ML20036A210

Florida Progress Corp 1992 Annual Rept

ML20036A210
Person / Time
Site:	Crystal River
Issue date:	12/31/1992
From:	Critchfield J, Korpan R FLORIDA PROGRESS CORP.
To:
Shared Package
ML20036A206	List: 3F0493-16, Forwards Annual Financial Repts for 1992 ML20036A207 ML20036A210 ML20036A212 ML20036A215
References
NUDOCS 9305100217
Download: ML20036A210 (65)

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k n 1992, stockwarket irwestors turned to st6lity stpckseiro R

$ Jaige giurobers, The reasons for investing in utility conipat.hi

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. from one tnyestor to the next, But one tlHngh.x

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Manyof the natiorfs elecyic utilities,.and utilpy li

' ' ?cdmpanies, benefited from thitssrge of intereMn (L ~ repo. t' takes % doser look at utility stocks and vylfy they haveE. u f

r f.heen popdlarwithinvestors.

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(f.~ Mhg are they and why do they choose to lovesttTitled "

NWe*U)156 focus,0n the people who invest in Horida nogiess. -

J+joitetting h@rogress, this report is dedicated to'allHaHp) '

'X.f ' 1 shareh6lders. triside are profiles in wtiich'weillrith ' -

you to.g few of them. This report also discusses what~

v.C Horida Progress is doing to invest in its future end how that i -

1 maybenefitshareholders.

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i 9 When people invest in Morida : Progress, they're essentiallyI -

allowing the company:to.tnake investroents irHts, future.. :. :

I They're giving the company's managernent in opporturnity to run a successful business, to strengthen the cornpahy and to.

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giosition it for. growth, fiew equipment and facilities are b.eing -

S built to sneet the future need.s of ouf customers.?And. ;

? f gewing our%siness, we can take advantage of torn., ~ '

Dopportunides.

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A (Dollars on millronx except per share amounts)

Annual Growth Rates l

(in percent) t 1992 1991 1991-1997 1987-1997 OPERATING RESULTS Utihty revenues

$1,774.1 51.718 8 3.2 3.8 Diversified revenues (continuing) 321.2 355.9 (9.7) 5.5 locome frorn continuing operations 175.7 174.5

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Loss from discontinued operations (2.4)

Net income 175.7 172.1 2.1 (1.3)

DATA PER SHARE Earnings:

Utihty

$ 1.99 5 2.03 (2.0)

(2.0)

Diversified

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(21.8)

Discontinued operations

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Consohdated 2.06 2.13 (33)

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Dividends 1.905 1.843 3.4 3.4 Book value 19.85 19.14 3.7 3.8 Closing stock pace 32 X 31 X 4.4 84 Stock pnce range 27 %-33 %

24 X-31 M flNANCIAL POSITION AT DECEMBER 31 Assets

$ 5,333.0 55,024.9 6.1 56 Total capitahzation 3,811.9 3.546 0 7.5 5.9 Capriahzation structure.

Short-term capital 5.3 %

1.9 %

Long term debt 43.4 46 8 Preferred stock 5.7 6.5 Common stock equity 45.6 44.8 OTHER STATISTICS Return on common equity 10.6 %

11.4 %

Dividend yield 5.9%

60%

Average common shares outstanding (in milhons) 85.4 80.8 5.7 2.5 Employees 7,301 7,350

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l ER811165 All BlVIDEIDS PER SARRE RTERR6E AllUAL IDIRL REllRIS*

For the peracts er&d De(ende 31.1992 bn g"sa m -

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1988 1989 1990 1991 1992 1 Year s Years 10 Years B Dividends gg Iarnings N Florida Progress g s&P flectncs E s&P s00

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O This report was printed on recycled paper. More than 10.000 pounds of offoce waste-paper - collected from recychng programs at Flonda Progress Corporation and florida Power Corporation - were used in producing the paper for this report.

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i L0RIBB PR00RESS C0RP0RRII0W 1

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l ormed in 1982, Florida h

Progress Corporation is

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Based in St. Petersburg, Fla., the J

company combines the strengths of a growing electric utility with a f

few select diversified businesses.

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e its principalsubsidiary is Florida Power Corporation, the state's FLORIDA POWER CORPORATION

+ Has a total capaaty of more than 7.000 megawatts of power. Its baL

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second-largest electric utility.

An e!ectnc utsty heaaquartered in st anced energy ma in 1992 was 47%

g-YO *""] 'h*' '"5 "U ".,, # D" Looking ahead, Florida Progress cos 24% oil, %% nuclear' and 13%

custome's :n fionda incorporated in pu chased oower will focus on maintaining Florida

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Power's operationaland financial generaron, pu chase, transm:ss<on

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' 9 " """""Y strength. The Florida Progress a strong trad t;on of praed4ng aua'dy dunng the last fue years Saies are g%

diversification strategy calls for serwce and iow e!ectnc rates npected to grow at about 4 5%

investing in businesses that help annuaHy in the next f we years tqh the company achieve higher earn-h"S^5"M.

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. Prov:ces customers uth rehabie serwce b

ings growth andincrease total y'in t

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OCALA I offices dnd three inajor customer lg seruce centers

' oRLANDO + ls improdng its operations to nonda Pows y

co ete strategstally for new

+ Proedes eeinoty to about iST.MRR$ BURG 3h bdSIness. Ronda Power is posi- )

i 1992 RSSElS. HEVEHES E EBHH6S one ento of nondes popu-W y $y tioning itself to g ow as the g

industry changes in the

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. Opera *es in one,1 the i'd sammmmes Fo ra' on's fetest-g'oeng states kfjf.[My

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• Proedes ser nce :n 32 of the state's 67 coun'ies, c over ng about 20,000

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5.g3g Assets Revenues E arnings e f 5 Fe+erm and (iearweier r

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LETTER T0 SHRREWDLDERS

Dear Fellow Shareholders:

arket conditions, particularly low interest rates, rate increase in 1984. The approved increase allows us to made utility stocks popular investments in 1992.

earn on our new investments in Florida Power, including During the year, more people invested in Florida f acihties expected to be placed into service in 1993. We con-Progress than ever before. This activity inspired tinue to invest in additional facilities to meet Florida's grow-the theme for our 1992 Annua! Report to Shareholders:

ing demand for electricity.

I Investing in Progress.

This report is dedicated to our shareholders and inside we

$5.5 million in 1992, down from the $10.4 million reported will introduce you to a few of them. Investments made by in 1991. The weak economy has hurt our ability to with,

these individuals and our other shareholders in 1992 helped draw from two diversified businesses - real estate and j us strengthen our company and invest in our future. Equity commercial lending and leasing. Though challenges remain capital raised from these investments will be used primarily in these areas, we're making progress. And we're heading by our largest subsidiary, Florida Power Corporation, for into 1993 in a stronger financial position than a year ago.

expanding operations and meeting customer growth.

As the economy improves, it should help our divestiture efforts. Our coal and transportation subsidiary and our life '

Our earnings for the year were up shghtly over 1991 despite insurance company are expected to post modest gains in the effects of the kngenng national recession. Florida 1993. These two diversified businesses will continue to fol-Progress reported earnings of $175.7 million in 1992, 2.1 low a steady growth strategy in 1993.

percent higher than the $172.1 million earned the year before. Eamings per share were $2.06 in 1992, compared for the 40th consecutive year, we increased dividends paid with $2.13 in 1991. The issuance of 4 6 million shares of per share. In November, our company's board of directors raised the annua! dividend rate on common stock to $1.94, new common stock during the year reduced our company's earnings per share. All share figures have been adjusted to n increase of 2.5 percent over the prior year. This continu-us record of increased dividends ranks Florida Progress in reflect our company's 3-for-2 common stock spht, effective the top 10 of the more than 2,000 companies listed on the June 30,1992.

New York Stock Exchange.

A weak economy continues to depress customer growth at The fundamentals of our utility business are being reshaped, our electric utihty. In 1992, Florida Power added about primarily because of regulatory pressures and new laws.

23,000 new customers for a customer growth rate of 2 per-Today's low interest rates are prompting state and federal cent. This is lower than Florida Power's average annual utihty regulators to reduce overall rates of return for many growth rate of 2.9 percent, which the utihty has recorded f the nation's electric companies. With dividend payout over the last five years. Slower customer growth in 1991 r tios in the industry already at near record-high levels, and 1992 has contr;buted to reduced rates of revenue I wer r tes of return are likely to mean that, at least for the growth at Florida Power. Though this slowdown in cus-ne r future, electric utilities will be slowing down their dm-tomer growth is expected to continue in the short term, our dend gr wth rates.

utthty is forecasting an improvement. A 2.6 percent average annual custorr3r growth rate is projected for the next five The National Energy Pohcy Act of 1992, signed into law in years. This is nearly twice the average projected for the elec-October, will affect future strategies at Florida Power. We're tric utihty industry during the same period.

currently studying all implications of the new law. This mea-sure encourages greater competition in the wholesale elec-In September, Florida Power was granted a retail base rate tric power markets. Portions of the new law also call for increase, its first in eight years. The incease is estimated i electric utikties to provide greater access to their transmis-result in additional annual tevenues of $85.8 million and is sion lines to non-utihty power producers.

being collected in three steps in 1992 and 1993. Although appeals are pending on parts of the increase, a final deci-In December, we made a number of high-level manage-sion from the Florida Pubhc Service Commission is expected ment changes as part of our plans to prepare for expected in February 1993. The new rates will help our utihty recover changes in the electric utility industry, in addition, we plan the higher operating expenses it has incurred since the last to consohdate several departments at the holding company 4

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Richard Korpan andJack B Cn!chfield with 5:m,f ar areas at F!cnda Pov,er We betes e orgarm Progress never wtil be taken for grantea. The theme of this l zationai cnange is r.ecessary to strea rine our ccrr pany, report, Investing in Progress, symbohres the importance makina os more eff c;em responsw. and, there cre, more of our shareholders. We're committed to budding a 4

compet twe stronger company so you can benefit from intesting in One of our comnenf s 'o' gtene naarc' rr4 mDets 3 rMang in Apn! 1993 We a t grat -f ui for the m atuab e coume!

I and finanoa: e>pe-Me c Ceente W 't taa McKee. !r Mr f

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7 McKee is a retired execur < ace pms, dent and ch ef f. nan-

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'e aa! off:cer of n nda Frorces' He has seried as a fior:dd

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o Progress c: rect c s:nce the hoH ng tornpany v.as fo'med in

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1982 and as a flo'.da Pc er d rector since 1976 Profdes of Dr. Jack B Catchfield att Fionaa Progress ocaro membe rs appear er. page ;0 of l this report Ir. format'on on rom nees to the board is con.

Chatrman and Chief Executive Officer tained in the Proxy Statemer i for the 1993 Ar.nua; Meeting cf Shareholders i

We are part:cutor y proua of our ernp:oyees for wore,ng togethe n 1992 to ach:ese se.+ra: strateg:c goob and for E: chard Korpan cont:nu:ng to corJr:bute to our comoaris success And. to Presioent and Chief Operating Officer you, our shareholders we erpress thants for you contin-ued support and conficence Your ovestment m Flor.da February 1,1993 l

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INVESTlWC IN PROGRESS n%f

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f any investors made a move to utility stock invest-l ments in 1992. This report takes a closer look at '

9g fQ what made these stocks popular investments in 1992 k 'l N k

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and what investors can expect in the f uture.

{Q iih Compames like Flonda Progress Corporation benefited from

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,mj2 this increase in market activity. Thousands of individual j

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investors purchased Florida Progress stock in 1992, which i e

helped the company broaden its total shareholder base. The a surge of interest from investors led the company to dedicate i this report to all its shareholders. This report focuses on the '

7 people who invest in Florida Progress and what the company is doing to invest in its future.

_4

,,e SHAREHOLDERS INVESTING IN FLORIDA PROGRESS SHAREHOLDER PROFILE -

Flonda Progress believes its shareholders are more than just investors in the company. They are essentially financial partners Name: Leo Kubiet, Tierra Verde, Florida with the company, joining together to build a successful busi-ness. Over the years, the investment made by each shareholder Occupation: Retired Senior Vice President, has helped build Florida Progress into one of the largest diversi-St. Petersburg Times fied utility holding companies in the Southeast. Looking ahead, Personal Data: Married with two children many company shareholders will continue to play a vital role by and three grandchildren providing the needed resources to position Florida Progress for growth and success in the future.

Investment Perspective: I was about to.

retire in 1987 and wanted to build my long_

Ustening to and communicating with shareholders always have been imp riant to Florida Progress. The company has de-term holdings in several companies. My.

vel ped sever I new investor programs and services in response objective was to establish an overall finan-largely to suggestions from shareholders. Florida Progress also cial portfolio that could supplement my has taken steps to improve communications with its share-retirement income; We plan to leave the holders.

portfolio to our children as part of our estate.

Interests & Hobbies: Enjoys traveling, tennis, golf and is a computer enthusiast P[RCI11R6[ 0i SHRRES 0WXED IN 1992 Shareholder Since: 1987 m

Indmdual shareholders 9

of record - 31%

W, N.%. shareholders through

~f4 brokers - 33%

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The investment perspectives of the shareholders in -'

D}fR this report are those of the individuals, not necessar-y

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i!y the viewpoints of the company or'its manage-

- ment. This is not an offer to sell or a solicitation of

' trinvloyee[~E%?

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l '; I an offer to buy any securities. The purchase of arstitavanar.

Flonda Progress stock should be made only after.

skrcholders - 3()%h n V

@ >L reviewing the current prospectus.

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SHAREHOLDER PROFILE Name: Starr Purdue, St. Petersburg,

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Occupation: Assistant Treasurer, Florida.

Power Corporation a

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s, Personal Data: Married with two children i

' on the floor of the New York stock Exchange, a specialist (center) pro-Investment Perspective: My husband and '

vides brok ers with daily trading information on Florida Progress' stock.

l look for investments that Will some day The specialist, employed by a registered exchange member. is responsi-1 l ble for creating an orderly market for the company's stock by matching provide for our Children % college eduCalion.

' buyers and 5ellers.

One way we're saving for the future is that we take advantage of the employee savings plan offered at Florida Power. Through pay-i Who are the company's shareholders and what kind of owner-

! ship do they have? The common stock of Flonda Progress is roll deduction, I have put money aside to

! owned pnmanly by individual investors, many of whor$ live in buy shares of Flonda Progress stock. It's an I Florida. More than 100,000 individual investors and some 200 easy way for us to build our holdings and institutions own the company's stock. About half of these indi-save for the future.

l vidual investors are reg stered with the company and the other Interests & Hobbies: Enjoys family l ha!i are investors who own their shares of stock through bro-activities j kers. Thousands of other individuals hold an interest in the I company through institutional investors, such as insurance Shareholder Since: 1991 l companies, mutua! funds, banks and pension f unds.

Individual ownershtp always has been a key part of the com-i pany's total shareholder mix. To help support its individual

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l investors, Flonda Progress in 1992 joined 150 other U.S com-g (j

~j l panies to become corporate sponsors of the new "Own Your 1

l Share of Amenca" campaign Th!s national program, devel-2 l

i oped by the blational Association of Investors Corporation,

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j encourages individuals to invest in American companies,

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f To improve relations with its shareholders, Florida Progress j formed an in-house investor services staff in 1979 and began l maintaining its own shareholder records Shareholders can cal1

! a company representative with questions concerning their

! accounts or the company's operations. A special toll-free tele-(

.I phone number now is available to serve Florida Progress share-4 I olders and interested investors h

l Progress Plus Stock Plan - Investors said they wanted a 1

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l stock purchase plan in which they could buy Florida Progress

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' common stock directly from the company. A dividend reinvest-g 4

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! ment plan was established in 1975 and, in February 1992,

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Florida Progress introduced the Progress Plus Stock Plan. The l

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stock directly from the company without paying typical broker-Starr Purdue with her husband, David, and their

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age fees. Under the new plan, all registered shareholders and children, Tamara and Cameron.

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employees can continue to purchase add:tional stock and rein-vest their dw.dends without papng typica! brok erage fees INVESTING IN UTILITIES a

Attract:ve dodend yields and nsing stock pnces caught the attention of many investors in 1992 Some inSestors cere mak-y ing the mose to utity statis because these investrnents were offenng higher yie!ds in 1992 than those offered by money mark et f unds and certificates of depos;t Ut+ty stocks generally g

,M were yeid:ng betneen 5 and 8 percent in 1992.

Histonca%, rnestors have uened utaty stocks as re!atively sta-ble mvestments These stocks usuauy proude investors with a rE!.able source of income as weh as the potential for increased dmdends And for the conservative investor, most of these stocks have he!d their value over time and provided some hedge a[;a;nst mf!ation r

impact of interest rates on utility stocks - There are other in portant factors to cons 4 der when bupng a utity stock. First of ah, it's important to understand utity stock s are equ:ty secu-

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Greg Johnson, Co-Portfolio Manager of Franklin Utihties Fund, one of florida Progress'!argest tions m the stock market as neh as company results ss a institutionalshareholders.

general ru!e, utity stock pnces daectly relate to prevaihng mad et cond<tions, particularly long-terrn interest rates As mterest rates dechne. u%tv stock pnces tend to ao up, and SHAREHOLDER PROF /LE

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een raes nse. these stock pnces normany drop Name: Franklin Utilities Fund, a mem-Though utmty stocis are consioered to be lower-nsk invest-ber of the $64-bilhon Frankhn Group of ments ny many in<estors. these stocks are subject to sh:fts in Funds of San Mateo, Cahfornia

"'a'k et (ond't'ons Because interest rates remamed low in 1992. the stod s of many e!ectoc utities cere popu!ar invest-Background. Founded in 1948, Frankhn ment choices dunng the year.

Utihties Fund currently manages more than Second!y, whde dmdend yield :s important, h: story shows

$2 billion in assets for over 125,000 msestors can benefit when they tate a long-term view of their investors.

utiMy Investments This approach a"ows them to take advan-taoe of the cunent dmdend vield as weh as the potential for investment Perspective: The fund invests long-term cap,tal appreciation In other words, utity stocks can in Quahty utihty companies that meet 6ts prowde mvestors wth the opportunity for both growth in stock requirements for earnings, customer pnce and :ncome f rom quarterly dedend oayments growth, a favorable regulatory environment

g. er me vea's utity :tocks genera 1y have offered lower mar-and strong management.

La nsk and have produced long-terrn total returns comparable to the Standard & Poor's (S&P) 500 index Tota! returns indicate Shareholder Since: 1948 hon seu an meestment has performed over a gwen penod.

Stod. pnce appreciation and cash dmdends are combmed to de* ermine the total return from 1982 to 1992, the S&P e!ectnc utity index provided an average annua! investment retum of 16 7 percent. Thrs m*x measures the stock performances of 24 of the country's najor electnc utity compantes The retum for th:s penod is c >nsid-ered h:gh by h:stoncal standards because of market conditions and the regu!atory returns anowed in the 1980s.

A changing industry - Over the last decade, the elecinc utd-sty industry has feit pressure from competition in only a few parts of the country That may soon change. A new law, passed in 1992 by Congress, marks a new era of change for electnc compan:es 0

1 l The Nationa! Energy Pohcy Act of 1992 is espected to create a it

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.,s regulate electnc utities Though it's not certa:n how these

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! petmve envnonment O'hers w 4 De in a pos+ tion to taL e adcan-l tage of the opportun.t.es and mose forward The industry b e!y l wW become less homogeneous m the future investors wW I need to studi how these char.ges affect then utity :nvest-ments ana their nr.es' ment r sk

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costs and oese:cp operatmo efinnoes Hondo Poner cons,s-tent \\y rand n gb in the an as at poaer p' ant effioencc los Harvey Haeseker tright), pictured with his son, operetmg and ma: tenan;e emenscs and dac!apment of a Bill (left), his grandson, Torn, and his great-i grandson, Wd/, who was bom Nov. 5, 7992.

l balanced, f!enb'e f ue! mw The Haesel er famdy represents four generations

By operat

ng eff cent:y, the utJ ty can ach4ece its goal cf offer of Fionda Progress shareholders.

l ing quahty, rehab'e ; n.ce at the :o Aest pass bte cost And l Flonda Power s sohd i;nanoa! cond,t4cn atso can he:p the utity SHAREHOLDER PROFILE l proude compethelv pnced electnc serv.ce m the f uture l Prepanng fo these mdustry changes has been at the core of Name: Harvey Haeseker, Tarpon i Fionda Power's strateg:c ptanning process f a several years Springs, Florida INVESTING IN FLORIDA POWER'S FUTURE Occupation: Retired St. Petersburg I The titie of this report a:so symboRes i anagement's effort to developer and home builder l

l invest in the futu'e Thu sect +on o scusses the says these ne, Personal Data: Married with three

' mvestment: are espected to benefri Honda Progress and its children, eight grandchildren and one

.; shareholders F.,or:da P.oner ' H conimue to be the pnrnary great-grandchild l bus: ness of Flonda Prog ess The elecinc utsty accounts for 75 l percent of the ha dm com:2any s conudated assets-Investment Perspective: With the recent l Today, nonoa Poner proodes e:ectroty to about one-th:ro of birth of our great-grandson, this begins the j Flonda's population. Fionda is projected to rematn the nation's sixth generation of Haesekers in Florida.

l fourth most popjous state oeu mto the next century ath Over the years, I've always tried to teach about 12 m " on customers, and hundreds more being added our chHdren the value of saving and invest-

every aeet nor da Pour meng m the future today it ing. Even today I tell them, ' Work hard and I

continues to bued f aceties that no help meet the needs of don't spend more than you take in, and it's torrorrow 5 customers it e utMy estmates :ts customers am never too earl.y to start investing for the need about 50 percent more e;ectnoty m 10 years future.

i Flonda Power p'ans to rneet that grov1h by add:nq new capac-Interests & Hobb.ies: Enj.oys travehng and a

1 j ity and us,ng a senes o,, mno othe energy efficency programs

,amh achM i Each of these resources has been mtegrated carefu"y mto a sens:b!e strategy that :s cost-effect've and environmentany sen-Shareholder Since: 1951

( sitive Here's how Fionda Power expects to meet the growing i demand for electroty in its serace area-t

( Add more generating capacity - Fionda Power is add;ng 728 mega^atts of power from eight new combustion turb nes These turbmes, ca4ed " peak ing units, typicaMy provide poner i dunng penods of high-energy use. Construction of the f ast 4

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""%jkyn(ffy [ ~~ " y ?&bM; ? a ' SHAREHOLDER PROFILE + Narne: Rosemary Charles, Port Orange, b ~ ich e j Ronda Honda Power customers who partic,pate in load management allow Occupat,on: Homemaker tre vMty darmg peabuse periods to control major household appIn s ances, such as pool purrps, water hea*e's and central air cond:tooning Personal Data: Mamed with !ive chadren and heating systems in return forjo<n:ng the program, inese customers and six grandchddren " moh'r ed=' *" 'he o "e' b' 'is investment Perspective. I grew up in a our un t3 v.as corrp;eted m October 1992 Tne otner four are f family that was closely involved in the od <chedded to go no same m Nxember 1993 and natural gas industry. So, naturaHy rve iats Ws decade. FWa Poe.er a bea n so+ on :ts next always been interested in utdities. Studyin9 map po<,er p: ant co m. To be toca'ed in Centra nonda on the stocks of these companies has been a 8,000 aves of rrmam ' onosahate land the new complex passion of mme for years. I pick companies na.e tne capau, cf moducog about 3.000 megawatts that have good fundamenta!s and then i of pee,e' v. hen f uy c _ ' p!eted !? e.di be but in phases, Mth invest for the long term. the fet geneM ng ur : opetted to be o ser, ce in 1998 The f.r',! un % di ine f.et Mie,, ! be fue:ed by natwd gas Interests & Hobbies Enjoys f amdy activs ties and managing her investment portfobo Purchase more power from neighboring utilities and cogenerators - Honda Foc.er has arranged to buy up to 400 Shareholders Since: 1981 ,egge;atts of :of,. cost po/ser over the next 17 years from The southem Company. m Atta,ta-based u% ho!dmg company. The ox r / be debered v:a an ect ng h:ch-vo!tage trans-rmson i:ne that conr:ects Georg.a w<tn Ror.Ja And by 1996, fior.da Por e ' plans to be pu'chas ng aboJt 1.tOO mc>gawatts Of DO/.er frCm a number of pnvate and pubhC Cogeneration and Sma? po/ cert?odJCtion foC6fres late in 1992, fionda Power announced its dec' son to delay the p'anned m-sendte ddte of <ts portion Gi a new Ronda-GeorCla transm ssion Lne ur.?d the veat 2002 Ong nah schedded for complet<on m 1998. ilonda Poser s section of the hne was postponed for t/,o reasons lhe utMI,' reeds more time 10 understand the :mphCatVS Concerning trangrusgan hne aC(ess 10

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j and pricing of the National Energy Policy Act of 1992. Also, l. current growth forecasts at Florida Power indicate the new line 2j will not be needed by the utility as early as previously planned.

j Continue to use innovative programs for reducing ener-gy demand - Florida Power boasts one of the nation's most SHAREHOLDER PROFIL8 successful programs for reducing electricity usage during peak-Name! Mccrorey Grier, Jr., Largo, !) demand periods. About 450,000 of the utihty's customers - fiorida\\ 0 ~ l more than any other program in the United States - now participate in load management, using technology pioneered . Occupation: Social Worker, Bay Pines W" by Florida Power in the early 1980s. Load management reduces ' V.A. Medical Cente'r" electrioty use during peak-demand periods, which helps post- . pone the need to build additional power plants. Plans call for . Personal Data: S; ingle - y, ' adding between 40,000 and 60,000 customers to the program investment Perspective-My philosophy" each year until the mid-1990s. . on: investing follows.the principles of thej ' By 1996, Florida Power estimates it will be able to control 'NAlCTwhich is a national nonprofit associa-H almost 1,450 megawatts of power during peak-demand peri-tion dedicated to' educating individual ' tj ods. This is roughly equivalent in size to the energy output of investors. The NAIC believes that irwestors L two large power plants. By meeting future energy needs with ~ should invest regularly, reinvest dividends, j ~ practical and balanced strategies, Florida Power can continue

select growth companies and create a diver-co to hold down costs to its customers.

sif ed portfolio of stocks, At the councill i i These strategies are expected to improve Florida Power's abikty . level,' we provide our members with invest [ j to manage customer growth and construction of any new rnent programs, company presentatioris and'

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capaaty. In the next five years, the utihty plans to fund most of investor fairs. I'm also a member of 'an ' '

"j its construction program from cash generated internally from investment club that bought Florida : I j operations. By having a manageable construction program-1 Progress stock in early 1992 when the' d Florida Power is able to maintain a favorable financial position. [U Progress PJus Stock Plan was first Financial strength - The nation's major credit-rating agen-announc d. e cies - Standard & Poor's, Moody's investors Service, Duff & 'i s Phelps and Fitch investors Service - rate Flonda Power's senior lnterests & Hobb,es: Enj.oys running,'b. icy-- ch,ng and,s a director of the Tampa Bay. j' t debt double A minus. Florida Progress plans to support the util_ ity's creditworthiness by adding new equity as Florida Power Council of the National Association of i expands its business. Favorable credit ratings allow Florida investors Corporation (NAIC)

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) Power to borrow money at lower interest rates and on more . Shareholder Since(1992I attractive terms. Lower finanang costs help reduce operating expenses. .g a ;m.m==,g g p q IWESTING IN OUR ENVIRONMENT i 4 -[s =y b AND OUR COMMUNITIES L j investing in the future of Florida Progress requires careful } 'i ~ l d ! s:: - 7j q j strategic planning and involves making prudent business deci-j sions. It also means evaluating how each decision might impact [i 1 the world around us. The theme of this report also is an expres-l 3 7r ~ r, -e [ l sion of the company's sensitivity to the future, particularly to h;[k " the environment and to the needs of the communities the company serves. a- ] 4 "1 Over the years. Florida Power has taken steps to minimize its 4 .(J impact on Florida's environment. The utihty has worked to y q.. and locations of new power knes and facilities. Demonstrating ~o ' g incorporate environmental protection into the design of routes ~J j environmental responsibility and leadership continues to be j M' ~ 5 one of Florida Power's top strategic goals. s 1 j Since 1983, Florida Power has bumed high-quahty, low-sulfur r' g"""" y y ~ ] fossil fuels in many of its power plar:ts, which helps reduce j sulfur dioxide emissions. And later this decade, when the utility - ~ i ~ 1L 4

s ) +y a ~g o h y c 36 + V 4 &N h SHAREHOLDER PROFILE %^ 4d + r Name: Jim Mauck, Venice, Flonda h h l 4 7 gN Occupation: Patient Transport, Venice Pe n i Data: Mamed with one child Investment Perspective: Years ago, my father got me interested in stocks and Ea& vear. mmpany employees voluteer thousands of hours to "h '* *

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• l investing. He taught me how to im9 rove mY who parteripate in the in st. Petersburg.

future by making long-term investments. Today, he and I enjoy talking about stocks, beg:ns generating poner at a large new energy complex in it's something fun we can do together. Central Fionda. the f rst un ts wdl be f ueled by <!ean-buming i We're always shanng information. natura! gas interests & Hobbies Attends church At the Crysta! Rner Energy Complex, construction of a massive "" t " "9 SY5t** '5 "" ""9 (

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• dl reg ~ ularly and enjoys fishing and going to p H od P wer meet tighter environmenta! reauirements.

the beach The 590-mdhon project is designed to cool sea water flowing Shareholder Since: 1984 f rom three generating units at the site l Leadership in recycling - Flonda Power contmues to strengthen its reputation as an env ronmental leader when it r: ;q 8-comes to v.aste managerr.ent in add tion to office paper, the ,y M c utaty now recycles more than 20 products, such as discarded strectLghts, aluminum, motor od, patnts, steel drums and card-

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board The utity also recent!y instahed a new devKe that recy-l ~ cles used w:re Ca"ed a " cable chopper, the device processes / the w;re's a'uminum. c opper and plastic into small recyclable rueces About 650 tons of used vae were recovered in 1992 -q j 1-and sold for reuse Since Honda Power began recychng materi-g.3{/ r als and equ pment, the utd ty has recerved approximate!y $4 2 meon from scrap sa!es Thew sa'es benefit customers because the money they bong an helps reduce the utikty's operating expenses .m g Leadership in community service - Since it was founded .g*f.#p pf~. neady a century ago, Flonda Power has maintained a nch tradi- - \\f". [, tion of serving commun: ties beyond just their electncal needs. p p 4 ' ].

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flonda Power employees beheve they have a respons:bihty to v oive something back to the areas in which they work and hve. y j; Toda( civ:c pnde and community spint at flonda Power never LQpes. have been stronger Company employees help orgaruze food 12

i i l dnves for tne hungry, pick up trash along b:ghways and coastal areas and coach youth sports teams. 4 j i i ! To help coord nate ds commun:ty service efforts, fionda Power .~ j 1 operates a compan:,wde vo unteer program for its employees. l CaHed "I Am invohed ' the program provides recogn: tion to a employees for their outstand:ng vo;unteer efforts Under this 1 i program, employees volunteered nearly 122.000 hours of ser-

7 vice in 1992.

\\1 '7{,- Employees recentiy donated hundreds of hours to help con-s } struct a 600-foot Doardsa!k, a dock and a ha:f-m11e nature trail nW !*+'. t j in Oca'a lhese are all part of a unique new enaronmental 'L

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/;.'; education museum located in a state park near Sner Spnnas ,s ! Around its semce temtory Ronda Power has joined other cor- <s porations to he's ret tahze io/cincome neighborhoods Each i year, errp:oyees in St Petersburg partiopate in "Pa;nt St Pete ($ Vf e l Proud,' a program in which so!unteers paint homes owned by .i d Mk i the elderly or d:sab:ed (j j gi%t@E-d' J l INVESTING IN A FEW SELECT DIVERSIFIED BUSINESSES l in the last two years. Flonda Progress has announced severa! j organcational changes that VM iead to a more focused daersi. SHAREHOLDER PROFILE ) l fication stratecy. These chances were made to improve the Name: Bill and Norma Dombey, l performante of the corrpary s duers fied operat ons Recent strategic p:annmg prooded a clearer vision for the future. Inverness, Florida j Florida Progress reaffirmed the benefits of divers:fication and is Occupation: Mr. Dombey - Retired Quality now concemrating on a group of select businesses Control Supervisor, General Electric; Mrs. Dombey-Homemaker I Personal Data: Married with two children j investment Perspective: Before we retired in the mid-1980s, we invested in several j stocks, particularly with companies that offered dividend reinvestment programs. 4 We reinvested our dividends, but now that ig 6 we're retired, we receive the dividends from i N 10N these stocks to help supplement our retire-ll n ment income. ..A j ?g -. , c interests & Hobbies: Mr. Dombey enjoys traveling, growing orchids and fishing. Mrs. Dombey likes traveling and painting. Both j are active in advanced education for seniors. Shareholders Since: 1980 I Q t Ig;g eY35MfMS M4Wg%JsMgg 4 J.psg3g h i a a v mm,. W t 1 Florida Power's recycling program includes the use of a

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at the utility's reclamation facihty in Wddwood. Fla. The unique device i cuts used were and cable into quarter-inch pieces. 1 i j 13 m,,,,.-..,,_m..,__ _,_._....,_,..,,,,,,,..y

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j ' ;,4 4 mrs ~ " Today, investing in Progress means investing in businesses AM -w that look to the future. In other words, Florida Progress plans 3 4 to invest en those businesses with solid growth potential. The ? company believes its streamlined strategy for diversification will 9 help achieve better earnings growth and result in a stronger [ financial position. To be successful, the strategy must result in a a more competitive dividend and higher total returns for 4 4" 1O shareholders. I 3b Flonda Progress continues to strengthen the company's coal 3,h. b and transportation business and its life insurance company. "i;} b. Electric Fuels Corporation has built profitable operations by ., ( investing in businesses that relate closely to the mining and transporting of coal. Expansion into these energy-related oper ; ations represents an excellent strategic fit for an electric utility i holding company, such as Florida Progress. Building energy-related businesses - Electric fuels contin-A ues its strategy of expanding into businesses that complement its full-service operations. Additional investments are likely to be made in markets that broaden the company's products and b services to its utility and industrial customers. With operations '5HAREHOLDER PROFILE. now i, nine states, Electric Fuels is involved in coal mining, rail and water transportation, railcar and barge repair services and - NameiWalter and Roberta Warden, - transloading f aalities. . Kissimmee, Florida in 1992, Electric Fuels sold about 10 million tons of coal, of . Occupation: Mr. Warden - Retired Plant ) which 4.5 milhon tons were sold to customers other than ~ (Facilities Supervisor, Martin Marietta Flonda Power. Earnings from its unregulated business account-Corporation, Aerospace Division; ed for about two-thirds of Electric Fuels' net income in 1992. Florid Progress is confident of the potential for earnings Mrs. Warden Homemaker and part-time.

income tax preparer growth in its coal and transportation business.

Personal Data: Married with four children - .-and three grandchildren. !!nvestment Perspective. We own quite a V few utilities and we usually buy them for r the. long term. We also like to buy stocks in gM i 1 which we can reinvest'our dividends and 4 s V }make additional purchases directly from the ' y 4 company. ,5 _i h = M* u A (Interests & Hobbies: The Wardens enjoy ~ photography, music, camping and church Jactivities g4 Shareholders Since: 1991 M f m s \\ e in. w l ,q In November, the Florida Progress board of directors increased the divi-dends paid per share for the 40th conwtutive year. y c i E_ . [ s m. N m .y....~

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=8Wg (" J Pf Vf;fy L ; #] F 4 f WWh(W,NyMyy$ ~ TX.96:W r %w a r y %^; *~ ~<., % f l '. a3Rw MC 2n ,..,? y, , 31 ? O p-em f vg c-n -9 ~ + "*m. r w + Lif2 insuranca unit continu:s stsidy growth - Acquired p4g a 1 6 1' i J a

. M dW e by Florida Progress in 1986, Mid-Continent Life insurance Company has increased profits every year since then and con-T" '

- y tinues to provide excellent returns. Earnings have risen an aver-x age of 21 percent annually in the last six years. Now hcensed.in i 37 states, Mid-Continent sells its policies through 7,000 inde-( w . pendent agents and, for 14 consecutive years, the company u - has achieved the highest insurance rating of A+ (Superior) from .b A.M. Best Company, a national insurance rating agency. A N steady, conservative growth strategy is planned for the insur-i ante company, with an emphasis on adding more regional c offices. Oth:r diversified operations - During 1990 and 1991, b f 2 Florida Progress decided to exit those diversified businesses that p , e. f do not fit into the company's long-range strategic plan. Since ? n s. then, all five of the building products operations have been 9 ~' sold and Florida Progress has continued to withdraw from two -f 4 f, other businesses. An orderly liquidation is under way for the /, company's commercial lending and leasing business and its real 'i f estate operations. ~ The financial instruments portfolio of the commercial lending M, and leasing business will continue to shrink as existing loans i and leases mature. Assets owned by this business also will be og A sold when market conditions are favorable. Although the finance unit has been profitable, its growth would have

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,f requ' ired too much of a capital commitment in the future. 1 i Instead, new capital raised by Florida Progress will be used to E C support Florida Power's planned construction program. ~'j ~3 g g g u ., ~ n, w w Florida Progress also is continuing a strategy to sell its real ,1,. - ~ 2 Q J% j uiN 7 estate assets when market conditions are favorable. The com- ^Ti

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, Q%b g pany believes it may take up to seven years to sell most of the [' y[ f 2 p1-i assets in its real estate portfolio. The ability to sell these real w s-u e[a f, V)pf [f;h<. -. - ;h.[y((/ estate investments will depend largely on the growth of - d" 4 M* ' *41 Florida's economy. G, ,z p - [ }M s[.-- //[tt C~ Focusing only on a few select businesses is expected to provide 1 + 7 N jpift 'y Florida Progress with additional earnings and improve the d Mgyifh ',',~; g k;j g "T results from the company's diversified operations. By investing m_ M 1n in Progress, these businesses can capitalize on their existing

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4N g i g(- ',4 M M operations and take advantage of tomorrow's opportunities. ^2 Y M kk A further discussion of the company's operations and financial ' h + h +hMh. ; $ Y ((9 results follows in the next section, titled Management's s Discussion and Analysis.fDIO ' 9 4 E e ~,% ' " 0:e IO,n G ' L ,d d c M : f,f' ; h k @n s h h 5 5[ hw %+ w w :: ~G 7 M i A R nn n y%f ""D'. sg%pc, M994 i shEOS VY g wa jgnsesom"gga st~ CHEMICAL ~ Igg wguD 3g Xc3 - g :s y % g vonfiM m \\ p %.. M $ 9 $d am-M1 5 7M M + e n2 w:8 ,j gy s f,, -n k,_al a, Y{I J d %,j u j - n; y' t g

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li R N R G E li E N T ' S DISCUSS 10W RWD RWRLYSIS L? 7 OPERATING RESULTS awarded interim increase of $31.2 milhon that became ef fective in April 1992. lorida Progress Corporation's 1992 consohdated The new rates provide Florida Power the opportunity to g earnings were $175.7 milhon, or $2.06 per share, earn a regulatory return on equity of 12 percent, with a new compared with $172.1 milhon, or $2.13 per allowed range between 11 and 13 percent. Previously, the share, for 1991 and $164.8 million, or $2.14 per utility was allowed to earn between 12.6 percent and 13.6 share, for 1990. A summary of earnings per percent. share by company is as follows: New revenues were included in the approved rate increase I EARNINGS PER SHARE to recover the cost of new investment to support customer 1992 1991 1990 growth, increased operating and maintenance costs and i approximately $40 mdlion of higher depreciation expenses. ' Rorica Power Corporaton $1.99 - $2 03 52.15 The rate increase also will allow Florida Power to recover flectret Fuels Corporaton .14 ; .10 .13 Mid-Continent life insurance Co. .09 .09 : .08 costs for employee benefits in accordance with new P*og ess Credtt Corporat on .Os ,10 108 accounting standards for pensions and other postretirement Talquin Cyporaton ( 19) ' . (08i . t03) ' benefits. A!though motions for reconsideration are pending .C, o porpte and other (02) ( 08) - 008) on portions of the rate increase, a final commission decision Dwersified .07 .13 .18 is expected in February 1993. (See Note 10 to the contmuing operatons 2.06 2.16 233 Consohdated Financial Statements on page 34 ) Dxent3nued operations. C03: 019) Consohdated $2.06 - ' $2.13 $2.14 The interim rates and new base rates increased operating revenues by $29 million and increased earnings by $15.4 During 1992, Florida Progress declared a 3-for-2 common mdkon for 1992, after recording new expenses authorized in stock spht to shareholders of record on June 30,1992. All the rate case. The new base rates and higher fuel adjust-share and per share amounts have been adjusted in this ment charges are expected to increase Flonda Power's 1993 report to reflect the spht. residential rates to a level that will be comparable to other investor-owned utihties in peninsular Florida. Utility In December 1992, Florida Power proposed a settlement greement with its wholesaie and transmission customers in In 1992, Florida Power Corporation earned $170.2 million, i its 1992 wholesale base rate proceeding, which will increase or $1.99 per share, compared with $164.1 million, or $2.03 nnual revenues by approximately $1 million. The settle-l per share, in 1991 and 5165.5 milhon, or 52.15 per share, in ment agreement stipulates a return on equity that is compa-l 1990. rable to the retail return on equity. The wholesale agree-Stock dilution accounted for essentially all of the decline in ment also authonzes lower depreciation rates than onginally l earnings per share in 1992 and 1991. Flonda Progress issued new shares of common stock through pubhc stock offerings in May 1991 and May 1992 and through the Progress Plus Stock Plan, the company's dividend reinvest-ment and stock purchase plan. Fionda Progress issued nev5 equity to capitalize on the market value of its common stock to raise equity for Florida Power's construction program. Operating revenues were 51.774 billion in 1992, compared with 51.719 billion in 1991 and $1.709 billion in 1990. Operating revenues were higher in 1992 due to the collec-tion of interim retail rates and an increase in permanent base rates, reflecting the outcome of the utihty's 1992 retail rate case. In Septemt,er 1992, the Florida Public Service Commission granted Florida Power a projected annual revenue increase of 585.8 million. The commission granted permanent increases in retail base rates of approximately 558 mil! ion in November 1992,59.7 mdlion in April 1993 and $18.1 milhon in September 1992, the Florida Public Service Commission approved sn November 1993. The commission also upheld a previousiy a retail base rate increase of $85.8 million for Florida Power. 1B c

j i i 1 requested by the utAty. These loner rates nave no eamings p: G 'W 3 p pf ? 7T 'i y.;- impact smce Ronda Poner depreoation expense for f.1 !1LQD1L wholesale customers wM be recovered through the settle-

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~ ..L'a ment rate Since the loner depreoatron rates a e retroactNe to December 1990. a depreoation adjustment na, made hF M[' $.. l ~ [ ~ j that noeased Honda Pxer's 1992 eam nos in the fourth quarter by 55 6 m lon (See Note 1 on page 28 ) Honda k.. l Power e*pects to te aco ttona reta l and who:esate rate J y. cases over in 2 next severs sears to support :ts f uture gronth Flonda Poner s c us+,mer a cwth rate for 1992 was 2 per-i .i~h f.- f' cent. compmed eth 21 percent rn 1991 An increase in the n. number of Customers o,r:ng 1992 ahowed a modest a per-pt 7 .,c cent increme m retal bonatt hcv sa'es for the gear in O '. '..,.N i k,,, n 1. "- @'eir 4 ' sp;te Cf a mdd Cochng 5eJsOn i 4 7 y ( ( T mun muRL usma uom g 6 ff e k.p:; y ;. _ +3.. . 4, ~... ,3... " y.. g m.a T;'. W 4 .~v., E.; ~- p. e....,.;.. v. g[f..

a Despite a 2 ' month refueling and maintenance outage in 1992, the e

v. - L; Crystal Rher Nuclear Plant operated at 73 4 percent capaaty dunng the year - the plant's fourth best annual performance in its 14-year l y ~ histo'y p:- .; ' ll [. ,'; ~ '.- tu, ...e '. : ~. ; * '.. _*i ~,.O. E $93MMMd%%bMN. / ',. ;,,' $ M '; ;,,%.} 6. v.T. G ' ' ?.') 7 j.[. M g 1988 1989 1990 1991 1992 gfectNe December 1990, the Ronda Pubhc Service I a nonea poner i,westor. owned oectnc utmties Comm:ssion ordered Fionda Power to increase its annual j depreoat:on e> pense, includ:ng a provis:on for fossd plant d:smant!ement costs, without an increase m base rates. Depreoation expense included a provision for fossd disman-Fuei and purcnased ocwe costs rema ned ta r!y constant 4 t!ement costs of 516.6 m.! hon :n 1991 and $18.2 mhon in beineer M., anc,.,191, bu decrea:,eo of 500 mAon m r 19_2,ihe 1992 retad rate deosion included revenues to 9 i 1991, compred a in 199,0,h ce; :ne was due onman!, recoser the additional depreoation expense starting in to ioner,05, fuei ces+; ano mcreased generat:on f rom the i 4 November 1992 (See Note 1 on page 28 ) y :e H. onda Pcaer recowts substa%ah A, nuoear p art fuel costs througn a iue: adatwrt dausc. and deters'any In Septemoer 1992, the aty of Sebung and the Sebnng ad;us'ments to P = tot og paoo. " s fwuat ons have Utities Ccmmiss:cn approved Fionda Power's contract to o ;. g y... v. - a.,, m" 'r, purchase Sebnng,s efecinc utikty d'stnbution system for m ,~# Jther utety opeasom ano rwr tenance e,penses incter:ed appamate!y 156 meon Ronda Power plans to include in by5338 m v >n 1992 ma#c due to maeased costs for !!s ra+e base approx:mately $24 mdhon for the book value of the nuoey aant ref ueLno outace v.d ceased costs f or the assets The majonty of the remaining amount would be t recoverab e eneraf comerdnan proyams used to ret:re Sebnng's debt and would be repa4d to Florida f ~ ~ Power throuch a trans tion rate from Sebnng customers On My 16, crestM Rxer Nudee ha t personne! comp:eted oser a penod of 15 years. Although the sale recewed a schedu ed b enraal refuel ng and ma,ntenance outage approva! irom the Honda Pubhc Service Commission in i Honda Power's snare of the 77-aay outage evpenses tota led December 1992, intervenors are appeahng the deosion to 130 2 rnaon (See Na'e 9 on page 34 ) in November 1992, the Honda Supreme Cour1 the U S Nudebr Regu!atory Comm ssion issued its most recent Systema $c Assessment nf Licensee Performance Several company subsid anes, includ:ng Honda Power, have ] report for the nudear Jn 1 The report ga.'e f avorabie ratings been not:fied by the U.S. Environmental Protection Agency ^ to the nuclear un:t m al seven functronM areas Dunng that each is or may be a potent any responsib!e party for the 1992, the nudear unis capac.ty f actor ms 73 A percent, deanup costs of several contaminated sites. In addition, 4 which is abor the maustri a erage Honda Power is a defendant in an action seeking contnbu-U ____.,m- ., ~ ~. -

tion for cleanup costs from the four prior owners of a for. Mid-Continent Life's eamings for 1992 increased to $8 mil-mer coal gasification plant site. (See Note 11 on page 36.) lion, or $.09 per share, from $7.5 million, or $.09 per share, in 1991 and $6.5 million, or 5.08 per share, in 1990. Diversified Operations Growing market share from the continuing expansion and in 1992, earnings from continuing diversified operations development of the regional office network is the principal were $5.5 million, or $.07 per share, compared with $10.4 reason for the rise in earnings. Unusually high death claims million, or 5.13 per share, in 1991 and $14.3 million, or $.18 in 1992 partially offset the impact of the higher revenues. Per share, in 1990. Florida Progress slowed the regional office expansion of the In 1990, the company reduced net income by $14.2 million, life insurance company during 1992 to better manage its or $.18 per share, for a loss on disposal of its building prod-growth. Since 1986, the insurance company's earnings have ucts operations. In 1991, an additional loss of $2.4 million, increased an average of 21 percent annually. or 5.03 per share, was recognized to complete the divesti-Earnings in 1992 for Progress Credit Corporation, Florida l tures. (See Note 12 on page 36.) Progress' commercial lending and leasing unit, were $4 mil-Florida Progress has been implementing changes that are lion, or $.05 per share, compared with $8.4 million, or $.10 reducing the size of its diversification program. The compa-per share, in 1991 and $6.5 million, or $.08 per share, in ny sold all five of its building products businesses and plans 1990. to sell its real estate properties as market conditions allow. The finance unit has been involved in leveraged leasing, Florida Progress also has been withdrawing from the lend-senior secured commercial lending and investing in pnmanly ing and leasing business. high-quality securities. S,nce announang its decision to i The sale of the real estate portfolio and the finance unit's implement an orderly liquidation of the investment portfolio holdings is expected to result in lower revenues and lower and the commercial lending and leasing businesses in interest expense for the company. The impact on net September 1991 Florida Progress has reduced the financial income depends on the timing of these sales and the rela-assets by 30 percent, or approximately $265 million. The tionship between the returns on the assets sold, carrying financial portfolio, which totaled $615.3 million at the end costs incurred and the interest rates on the associated debt of 1992, primarily contains commercial aircraft loans and repaid. leases and first mortgage real estate loans. The recession in the national economy as well as deteriorat-Since the end of 1990, the commercial lending and leasing ing conditions in the airline industry and in Florida's real 's f nance receivables have been affected by conditions estate market have extended the time frame for the diveste in the airline industry and a weak real estate market. As a ture of these businesses and reduced the operating results. result, its business has experienced delinquencies in ongoing As of the end of 1992, Florida Progress had reserves of le se nd lo n p yments as well as loan prinapal maturities. $22.9 million fc>r the lending and leasing portfolio and had The unit has negotiated the restructuring of certain transac-recorded provisions for expected losses upon the sale of cer-tions and instituted legal remedies and other remedial tain real estate holdings. Assuming no further deterioration ctions, where appropriate. (See Note 5 on page 31.) in the airline and real estate industries, these reserves are expected to be adequate to implement the company's liqui-In 1992, Ta! quin Corporation, FlonJa Progress' real estate dation strategy. unit, realized losses from continuing operations of $16.7 The company plans to concentrate on expanding its coal million, or $.19 per share, compared with losses of $6.6 mil-and transportation business, Electric Fuels Corporation. The lion, or $.08 per share, in 1991 and $2.3 million, or 5.03 per company believes this energy-related business is an excellent share, in 1990. strategic fit with its utility business. In 1992, Talquin provided for expected losses upon the sale Florida Progress is continuing its established growth strategy of its real estate holdings, primarily one property, in for its life insurance business, but at a slightly slower pace. response to the continuing weak Florida real estate market. Mid-Continent Life insurance Company has remained prof-The after-tax effect of these provisions reduced 1992 earn-itable, posting steady annual earnings growth since its ings by $7.4 million, or $.09 per share. This was the major acquisition in 1986. reason for the higher losses in 1992 at the real estate unit. Earnings for Electric Fuels were $12.1 million, or 5.14 per The timing of earnings from an installment sale of Talquin's share, in 1992, compared with $8 million, or 5.10 per share, citrus operations also impacted the 1991 and 1990 results. in 1991 and $9.9 million, or $.13 per share, in 1990. In 1991, the real estate unit recognized the last installment Earnings from unaffiliated coal sales in 1992 were higher gain of $3.1 million, or $.04 per share, from this sale. In than in 1991 due to some recovery from unfavorable mar-1990, earnings of $6.8 million, or 5.09 per share, were ket conditions that impaired margins during 1991. In 1992, attributable to this operation. better results from barge operations and the earnings from newly acquired coal reserves and railcar repair operations Florida Progress' investments in its real estate portfolio, contributed to the earnings increase. including its exposure through partnership liabilities and 18

R ET U R R DI E D UllV on percent) Electric Fuels, improved operating results this year increased 3 the 1992 retum. The percentage of equity invested in diver-sified operations was 16 percent at the end of 1992 and is f likely to remain below 20 percent. t n pr i h interest Expense and inflation 7 N/ Interest expense decreased in 1992, compared with 1991, , ' h iR M'# due to lower interest rates and reduced average debt levels My i in 1992. The lower average debt levels in 1992 were due kl h> primarily to asset dispositions at the finance unit. Yy Nh Allowance for funds used during construction increased (QQ (h<. 59.3 million in 1992 and 55.2 million in 1991, due to an increased construction program at Florida Power during [A, j f1989 7 Q [1990 M g p y gf iss/ y 6 these years. v s ~ Js [ 6yorsado%g# idcotiihr yEenihed c6efetiog V Even though the inflation rate has been relatively low in D 9 , & J & J wa @ e W MM a recent years, inflation continues to affect Florida Progress by reducing the purchasing power of the dollar and increasing debt guarantees, total approximately $275 million. At the cost of replacing assets used in the business. This has a December 31,1992, the majority of this capital was invested negative effect on the company since regulators do not in Barnett Tower, Florida Progress' headquarters building, generally consider this economic loss when utility rates are the Carillon office park and partnerships developing upscale set. However, such losses are partly offset by the economic apartment complexes and lifecare facilities. gains that result from the repayment of long-term debt with infl ted dollars. Since Florida Progress' real estate properties are located in growth areas, management believes the market for its pro-New Account.ing Standards jects should begin to recover as the economy improves. The weak real estate market will require the company to hold Florida Progress will adopt Financial Accounting Standard these properties, and absorb the related carrying costs, until No 109, " Accounting for income Taxes," in 1993. The economic conditions improve and the properties can be company has determined that the adoption of the standard sold. will not have a significant impact on earnings in 1993. (See in 1991, diversified revenues, cost of sales and other expenses increased significantly, compared with 1990. Florida Progress also will be required to adopt Financial These increases resulted from new coal operations at Accounting Standard No.106, " Employers' Accounting for Electric Fuels, sales growth at Progress Credit and Mid. Postretirement Benefits Other Than Pensions," starting in Continent t.ife and increased loan and lease loss provisions 1993. This standard mandates that an employer's obligation at Progress Credit. The decline in diversified revenues and fcr postretirement benefits be fully accrued by the date operating expenses in 1992 is primarily due to the with. employees attain full eligibility to receive these benefits. drawal from the leasing and lending businesses. Florida Progress' policy has been to accrue benefits currently payable along with amortization of past service costs for The return on equity chart highlights the relationship current retirees. The company will accrue approximately $18 between utihty and continuing diversified operations. The million in additional annual costs under the new standard in returns on the utility's common equity were 12.3 percent in 1993, but a substantial portion will be recovered through 1992, 12.9 percent in 1991 and 14.2 percent in 1990. The increased customer base rates at Florida Power. Florida lower retums in 1992 and 1991 are primarily due to higher Power included its share of these costs in its 1992 rate depreciation expenses without recovery in customer rates proceedinos before state and federal regulators. Both regu-and increasing common equity balances- ~ latory commissions have allowed or are expected to allow The returns on equity for continuing diversified operations these costs to be recovered in new rates. (See Note 8 on were 2 percent in 1992, 4.8 percent in 1991 and 7.6 per-page 33.) cent in 1990. Excluding the results from the real estate unit, The accompanying financial statements include the disclo-the diversified returns were 10 percent in 1992,9.8 percent sures as of December 31,1992, required by Financial in 1991 and 11.4 percent in 1990. Accounting Standard No.107, " Disclosures About Fair in all periods, diversified returns were depressed, mainly due Value of Financial Instruments." The standard requires the to holding real estate properties in the absence of signifi-company to compile the estimated fair value of the compa-cant sales activity. A smaller financial instruments portfolio ny's financial instruments and compare these values to the and lower revenues reduced the returns in 1992 and 1991. carrying costs of the financial instruments as of the balance While the 1991 return also was hurt by lower results at sheet date. (See Note 4 on page 30.) U

f SOURCES 0F C api 1RL + om -_c y ,y 900 n. , +.J N th 800 'N p., s ,4 r. 700 fN M-b,.; 7 600 s00 'J" f f[. f[f yg f g. 'Q ,. - s !. h MP ( n l($ -' y Q@ W g,Y j,9 n, 300 lh 200 !Y 100 g( p p , hf ..,j, 9 e .a 4 D N' i.. Y.,, +. , '.,D s. .m 19SS 1989 1990 1991 1992 5528.1 5668.1 5821.2 S P 71.1 5734.1 } ',k R operations Debt w '*m < E Comrno, stock .~ ' J: ..l 15 finanoalintestments E Other 0 5 - p v D New Federal Energy Law k~ [ I. I I The Nat'ona! Energy Fohc3 Act of 1992 became law m ',; ~ J 4 Octooer 1992. The new energ, law changes certa:n aspects F f; l v,' - ' * ' ' I', / of the federa! regu!at:on of the elecinc utsty industry and f' ' federa: pokes oo,em ng the generation and transnyssion 1 Et - E. \\ Th:s lacc re.,ses the PuDhc Utky Ho!d.ng Company Act of [ ' }d,.,,,. V4 of elecinc power ~. -4 s g i . C' t c - f J 'j 1935 to create a new category of non-utsty generator 1.. yc cahed an "Enempt Who!esa:e Generator Noe, an e>empt

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v+ Ng [$f je fachty can be onned be an independent power producer or n i ,vhoh owned bj an 'e!ectnc utlhty company The new f-i N E I .) UN ' - g e emot class:fKation should alow independent power pro-A me crysW River Energy complex construction of a 590-milhon ducers and electnc utd ty compames greater investn ent f ex-water-coohng system is nearing completion. The system is designed tokty in tne whoiesa e power rnark et to cool sea water flowing through Crystal River Units 1,2 and 3 The new ian gNes the Federa; Energy Regulatory Commission greater a; thor.ty to reou re e6cinc uW ties to prowde access to transrrass,on hnes for independent power producers and to estabbsh the rates to be charged. Thts section of the law rs espected to boost the a! ready fast-growing inoependent [HPlI AL EE0lllR[H[hl$ power busmess and increase competition in wholesale ] mark ets. 800 The eneroy law a!so impacts nuclear power operations The U S. EnEronmenta' Protection Agency is required to issue 'O t r= [ speof tc rad:ation protectron standards for the proposed 600 y e k t+] high-level nuclear waste repository at Yucca Mountain, 300 e..! J lw' Nevada This law estabhshes a fund to pay for the deconta-t g.) ' f-m: nation and decomm:s90ning of nuclear ennchment faah-

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{ _,J yd d ties operated by the U S Department of Energy. (See Note 9 [ 330 m-eq wg mm 200 yy s V-W{ on page 34 ) ,d M I N M@ lM _y M. [# 5ections of the law a!so proode funding for research pro-o M h4 dM 2E.. grams to renew the effects of electnc and magnetic fields 19P8 1989 1990 1991 1992 and to promote elecinc vehicle technology. 5528.1 5668.1 5821.2 5871.1 5734.1 m utmty Property D mdends E Finanda! Mwestments Flonda Power currently is reviewing the numerous portions n oivemfied propertv a Debt erpayments other of the new law and how they coliectively impact its future 4 strateg'es N

LIQUIDITY AND CAPITAL RESOURCES C APl16L STRUC1DRE menn Finanang for utthty and d versified operations :s coordinated g~ j 100 77, and managed at the hold.ng company. Cash f rom opera-tions has been the pnmary source of capital for Flonda g Progress over the last f we years in May 1991, Florida Progress sold 4 4 muon commor' 60 shares through its brst underwr,tten pubhc stock offenng .T since 1983. The net proceeds tota led $113 2 mdhon in a y y ... ?+ I May 1992 pubhc offenng. the company sold an add <tional 7' 2.6 mdhon common shares The net proceeds of this offer-P - : c ing were 576.5 mnon Dunng the last three years, the com-h L;q [ I '; 7 ~ ?.- f 20 pany also raised equ:ty cap;tal through rts Progress Pius %nw; m,,,..., ;.~ A. b c ./x D ~.~ w' Stock Plan and a predecessor p'an In 1992, approomateh 2 m m9 1990 w91 m2 ' mdhon shares of common stock nere issued through th:s plan and the company's savings plan, pe!d.ng 5611 muon s cornmon stock

preferrea stod Other sources of capdal have included proceeds from the a tong term oent a short-term capital sale of the build.ng products operations and rea' estate properties In 1991, 5127 9 maon was recewed from the net reduction of the commeraal lend:ng and leas ng un.t's ment Coastal is expected to build a 700-mde p:pehne to finanaal assets in 1992, an addritonal 5701 m%on reduc-Central Fionda by 1995 Once completed, the pipehne ini-tion in finanaa! assets was reahced teaHy is expected to provide Flonda Power with long-term Fionda Progress' common equ ty, as a percent of totaf capt.

hun uansportation of 120 mdhon cubic feet of natural gas tal, increased to 45 6 perce nt in 1992, corrpared wah 44 8 per day to cunent od-bred generation faahties, which wdl percent m 1991 and 38 8 percent in 1990. In ada,t;on, be mod:fied to use both natural gas and od When two 4 short term debt as a percent of cap:tal was 5.3 percent in un;ts at the Folk County complex beg:n operation in 1999, a j 1992, 1 9 percent m 1991 and 18 6 percent n 1990 the p.pehne is antopated to provide a total of 210 mdhon Compared with 1990. the improvement in the company's cub'c feet of natural gas per day to Flonda Power. Final cap:ta! struct:;re resuhed from se!hng Flonda Progress com. approval to budd the p,pehne is contingent on cbtain.ng all mon stock, Fionda Power hrst mortgage bonds, real estate regu!atory approve ls, finanang and commitments from cus-properties and tendtng and leasing assets Fionda Progress tomers. Flanda Power a'so is considenng the possibd.ty of pr: mary short-and long-term capital requdements resuit becom;n9 an eaudy partner 'n thts Pro ect from utsty construction and property additions, o adend As of year-end, the utihty had severa! long-term purchase payments to common shareholders, debt repaiments and power commitments as part of its p!an to meet future dwersified property add t,ons Other cap 4tal teamrements energy demand growth (See Note 11 on page 35 with include bus; ness acquisitions and pnt venture investments respect to present and possib;e future impact of these ""' I Utility Flonda Power's construction expend;tures for 1992 totated The Clean A:r Act of 1990 recunes electnc ut:hty compan!es $472.9 muon, conststing poman!y of distnbution and pro-to reduce sulfur d;oude emiss ons m two phases. Fionda duction expend tutes Tne fwe-sear construct or. program Power whi not be affected significantly by Phase I in 1995 includes pianneo e> pend tures of $446 muon, 5375 m.!_ and expects to meet Phase il requ:rements in the year 2000 Lon,1400 muon 5285 mdhon and 5429 m.lhon for 1993 mth m;n: mal capita! mochf: cations through 1997 Fionda Po/,er forecasts that about two-In add;t:on to f und.ng its construction commitments with th;rds of these construct (on apend tures wdl be hnanced cash from operations, Flonda Power accesses the captial wdh interna lly generated tunas madets through the issuance of commercial paper, in August 1991, the utd ty fied a need certshcation petition medium-term notes and irrst mortgdge bonds and recewes wrth the Fionda Pubhc Seroce Commission for approsa! to equ:ty from Florida Prog ess' common stock sales. Florida construct gas-iired, combined-cycle generating un;ts m Polk Power's goal is to maintain a capital structure that will County, Flonda Construction expenddures of $223 muon reta,n : s ocub e A minus credit rating are planned for inis new energy comp lex in the 1993-1997 Dunng 1992 Honda Power repard 5243 2 mdhon of long-forecast with the bulk of the e, pend tures :n the later years term debt, of which 514 4 m@on were first mortgage Florida Power plans to use natural gas for the first phase of bonds, 520 muon were med um-term notes and $208 8 the new energy comp!ex in Poi County The u!>hty is nego-muon were po!!ution control tevenue bonds in December 1:ating with the Coastal Corporation, a Houston-based 1992, Flonda Power !ssued 1225 muon of new hrst mort-energy company, for a natural gas transportation agree-gage bonds consisting of a $150 meon 8% senes due d i i l

2022, and a 575 milhon 6M% series due 1999. Proceeds A-1 by Standard & Poor's and P-1 by Moody's and its ' from the 64% series were used in January 1993 to refund medium-term note program is rated A and A2, respectively. 575 million of outstanding first mortgage bonds. (See Note in early 1991, Progress Capital estabhshed a private $400-2 on page 29.) Florida Power's embedded cost of long-term million medium-term note program with matunties that may - debt remained unchanged at 7.8 percent at December 31, range from nine months to 30 years. Progress Capital issued - 1992, compared with the prior year-end. $174 million in medium-term notes during 1991. The notes in August 1992, Florida Power established a new 5200-mil. were issued to better match the expected holding period of l lion public medium-term note program, providing for the assets of diversified subsidiaries, including restructured loans issuance of either fixed or floating interest rate notes, with at the commercial lending and leasing unit. The program maturities that may range from nine months to 30 years. was not used during 1992, leaving $226 million available for The medium-term note program was not used during 1992. f uture issuance at either fixed or floating interest rates. During 1992, Florida Power purchased and redeemed in November 1991, progress Capital established two new 50,000 shares of its Cumulative Preferred Stock, pursuant to revolving bank credr %cilities, a 364-day, $100-million facili-sinking fund provisions. (See Note 3 on page 30.) ty and a five-year,13N-million facihty. These facilities are used to back up Progress Capital's commercial paper pro-During 1992, Florida Progress contributed $121.6 million to gram. The 364-day facility was renewed in November 1992. Flonda Power from the proceeds of the holding company's By changing the term of the commercial paper backup facili-May 1992 public stock offering and the Progress Plus Stock ty to be primanly long-term and reducing the amount of i Plan. In May 1991, Florida Progress contributed $100 million short-term debt, Progress Capital has strengthened its short-I in equity capital to the utility from the proceeds of the May term liquidity. At December 31,1992, Progress Capital's l 1991 public stock offering. These funds were used to reduce short-term debt (including current maturities) as a com-outstanding commercial paper and to further strengthen ponent of total capital was 9.2 percent, compared to 3.7 Florida Power's finanaal posrtion. percent in 1991 and 46 percent in 1990. Flonda Power has a $400-million commercial paper program in 1992, total diversified capital expenditures were $26.1 that is rated A-1+ by Standard & Poor's and P-1 by Moody's. million, primarily for the non-regulated coal operations at Florida Power's interim financing needs are funded primarily Electnc Fuels. Sales of leases, loans and securities generated through its commeraal paper program. In November 1991, net proceeds of $70.1 million and 5127.9 million in 1992 and Florida Power established 364-day and five-year revolving 1991, respectively, due to the planned liquidation of the bank credit facilities, both for $200 million, which are used finance unit's assets. This compares with a net use of funds to back up commercial paper. In November 1992, the 364-of $229.2 million in 1990. day faality was renewed. (See Note 2 on page 29.) in 1993, diversified capital expenditures are expected to be $15 milbon, with most of these planned expenditures desig-D.iversified Operations i nated for facihty construction and equipment replacements Progress Capital Holdings, Inc. is a downstream holding at Electric Fuels. These expenditures are expected to be . company that consolidates the financial strength of the f nanced through cash generated intemally and medium-diversified operations. Progress Capital has the benefit of a term notes. support agreement with Florida Progress, which helps to lower the cost of capital to those individual businesses. Florida Progress has off-balance sheet risk related to debt of unconsolidated partnerships. (See Note 11 on page 35.) Progress Capital funds diversified operations primarily Should a partner in any partnership become unable to meet through the issuance of commertjal paper and medium-term its share of the partnership's obligations, the remaining part-notes. Progress Capital's commefciar paper program is rated ners would be liable forlaMhh debts of the partnership. &q d JN . p%3 Q l s n [q: ~~ ?T,G w? d f,. f ,s i &R M? n&e)n y}l. %#;wnWw q ~. n =y w f. Q ~n e a ma \\: g;j @%w w:% h..j,s g W@hDh ...li K +2 jl h;, ;, % 4 ix,. k rp W/ 4 g I NN h hjgw,h a[j%. $gy .g ym .,g h 'a (W '.g p h ;.h ik [ n, f 4, 9-q g "J g ). Q, r

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IFORTHE YEARS ENDED DECEMBER 31,1992.1991 and 1990 (in milhons, exceptpershare amounts) 1992 1991- -1990-1 REVENUES:

Electric utikty

$1,774.1 51,718.8 - $1,709.1 Diversified 321.2 . 355.9 301.7. 2,095.3 2.074.7 2,010.8? ! EXPENSES: Electric utility: Fuelusedin generation 471.9 498.5 .527.41 Purchased power and deferred fuel 136.7 108.1 139.2 Other operations 310.9 282.0 -257.4 Operations 919.5 8P8.6 924.0-Maintenance 139.7 134.8 126.2 . Depreciation 209.5 206.3 161.1 ~ Taxes other than incometaxes 138.3 129.3 119.9-1,407.0 1,359.0- '1,331.2 ' Ditersified: Cost of sales 238.4 238.4 205.8-Other 45.1 61.9 ' 39.7 - 283.5 .300.3 245.5 INCOME FROM OPERATIONS 404.8 415.4 J 434.1 INTEREST EXPENSE AND OTHER: Interest expense 134.2 146.1-l 144.4 - Allowance for funds used during construction (18.7) (9.4)l (4.2); ' Preferred dividend requirements of Florida Power 16.7 16.8 .16.8 - - Otherexpense(income) net 8.4 '(4.5) (5.1) 140.6-149.0 151.92 INCOME FROM CONTINUING OPERATIONS BEFORE INCOMETAXE5 264.2 266.4 . 282.2 - Income taxes 88.5 91.9 102.4'

INCOME FROM CONTINUING OPERATIONS 175.7 174.5 179.8

' DISCONTINUED OPERATIONS, net of income taxes:

Lossfrom operations f(.8) L

. Provision forloss on disposal .(2.4): (14.2). (2.4) - (15.0) loss from discontinued operations

NET INCOME

$ 175.7 ..$ ' 172.1 $ ' 164.8 - AVERAGE SHARES OF COMMON SlOCK OUTSTANDING - 85.4 80.8 ~ 77.0 ~ EARNINGS PER AVERAGE COMMON SHARE: , ? Continuing operations l $2.06 ' $2.16 $233, ' Discontinued operations (.03)

(.19) J

$2.06 $2.13 $2.14. Theaccompanyingnotesareanintegralpartof thesefinancialstatements. l

@ t 0 X 5 9 [iIR I E D A' A L HOE 9 S 11 E E ISjM L Djl a ski,6 R E $ S/I Dji[0,R R I1[0 II' ' f DECEMBER 31,1992 and 1991 (Dollars in mdhons) 1992 1991 ASSET 5 PROPERTY, PLANT AND EQUlPMENT: Electric utility plant in service and held for future use $4,853.9 $4.544.5. Less: Accumulated depreciation 1,809.9 1,657.7 ; 3,044.0 2.886.8 j Construction work in progress 333.8 241.5 l Nuclear fuel, net of amortization of $273.6 in 1992 and $247.2 in 1991 64.2 65.0 ! Net electric utikty plant 3,442.0 3,193.3 ' Other property, net of depreciation of $119.9 in 1992 and $98.6 in 1991 393.6 348.3 3,835.6 3,541.6 CURRENTASSET5: Cash and equivalents 8.1 23.2 Accounts receivable, net 202.1 178.4 Current portion of leases and loans receivable 25.4 62.1 1 inventories, primarily at average cost: Fue! 107.1 81.5 Utility materials and supplies 103.4 95.3 - Diversified materials and products 11.2 8.6 Underrecoveryof fuelcost 4.4 Other 34.6 37.0 496.3 486.1 NET ASSETS OF DISCONTINUED OPERATIONS 44.1 OTHER ASSETS: Investments: Leases and loans receivable, net 529.6 560.6 Marketable securrties 119.5 98.6 Joint ventures, partnerships and unregistered stock 91.4 101.6 Nuclear plant decommissioning fund 89.8 69.9 Deferred insurance policy acquisition costs 68.6 55.7 Other 102.2 66.7 1,001.1 953.1 $5,333.0 ' $5.024.9 The accompanying notes are an integralpart of these financialstatements. 24

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'?% ~. 0*. e:.k k.W ):L b Na% 1, '.h : " \\M i.M \\ e r .) (Dollarsin milhons) 1992 1991 CAPITAL AND LIABILITIES COMMON STOCK EQUITY: Common stock without par value, 250,000,000 shares authorized, 87,529,856 shares outstanding in 1992 and 82,932,918 in 1991 $ 949.2 $ 811.6 Retained earnings 788.4 776.1 1,737.6 1,587.7 . CUMULATIVE PREFERRED STOCK OF FLORIDA POWER: Without sinking funds 133.5 133.5 With sinking funds 82.5 97.5 . LONG-TERM DEBT 1,656.4-1,659.1 'TOTALCAPITAL 3,610.0 3,477.8 P CURRENT UABluTIES: Accounts payable 108.9 93.9 Customers' deposits 69.0 66.8-incometaxes payable 39.6 25.2 Accruedinterest 42.2 37.9 Overrecovery of fuelcost 39.4 Other 60.4 56.5 320.1 319.7 Notes payable 2.9 - .4 - Current portion of long-term debt and preferred stock 199.0-67.8 '522.0 387.9' DEFERRED CREDITS AND OTHER LIABluTIES: Deferred incometaxes 816.7 829.5-Unamortizedinvestmenttax credits 129.0 138.1 Insurance policybenefit reserves 140.3 115.9 - Other 115.0 75.7 1,201.0 1,159.2 COMMITMENTS AND CONTINGENCIES (Note 11) $5,333.0 $5,024.9 25

,s my,o- .~,..n. ,. +, w. n o v,,.# d ( h, +N h.D M,,r uH I E Di S M,,..,.. w.cp m-$,sa fi C B S 0 f t,0.W @sw-ot ...s ...ve,w, s_. ._# v em r.,y e >ff a i,l D Of 2 0 B H E S S#t G BR, A Hi D Iw& - j f.w w.a. s r az.5 - r-w <w c en -wu _r.,a s FOR THE YEARS ENDED DECEMBER 31.1992.1991 and 1990 On milhons) 1992 1991 1990 OPERATING ACTIVITIES: Income from continuing operations $175.7 $174.5 $179.8 Adjustmentsfor noncash items: Depreciation and amortization 268.7 266.3 207.4 Deferred income taxes and investment tax credits, net (17.4) (22.6) 5.2 Changes in working capital, net of effects from acquisrtion or sale of businesses: Accounts receivable (18.6) (4.7) 11.6 Inventories (36.8) 21.5 (29.4) Overrecovery (underrecovery) of fuel cost (43.8) 46.4 14.4 Accounts payable 14.2 17.8 (27.9) Other 23.1 13.7 13.7 Other operating activities 8.6 15.6 (1.1) Cash provided by continuing operations 373.7 528.5 373.7 Loss from discontinued operations (2.4) (15.0) Adjustments for noncash items. primanly loss provision in 1990 8.7 23.6 Cash provided by discontinued operations 6.3 8.6 373.7 534.8_ 382.3 INVESTING ACTIVITIES: Property additions (including allowance for borrowed funds used during construction) (519.6) (597.6) (327.4) Proceeds from sale of properties 7.1 31.3 31.1 Purchase of leases, loans and securitjes (65.7) ('21.14 (364.2) Proceeds from sa!e or collection of leases. loans and secunties 135.8 249.0 135.0' Acquisition of businesses (23.0) (5.7) (36.2) Proceedsfrom sale of businesses 24.4 21.0 .1 ' investments in joint ventures, partnerships and unregistered stock (5.3) (11.2) (78.9) Distributions from joint ventures and partnerships 5.0 15.0 2.5 - Other investing activities (15.1) (10.6) (12.8) (456.4) 929.9) (650.8) FINANCING ACTIVITIES: Issuance of long-term debt 450.3 384.1 306.5 Repayment of long-term debt (315.3) (266.2) (136.1) Increase (decrease) in commerMI paper with long-term support (34.1) 175.1 Redemption of preferred stock (5.0) Sale of common stock 137.6 141.1 23.9 Dividends paid on common stock (163.4) (149,8) (136.7) increase (decrease) in short. term debt .2 (578.1) 189.4 Other financing activities (2.7) (1.1) 2.5 67.6 (294.9) 249.5 NET INCREASE (DECREASE)IN CASH AND EQUlVALENTS (15.1) 10.0 (19.0) Beginning cash and equivaients 23.2 13.2 32.2 ' ENDING CASH AND EOU1 VALENT 5 $ 8.1 $ 23.2 $ ' 13.2 SUPPLEMENTAL DISCLO5URE OF CASH FLOW INFORMATION-Cash paid during the penod for: Interest (net of amount capitahzed) $129.9 $147.5 $141.3 income taxes (net of refunds) $ 91.5 $101.5 $ 84.1 The cccompanying notes are an integralpart of these financialstatements. 26

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FOR THE YEARS ENDED DECEMBER 31,1992,1991 AND 120 (Dolla s in milhons. except per share amounts)

Cumulatwe Preferred Stock of Flonda Power Without With Common Retained sinking sinking stock Earnings funds Funds Balance, December 31,1989 $646.6 $725.7 $133.5 $100.0 Net income 164.8 .. Common stock issued - 974,589 shares 23.9 Cash dividends on common stock ($1.777 per share) (136.7) Balance, 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) Balance, December 31,1991 811.6 776.1 133.5 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 (15.0) Balance, December 31,1992 $949.2 $788.4 $133.5 $ 82.5 The accompanying notes are an integralpart of these financialstatements. I .~. ..... ~.. s, s xv, .,,8 rm-. a m r ..,.m i ' l10 T E S110 lC O I S.D.Lll D R T E Djfl X B X II R L = S i 8 T Eji E N I S %tFJD R(D Rj A 0 6 H E S (1)

SUMMARY

OF SIGNIFICANT ACCOUNTING POLICIES istrative costs and an allowance for funds used during con-G:n:;rd - Florida Progress Corporation (the Company) is ex-struction. Substantially all of the utility plant is pledged as col-empt from regulation as a registered holding company under lateral for Florida Power's first mortgage bonds. the Public Utility Holding Company Act of 1935. Its largest Utility Revenues, Fuel and Purchased Power Expenses-- subsidiary, representing 75% of total assets, is Florida Power Florida Power accrues the non-fuel portion of base revenues Corporation (Florida Power), a public utility engaged in the for services rendered but unbilled. generation, purchase, transmission, distribution and sale of Revenues. include amounts resulting from fuel, purchased electric energy within Florida. power and conservation adjustment clauses, which are de-The consolidated financial statements combine the financial signed to permit full recovery of these costs. The adjustment results of the Company and its majority-owned operations. All factors are based on projected costs for a six-month period. significant intercompany balances and intercompany transac-Revenues and expenses are adjusted for differences between tions have been eliminated. Investments in 20% to 50% recoverable fuel. purchased power and conservation costs and . owned joint ventures are accounted for using the equity amounts included in current rates. The cumulative fuel cost dif-method. ference is shown on the balance sheet as overrecovery or un-Certain reclassifications have been made to amounts in prior derrecovery of fuel costs. Any overrecovery or underrecovery years to conform to the current year's presentation and all of costs, plus an interest factor, is refunded or billed to cus-share and per share amounts have been adjusted to reflect the tomers during the subsequent six-month period. 3-for-2 common stock split to shareholders of record on June The cost of fossil fuel for electric generation is charged to 30,1992. expense as consumed. The cost of nuclear fuel is amortized to Utility Plant - Utihty plant is stated at the original cost of fuel expense based on the quantity of heat produced for the construction, which includes payroll and related costs such as generation of electric energy in relation to the quantity of heat taxes, pensions and other fringe benefits, general and admin-expected to be produced over the life of the nuclear fuel core. 27 a

J Errned Incoma on Fin:nce 1. casts - The Company uses Effective December 1,1990, Florida Power was authorized the finance method for recognizing eamed income from fi-by the Florida Public Service Commission (FPSC) to apply new nance leases, which are primarily leveraged leases having depreciation rates, which resulted in a $37.2-million increase terms of five to 28 years: Accordingly, earned income, in-in depreciation expense for 1991. This increase included $16.6 ciuding any residual values expected to be recognized, and the million for fossil plant dismantlement costs. These new rates related deferred investment tax credits are amortized as rev-were disallowed in connection with the settlement of Florida enues over the term of the transaction to provide an approx-Power's 1992 wholesale customer rate request, resulting in the f imate level return on the positive net investment. Residual reversal of previously recorded depreciation. The reversal in-values are determined principally on the basis of indepen-creased net income in the fourth quarter of 1992 by $5.6 mil-t dent appraisals of the anticipated values of the leased assets lion, of which $3.1 million was applicable to periods pnor to remaining at the expiration of the lease. 1992. During 1991, although the FPSC determined that alf in-vestor-owned electric utilities should provide currently for fos ' incoms Taxes - Deferred income taxes have been provided sil plant dismantlement costs, it approved Florida Power's on all significant book-tax timing differences, except during motion to defer the implementation of any additional depre-periods when applicable regulatory authonties did not permit ciation expense associated with this matter until Florida Power's the recovery of such taxes through rates charged to customers next proceeding for review of base rates. Fossil plant disman-by Florida Power. tiement costs, totaling $24.1 million annually, were approved The cumulative net amount of income tax timing differences by the FPSC and, effective November 1992, are being recog-for which deferred taxes have not been provided was approx-nized and are recoverable through the new retail base rates. imately $118 million at December 31,1992. As allowed under Florida Power charges maintenance expense with the cost current regulatory practices, deferred taxes not previously pro" of repairs and minor renewals of property. The plant accounts vided are collected in customers' rates as such taxes become are charged with the cost of renewals and replacements of property units. Accumulated depreciation is charged with the Defe red investment tax credits subject to regulatory ac-c st,less the net salvage, of property units retired. counting practices are being amortized to income over the lives of the related properties. Additionally, deferred investment tax Allowance for Funds -- The allowance for funds used dur-credits associated with finance lease transactions are being ing construction represents the estimated cost of capital funds [ amortized to revenues as described above. (equity and debt) applicable to utility plant under construction. I Financial Accounting Standard No.109, " Accounting for Recognition of this item as a cost of utility plant under con-income Taxes," was issued in 1992 and will be adopted by the struction is appropriate because it constitutes an actual cost, Company in the first quarter of 1993. The objective of this stan-of construction and, under established regulatory rate prac-dard is to recognize the amount of current and deferred taxes tices, Florida Power is permitted to earn a return on these payable and refundable for all events that have been recog-costs and recover them in the rates charged for utility services nized in the financial statements or tax returns based on en-while the plant is in service. acted tax laws at the date of the financial statements. The average rate used in computing the allowance for funds As indicated in Note 6, the Company has determined that was 8% for 1992,1991 and 1990. the adoption of the standard will not have a significant impact insurance Premiums, Policy Acquisition Costs and on earnings in 1993 and will result in a reduction of deferred Benefit Reserves - Life insurance premiums are recognized income taxes on the Company's balance sheet. Substantially all as revenue over the premium-paying periods of the policies. of these reductions in deferred income taxes are applicable to The Company defers recoverable costs in its insurance oper-Florida Power and result f rom timing differences for which de-ations that directly relate to the production of new business. ~ ferred income taxes have been provided in pnor years at higher These costs are amortized over the expected premium-paying statutory rates and the tax effect of deferred investment tax period. Reserves are established out of each premium pay-credits, partially offset by timing differences discussed above ment to provide for the present value of future insurance pol-for which deferred income taxes have not been provided. icy benefits, using reasonable assumptions for future When Florida Power records these reductions in deferred in-investment yield, mortality, withdrawa!s and the risk of ad-come taxes, a regulatory liability for the net amount also will verse deviation. be recorded and there will be no effect on net income. Flonda Power expects to recover these tax effects in future electric Profit from Real Estate Sales - Profit from the sale of real rates when such timing differences reverse. estate is recognized only upon the closing of a sale, the trans-fer f wnership rights to the purchaser and receipt of an ad-Dzpreciation and Maintenance - The Company provides equ te cash down payment. for depreciation of the cost of properties over their estimated useful lives primarily on a straight-line basis. Florida Power's Marketable Sewrities and Financial instruments - The annual provision for depreciation, including a provision for nu-Company considers all highly liquid debt instruments pur-clear plant decommissioning costs and fossil plant dismantle-chased with a maturity of three months or less to be cash ment costs, expressed as a percentage of the average balances equivalents. Fixed-income securities are carried at amortized of depreciable utaty plant was 4.6% for 1992,4.8% for 1991 cost and other equity securities are stated at the lower ag-and 4% for 1990. 9regate of cost or market va!ue. 1 l N l l

. (2) DEBT I , The Company's long-term' debt at Duember 31,1992 and 1991 is scheduled to mature as follows: q interest (in mi# ions) Rate 1992 1991 Flonda hwer Corporation: l First mortgage bonds: Matunng through 1997. 1992 4.25 % 5 5 14 4 i 1993 (ear!y redemption) 8 48% (a) 75.0 75.0 1995_ 4.74% (a) 34.4 34 4 ( l1997 6.13 % 16.7 16.7' Matunng 1998 through 2002 713% (a) 245.5 170.5 i ' Matunng 2003 through 2006 8.21 % (a) 210.0 210 0 Matunng 2021 and 2022 8 31% (a) 300.0 150.0 Dtscount. net of premium, being amorteed over term of bonds (2.2) 7 879.4 671.7 Pollution control finanong obligations. Matunng 2002 through 2027 6 59% (a) 240.9 132 4 - Annual tender bonds matunng in 2012 and 2013 5 00 % 108.6 . Notes matunng: 1992 1993 8.3 7% (a) 45.0 65 0 1994-1997 8 45% (a) 94.5 94.5 Commeraal paper, supported by revolver matunng December 31,1996 3 54% (a) 96.0 78.0 Progress Capital Hoidings: + Commercial paper, supported by revolver maturing November 30.1996 3 62% (a) 195.0 247.1 - Notes matunng: 1992-1993 5.24% (a) 40.0 50 0 1994 2001 8 63% (a) 202.3 202.3 . Progress teasing Corporaton (an due within 5 years) 9.54% (a) 26.6 34 0 Other subsidianes. debt matunng through 1999 6 79% (a) 23.2 40 8 i 1,842.9 1,724.4 Less: Current portion of long-term debt 186.5 65.3 s1.656.4 51.659.1' (a) Weighted average interest rate at December 31,1992 i The Company's consolidated subsidiaries have lines of credit were scheduled to mature in 2012 and 2013. In addition, dur- . totaling $800 million, which is used to support commercial ing August 1992, Florida Power issued $100.1 million of polf paper facilities. The lines of credit were not drawn on as of lution control refunding revenue bonds due 2022 at a fixed - December 31,1992. Interest rate options under line of credit interest rate of 6.35%. Proceeds from the bonds were used for i . arrangements vary from sub-prime or money market rates to the redemption of various outstanding series of bonds with a the pnme rate. Banks providing lines of credit are compensated weighted average interest rate of 9.11 % and maturities rang-through fees. Commitment fees on lines of credit vary be-ing rom 2002 to 2012.' 4 hveen.1 and.225 of 1%. The combined aggregate maturities of long-term debt for The lines of credit, whth were put into place in November 1993 through 1997 are $186.5 million, $74.2 rni! hon, $51.7 mil-t 1991, consist of four revolving bank credit facilities, two each lion, 5456.1 million and $49.6 million, respectively. In addition. l for Florida Power and Progress Capital Holdings, Inc. (PCH). The about half of Florida Power's first mortgage bond issues have .i Florida Power facilities, $200 million each, are for terms of 364 an annual 1% sinking fund requirement. These requirements, days and five years. The PCH facihties consist of $100 million which total $5.5 million annually for 1993 through 1995 and l with a 364-day terrn and $300 million with a five-year term. $4.9 million annually for 1996 and 1997, are expected to be Both 364-day facilities were renewed in November 1992. The satisfied with property additions. five-year facilities can be extended for two additional years in January 1993, Florida Power refunded $75 million of first i upon the banks' approval of the company's request to extend. mortgage bonds, with a weighted average interest rate of. Based on the maturity of the underlying backup lines of credit, 8.48%, which were or:ginally due to mature in 1999 and y all outstanding commercial paper at December 31,1992 and 2000. j 1991 is classified as long-term debt. Florida Progress has a support agreement with PCH that re-in January 1992iFlorida Power refunded $108.6 million of quires the parent company to maintain a minimum net worth - annual tender pollution control revenue bonds with a 6%% at PCH. At December 31,1992, approximately $9 million of. ' i fixed interest rate series due 2027. The annual tender bonds PCH's retained earnings were restricted. l

(3) PREFERRED AND PREFERENCE STOCK AND SHAREHOLDER RIGHTS A summary of outstanding Cumulative Preferred Stock of Florida Power follows: Current outstanding Dmdend Redemption shares December 31 Rate Pnce Authonzed Outstanding 1992 1991 (In milhons) Without sMkmg funds, not subject to mandatory redempson. 4 00 % $104 25 40.000 39,930 $ 4.0 $ 4.0 4 40 % 1102 00 75,000 75,000 7.5 7.5 4.58 % 5101 00 100.000 99,990 10.0 10 0 4 60% $103.25 40,000 39,997 40 4.0 4.75 % 1102 00 80,000 80,000 8.0 8.0 3 7.40% $102 48 300,000 300,000 30.0 30.0 l 7.76 % $102.9Bia) 500,000 500.000 50.0 50 0 8.80 % $101.00 200.000 200,000 20.0 '20.0 l $133.5 5133.5 Wrth sinking funds. subject to mandatory redemption. 7.08 % 5104 72(b) 500,000 450,000 $ 45.0 5 50.0 7 84 % 1103 92(c) 500.000 500,000 50.0 50.0 95.0 100.0 tess Current portion 12.5 2.5 1 82.5 5 97.5 (a) $ 102.21 aher February 15.1994 (b) $102.35 aher November 15.1995 $100.00 aher November 15,2001 (c) $10196 aher November 15,1993, $ 100 00 aher Nowmber 15,1994 The Company has 10 million shares of authorized, but unis-two-thirds of one right. Upon certain occurrences, the rights sued, Preferred Stock without par value issuable in series. The may be exercised to purchase shares of the Company's, or a first series, designated Junior ParticipWng Preferred Stock, surviving entity's, common stock. Alternatively, the Board may. was created in 1991 but remains unissued. The Junior Preferred approve a stock issuance to each holder of rights, with no cash Stock is entitled to quarterly dividends equal to the greater of payment by shareholders. The rights have no voting or divi- $10.00 per share or 100 times the per share common stock dend rights and expire December 2001, unless redeemed ear-dividend and is entitled to 100 votes per share held. Florida lier by the Company. Power has 4 million shares of authorized Cumulative Preferred Stock, $100 par value, of which 2.3 million shares are out. (4) FINANCIAL INSTRUMENTS standing. In addition, Florida Power has 1 million shares of au. The Financial Accounting Standards Board issued Statement thorized, but unissued, Preference Stock, $100 par value, and No.107, " Disclosures about Fair Value of Financial Instro-5 million shares of authorized, but unissued, Cumulative ments," in December 1991. This statement requires disclosure of f ir values for financial instruments as of December 31, Preferred Stock, without par value. During 1992, Florida Power acquired $5 million of 7.08% 1992. In cases where quoted market prices are not available, series Preferred Stock under mandatory and optional sinking f ir values are based on estimates udg present value or other fund requirements. !n March 1993, Flonda Power will redeem v luation techniques. Those techniques are affected signifi-its $20 million 8.80% series perpetual preferred stock, as well cantly by the assumptions used, including the discount rate as the 1993 mandatory and optional sinking fund amounts on nd estimates of future cash flows. In that regard, the derived its 7.08% and 7.84% series preferred stock, totaling $5 mil. f ir v lue estimates cannot be substantiated by comparison lion and $20 million, respectively. Minimum preferred stock re, with independent markets and, in many cases, could not be demption requirements for 1994 through 1997, after giving realized by sale of the instrument. The following methods and effect to the above retirements, are $12.5 million, $12.5 mil. ssumptions were used by the Company in estimating its fair v lue disclosures for financial instruments. lion, $12.5 million and $2.5 million, respectively. In November 1991, the Company adopted a Shareholder Loans Receivable - The fair values for commercial finance Rights Plan. The Shareholder Rights Agreement provides that loans have been estimated using discounted cash flow analy-attached to each share of common stock is one right which, ses, management's estimate of the interest rate that would when exercisable, entitles the holder of the right to purchase apply in today's market.on an individual loan basis, as well as one one-hundredth of a share of Junior Participating Preferred repayment assumptions that may differ from the current loan Stock at a purchase price of $130, subject to adjustment. The document in certain cases. Estimating fair values for loans as-number of rights attached to each share of common stock is sociated with the airline industry is difficult due to a limited also subject to adjustment, and after giving effect to the 3-for-number of similar transactions in a troubled industry. 2 common stock split to shareholders of record on June 30, Management has therefore estimated a range of fair values for 1992, each share of common stock now has attached to it these loans. 30

l l i The fair values for real estate loans and insurance policy (5) LEASES AND LOANS RECElVABLE AND i . loans are estimated using discounted cash flow analyses and CONCENTRATION OF CREDIT RISK using interest rates currently being offered for similar loans. At December 31,1992 and 1991, investments in leases and j ' Loans with similar charactenstics are aggregated for purposes loans receivable were as follows: of the calculation. On mdhons) 1992 1991 1 Other loans, pnmarily notes from the sales of companies,

• * *'ed5"5 are valued at the carrying amounts for vanable rate loans and using discounted cash flow analyses at current market rates ior 3),$[#[ g g fixed-rate instruments.

uneamed income (91.5) (68 9) i M rketable Securities -The fair values for marketable ciebt Defe"ed 'nvestment tax cred,ts (25 4) (31 3) j ~ and equity securities are based on quoted market prices Mal fmance leases 349.7 343 9 Nuclear Plant Decommissioning and Storm Damage Loans recewable Res rve Funds - The assets in these funds consist of cash comrnerc at finance business 207.5 275 3 and equivalents, which are valued at their carrying amount, Ufe 'nsurance business 21.1 24 0 and equity securities and governmental notes and bonds, Totanoans recewable 228.6 299.3 which are valued at quoted market price 5. Anowance for losses (23.3) (20 5) Prefirred Stock of Florida Power with Sinking Funds - 555.0 622.7 The fair values of Florida Power's preferred stock subject to test cunen ponion 25.4 62.1 mandatory redemption are estimated using discounted cash is29.6 5560 6 flow analyses, based on current market rates. Rentals receivable from finance leases represent unpaid Debt - The carrying amounts of debt with variable interest rentals less principal and interest on non-recourse third party rates that reprice frequently (primanly commercial paper) ap-debt. PCC's share of rentals receivable is subordinate to the proximate their fair value. The fair values for debt with fixed share of the debt holders who also have a secunty interest in interest rates are estimated using discounted cash flow analy-the leased property. ses, based on the Company's current incremental borrowin9 Finance leases primarily consist of leveraged investments in rates for similar types of borrowing arrangements. aircraft as described below. The majonty of the aircraft leases The fair value analysis ignores redemption prices and is-have terms of 15 to 20 years, wrth a maximum of 28 years. Net suance costs (includmg underwnting commissions) that would contractual maturities of rentals receivable under these con-be required to refund existing fixed interest rate debt. In addi-tracts are 517.9 million, $17.5 million, $21 A million, $18.6 mil-tion, the analysis assumes that all of the debt is currently lion and 514.3 million for 1993 through 1997, respectively, and callable. 5193.6 million thereafter. Deferred taxes apphcable to lever-The Company had the fcllowing financial instruments for aged leases were 5264.2 million and 5287.5 million at which the estimated f air values differ from the carrying values December 31,1992 and 1991, respectively. at December 31,1992: Net income recognized from leveraged leases (after pay-Carrying Fair ments to non-recourse lenders, but before other borrowing On md/fons) Amount Value costs) Were as follows: Assets: On mahons) 1992 1991 1990 Loans recewable' lease income (loss) 5(3.6) 507) 510.1 Commeroaanance bu9 ness income tax effect (3.5) 8 (3 4) Rea! estate 5 139 6 5 132 Amort;7ation of investment Airline 67.9 37 to 54 tax cedtts 59 20 29 Ufe insurante buvness. 5(1.2) 52.1 5 96 Loar s secured by real estate 11.2 11 7 othe 1 1 At December 31,1992 and 1991, PCC's portfolio included Lest Aliowance for loan loses (19.2) investments in the airline and commercial real estate industries as MowE Totat loans 5 221.3 5200 4 to 217.4 Marketable secur:bes 5 119.5 5 122,6

1. n mdhons) 1992 1991-Nuclear plant decommissionmg and Mline industry.

storm damage reserve funas 92.7 96 4 Finante leases 5269.3 5252 4 ' CAPITAL AND LIABitmEs. Loans recewable 67.9 112.0 Prefened stock with sinking f unas 5 95.0 5 99 7 Joint ventu?es and unregistered stcd 43.2 48.8 tong-term debt: tcluipment on operating lease 9.5 10 6 Flonda Power Corporation 1.355 8 1.376.1 5389.9 5423 8 Prog ess Capita! Hold;ngs 487.1 503 4 Commercat real estate vndustry: In accordance with its liquidation plan, Progress Credit ' f' nance leases 5 15.9 5 18.0 '*"5"'* '33# '03'3 Corporation (PCC) sold $118 A million of marketable securities $155.5 5181.3 during 1991 for a pretax gain of $14.5 million 31

PCC's commercial finance loans to entities associated with (6) INCOME TAXE5 the airkne industry are secured by secunty interests on aircraft, m mM nd 1992 1991 1990 aircraft engines or spare parts. These loans are further collat-erahzed, where apolicable, by an assignment to PCC of the componer ts of income tan expense borrowers' lease agreements with third party users of the se-Payab:e current!y: cured equipment and, in some cases. third party guaranties federat 5 98.1 5995 5 841 state 7.8 14 3 13.5 PCC's !oans receivable from bcarrowers engaged in com-105.9 113.8 97.6 meraal real estate activities are secured by first mortgage hens on the related commeraal real estate, assignment of ieases and

• } "*I "
• D (9.3) 0 2 9) 7.0 selected third party guarantiel state 1.0

.4 30 1 in September 1991, the Company announced that PCC (8.3) 0 2 5) 10 0 l would begin an orderly withdrawal from the commercial leas-Amom7ation of investment tax cred:ts. net (9.1) (9 B) (7 0) ) ing and lending industry. No new transactions are being ini-88.5 91 5 100.6 ) tiated, and PCC's portfolio of leases, loans and other Tax benef ts related to discontinued " ** '5 4 L8 investments are being reduced as the portfolio maturities and 5 88.5 5 91.9 5102.4 market opportunities perm:1. Components of deferred income tax Due to conditions in the airhne. dustry and a weak real es-DJference between finanoa! and tax in tate market, PCC has expenenced delinquences in ongoing accounting for leases 5(27.4) 5 19.4 5 401 lease and loan payments as well as loan pnncipal maturities. ^jeye('ggver (under) stract4ne tax PCC has negotiated the restructuring of certain transactions-uncerrecovery toverrecovery) of fuel cost 18.7 060) (4.0) Although most of the outstanding real estate and aircraf t loans Non-deductbie reserves, net (5.0) (7.1) (SI) mature dunng the next five years, PCC expects many cf the overhead expenses capcahred for ( borrowers will not be able to retire the loans at matunty. PCC D hmM and will pursue its options for any non-performing assets, includ-tax accountng for property sales 1.8 (9 6) ing restructunng, remedial actions and remarketing. The Decrease in a:tematve minimum 24 Company beheves PCC's existing reserve of $22.9 milhon is ad-tax [awam g, 9 equate to cover its planned orderly hquidation, assuming n 5 (8.3) 5025) 5 10.0 further cieterioration in the airline and real estate industries. PCC's portfolio at December 31,1992 includes $71.1 million The pnmary differences between the statutory rate and the of aircraft leases, which were restructured in 1991 and 1992, effective income tax rates are detailed below; and $22.6 milhon, which current!y is being restructured. PCC's 1992 1991 1990 portfolio also includes approximately $56.4 miikon of restruc~ reaere statutory income tax rate 34.0 % 34 0 % 34o% tured aircraft loans to Pegasus Capital Corporation, a company state income tax. net of federauncome in which PCC has a 21% minonty interest. In add! tion, PCC has tax benetts 3.0 35 39 received $10 milhon in partial principal payments on a $35-mil-Amot ation of rnvestment tax cred ts (3.2) (3 5) (3 8) other (2.3) (1 1) 1.6 ! ion restructured real estate loan and anticipates full repayment f"e*'inc me tax rates 31.5 % 32 9 % 35.7 % upon the expected sale of the collateral property in 1994. All restructured assets were performing in accordance with their At December 31, 1992, Florida Progress had net non-new terms at year-end and the restructurings did not materi-current deferred tax liabihties of $816.7 milhon and net cut-ally reduce PCC's future annual revenue. rent deferred tax assets of $13.7 million. The principal timing During 1992 and 1991, PCC provided $6.4 milhon and $17.9 differences, at original tax rates, included in these deferred tax balances are the difference between book and tax basis for million, respectively, for possible loan and lease losses and had write-offs totahng $3.7 million and $7.5 milkon, respectively. deprecable assets of $610 million and the difference between financial and tax accounting for leases of $264 million. Leases and loans generally are p! aced on non-accrual sta-The Company plans to adopt the provisions of Financial tus when the collectibihty of interest or principal is uncertain. Accounting Standard No.109, " Accounting for income One real estate loan for $15.1 million was on non-accrual sta-Taxes," effective January 1,1993. At the time of adoption, the tus as of December 31,1992. The assets that collateralize this Company will reduce its deferred tax balance by approxi-loan are in the process of being sold. The expected loss of up m tely $60 milhon. Substantially all of this reduction is at-to $4.5 million on this loan has been included in PCC's reserve tributable to Florida Power, which will record a net balance at December 31,1992. corresponding regulatory liabihty for a similar amount. The in addition to the above, PCC foreclosed on a $5.4-milhon adoption of this standard will have no significant eamings im-real estate loan during 1991 and is currently marketing the pact. The Company does not plan to restate prior years' re-property for resale. sults for this change. 32

_n.. (7) BUSINESS SEGMENTS make annual contnbutions to the plan based on an actuarial The Company defines its pnncipal business segments as determination and in consideration of tax regulations and utikty and diversified operations The utility is engaged in the funding requirements under federal law. generation, purchase, transmission, distnbution and sale of Based on actuarial calculations and the funded status of the electric energy. The diversified segment includes coal mining, perision plan, the Company was not required to contribute to procutement and transportation operations that have signifi-the plan for 1992,1991 or 1990. Shown below are the com-cant sales to the utility. Other continuing diversified operations ponents of the net pension cost calculations for those years. include activities in leveraged leasing, comrnercial finance, hfe

1. n mdhood 1992 1991 1"40 insurance, real estate and technology.

Service cost $18.1 5139 5151 The Company's business segment information for continu-interest cost 25 4 22 4 21 1 ing operations for 1992,1991 and 1990 is summarized below. Actual losses (earnings) on plan assets (37.3) (91 4) 19 2

• t "" '#dt' o and deferral (31) 58 0 (ss 8>

No single customer accounted for more than 10% of unaffil-iated revenues. Intra-segment sales have been ehminated and wt penson cost (benefit) 3.1 29 ( 4) Rmum w dement (2 a 4 the Company's equity in the earnings of partnerships and joint t mon c a mne 52.2 5 .2 5 - ventures has been included in revenues. On mdlonM 1992 1991 1990 ng w g aWFaWadE W N N used in the calculation of pension costs: Ut:hty 51,774.1 51,718 8 51,709.1 1992 1991 1990 D6ershed D:scount rate 7.25 % 8 50 % 7 50 % Electnc fue!s Corporation Expected long-term eate of return 9.00 % 9 00 % 9 00 % Coal sa;es to eiectoc utity 264.6 262 2 2852 Rate of corrpensation increase 6.00 % 6 00 % 6 75 % l Sales to extemal custome s 200.7 197 1 1715 I other deversif;ed 122.8 161 1 130 6 The following summarizes the funded status of the pension 2,362.2 2.339 2 2.296 4 plan at December 31,1992 and 1991: l Ehminations (266.9) (264 5) (285 6) an mdhons; 1992 1991 Revenues from extemal customers $2,095.3 52.074 7 52.010 8 Acc umuW d benefit obhgation income from operat:ons Vested 5229.2 5224.1 uMty 5 367.1 5 3598 5 3779 raon+ested 33.9 32 8 Divers 6ed Electnc Fueis Corporat:on 21.1 17 4 17.7 263.1 256 9 other d4vershed 16.6 38 2 38 5 Effect of protected compensaton increases 96.3 94 1 404.8 415 4 4341 Pro;ec1ed benef:t obhgat,on 359.4 3510 Interest and other expense 140.6 149 0 151 9 Pian assets at market va:ue, pomanly hsted income from continwng operatons stocks and bonds 460.0 4350 before income taxes 5 264.2 1 2664 5 2822 p:a, assets in excess of protected benef:t obhcat:on $ 100.6 5 840 ! dent 6aDie assets: cons!st:ng of the fohoeng components-utMiy $3,980.3 53.642 9 53,515 8 unrecogneed transit <on asset 5 50.3 $ 55 2 Dwers6ed Unracogneed poor service cost (11.2) (6 5) Decint Fue!s Corporaton 328.7 280 4 258 4 EUect of changes in assumptons and diference Other dwers6ed 1,024.0 1.101 6 1.271 7 between actual and estimated expenence 61.5 35 3 55,333.0 55.024 9 55.045 9 5100.6 5 840 Depreoatron and amorteapon utsty 5 243.4 5 2419 5 190 4 The following weighted average actuarial assumptions were D*ers'f >ed used in calculating the plan's year-end funded status: Electnc Fue!s Co poraton 18.9 17.8 12 9 Other dwers6ed 6.4 66 41 1992 1991 5 268.7 5 2663 5 2074 D'scount rate 7.75 % 7.25 % Capita! ado: tons. Rate of compensati n increase 5.50 % 6.00 % UbMy 5 493.5 5 3597 5 2765 Diver 56ed The Company will implement Fmancial Accounting Elecinc Fueis Corporaton 23.1 28 9 19 7 Standard No.106, " Employers' Accounting for Postretirement Other dwe 36ed 3.0 90 31 2 Benefits Other Than Pensions," in the first quarter of 1993. 5 519.6 5 3976 5 327.4 This standard requires that an employer's obligation for postre-tirement benefits be fully accrued by the date employees at-(8) RETIREMENT BENEFIT PLANS tain full eligibility to receive such benefits. The Company and The Company and certain of its subsidianes have a non-some of its subsidiaries provide some health care and hfe in-contributory defined benefit pension plan covenng substan-surance benefits for retired employees. Employees become el-tially all employees The benefits are based on length of service, igible for these benefits when they reach normal retirement compensation during the highest consecutive 48 of the last age while working for the Company. The Cornpany has esti-120 months of employment and social secunty benefits. Prior mated that its unaccrued hability at January 1,1993 is ap-to January 1,1992, the compensation portion of the benefit proximately $120 million. This habikty assumes a discount rate formula was based on the highest consecutive 60 of the last of 8%, and medica! trend rates for 1993 and years thereafter 120 months of employment. The participating cor,ipanies ranging from 14.5% to 6% for persons under age 65, and 10 5% 33

P to 5% for retirees over age 65. The Company plans to accrue this is expected to be recovered from customers through the fuel ad-obhgation over a 20-year period. The Company's pohty since justment clause. Flonda Power expects collection to begin in 1993. January 1,1985 has been to accrue benefits currently payable Fuel Disposal Costs - Florida Power has entered into a contract along with amortization of past service costs of current retirees. with the DOE for the transportation and disposal of spent nuclear The Company had accrued $23.9 milhon at December 31,1992 fuel. Disposal costs for nuclear fuel consumed are being col-using this method. The Company forecasts its annual cost for lected from customers through the fuel adjustment clause at a 1993 will increase from approximately 55 milhon to approximately rate of 5.001 per net nuclear kilowatt-hour sold and are paid to l. 523 mdhon under the new standard. A substantial portion of the the DOE quarterly. Florida Power currently is storing spent nuclear additional cost will be recovered from F!onda Power customers fuel on site and has sufficient storage capaaty in place or under through the recently approved inaease in retail base rates as dis-construction for fuel burned through the year 2009 cussed in Note 10. Plant Maintenance and Refueling Outages-Florida Power accrues a reserve for maintenance and refueling expenses antic-l (9) NUCLEAR OPERATIONS ipated to be incurred during scheduled nuclear p! ant outages. A ; Jointly Owned Plant -in 1992. Flonda Power purchased the planned midcycle maintenance outage, which occurred from I aty of Sebnng's.45% interest in the Crystal River Nuclear Plant. October 10 to November 25,1991, resulted in a cost of 59.5 mil-I The purchase pnce was approximately 52 milkon. Flonda Power's lion to Flonda Power. ) 90.45% ownership in the nudear unit as of December 31,1992 The 1992 refuehng outage, which occurred from Apol 30 to l amounted to $606.6 milhon of utility plant in service, 518.7 mil-July 16,1992, a total of 77 days, resulted in a cost of $30.2 mil-4 tion of construction work in progress,564 2 milhon of unamor-hon to Flonda Power. tized nuclear fuel and 5343.3 million of accumulated The next planned midcycle maintenance outage, scheduled for depreciation, which includes 5102 milkon of accumulated prov'- eight weeks beginning in March 1993, presently is estimated to ! sions for decommissioning costs. The 1992 net capital additions cost $12 milhon. for Florida Power were $20.5 milhon, and deprecation expense, insurance - The Price-Anderson Act currently limits the liabil-i exclusive of nuclear decommissioning, was $25 milhon. Each ity of an owner of a nuclear power plant for a single nuclear in-participant provides for its own finanang Flonda Power's share cident to 57.8 bilhon. Florida Power has purchased the maximum of the operating costs is included in the appropriate expense cap-available commercial insurance of $200 milhon with the balance tions in the consolidated statements of income. provided by indemnity agreements prescribed by the U.S. Nuclear Decommissioning Costs - Florida Power's nuclear pl ant de-Regulatory Commission. In the event of a nuclear incident at any preciation rates include a provision for future decommissioning U.S. nuclear power plant, Florida Power could be assessed up to costs that are recoverable through rates charged to customers. 566 million per incident, with a maximum assessment of $10 mil-Flonda Power is plaang its collections in an externally managed lion per year. In addition to this liabihty insurance Florida Power trust f und. The recovery from customers, plus income earned on carries extra expense insurance with Nuclear Electnc insurance, the trust fund, are intended to be sufficent to cover Florida Ltd (NEIL) to cover the cost of replacement power dunng any Power's share of the future dismantlement, removal and land prolonged outage of the nuclear unit. Under this policy, Florida restoration costs. Florida Power has a hcense to operate the Power is subject to a retroactive premium assessment of up to nuclear unit through December 3,2016, and contemplates de-52.8 milhon in any year in which pohcy losses exceed accumu-commissioning beginning at that time. Total future decommis-lated premiums and investment income. sioning costs, in the latest study approved by the regulatory authonties. were estimated to be approximately 5216 milhon in (10) RATES AND REGULATION 1992 dollars. Decommissioning expense, as authonzed by the Retail Rates - Effective January 1,1991, the FPSC voted to dis-FPSC and the Federal Energy Regulatory Commission (FERC), ad-continue a customer bilkng credit that increased 1991 retail rev-justed for the acquisition of the aty of Sebring's.45% interest in enues by 512.7 milhon and net income by 57.9 milhon. Prior to the nuclear unit, was 5119 milhon for 1992 and 511.8 milhon for 1990, the original credit related to the pass-through to customers 1991 and 1990. In response to issues raised by the FPSC, a new of a deferred income tax savings from tax rate reductions. decommissioning cost study was submitted in September 1991, in January 1992, Florida Power filed a retail base rate incease which estimated total future decommissioning costs to be 5293.1 request of $145.9 milhon based on a regulatory return on equity milkon in 1991 dollars. The FPSC postponed its consideration of of 13.6 percent. The request was based upon a dual-year test the study until 1994, at which time updated decommissioning period that included 1992 and 1993. In September 1992, the cost estimates will be reviewed. Florida Power expects to be able FPSC granted Florida Power an annual revenue increase of 585.8 to recover any increase in nuclear decommissioning costs through milkon. future rates. The new rates provide Florida Power the opportunity to eam The National Energy Pohty Act of 1992 estabhshes a fund to a regulatory retum on equity of 12 percent, with a new allowed pay for the decontamination and decommLsioning of nuclear range between 11 and 13 percent. The FPSC granted increases in enrichment facitrties operated by the U.S. Department of Energy retail base rates of approximately $58 million in November 1992, (DOE). The fund is expected to consist of payments from affected 59.7 milhon in April 1993 and 518.1 million in November 1993. domestic utilities and the federal govemment. Florida Poweri es-The FPSC also upheld a previously awarded interim increase of timated annual special assessment, before adjustment for infla-531.2 million. Although motions for reconsideration are pending tion, is expected to be $14 milhon. Flonda Power recognized the on portions of the increase, a final FPSC decision is expected in total estimated liabikty of $216 milhon at December 31,1992, February 1993. Management expects no significant changes in the with a corresponding regulatory asset, as this special assessment final order. H

The intenm rates and new base rates increased 1992 operat-The table below shows the annual capacity payments, and the ing revenues by 529 milhon and increased earnings by 515.4 present value of these payments at 10% (at December 31,1992), million, after recording new expenses authorized in the rate case. that the utihty expects to incur if all units were to come on hne as Wholesale Rates - flonda Power 3 rate treatment of its whole-c ntracted, based upon such generation being available: sale customers was consistent with the rate treatment of its re- [fygts gy,3,ng tail customers for 1990. However, in 1991 wholesale customers continued to receive a small customer bilkng credit that was dis-1993 5 24 6 5 22 4 continued for retail customers. 1994 81.7 67.5 in December 1992, Florida Power reached a settlement agree-9j 145 0 ment for 1992 with its wholesale and transmission customers-1997 235.3 146.1 The new rates will incease annual revenues approximately 51 md-1998-202s 10,608 3 1,748.7 ' lion. The settlement provides for a retroactive change in Flonda Total 511.369.3 52.284.3 Power's deprecation rates to December 1990 (See Note 1 on page 28.) The capacity cost of power purchased from non-utihty gener-In December 1992, Flonda Power fded an 58.4-mdhon rate in-ators was $10 mdhon in 1992 and 52 million in 1991 and 1990. crease with FERC for 1993. The new rates for its wholesale cus-Flonda Power does not plan to vary materially from the level tomers would enable Flonda Power to include the cost of new of purchased power it currently has under contract. The util ty be- ' facilities and increased capaaty costs into base rates. lieves that its current contracts allow for system reliabihty and help reduce construction expenditures. However, without a change in (11) COMMITMENTS AND CONTINGENCIES 7 regulatory pohty, these contracts could weaken its overall credit Utility Construction Program - Substantial commitments ratings. l have been made in connection with Florida Power's construction The FPSC allows these capaaty payments to be recovered program, which are presently estimated to result in construction through a capaaty cost recovery clause, which is similar to, and expenditures in 1993 of $446 mdhon for electric plant and nu-works in conjunction with the f uel adjustment clause.

clear fuel Fu:.1 end Purchased Power Commitments - To supply a por-Coal-Related Contracts - In connection with the supply of tion of the fuel requirements of its generating piants, Flonda coal to Florida Power Electric Fuels Corporation has entered into Power has entered into various long-term commitments to pro-several contracts with outside parties for the purchase of coal and vide fossil and nuclear fuels and to reserve pipehne capaaty for also several operating leases related to coal procurernent, pro-natural gas, in most cases, such contracts contain provisions for cessing and transportation. Minimum coal purchases are approx-price escalation, minimum purchase levels and other financial imately 5.1 mdkon tons per year. The annual obkgations under

' commitments. Additional commitments wdl be required in the fu-these commitments are 5207.9 mdhon, 5178 mdhon, 5118 9 mil-ture to supply Flonda Power's fuel needs hon, 573.3 mdhon and 573 million for the years 1993 through Florida Power has entered into long-term contracts with The 1997, respectively, and 5337.9 milhon thereaf ter. The total cost in-Southern Company for up to 400 megawatts of purchased power cuned under these comm:tments was $247.9 milhon in 1992, annually through 2010, representing approximately 5% of total 5242.4 million in 1991 and 5243.1 milhon in 1990. current system capaoty. The power wdl be supphed by coal-fged t generating units that have a combined capaaty of approximately Off-Balance Sheet Risk - Several of the Company's subsidiaries 3,500 megawatts. The entire commitment is guaranteed by The are general partners in unconsohdated partnerships and joint Southem Company's total system, which is approximately 30,000 ventures. The Company or subsidiaries have agreed to support megawatts The lor g-term contracts obhgate Flonda Power to pay certain loan agreements of the partnerships and joint ventures. certain minimum annual amounts representing capacity pay-The totals of the debt support agreements were 568.7 million ments. The estimated annual capaoty payments under the con-and 584 million at December 31,1992 and 1991, respectively, of tracts would be 538 milhon, 550 milhon, 562 milhon and 561 which 511.2 milhon were cash deficiency agreements, 545.8 mil-million for 1993,1994,1995 and 1996 through 2010, respectively lion and 569.1 million were guaranties, and 511.7 million and + The capacity cost of power purchased under these contracts was 53.7 mdlion were stand-by letters of credit, respectively. As a $22 million in 1992 and 1991 and $19 milhon in 1990. general partner, those subsidiaries are potentially liable f or all the As of December 31,1992, Flonda Power had entered into partnerships' obligations. If the other partners failed to perform long-term contracts with non-utihty electnoty generators for 1,091 their obligations and if the partnership assets, consisting primar-megawatts of capacity. These contracts have terms ranging from ily of land and buildings, were worthless, those subsidiaries could 20 to 35 years. In most cases these contracts account for 100% be hable for an additional $118.9 mdhon as of December 31, of the generating capacity of each of the facihties. Of the 1,091 1992, which represents partnership liabikties exceeding amounts , megawatts under contract,187 rnegawatts are currently available as mentioned earber. The Company considers these credit risks to and the remaining future capaaty is a part of the utihtyt plans for be minimal, based upon the asset values supporting the part-meeting f uture electrioty demand growth. All commitments have nership habihties. been submitted to, and approved by, the FPSC. However, Florida Maturities under these debt agreements, excluding non-Power expects that approximately 25% (65 megawatts) of theiu-recourse debt, totaled 543.2 million, 52.6 milhon, 52.9 milhon, ture projects that have not secured financing nor started con- $21.3 million and 522.4 million for 1993 through 1997, struction will fail to come on line. respectively. l 35 j

i Retroactive insurance Premiums-As mentioned under Note brought by Union Carbide Corporation (UCC), a customer of 9, " Nuclear Operations," Florida Power is subject to retroactive FP&L, seeking injunctive relief and damages. The suit cha!!enges premium assessments in connection with its nuclear insurance. a longstanding temtorial agreement between the two unaffili-In addition, Flonda Power currently cames approximately 52 bil-ated, neighboring utilities, notwithstanding the defendants' con-tion in property insurance provided through several different poh-tention that the agreement was clearly authonzed by state law cies. One of these pohcies, which also is underwntien by NEIL and approved by the FP5C. Florida Power believes that the state provides 51.3 bilhon of excess coverage. Under this pohty, Florida action exemption from the antitrust laws is apphcable to the Power is subject to a retroactive premium assessment of up to agreement and its consequent refusal to provide electriaty to 56.7 milhon in any pohcy year in which losses exceed funds avail-able to NEIL ' UCC. While it is not possible to determine the Company's expo-sure to liabihty, management believes it has a strong defense and Contaminated Site Cleanup - Several subsidiaries of the intends to vigorously defend against this action. Company have received notices from the U.S. Environmental (12) DISCONTINUED OPERATIONS Protection Agency (EPA) that each is or could be a " potentia!!y in October 1990, the Company announced its intention to sell responsible party" under the Comprehensive Environmental its building products operations as part of its strategic planning Response Compensation and liabihty Act (CERCLA) and the g Superfund Amendment and Reauthorization Act and may be Company provided for the disposition costs and future operating jointly and severally required to share in the costs of cleaning up losses of the building products segment in 1990, which reduced several contaminated sites identified by the EPA. In addition, eamings by 514.2 milkon, net of apphcable tax benefits of 51.7 mil-Flonda Power has been named as a defendant in one suit brought i lion. The Company sold all the building products companies by against four poor owners of a coal gasification plant site, seek-early 1992 and recorded an additional 52.4 million provision for ing contnbutions pursuant to CERCLA and Florida law toward the losses n 1991, net of tax benefits of 51.4 milhon, based on the cost of cleaning up that site and nearby property that may have final sales pnces for the companies. The Company received net become contaminated. The Company is unable to estimate the cash and notes totakng 529.2 milhon in 1991 related to these extent of its habihty for the cleanup of these sites, because the sales, and received an additional 519.8 milkon in 1992. The ac-extent to which other parties will ultimately share in the costs of companying financial statements account for these companies as cleaning up these sites is not presently determinabie, and because ,, Discontinued Operations." Accordingly, the results and balances the Company has not yet been able to determine the potential related to this segment have been segregated from the ongoing costs of cleaning up these sites. Management expects to recover o erations of the Company in the accompanying financial state-the costs for most of these sites through the ratemaking process, ments for all years presented. In addition, the Company's real es-but recognizes that recovery is not assured. tate unit is managing and attempting to sell certain real estate Union Carbide Lawsuit - Florida Power and Flonda Power & holdings totakng 59.3 million previously used in the building prod-Light Company (FP&L) are co-defendants in an antitrust action utts operations. QUARTERLY FINANCIAL DATA (Unaud:ted) %ree Months Enced (in mdirons, evcept per share amounN Mrch 31 June 30 september 30 December 31 1992 Revenues $463.5 $511.7 $626.6 $493.5 income from oparatons 79.5 84.8 148.9 91.6 Net income 30.1 34.9 74.6 36.1 Eamings per average commo, share .36 .41 .86 .41 Dividends per common share .473 .473 .473 .485 Common stock poce per share High 31 % 30% 33% 33% Low 27% 28% 30% 31 % 1991 Revenues $456 6 $ 528.1 1589 4 5500 6 locome from operatons 87.0 106.1 148.3 74.0 Net income 33 0 43 1 71.5 24.5 Eamings per average common share-Continuing operanons 43 .54 87 .33 Discontinued operations ( 03) Net income 43 .54 .87 .30 Dividends per common share 457 457 .457 A73 Common stock price per share: High 27% 27% 29% 31 % tow 24% 25% 25% 28% The business of the Compan(s largest subsidiary. Flonda Power, is seasonal in nature and it is management's opinion that compansons of eamings for the quarters do not give a true indicadon of overall trends and changes in the Company's operations. As explarned in Note 1 on page 28 Ilonda Power recorded - an adjustment to deprecation expense in the fourth quarter of 1992, wtuch increased earnings by 55 6 million. Due to the timing of common stock issues, the sum of the quarterly eamings per share do not equal the corresponding annual figure. 36

a .i i %e owyr e xn,, p mw yr y =puwgw w wy y vyy 7, www, f8hNbbbddl MMdbON bhab 59N dhb b I h dh MANAGEMENT'S REPORT AUDITORS' REPORT i I . To Our Shareholders: To the Shareholders of Florida Progress Corporation: Management is responsible for the integrity and objectivity of We have audited the accompanying consolidated balance . the financial and operating information contained in this 1992 sheets of Florida Progress Corporation and subsidiaries as of l Annual Report to Shareholders, including the consolidated fi-December 31,1992 and 1991, and the related consolidated nancial statements covered by the Auditors' Report. These statements of income, cash flows, and shareholders' equity for statements were prepared in accordance with generally ac-each of the years in the three-year period ended December 31, cepted accounting principles and necessarily include amounts 1992. These financial statements are the responsibility of < that are based on judgments and estimates by management. Florida Progress Corporation's management. Our responsibil-ity is to express an opinion on these financial statements based Florida Progress Corporation maintains intemal control sys-on our audits. tems and related policies and procedures designed to provide reasonable assurance that assets are safeguarded, that trans-We conducted our audits in accordance with generally ac-actions are executed as authorized and are properly recorded cepted auditing standards. Those standards require that we ~i and that accounting records may be relied upon for the prepa-plan and perform the audit to obtain reasonable assurance a ration of consolidated financial statements and other finan-about whether the financial statements are free of material ' cial information. These policies and procedures include a Code misstatement. An audit includes examining, on a test basis, ev- .j of Conduct program intended to ensure employees adhere to idence supporting the amounts and disclosures in the finan-the highest standards of personal and professional integrity. cial statements. An audit also includes assessing the The design, monitoring and revision of internal control sys-accounting principles used and significant estimates made by - tems involve, among other things, management's judgment management, as well as evaluating the overall financial state-with respect to the relative cost and expected benefits of spe-ment presentation. We believe that our audits provide a rea-l cific control measures. The company also maintains an inter-sonable basis for our opinion. nal auditing function that evaluates and formally reports on in ur opinion, the financal statements referred to above f the adequacy and effectiveness of intemal controls, policies present fairly, _n all material respects, the financial position of j i and procedures. Florida Progress Corporation and subsidiaries as of December in addition, the audit committee of the board of directors, 31,1992 and 1991, and the results of their operations and .j consisting solely of outside directors, meets periodically with their cash flows for each of the years in the three-year period - management, the internal auditors and the independent au-ended December 31,1992, in conformity with generally ac-ditors to review matters related to internal controls, audit re-cepted accounting principles. l sults, financial statements and financial reporting. Annually, q the audit committee recommends to the board of directors ~ he selection of independent auditors. Both the independent t auditors and the internal auditors periodically meet alone with [ gg - the audit committee and have free access to the committee - at any time. .l 1For Management, St. Petersburg, Florida January 25,1993 ) i 1 J I i

David R. Kuzma

- Senior Vice President and Chief Financial Officer I n 1 i j

SELECIED 0RIA 1982 1882 Annual Growth Rates (in percen!) 1987 1992 1982-1992 1992 1991 1990 FLORIDA PROGRESS CORPORATION Summary of operations (in milhons)- UtAty revenues 38 3S $ 1,774.1 $ 1,718 8 $ 1,709.1 Dwesfred revenues (continuing) 55 51.3 321.2 355 9 301.7 income from continuing operations ( 9) 79 175.7 174 5 179 8 income Ooss) from discontinued operations (2 4) (15 0) Net income (13) 79 175.7 172.1 164 8 Balance sheet data (in milhons) Total asses 56 62 5 5,333.0 $ 5,024.9 5 5.0459 Capitah7ation: Short-term capital (5 6) 16 8 $ 201.9 68.2 5 681.0 tong-term debt 8.7 33 1,656.4 1,059.1 1,326.2 Preferred stock (15) (2 4) 216.0 231.0 233 5 Common stock equity 66 91 1,737.6 1,587.7 1,424.3 Total caprtahzation 5.9 5.5 $ 3,811.9 $ 3.546 0 $ 3.665 0 Common stock data Average shares outstanding (in milhons) 2.5 43 85.4 80 8 77.0 Earrungs per share Utsty (2 0) 3.7 $1.99 $2.03 $2.15 Dwersified (21 8) 8.8 .07 13 .18 D:scontinued operations ( 03) (19) Conschdated (3 7) 34 2.06 2.13 2.14 Dividends per common share 34 46 1.905 1.843 1.777 Drodend payout 93.0 % 87.0 % 829% Dnndend yield 5.9 % 60% 7.2% Book value per share of common stock 38 46 $19.85 $1914 118.37 Retum on common eauity 10.6% 11 4 % 11.8 % Common sixk pnce per share-High 33% 31 % 27 i_ow 27% 24 % 22% Cbse 84 10.0 32% 31 % 25% Pnce eamings ratio (year +nd) 15.8 14 7 11.9 Other yearend data Number of employees (21) 4.1 7,301 7,3S0 7,879 Nurnber of common shareholders ( 6) .2 44,870 42,176 41,970 FLORIDA POWER CORPORATION Electnc sales billed (milkons cf KWH). Residentia! 44 5.6 12,825.8 12,623 9 12,415.5 Commeraal 46 6.8 7,544.1 7,489 2 7,321,.7 industnal ( 6) 1.8 3,254.5 3,303 0 3,455 7 Total retai! sales 39 5.3 25,414.0 25,179.1 24,878.3 Totalelectnc sales 26 3.3 27,375.5 27,350 2 27,143 7 Residential sennte (awrage annual): KWH sales per customer 1.5 21 12,214 12.257 12,319 Revenue per customer 1.3 21 $884 $899 $896 Ratio of eamings to f:xed chages (SEC rnethod) (1.2) 47 3.84 3.87 3.89 Embedded cost of long term debt ( 8) (2.1) 7,8% 7.8% 7.9% Embedded cost of preferred stock (2.5) 7.2 % 7.2% 72% Operating Data: Net system capabikty (MW) 3.3 1.7 7,002 6,623 6,571 Net system peak (VW) 6.5 2.7 6,982 6.056 5,026 Construction additions (in milions) 20 6 2.5 $491.6 1355 3 $269.5 Fercentage of constructon expenditures generated :ntemally (19 7) (2.0) 32 % 90 % 52 % Awrage number of customers 2.9 36 1,182,170 1,159,237 1,135,499 Number of ful!. time empicyees 1.5 1.9 5,806 5.677 5,570 38

l l 4 r 1989 1988 1987 1986 1985 1984 1983 1982 9.627.0 $ 1468 5 $ 1,4722 $ 1,530 5 $ 1,504.9 $ 1,336.7 $ 1,371.8 $ 1,222.5' i 274.3 270.1 245.5 186.0 159.0 63.4 28 5.1 .186.1 178.6 184.1 180.7 160.9 115.8 103.9 82.1 1.0 1.2 3.7 .5 '187.1 179 E 187.B 181 2 160 9 115 8 103.9 82.1 6 G,610.4 $ 4.272.3 $ 4.067 2 5 3.855.5 5 3,6666 $ 3,432.8 $ 3,170.9 $ 2,914.9 498.6 $ 366 5 1 2690 89.5 5 205.0 61.1-1 65 4 42.7 -i 1,125.8 1,048 8 1,093 0 1,240.3 1,220.9 1,310.7 1,250 6 1,195.2 233.5 233.5 233.5 233.5 265 1 268 2 274.3 275.9 9,372.3 1,316.9 1,264 7 1,156 4 1,014 2 883.5 818 3 725.0 2,230 2 $ 2.965 7 $ 2.860.2 5 2.719.7 $ 2,705.2 $ 2,523.5 $ 2,408 6 5 2,2388 76 6 76 6 75 4 73.3 68.4 64.0 59.0 55.8' $2.19 $2 21 $2 20 $225 $2.25 $1.77 $1.79 $1.44 24 .13 24 .21 .10 .04 (.03) .03 .01 .01 .05 .01 2.44 2.35 2 49 2.47 2.35 1.81 1.76 1.47 1.72 1.667 1.613 1.54 1.46 1.38 1.30 1.22 70 4 % 71 0 % 64 7 % 61.4 % 62 2 % 76.3 % 73.6 % 83.1 % 66% 7.3% 7.6% 6.1% 7.4% 9.1% 10.1 % 10.1 % ' $17.92 $1720 $16 51 $15.51 $14.42 $13.35 $13 07 $12.62 13.9 % 13.9 % 15.5 % 16.4 % 16.8 % 13 6 % 13.7 % 11.8 % 26% 25% 29% 31 % 20% 16% 15 13 22% 21% 19% 20% 15% 12% 12 9% 26% 23% 21% 26% 20% 15% 13% 12%' _ 10.9 99 8.7 10 7 87 8.7 7.7 8.6 7,490 7,974 8.116 8,030 7,208 5,573 5,077 4,864 43,005 44,929 46,147 46,586 48,052 48,933 48,712 43,887 + 1,786.9 11,065.6 10,318.8 9,819 2 9,175.0 8,553.6 8,009.5 7,425 0 3,989.8 6,479.4 6,016.4 5,573.0 5,106.6 4,547.7 4,118.6 3,895.2 2,766.1 3,680.6 3,349 4 3.122.3 3,166.0 2.989 0-2,701.0 2,715.5 G,123.3 22.691.7 21,039 6 19,833 8 18,716 0 17,279.1 15.972.0 15.130 6 1510.5 26,130.9 24,103.7 23,170.0 21,272.4 20,596.4 21,774h 19,869.9 12,059 11,754 11,356 11,255 10,940 10,638 ' 10,388 9,964 $845 $814 $327 $914 $883 $818 $783 $720 3 79 3 79 4.08 4.29 3.81 3.07 2,94 2.42-

81%

80% 8.1% 8.7% 8.8% 92% 91% 9.6% - 72% 7.2% 72 % 8.4% 9.3% 9.3% 9.3% 9.3%. 6.309 6,086 5,966 ~ 5,961 ' 5.989 5,927 5,993 - 5.899 6,817 6,188 5,087 5,977 5,813 - 4,858 4,913 5,347 $254.8 $201,1 $192.8 - $195.2 $201.2 $284.5 $285.8 $385.3 73 % 100 % 96 % 100 % 100 % 99% 66 % 39 % .@1,817 - ' 1,060,971 1,023,222 980,427 940,976 900,799 861,548 829,810' 5,553 5,512' 5,395 5,323 5.215 5,070 4,923 4,829 I 39

.~ 3Qtm y,wrvnpwn ;mymim w~ qv;wawwwqwylp Mt IIITzmMe rn yoo 3,wWpq l' %I11EO t_aEl11 i W RIip 4 WA.1I;14til>m m m.m.m U t 6 m.mA m + um.mm _ m.m _a BOARD OF DIRECTORS of San Diego Gas & Electric Company. He Charles B. Reed,51, is Chancellor of the-is a director of SunBank of Tampa Bay. A State University System of Florida. He pre- - Dr. Jack B. Critchfield, 59, is Chairman company director since 1989, he is a viously served as Chief of Staff and of the Board and Chief Executrve Officer member of the Executive and Finance & Deputy Chief to Ilorida Governor Bob, of Florida Progress. He serwd as a Florida Budget Committees. Graham. A company director since 1992,- S Power Corporation director from 1975 to 1978 before joinir'g the utility in 1983. He Clarence V. McKee, 50, is Chairman and he is a member of the Nominating ! Committee. is a director of Barnett Banks, Inc. in Jack-Chief Executive Officer of McKee Com-sonville, Florida. A company director since munications, Inc., a television and radio Joan D. Ruffier,53,is a General Partner ! 1988, he is chairman of the Executive investment firm in Tampa, Florida. He is a in Sunshine Cafes, an Orlando-based food '

• Committee, director of Bamett Bank of Tampa, N.A.

and beverage concession business, which j and Bamett Banks, Inc. in Jacksonville. A has operations at two Florida airports. A Michael P. Graney,49,15 a Partner in company director since 1989, he is chair-certified public accountant, she is a for i the law firm of Simpson Thacher & Bart-man of the Compensation Committee and mer chairman of the Board of Regents of lett in Columbus, Ohio. Speciahzmg in a member of the Audit Committee-f Florida.She J utilities law, htigation and antitrust, he is a t.he State University System olle Bra as a director of the Jacksonvi member of the American, District of Clarence W. McKee, Jr., 68, is a retired Columbia, Ohio and Columbus Bar Asso. Executive Vice President and Chief Finan-the Federal Reserve Bank of Atlanta; A, com a r ciations and the Federal Energy Bar cial Officer of Florida Progress. He is p g Aud t and inanc &a Association. A company director since Chairman of the Board of Trustees of Bay-1991, he is a member of the Compensation, front Medical Center in St. Petersburg. A Budget Committees.' Executive and Nominating Committees. Florida Power director since 1976 and a Robert T. Stuart, Jr., 60, is a ' retired 'I Chairman and Chief Executive Officer of j Allen J. Keesler, Jr.,54, is President and member 1 Fin nce & udge Mid-Continent Life insurance Company in ! Chief Executive Officer of Flonda Power-Committee-Since joining Florida Power in 1963, he Oklahoma City, which Florida Progress I has held several positions in engineering Vincent J. Naimoli, 55, is Chairman and acquired in 1986. A company director i and operations. In 1982, he was promot. Chief Executive Officer of Anchor indus-s!nce 1986, he is a member of the Execut ; ed to President and Chief Executive tries international, Inc., a Tampa invest, tive Committee. Officer of Talquin Corporation and served ment and management firm. He previous-Jean Giles Wittner, 58,. Pres. dent of ;; is i in that position until returning to Florida ly served as Chairman and Chief Executive Power in 1988. He is a director of Officer of Anchor Glass Container Corpor-Wittner & Company, a St. Petersburg firm SouthTrust Corporation. A Florida Power ation. A company director since 1992, he !nvolved m real estate management,, director since 1988 and a company direc. is a member of the Compensation and 'nsqance brokerage and consulting. She J tor since 1992, he is a member of the Finance & Budget Committees. previously served as President and Chief 1 Executive Officer of a savings association ; Finance & Budget Committee. Richard A. Nunis, 60, is Chairman of until it was sold in 1936. A Florida Power - director since 1977 and a company direc-- for since 1982, she is chairman Richard Korpan,50, is President and Walt Disney Attractions in Orlando, Flor, Chief Operating Officer of Florida Progress. ida. He is a director of The Walt Disney He joined the company in 1989 as Execu-Company and SunBank, N.A. in Orlando. Audit Committee and a member of the ; tive Vice President and Chief Financial A company director since 1989, he is Compensation Committee. Officer He previously served as President chairman of the Finance & Budget and and Chief Executive Officer of Pacific Nominating Committees and a member 1 Diversified Capital Company, a subsidiary of the Executive Committee.- l i 't l .. t I OFFICERS 'j Dr. Jack B. Critchfield Jeffrey R. Heinicka Allen J. Keesler, Jr, li Chairman and Chief Executive Officer Vice President and Treasurer President and Chief Executive Officer,L l Florida Power Corporation - Richard Korpan Dan R. Johnson President and Chief Operating Officer Vice President and Controller - Richard D. Keller. -i President and Chief Executive Officer. - David R. Kuzma Darryl A Electric Fuels Corporation Vice Pres,. LeClair Senior Vice President and Chief Financial ident, Mergers, Acquisitions Officer and Divestitures, and President, Riley R. Simon - d Joseph H. Richardson Progress Credit Corporation 1 President and Chief Executive Officer, ; i Senior Vice President, Corporate Mid-Continent Life insurance Company Development, and President and Chief Larry J. Newsome Executive Officer, Talquin Corporation Vice President, Tax Administration Dudley E. Bryant President and Chief Executive Officer, Kenneth E. Armstrong Stephen D. Purifoy Advanced Separation Technologies Vice President and General Counsel Secretary ' incorporated l 40 y y -s .-wr

L ?! W V E S T 0 R I N10 R H 8 T 0 W Investor Services Annual Reports on Form 10-K and Statistical All dividend checks, shareholder reports, proxy matenal and Supplement " tax forms are handled from cur 51. Petersburg corporate A copy of the company's 1992 Form 10-K, without exhibits, office. All correspondence concerning address changes, divi-will be supphed without charge to shareholders requesting dend checks and related matters should be d>ected to: it A Florida Power Corporation 1992 Form 10-K, without exhibits, and a detailed 10-Year Statistical Report also are investor Services available. Requests should be addressed to Investor Services Florida Progress Corporation at the address shown. P, O. Box 33028 , St. Petersburg, Florida 33733-8028 Life Insurance Information . Telephone (813) 824-6418 inquiries concerning life insurance policies /ith Mid-Tolf-Free (800) 352-1121 Continent bfe insurance Company should be directed to: Transfer Agent and Registrar Marketing Department inquiries concerning the transfer of common stock certifi-Mid-Continent Life Insurance Company 00 Gassen Dse cates of Florida Progress or preferred stock certificates of 1 ' Florida Power should be directed to: Oklahoma City, Oklahoma 73106 Toll-free (800) 735-9701 Chemical Bank Auditors - Stock Transfer Administration at Marwd 450 West 33rd Street,15th Floor q New York, New York' 10001 St. Petersburg, Florida Telephone (212) 613-7147 Analysts' Contacts Common Stock D..dends Richard R. Champion (813) 824-6428 ivi i Director, investor Relations Record dates are normally on or about the fifth day of March, June, September and December. Quarterly dividends Mark A. Myers (813) 824-6422 are mailed to reach shareholders on or about the 20th day Manager, investor Communications l of March, June, September and December, j investor Relations Fax (813) 824-6401 - Common Stock Listed New York Stock Exchange Corporate Offices + Pacific Stock Exchange Bamett Tower J ' Ticker symbol: FPC One Progress Plaza Newspaper listing: FlaPrg St. Petersburg, Flonda 33701 Telephone (813) 824-6400 1 ,.N [ ').. .-b' iI~ t. + l g . l l_.. l.. k ?. - ': . v. em (N Ll.v.4, m. n r..,.... ..~ c. . [] uh 4 n w,n,{_ ' ' '^ ] c hy.j.[he;jg Y f ;. s i .. ~. _. y Y ,h.... T hI;.w.l.~~l L b. ,f }sf Uh 't gQ y[.. ;; y _.,... j , (3. ' n. m pg.g.a -. . ~. p 4.' ' u <,. ; 3, 5 ' /.] .f .. f '[. [,.., 6 .,,.g, n. -6 i _ yf,-. Ww 1 JL WW 6,G ' :::+..::.;J i .hy ';. ~ ': 1

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O SEMINOLE ELECTRIC COOPERATIVE. INC. CONSOLIDATED FINANCIAL STATEMENTS DECEIGER 31, 1992 i i P

Sutte 2800 Telephone 813 223 7577 400 North Ashley Street P 0. 00x 2MO Tampa. FL 33E01-2640 i CC Ni[Cl$l0llSC REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS To the Board of Trustees Seminole Electric Cooperative, Inc. In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of revenue and expenses and patronage capital and of cash flows present fairly, in all material respects, the financial position of Seminole Electric Cooperative, Inc. and its subsidiary (the Cooperative) at December 31, 1992 and 1991, and the results of their operations and their cash flows for the years then ended in conformity with generally accepted accounting principles. These financial statements are the responsibility of the Cooperative's management; our responsibility is to express an opinion on these financial statements based upon our audits. We conducted our audits of these statements in accordance with generally accepted auditing standards and the financial audit requirements of the government auditing standards issued by the Comptroller General of the United States. These standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above. A /] Tampa, Florida February 24, 1993

SEMINOLE ELECTRIC COOPERATIVE. INC. CONSOLIDATED BALANCE SHEETS December 31, 1992 1991 ASSETS Utility plant: Plant in service $ 758,218,478 $ 745,592,070 Construction work in progress 34.277.627 12.353.374 792,496,105 757,945,444 Less accumulated depreciation and amortization (194.758.381) (172.590.329) Utility plant, net 597.737.724 585.355.115' -- i Investments: Investments in associated organizations 17,177,131 11,903,287 Funds held by trustees 16.902.200 16.518.270-i Total investments 34.079.331' 28.421.557 Current assets: Cash and cash equivalents 67,399,201 75,898,774 Receivables, principally for sales of electricity 18,477,925 21,203,917 Inventories, at average cost: l: Materials and supplies 15,261,942 14,569,430 j Fuel 24,097,881 25,600,542 1 Prepayments and other 4.423.338 2.135.978- { Total current assets 129.660.287-139.408.641 Deferred charges 39.563.068 39.909.731 $ 801.040.410- $ 793.095,044 c; l 1 The accompanying notes are an integral part j of these financial statements. i t I r en,. - rc ,w

i l SEMINOLE ELECTRIC COOPERATIVE. INC. i CONSOLIDATED BALANCE SHEETS December 31. 4 1992 1991 EOUITY AND LIABILITIES Equity: Memberships . 1,100 1,100 Patronage capital 50,758,540 36,766,995 Donated capital 31.615 31,615 i Total equity 50,791,255 36,799.710 ] Long-term liabilities: _619,368,241 j Long-term debt 612,225,427 Obligations under capital leases 31,156,570 32,375,415 ^ Other 197.938 1,865,405 t Total long-term liabilities 643.579.935 653.609.061 Current liabilities: i Current portion of. Long-term debt 7,143,061 6,479,-163 Obligations under capital leases 1,193,419 1,089,217 Accounts payable 25,789,756 23,422,835 l Other accrued liabilities 30,992.584 _ 28,046.328 Total current liabilities 65.118,820 59.037,543 Deferred gain on sale-leaseback j of plant 24,009.080 25.424.849 Other deferred credits 17.541,320 18,223,881 'I Commitments and Contingencies j (Notes 10 and 11) S 801.040,410 $ 793.095.044' l i

a i

The accompanying notes are an integral part of these financial statements. -) i ..r,-

SEMINOLE ELECTRIC COOPERATIVE. INC. I CONSOLIDATED STATEMENTS OF REVENUE AND EXPENSES AND PATRONAGE CAPITAL For the years ended December 31. 1992 1991 l l Operating revenue S 456.620.935 $ 451.268.182 Operating expenses: Operation: Fuel 181,087,632 174,237,366 Other production expenses 33,560,549 32,401,570 Purchased power 75,955,980 80,534,654 Transmission 24,996,195 26,795,725. Administrative and general 14,757,758' 16,035,693 Depreciation and amortization 25,998,359 25,706,498-Lease of coal-fired plant 29,755,534 30,851,705 Taxes, primarily property 10,562.056' ~10,464.229 396,674.063 397.027.440 Operating margins before interest charges 59,946,872 54,240,742 Interest expense net of amounts -54.610.600. r capitalized 50.346.546 Operating margins /(deficits) 9,600,326 ( 369,858) Patronage capital credits 58.535 87.367 Net operating margins / (deficits) 9,658,861 '( 282,491) 1 Nonoperating income /(expense): Interest income 5,057,889 5,948,790 Other income / (expense), net (- 725.205) 444.621 Net margins 13,991,545 6,110,920 .j Patronage capital, beginning of year 36,766,995' 131,508,037 '( 851.962) Patronage capital retirements Patronage capital, end of year 50.758.540 36.'766.995' t i The accompanying notes are an. integral part of these. financial statements.

SEMINOLE ELECTRIC COOPERATIVE. INC. CONSOLIDATED STATEMENTS OF CASH FLOWS For the years ended December 31, 1992 1991 i, Cash flows from operating activities: Net margins S 13.991.545 6.110.920 Adjustments to reconcile to cash: Depreciation and amortization 28,174,771 27,773,263 Amortization of deferred gain on sale-leaseback of plant ( 1,415,769) ( 1,415,769) l Lease expense / lease payment difference ( 891,439) ( 891,439) Write off of obsolete inventory 48,670 871,841 Other, net ( 58,535) ( 87,367) i Change in assets and liabilities-Receivables 2,725,992 ( 9,369,523) Inventories 761,479 ( 899,741) i Prepayments and other ( 2,287,360) 394,363 Deferred charges ( 3,861,576) 1,771,853 i Other long-term liabilities ( 1,667,467) ( 1,788,155) Accounts payable 2,366,921 6,226,325 Other accrued liabilities 2,946,256 2,975,467 Deferred credits 588 399.181 Total adjustments 26.842.531 25.960.299 Net cash provided by operating activities 40.834.076 32.071.219 f Cash flows from investing activities: Utility plant (36,210,884) (16,751,706) Long-term investments ( 5.529.206) 392.755 Net cash used in investing activities (41.740.090) (16.358.951) Cash flows from financing activities: ( B51,962) l Payments of patronage capital credits Payments of.long-term debt ( 6,478,916) ('5,812,590) t Capital lease obligations (_J.114.643) ( 993.512) Net cash used in financing activities ( 7.593.559) ( 7.658.064) Net ~ increase /(decrease) in cash and cash equivalents ( 8,499,573) 8,054,204 Cash and cash equivalents -- beginning 75.898.774 67.844.570 Cash and cash equivalents -- ending $ 67.399,201 $ 75.898.774 i i The accompanying notes are an integral part of these financial statements.

r I I t SEMINOLE ELECTRIC COOPERATIVE. INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1 - THE COOPERATIVE: i Seminole Electric Cooperative, Inc. (Seminole) is a generation and transmission cooperative. It is responsible for meeting the electric 1 power and energy needs of its eleven distribution cooperative members operating within the State of Fl orida -. Seminole's rates are i established by its Board of

Trustees, which is composed of representatives from each member cooperative.

Seminole constructed and operates two coal-fired generating I facilities (Seminole Unit No.1 and Unit No. 2) near Palatka, Florida I with approximately 600 megawatts of net output per unit. These units are connected to the Florida bulk power supply grid through Seminole's 230 kV transmission lines and associated f acilities. Both units commenced commercial operation in 1984. Seminole holds a 1.6994% undivided ownership interest in the Crystal River Unit No. 3 (CR3) nuclear power plant operated by Florida Power Corporation. Seminole also owns various transmission facilities connecting individual members to the Florida bulk power grid. In 1989, Acuera Corp. (Acuera), a wholly owned taxable subsidiary, was formed for the primary purpose of acquiring a power plant site for future generation use. Acuera completed the purchase of this site during 1991. The site has. been leased, subject to certain restrictions, to an Independent Power Producer (IPP). The consolidated financial statements include the results of operations and financial position of Seminole and Acuera. All intercompany transactions have been eliminated. 6 i NOTE 2 -

SUMMARY

OF SIGNIFICANT ACCOUNTING POLICIES: l Seminole complies with the Uniform System of Accounts as prescribed. l by the Rural Electrification Administration (REA). In conformance with generally accepted accounting principles, the accounting policies and practices. applied by Seminole in the determination of rates are also employed for financial reporting purposes. j -Utility Plant Utility plant owned by Seminole is stated at original cost. Such cost includes applicable supervisory and overhead cost, plus net-- l interest charged during construction. The amounts of interest ') capitalized during 1992 and 1991 were $1,721,370 and $542,786, respectively. The cost of maintenance and repairs including renewals of minor items of property, is charged to operating expense. The-cost of replacement of depreciable property units, as distinguished )

.i 1

1 -l

l ii -2 i i from minor items, is charged to utility plant. The cost of units replaced or retired, including cost of removal, net of any salvage

value, is charged to accumulated depreciation.

Certain leased transportation equipment is valued at the total net present value of minimum lease payments. OD_eratinq Revenue i Seminole has wholesale power contracts with each of its members, whereby the members must purchase all electric power and energy which the member shall require for its system within the State of Florida from Seminole to the extent that Seminole shall have such power, energy and facilities available. The only exception relates to contracts between several members and the Southeastern Power Administration, which provides less than 2% of the total energy required by all members. Operating revenue consists primarily of sales of electric power and energy by Seminole and a facilities use charge for Seminole's transmission lines serving a single member cooperative. Member revenues include amounts resulting from a fuel and purchased power adjustment clause which provides for billings to reflect increases or decreases in fuel and fuel related purchased power costs. The adjustment factor is based on costs projected by Seminole for a twelve-month period. Any overrecovery or underrecovery of costs plus an interest factor are to be refunded or billed to the members semi-annually. Overrecoveries of $13,111,872 at December 31, 1992 and $10,328,470 at December 31, 1991 are recorded as accrued liabilities until refunded. Included in operating revenue are approximately $434 million of revenue from members for each of.the years ended December 31, 1992 and 1991, of which approximately $16 million and $17 million are included in receivables at December 31, 1992 and 1991, respectively. Deoreciation and Amortization Seminole provides for depreciation on owned utility plant using composite rates applied annually on a straight-line basis that will amortize the original cost of depreciable property over its estimated useful life. The rates for 1992 and 1991 were as follows: 1992 1991 Coal-fired production plant 3.10% 3.10% Transmission plant 2.75% 2.75% General plant 8.07% 7.79% Nuclear production plant 4.49% 4.54% Depreciation expense amounted to $22,157,188 and $21,975,530 for 1992 and 1991, respectively.

-3 Lmprovements to the leased coal-fired plant are amortized over the remaining life of the base lease term. The composite rates were 5.33% and 4.84% for 1992 and 1991, respectively. Amortization of leased assets under capital leases amounted to $1,101,381 and $1,004,011 in 1992 and 1991, respectively. Amortization of Deferred Gain Deferred gain on sale-leaseback of plant is being amortized on a straight-line basis.over the base lease term of 25 years commencing in 1985 and is reflected as a reduction of operating expenses. Deferred Charaes Deferred charges consisted of unamortized debt expense and related prepayment penalties, costs associated with a load management incentive fee program, and other miscellaneous deferred debits. These costs will be recovered primarily through rates over various amortization periods ranging from five to twenty years. Deferred charges also included depreciation and interest.on certain common transmission lines and production facilities incurred prior to commercial operation of Seminole Unit No. 2. The unamortized amounts at December 31, 1992 and 1991 were approximately $9.6 and $11.0 million, respectively. Such deferrals are being recovered in rates charged to members over a ten year period through a phase-in plan. Amortization of these deferred charges included in depreciation and amortization, amounted to approximately $1.4 million for both years 1992 and 1991. Deferred Credits At December 31, 1992 and 1991, deferred credits primarily included. deferred lease expense which represents the dif ference between cash payments and expense recognized on a straight-line basis related to the operating lease of certain generating facilities, and a reserve for CR3 decommissioning costs.

I -4 Cash Equivalents Seminole considers all short-term, highly liquid investments with an original maturity of 3 months or less to be cash equivalents. Reclassifications Certain reclassifications have been nede to the 1991 statements to conform to current classifications. There were no changes in net margins as previously reported. i i NOTE 3 - UTILITY PLANT: -i December 31 'i 1992 1991 ') 1 Owned property: Coal-fired plant S 577,462,205 $ 575,272,856 Transmission plant 89,327,794 89,338,727 General plant 21,764,350 20,980,498 Nuclear plant, including fuel 16.876.918 16.235.212 705,431,267 701,827,293 ? Leased property under capital leases: 39,389,435 Transportation equipment 39,365,058 Leasehold improvements: Coal-fired plant 13.422.153 4.375,342 i 758,218,478. 745,592,070

i Construction work in progress 34.277.627 12,353.374 792.496,105 757.945.444-Accumulated depreciation

~! and amortization (186,838,993) .(166,115,338)- Accumulated amortization of leased assets ( 7,154,946). ( 6,053,565) i of leasehold improvements ( 764.442) i Accumulated amortization _ (' 421.426)- { (194.758.381)- 172,590.329) ( $ 597.737.724 $ 585.355.115 -l 4 -i NOTE 4 - INVESTMENTS: December 31 1992 1991 Investments in associated organizations: National Rural Utilities Cooperative Finance Corporation (CFC): Membership 1,000 1,000 Capital Term Certificates 1,401,516 1,402,544 Subordinated Term Certificates 14,837,221 9,027,503 Patronage Capital Certificates 619,181 1,019,100 National Bank for Cooperatives (CoBank) 203,385 313,982 Other 114.82R 139.158 17.177.131 '$ 11.-903.287 Funds held by trustees-Pollution control bond funds 15,095,359 $ 14,921,898 Nuclear decommissioning trust fund 1.806,841 1.596.372 16.902.200 $ 16.518.270 It is not practicable to estimate the fair value of CFC Capital Term' Certificates due to the nature and maturity of these investments. These. investments are required as a condition of membership:and of loans provided to Seminole by CFC. Of the $1,401,516 carrying amount l at December 31, 1992, $63,307 matures in 2075 and $918,124-matures in 2080. Both of these amounts pay 5% annual interest. Additionally, $364,283 matures in 2017 and pays 3% annual interest-

i and $55,802 bears no interest and amortizes through 2019.

i Investments in CFC Subordinated Term Certificates are required as a condition of guarantees.provided to others by 'CFC on behalf of Seminole and are generally priced at market _ rates atLthe time of issuance. At December 31, 1992 the estimated. fair value of these investments in the amount of approximately $18 million is based on-the current rates offered by CFC for this type of required . investment. At December 31, 1992 the estimated fair,value of funds ? held i by trustees in the amount of. approximately $17 million. is _ based L on: quoted market prices for the securities-held by the trustees. j i ---n-v<me n. ~ >, - r w, -nw

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q p NOTE 5 - LONG-TERM LIABILITIES: Lono-Term Debt December'31 1992 1991 First mortgage notes payable to Federal Financing Bank (FFB), guaranteed by REA, principal due in various installments through 2020, interest at 7.221% to 10.983% 452,716,780 $ 457,142,289 First mortgage notes payable to REA, principal due in various installments through 2019, interest at 5% 5,205,789 5,327,337 Pollution control revenue bonds, payable to the Putnam County Development Authority, guaranteed by CFC, principal due in various installments through 2014, interest at adjustable rates, currently 3.90% and 2.85% 153,450,000 155,300,000. First mortgage notes payable to CFC, principal due in various installments through 2019, interest at adjustable rates, currently 4.875% and 9.50% 7.995.919 8.077.778 619,368,488 .625,847,404 Less current portion ( 7.143,061) ( 6,479,163) $ 612.225,427 $_619,368,241 Interest paid, including that on the above debt, totaled $51,176,891 and $54,130,944 in 1992 and 1991, respectively.. The maturities and annual sinking fund requirements of all'1ong-term debt.for the four years subsequent to December 31,

1993, are presented below:

Annual Maturities Year ending-and Sinking Fund December 31. Recuirements 1994 7,698,093 1995 8,911,894' 1996 9,727,368 1997 $ 10,657,380 R

_ _ _ _ _ _ _ _ _ _ - _ _ _ _ _ _ _ _ - _ _ _ _ _. Substantially all owned assets and leasehold interests are pledged as collateral for the above mentioned debt to the United States of America (REA and FFB) and CFC. At December 31, 1992 the estimated fair value of long-term debt is approximately $671 million. For Seminole's fixed rate long-term debt, f air value is estimated based on the net present value of cash flows of the existing debt, using the current interest rates, applicable to Seminole for new debt of the same remaining maturities, as the discount rate. For that portion of long-term debt that reprices to market rates at intervals of six months or less, the carrying amount, adjusted for the f air value of the interest rate swap agreement described below, has been used as a reasonable estimate of fair value. In December of 1991, Seminole entered into an interest rate swap agreement to manage exposure to changes in interest rates on a portion of its adjustable rate pollution control revenue bonds. This agreement effectively changes Seminole's interest rate exposure on the notional amount of $80 million to a fixed rate of 4.21% for a two year period, without the exchange of the underlying principal amounts. The differential to be paid or received is accrued as the adjustable interest rate changes and is recognized over the life of the agreement as a component of nonoperating income or expense. In the event of nonperformance of the counterparty, which is an event that Seminole does not anticipate, Seminole would then be exposed to the risk of the current market interest rates for the adjustable rate pollution control revenue bonds. Oblications Under Canital Leases At December 31, 1992, Seminole was obligated under certain capital leases of transportation equipment for which base lease terms expire on various dates through 2005. The following is a schedule of future lease payments under these leases together with the present value of the net minimum lease payments as of December 31, 1992: Year ending December 31. i 1993 4,201,373 1994 4,201,373 1995 4,523,511 1996 4,640,640 1997 4,640,640 Later years 33.169.301 Total minimum lease payments 55,376,838 l Less amount representing interest (23.026.849) Present value of minimum lease payments 32,349,989 Less current principal portion ( 1.193.419) $ 31.156,570 i .i..--......i.-.. .m ......,,m

These transportation equipment leases provide for renewals and options to purchase at fair market value at various dates or upon expiration. Payments under these transportation equipment leases totaled $4,204,318 each year for 1992 and 1991. These payments were included as a cost of fuel inventory and expensed based on the tons of coal burned throughout the year. NOTE 6 - NET MARGINS AND EOUITY RESTRICTIONS': j i Under provisions of the REA mortgage, until the total of equities equals or exceeds forty percent of total assets, the distribution of i capital contributed by members is limited generally to twenty-five percent of patronage capital and margins of the next preceding year where, after giving effect to such distribution, the total equity will equal or exceed twenty percent of total assets. Distributions may be made, however, in such amounts as may be approved by REA through waiver of the aforementioned restrictions. Such i distributions to members totaled $851,962 in 1991. t The REA mortgage requires Seminole to design its wholesale rates with j a view towards maintaining, on a calendar year basis, a Times Interest Earned Ratio (as defined) of not less than 1.0 and a Debt Service Coverage Ratio (as defined) of not less than 1.0. An REA stipulation arising from the. sale of tax benefits requires Seminole to design its wholesale rates to provide an annual Times Interest i Earned Ratio (as defined) of not less than 1.05. t In 1992 and 1991, Seminole achieved a Times Interest Earned Ratio (as defined) of 1.23 and 1.10, respectively, and a Debt Service Coverage Ratio (as defined) of 1.4 and 1.3, respectively. NOTE 7 LINES OF CREDIT: Seminole had available lines of credit totaling $100 million of which none were drawn at December 31, 1992. REA policy governs use of these funds. NOTE 8 - INCOME TAXES: I Seminole is a non-exempt cooperative subject to federal and state income taxes and files a consolidated return. As a cooperative, Seminole is entitled to exclude from taxable income those margins; assigned to members as patronage credits. Seminole's ratemaking methods provide that income taxes are recognized as expense and are recovered through rates when currently payable. In addition, income tax credits are accounted for as a

t } reduction of taxes currently payable in the period utilized. Temporary dif ferences in certain items of income and expense for tax and financial reporting purposes result primarily from depreciation, amortization and sale-leaseback of plant. In 1992 and 1991, income tax losses resulted after the application of net operating loss carryforwards and member loss carryforwards, respectively. However, due to the alternative minimum tax (AMT) provisions enacted by the Tax Reform Act of 1986, Seminole was limited in 1992 in using net operating loss carryforwards, which resulted in payment of AMT liabilities for federal purposes in the amount of approximately $280,000. The AMT charged to operations in 1992 will be available as a credit to offset regular income tax in future years, for both book and tax purposes. Since Seminole became taxable in 1981, deferred taxes have not been provided on approximately $211 million of cumulative net temporary differences. Of this amount, approximately $496 million relates to taxable temporary dif ferences and approximately $285 million relates to deductible temporary differences. At December 31, 1992, net operating losses and income tax credits of approximately $211 million and $13 million are available to of fset future taxable income and tax. liabilities, respectively, through 2006 and 2001. In 1991, all of the remaining member loss carryforwards were used. During 1992, the Financial Accounting Standards Board (FASB) issued Statement No. 109, " Accounting for Income Taxes" which is effective beginning in 1993. This statement will require certain changes in. the way Seminole accounts for income taxes, including a requirement to record an asset related to cumulative temporary differences and the establishment of the related income tax liability. Adoption of this statement should result in Seminole recording a deferred tax aaset reflecting deductible temporary differences and loss carryforwards at statutory rates and an income tax liability for taxable temporary differences, each in the amount of approximately $187 million. The adoption of this statement is not expected to have a material effect on the results of operations. Management is aware of certain positions taken by the IRS with respect to examinations of other cooperatives, including issues with -respect to allocation of income and expense. These matters, if adversely resolved and subsequently applied in an' IRS examination of Seminole, could result in a significant tax liability for Seminole. Management believes that its tax returns have been prepared fully in compliance with applicable sections of the Internal Revenue Code and, as such, that no significant amount of liability.would result from such an examination. Accordingly, Seminole has not recorded a e liability related to these issues.

I i i NOTE 9 - EMPLOYEE BENEFITS: Substantially all Seminole employees participate in the National j Rural Electric Cooperative Association (NRECA) Retirement and t Security Program (the Program), a defined benefit pension plan l qualified under Section 401 and tax-exempt under Section 501(a) of i the Internal Revenue Code. Seminole had made annual contributions j to the Program equal to the amounts accrued for pension expense until 'l July 1,1987, when a moratorium on contributions came into effect due to reaching full funding limitation. Accordingly, there was no l pension expense under this plan for 1992 or 1991. In this multiemployer plan, which is available to all member cooperatives of NRECA, the accumulated benefits and plan assets are not determined or allocated separately by individual employer. t In December 1990, the FASB issued Statement No. 106, " Employer's Accounting for Postretirement Benefits Other Than Pensions", which l becomes effective for fiscal years beginning af ter December 15, 1992 for enterprie s in general. Since Seminole is a non-public enterprise aI, sponsors a defined benefit plan with no more than 500 l plan participants in the aggregate, inplementation is required in 1995. Adoption of this statement is not expected to ha.ve a material effect on the financial statements. NOTE 10 - OPERATING LEASES: At December 31, 1992, Seminole was obligated under certain leases of generating facilities and transportation equipment for which base lease terms expire on various dates through 2009. The lease of the generating facilities contains a variable interest rate component that could affect future lease payments. Base rental obligations under these leases are payable as follows: Year ending f December 31. 1993 40,770,213 1994 S 40,770,213 t 1995 40,770,213 1996 40,770,213 1997 40,770,213 Thereafter $ 466,112,388 t These leases provide for renewals and options'to purchase at fair market value at various dates or upon expiration. i Rental payments for these transportation equipment leases totaled. t $4,609,100 each year for 1992 and 1991. These payments were included as a cost of fuel inventory and expensed based on the tons of coal burned throughout the year. l r

NOTE 11 - COMMITMENTS AND CONTINGENCIES: I Seminole is purchasing most of the coal for the plant under long-term l contracts expiring in 1995 and 2010. Contract terms specify minimum l annual purchase commitments, subject to force majeure conditions, and prices, which are subject to adjustment for changes in costs. In addition, Seminole has long-term contracts expiring through 2010 for i transportation of substantially all coal purchases. Contract terms l include a minimum cost as determined by a base quantity of tons j shipped and prices, which are subject to adjustment for changes in costs. Effective October 1991, Seminole entered into a long-term contract for a portion of the coal transportation previously provided under filed tariff. Total charges under these long-term contracts l were approximately $127 million and $106 million in 1992 and 1991, l respectively. In May of

1990, Seminole established an external-Nuclear j

Decommissioning Trust Fund NDTF) in compliance with regulations t prescribed by the Nuclear Regulatory Commission. The fund balance i of approximately $1.8 million represents Seminole's cumulative share of the estimated sinking fund reserve required to decommission CR3. Prospectively, annual cash deposits will be made to the NDTF l representing Seminole's annual share of the projected sinking fund-requirements. These amounts will be recovered from members through I rates and a provision made in current operations each year. Based upon a study completed in 1986 and updated in 1991, Seminole's total share of the projected cost 'of decommissioning is approximately $3.7 i million in 1991 dollars, and decommissioning expenditures are ) ~ expected to occur over a nine year period ending in the year 2023. During

1989, Seminole entered into a

twenty year agreement, i commencing in 1993, with an IPP for the purchase of 295 megawatts of t capacity by Seminole from a generating station to be constructed and operated by the IPP on a site leased from Acuera and, during the initial ten years of the agreement, an additional 145 megawatts of i capacity to be supplied by the IPP from an existing coal-fired generating f acility. Under the terms of the agreement, Seminole will receive this capacity on a first call basis, subject to certain restrictions as to its use. Seminole is obligated to make annual l "take or pay" capacity payments of approximately $35 million over the initial ten years and approximately $21 million over the final ten years of the agreement. e T}}