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Filed by Florida Progress
Corporation Pursuant to Rule 425 under
the Securities Act of 1933
and deemed filed pursuant to Rule 14a-12
of the Securities Exchange Act of 1934
Subject Company: Florida Progress Corporation
Commission File No. 001-08349
Commencing on March 24, 2000, Florida Progress Corporation began
mailing its 1999 Annual Report to Shareholders, which contained the following
letter and related material:
BIGGER. BETTER. STRONGER.
1999 will be remembered as a historic year for Florida Progress Corporation. Our
largest subsidiary, Florida Power Corporation, completed its first century of
service. Generations of employees have created a tradition of commitment that
forms the basis of an ongoing relationship with customers in what continues to
be one of the fastest-growing markets in the country.
We are bigger, better and stronger than ever before, and the proof is in our
1999 achievements. Florida Progress enjoyed considerable financial and
operations successes during the year. Earnings increased significantly. Our
nonregulated businesses posted record results. Florida Power set a new record
for power plant output and performance and added more cost-efficient generating
capacity during the year. And most significant in 1999, we entered into an
agreement to combine Florida Progress with Carolina Power & Light Company in a
transaction designed to offer our shareholders a substantial premium.
As we celebrated our company's 100-year anniversary, our employees and the
communities we serve came together to honor our proud past. One important legacy
of our rich history is momentum. Our financial and operational successes are
mounting -- as we move toward an even more powerful future.
LETTER TO OUR SHAREHOLDERS:
[Picture of Richard Korpan, Florida Progress Chairman, President and Chief]
Executive Officer]
In 1999, Florida Progress Corporation achieved major milestones as we
moved into a position of increasing prominence. The year will be remembered as
historic and outstanding for a number of reasons.
Proud Past
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In 1999, our principal subsidiary, Florida Power Corporation, marked
its 100th year of service. We celebrated with an extensive advertising and
community campaign that reached hundreds of thousands of our customers.
In this historic year, both Florida Power and Electric Fuels
Corporation -- our energy and transportation subsidiary -- celebrated impressive
financial and operational successes. After a hundred years, some companies might
rest on their laurels, but at Florida Progress, we have leveraged the momentum
of our past to make us bigger, better and stronger.
Powerful Future
The growth of our company over the past century has been marked at
times by a series of mergers and acquisitions. On August 22, 1999, our board
made a historic decision to accept an offer to combine Florida Progress with
Carolina Power & Light Company (CP&L). It was an opportunity for us to become
part of a larger, stronger energy company and create one of the most powerful
regional electric and natural gas companies in the Southeast U.S.
The planned combination with CP&L, headquartered in Raleigh, North
Carolina, provides our shareholders with a premium price that recognizes the
outstanding value of our successful company. A joint proxy statement about the
combination will be sent to shareholders of both companies.
A powerful presence in the Southeast U.S.
The combined companies will create the nation's ninth-largest energy
utility based on generating capacity of more than 18,500 megawatts. The new
company will have total revenue of almost $7 billion and serve 2.5 million
electric customers.
Our two companies are a great strategic fit. We both share
complementary visions of how to provide our high-growth markets with reliable,
competitively priced energy and excellent customer service. Together, we are
committed to expanding electric generation capacity in the Southeast U.S. Each
company has announced plans to build additional capacity to meet the future
energy needs of its customers.
Our combination with CP&L is expected to produce more than $100 million
in annual synergies. These synergies will result from operating efficiencies and
the elimination of duplicate corporate and administrative programs and services.
Revenue enhancements also are possible from wholesale marketing opportunities
and generation expansion.
The new company will create a platform for growth and will increase our
competitive position in generation, power marketing and delivery of energy
services. The move fulfills our strategic objective to increase our company's
size and become a leading energy provider, serving some of the fastest-growing
markets in the country.
Earnings per share up 10.7 percent
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Florida Progress reported record earnings in 1999. Earnings per share
climbed to $3.21, a 10.7-percent increase over 1998. This increase is impressive
considering that 1998 was a strong year in which earnings per share were $2.90,
also a 10.7-percent increase, before nonrecurring items, over 1997. Consolidated
earnings were $314.9 million in 1999 on revenues of $3.8 billion, compared with
1998 earnings of $281.7 million on revenues of $3.6 billion.
Our outstanding 1999 financial results were due to the continued strong
improvement in earning from Florida Power and a significant increase in earnings
from Electric Fuels.
At Florida Power, the story was growth -- both in customers and usage.
About 27,000 new retail customers were added during 1999. The number of new
residential customers increased by almost 2 percent, while commercial customers
grew by 3 percent. Total kilowatt-hour sales rose by 3.4 percent over 1998.
Our utility reported 1999 earnings of $264.7 million, or $2.70 per
share, compared with $248.6 million, or $2.56 per share, in 1998.
At Electric Fuels, earnings per share were up about 45 percent over
1998. The company's Energy & Related Services unit contributed to most of the
earnings increase. This resulted from the growing production and sales of
Electric Fuels' newest product: a coal-based synthetic fuel, which generates tax
credits. In 1999, about 2 million tons of synthetic fuel were sold, primarily to
electric utilities. The company's Rail Services unit also posted higher earnings
during the year.
Our energy and transportation subsidiary reported 1999 earnings of
$62.5 million, or $.64 per share, up from $42.3 million, or $.44 per share, in
1998.
Continuing a trend of solid earnings growth
To our shareholders, we continue to deliver on our goal to produce
consistent annual earnings per share growth of 5 percent or better. Fueling our
confidence in 2000 is the forecast of a strong Florida economy, continued sales
growth at Florida Power, and profitable growth opportunities at Electric Fuels.
In the years ahead, we're confident that we can achieve this
shareholder commitment as we combine our operations with CP&L. The new company's
long-term potential is excellent. Both utilities operate in fast-growing service
territories and are building new generation facilities to meet increasing
customer demand. The regulatory climate is constructive, fair and reasonable in
the states served by both utilities.
Our confidence in sustained earnings growth is a key factor used in
setting dividend policy. In 1999, Florida Progress increased the dividends paid
per share -- for the 47th consecutive year -- to $2.18. Over the past several
years, our board has evaluated the company's dividend policy to ensure that our
dividend payout and dividend rate are
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appropriate, given the industry outlook for utilities, our business plan and our
projected earnings growth.
Our policy has been to increase the annual dividend rate by about 2
percent each year while continuing to lower our payout ratio. Under our
agreement with CP&L, we have the flexibility to continue that policy if the
Florida Progress board of directors so decides. Our combination with CP&L is
scheduled to be completed in the fall of 2000, pending shareholder and
regulatory approvals.
1999 stock performance ranks 2nd among S&P electrics
Florida Progress' common stock outperformed most electric utility
stocks in 1999. Utility stocks in general fell in disfavor during the year due
to investor preference for high-growth technology companies and concerns over
higher interest rates.
The Standard & Poor's (S&P) Electrics Index, composed of 29 major
electric utilities, dropped 23.2 percent in 1999, the worst annual performance
since 1974. Many utilities hit 52-week lows in late 1999, but our stock price
benefited from the announcement in August of our agreement to combine our
company with CP&L and strong 1999 operating results. Our share price closed the
year at $42.31, down only 5.6 percent in 1999.
The slide in utility stocks meant that total annual returns -- stock
price appreciation and dividends -- also were down for the year. The S&P
electrics realized an average total return in 1999 of negative 19.4 percent,
while Florida Progress' investment return finished the year at negative .7
percent. This ranked second among all the 29 S&P electrics. On a longer-term
basis, over the past five years, our stock has continued to outperform the S&P
electrics, achieving an average annual total return of 14.2 percent.
We were pleased that S&P placed Florida Progress on its S&P 500 Index,
effective June 21. The S&P 500 Index is widely recognized as a measure of U.S.
stock market performance. Our company was selected from a list of companies
because of a variety of factors, including our size and significance.
Serving Florida for 100 years
In 1999, Florida Power celebrated 100 years of service. The anniversary
provided the opportunity to honor our past by renewing our commitments for the
future. Our anniversary message was simple: you can count on us now and in the
future, just like you could count on us in the past.
We renewed our commitments to shareholders, customers, employees and
communities by establishing specific business objectives. For example, we set a
goal to increase shareholder value and deliver consistent annual earnings per
share growth of 5 percent or
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better. I'm pleased to say that we've already made major progress in that area
in the first year.
Throughout 1999, a series of events and activities were held to focus
attention on Florida Power's 100-year anniversary and our commitments. During
the year, nearly 4,700 past and present employees demonstrated their dedication
to the company's commitments by signing a 32-foot banner, bearing the words
"Count On Us." The banner traveled to company facilities around the state to
raise awareness of the campaign and gain momentum as the company approached its
official anniversary date: July 18, 1999. Anniversary activities will continue
during 2000.
Building momentum to a powerful future
We are proud of our past. In our first century, we evolved a tradition
of service that is the core of a strong relationship between our dedicated
employees and the customers we serve. We have build a company with solid
fundamentals -- a company of outstanding value that has been recognized by
today's competitive market.
We have build momentum -- the kind of momentum that should continue to
grow. You can see it in the outstanding achievements of 1999. And you'll
continue to see it as we move toward an even more powerful future.
/s/ Richard Korpan
Richard Korpan
Chairman, President and Chief Executive Officer
February 7, 2000
1999 HIGHLIGHTS
o Consolidated earnings per share up 10.7 percent
o Florida Power earnings per share up 5.5 percent
o Electric Fuels earnings per share up 45 percent
o Annual dividend increased to $2.18 per share
o Stock performance second among S&P Electrics Index
o Agreed to a combination with CP&L that provides shareholders with a
substantial premium
o Planned combination creates large regional utility with 2.5 million
customers
o Power generation at record-high output and efficiency.
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In connection with the share exchange between CP&L Energy and Florida
Progress, Carolina Power & Light and Florida Progress have filed with the
Securities and Exchange Commission (the "SEC") a preliminary joint proxy
statement/prospectus. CP&L will file a Registration Statement on Form S-4 and
Florida Progress will file a definitive proxy statement each of which will
contain the definitive joint proxy statement/prospectus of CP&L Energy and
Florida Progress in addition to other relevant documents concerning the share
exchange with the SEC. WE URGE INVESTORS TO READ THE DEFINITIVE JOINT PROXY
STATEMENT/PROSPECTUS AND ANY OTHER RELEVANT DOCUMENTS TO BE FILED WITH THE SEC
BECAUSE THEY CONTAIN IMPORTANT INFORMATION. Investors will be able to obtain the
documents free of charge at the SEC's web site, http://www.sec.gov. In addition,
documents filed by Carolina Power & Light and CP&L Energy with the SEC can be
obtained by contacting Carolina Power & Light and CP&L Energy at the following
address and telephone number: Shareholder Relations, 411 Fayetteville Street,
Raleigh, North Carolina 27601, telephone: (800) 662-7232. Documents filed with
the SEC by Florida Progress can be obtained by contacting Florida Progress at
the following address and telephone number: Investor Services, P.O. Box 14042
(BT11B), St. Petersburg, Florida 33733, telephone: (800) 937-2640. READ THE
DEFINITIVE JOINT PROXY STATEMENT/PROSPECTUS CAREFULLY BEFORE MAKING A DECISION
CONCERNING THE SHARE EXCHANGE.
CP&L Energy, its officers, directors, employees and agents may be
soliciting proxies from CP&L Energy shareholders in connection with the share
exchange. Information concerning the participants in the solicitation is set
forth in the preliminary joint proxy statement/prospectus filed by Carolina
Power & Light with the SEC on March 6, 2000.
Florida Progress, its officers, directors, employees and agents may be
soliciting proxies from Florida Progress shareholders in connection with the
share exchange. Information concerning the participants in the solicitation is
set forth in the preliminary joint proxy statement/prospectus filed by Florida
Progress with the SEC on March 6, 2000.
