1

Morgan Stanley13th Annual Global Electricity

and Energy Conference

Peter ScottChief Financial Officer

New YorkMarch 16, 2006

Morgan Stanley13th Annual Global Electricity

and Energy Conference

Peter ScottChief Financial Officer

New YorkMarch 16, 2006

Discussion Topics2005 Accomplishments and 2006 Priorities

Utilities

Progress Ventures

Coal and Synthetic Fuel

Financial Objectives

Plans for Reducing Holding Company Debt

2005 Accomplishments 2005 Accomplishments andand

2006 Priorities2006 Priorities

Discussion Topic

2005 Accomplishments1. Enter 2006 with projected core business EPS growth that supports

dividend growth for 18th consecutive year

2. Sustain record of excelling at the basics – generation performance, T&D reliability, customer satisfaction and employee safety

3. Implement organization and process changes to eliminate $75M to $100M in projected non-fuel O&M growth by end of 2007

4. Reduce leverage and recover stable investment grade rating at the holding company

5. Make progress on IRS tax audit of Earthco synthetic fuel plants

6. Successfully resolve Florida rate case and recovery of storm costs

7. Negotiate a reasonable bargaining unit contract

2005 Regulatory ProceedingsFuel recovery – South Carolina

Fuel recovery – North Carolina

Fuel recovery – Florida

2004 storm cost recovery

2005 PEF rate case

2006 Priorities1. Excel in the fundamentals2. Prepare for future baseload generation capacity3. Sustain earnings growth for 2006 and beyond4. Continue reducing Holding Company debt 5. Stay on track with cost savings objectives6. Successfully resolve Earthco synthetic fuel audits7. Improve Progress Ventures return on investment

UtilitiesUtilities

Discussion Topic

Utilities Overview

Florida

Georgia

North Carolina

South Carolina

9,000 MW capacity1.6M customers

12,500 MW capacity1.4M customers

Carolinas

Florida

Service Area

A Strong Record of Growth

Annual Customers

(in th

ousa

nds)

1,2131,246

1,2761,302

1,325

1,3821,352

1,100

1,150

1,200

1,250

1,300

1,350

1,400

1,450

1999 2000 2001 2002 2003 2004 2005

Annual Customers

(in th

ousa

nds)

1,3771,407

1,4761,511

1,578

1,443

1,548

1,2501,3001,350

1,4001,4501,5001,550

1,6001,650

1999 2000 2001 2002 2003 2004 2005

CGR = 2.4%CGR = 2.2%

Progress Energy Carolinas Progress Energy Florida

Added over 70,000 new customers in 2005

Regulatory UpdateProgress Energy Florida (PEF)

Rate stability through mid-2010Base rate increase upon completion of Hines 4FL legislative session in progress

Progress Energy Carolinas (PEC)NC – rate freeze through 2007SC – no rate action expected

Fuel Clause Filings by State

$315M$40M$255MDec. 31, 2005 deferred balance

YesYes NoMid-year adjustment option?

Jan. 1July 1Oct. 1Effective date of new rates

1/1 – 12/317/1 – 6/3010/1 – 9/30Test period

SeptemberMayJuneFuel filing date

FloridaSouth CarolinaNorth Carolina

Environmental ComplianceNC Clean Smokestacks

Est. total spend: $1.1B - $1.4BExpenditures to date: $294M

Clean Air Interstate Rule (CAIR)PEF Est. total spend: ≅ $1.0B

Clean Air Mercury Rule (CAMR)

Utility Value Drivers

Rate stabilityRate stability ● PEC rate freeze through end of 2007● PEF rate stability through mid-2010

● Added 73,000 new customers during 2005● Increase in electric sales of 2+%

● New contracts at both utilities during 2005● Opportunities for excess generation

Cost management initiativeCost management initiative ● Timing of cost management initiative savings● Realization of benefits

Strong retail revenue growthStrong retail revenue growth

Wholesale opportunitiesWholesale opportunities

Rate base growthRate base growth● New generation at PEC and PEF● Environmental clause at PEF● NCUC to decide on environmental expenditures by 2007

Progress VenturesProgress Ventures

Discussion Topic

Progress Ventures Overview

Competitive Commercial Operations Winchester Gas

325 bcfe proven gas reserves325 bcfe proven gas reserves≅≅ 175 bcfe probable gas 175 bcfe probable gas reservesreserves+/+/-- 25 bcfe annual production25 bcfe annual production

3,100 MW of competitive 3,100 MW of competitive generation in servicegeneration in serviceContractual management/ Contractual management/ scheduling of 2,500 MWs of scheduling of 2,500 MWs of Georgia system generationGeorgia system generationFocus on SoutheastFocus on Southeast

Henry Hub

PV Gas Properties

Pipeline Access

Progress Ventures

Washington

WaltonRowan

Effingham

Monroe

DeSoto

Cooperatives served

History of Natural Gas Properties2000 - Acquired Florida Progress, including Mesa Hydrocarbons

2002 - Acquired Winchester to provide natural hedge for GA contracts ($150M)

2003 - Acquired 190 bcfe of proven reserves from Republic ($170M)

2003 - Sold Mesa Hydrocarbons ($100M)

2004 - Sold North Texas gas assets ($250M)

2005 - Acquired 25 bcfe of proven reserves from Enerquest($50M)

125

30 325

175

0

250

500

12/31/02 12/31/2005

Proved Probable

Creating Value in Natural Gas

Key Points

● Cash flow ≅ capex

● Production = 25± bcfe

● Low risk

Key Points

● Cash flow ≅ capex

● Production = 25± bcfe

● Low risk

Reserves in bcfe

$1.3 Billion value per year-end reserve report

Progress Ventures Portfolio Optimization

0

5

10

15

20

25

2006 2007

Set aside for CCO Hedged Open

2006 hedged position is at prices higher than 2005

In bcfe

+/-

35%

65%

35%

30%

35%

Progress Ventures Generation Three Separate Markets

*Gas/oil capabilitiesService Territories

Plant Site Customer MWs

Rowan* CT Duke Toll (2010) 459

Rowan* CC 225 MW S.T. deals 466

Total ,925

Plant Site Customer MWs

Monroe* CT Georgia EMCs 315

Walton CT Georgia EMCs 460

Effingham CC Georgia EMCs 480

Washington CT Georgia EMCs 600

Total …….1,855

Plant Site Customer MWs

Desoto* CT FPL Toll (2007) 320

Total ,320

Progress Ventures Value Drivers

Valuable reservesValuable reserves ● Increased proven reserves by 74 bcfe in 2005● Plans to drill 70+ new wells in 2006

● 8 bcfe set-aside provides natural hedge for CCO● Hedging most of remaining production at prices

higher than 2005

● Active in Southeast wholesale market● Seeking additional market opportunities

● Opportunity for leverage● Opportunity for selective sales

Conservative risk management

Conservative risk management

● Gas hedges● Gas reserves● Off-peak hedges

Gas production of 25-27 bcfe

Gas production of 25-27 bcfe

Competitive Commercial Operations

Competitive Commercial Operations

Debt freeDebt free

Coal and Synthetic Coal and Synthetic FuelsFuels

Discussion Topic

Synthetic Fuel Audit StatusReceived Technical Advice Memorandum confirming the IRS National Office has determined our Earthco facilities met the placed-in-service criteria:

Removes uncertainty regarding the significant cash flow benefitsAnticipates receiving written confirmation from Field Audit Staff in Q2

As of Dec. 31, $1.25 billion of tax credits generated by Earthco plants

Oil Price Phaseout Scenario

NYMEX WTI prices used as proxy for EIA wellhead price, which historically has been a $5-6 spread

$55$57$59

$61$63$65$67$69

$71$73$75

2006 2007

Ave

rage

Ann

ual N

YMEX

Pric

e

Phaseout begins

Breakeven point

Full phaseout$71.56

$64.67

$58.19

$72.22

$65.26

$58.71

Cash Impact from Utilization of Synthetic Fuel Tax Credits

($70)

($35)

$0

$35

$70

$105

$140

2006 2007 2008 2009 2010 2011

Cash operating losses go

away

Cash operating losses go

away

Increased ability to utilize synthetic fuel credits

Increased ability to utilize synthetic fuel credits

● Increase in operating cash flow post-synthetic fuel production●Unused credits at 12/31/05 ≅ $1.0 billion● Increase in operating cash flow post-synthetic fuel production●Unused credits at 12/31/05 ≅ $1.0 billion

($ in millions)

Plans for 2006Producing minimal quantities in Q1 due to oil prices

Monitoring Tax Reconciliation Bill Establishes the average annual price and phase-out prices based on previous calendar yearProvides opportunity for 12 million tons of production in 2006, if passed

Evaluating plans for other non-core businessesApproved plan to divest coal minesDivested Dixie Fuels in March for $16M net proceeds

Financial ObjectivesFinancial Objectives

Discussion Topic

PGN Financial ObjectivesProvide consistent and sustainable core business EPS growth

3% – normal wholesale5% – with excess wholesale opportunities

Increase return on Progress Ventures investmentsSeek additional electric opportunities in SoutheastContinue development of reserves at East Texas and Louisiana gasproperties

Continue efforts to reduce holding company debtImprove operating cash flowEvaluate strategic alternatives to divest non-core assets

Continue to grow the dividendTarget a long-term payout ratio post 2007 of 70%-75%Maximum payout of 85% of core business earnings post-2007

2006 Projected Ongoing Earnings

$3.15 - $3.35Ongoing EPS*$2.45 - $2.65Core ongoing EPS*

$810Total ongoing earnings175Coal and synthetic fuels (non-core)

$635Total Core(185)Corporate and Other

25Progress Ventures$795Utilities2006

• EPS based on weighted average shares of 250M• See Appendix for discussion of the 2006 ongoing earnings adjustments

($ in millions)

2006 Projected Capital Expenditures

140156Progress Ventures

502PEF CAIR

$1,770$1,366Total Capital Expenditures5017Other

$1,060875Maintenance

$1,580$1,193Total Utilities520318Growth250201Distribution and Transmission

220115New generation

70125Nuclear fuel / decommissioning320235PEC Environmental

$670$515Base capitalUtilities

20062005($ in millions)

2006 Projected Cash Flows

(520)(318)Utility growth cap ex

19517Cash Flow before growth cap ex

$(280)$163Cash flow before debt activities

(190)(219)Ventures growth and other cap ex

100208Equity issuance135475Asset sales

(515)(520)Cash flow after dividend and cap ex

(610)(582)Dividend(1,060)(875)Utility maintenance cap ex$1,865$1,474Operating cash flow20062005($ in millions)

Plans for Reducing Plans for Reducing Holding Company DebtHolding Company Debt

Discussion Topic

Divestitures and Holding Company Debt Reduction

DIVESTITURESUPCOMING MATURITIESDEBT PAYOFFS

• MEMCO Barge

• NCNG

• Mesa

• Railcar, Ltd.

• North Texas Gas

• Progress Rail

• Progress Telecom

• Dixie Fuels

• Lease

• Genco

• Holdco*

$230M

$240M

$900M

• 2007

• 2008

• 2010

• 2011

• QUIPS*

$350M

$400M

$100M

$1,250M

$300M

$1.6 Billion $2.4 Billion$1.4 Billion

* - callable Quarterly Income Preferred Securities; due 2039

Debt Reduction Plan

Complete selected asset sales or monetizationsof ≅ $1.3B by end of 2007

Accomplish in accretive manner to the core business

Payoff or buyback holding company debt

Options to Fund Debt ReductionProgress Telecom…………………..

Dixie Fuels…………………………..

Financial gas hedges at CCO……

Coal mining assets…………………

River terminals……………………..

Merchant plants……………………..

Natural gas properties……………..

Unused synthetic fuel tax credits….

$70M net proceeds

$15M net proceeds

$100M FMV

$60M NBV

$40M NBV

$1.3B NBV

$1.3B per valuation report$1.0B BV

$3.9 Billion

Post-2007 Results of Debt Reduction

Restored balance sheet

Reduced dividend requirement from subsidiaries

Created capacity for greater capital investment at utilities

Increased Core EPS

Made the Parent dividend sustainable

Financing Baseload Construction post-2010(Illustrative Example)

150Capital infusion

$ 500Increase in Utility Equity

(650)Dividend to Parent

$1,000Utility Earnings

($ in millions)

$2,000Cash Available for CapEx

500Incremental Debt

150Capital infusion

(650)Dividend to Parent

$2,000Utility Cash Flow

Key Points

● Maintains appropriate capital structure

● Provides for accretive rate base expansion

Key Points

● Maintains appropriate capital structure

● Provides for accretive rate base expansion

PGN Financial Themes:2006 and BeyondStrengthen financial flexibility and credit quality

Risk reductionHolding company debt reduction

Ensure post-2007 synthetic fuel cash flow used for corporate purposes

Provide visibility of core business strategy and financial plans

Grow Core EPS at 3-5% and sustain dividend growth

Steady Increases for 30 of Past 31 Years

$0.00

$0.50

$1.00

$1.50

$2.00

$2.50

1977

1979

1981

1983

1985

1987

1989

1991

1993

1995

1997

1999

2001

2003

2005

Dividends Paid

(18 years in a row)(18 years in a row)

(Ind.

)

0

2

4

6

8

10

12

14

16

# of

per

iods

out

perfo

rmin

g th

e fiv

e-ye

ar m

ean

A Superior Buy-and-Hold Stock 18 rolling five-year periods (1983 through 2005)

PGNPGN

Peer group includes: AEP, Allegheny, Centerpoint, Cinergy, Con Ed, Constellation, CMS, Dominion, Duke, DTE, Edison International, Entergy, Exelon, FPL, Northeast Utilities, PG&E, PSEG, PPL, Pinnacle West, SCANA, Southern, TECO, TXU, Wisconsin Energy and Xcel

Each bar = one company in peer groupHeight of bar = number of periods exceeding five-year mean return

AppendixAppendix

2005 Utility Fuel Mix

Gas/Oil33%

Coal33%

Nuclear13%

Progress Energy FloridaProgress Energy Florida

Gas/Oil4%

Coal47%

Nuclear42%

Hydro1%

Progress Energy CarolinasProgress Energy Carolinas

PurchasedPower

6%

PurchasedPower21%

Environmental Compliance ProgramsNC Clean Smokestacks

Amortization ranges from $0 - $174M annually

$395M recorded to date; $570M by 2007

Estimated total capital expenditures: $1.1B - $1.4B

$294M spent to date

PEF CAIR

Recovered through Environmental Cost Recovery Clause

11.75% ROE specified in rate settlement agreement

Categorized as growth capital

Estimated cost: ≅ $1.0B

Natural Gas Proven Reserves

247

32529

73 (24)

0

50

100

150

200

250

300

350

400

2004 ProvenReserves

Acquisitions Proved reservesduring year

Production 2005 Provenreserves

Proving up of Natural Gas Reserves

bcfe

Continuing to add value through self-funding drilling program

CCO Net Book Value of Plants

Desoto $125M

GA CT $500MGA CC $275M

Rowan CT $175MRowan CC $200M

$1.3 Billion

Synthetic Fuel and Coal Businesses

• Synthetic fuels• Coal mining• Coal marketing• Terminal operations

Strategic Advantages• Physical assets• Market presence• Operational excellence

Synthetic Fuels OverviewSection 29/45 tax credits

Basic economicsOperating loss on productionTax credit per ton soldTaxes paid at the AMT rate

Production capability up to 16M tons per year

Coal BusinessesDixie Fuels

Divested March 2005NBV: $14 million Net proceeds $16 million

Coal mining operationsPlan to divestNBV: $60-70 million

River terminalsEvaluating optionsNBV: $40 million

2006 Ongoing Earnings Adjustments

Contingent Value Obligation (CVO) Mark-to-Market - In connection with the acquisition of Florida Progress Corporation, Progress Energy issued 98.6 M CVOs. Each CVO represents the right to receive contingent payments based on after-tax cash flows above certain levels of four synthetic fuel facilities purchased by subsidiaries of Florida Progress Corporation in October 1999. The CVOs are debt instruments and, under GAAP, are valued at market value. Unrealized gains and losses from changes in market value are recognized in earnings each quarter. Since changes in the market value of the CVOs do not affect the company’s underlying obligation, management does not consider the adjustment a component of ongoing earnings.

Progress Telecom LLC Discontinued Operations – On January 26, 2006, we announced that Level 3 signed a definitive agreement to acquire Progress Telecom LLC, which is jointly owned by Progress Energy and Odyssey Telecorp, Inc. Closing is expected to occur early in the second quarter of 2006. Closing is subject to customary closing conditions, including receipt of applicable state and federal regulatory approvals. Due to our plans to dispose of these assets, management does not believe this activity is representative of ongoing operations of the company.

Coal Mine Discontinued Operations – On November 14, 2005, our Board of Directors approved a plan to divest of our coal mining operations and, as a result, we have classified the coal mining operations as discontinued operations. Due to our commitment to dispose of these assets, management does not believe this activity is representative of ongoing operations of the company.

Progress Energy’s management uses ongoing earnings per share to evaluate the operations of the company and to establish goals for management and employees. Management believes this presentation is appropriate and enables investors to more accurately compare the company’s ongoing financial performance over the periods presented.

The 2006 earnings guidance of $3.15 to $3.35 per share excludes any impacts from the CVO mark-to-market adjustment and discontinued operations of Progress Telecom LLC and our coal mining operations. Therefore, Progress Energy is not able to provide a corresponding GAAP equivalent for 2006 earnings guidance figures. Reconciling adjustments from GAAP earnings to ongoing earnings are as follows: