreciation is '

income of S.8 million, attributable to the Company's non- charged with the cost, less the net salvage, of property I regulated activities. units retired.

I Under the new standard, deferred income taxes ate pro- Allowance for Funds - The allowance for funds used dur-vi/.ed w all significant temporary differences between the ing construction represents the estimated cost of capital 6nancial steeats and the tax bases of assets and liabili- funds (equity and debt) applicable to utility plant under ties using presently er: acted tax rates. In adopting the stan- construction. Recognition of this item as a cost of utility dard, the Company rec >rded a net decrease in deferred tax plant under construction is appropriate because it consti-balances of $57.7 mil: ion. Substantially all of this net tutes an actual cost of construction and, under established decrease is attributable to Florida Power and resulted from regulatory rate practices, Florida Power is permitted to the reversal of deferred income taxes accrued in prior years earn a return on these costs and recover them in the rates at rates in excess of the presently enacted tax rate and the charged for utility services while the plant is in service.

recognition of a temporary difference related to deferred In 1993, the FPSC reduced Florida Power's allowance investment tax credits. The decrease to deferred income for funds rate to 7.8%, effective July 1,1993. The revision taxes was partially offset by an increase for temporary dif- was prompted by the utility's newly authorized cost of ierences for which no deferred taxes had been recorded capital. The average rate used in computing the allowance because of prior regulatory practices. Because of regulatory for funds was 7.9% for 1993 and 8% for 1992 and 1991.

precedent and Florida Power's intent to recover and settle I " *" " E "".*ns,Poh. ey Acquisit,on i Costs and Benefit these amounts in future rates, a corresponding regulatory asset and regulatory liability were recorded and there was Rnerves - Life m.surance prermums re recogmzed as no effect on net income. revenue over the premium-paying periods at the pohcies.

The Company defers recoverable costs in its insurance Deterred mvestment tax credits subject to regulatory ac- operations that directly relate to the production of new counting practices are amorti:cd to income over the lives business. These costs are amortized over the expected pre-of the related properties. Additionally, deferred investment mium paying period. Reserves are established out of each tax credits associated with finance lease transactions are premium payment to provide for the present vahte of amortized to revenues as described earher. future insurance policy benefits, using reasonable assump-tions for future investment yield, mortality, withdrawals '

Depreciation and Maintenance - The Company provides and the risk of adverse deviation. I tor depreciation of the cost of properties over their estimat-ed useful lives primarily on a straight line basis. Florida Profit from Real Estate Sales - Profit from the sale of real l Power's annual provision for depreciation, including a pn>. estate is recognized only upon the closing of a sale, the vision for nuclear plant decommissioning costs and fossil transfer of ownership rights to the purchaser and receipt of plant dismantlement costs, expressed as a percentage of an adequate cash down payment.

the average balances of depreciable utility plant, was 4.8% Marketable Securities and Financial Instruments - The for 1993,4.6% for 1992 and 4.8% for 1991. Company considers all highly liquid debt instruments pur.

Florida Power was authorized by the Florida Public chased with a maturity of three months or less to be cash Service Commission (FPSC) to apply new depreciation equivalents. Fixed income securities are carried at amor-rates, which resulted in a $37.2 million increase in depre. tired cost and other equity securities are stated at the ciation expense for 1991. This increase included $16.6 mil. lower aggregate of cost or market value.

lion for fossil plant dismantlement costs. The effect of Florida Progress will be required to adopt Financial Ac-these new rates on wholesale customers was reversed in counting Standard No. I15, " Accounting for Certain connection with the settlement of Florida Power's 1992 Investments in Debt and Equity Securities," in 1994. The wholesale rate request, resulting in a one-time adjustment standard requires the Company to address the accounting of previously recorded depreciation. The reversal increased and reporting for investments in debt and equity securities.

net income in the fourth quarter of 1992 by $5.6 million, The standard requires investments to be classified in three of which $3.1 million was applicable to periods prior to categories depending on the Company's intended use. The 1992. The 1992 retail rate case included higher fossil plant adoption of this standard is required to be reflected dismantlement costs, totaling about $24 million annually, prospectively, and is not expected to have a material beginning in November 1992. impact on 1994 earnings.

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(2) DEBT The Company's long-term debt at December 31,1993 and 1992, is scheduled to mature as follows:

Interest (In mdhond Rate 1993 1992 l

Flonda Power Corporanon:

hrst mortgage bonds:

Matunng through 1998 1993 learly redemption) 8 48%ib! $ - $ 75.0 1995 4.74%(a) 34.4 34.4 1997 6.13 % 16.7 16.7 1998 (early redemption' 7.00 % - 20.5 Matunng 1999 through 20G1 6.50*4a) 335.0 3R0 Matunng 2006 and 2008 688% 80.0 80.0 Maturmg 2021 through 2023 7.98*4a1 400.0 300 0 Discount, net of premium. being amoru:cd over term of bonds (7.3) (2.21 878.8 8 79.4 l Pollution comrol hnancmg obhganons:

Maturing 2014 through 2027 6.5994a) 240.9 240.9 1 Notes matunng:

1993 1994 8.41 %[a1 45.9 90.0 l

1995-2008 7.79%(a) 78.9 49.5 Commercial paper, supported by revolver matunng December 31.1998 129*Wa1 200.0 96.0 l Progress Capital Holdmgs:

! Commercial paper, supported by revolver matunng November 30.1998 331*4al 245.0 1910 l Notes matunng:

1993 1994 9.18*4al 20.3 60 3 199k2001 8.56%(al 182.0 182.0 Other debt, maturing through 2006 8.62Nat 51.4 49.8 1,943.2 1,842.9 Less: Current portion of long-term debt 76.6 l86.5

$ 1.866.6 $ 1,656.4 (al Weighted average mterest rate at December 31,1993.

l (b) Weighted average mterest rate at the redemptmn date.

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The Company's consolidated subsidiaries have lines of mortgage bonds, with a weighted average interest rate of credit totaling $800 million, which are used to support 6.35%, which are due to mature from 1999 through 2008.

l commercial paper. The lines of credit were not drawn on In connection with the purchase of the Sebring Utilities as of December 31,1993. Interest rate options under line Commission electric distribution system in April 1993, of credit arrangements vary from sub prime or money Florida Power issued $30.7 million of 15 year,6.67% amor-market rates to the prime rate. Banks providing lines of tizing medium-term notes. The net proceeds were used to credit are compensated through fees. Commitment fees on repay commercial paper that was issued initially to retire i lines of credit vary between .I and .225 of 1%. the Sebring Utilities Commission debt.

l The lines of credit consist of four revolving bank credit In December 1993, Florida Power issued $100 million l facilities, two each for Florida Power and Progress Capital of First Mortgage Bonds, 7% Series due 2023. The pro-l Holdings, Inc. (PCH). The Florida Power facilities, $200 ceeds were used for the repayment of commercial paper million each, are for terms of 364 days and five years. The and for general corporate purposes.

l PCH facilities consist of $100 million with a 364 day term The combined aggregate maturities of long-term debt I and $300 million with a five-year term. In 1993, both 364- for 1994 through 1998 are $76.6 million, $46.8 million,

day facilities were renewed to November 1994. In addi- $175.5 million, $110.3 million and $4016 million, respec-tion, both five year facilities were extended to 1998. Based tively. In addition, about 17% of Florida Power's outstand-on the duration of the underlying backup credit facilities, ing first mortgage bonds have an annual 1% sinking fund

$445 million of the outstanding commercial paper at requirement. These requirements, which total $1.8 mil-December 31,1993, and all outstanding commercial paper lion annually for 1994 and 1995, $1.3 million annually for at December 31,1992, are classified as long term debt. 1996 and 1997 and $1 million for 1998, are expected to be In 1993, Florida Power refunded $355.5 million of its satisfied with property additions.

first mortgage bonds, with a weighted average interest rate Florida Progress has a support agreement with PCH of 8.13%, which were comprised of seven series originally that requires the parent company to maintain a minimum due to mature from 1998 through 2006. Florida Power net worth at PCH. At December 31,1993, PCH's net refunded substantially all of these first mortgage bonds worth was $98.1 million higher than the amount required

, using the proceeds from the issuance of four series of first under this agreement.

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(3) PREFERRED AND PREFERENCE STOCK AND SHAREHOLDER RIGHTS A smunury of outstanding Cumulative Preferred Stock of Florida Power follows:

Current Outstandmg Dimlend Redemptton Shares 1)ecember 31 Rate l'nce Authonzed Outstanding 1991 1992 tin milhorn) ,

l Without smkmg funds, not subiect to mandatory redemption:

4 00 % $1012i 401X)n 39,980 $ 4.0 $ 40 j 4 40 % $ 102.lM) 7;AXX) 75fX)0 7.5 7.5 45 % $ 101.lX) 100,000 99,990 10.0 10.0

~

4 60 % Slut 25 40JXX) 39,997 4.0 4.() ,

8.0 8.0 l

4. 7 % 5102 00 S0JXX) 80.OlX1 7.40 % $ 102.4s 30tMXX) 3(X)J)00 30.0 30 0

7. 7W $ 102.9sia) 5LK),000 500,0(X) 50.0 30.0 x 0% $1011X) 200 000 - -

20.0

$ 11 Li $1R; With sinkmg t'unds, subiect to rmndatory reenotion:

7 0n $ MR72;bi 500JXX) F0jXX1 $ 35.0 $ 410

_7 X4 % $10196 500.000 - - 50.0 RO 9i0 Lew Current pornon -

12. '>

$ 15.0 $ 82.5 M $IM21 af ter Februarv 15 1994 (b) $IM30 after November IL 19% $1%X)after November 15 2001 The Company has 10 million shares of authorized, but to adjustment. The number of rights attached to each unissued, Preferred Stock without par value issuable in share of common stock is also subject to adjustment, and i series. The first series, designated Junior Participating after giving effect to the 3 for 2 connuon stock split to Preferred Stock, was created in 1991 but remains unissued. shareholders of record on June 30, 1992, each share of ,

The Junior Participating Preferred Stock is entitled to conunon stock now has attached to it approximately two-  !

quarterly dividends equal to the greater of $10 per share or thirds of one right. Upon certain occurrences, the rights 100 times the per share conunon stock dividend and is may be exercised to purchase shares of the company's, or i entitled to 100 votes per share held. Florida Power also has a surviving entity's, common stock. Alternatively, the  ;

4 million shares of authorized Cumulative Preferred Board may approve a stock issuance to each holder of l Stock. $100 par value, of which 1.5 milhon shares are out- rights, with no cash payment by shareholders. The rights standmg. In addition, Florida Power has I million shares have no voting or dividend rights and expire December of authorized, but anissued, Preference Stock, $100 par 2001, unless redeemed earlier by the Company.

value, and 5 million shares of authotized, but unissued, Cumulative Preferred Stock, without par value. (4) FINANCIAL INSTRUALENTS in March 1993, Florida Power redeemed its $20 milhon The fair value amounts of the Company's financial instru-8.80% series perpetual preferred stock, as well as the 1993 ments have been determined using available market infor-mandatory and optional sinking fund amounts on its mation and valuation methodologies deemed appropriate 7.0S% and 7.84% series preferred stock, totaling $5 mil- in the opinion of management. However, considerable lion and $20 million, respectively. judgment is necessarily required in interpreting market in December 1993, Florida Power redeemed the 1994 data to develop the estimates of fair value. Accordingly, mandatory and optional sinking fund amounts on the the estimates presented are not nccessarily indicative of 7.08% and 7.84% series preferred stock, totaling $$ mil- the amounts that the Company could realize in a current lion and $20 million, respectively. In addition, Florida market exchange. The use of different market assump-Power redeemed all the remaining shares of its 7.84% tions may have a material effect on the estimated fair series preferred stock, totaling $10 million, at a redemp- value amounts. The following methods and assumptions tion price of $101.96. were used by the Company in estimating its fair value dis.

Preferred stock redemption requirements for 1995 closures for financial instruments.

through 1998, after giving effect to the above retirements, Loans Receivable - The fair values for commercial finance are $2.5 million annually. loans have been estimated using discounted cash flow In November 1991, the Company adopted a Shareholder analyses, management's estimate of the interest rate that Rights Plan. The Shareholder Rights Agreement provides would apply in today's market on an individual hian basis, that attached to each share of common stock is one right as well as repayment assumptions that may differ from the which, when exercisable, entitles the holder of the right to current loan document in certain cases. Estimating fair val-purchase one one hundredth of a share of Junior Partici- ues for loans associated with the airline industry is difficult pating Preferred Stock at a purchase price of $130, subject due to a limited number of similat trar sactions in a trou-O

bled indusny. Management has therefore estimated a range of fair values for these loans.

(5) LEASES AND LOANS RECEIVABLE AND CONCENTRATION OF CREDIT RISK The fair values for real estate loms and insurance poh..

At December 31.1993 and 1992, investments in leases and cy loans are estimated using discounted cash flow analy-ses and using ir.tetest rates currently being offered for sim. loans receivable were as tollows:

""""H'""" l'"3 1992 ilar loans. Loans with similar characteristics are aggregat-ed for purposes of the calculation, Fmance leases:

Other loans, primaril> notes from the sales of compa.

nies, are valued at the carrying amounts for variable rate

["'dj]']"h,i ,i,, $2 $

wand mmne (82.1) 19 a loans and using discounted cash flow analyses at current tieferred insestment tax credas (22.0) (25.4) market rates for hxed rate instruments. Total hnance leases 31IS 349.7 Marketable Securities - Fair values for marketable debt Loans rece:vable:

conunercial 6 nance busmeu 210.9 207.5 and equity securities are based on quoted market prices.

Life insurance busmeu 19.1 21.1 Nuclear Plant Decommissioning Fund - The assets in rotal loans receivable 210.0 228 6 this fund consist of cash and equivalents, which are val- Allowance h>r losses i24.8) (2u ued at their carrying amount, and equity securities and 516.7 535 0 govemmental notes and bonds, which are valued at quot. Less: current portion 3u 2u

$485.4 $;29.6 ed market prices.

Preferred Stock of Florida Power with Sinking Funds - Rentals receivable from finance leases represent unpaid The fair values of Florida Power's preferred stock subiect rentals less principal and interest on non. recourse third to mandatory redemption are estimated using discounted party debt. PCC's share of rentals receivable is subordinate cash flow analyses, based on current market rates. to the share of the debt holders who also have a security interest in the leased property.

Debt - The carrying amounts of debt with short-term maturities (primarily commercial paper) approximate their Finance leases primarily consist of leveraged invest.

fair value. The fair values for debt with fixed interest rates ments in aircraft as described below. The maiority of the are estimated using discounted cash flow analyses, based aircraft leases have terms of 15 to 20 years, with a maxi-on the Company's current incremental borrowing rates for mum of 28 years. Net contractual maturities of rentals similar types of borrowing arrangements. receivable under these contracts are $13.8 million, $14.4 million, $13.5 million, $11.6 million and $11.3 million for The fair value analysis ignores redemption prices and issuance costs (including underwriting commissions) that duough 1998, respectively, and $179.7 million in would be required to refund existing fixed interest rate tmal dumafter. Deferred taxes applicable to leveraged debt. In addition, the analysis assumes that all of the debt leases were $242.1 million and $264.2 million at Dmmber 31,1993 and 1992, respectively.

is currently callable at fair value.

Net income recognized from leveraged leases (af ter pay.

The Company had the following financial instruments

""'nts to non-recourse lenders, but before other borrowing for which the estimated fair values differ from the carrying values at December 31,1993 and 1992: costM was as Mows (In Inil!mns! 1993 1992 1991 1991 1092 Caroing Fair Carn mx r.ur Lease mcome (lossl $ 2.7 $p 6l $ (.7)

(In m:llionu Amount value Amount Value income tax effect (1.3) p.5) .M Assets- Effect of change m tax rate on Loans retenable dciet red assets / liabilities (2.9) -- -

Commercial hnance busme" Amortizanon of investment tax Real estate $143.2 $ 14'.2 5119 6 $ 112.0 credas 1.4 5.9 10

"" " " " ~ -

Lue t rance bunnen Loans sceured lw real estate 9.1 10.5 11.2 11.7 $37 Sil 2I $2 I

]

2$ M Dmmber 31,1993 and 1992, PCC's portfolio includ. l 1 22 i io 2144 to20ss ed investments in the airline and commercial real estate l Allowance for loan lom (21.8) .

(19.21 _ industries as follows: l II'I4 SI * (In mz/hons/ 1993 1991 Toral loans receivable $ 20n.2 to 214 6 5200 4 to 2n; M Marketable securmes $ 129.1 S i 11.9 5119 5 $122 6 Airlme industry:

Nudcarylant Jewmmmonmg tund 10'? I12.0 92 7 96 4 Fmance leases $261.9 $269J ,

CArrrAL AND LIANLmEs Loans receivable 62.7 67S l

Preferred md with smking tunJ4 $ 33.0 $ 3'.1 5 93 0 $ 99.7 Joint ventures 41.1 412 i Long-tenn dsbt: Equipment operating leases 8.4 9.5 l

Flonda Power Corporatmn 1,144.5 1,525.4 1.354 s 1,3 % I $376.1 $389.9 l Prm:n ss Captal Hold no 498? 31?.2 4s? I sul 4 Commercial real estate mdustry: l In accordance with its liquidation plan, Progress Credit Fmance leases $ iss $ iss Corporation (PCC) sold $118.4 million of marketable secu. Loans recemble 118.2 n9.6 rities during 1991 for a pretax gain of $14.5 million. $ 164.1 $l m

+ l

PCC's commercial finance loans to entities associated I (6) BUSINESS SEGMENTS with the airline industry are secured by security interests l in aircraft, aircraft engines or spare parts. These loans are The c,ompany defines its principal business segments as further collateralized, where applicable, by an assignment utility and diversified operations. The utihty is engaged m to PCC of the borrowers' lease agreements with third party the gnaanon, punhaw uansnussion, disuibution and j sale of electne energy. jFhe Electric Fuels Corporatton users of the secured equipment and, in some cases, third party guaranttes.

(Electric Fuels) operations include coal mining, procure-ment and transportation services to Flonda Power and l PCC's loans receivable from borrowers engaged in com' other external customers. Other continuing diversified mercial real estate activities are secured by first mortgage o ations include activities in leveraged leasing, commer- l liens on the related commercial real estate, assignment of c al f nance, life insurance, real estate and technology i leases and selected third party guaranties.

development. I No new transactions are being initiated unless they facil-itate the Company's orderly withdrawal strategy. In lune 1993, Electric Fuels acquired the assets of a rail )

Due to conditions in the airline industry and a weak smices company that contributed approximately $80 mil-real estate market, PCC has experienced delinquencies in li n to 1993 revenues. l ongoing lease and loan payments as well as loan principal The Company's business segment information for con-  ;

maturities. PCC has negotiated the restructuring of certain tinuing operations for 1993,1992 and 1991 is summarized I transactions. Although most of the outstanding real estare below. No single customer accounted for more than 10% of ,

and aircraft loans mature during the next five years, PCC unaffiliated revenues. Intra-segment sales have been elimi-expects many of the borrowers will not be able to retire the nated and the Company's equity in the camings of partner-loans at maturity. PCC will pursue its options for any non- ships and joint ventures has been included in revenues. l performing assets, including restructuring, remedial actions and remarketing. (In milhong 1993 1992 1991 PCC's portfolio at December 31,1993, included $81.9 Revenues:

million of aircraft leases, which were restructured in 1991 utihty $ 1,937.6 s i,774.1 S1,718.8 through 1993. PCC's portfolio also includes $51.6 million niversified:

of restructured aircraft loans to Pegasus Capital Corpo. Elcetric Fuels Corp ti ration, a company in which PCC has a 21% mmonty m' sales to extem.d customers 335.8 200.7 197.1 ,

terest. In 1992, PCC received $10 million in partial princi- Other diversified 157.7 122.8 161.l  !

pal payments on a $35 million restructured real estate 2,696.0 2,362.2 2.M9.2 loan and anticipates full repayment upon the expected Ehminations ill7.01 (266 M (264.51 sale of the collateral property.

nevenues from extemal customers s2.449.0 $2.095 3 s2.074.7 All restructured assets were performing in accordance income from operationt with their new terms at year end and the restructurings utihty s 391.5 $ 367.1 5 M98 did not materially reduce PCC's future annual revenue. Diversified:

During 1993,1992 and 1991, PCC provided $5.9 mil. Electric Fuels Corporanon 30.3 21.1 17.4 lion, $6.4 million and $17.9 million, respectively, for pos- Other diversified 20.8 16.6 38.2 sible loan and lease losses and had write-offs wtaling $4.2 442.6 4n8 41s.4 l

million, $3.7 million and $7.5 million, respectively. The Interest and other expense 136.4 140.6 149.0 '

Company believes PCC's existing reserve of $24.5 million income from continumx operanons is adequate to cover its planned orderly liquidation, before uworne tam s 30m2 s 2n2 s 266A assuming no further deterioration in the airline and real Identifiable assets:  ;

estate industries. Utihty S4,254.2 S3.980.3 s1642.9 l Diversihed.

Leases and loans generally are placed on non-accrual Electnc Fuels Corporatmn 307.2 32R7 280 4 status when management beheves the collectibility of Other divemfied 98'.4 1.024.0 1,101.6 i interest or principal is unlikely. At December 31,1992, 55,638.8 situ o s;.024.9 l there was a $15.1 million loan on non-accrual status. Depreciation and amom: anon:

There were no assets on non accrual status as of Decem- utility s 276.5 s 2a4 s 241.9 ber 31,1993. Utversified:

The Company plans to adopt the provisions of Finan- Electric Fuels Corporation 16.4 18.9 17.8 cial Accounting Standard No. I14, " Accounting by Cred. Other diversified 7.0 64 6.6 itors For Impairment of a Loan," effective in 1995. The s 299.9 s 268.7 s 266.3 standard requires that impaired loans be measured based Capital addaiont on the loans' present value of expected future cash flows, utihty s 440.7 s 49 u s 3;9.7 or the loans' observable market price or the fair value of Diversi6ed:

the collateral. The standard will be adopted prospectively. Electric Fuels Corporauon 19.5 23.1 28.9 The Company does not expect the adoption of this stan- "'h*' d'versihed 2.2 3.0 9.0 dard to have a material impact on earnings. 5 462A $ 519 6 S 397 6 l

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l 1

' At hnlber 31, 1993, Florid Progress had net non-(7) INC0 ale TAXES current deferred tax liabilities of $756.3 million and net (In nn!honsl 1991 1992 1991 current deferred tax assets of $29.2 million.The Company l Components of income tax e'tpense: expects the results of future operations will generate suffi-Payable currently cient taxable income to allow the utilization of deferred Federal $140J S911 $99,;

tax assets, state 18.8 7.x 14.3_,

t 159.5 105 9 1118 l

Deterred, net; (8) RETIREAlENT BENEFIT PLANS .

rederal il9.21 (9 3 (12.9)

Pension llenefits - The Company and certain ot its sub-state (5.1) LO .4 sidiaries have a non. contributory defined benefit pension Effect of change m tax rate on plan covering substantially all employees. The benefits are deferred awetChabilities 4.7 - -

based on length of service, compensation during the high-i19.61 tx3 il23 est consecutive 48 of the last 120 months of employment Amorti:ation of mvestment and social security benefits. Prior to January 1,1992, the l tax credits. net (9.5) l9.11 i9A! compensation portion of the ben / formula was based on n o.4 m C the highest consecutive 60 the last 120 months of di t nt p anons - -

.4 employmem The participatia companies make annual mntributions to the plan based en an actuarial determina.

$ n o.4 $se $ 919 tion and in consideration of tax regulations and tunding The principal components of deferred income tax ex- requirements under federal law.

pense for 1992 and 1991 were the difference between the 11ased on actuarial calculations and the funded status of financial and tax accounting for leases, the underrecovery the pension plan, the Company was not required to con-or overrecovery of fuel costs .md the difference between tribute to the plan for 1993,1992 or 1991. Shown below accelerated and straight line depreciation. are the components of the net pension cost calculations The primary differences between the statutory rates for those years:

and the effective income tax rates are detailed below:

Un millmns) 1993 1992 1991 Federal statutory income tax rate 15.0 % 34.0 % 34.0 %

e cou

$1A}

W $IU

' I

"P ""I""' * "

i t.I t 2.8 3.0 3.5 Net amortization and deferral 17.9 ( l.11 u0 Amomzation of investment tax credits (3.0) illi (13 Effect of change in tax rate on deferred Net pension cost 1.0 11 2.9 assets /liabihties 1.5 - Regulatory adiustment -

i.9) 12.7)

Other (1.81 (2.31 (l.1) Net pension cost recogni:cd $ 1.0 $ 2.2 $ .2 Effective income tax rates IL5% 31.5 % 32 9 %

e foHowing summ rizes the funded status of the The Omnibus lludget Reconciliation Act of 1993 in-pension plan at December 31,1993 and 1992:

cluded various rule changes and increased the maximum corporate income tax rate from 34 percent to 35 percent. d" ""Ih""" I"3 19"2 The impact of the new tax law increased the Company's ^ccumulated benent obhgation:

1993 income tax expense by $7.9 million. This included jdmed $

$ dh

$3.2 million attributable to the new tax rate on current 311.9 mi income and $4.7 million resulting from an adjustment of Effect of pnnected compensation increases 91.8 96.3 non regulated deferred tax balances. The tax rate change pnnected benefit obligation 405.7 3 59.4 increased Florida Power's deferred tax balances by $18.3 plan assets at market value, pnmanly hsted million with a correspondmg net increase to the regulatory "ocks and bonds m e plan assets in excess of pr sected beneht obligation s 99.3 $100 6 asset.

tmgtf f nc nentt The following summarizes the components of deferred C""g'['r tax liabilities and assets at December 31,1993: Unrecognized prior senice cost (10.3) 111.21 Effect ot changes m assumptions and difference (In nu!lmnd 1991 between actual and estimated expenence 64.1 61.5 Deterred tax habilities: $ 99.1 $100 6 Ddference in tax basis of property, plant and eqwpment $ 532.4 Difference in accounting for leveraged leases 242.8 The following weighted average actuarial assumptions other 90.1 at January I were used in the calculation of pension costs Total deterred tax habiltttes $865 I for the following years:

Deferred tax assets:

$ 89.1 I993 I992 199I Accmed book expenses Unbtlled resenues 17.3 Discount rate 7.75 % 7.25 % 8.50 %

Other 31.8 Expected long-term rate of return 9.00 % 9 00 N 9.00 %

Total deferred tax assets $138.2 Rate of compensanon increase 5.50 % 6 00 % 6.00 %

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The Company used a discount rate of 7.25 percent and ed postretirement benefit obligation as of December 31, a rate of compensation increase of 5 percent to calculate 1993 by 15.1 percent l$213 millionL The change in the dis-the pension plan's 1993 year end funded status. The count rate hom 4 percent at December 31,1992 to 7.5 per.

change in the discount rate from 7.75 percent at December cent at December 31,1993, increased the projected benefit 31,1992 to 7.25 percent at December 31,1993, increased obhgation by $11.4 inillion and is expected to increase the projected benefit obligation by $25.8 million and is annual postreurement benefit costs by $ 8 million, begm-expected to increase annual pension costs by $.8 million, ning in 1994.

beginning in 1994. Due to different retail and wholesale regulatory require-Other Pmtretirement llenefits -- The Company and some ments, Florida Power plans to make quarterly contribu-of its subsidiaries provide certain health care and life insur. tions to an irrevocable external trust fund recently estab.

ance benefits for retired employees. Employees become eli. hshed for wholesale ratemaking, while continuing to gible for these benefits when they reach normal retirement accrue postretirement beneht costs to an unfunded reserve age while working for the Company. Prior to 1993, the for retail ratemaking.

Company's policy had been to accrue benefits currently Early llettrement Option - In late 1993, Florida Progress payable along with amortization of past service costs of offered an early retirement option to certain employees age current retirees. The Company had accrued $23.9 million 55 or older with at least 20 years of service with the at December 31,1992. using this method. The Company Company. The effective retirement date for those employ-implemented Fmancial Accounting Standard No.106, ecs accepting the option is February 1,1994. The Company

" Employers' Accounting for Postretirement llenefits Other recognized expenses related to this offer of about $6 mil-Than Pensions," effective January 1,1993. This standard hon in 1993, which are not included in the postretirement requires that an employer's obligation for postretirement benefit cost table. The Company estimates the related benefits be fully accrued by the date employees attain full expenses in 1994 will be about $13 million.

eligibility to receive such benefits. The Company's costs New Accounting Standard - The Company will be for 1993 increased from $5 million to $23.9 million under required to adopt Financial Accounting Standard No. I12, the new standard. A substantial portion of the additional " Employers' Accounting for Postemployment lienefits,"

cost was recovered from Flonda Power customers through in 1994. The adoption of this standard is not expected to new retail base rates as discussed in Note 10. have a materialimpact on earnings in 1994.

The net postretirement benefit cost for 1993 was:

lin rmlhano 1991 (9) NUCLEAR OPERATIONS Serva.c cost $ i.6 ony wned Mant - De following infortnation relates Interest cost i t ,M to Florida Power's 90.4% proportionate share of the Amomration of unrecognized transinon obhgat on 6.5 Crystal River Nuclear Plant at December 31,1993:

$21.9 (in nulhond 1991 i

The folhiwing summari: es the plan's status, reconciled $"tuQ,,lantn in , 5622j with amounts recognized in the Company s balance sheet unanmm ed nucbriuet 68a at December 31: Accumulated deprecianon 266.3 tin nulhono I99) 1@2 Accumulated postretirement beneht obbganon: Net capital additions for Florida Power were $20.1 mil-Retuees s 94.3 $nM lion in 1993, and depreuation expense, exclusive of nuclear

,' decommissioning, was $26.2 million. Each co owner pro-r i I a tic t 7 2 7 vides for its own financing. Florida Power's share of the Unrecogmzed transmon obhganon asset balances shown previously and operating costs are U 20.7) 0 28.21 Unreah:cd losses g s) . included in the appropriate consolidated financial state.

Accrued postretuement bencht cost S 47A s 2.R ments. Amounts exclude any allocation of costs related to common facilities.

The following weighted average actuarial assumptions Deconunissioning Costs - Florida Power's nuclear plant were used in the calculation of the year-end status of other depreciation expenses include a provision for future posttetirement benefits: decommissioning costs that are recoverable through rates 1991 tw2 charged to customers. Florida Power is placing amounts thscount rate  ?.ss s0% collected in an externally managed trust fund. The recov-Rate of compensation merease 5.0% i;%

ery from customers, plus income earned on the tiust fund, Health care cost trend rater Pre-Methcare 13.00 5.23 % 14 An 6 00%

is intended to be sufficient to cover Florida Power's share rost. Medicare 9.75 smo% in sn ; 00% of the future dismantlement, removal and land restoration costs. Florida Power has a license to operate the nuclear The transition obligation is being accrued through 2012. unit through December 3,2016, and contemplates decom.

A one-percentage point increase in the assumed health care missioning beginning at that time.

cost trend tate for each future year would have increased In the current site specific study approved by regulatory 1993 cost by 18.6 percent 153.2 million) and the accumulat- authorities, total future decommissioning costs are esti-

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mated to be approximately $1.2 billion, which corresponds nuclear plant outages. A planned 51 day mid-cycle main-to $221 million in 1993 dollars. Decommissioning ex- tenance outage in 1993, cost Florida Power $9.7 million. /\

pense, as authorized by the FPSC and the Federal Energy 77-day refueling outage in l992, resulted in a cost of $30.2 Regulatory Conunission (FERC), was $11.9 million for million to Florida Power.

1993 and 1992 and $11.8 million for 1991. The next planned refeehng outage, scheduled for approx-Florida Power prepared a 1991 site. specific study at the imately nine weeks beginning in April 1994, presently is request of the FPSC that estimated decommissioning estimated to cost $21.4 million.

costs. Those costs, expressed in 1993 dollars, are $307.6 Insurance - The Price-Anderson Act currently limits the million. The FPSC postponed consideration of that study liability of an owner of a nuclear power plant for a single until 1994. Florida Power is required to file a new site-spe- nuclear incident to $9.4 billion. Florida Power has pur.

cific study with the FPSC in 1994, which will incorporate chased the maximum available conunercial nuclear liabil.

current cost factors. technology and radiological criteria. ity insurance of $200 million with the balance provided by The results of that study cannot be reasonably estimated at indemnity agreements prescribed by the NRC. In the this time. However, based on pnor regulatory treatment, event of a nuclear incident at any U.S. nuclear power Florida Power expects to recover any increase in nuclear plant, Florida Power could be assessed up to $79.3 million deconunist.oning costs through future rates, per incident, with a maximum assessment of $10 million The U.S. Nuclear Regulatory Conunission (NRC) per year. Florida Power has never been assessed for a issued updated waste burial cost factors in 1993, which are nuclear incident under these indemnity agreements. In used in the generic NRC fonnula for estimating decom- addition to this liability insurance, Florida Power carries missioning costs. Florida Power's 1991 site-specific study extra expense insurance with Nuclear Electric insurance, contains estimates for decommissioning costs that exceed Ltd. (NEIL) to cover the cost of replacement power during current NRC minimum requirements. any prolonged outage of the nuclear unit. Under this poli.

The National Energy Policy Act of 1992 established a cy, Florida Power is subject to a retroactive premium fund to pay for the decontamination and deconunissioning assessment of up to $2.7 million in any year in which poli-of nuclear enrichment facilities operated by the U.S. cy losses exceed accumulated premiums and investment Department of Energy (DOEl. The fund is expected to con- income.

sist of payments from affected domestic utilities and the

, federal government. Flonda Power s current annual spe. (10) RATES AND REGLILATION cial assessment, before adjustment for inflation, is $1.4 Retail Rates -In January 1992, Florida Power filed a retail million. Florida Power recorded a total estimated liability base rate increase request of $145.9 million using a regula.

of $19.5 million at December 31,1993, with a correspond. tory return on equity of 13.6 percent. The request was ing regulatory asset. This special assessment is being based upon a dual. year test period that included 1992 and

, recovered from utility customers through the fuel adjust. 1993. In September 1992, the FPSC granted Florida Power ment clause. an annual revenue increase of $85.8 million.

The Financial Accounting Standards Board has issued The new rates provide Florida Power the opportunity to Interpretation No. 39, " Offsetting of Amounts Related to earn a regulatory return on equity of 12 percent, with a Certain Contracts." Based in part on the issuance of this new allowed range between 11 and 13 percent. The FPSC interpretation, the Securities and Exchange Commission granted increases in retail base rates of approximately $;S

{SEC) staff announced it intends to require that estimated million in November 1992, $9.7 million in April 1993 and nuckar decommissioning costs be shown as a liability in $18.1 million in November 1993. The FPSC also upheld a the financial statements, beginning in 1994. Florida Power previously awarded interim increase of $31.2 million.

currently has recorded the accumulated provisions for The interim rates and new base rates increased 1992 nuclear decommissioning costs as a contra asset on the bal. camings by $15.4 million. The new base rates increased ance sheet. If the SEC staff maintains its position, a liabili. 1993 earnings by $10.4 million, after recording new ex-ty and a corresponding asset of $30E6 million each would penses authori: ed in the rate case.

be recorded in 1994 based on available cost estimates. Wholesale Rates -In December 1993, Florida Power exe.

Fuel Disposal Costs - Florida Power has entered into a cutd a settlement agreement with its yvholesale cus-tomers in its 1993 base rate proceedmg. Fhe agreement contract with the DOE for the transportation and disposal provides for an annual revenue increase of $3.7 million, of spent nuclear fuel Disposal costs for nuclear fuel con, effective February 1993. The settlement is exgcted to be sumed are being collected from customers through the approved by the FERC in the first quarter of 1994.

fuel adjustment clause at a rate of $.001 per net nuclear kilowatt. hour sold and are paid to the DOE quarterly. In m ,& a Power readed a wukmaa agrmnent with its wholesale customers, which resulted m, Florida Power currently is storing spent nuclear fuel on site and has sufficient storage capacity in place or under no sigmficant change m revenues. The 1992 settlement construction for fuel burned through the year 2009. ""' #PPmved by the FERC and lrovided 1 for a retroactive change m. Flonda Power's depreciation rates to December Plant Maintenance and Refueling Outages - Florida 1990. (See Note 1 on page '28.)

Power accrues a reserve for maintenance and refueling Florida Power expects to file a 1994 wholesale base rate expenses anticipated to be incurred during scheduled proceeding in the first quarter of 1994. Florida Power will

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be requesting an increase in revenues of approximately future electricity demand growth. All conunitments have

$10 million to recover costs for new generating facilities been approved by the FPSC.

and higher purchased power costs. If approved by the The following table shows the annual capacity pay.

FERC, the rate increase will go into effect in March 1994. ments, and the present value (at 10%) of these payments at December 31,1993, which the utility expects to incur if (11) COAIAllTALENTS AND CONTINGENCIES all units are brought into service as contracted and meet Utility Construction Program - Substantial commit- contracted perfonnance requirements: I ments have been made in connection with Florida Power's capacity Present  ;

construction program, which are presently estimated to a,, ,n mmno an ments value result in construction expenditures in 1994 of $344 mil- i994 3 33 3 77 l lion for electric plant and nuclear fuel. wv; ist iso l Sunshine Pipeline Project - Florida Power currently has a 1996 IM l tyy7 y'l8 go 30% equity ownership interest in both an intrastate and 1998 247 1;4 an interstate gas pipeline partnership, with an option to 1999 202s ma97 2.022 reduce or climinate its interest in December 1994. The Total 51t462 St726 cost of the pipeline project is estimated to be approximate-The capacity cost of power purchased from non utility ly $600 million. In 1994. Florida Power expects to invest generators was $33 million in 1993, $10 million in 1992

$6 million in these partnerships.

and $2 million in 1991.

Fuel and Purchased Power Commitments - Florida Power has entered into various hmg term comnutments to pro- Fidia Power does not plan to increase the level of pur-vide the foss,d and nuclear tuel requirements of its generat- chased power it currently has under contract. The utility ing plants and to reserve pipeline capacity for natural gas.

believes that its current contracts allow for system reliabil-ty and help reduce construction expenditures. These con-In most cases, such contracts contain provisions for price escalation, minimum purchase levels and other financial tracts could weaken Florida Power's everall credit ratings.

conunitments. Estimated annual payments, bised on cut- The FPSC allows these capacity payments to be recov-rent market prices, for Florida Power's finn conunitments cred through a capacity cost recovery clause, which is sim.

for fuel purchases, excluding coal and purchased power, are ilar to, and works in conjunction with the fuel adjustment

$3.7 million, $12.9 million, $35.2 million, $36.6 million clause.

and $36.1 million for 1994 through 1998, respectively, and ,

$1,150.3 million in total thereafter. Additional commit- Coal Related Contracts -In connection with the supply ments will be required in the future to supply Florida ot coal to Florida Power and other customers, Electric Fuels Power's fuel needs. has entered into several contracts with outside parties for Flon,da Power has entered into long. term contracts wah the purchase of coal and also several operating leases relat-The Southern Company for up to 400 megawatts of pur- ed to coal procurement, processing and transportation. i chased power ammally through 2010, representing 4.7% of Alinimum coal purchases are approximately 4 million tons l Florida Power,s total current system capacity. Florida

, g ,g ggg, g g g, g j Power has an option to lower these purchases to 200 leases are $192.4 million, $122.9 million, $76.9 million, megawatts annually, beginning in 2000 with a three year $76.3 million and $75.1 million for the years 1994 through notice. The power will be supplied by coal.ftred generating 199 respectively, and $264.2 million in total thereaf ter, units that have a combined capacity of approximately The total cost incurred under these commitments was

$2131 mulion in 1993, $249.3 million in 1992 and $250.2 3,500 megawatts. The entire commitment is guaranteed by gg g 199g The Southern Company s total system, which is appmx-imately 30,000 megawatts. The long term contracts obli- off. Balance Sheet Risk - Several of the Company's sub-gate Florida Power to pay certain minimum annual sidiaries are general partners in unconsolidated partner-amounts representing capacity payments. The estimated ships and joint ventures. The Company or subsidiaries annual capacity payments under the contracts will be $49 have agreed to support certain loan agreements of the part-million in 1994 and then approximately $60 million annu- nerships and joint ventures. The totals of the debt support ally until the contract expires in 2010. The capacity cost of agreements were $33.9 million and $68.7 million at power purchased under these contracts was $38 million in December 31,1993 and 1992, respectively, of which $26.4 1993 and $22 milhon in 1992 and 1991. million and $45.8 million were guaranties, $7.5 million As of December 31,1993, Florida Power had entered and $11.7 million were stand-by letters of credit, respec-into long term contracts with non utility generators for tively, and $11.2 million in 1992 were cash deficiency '

1,117 megawatts of capacity. These contracts have terms agreements. If the other partners fail to perform their obli-ranging from nine to 35 years. In most cases, these con- gations and if the partnership assets, consisting primarily tracts account for 100% of the generating capacity of each of land and buildings, were worthless, those subsidiaries of the facilities. Of the 1,117 megawatts under contract, could be liable for an additional $52.8 million as of De.

473 megawatts are currently available and the remaining cember 31,1993, which represents partnership liabilities future capacity is a part of the utility's plans for meeting exceeding amounts as mentioned earlier. The Company

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i considers these credit risks to be minimal, based upon the brought against four prior owners of a coal gasification asset values supporting the partnership liabilities. plant site, seeking contributions pursuant to CERCLA and )

Insurance Coverage - Florida Power is subject to retroac. Florida law toward the cost of cleaning up that site and tive premium assessments in connection with its nuclear nearby property that may have become contaminated. The liability insurance. In addition, Florida Power currently best estimates currently available to the Company indi.

! carries approximately $2.1 billion in nuclear property cate that its proportionate share of liability for cleaning up l insurance provided through several different policies. One the sites range from S.7 million to $1.5 million, and it has of these policies, which also is underwritten by NEIL, reserved $1 million against these potential costs. Liability pn,vides $1.4 billion of excess coverage. Under this poli. for such cleanup costs is technically joint and several.

cy, Florida Power is subject to a retroactive premium However, the Company presently has no reason to believe assessment of up to $6.5 million for the first loss in any that it will ultimately have to pay a significantly dispro.

policy yeat in which losses exceed funds available to portionate share of the cleanup costs of any of the sites.

NEIL in the event of multiple losses in any policy year, Although it does not currently contemplate a need to do Florida Power's aggregate retroactive premium could total so, Florida Power believes that it would have a sound basis up to $13.9 million. for seeking recovery through the ratemaking process in Effective November 1993, the FPSC authorized Florida the event it ultimately has to pay a significantly dispro.

l portion te share of the costs of cleaning up any contami.

' Power to self insure the utility's transmission and distri.

l bution lines against loss due to storm damage and other n ted site. It is recogmzed, however, that no such recovery w uld be assured.

l natural disasters. Florida Power is accruing $3 million annually to the storm damage reserve and may defer any Union Carbide Lawsuit - Florida Power and Florida Power losses in excess of the reserve. & Light Company (FP&L) are co. defendants in an antitrust action brought by Union Carbide Corporation (UCC), a Contaminated Site Cleanup - Florida Power and other customer of FP&L, seeking injunctive relief and damages.

subsidiaries of the Company have received notices from The suit challenges a long-standing territorial agreement the U.S. Environmental Protection Agency (EPA) that between the two unaffiliated, neighboring utihties, each is or could be a "potentially responsible party" under notwithstanding the defendants' contention that the agree-l the Comprehensive Environmental Response, Compen- ment was clearly authorized by state law and approved by sation and Liability Act (CERCLA) and the superfund the FPSC. Florida Power believes that the state action l Amendment and Reauthorization Act and may be liable, exemption from the antitrust laws is applicable to the together with others, for the costs of cleaning up several agieement and its consequent refusal to provide electricity contaminated sites identified by the EPA. In addition, to UCC. Management believes it has a strong defense and Florida Power has been named as a defendant in one suit intends to vigorously defend against this action.

QUARTERLY FINANCIAL DATA lUnandacdl Three Maths Ended IIn millions. cxcept per share amounnJ March 31 lune 30 september 30 December 31 1993 Revenues $493.3 $353.3 $768.9 $63 3.5 Income from operations 84.8 99.5 172.2 86.1 Net income 34.4 43.0 82.0 37.2 Earnings per average common share .39 .49 93 .42 Dividends per common share .485 .485 .485 .495 Common stock price per share:

High 35% 36 36% 35M Low 31% 32% 34% 32%

1992 Revenues $463.5 $5 l 1.7 $626.6 $493.5 income from operations 79.5 84.8 148.9 91.6 l Net income 30.1 34.9 74.6 36.1 Earnings per average common share .36 .41 .86 .41 Dividends per common share .473 .473 .473 .485 Common stock price per share:

High 3iK 301 33% 33%

Low 27X 28% 303 31%

The business of the Company's largest subsidiary, Florida Power, is seasonal in nature and it is management's opinion that comparisons of eamings for the quarters do not give a true indication of overall trends and changes in the Company's opera.

tions. As explained in Note 1 on page 28, Florida power recorded an adiustment to depreciation expense in the fourth quarter of 1992, which increased camings by $3.6 million. Due to the timing of common stock issues, the sum of the 1992 quarterly earnings per share do not equal the correspondmg annual figure.

+

SELECTED DATA 1983 1993 Annual Grow th Rates on perunti l 19u.1991 19 0 1994 t991 1o92 1991 l LORID A PROGRESS CORPORATION Sununary of operations (in milhonsh j Utility revenues 5.9 3.6 $ 1,9 57.6 S I,7 71.1 $ 1,718.8 Diversified revenues leontmuingi 12.7 67.7 491.4 32l.2 355.9 l Income from contmumg operations 1.9 6.6 195.8 175.7 174.5  !

Income llossi itom discontinued operanons and change in accounting .8 -

(2.41 1 Net income 1.8 6.6 196.6 175.7 172.1 l ltdance sheet data tin milhonsh Total assets 3.7 5.9 $5,6 38.8 S;.333.0 $ 5,024.9 Capitalization:

Short. term capital (11.31 11.9 $ 201.6 $ 201.9 $ 68.2 Long-term debt 12.2 4.1 t ,866.6 1.656.4 1,659.1 Preferred stock (8.7) 16.0 148.5 216.0 231.0 Common stock eqmtv 6.7 8.3 1,820.5 1,737.6 1,587.7 Total capitalization 6.4 5.3 $ 4,037.2 $3.811.9 $3,546.0 Common stock data:

Average shares outstandmg (in millions) 2.9 4.1 88.3 85.4 80.8 Eamings per share:

Utihty (1.41 1.4 $ 2.06 S1.99 $ 2.03 Diversified (continuing) 4.2 .16 .07 .13 Discontmued operations and change in accounting .01 -

(D3)

Consohdated (1.01 2.4 2.23 2.06 2.13 Dividends per common share 3.2 4.1 1.95 1.905 l.843 Dtvidend payout 87.6 % 93.0 % 87.0 %

Dividend yield 5.9"a 5.9 "a 6.0%

llook value per share of common stock 3.5 4.6 520.40 $ 19.85 S19.14 Return on conunon equity 11.1% [0.6% 11.4%

Common stock once per share:

thgh 36% 33a als low 315 27N 2h Close 7.7 9.6 33% 32X 31S Price earnings ratio lycar-end! 15.1 15.8 14.7 Other year.end data:

Number et emplovees (.41 4.4 7,825 7,301 7,3 ;0 Number of common shareholders ( 21 (.91 44,371 44.870 42.176 FLORIDA POWER CORPORATION Electric sales bdled inulhons of KWiU:

Residential 3.9 5.3 13,172.6 12,825.8 12,623.9 Commeretal 4.0 6.7 7,884,8 7,544.1 7,489.2 Industnal (1.7) 2.3 3,380.8 3,254.5 3,303.0 Total retail sales 3.2 5.2 26,528.1 25,414.0 25,179.1 Total electne sales 1.9 2.8 28,647.8 27,375.5 27,35l).2 Residential servlee (average annualt KWII sales per customer I.l l.8 12,420 12,214 12,257 Revenue per customer 3.8 2.3 $983 $SSI $899 Ratio of carnings to fixed charges lSEC methodi .2 2.7 3.81 3.84 3.87 Fmbedded cost of long. term debt (3.21 12.9) 6.8 % 7.5 % 7. 7 %

Embedded cost of preferred stock i1.11 (3.11 6.8 % 7.3 % 7.3 %

Operating data Net system capabihty (MW) 4.4 2.4 7,563 7,002 6,623 Net system peak (MW) 1.7 3.2 6,729 6,082 6,056 Construction additions (in milhons) 17.1 4.5 5442.0 $491.6 $355.3 Percentage of construction expenditures generated internally (6.9) .6 70 % 32"a 90 %

Average number ot customers 2.7 3.5 1,214,651 1,182,170 1,159,237 Number of full. tune employees 1.0 1.7 5,807 5.806 5,677

l 1

1 1

l 1990 1989 19ss 19x' 19s6 los; 1988 1941 l

$ 1,709.1 $ 1,627.0 $ 1,468.5 $ 1,472.2 $ 1,5 30.5 $ 1,504.9 $ 1,336.7 $ 1,3 71.8 l 301.7 274.3 270.1 245.5 186.0 159.0 614 2.S I

179.8 186.1 178.6 184.1 180.7 160.9 115.8 103.9 (15.0) l.0 1.2 3.7 .5 - - -

164.8 187.1 179.8 187.8 181.2 160 9 115.8 1019

$5,045.9 $ 4,610.4 $ 4,272.3 $4,067.2 $3,85;.5 $3.666.6 $3,432.8 $ 1,170 9_

$ 681.0 $ 498.6 $ 366.5 $ 269.0 $ 89.5 $ 205.0 $ 61.1 $ 6;.4 1,326.2 1,125.8 1,048.8 1,091.0 1,240.3 1,220.9 1,310.7 1,250.6 2315 233.5 233.5 233.5 233.5 265.1 26S) 174.3 1,424.3 1,372.3 1,316.9 1,264.7 1,156.4 1,014.2 8815 818.3

$3,665.0 $3,230.2 $2.965.7 $ 2,860.2 $ 2,719.7 $2,705.2 $ 2,523.5 $ 2,408.6 77.0 76.6 76.6 75.4 73.3 6S.4 64.0 59.0

$215 $ 2.19 $2.21 $2.20 $2.25 $2.25 $ 1.77 $1.79

.18 .24 .13 .24 .21 .10 .04 ( 03)

{.19) .01 .01 .05 .01 - - -

2.14 2.44 2.35 2.49 2.47 2.3; 1.81 1.76 t.777 1.72 1.667 1.613 1.54 1.46 1.38 1.30 J2.9 % 70.4 ro i t.0% 64. 7'% 61.4 % 62.2 % 76.3 % 73.6 %

'.29o 6.6 % 7.39a 7.6"6 6. l "a 7.4 % 9.1 % 10.1 %

$ 18. ' 7 $ 17.92 $17.20 $ 16.51 $ 15.51 $ 14.42 $lll5 $ 1107 l18% 119% 119% 15.5 % 16.4"6 16.S"6 13.6 % 13.7"6 27 26% 25S 29A 314 204 16x 15 2.' h 224 21'. 194 'O4 15A 124 12 25's 26% 23% 21% 26% 204 15h l31 11.9 ,

10.9 9.9 S.7 10.7 8.7 8.7 7.7 7,879 7,490 7.974 8,116 8,030 7,208 5,573 5,077 41,970 43,005 44,929 46,147 - 46,586 48,052 48,933 48,712 12,415.5 11,786.9 11,065.6 10,318.8 9,819.2 9,175.0 8.553.6 8,009.5 7,328.7 6,989.8 6,479.4 6,016.4 5,5710 5,106.6 4,547,7 4,118.6 3,455.7 3,766.1 3,6SO.6 3,349.4 3,122.3 3,166.0 2,989.0 2,701.0 24,878.3 24,123.3 22,691.7 21,039.6 19,833.8 18,716.0 17,279.1 15,972.0 27,143.7 26,510.5 26,130.9 24,1M.7 23,170.0 21,272.4 20,596.4 2 t,7 74.0 12,319 12.059 11,754 11,3;6 11,235 10,940 10,63S 10,388

$896 $S45 $814 $827 $914 $883 $818 $7S3 3.89 1 79 3.79 4.08 4.29 3.81 3 07 2.94 7.9 % 8.1% 8.0% 8.1 % 8.7 % 8.8 % 9.2"a 9.1 %

7.2% 7.2 *a 7.2% 7.2% 8.4 % 9.3 % 9.3 % 9.3 "o 6,571 6,309 6,086 5,966 5,961 5,989 5,927 5,993 5.026 6,817 6,188 5,087 5,977 5,813 4,858 4,913

$269.5 $254.8 $201.1 $ 192.8 $ 195.2 $201.2 $284.5 $283.8 52% 73 % 100 % 96 % 100 % 100 % 99 % 66 %

1,135,499 1,101,817 1,060,971 1,023,222 980,427 940,976 900,799 861,548 5,570 5,553 5,512 5,395 5,323 5,215 5,070 4,923

+

2 DIRECTORS AND 0FFICERS

BOARD of DIRECTORS

• i Dr. Jack B. Critchfield,60, is Chairman a subsidiary of San Diego Cas & Electric Joan D. Rulfier,54, is a General Partner j of the Board and Chief Executive Otficer Company. He is a director of SunBank of in Sunshine Cales, an Orlando. based

of Florida Progress. He served as a Tampa Bay, A company director since food and beverage concession business, 4

Florida Power Corporation director from 1989, he is a member of the Executive which has operations at two Florida air-1 1975 to 1978 before joining the utihty in and Finance & Budget Committees. ports. A certified public accountant, she j 1981 He is a director of Bamett Banks, Clarence V. McKee. 51, is Chairman and is a former chairman of the Board of j inc., in Jacksonville, Florida. A company Chief Executive Officer of McKee Regents of the State University System i director since 1988, he is chairman of the Communications, Inc., a television and of Florida. She is a director of the I j Executive Committee. radio investment firm in Tampa. Jacksonville Branch of the Federal  !

Michael P. Graney,50, is a Partner in Florida. He is a director of Bamett Bank Reserve Bank of Atlanta. A company j l

the law firm of Simpson Thacher & of Tampa, N.A. and Bamett Banks, Inc., director since 1990, she is a member of i Bartlett in Columbus, Ohio. Specializing in Jacksonville. A company director the Audit, indemmfication and Finance  ;

in utilities law, htigation and antitrust, since 1989, he is chairman of the & Budget Committees. j i he is a member of the Amencan, Dis. Com ensation Committee and a mem. Robert T. Stuart, Jr., 61, is a retired ,

trict of Columbia, Ohio and Columbus ber o the Audit Committee. Chairman and Chief Executive Officer i f Bar Associations and the Federal Energy Vincent J. Naimoli,56, is Chairman and of Mid continent Life Insurance

Bar Association. A company director Chief Executive Officerof Anchor Indus. Company in Oklahoma City, which since 1991, he is chainnan of the Indem' tries Intemational, Inc., Tampa invest- Florida Progress acquired in 1986. A 1 mfication and Nominating Comnuttees ment and management firm. He prev . company director since 1986, he is a and a memberof the Executive and Com- ously served as Chairman and Chief memberof the Executive Committee.

pliance Committees- Executive Officer of Anchor Glass Paul R. Verkull,54, is President and Allen J. Keesler, Jr.,55, is President and Container Corporation. A company Chief Executive Officer of the American Chief Executive Officer of Florida director since 1992, he is a member of Automobile Association, based in i Power. Since joining Florida Power in the Compensation, Finance & Budget Heathrow, Florida, a not-for profit asso-1963, he has held several positions in and Nominating Committees. ciation of motor clubs serving the engineering and operations. In 1982, he Richard A. Nunis, 61, is Chairman of United States and Canada. He is a was promoted to President and Chief Walt Disney Attractions in Orlando, director of NationsBank of Florida, N.A.

4 Executive Officer of Talquin Corpora. Florida. He is a director of The Walt A company director since 1993, he is a tion and served in that position until Disney Company and SunBank, N.A. in member of the Finance & Budget and i retuming to Florida Power in 1988. He is Orlando. A company director since 1989, Indemnification Committees.

a director of SouthTrust Corporation. A he is chairman of the Finance & Budget Jean Giles Wittner,59, is President of Florida Power director smce 1988 and a Committee and a member of the Exec. Wittner & Company, a St. Petersburg j company director since 1992, he is a utive and Compensation Committees. firm involved in real estate manage, member of the Finance & Budget ment, insurance brokerage and consult.

Charles B. Reed,52, is Chancellor of the l State University System of Florida in ing. She reviously served as President

Richard h.'orpan 31, is President and Tallahassee, Florida. He previously and Chie Executive Officer of a savings i 1 Chief Operating Officer of Florida served as Chief of Staff and Deputy ass ciation until it was sold in 1986. A j

Progress. He joined the company in 1989 Chief to Florida Govemor Bob Graham. Florida Power director since 1977 and a j as Executive Vice Prestdent and Chief A company director since 1992, he is a c mpany director since 1982, she is

, Financial Officer. He previously served member of the Finance & Budget and chairman of the Audit Committee anda

{ as President and Chief Executive officer Nominating Committees. member of the Compensation and of Pacific Diverstfied Capital Company, Compliance Committees.

i l

t i s. .. ..

i

. J(0FFICERS d

Dr. Jack B. Critchfield Jeffrey R. lleinicka Allen J. Keester, Jr. ,

Chairman and Chief Executive Officer Vice President and Treasurer President and Chief Executive Officer, '

Florida Power Corporation Richard h.orpan Dan R. Johnson i President and Chief Operating Officer Vice President Richard D. Keller  !

David R. Kurma President and Chief Executive Officer, l Darryl A. LeCla.ir Electric Fuels Corporation Sentor Vice President and Chief ,,

i Financial Officer Vice President, Mergers, Acquisitions

and Divestitures, and President, Riley R. Simon

Joseph II. Richardson Progress Credit Corporation President and Chief Executive Officer,

) Senior Vice President, Corporate Mid-Continent Life Insurance i Development Larry J. N<.wsome Company ,

Vice Prmdent, Tax Administration 1 Kenneth E. Armstrong Dudley E. Brunt  !

l Vice President, General Counsel John searJino, Jr. President and Chict 1.xecutive Officer, '

j and Secretary Vice Pre,ident and Controller Advanced Separation Technologies incorporated 4 +

4

- . . -- --, -..- ~ ,,- - , - . . . - , - . - . . - -

A IOW-COSI lilW5tillelltylall (0111 Florida Progress CoryorallOII N 3) rogress Plus is an economical, Plan features include: l i i

j convenient and flexible way to + Full or partial reinvestment of I l purchase shares of Florida Progress dividends '

AL. common stock directly from the + Purchase of shares through cash  !

company without paying typical brokerage investments '

fees. Those eligible for the plan are:

+ Safekeep ng services for stock l

+ Registered shareholders of Flonda i certificates Progress i

+ Non-shareholders who are Florida This is not an offer to sell or a sohcztation of an  !

residents offer to buy anv secanties The offerms is ma le I

+ Employees of the company and its on/v by means of the pmspectus for the  !

subsidiaries Progress Phis Stock Plan 8

,________________________________..______________________q Please check one of the following:

PROGRESSPills assssssssssscIIIIIItiIttIII.' s l

Sitx'XPIM g J l am a registered snareholder of Flonda Progress. ,

J My shares of Flonda Progress stock are held by a brokerage firm i J l am not a Florida Progress shareh0lder. I J l am not a Flanda Progress shareholder but I am a Florida resident.  !

i Please send me information and a prospectus about this low-cost investment plan from Florida 1 Progress Corporation l

(Pleese print) 8 Name _

s i

Stree! __

i 1

City State Zip i i

No Postage Requred l l

8 4

1

I PROGRESSPLUS REEEEEERRREIREIIIIIIIIIIIIIII STOCKPLAN NO POSTAGE NECESSARY l I

IF MAILED IN THE UNITED STATES BUSINESS REPLY Mall -!

' FIRST CLASS M AIL PERMIT NO. 504 ST. PETERSBURG, FL POSTAGE WILL BE PAID BY ADDRESSEE FLORIDA PROGRESS CORPORATION INVESTOR SERVICES BT8C

• P.O. BOX 33028 [

ST. PETERSBURG, FLORIDA 33733-9766 liillisillilinleillisillililiili lillisillisiellil

?.

INVEST 01t SERVICES .

ANNLIAL REPORTS ON FORAl 10 K ANI)

All dn ah nd i ha ks sh.i.n holdri icrosis piou maten STATIST 10\L StlPPLE AIENT al .md i.n te n ms .u t h.mdlot inim om si Ptarisburg .\ i nps os t he i omp.nn s lw t loim lu k wnhom L tillM O.lle alltit t' All t 6 H itNpt HItk ilt t' s l'nt t vliint .iddicss c\hiluts u ill 14 slippih d w illiotti t ll.nt t te n sil.iiclit eld

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t o n .it e s of f lood.i l'ionicss or pielcool stock i sloh  ! H Ni tliwen l inw (atts of Ilos hki l'owci should tw dnt tint to ( Mah.unatus.t CaHoma't Ms i stH P 'l > Col

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ANALYSTS' CONTACTS COAI AION STOCK lilVil)ENilS N" " " " ' '" " l" "" # " " ' d " I ' '

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l PROGRESSPLUS GCEEEEEEEIIllillllillllllilli 51DCKPIM Proeress Plus is an etonomical, convenient and flexihie way to A safekecrin,: service for common stock ccttificates also i, purchase shares of Florida Progress common stock. offered to eltminate the risk of lost certtiteates. Smce shares Ilhise tilelble for the pl.nl are: depomd for deLermg are mted as Nuess M us 4 ares they titay be sold through the plan.

Reastered shareho!Jers Ln,hareholden u ho are F lorida resident' The Frontess Plus stock Plan replaced the company's thvi-dond remvem and ud ruraaw plan. %archoldm m

[n1plos ecs or the colitrativ and its stihsidiaries that plan atitomatically becaine partietpants in the new plan.

(Inte enti){lt d in the plan p.ittteiratits tari- All adininistr.itive costs tor the pl.in .ite paid hs the contraits.

Rttels e di'.lderid pavinens direttis i>r autiini.iticalls rein. A Proerew Plus stock Plari Frospectu+ and other iiiMrnia-

! s eu all or a portion of their quarterk diudenJs on toni. tion can he obtained bv returning the reply card in tlus annual

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