10-Q 1 d10q.txt FORM 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2001 ------------- OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ________ to ____________. Commission Exact name of registrants as specified in their charters, state of I.R.S. Employer File Number incorporation, address of principal executive offices, and telephone number Identification Number 1-8349 Florida Progress Corporation 59-2147112 A Florida Corporation 410 South Wilmington Street Raleigh, North Carolina 27601 Telephone (919) 546-6111 1-3274 Florida Power Corporation 59-0247770 A Florida Corporation One Progress Plaza St. Petersburg, Florida 33701 Telephone (727) 820-5151

NONE ----- (Former name, former address and former fiscal year, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X . No . --- --- This combined Form 10-Q is filed separately by two registrants: Florida Progress Corporation and Florida Power Corporation. Information contained herein relating to either individual registrant is filed by such registrant solely on its own behalf. APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. As of July 31, 2001, each registrant had the following shares of common stock outstanding

~~UNITED~~Registrant ~~STATES SECURITIES~~Description ~~AND~~Shares ~~EXCHANGE~~---------- ~~COMMISSION Washington~~----------- ------ Florida Progress Corporation Common Stock, DCwithout ~~20549~~ par value 98,616,658 (all of which were held by Progress Energy, Inc.) Florida Power Corporation Common Stock, without par value 100 (all of which were held by Florida Progress Corporation)

FLORIDA PROGRESS CORPORATION AND FLORIDA POWER CORPORATION FORM 10-Q - For the Quarter Ended June 30, 2001 Glossary of Terms Safe Harbor For Forward-Looking Statements PART I. FINANCIAL INFORMATION Item 1. Financial Statements Florida Progress Corporation ---------------------------- Consolidated Statements of Income Consolidated Balance Sheets Consolidated Statements of Cash Flows Florida Power Corporation ------------------------- Statements of Income Balance Sheets Statements of Cash Flows Notes to Financial Statements Florida Progress Corporation and Florida Power Corporation Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Item 3. Quantitative and Qualitative Disclosures About Market Risk PART II. OTHER INFORMATION Item 1. Legal Proceedings Item 6. Exhibits and Reports on Form 8-K Signatures 2 GLOSSARY OF TERMS The following abbreviations or acronyms used in the text of this combined Form 10-Q are defined below:

~~FORM~~TERM 10DEFINITION -Q --- ---------- AST.......................................Advanced Separation Technologies Btu.......................................British thermal units CVO.......................................Contingent Value Obligation Company or Florida Progress...............Florida Progress Corporation CP&L......................................Carolina Power and Light Company CP&L Energy...............................CP&L Energy, Inc. CR3.......................................Florida Power's nuclear generating plant, Crystal River Unit No. 3 DOE.......................................United States Department of Energy Electric Fuels............................Electric Fuels Corporation EPA.......................................United States Environmental Protection Agency Energy Ventures...........................Progress Energy Ventures, Inc. FASB......................................Financial Accounting Standards Board FDEP......................................Florida Department of Environmental Protection FERC......................................Federal Energy Regulatory Commission Florida Power or the utility..............Florida Power Corporation Florida Progress or the Company...........Florida Progress Corporation FPSC......................................Florida Public Service Commission Funding Corp..............................Florida Progress Funding Corporation IRS.......................................Internal Revenue Service MEMCO.....................................MEMCO Barge Line, Inc. MGP.......................................Manufactured Gas Plant MW........................................megawatts NEIL......................................Nuclear Electric Insurance Limited NRC.......................................United States Nuclear Regulatory Commission PLR.......................................Private Letter Ruling Preferred Securities......................7.10% Cumulative Quarterly Income Preferred Securities, Series A, of FPC Capital I, fully and unconditionally guaranteed by Florida Progress Preferred Stock...........................Florida Power Cumulative Preferred Stock, $100 par value Progress Capital..........................Progress Capital Holdings, Inc. Progress Energy...........................Progress Energy, Inc. Progress Rail.............................Progress Rail Services Corporation Progress Telecom..........................Progress Telecommunications Corporation PRP.......................................potentially responsible party, as defined in CERCLA PUHCA.....................................Public Utility Holding Company Act of 1935, as amended QFs.......................................Qualifying facilities RTO.......................................Regional Transmission Organization SEC.......................................United States Securities and Exchange Commission Section 29................................Section 29 of the Internal Revenue Service Code SFAS......................................Statements of Financial Accounting Standards the Trust.................................FPC Capital I

3 SAFE HARBOR FOR FORWARD-LOOKING STATEMENTS The matters discussed throughout this Form 10-Q that are not historical facts are forward-looking and, accordingly, involve estimates, projections, goals, forecasts, assumptions, risks and uncertainties that could cause actual results or outcomes to differ materially from those expressed in the forward-looking statements. In addition, forward-looking statements are discussed in "Management's Discussion and Analysis of Financial Condition and Results of Operations" including, but not limited to, statements under the sub-heading "Other Matters" concerning synthetic fuel tax credits and regulatory developments. Any forward-looking statement speaks only as of the date on which such statement is made, and the Company undertakes no obligation to update any forward-looking statement or statements to reflect events or circumstances after the date on which such statement is made. Examples of factors that you should consider with respect to any forward-looking statements made throughout this document include, but are not limited to, the following: governmental policies and regulatory actions (including those of the Federal Energy Regulatory Commission, the Environmental Protection Agency, the Nuclear Regulatory Commission, the Department of Energy, the Securities and Exchange Commission under the Public Utility Holding Company Act of 1935, as amended, the Florida Public Service Commission), particularly legislative and regulatory initiatives that may impact the speed and degree of the restructuring of the electricity industry and the results of negotiations related to the expiration of Florida Power's rate stipulation; the outcome of legal and administrative proceedings before our courts and principal regulators; risks associated with operating nuclear power facilities, availability of nuclear waste storage facilities, and nuclear decommissioning costs; changes in the economy of areas served by Florida Progress; the extent to which we are able to obtain adequate and timely rate recovery of costs, including potential stranded costs arising from the restructuring of the electricity industry; weather conditions and catastrophic weather-related damage; general industry trends, realization of cost savings related to synergies resulting from the acquisition by Progress Energy, increased competition from energy and gas suppliers, and market demand for energy; inflation and capital market conditions; the success of our direct and indirect subsidiaries; the extent to which we are able to use tax credits associated with the operations of the synthetic fuel facilities; and unanticipated changes in operating expenses and capital expenditures. All such factors are difficult to predict, contain uncertainties that may materially affect actual results, and may be beyond the control of the Company. New factors emerge from time to time, and it is not possible for management to predict all such factors, nor can it assess the effect of each such factor on the Company. 4 PART I. FINANCIAL INFORMATION Item 1. FINANCIAL STATEMENTS ----------------------------

~~[X]~~CONSOLIDATED ~~QUARTERLY~~STATEMENTS ~~REPORT~~of ~~PURSUANT~~INCOME TO--------------------------------- ~~SECTION~~Florida 13Progress ORCorporation 15Three Months Ended Six Months Ended June 30, June 30, (dIn thousands) OF2001 ~~THE~~2000 ~~SECURITIES~~2001 ~~EXCHANGE~~2000 ~~ACT~~------------------------------------------------------------------------------------------------------------------------------------ OFOperating ~~1934~~Revenues Electric $ 783,660 $ 693,336 $ 1,594,133 $ 1,318,645 Diversified businesses 349,988 349,649 684,426 643,274 ------------------------------------------------------------------------------------------------------------------------------------ Total Operating Revenues 1,133,648 1,042,985 2,278,559 1,961,919 ------------------------------------------------------------------------------------------------------------------------------------ Operating Expenses Fuel used in electric generation 220,616 146,974 437,003 285,185 Purchased power 126,603 120,267 252,222 223,392 Operations and maintenance 119,815 124,694 230,681 237,897 Depreciation and amortization 94,646 92,162 246,714 177,823 Taxes other than on income 57,076 52,770 117,185 105,903 Diversified businesses 384,772 359,498 735,369 648,036 ------------------------------------------------------------------------------------------------------------------------------------ Total Operating Expenses 1,003,528 896,365 2,019,174 1,678,236 ------------------------------------------------------------------------------------------------------------------------------------ Operating Income 130,120 146,620 259,385 283,683 ------------------------------------------------------------------------------------------------------------------------------------ Other Income (Expense) Interest income 738 163 777 329 Other, net (5,940) 1,360 (10,980) (2,209) ------------------------------------------------------------------------------------------------------------------------------------ Total Other Income (Expense) (5,202) 1,523 (10,203) (1,880) ------------------------------------------------------------------------------------------------------------------------------------ Income before Interest Charges and Income Taxes 124,918 148,143 249,182 281,803 ------------------------------------------------------------------------------------------------------------------------------------ Interest Charges Long-term debt 36,896 41,764 77,556 80,461 Other interest charges 9,342 11,688 19,204 23,316 Allowance for borrowed funds used during construction (111) (470) (204) (870) ------------------------------------------------------------------------------------------------------------------------------------ Total Interest Charges, Net 46,127 52,982 96,556 102,907 ------------------------------------------------------------------------------------------------------------------------------------ Income from Continuing Operations before Income Taxes 78,791 95,161 152,626 178,896 Income Taxes (Benefit) (23,109) (11,338) (24,899) (2,760) ------------------------------------------------------------------------------------------------------------------------------------ Income from Continuing Operations 101,900 106,499 177,525 181,656 Discontinued Operations (Note 3) : Income from discontinued operations (net of applicable income tax expense of $1,481 and $2,157 for the three months ended and $1,848 and $3,030 for the six months ended June 30, 2001 and 2000, respectively) 2,319 3,488 2,682 4,786 ------------------------------------------------------------------------------------------------------------------------------------ Estimated loss on disposal of discontinued operations, including provision of $5,468 for pre-tax operating income during phase-out period, (net of applicable income tax expense of $1,231) (14,408) (14,408) ------------------------------------------------------------------------------------------------------------------------------------ Net Income $ 89,811 $ 109,987 $ 165,799 $ 186,442 ====================================================================================================================================

See Notes to financial statements. 5

~~For~~CONSOLIDATED ~~the~~BALANCE ~~Quarterly~~SHEETS ~~Period~~--------------------------- ~~Ended~~Florida ~~September~~ Progress Corporation (In thousands) June 30, December 31, Assets 2001 2000 ---------------------------------------------------------------------------------------------------------------------- Utility Plant Electric utility plant in service $ 7,057,058 $ 6,998,135 Accumulated depreciation (3,850,786) (3,701,975) ---------------------------------------------------------------------------------------------------------------------- Utility plant in service, net 3,206,272 3,296,160 Held for future use 8,274 8,274 Construction work in progress 179,703 124,988 Nuclear fuel, net of amortization 62,395 39,879 ---------------------------------------------------------------------------------------------------------------------- Total Utility Plant, Net 3,456,644 3,469,301 ---------------------------------------------------------------------------------------------------------------------- Current Assets Cash and cash equivalents 18,057 24,200 Accounts receivable 492,639 482,270 Accounts receivable-affiliates 21,162 507 Taxes receivable 38 16,363 Deferred income taxes - 39,576 Inventory 442,166 371,919 Deferred fuel cost 86,212 90,434 Prepayments 12,648 23,027 Net assets of discontinued operations 48,047 69,642 Other current assets 26,322 25,251 ---------------------------------------------------------------------------------------------------------------------- Total Current Assets 1,147,291 1,143,189 ---------------------------------------------------------------------------------------------------------------------- Deferred Debits and Other Assets Income taxes recoverable through future rates 23,258 19,689 Deferred purchased power contract termination costs 148,757 226,656 Unamortized debt expense 18,575 19,128 Nuclear decommissioning trust funds 404,279 400,719 Diversified business property, net 679,860 666,360 Miscellaneous other property and investments 157,542 181,569 Goodwill, net 129,323 113,152 Other assets and deferred debits 257,499 252,821 ---------------------------------------------------------------------------------------------------------------------- Total Deferred Debits and Other Assets 1,819,093 1,880,094 ---------------------------------------------------------------------------------------------------------------------- Total Assets $ 6,423,028 $ 6,492,584 ====================================================================================================================== Capitalization and Liabilities ---------------------------------------------------------------------------------------------------------------------- Capitalization ---------------------------------------------------------------------------------------------------------------------- Common stock $ 1,352,346 $ 1,318,309 Retained earnings 727,253 670,679 Accumulated other comprehensive loss (1,707) (1,407) Preferred stock of subsidiaries-not subject to mandatory redemption 33,497 33,497 Long-term debt, net 2,221,153 2,276,416 ---------------------------------------------------------------------------------------------------------------------- Total Capitalization 4,332,542 4,297,494 ---------------------------------------------------------------------------------------------------------------------- Current Liabilities Current portion of long-term debt 209,550 190,466 Accounts payable 303,580 352,606 Accounts payable-affiliates 35,597 48 Interest accrued 63,000 64,118 Short-term obligations 302,049 467,292 Advances from parent 192,770 45,180 Other current liabilities 306,937 308,418 ---------------------------------------------------------------------------------------------------------------------- Total Current Liabilities 1,413,483 1,428,128 ---------------------------------------------------------------------------------------------------------------------- Deferred Credits and Other Liabilities Accumulated deferred income taxes 313,766 302,029 Accumulated deferred investment tax credits 58,273 62,160 Other liabilities and deferred credits 304,964 402,773 ---------------------------------------------------------------------------------------------------------------------- Total Deferred Credits and Other Liabilities 677,003 766,962 ---------------------------------------------------------------------------------------------------------------------- Commitments and Contingencies (Note 9) ---------------------------------------------------------------------------------------------------------------------- Total Capitalization and Liabilities $ 6,423,028 $ 6,492,584 ======================================================================================================================

See Notes to financial statements. 6

OR CONSOLIDATED STATEMENTS of CASH FLOWS ------------------------------------- Florida Progress Corporation Six Months Ended June 30, (In thousands) 2001 2000 ----------------------------------------------------------------------------------------------------------------------- Operating Activities: Net income $ 165,799 $ 186,442 Adjustments to reconcile net income to net cash provided by operating activities: Income from discontinued operations (2,682) (4,786) Estimated loss on disposal of discontinued operations 14,408 - Depreciation and amortization 250,972 194,485 Deferred income taxes and investment tax credits, net 22,518 (7,692) Deferred fuel cost (credit) 4,222 (58,702) Changes in working capital, net of effects from sale or acquisition of business Net increase in accounts receivable (26,771) (76,177) Net increase in inventories (84,989) (50,189) Net (increase) decrease in prepaids and other current assets 9,353 (22,819) Net decrease in accounts payable (8,211) (22,363) Net increase in other current liabilities 178,280 20,533 Other operating activities (37,789) 56,919 ----------------------------------------------------------------------------------------------------------------------- Net Cash Provided by Operating Activities 485,110 215,651 ----------------------------------------------------------------------------------------------------------------------- Investing Activities: Property additions (121,701) (109,943) Nuclear fuel additions (33,058) - Proceeds from sale of asset 5,532 - Other investing activities (62,422) (86,451) ----------------------------------------------------------------------------------------------------------------------- Net Cash Used in Investing Activities (211,649) (196,394) ----------------------------------------------------------------------------------------------------------------------- Financing Activities: Proceeds from issuance of long-term debt 87 - Net increase (decrease) in short-term indebtedness (165,243) 89,349 Retirement of long-term debt (36,429) (1,181) Equity contribution from parent 33,466 - Dividends paid to parent (109,224) - Dividends paid on common stock - (109,461) Other financing activities (2,244) 1,862 ----------------------------------------------------------------------------------------------------------------------- Net Cash Provided Used in Financing Activities (279,587) (19,431) ----------------------------------------------------------------------------------------------------------------------- Cash Provided by (Used in) Discontinued Operations (17) 14 ----------------------------------------------------------------------------------------------------------------------- Net Decrease in Cash and Cash Equivalents (6,143) (160) ----------------------------------------------------------------------------------------------------------------------- Cash and Cash Equivalents at Beginning of the Period 24,200 9,587 ----------------------------------------------------------------------------------------------------------------------- Cash and Cash Equivalents at End of Period $ 18,057 $ 9,427 ======================================================================================================================= Supplemental Disclosures of Cash Flow Information Cash paid (received) during the period - interest (net of amount capitalized) $ 97,659 $ 102,100 income taxes (net of refunds) $ (86,670) $ 63,100

See Notes to financial statements. 7

[STATEMENTS ]of ~~TRANSITION~~INCOME ~~REPORT~~Florida ~~PURSUANT~~Power TOCorporation ~~SECTION~~Three 13Months OREnded 15Six Months Ended June 30, June 30, (dIn thousands) OF2001 ~~THE~~2000 ~~SECURITIES~~2001 ~~EXCHANGE~~2000 ~~ACT~~------------------------------------------------------------------------------------------------------------------------------------ OFOperating ~~1934~~Revenues Electric $ 783,660 $ 693,336 $ 1,594,133 $ 1,318,645 Operating Expenses Fuel used in electric generation 220,616 146,974 437,003 285,185 Purchased power 126,603 120,267 252,222 223,392 Operation and maintenance 119,815 124,694 230,681 237,897 Depreciation and amortization 94,646 92,161 246,714 177,824 Taxes other than on income 57,076 52,770 117,185 105,903 ------------------------------------------------------------------------------------------------------------------------------------ Total Operating Expenses 618,756 536,866 1,283,805 1,030,201 ------------------------------------------------------------------------------------------------------------------------------------ Operating Income 164,904 156,470 310,328 288,444 ------------------------------------------------------------------------------------------------------------------------------------ Other Income (Expense) Interest income 739 163 777 329 Other, net (3,187) 2,350 (4,941) 2,447 ------------------------------------------------------------------------------------------------------------------------------------ Total Other Income (Expense) (2,448) 2,513 (4,164) 2,776 ------------------------------------------------------------------------------------------------------------------------------------ Income before Interest Charges and Income Taxes 162,456 158,983 306,164 291,220 ------------------------------------------------------------------------------------------------------------------------------------ Interest Charges Long-term debt 23,928 26,108 48,479 52,000 Other interest charges 4,017 6,363 8,554 12,666 Allowance for borrowed funds used during construction (111) (470) (204) (871) ------------------------------------------------------------------------------------------------------------------------------------ Total Interest Charges, Net 27,834 32,001 56,829 63,795 ------------------------------------------------------------------------------------------------------------------------------------ Income before Income Taxes 134,622 126,982 249,335 227,425 Income Taxes 49,933 47,122 92,662 83,785 ------------------------------------------------------------------------------------------------------------------------------------ Net Income 84,689 79,860 156,673 143,640 Dividends on Preferred Stock 378 378 756 756 ------------------------------------------------------------------------------------------------------------------------------------ Earnings for Common Stock $ 84,311 $ 79,482 $ 155,917 $ 142,884 ====================================================================================================================================

See Notes to financial statements. 8

~~For~~BALANCE ~~the~~SHEETS ~~transition~~-------------- ~~period~~Florida ~~from~~Power ~~_______~~Corporation (In thousands) June 30, December 31, Assets 2001 2000 ---------------------------------------------------------------------------------------------------------------------- Utility Plant Electric utility plant in service $ 7,057,058 $ 6,998,135 Accumulated depreciation (3,850,786) (3,701,975) ---------------------------------------------------------------------------------------------------------------------- Utility plant in service, net 3,206,272 3,296,160 Held for future use 8,274 8,274 Construction work in progress 179,703 124,988 Nuclear fuel, net of amortization 62,395 39,879 ---------------------------------------------------------------------------------------------------------------------- Total Utility Plant, Net 3,456,644 3,469,301 ---------------------------------------------------------------------------------------------------------------------- Current Assets Cash and cash equivalents 7,625 3,380 Accounts receivable 308,147 289,237 Accounts receivable-affiliates 18,111 38,729 Advances to ~~_______~~ parent 20,801 - Deferred income taxes - 39,576 Inventory 176,925 139,116 Deferred fuel cost 86,212 90,434 Prepayments 3,327 9,097 Other current assets 79 - ---------------------------------------------------------------------------------------------------------------------- Total Current Assets 621,227 609,569 ---------------------------------------------------------------------------------------------------------------------- Deferred Debits and Other Assets Income taxes recoverable through future rates 23,258 19,689 Deferred purchased power contract termination costs 148,757 226,656 Unamortized debt expense 9,210 9,526 Nuclear decommissioning trust funds 404,279 400,719 Miscellaneous other property and investments 49,216 54,816 Other assets and deferred debits 213,394 187,763 ---------------------------------------------------------------------------------------------------------------------- Total Deferred Debits and Other Assets 848,114 899,169 ---------------------------------------------------------------------------------------------------------------------- Total Assets $ 4,925,985 $ 4,978,039 ====================================================================================================================== Capitalization and Liabilities ---------------------------------------------------------------------------------------------------------------------- Capitalization ---------------------------------------------------------------------------------------------------------------------- Common stock $ 1,075,414 $ 1,075,414 Retained earnings 936,307 889,614 Preferred stock of subsidiaries-not subject to mandatory redemption 33,497 33,497 Long-term debt, net 1,396,278 1,397,116 ---------------------------------------------------------------------------------------------------------------------- Total Capitalization 3,441,496 3,395,641 ---------------------------------------------------------------------------------------------------------------------- Current Liabilities Current portion of long-term debt 82,000 82,000 Accounts payable 168,634 170,126 Accounts payable-affiliates 57,506 39,526 Taxes accrued 64,371 4,401 Interest accrued 44,427 47,117 Advances from parent - 20,180 Short-term obligations 117,600 192,530 Other current liabilities 255,402 258,633 ---------------------------------------------------------------------------------------------------------------------- Total Current Liabilities 789,940 814,513 ---------------------------------------------------------------------------------------------------------------------- Deferred Credits and Other Liabilities Accumulated deferred income taxes 379,000 387,901 Accumulated deferred investment tax credits 57,751 61,626 Other liabilities and deferred credits 257,798 318,358 ---------------------------------------------------------------------------------------------------------------------- Total Deferred Credits and Other Liabilities 694,549 767,885 ---------------------------------------------------------------------------------------------------------------------- Commitments and Contingencies (Note 8) ---------------------------------------------------------------------------------------------------------------------- Total Capitalization and Liabilities $ 4,925,985 $ 4,978,039 ======================================================================================================================

See Notes to financial statements. 9

	Exact name of Registrant as specified in its	I.R.S. Employer
Commission File	charter, state of incorporation, address of	Identification
No.	principal executive offices, telephone	Number
1-8349	FLORIDA PROGRESS CORPORATION A Florida Corporation One Progress Plaza St. Petersburg, Florida 33701 Telephone (727) 824-6400	59-2147112
1-3274	FLORIDA POWER CORPORATION A Florida Corporation One Progress Plaza St. Petersburg, Florida 33701 Telephone (727) 820-5151	59-0247770

See Notes to financial statements. 10 FLORIDA PROGRESS CORPORATION AND FLORIDA POWER CORPORATION NOTES TO FINANCIAL STATEMENTS NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES General. Florida Progress Corporation (the Company or Florida Progress) is a ------- holding company under the Public Utility Holding Company Act of 1935 (PUHCA). The Company became subject to the regulations of PUHCA when it was acquired by CP&L Energy, Inc. on November 30, 2000 (See Note 2). CP&L Energy, Inc. subsequently changed its name to Progress Energy, Inc. (Progress Energy or the Parent). Florida Progress' two primary subsidiaries are Florida Power Corporation (Florida Power) and Electric Fuels Corporation (Electric Fuels). Florida Power is a regulated public utility engaged in the generation, transmission, distribution and sale of electricity in portions of Florida. Florida Power is regulated by the Florida Public Service Commission (FPSC) and the Federal Energy Regulatory Commission (FERC). Electric Fuels' Rail Services, Inland Marine Transportation and the non-Florida portion of its Energy & Related Services operations report their results one-month in arrears. Basis of Presentation. These financial statements have been prepared in --------------------- accordance with accounting principles generally accepted in the United States of America (generally accepted accounting principles) for interim financial information and with the instructions to Form 10-Q and Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. Because the accompanying consolidated interim financial statements do not include all of the information and footnotes required by generally accepted accounting principles, they should be read in conjunction with the audited financial statements for the period ended December 31, 2000 and notes thereto included in Florida Progress' and Florida Power's Form 10-K for the year ended December 31, 2000. The amounts included in the consolidated interim financial statements are unaudited but, in the opinion of management, reflect all adjustments necessary to fairly present Florida Progress' and Florida Power's financial position and results of operations for the interim periods. Due to seasonal weather variations and the timing of outages of electric generating units, the results of operations for interim periods are not necessarily indicative of amounts expected for the entire year. Certain reclassifications have been made to prior-year amounts to conform to the current year's presentation. The financial statements include the financial results of the Company and its majority-owned operations. All significant intercompany balances and transactions have been eliminated. Investments in 20% to 50%-owned joint ventures are accounted for using the equity method. In preparing financial statements that conform with generally accepted accounting principles, management must make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and amounts of revenues and expenses reflected during the reporting period. Actual results could differ from those estimates. NOTE 2. ACQUISITION BY PROGRESS ENERGY, INC. On November 30, 2000, Progress Energy acquired all of the outstanding shares of Florida Progress' common stock in accordance with the Amended and Restated Plan of Exchange, including the related Plan of Share Exchange, dated as of August 22, 1999, as amended and restated as of March 3, 2000, among CP&L Energy, Florida Progress and Carolina Power & Light Company (CP&L). Florida Progress shareholders received $54.00 in cash or shares of Progress Energy common stock having a value of $54.00, subject to proration, and one contingent value obligation (CVO) in exchange for each share of Florida Progress common stock. The exchange ratio for the shares of Progress Energy common stock issued to Florida Progress shareholders was 1.3473. Each CVO represents the right to receive contingent payments based upon the net after-tax cash flow to Progress Energy generated by four synthetic fuel facilities purchased by subsidiaries of Florida Progress in 1999. The acquisition was accounted for by Progress Energy using the purchase method of accounting; however, due to the significance of the public debt and preferred securities of the Company and Florida Power, the acquisition cost was not pushed down to the Company's separate financial statements or Florida Power's. In connection with the acquisition of the Company by Progress Energy, the Company began the implementation of a plan to combine operations with Progress Energy. In the fourth quarter 2000, the Company recorded executive involuntary 11 termination costs of $24.5 million and non-executive involuntary termination costs of $41.8 million. Substantially all of the executive termination expense was attributable to lump-sum severance costs paid in December 2000. The second quarter 2001 activity for the non-executive termination costs is detailed in the table below: Non-Executive In millions Termination Costs ----------------- Balance at March 31, 2001 $ 30.4 Payments (2.4) ---------------------- Balance at June 30, 2001 $ 28.0 ====================== The Company completed the implementation phase of the non-executive plan in June 2001 and expects to finalize the plan by the end of 2001. The majority of the related severance payments are expected to occur in 2001 with the remaining payments occurring through 2003. The Company expects additional termination effects related to pension and postretirement benefit plan curtailments in 2001. NOTE 3. DISCONTINUED OPERATIONS On July 23, 2001, Progress Energy announced the disposition of the Inland Marine Transportation segment of the Company, which is operated by MEMCO Barge Line, Inc. Inland Marine provides transportation of coal, agricultural and other dry-bulk commodities as well as fleet management services. Progress Energy has entered into a contract to sell MEMCO Barge Line, Inc., to AEP Resources, Inc., a wholly-owned subsidiary of American Electric Power. The purchase price for MEMCO is $270 million, of which approximately $210 million will be used for the early termination of certain off balance sheet arrangements for assets currently leased by MEMCO. The results of operations for all periods presented have been restated for the discontinued operations of the Inland Marine Transportation segment. The net income of these operations for the three and six months ended June 30, 2001 and 2000, is included in the consolidated statements of income under Discontinued Operations. Revenues from such operations were $45.9 million and $48.9 million for the three months ended June 30, 2001 and 2000, respectively, and $84.2 million and $91.1 million for the six months ended June 30, 2001 and 2000, respectively. An estimated loss on disposal of approximately $14.4 million has been recorded until the disposition of the segment is complete and the actual loss can be determined. The transaction is expected to close by the end of September 2001. The net assets relating to the disposition have been segregated on the consolidated balance sheets. A detail of these net assets as of each balance sheet date is detailed in the table below: In millions June 30, 2001 December 31, 2000 ---------------- ------------------- Current assets $ 27.2 $ 28.6 Non-current assets 72.0 75.0 Current liabilities (20.9) (17.3) Non-current liabilities (15.9) (16.7) Provision for loss on disposal (14.4) - ---------------- ------------------- $ 48.0 $ 69.6 ================ =================== NOTE 4. FINANCIAL INFORMATION BY BUSINESS SEGMENT The Company's principal business segment is Florida Power, an electric utility engaged in the generation, purchase, transmission, distribution and sale of electricity primarily in Florida. The other reportable business segments are Electric Fuels' Energy & Related Services and Rail Services. Electric Fuels' Inland Marine Transportation unit is no longer a reportable segment due to the pending disposition of these operations (See Note 3). Energy & Related Services includes coal and synthetic fuel operations, natural gas production and sales, river terminal services and off-shore marine transportation. Rail Services' operations include railcar repair, rail parts reconditioning and sales, railcar leasing and sales, providing rail and track material, and scrap metal recycling. The other category consists primarily of Progress Telecom, the Company's telecommunications subsidiary, the Company's investment in FPC Capital Trust, which holds the Preferred Securities, the holding company, Florida Progress Corporation and elimination entries. Progress Telecom markets wholesale fiber-optic based capacity service in the Southeastern United States and also markets wireless structure attachments to wireless communication companies and governmental entities. Florida Progress allocates a portion of its operating expenses to business segments. 12 Financial data for business segments for the periods covered in this Form 10-Q are presented in the table below:

~~Indicate~~Energy byand ~~check~~Related ~~mark~~Rail ~~whether~~(In ~~each~~thousands) ~~registrant~~Utility (Services Services Other Consolidated ------------------------------------------------------------------------------------------------------ Three months ended June 30, 2001: Revenues $ 783,660 $ 91,800 $ 225,861 $32,327 $1,133,648 Intersegment revenues -- 111,896 541 (112,437) ~~has~~ ~~filed~~-- ~~all~~Income ~~reports required~~(loss) tofrom becontinuing ~~filed~~operations by84,311 ~~Section 13~~38,242 or(9,690) 15(d10,963) of101,900 ~~the~~Total ~~Securities~~assets ~~Exchange~~4,925,985 ~~Act~~438,526 ~~of 1934~~802,536 ~~during~~255,981 ~~the~~6,423,028 ~~preceding~~====================================================================================================== 12 Energy and Related Rail Utility Services Services Other Consolidated ------------------------------------------------------------------------------------------------------ Three months ended June 30, 2000: Revenues $ 693,336 $ 59,699 $ 284,394 $5,556 $1,042,985 Intersegment revenues -- 66,434 327 (or66,761) ~~for~~-- ~~such~~Income ~~shorter~~(loss) ~~period~~from ~~that~~continuing ~~the registrant~~operations ~~was~~79,482 ~~required~~21,873 to1,909 ~~file~~3,235 ~~such~~106,499 ~~reports~~Total assets 4,895,026 579,393 875,544 158,100 6,508,063 ====================================================================================================== Energy and Related Rail Utility Services Services Other Consolidated ------------------------------------------------------------------------------------------------------ Six months ended June 30, 2001: Revenues $1,594,133 $ 176,488 $ 450,026 $57,912 $2,278,559 Intersegment revenues -- 192,412 578 (192,990) -- Income (loss) from continuing operations 155,917 67,423 (11,788) (34,027) 177,525 Total assets 4,925,985 438,526 802,536 255,981 6,423,028 ====================================================================================================== Energy and Related Rail Utility Services Services Other Consolidated ------------------------------------------------------------------------------------------------------ Six months ended June 30, 2000: Revenues $1,318,645 $ 108,377 $ 525,004 $9,893 $1,961,919 Intersegment revenues -- 130,980 327 (2131,307) ~~has~~ ~~been~~-- ~~subject~~Income to(loss) ~~such filing~~from ~~requirements~~continuing ~~for~~operations ~~the~~142,884 ~~past~~34,507 ~~90 days.~~2,847 ~~Yes~~1,418 ~~[X]~~181,656 NoTotal ~~[ ]~~ assets 4,895,026 579,393 875,544 158,100 6,508,063 ======================================================================================================

NOTE 5. IMPACT OF NEW ACCOUNTING STANDARDS Effective January 1, 2001, the Company adopted Statement of Financial Accounting Standards (SFAS) No. 133, "Accounting for Derivative Instruments and Hedging Activities", as amended by SFAS No. 138. SFAS No. 133, as amended, establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities. SFAS No. 133 requires that an entity recognize all 13 derivatives as assets or liabilities in the consolidated balance sheet and measure those instruments at fair value. The adoption of SFAS No. 133 did not have any effect on the Company's financial statements. During the second quarter of 2001, the FASB issued an interpretation of SFAS No. 133 indicating that options, in general, cannot qualify for the normal purchases and sales exception, but provided an exception that allows certain electricity contracts, including certain capacity-energy contracts, to be excluded from the mark-to-market requirements of SFAS No. 133. These interpretations are effective July 1, 2001. The Company is continuing to review contracts to determine whether they meet the criteria for the normal purchases and sales exception. If an electricity or fuel supply contract in its regulated business is subject to mark-to-market accounting, there would be no income statement effect of the mark-to-market because the contract's mark-to-market gain or loss will be recorded as a regulatory asset or liability. Any mark-to-market gains or losses on contracts outside its regulated business will affect income unless those contracts qualify for hedge accounting treatment. The application of the new rules is still evolving and further guidance from the Financial Accounting Standards Board (FASB) is expected, which could additionally impact the Company's financial statements. On July 20, 2001, the FASB issued SFAS No. 141 "Business Combinations" and No. 142 "Goodwill and Other Intangible Assets". SFAS No. 141 requires business combinations initiated after June 30, 2001 to be accounted for using the purchase method of accounting and clarifies the criteria for recording of other intangible assets separately from goodwill. SFAS No. 142 requires that, effective January 1, 2002, the Company cease amortization of goodwill. It also requires the Company to evaluate goodwill for impairment at least annually, which could result in periodic impairment charges. Goodwill amortization on an after-tax basis was $0.4 million and $1.3 million for the three and six months ended June 30, 2001, and is expected to be approximately $2.5 million for the year. The Company is currently assessing the impact adopting these statements will have on the financial statements. In June 2001, the FASB approved the issuance of SFAS No. 143 "Accounting for Asset Retirement Obligations" that provides accounting guidance for the costs of retiring long-lived assets and is effective for fiscal years beginning after June 15, 2002. The Company will assess the impact adoption of this statement will have on the financial statements once the final statement is issued. NOTE 6. FINANCING ACTIVITIES On July 18, 2001, Florida Power issued $300 million of First Mortgage Bonds, 6.65% Series due July 15, 2011. Proceeds from the issuance were primarily used to retire commercial paper. NOTE 7. FLORIDA PROGRESS OBLIGATED MANDATORILY REDEEMABLE CUMULATIVE QUARTERLY INCOME PREFERRED SECURITIES (QUIPS) OF A SUBSIDIARY TRUST HOLDING SOLELY FLORIDA PROGRESS GUARANTEED SUBORDINATED DEFERRABLE INTEREST NOTES In April 1999, FPC Capital I (the Trust), an indirect wholly owned subsidiary of the Company, issued 12 million shares of $25 par cumulative Company-obligated mandatorily redeemable preferred securities due 2039 (Preferred Securities), with an aggregate liquidation value of $300 million and a quarterly distribution rate of 7.10%, payable quarterly. Currently, all 12 million shares of the Preferred Securities that were issued are outstanding. Concurrent with the issuance of the Preferred Securities, the Trust issued to Florida Progress Funding Corporation (Funding Corp.) all of the common securities of the Trust (371,135 shares), for $9.3 million. Funding Corp. is a direct wholly owned subsidiary of the Company. The existence of the Trust is for the sole purpose of issuing the Preferred Securities and the common securities and using the proceeds thereof to purchase from Funding Corp. its 7.10% Junior Subordinated Deferrable Interest Notes due 2039 (subordinated notes), for a principal amount of $309.3 million. The subordinated notes and the Notes Guarantee (as discussed below) are the sole assets of the Trust. Funding Corp.'s proceeds from the sale of the subordinated notes were advanced to Progress Capital Holdings, Inc. (PCH), and used for general corporate purposes including the repayment of a portion of certain outstanding short-term bank loans and commercial paper. The Company has fully and unconditionally guaranteed the obligations of Funding Corp. under the subordinated notes (the Notes Guarantee). In addition, the Company has guaranteed the payment of all distributions required to be made by the Trust, but only to the extent that the Trust has funds available for such distributions (Preferred Securities Guarantee). The Preferred Securities Guarantee, considered together with the Notes Guarantee, constitutes a full and unconditional guarantee by the Company of the Trust's obligations under the Preferred Securities. 14 The subordinated notes may be redeemed at the option of Funding Corp. beginning in 2004 at par value plus accrued interest through the redemption date. The proceeds of any redemption of the subordinated notes will be used by the Trust to redeem proportional amounts of the Preferred Securities and common securities in accordance with their terms. Upon liquidation or dissolution of Funding Corp., holders of the Preferred Securities would be entitled to the liquidation preference of $25 per share plus all accrued and unpaid dividends thereon to the date of payment. These preferred securities are classified as long-term debt on Florida Progress' balance sheets. NOTE 8. COMPREHENSIVE INCOME Comprehensive income for Florida Progress for the three months and the six months ended June 30, 2001 was $89.8 million and $165.5 million, respectively. For the three months and the six months ended June 30, 2000, comprehensive income was $110.0 million and $186.3 million, respectively. Florida Power does not have any items of other comprehensive income. NOTE 9. COMMITMENTS AND CONTINGENCIES Insurance -- Florida Progress and its subsidiaries utilize various risk management techniques to protect certain assets from risk of loss, including the purchase of insurance. Risk avoidance, risk transfer and self-insurance techniques are utilized depending on the Company's ability to assume risk, the relative cost and availability of methods for transferring risk to third parties, and the requirements of applicable regulatory bodies. Florida Power self-insures its transmission and distribution lines against loss due to storm damage and other natural disasters. Pursuant to a regulatory order, Florida Power is accruing $6 million annually to a storm damage reserve and may defer any losses in excess of the reserve. Under the provisions of the Price Anderson Act, which limits liability for accidents at nuclear power plants, Florida Power, as an owner of a nuclear plant, can be assessed for a portion of any third-party liability claims arising from an accident at any commercial nuclear power plant in the United States. If total third-party claims relating to a single nuclear incident exceed $200 million (currently available through commercial insurance), Florida Power could be assessed up to $88.1 million per incident, with a maximum assessment of $10 million per year. Florida Power also maintains nuclear property damage insurance and decontamination and decommissioning liability insurance totaling $1.6 billion. This insurance coverage is purchased from Nuclear Electric Insurance Ltd. (NEIL). Florida Power is self-insured for any losses that are in excess of this coverage. Under the terms of the NEIL policy, Florida Power could be assessed up to a maximum of $9.13 million in any policy year if losses in excess of NEIL's available surplus are incurred. Florida Power has never been assessed under these nuclear indemnities or insurance policies. Claims and Uncertainties -- The Company is subject to federal, state and local regulations addressing air and water quality, hazardous and solid waste management and other environmental matters. Various organic materials associated with the production of manufactured gas, generally referred to as coal tar, are regulated under federal and state laws. The lead or sole regulatory agency that is responsible for a particular former coal tar site depends largely upon the state in which the site is located. There are several MGP sites to which Florida Power has some connection. In this regard, Florida Power, with other potentially responsible parties, is participating in investigating and, if necessary, remediating former coal tar sites with several regulatory agencies, including, but not limited to, the U.S. Environmental Protection Agency (EPA) and the Florida Department of Environmental Protection (FDEP). Although the Company may incur costs at these sites about which it has been notified, based upon current status of these sites, the Company does not expect those costs to be material to the financial position or results of operations of the Company. The Company has accrued amounts to address known costs at certain of these sites. The Company is periodically notified by regulators such as the EPA and various state agencies of its involvement or potential involvement in sites, other than MGP sites, that may require investigation and/or remediation. Although the Company may incur costs at the sites about which it has been notified, based upon the current status of these sites, the Company does not expect those costs to be material to the financial position or results of operations of the Company. The EPA has been conducting an enforcement initiative related to a number of coal-fired utility power plants in an effort to determine whether modifications at those facilities were subject to New Source Review requirements or New Source Performance Standards under the Clean Air Act. Florida Power has recently been asked to provide information to the EPA 15 as part of this initiative and has cooperated in providing the requested information. The EPA has initiated enforcement actions against other unaffiliated utilities as part of this initiative, some of which have resulted in or may result in settlement agreements, ranging from $1.0 billion to $1.4 billion. These settlement agreements have generally called for expenditures to be made over extended time periods, and some of the companies may seek recovery of the related costs through rate adjustments. The Company cannot predict the outcome of this matter. In July 1997, the EPA issued final regulations establishing a new eight-hour ozone standard. In October 1999, the District of Columbia Circuit Court of Appeals ruled against the EPA with regard to the federal eight-hour ozone standard. The U.S. Supreme Court has upheld, in part, the District of Columbia Circuit Court of Appeals decision. Further litigation and rulemaking are anticipated. The Company cannot predict the outcome of this matter. Florida Power currently is storing spent nuclear fuel onsite in spent fuel pools. If Florida Power does not seek renewal of the Crystal River Unit No. 3 (CR3) operating license, with certain modifications to its storage pools currently underway, CR3 will have sufficient storage capacity in place for fuel consumed through the end of the expiration of the license in 2016. If Florida Power extends the CR3 operating license, dry storage may be necessary. Florida Power has filed claims with the Company's general liability insurance carriers to recover costs arising out of actual or potential liabilities. Some claims have settled and others are still pending. While management cannot predict the outcome of these matters, the outcome is not expected to have a material effect on the financial position or results of operations. Regulatory developments - Florida Power previously operated under an agreement committing several parties not to seek any reduction in its base rates or authorized return on equity. That agreement expired on June 30, 2001. On May 3, 2001, the staff of the Florida Public Service Commission, or FPSC, recommended that the FPSC require Florida Power to submit, by September 14, 2001, minimum filing requirements, based on a 2002 projected calendar year, to initiate a rate proceeding regarding its future base rates. The FPSC staff also recommended to the FPSC that, pending completion of Florida Power's rate case, annual revenues of $114 million should be held subject to refund to its customers. On June 20, 2001, the FPSC issued an order accepting its staff's recommendation that Florida Power be required to hold $114 million of revenue subject to refund and to file, by September 14, 2001, minimum filing requirements based on a projected 2002 test year. On July 2, 2001, Florida Power filed a request for rehearing of the portion of the FPSC 's order requiring that it hold $114 million of revenues subject to refund on the grounds that the order contradicted FPSC precedent, was inconsistent with the applicable statutory requirements and violated Florida Power's due process rights. Florida Power is awaiting a decision from the FPSC on how they intend to proceed in this matter. Also, since the FPSC's June 20, 2001 order, Florida Power has been working with FPSC staff and other interested parties to establish special procedures for the filing of the minimum filing requirements. The Company cannot predict the outcome or impact of these matters. LEGAL MATTERS Age Discrimination Suit -- Florida Power and Florida Progress have been named defendants in an age discrimination lawsuit. The number of plaintiffs remains at 116, but four of those plaintiffs have had their federal claims dismissed and 74 others have had their state age claims dismissed. While no dollar amount was requested, each plaintiff seeks back pay, reinstatement or front pay through their projected dates of normal retirement, costs and attorneys' fees. In October 1996, the Federal Court approved an agreement between the parties to provisionally certify this case as a class action suit under the Age Discrimination in Employment Act. Florida Power filed a motion to decertify the class and in August 1999, the Court granted Florida Power's motion. In October 1999, the judge certified the question of whether the case should be tried as a class action to the Eleventh Circuit Court of Appeals for immediate appellate review. In December 1999, the Eleventh Circuit Court of Appeals agreed to review the judge's order decertifying the class and oral arguments were held in January 2001. In anticipation of a potential ruling decertifying the case as a class action, plaintiffs filed a virtually identical lawsuit, which identified all opt-in plaintiffs as named plaintiffs. This case had been held in abeyance until reactivated in July 2000 upon motion of the plaintiffs. On July 5, 2001, the Eleventh Circuit Court of Appeals ruled that as a matter of law, disparate claims cannot be brought under the Age Discrimination in Employment Act. This ruling has the effect of decertifying this case as a class action. The plaintiffs may appeal this ruling. The Company cannot predict the outcome of this matter. In December 1998, during mediation in this age discrimination suit, plaintiffs alleged damages of $100 million. Company management, while not believing plaintiffs' claim to have merit, offered $5 million in an attempt to settle all claims. Plaintiffs rejected that offer. Florida Power and the plaintiffs engaged in informal settlement discussions, which terminated on December 22, 1998. As a result of the plaintiffs' claims, management has identified a probable range of $5 million to $100 million with no amount within that range a better estimate of probable loss than any other amount; accordingly, Florida Power has accrued $5 million. In December 1999, Florida Power also recorded an accrual of $4.8 16 million for legal fees associated with defending its position in these proceedings. There can be no assurance that this litigation will be settled, or if settled, that the settlement will not exceed $5 million. Additionally, the ultimate outcome, if litigated, cannot presently be determined. Advanced Separation Technologies (AST) -- In 1996, Florida Progress sold its 80% interest in AST to Calgon Carbon Corporation (Calgon) for net proceeds of $56 million in cash. In January 1998, Calgon filed a lawsuit against Florida Progress and the other selling shareholder and amended it in April 1998, alleging misstatement of AST's 1996 revenues, assets and liabilities, seeking damages and granting Calgon the right to rescind the sale. The lawsuit also accused the sellers of failing to disclose flaws in AST's manufacturing process and a lack of quality control. Florida Progress believes that the aggregate total of all legitimate warranty claims by customers of AST for which it is probable that Florida Progress will be responsible for under the Stock Purchase Agreement with Calgon is approximately $3.2 million, and accordingly, accrued $3.2 million in the third quarter of 1999 as an estimate of probable loss. Florida Progress filed a motion for summary judgement, which is pending. Qualifying Facilities Contracts -- Florida Power's purchased power contracts with qualifying facilities employ separate pricing methodologies for capacity payments and energy payments. Florida Power has interpreted the pricing provision in these contracts to allow it to pay an as-available energy price rather than a higher firm energy price when the avoided unit upon which the applicable contract is based would not have been operated. The owners of four qualifying facilities filed suits against Florida Power in state court over the contract payment terms, and one owner also filed suit in federal court. Three of the state court suits have been settled and the federal case was dismissed. In the remaining state court suit, the trial regarding NCP Lake Power (Lake) concluded in December 1998. In April 1999, the judge entered an order granting Lake's breach of contract claim and ruled that Lake is entitled to receive "firm" energy payments during on-peak hours, but for all other hours, Lake is entitled to the "as-available" rate. The Court also ruled that for purposes of calculating damages, the breach of contract occurred at the inception of the contract. In August 1999, a Final Judgement was entered for Lake for approximately $4.5 million and Lake filed a Notice of Appeal. Also in this case, in April 1998, Florida Power filed a petition with the FPSC for a Declaratory Statement that the contract between the parties limits energy payments thereunder to the avoided costs based upon an analysis of a hypothetical unit having the characteristics specified in the contract. In October 1998, the FPSC denied the petition, but Florida Power appealed to the Florida Supreme Court. On January 26, 2001, the District Court of Appeals reversed the trial court's order and held that the contract requires Florida Power to pay Lake the firm energy rate for all hours that the avoided unit operates, less any maintenance shut-down hours. The District Court of Appeals remanded the case to the trial court for a new trial to determine the appropriate amount of damages consistent with the appellate court's ruling. Florida Power has sought rehearing of the District Court of Appeal's decision. Although granting Florida Power's request, the District Court of Appeal's confirmed its initial decision. Management does not expect that the results of these legal actions will have a material impact on Florida Power's financial position, results of operations or liquidity. Florida Power anticipates that all fuel and capacity expenses, including any settlement amounts incurred as a result of the matters discussed above, will be recovered from its customers. Easement Litigation -- In December 1998, Florida Power was served with a class action lawsuit seeking damages, declaratory and injunctive relief for the alleged improper use of electric transmission easements. The plaintiffs contend that the licensing of fiber optic telecommunications lines to third parties or telecommunications companies for other than Florida Power's internal use along the electric transmission line right-of-way exceeds the authority granted in the easements. In June 1999, plaintiffs amended their complaint to add Progress Telecommunications Corporation, an indirect wholly owned subsidiary of Florida Progress, as a defendant and to add counts for unjust enrichment and constructive trust. In January 2000, the court conditionally certified the class statewide. In a mediation held in March 2000, the parties reached a tentative settlement of this claim. In January 2001, the Court preliminarily approved the amended settlement agreement, certified the settlement class and approved the class notice. Management does not expect that the results of these legal actions will have a material impact on Florida Progress' financial position, results of operations or liquidity. Accordingly, no provision for loss has been recorded pertaining to this matter. A final settlement hearing date set for June 2001 was held, with no decision rendered. Other Legal Matters -- Florida Progress and Florida Power are involved in various other claims and legal actions arising in the ordinary course of business. In the opinion of management, the ultimate disposition of these matters will not have a material adverse effect upon either company's consolidated financial position, results of operations or liquidity. 17 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OPERATING RESULTS For the three and six months ended June 30, 2001, as compared to the corresponding periods in the prior year. Florida Progress' consolidated income from continuing operations for the three and six month periods ended June 30, 2001, was $101.9 million and $177.5 million, compared to income from continuing operations of $106.5 million and $181.7 million, for the same periods in 2000. FLORIDA POWER CORPORATION Florida Power, the largest subsidiary of Florida Progress, reported net income of $84.3 million and $155.9 million for the second quarter and first half of 2001, compared to $79.5 million and $142.9 million for the comparable periods in 2000. The components of retail and wholesale electric megawatt-hour sales for the three and six months ended June 30, 2001, and 2000 were as follows:

~~Indicate~~(In ~~the~~millions ~~number~~ of ~~shares~~mWh) ~~outstanding~~Three ofMonths ~~each~~Ended ofSix ~~the~~Months ~~registrants’ classes~~Ended ofJune ~~common~~30, ~~stock~~June 30, as2001 of2000 ~~the~~% ~~latest~~Change ~~practicable~~2001 ~~date~~2000 % Change ---- ---- -------- ---- ---- -------- Residential 4,375 4,358 0. 4% 8,525 8,077 5.5% Commercial 2,900 2,828 2.5 5,231 5,102 2.5 Industrial 995 1,080 (7.9) 1,962 2,164 (9.3) Governmental 690 685 0.7 1,283 1,266 1.3 Wholesale 977 904 8.1 1,698 1,588 6.9 --------------------------------------------------------------------------------------------------- Total mWh Sales 9,937 9,855 0.8% 18,699 18,197 2.8%

Florida Power's retail kilowatt-hour sales increased slightly during the second quarter of 2001 and for the year to date, compared with 2000. Residential and commercial sectors increased due to continued customer growth. Weather, a key factor influencing usage among residential customers, negatively influenced retail sales for the quarter due to cooler than normal temperatures. Year to date, weather impacts have been flat compared to prior year. Industrial sales declined due to weakness in the phosphate industry. Wholesale sales increased for the quarter and year to date compared to 2000, which is attributable to higher sales to Seminole Electric Cooperative, Florida Power's largest wholesale customer. The increase reflects an increase in the capacity contract with this customer. Fuel used in generation and purchased power increased $80.0 million and $180.6 million, for the second quarter and first half of 2001, respectively, when compared to the same periods last year. The increase is due mainly to the increased price of coal, oil and gas and increased usage. Fuel and purchased power expenses are recovered primarily through cost recovery clauses and, as such, have no material impact on operating results. Operations and maintenance expense decreased slightly during the quarter and year to date. The decrease is due primarily to lower employee-related costs resulting from the reorganization after the acquisition by Progress Energy. Depreciation and amortization increased $68.9 million year to date primarily due to accelerating the amortization of the Tiger Bay regulatory asset in March 2001. The additional amortization had no significant earnings impact as it was offset by the recognition of $63 million of revenues that were deferred pursuant to a regulatory order in the fourth quarter of 2000. ELECTRIC FUELS CORPORATION Electric Fuels makes up the majority of Florida Progress' diversified operations. The results of operations for Electric Fuels' Energy and Related Services and Rail Services units are discussed below. On July 23, 2001, Progress Energy announced that it had entered into a contract to sell the Inland Marine Transportation business segment to AEP Resources, Inc., a wholly owned subsidiary of American Electric Power, for a purchase price of $270 million. 18 Therefore, the results of operations of the Inland Marine Transportation segment are no longer included in Florida Progress' income from continuing operations. Energy and Related Services - Earnings at the Energy and Related Services Group --------------------------- increased $16.4 million and $32.9 million from the three and six month periods in the prior year. The increase was due primarily to higher synthetic fuel sales and related tax credits during the quarter compared with last year (See "Other Matters" below). Improved operating results of the gas operations, resulting from increases in the number of wells and a higher price for natural gas, and an increase in coal deliveries over the prior year also contributed to increased earnings in the Energy and Related Services group. Rail Services - Results in the Rail Services group decreased $11.6 million and ------------- $14.6 million for the quarter and first half of 2001 when compared to 2000. Current year results were negatively affected by the significant downturn in the domestic scrap market and the continuing weak market for railcar parts. OTHER The other group includes telecommunications, holding company and financing expenses. The increased losses for the three and six months ended June 30, 2001 when compared to the corresponding periods in the prior year are due primarily to the recording of an intra-period income tax allocation adjustment. Generally accepted accounting principles require companies to apply a levelized effective tax rate to interim periods that is consistent with the estimated annual rate. Income tax expense was increased by $5.5 million for the second quarter and $20.4 million for the first half of 2001. For the comparable periods in 2000, income tax expense was decreased by $11.1 million for the second quarter and $18.7 million for the first half of 2000, to maintain an effective tax rate consistent with the estimated annual rate. The tax credits associated with the Company's synthetic fuel operations lower the overall effective tax rate. These credits, along with seasonal earnings variations, can also cause large swings in the effective tax rate for interim periods. Therefore, this adjustment will vary each quarter, but have no effect on net income for the year. The telecommunications group also had higher losses than the second quarter and first half of 2000 due to continued expansion of the business. MATERIAL CHANGES IN LIQUIDITY AND CAPITAL RESOURCES During the six months ended June 30, 2001, $121.7 million was spent on the Florida Power construction program and $62.5 million was spent in diversified operations. During the first quarter of 2001, Progress Capital Holdings retired $31 million in Medium-Term Notes. The $6 million of medium-term notes that were retired in January had a 9.95% coupon rate and the $25 million of medium-term notes that were retired in February had a 6.13% coupon rate. Progress Energy issued commercial paper to fund the maturing medium-term notes. On July 18, 2001, Florida Power issued $300 million of First Mortgage Bonds, 6.65% Series due July 15, 2011. Proceeds from the issuance were primarily used to retire commercial paper. OTHER MATTERS Regulatory Developments ----------------------- Florida Power previously operated under an agreement committing several parties not to seek any reduction in its base rates or authorized return on equity. That agreement expired on June 30, 2001. On May 3, 2001, the staff of the Florida Public Service Commission, or FPSC, recommended that the FPSC require Florida Power to submit, by September 14, 2001, minimum filing requirements, based on a 2002 projected calendar year, to initiate a rate proceeding regarding its future base rates. The FPSC staff also recommended to the FPSC that, pending completion of Florida Power's rate case, annual revenues of $114 million should be held subject to refund to its customers. On June 20, 2001, the FPSC issued an order accepting its staff's recommendation that Florida Power be required to hold $114 million of revenue subject to refund and to file, by September 14, 2001, minimum filing requirements based on a projected 2002 test year. On July 2, 2001, Florida Power filed a request for rehearing of the portion of the FPSC 's order requiring that it hold $114 million of revenues subject to refund on the grounds that the order contradicted FPSC precedent, was inconsistent with the applicable statutory requirements and violated Florida Power's due process rights. Florida Power is awaiting a decision from the FPSC on how they intend to proceed in this matter. Also, since the FPSC's June 20, 2001 order, Florida Power has been working with FPSC staff and other interested parties to establish special procedures for the filing of the minimum filing requirements. The Company cannot predict the outcome or impact of these matters. In its May 3, 2001 recommendation, the FPSC staff expressed concerns related to Florida Power's plans to participate in the creation of the GridFlorida regional transmission organization, or GridFlorida RTO, along with Florida Power & Light 19 Company and Tampa Electric Company. The FPSC staff raised questions about the prudence of establishing the new system and costs associated with the process. Florida Power is continuing to evaluate the concerns that the FPSC staff has raised about the GridFlorida RTO and the impact those concerns might have on the implementation of the GridFlorida RTO plan this year. On June 27, 2001, the FPSC issued an order establishing a two-phase process for addressing these GridFlorida RTO issues in the context of Florida Power's pending rate case. In the first phase, the FPSC will address the general issues associated with the prudence of the GridFlorida RTO on an expedited basis, with a decision scheduled for October 30, 2001. The second phase will address ratemaking issues and will be decided as part of the general rate proceeding. The Company cannot predict the outcome or impact of these matters. Regional Transmission Organizations ----------------------------------- In October 2000, Florida Power, along with Florida Power & Light Company and Tampa Electric Company filed with the Federal Energy Regulatory Commission, or FERC, an application for approval of a regional transmission organization, or RTO, for peninsular Florida, currently named GridFlorida. On March 28, 2001, FERC issued an order provisionally granting GridFlorida RTO status and directing the GridFlorida applicants to make certain changes in the RTO documents and to file such changes within 60 days. On May 29, 2001, the GridFlorida applicants made the compliance filing as directed by FERC but FERC has not yet issued an order on that compliance filing. On May 16, 2001, the FPSC initiated dockets to review the prudence of the GridFlorida applicants' decision to form and participate in the GridFlorida RTO. The GridFlorida applicants have announced that they will hold GridFlorida development activities in abeyance. An order on this issue is expected in late October of 2001. The Company cannot predict the outcome of this matter. On July 12, 2001, FERC issued an order requiring certain parties involved in the GridSouth RTO to develop a plan for a single RTO for the southeast. The GridFlorida applicants and the parties to the GridFlorida docket before FERC were encouraged to participate, but were not required to do so. Florida Power and the other GridFlorida applicants are participating in the mediation. The mediation is scheduled to last 45 days from July 12th, and ten days after the mediation the presiding administrative law judge will submit a proposal to FERC. The Company cannot predict the outcome of this mediation or the effect that it may have on the GridFlorida proceedings currently ongoing before the FERC and the FPSC. Synthetic Fuels Tax Credits --------------------------- On April 20, 2001 and May 4, 2001, the Internal Revenue Service (IRS) released Revenue Procedure 2001-30 and Revenue Procedure 2001-34, respectively, that outline the conditions that must be met to receive a Private Letter Ruling (PLR) for Section 29 tax credits from the IRS. PLRs represent advance rulings from the IRS applying its interpretation of the tax law to an entities' facts for Section 29 credits. The Company continues to pursue PLRs for its two majority-owned facilities and two minority-owned facilities that have not received PLRs. In management's opinion, the Company is complying with all the necessary requirements to be allowed such credits under Section 29, although it cannot provide with certainty that it will receive PLRs or prevail, if challenged by the IRS, on any credits taken. Franchise Litigation -------------------- Five cities, with a total of approximately 36,000 customers, have sued Florida Power in various circuit courts in Florida. The lawsuits principally seek (1) a declaratory judgment that the cities have the right to purchase Florida Power's electric distribution system located within the municipal boundaries of the cities, (2) a declaratory judgment that the value of the distribution system must be determined through arbitration, and (3) injunctive relief requiring Florida Power to continue to collect from Florida Power's customers and remit to the cities franchise fees during the pendency of the litigation and as long as Florida Power continues to occupy the cities' rights-of-way to provide electric service, notwithstanding the expiration of the franchise ordinances under which Florida Power had agreed to collect such fees. One circuit court has entered a declaratory judgment and order requiring arbitration to establish the purchase price of Florida Power's facilities within one of the cities. Florida Power has appealed that decision to a district court of appeal. The appeal has been fully briefed and orally argued, and Florida Power is awaiting a decision from the appeals court. To date, no city has attempted to actually exercise the right to purchase any portion of Florida Power's electric distribution system, nor has there been any proceeding to determine the price at which such a purchase could be made. The Company cannot predict the outcome of these matters. 20 NEW ACCOUNTING STANDARDS ------------------------ During the second quarter of 2001, the FASB issued an interpretation of SFAS No. 133 indicating that options in general cannot qualify for the normal purchases and sales exception, but provided an exception that allows certain electricity contracts, including capacity-energy contracts, to be excluded from the mark-to-market requirements of SFAS No. 133. These interpretations are effective July 1, 2001. The Company is continuing to review contracts to determine whether they meet the criteria for the normal purchases and sales exception. If an electricity capacity-energy contract or fuel supply contract in its regulated business is subject to mark-to-market accounting, there would be no income statement effect of the mark-to-market because the contract's mark-to-market gain or loss will be recorded as a regulatory asset or liability. Any mark-to-market gains or losses on contracts outside its regulated business will affect income unless those contracts qualify for hedge accounting treatment. On July 20, 2001, the FASB issued SFAS No. 141 "Business Combinations" and No. 142 "Goodwill and Other Intangible Assets". SFAS No. 141 requires business combinations initiated after June 30, 2001 to be accounted for using the purchase method of accounting and clarifies the criteria for recording of other intangible assets separately from goodwill. SFAS No. 142 requires that, effective January 1, 2002, the Company cease amortization of goodwill. It also requires the Company to evaluate goodwill for impairment at least annually, which could result in periodic impairment charges. Goodwill amortization on an after-tax basis was $0.4 million and $1.3 million for the three and six months ended June 30, 2001, and is expected to be approximately $2.5 million for the year. The Company is currently assessing the impact adopting these statements will have on the financial statements. In June 2001, the FASB approved the issuance of SFAS No. 143 "Accounting for Asset Retirement Obligations" that provides accounting guidance for the costs of retiring long-lived assets and is effective for fiscal years beginning after June 15, 2002. The Company will assess the impact adoption of this statement will have on the financial statements once the final statement is issued. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK INTEREST RATE RISK Certain market risks are inherent in Florida Progress' financial instruments, which arise from transactions entered into in the normal course of business. Florida Progress' primary exposures are changes in interest rates with respect to long-term debt, commercial paper and the FPC obligated mandatorily redeemable securities of trust, and fluctuations in the return on marketable securities with respect to its nuclear decommissioning trust funds. Florida Progress' exposure to return on marketable securities for the decommissioning trust funds has not changed materially since December 31, 2000. The total fixed rate debt at June 30, 2001 was $1.6 billion, with an average interest rate of 6.79% and the total commercial paper outstanding at June 30, 2001 was $500 million, with an average interest rate of 4.20%. Florida Progress also had $300 million outstanding of FPC mandatorily redeemable securities of trust, with a fixed interest rate of 7.10%. PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS 1. Wanda L. Adams, et al. v. Florida Power Corporation and Florida Progress Corporation, U.S. District Court, Middle District of Florida, Ocala Division, Case No. 95-123-C.V.-OC-10. See prior discussion of this matter in the 2000 Form 10-K, Item 3, paragraph 3. The plaintiffs filed a motion with the District Court to reopen the case of Akin, et al. vs. Florida Power, and to dismiss the Adams ------------------------------ ----- case. The Akin case was originally filed in an effort to preserve the ---- litigation rights of the 61 plaintiffs who opted into the Adams case. The ----- Court had previously stayed the Akin case pending a ruling on Florida ---- Power's motion to decertify the class. Oral arguments were held in January 2001. On July 5, 2001, the Eleventh Circuit Court of Appeals ruled that as a matter of law, disparate claims cannot be brought under the Americans with Disabilities Act. This ruling has the effect of decertifying the Akin ---- case as a class action. The plaintiffs may appeal this ruling. The Company cannot predict the outcome of this matter. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits: None 21 (b) Reports on Form 8-K: During the second quarter of 2001, Florida Progress and Florida Power did not file any reports on Form 8-K. However, the following report on Form 8-K was filed in the third quarter of 2001: Florida Power Corporation ------------------------- Financial Item Statements Reported Included Date of Event Date Filed -------- -------- ------------- ---------- 5 No July 1, 2001 July 23, 2001 22 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. FLORIDA PROGRESS CORPORATION FLORIDA POWER CORPORATION (Registrants) Date: August 10, 2001 By: /s/ Peter M. Scott III ------------------------------------ Peter M. Scott III Executive Vice President and Chief Financial Officer By: /s/ Robert H. Bazemore, Jr. ----------------------------------- Robert H. Bazemore, Jr. Vice President and Controller Chief Accounting Officer 23

		Shares Outstanding
Registrant	Description of Class	at September 30, 2000
Florida Progress Corporation	Common Stock, without par value	98,616,919
Florida Power Corporation	Common Stock, without par value	100(all of which were held by Florida Progress Corporation)

This combined Form 10-Q represents separate filings by Florida Progress Corporation and Florida Power Corporation. Florida Power makes no representations as to the information relating to Florida Progress’ diversified operations.

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

FLORIDA PROGRESS CORPORATION CONSOLIDATED FINANCIAL STATEMENTS

FLORIDA PROGRESS CORPORATION Consolidated Statements of Income (Dollars in millions, except per share amounts)

			Three Months Ended						Nine Months Ended
			September 30,						September 30,
			2000			1999			2000			1999
			(Unaudited)						(Unaudited)
REVENUES:
	Electric utility		$	914.5		$	794.9		$	2,237.8		$	2,037.3
	Diversified			399.4			312.4			1,119.7			866.7
				1,313.9			1,107.3			3,357.5			2,904.0
EXPENSES:
	Electric utility:
		Fuel		213.2			191.5			501.4			448.7
		Purchased power		166.3			106.7			389.7			305.4
		Energy conservation costs		20.0			25.4			50.0			61.9
		Operation and maintenance		98.7			108.0			308.2			325.9
		Depreciation and amortization		135.5			86.8			313.3			260.8
		Taxes other than income taxes		59.4			56.9			165.3			159.9
				693.1			575.3			1,727.9			1,562.6
	Diversified:
		Cost of sales		389.1			273.6			1,070.7			768.4
		Loss related to life insurance subsidiary		12.8			—			12.8			—
		Other		21.8			30.3			63.7			60.7
				423.7			303.9			1,147.2			829.1
INCOME FROM OPERATIONS				197.1			228.1			482.4			512.3
INTEREST EXPENSE AND OTHER:
	Interest expense			46.1			42.3			139.5			131.2
	Allowance for funds used during construction			(1.1	)		(.4	)		(3.0	)		(6.7	)
	Distributions on company obligated mandatorily redeemable preferred securities			5.3			5.3			16.0			9.9
	Other expense / (income), net			(4.8	)		(7.5	)		(8.4	)		(10.8	)
				45.5			39.7			144.1			123.6
INCOME BEFORE INCOME TAXES				151.6			188.4			338.3			388.7
		Income taxes		1.3			51.1			1.6			107.2
NET INCOME			$	150.3		$	137.3		$	336.7		$	281.5
AVERAGE SHARES OF COMMON STOCK OUTSTANDING				98.6			98.3			98.6			97.9
EARNINGS PER AVERAGE COMMON SHARE
	(Basic and Diluted):		$	1.53		$	1.40		$	3.42		$	2.87
DIVIDENDS PER COMMON SHARE			$	.555		$	.545		$	1.665		$	1.635

The accompanying notes are an integral part of these consolidated financial statements.

FLORIDA PROGRESS CORPORATION Consolidated Balance Sheets (Dollars in millions)

						September 30,		December 31,
						2000		1999
					(Unaudited)
ASSETS
PROPERTY, PLANT AND EQUIPMENT:
	Electric utility plant in service and held for future use					$	6,868.6	$	6,784.8
	Less — Accumulated depreciation						3,095.2		2,923.8
				Accumulated decommissioning for nuclear plant			313.6		285.0
				Accumulated dismantlement for fossil plants			134.0		132.5
							3,325.8		3,443.5
	Construction work in progress						194.3		139.7
	Nuclear fuel, net of amortization of $417.5 in 2000 and $401.0 in 1999						45.7		68.7
			Net electric utility plant				3,565.8		3,651.9
	Other property, at cost, net of depreciation of $314.1 in 2000 and $275.0 in 1999						709.9		703.4
							4,275.7		4,355.3
CURRENT ASSETS:
	Cash and equivalents						4.0		9.6
	Accounts receivable, less allowance for doubtful accounts of $6.9 in 2000 and $5.8 in 1999						559.6		420.6
	Inventories, primarily at average cost:
		Fuel					77.7		76.4
		Utility materials and supplies					96.7		90.8
		Diversified operations					264.3		209.3
	Underrecovered utility fuel costs						70.9		—
	Deferred income taxes						14.8		41.3
	Prepayments and other						169.2		113.7
							1,257.2		961.7
DEFERRED CHARGES AND OTHER ASSETS:
	Costs deferred pursuant to regulation:
		Deferred purchased power contract termination costs					232.2		297.8
		Other					76.1		94.0
	Investments in nuclear plant decommissioning fund						409.5		377.2
	Goodwill						243.8		171.1
	Joint ventures and partnerships						88.8		66.2
	Other						262.8		204.9
							1,313.2		1,211.2
						$	6,846.1	$	6,528.2

The accompanying notes are an integral part of these consolidated financial statements.

FLORIDA PROGRESS CORPORATION Consolidated Balance Sheets (Dollars in millions)

		September 30,			December 31,
		2000			1999
		(Unaudited)
CAPITAL AND LIABILITIES
COMMON STOCK EQUITY:
	Common stock	$	1,274.2		$	1,267.3
	Retained earnings		914.3			741.8
	Other comprehensive income		(.7	)		(.4	)
			2,187.8			2,008.7
PREFERRED SECURITIES:
	Cumulative preferred stock of Florida Power without sinking funds		33.5			33.5
	Company-obligated mandatorily redeemable quarterly income preferred securities (QUIPS) of a subsidiary trust holding solely Florida Progress guaranteed junior subordinated deferrable interest notes		300.0			300.0
LONG-TERM DEBT			2,041.9			2,154.1
TOTAL CAPITAL			4,563.2			4,496.3
CURRENT LIABILITIES:
	Accounts payable		306.7			309.0
	Customers’ deposits		107.7			105.6
	Taxes payable		76.8			10.3
	Accrued interest		58.5			77.4
	Overrecovered utility fuel costs		—			31.6
	Other		104.0			112.4
			653.7			646.3
	Notes payable		332.5			153.1
	Current portion of long-term debt		275.9			163.2
			1,262.1			962.6
DEFERRED CREDITS AND OTHER LIABILITIES:
	Deferred income taxes		538.9			565.3
	Unamortized investment tax credits		64.1			70.0
	Other postretirement benefit costs		127.8			123.1
	Other		290.0			310.9
			1,020.8			1,069.3
		$	6,846.1		$	6,528.2

The accompanying notes are an integral part of these consolidated financial statements.

FLORIDA PROGRESS CORPORATION Consolidated Statements of Cash Flows (Dollars in millions)

				Nine Months Ended
				September 30,
				2000			1999
				(Unaudited)
OPERATING ACTIVITIES:
	Net income			$	336.7		$	281.5
	Adjustments for noncash items:
		Depreciation and amortization			389.1			326.9
		Provision for loss on investment in life insurance subsidiary			12.8			—
		Deferred income taxes and investment tax credits, net			(11.6	)		(35.2	)
	Changes in working capital, net of effects from sale or acquisition of businesses:
			Accounts receivable		(138.3	)		(70.9	)
			Inventories		(24.5	)		(82.6	)
			Overrecovered/underrecovered utility fuel costs		(102.5	)		15.5
			Accounts payable		(1.7	)		(27.8	)
			Taxes payable		16.0			148.7
			Prepayments and other		(95.7	)		(44.9	)
	Other operating activities				(23.2	)		8.6
					357.1			519.8
INVESTING ACTIVITIES:
	Property additions (including allowance for borrowed funds used during construction)				(254.2	)		(417.2	)
	Acquisition of businesses				(47.0	)		(8.2	)
	Proceeds from sale of properties and businesses				4.3			27.2
	Proceeds from sale and leaseback				—			47.0
	Other investing activities				(21.3	)		(39.3	)
					(318.2	)		(390.5	)
FINANCING ACTIVITIES:
	Issuance of long-term debt				—			50.0
	Repayment of long-term debt				(76.7	)		(68.6	)
	Increase/(decrease) in commercial paper with long-term support				16.5			(46.5	)
	Issuance of company obligated mandatorily redeemable preferred securities				—			300.0
	Sale of common stock				—			43.2
	Dividends paid on common stock				(164.2	)		(160.4	)
	Increase/(decrease) in short-term debt				179.4			(236.2	)
	Other financing activities				.5			(2.0	)
					(44.5	)		(120.5	)
NET INCREASE/(DECREASE) IN CASH AND EQUIVALENTS					(5.6	)		8.8
	Beginning cash and equivalents				9.6			2.5
ENDING CASH AND EQUIVALENTS				$	4.0		$	11.3
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
	Cash paid during the period for:
		Interest (net of amount capitalized)		$	154.8		$	137.9
		Income taxes (net of refunds)		$	120.0		$	86.4

The accompanying notes are an integral part of these consolidated financial statements.

FLORIDA PROGRESS CORPORATION Consolidated Statements of Common Equity and Comprehensive Income (Unaudited) For the periods ended September 30, 2000 and 1999 (Dollars in millions, except per share amounts)

										Accumulated
										Other
					Common		Retained			Comprehensive
		Total			Stock		Earnings			Income
Balance, December 31, 1998		$	1,862.0		$	1,221.1	$	640.9		$	—
Net income			281.5					281.5
Common stock issued			46.2			46.2
Cash dividends on common stock			(160.4	)				(160.4	)
Balance, September 30, 1999			2,029.3			1,267.3		762.0			—
Balance, December 31, 1999			2,008.7			1,267.3		741.8			(.4	)
Net income			336.7					336.7
Foreign currency translation adjustment			(.3	)							(.3	)
	Comprehensive income		336.4			—		336.7			(.3	)
Common stock issued			6.9			6.9
Cash dividends on common stock			(164.2	)				(164.2	)
Balance, September 30, 2000		$	2,187.8		$	1,274.2	$	914.3		$	(.7	)

The accompanying notes are an integral part of these consolidated financial statements.

FLORIDA POWER CORPORATION Statements of Income (Dollars in millions)

			Three Months Ended						Nine Months Ended
			September 30,						September 30,
			2000			1999			2000			1999
			(Unaudited)						(Unaudited)
OPERATING REVENUES:
		Residential	$	468.7		$	446.9		$	1,135.0		$	1,072.5
		Commercial		197.0			180.0			498.2			464.7
		Industrial		55.8			54.8			160.3			155.8
		Sales for resale		81.7			72.1			195.7			164.7
		Other		111.3			41.1			248.6			179.6
				914.5			794.9			2,237.8			2,037.3
OPERATING EXPENSES:
	Operation:
		Fuel		213.2			191.5			501.4			448.7
		Purchased power		166.3			106.7			389.7			305.4
		Energy conservation costs		20.0			25.4			50.0			61.9
		Operation and maintenance		98.7			108.0			308.2			325.9
		Depreciation and amortization		135.5			86.8			313.3			260.8
		Taxes other than income taxes		59.4			56.9			165.3			159.9
				693.1			575.3			1,727.9			1,562.6
	Income taxes:
		Currently payable		83.6			87.2			181.0			182.7
		Deferred, net		(11.3	)		(14.4	)		(22.3	)		(35.1	)
		Investment tax credits, net		(2.0	)		(2.0	)		(5.9	)		(5.9	)
				70.3			70.8			152.8			141.7
				763.4			646.1			1,880.7			1,704.3
INCOME FROM OPERATIONS				151.1			148.8			357.1			333.0
OTHER INCOME AND DEDUCTIONS:
		Allowance for equity funds used during construction		.6			.2			1.6			3.0
		Other income, net		1.9			3.1			2.4			3.8
				2.5			3.3			4.0			6.8
INTEREST CHARGES
		Interest on long-term debt		25.1			26.5			77.1			80.1
		Other interest expense		6.8			4.5			19.5			13.4
				31.9			31.0			96.6			93.5
		Allowance for borrowed funds used during construction		(.5	)		(.2	)		(1.4	)		(3.7	)
				31.4			30.8			95.2			89.8
NET INCOME				122.2			121.3			265.9			250.0
DIVIDENDS ON PREFERRED STOCK				.3			.3			1.1			1.1
NET INCOME AFTER DIVIDENDS ON PREFERRED STOCK			$	121.9		$	121.0		$	264.8		$	248.9

The accompanying notes are an integral part of these financial statements.

FLORIDA POWER CORPORATION Balance Sheets (Dollars in millions)

				September 30,		December 31,
				2000		1999
				(Unaudited)
ASSETS
PROPERTY, PLANT AND EQUIPMENT:
	Electric utility plant in service and held for future use			$	6,868.6	$	6,784.8
	Less — Accumulated depreciation				3,095.2		2,923.8
			Accumulated decommissioning for nuclear plant		313.6		285.0
			Accumulated dismantlement for fossil plants		134.0		132.5
					3,325.8		3,443.5
	Construction work in progress				194.3		139.7
	Nuclear fuel, net of amortization of $417.5 in 2000 and $401.0 in 1999				45.7		68.7
					3,565.8		3,651.9
	Other property, net				9.3		10.0
					3,575.1		3,661.9
CURRENT ASSETS:
	Cash and equivalents				2.2		—
	Accounts receivable, less allowance for doubtful accounts of $4.9 in 2000 and $4.0 in 1999				304.9		210.8
	Inventories, primarily at average cost:
		Fuel			77.7		76.4
		Materials and supplies			96.7		90.8
	Underrecovered utility fuel costs				70.9		—
	Deferred income taxes				14.8		41.4
	Prepayments and other				127.0		101.3
					694.2		520.7
DEFERRED CHARGES AND OTHER ASSETS:
	Costs deferred pursuant to regulation:
		Deferred purchased power contract termination costs			232.2		297.8
		Other			76.1		94.0
	Investments in nuclear plant decommissioning fund				409.5		377.2
	Other				51.4		50.9
					769.2		819.9
				$	5,038.5	$	5,002.5

The accompanying notes are an integral part of these financial statements.

FLORIDA POWER CORPORATION Balance Sheets (Dollars in millions)

		September 30,		December 31,
		2000		1999
		(Unaudited)
CAPITALIZATION AND LIABILITIES
CAPITALIZATION:
	Common stock	$	1,004.4	$	1,004.4
	Retained earnings		991.7		880.6
			1,996.1		1,885.0
CUMULATIVE PREFERRED STOCK:
	Without sinking funds		33.5		33.5
LONG-TERM DEBT			1,398.0		1,478.8
TOTAL CAPITAL			3,427.6		3,397.3
CURRENT LIABILITIES:
	Accounts payable		147.5		152.9
	Accounts payable to associated companies		15.2		23.1
	Customers’ deposits		107.7		105.6
	Income taxes payable		56.2		—
	Accrued other taxes		69.6		5.8
	Accrued interest		47.8		59.6
	Overrecovered utility fuel costs		—		31.6
	Other		41.0		79.3
			485.0		457.9
	Notes payable		200.5		153.1
	Current portion of long-term debt		81.9		76.8
			767.4		687.8
DEFERRED CREDITS AND OTHER LIABILITIES:
	Deferred income taxes		467.5		509.9
	Unamortized investment tax credits		63.6		69.5
	Other postretirement benefit costs		123.7		119.4
	Other		188.7		218.6
			843.5		917.4
		$	5,038.5	$	5,002.5

The accompanying notes are an integral part of these financial statements.

FLORIDA POWER CORPORATION Statements of Cash Flows (Dollars in millions)

			Nine Months Ended
			September 30,
			2000			1999
			(Unaudited)
OPERATING ACTIVITIES:
	Net income after dividends on preferred stock		$	264.8		$	248.9
	Adjustments for noncash items:
		Depreciation and amortization		338.9			280.4
		Deferred income taxes and investment tax credits, net		(28.2	)		(41.0	)
	Changes in working capital:
		Accounts receivable		(94.1	)		(85.3	)
		Inventories		(7.2	)		(39.0	)
		Overrecovered/underrecovered utility fuel costs		(102.6	)		15.5
		Accounts payable		(13.3	)		(5.6	)
		Taxes payable		130.2			145.9
		Prepayments and other		(83.8	)		(40.0	)
	Other operating activities			(18.8	)		13.7
				385.9			493.5
INVESTING ACTIVITIES:
	Construction expenditures			(186.1	)		(252.6	)
	Allowance for borrowed funds used during construction			(1.4	)		(3.7	)
	Other investing activities			(14.0	)		(12.9	)
				(201.5	)		(269.2	)
FINANCING ACTIVITIES:
	Repayment of long-term debt			(75.9	)		(15.8	)
	Decrease in commercial paper with long-term support			—			(6.4	)
	Dividends paid on common stock			(153.7	)		(150.3	)
	Increase/(decrease) in short-term debt			47.4			(47.3	)
				(182.2	)		(219.8	)
NET INCREASE IN CASH AND EQUIVALENTS				2.2			4.5
	Beginning cash and equivalents			—			—
ENDING CASH AND EQUIVALENTS			$	2.2		$	4.5
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
	Cash paid during the period for:
		Interest (net of amount capitalized)	$	104.8		$	95.8
		Income taxes (net of refunds)	$	117.8		$	107.6

The accompanying notes are an integral part of these financial statements.

FLORIDA PROGRESS CORPORATION AND FLORIDA POWER CORPORATION

NOTES TO FINANCIAL STATEMENTS

1) Florida Progress Corporation’s (“Florida Progress” or the “Company”) principal business segment is its Utility segment. Florida Power Corporation (“Florida Power”), the largest subsidiary of Florida Progress, engages in the generation, purchase, transmission, distribution and sale of electricity. Florida Progress’ other reportable business segments are Electric Fuels Corporation’s (“Electric Fuels”) Energy and Related Services, Rail Services and Inland Marine Transportation units. Financial data for business segments for the periods covered in this Form 10-Q are presented in the table below:

				Energy and			Rail		Inland Marine
(In millions)		Utility		Related Services			Services		Transportation		Other			Eliminations			Consolidated
Three months ended September 30, 2000:
	Revenues	$	914.5	$	97.7		$	250.2	$	42.8	$	7.7		$	1.0		$	1,313.9
	Intersegment revenues		—		57.9			.2		4.3		(2.1	)		(60.3	)		—
	Income tax expense (benefit)		72.1		(62.9	)		1.0		2.0		(10.8	)		(.1	)		1.3
	Segment net income (loss)		121.9		42.6			.1		3.1		(17.3	)		(.1	)		150.3
Nine months ended September 30, 2000:
	Revenues	$	2,237.8	$	203.7		$	775.2	$	124.3	$	13.2		$	3.3		$	3,357.5
	Intersegment revenues		—		188.9			.5		13.8		(7.1	)		(196.1	)		—
	Income tax expense (benefit)		155.9		(141.7	)		4.4		5.0		(21.7	)		(.3	)		1.6
	Segment net income (loss)		264.8		95.9			2.9		7.9		(34.3	)		(.5	)		336.7
	Total assets		5,038.5		685.5			852.7		104.0		496.9			(331.5	)		6,846.1
Three months ended September 30, 1999:
	Revenues	$	794.9	$	47.5		$	223.5	$	38.2	$	2.1		$	1.1		$	1,107.3
	Intersegment revenues		—		69.1			.3		3.0		(.9	)		(71.5	)		—
	Income tax expense (benefit)		73.6		(20.6	)		4.7		2.1		(8.4	)		(.3	)		51.1
	Segment net income (loss)		121.0		17.2			5.6		3.3		(9.3	)		(.5	)		137.3
Nine months ended September 30, 1999:
	Revenues	$	2,037.3	$	135.1		$	622.0	$	101.9	$	4.2		$	3.5		$	2,904.0
	Intersegment revenues		—		197.2			1.3		11.1		(7.4	)		(202.2	)		—
	Income tax expense (benefit)		145.3		(32.3	)		10.1		3.9		(19.5	)		(.3	)		107.2
	Segment net income (loss)		248.9		33.6			11.8		6.2		(18.5	)		(.5	)		281.5
	Total assets		5,050.1		350.9			752.0		102.9		534.5			(377.4	)		6,413.0

2)		In November 1999, Florida Power received approval from the Florida Public Service Commission (“FPSC”) to defer nonfuel revenues towards the development of a plan that would allow customers to realize the benefits earlier than if they are used to accelerate the amortization of the Tiger Bay regulatory asset. The approval required that a plan be submitted to the FPSC by August 1, 2000. On July 31, 2000, Florida Power filed a motion with the FPSC requesting a two-month extension. The plan was required to be filed by October 2, 2000. Florida Power was unable to identify a satisfactory rate initiative that might allow its ratepayers to receive these benefits sooner and, therefore, applied the deferred revenues of $44.4 million, plus accrued interest, to the amortization of the Tiger Bay regulatory asset for the month ended September 30, 2000. There was no impact to earnings.
3)		FLORIDA PROGRESS OBLIGATED MANDATORILY REDEEMABLE CUMULATIVE QUARTERLY INCOME PREFERRED SECURITIES (QUIPS) OF A SUBSIDIARY TRUST HOLDING SOLELY FLORIDA PROGRESS GUARANTEED SUBORDINATED DEFERRABLE INTEREST NOTES
		In April 1999, FPC Capital I (“the Trust”), an indirect wholly owned subsidiary of Florida Progress, issued 12 million shares of $25 par cumulative Company-obligated mandatorily redeemable preferred securities

		(“Preferred Securities”) due 2039, with an aggregate liquidation value of $300 million and a quarterly distribution rate of 7.10%. Currently, all 12 million shares of the Preferred Securities that were issued are outstanding. Concurrent with the issuance of the Preferred Securities, the Trust issued to Florida Progress Funding Corporation (“Funding Corp.”) all of the common securities of the Trust (371,135 shares), for $9.3 million. Funding Corp. is a direct wholly owned subsidiary of the Company.
		The existence of the Trust is for the sole purpose of issuing the Preferred Securities and the common securities and using the proceeds thereof to purchase from Funding Corp. its 7.10% Junior Subordinated Deferrable Interest Notes (“subordinated notes”) due 2039, for a principal amount of $309.3 million. The subordinated notes and the Notes Guarantee (as discussed below) are the sole assets of the Trust. Funding Corp.’s proceeds from the sale of the subordinated notes were advanced to Progress Capital Holdings, Inc. (“PCH”), a subsidiary of Florida Progress that provides financing for Florida Progress’ diversified operations, and used for general corporate purposes including the repayment of a portion of certain outstanding short-term bank loans and commercial paper.
		The Company has fully and unconditionally guaranteed the obligations of Funding Corp. under the subordinated notes (the “Notes Guarantee”). In addition, the Company has guaranteed the payment of all distributions required to be made by the Trust, but only to the extent that the Trust has funds available for such distributions (“Preferred Securities Guarantee”). The Preferred Securities Guarantee, considered together with the Notes Guarantee, constitutes a full and unconditional guarantee by the Company of the Trust’s obligations under the Preferred Securities.
		The subordinated notes may be redeemed at the option of Funding Corp. beginning in 2004 at par value plus accrued interest through the redemption date. The proceeds of any redemption of the subordinated notes will be used by the Trust to redeem proportional amounts of the Preferred Securities and common securities in accordance with their terms. Upon liquidation or dissolution of Funding Corp., holders of the Preferred Securities would be entitled to the liquidation preference of $25 per share plus all accrued and unpaid dividends thereon to the date of payment.
4)		CONTINGENCIES -
		Insurance — Florida Progress and its subsidiaries utilize various risk management techniques to protect certain assets from risk of loss, including the purchase of insurance. Risk avoidance, risk transfer and self-insurance techniques are utilized depending on the Company’s ability to assume risk, the relative cost and availability of methods for transferring risk to third parties, and the requirements of applicable regulatory bodies.
		Florida Power self-insures its transmission and distribution lines against loss due to storm damage and other natural disasters. Pursuant to a regulatory order, Florida Power is accruing $6 million annually to a storm damage reserve and may defer any losses in excess of the reserve. The reserve balances at September 30, 2000 and 1999 were $30.1 million and $28.6 million, respectively.
		Under the provisions of the Price Anderson Act, which limits liability for accidents at nuclear power plants, Florida Power, as an owner of a nuclear plant, can be assessed for a portion of any third-party liability claims arising from an accident at any commercial nuclear power plant in the United States. If total third-party claims relating to a single nuclear incident exceed $200 million (the amount of currently available commercial liability insurance), Florida Power could be assessed up to $88.1 million per incident, with a maximum assessment of $10 million per year.
		Florida Power also maintains nuclear property damage insurance and decontamination and decommissioning liability insurance. Effective October 1, 1999, the total limit purchased for this type of insurance was reduced from $2.1 billion to $1.6 billion. The reduction was based on a review of the potential property damage exposure, the legal minimum required to be carried, and the amount of insurance being purchased by other owners of single unit nuclear sites. The full amount of insurance is purchased from Nuclear Electric

Insurance Ltd. (“NEIL”). Florida Power is self-insured for any losses that are in excess of this coverage. Under the terms of the NEIL policy, Florida Power could be assessed up to a maximum of $8.7 million in any policy year if losses in excess of NEIL’s available surplus are incurred. Florida Power has never been assessed under these nuclear indemnities or insurance policies. Contaminated Site Cleanup — The Company is subject to regulation with respect to the environmental impact of its operations. The Company’s disposal of hazardous waste through third-party vendors or through a release of hazardous materials to the environment can result in costs to clean up facilities found to be contaminated. Federal and state statutes authorize governmental agencies to compel responsible parties to pay for cleanup of these hazardous waste sites. Florida Power and former subsidiaries of the Company, whose properties were sold in prior years, have been identified by the U.S. Environmental Protection Agency (“EPA”) as Potentially Responsible Parties (“PRPs”) at certain sites. Liability for the cleanup of costs at these sites is joint and several. One of the sites that Florida Power previously owned and operated is located in Sanford, Florida. There are five parties, including Florida Power, that have been identified as PRPs at the Sanford site. A Participation Agreement was signed, and subsequently amended, among the PRPs of the Sanford site to allocate $1.9 million to perform a Remedial Investigation, Baseline Risk Assessment and Feasibility Study (“RI/FS”) for phases one and two of the cleanup. Florida Power is liable for approximately 40% of the costs for the RI/FS as agreed to in the Participation Agreement. In March 2000, the EPA selected a “preferred” remedy for the cleanup of the contaminated soils at the site, which was documented in a Record of Decision on July 5, 2000. Cleanup will be addressed in three phases for project management purposes. A second participation agreement was negotiated in late summer 2000 that defined and allocated Remedial Design and Remedial Action costs among the participants for all three phases of the cleanup. Florida Power’s future cost share allocation is approximately 43%. The discussions and resolution of liability for cleanup costs could cause Florida Power to increase the estimate of its liability for those costs. The range of any additional costs are not expected to have a material effect on Florida Progress’ or Florida Power’s financial position, results of operations or liquidity. In December 1998, the EPA conducted an Expanded Site Inspection at a former Florida Power plant site near Inglis, Florida. Soil and groundwater samples were obtained from the Florida Power property, as well as sediment samples from the adjacent Withlacoochee River. A final copy of the report, along with a Request for Information under the Comprehensive Environmental Response Compensation and Liability Act (“CERCLA” or “Superfund”) was received in December 1999. Upon review of Florida Power’s reply and further testing at the site, the EPA’s conclusions may change the current hazard ranking and ultimately result in the Inglis site being placed on the National Priorities List (“NPL”). If this property is placed on the NPL, then the EPA could conduct remediation actions at the site and seek repayment of those costs as well as investigative costs from any PRPs. Past costs currently exceed $3.5 million with Florida Power identified as the only major viable business associated with this site. In June 2000, Florida Power received confirmation that the EPA intends to issue a Consent Order, which would require Florida Power to enter into an agreement to conduct an RI/FS on the property. After the EPA has reviewed the findings associated with the Expanded Site Investigation conducted in December 1998, and some additional sediment sampling in the Withlacoochee River that it will conduct in the fourth quarter of 2000, negotiations with respect to Florida Power’s participation will take place late in the fourth quarter of 2000. The results of such sampling could expand the scope, and thus the cost, of any required cleanup. In addition to these designated sites, there are other sites where Florida Progress may be responsible for additional environmental cleanup. Florida Progress estimates that its share of liability for cleaning up all designated sites ranges from $9 million to $13 million. It has accrued $9 million against these potential costs. There can be no assurance that the Company’s estimates will not change in the future.

Age Discrimination Suit — Florida Power and Florida Progress have been named defendants in an age discrimination lawsuit. The number of plaintiffs remains at 116, but four of those plaintiffs have had their federal claims dismissed and 74 others have had their state age claims dismissed. While no dollar amount was requested, each plaintiff seeks back pay, reinstatement or front pay through their projected dates of normal retirement, costs and attorneys’ fees. In October 1996, the Federal Court approved an agreement between the parties to provisionally certify this case as a class action suit under the Age Discrimination in Employment Act. Florida Power filed a motion to decertify the class and in August 1999, the Court granted Florida Power’s motion. In October 1999, the judge certified the question of whether the case should be tried as a class action to the Eleventh Circuit Court of Appeals for immediate appellate review. In December 1999, the Court of Appeals agreed to review the judge’s order decertifying the class and scheduled oral arguments for December 2000. In anticipation of a potential ruling decertifying the case as a class action, plaintiffs filed a virtually identical lawsuit which identified all opt-in plaintiffs as named plaintiffs. This case had been held in abeyance until reactivated in July 2000 upon motion of the plaintiffs. In December 1998, during mediation in this age discrimination suit, plaintiffs alleged damages of $100 million. Company management, while not believing plaintiffs’ claim to have merit, offered $5 million in an attempt to settle all claims. Plaintiffs rejected that offer. Florida Power and the plaintiffs engaged in informal settlement discussions, which terminated on December 22, 1998. As a result of the plaintiffs’ claims, management has identified a probable range of $5 million to $100 million with no amount within that range a better estimate of probable loss than any other amount; accordingly, Florida Power has accrued $5 million. In December 1999, Florida Power also recorded an accrual of $4.8 million for legal fees associated with defending its position in these proceedings. There can be no assurance that this litigation will be settled, or if settled, that the settlement will not exceed $5 million. Additionally, the ultimate outcome, if litigated, cannot presently be determined. Advanced Separation Technologies (“AST”) — In 1996, Florida Progress sold its 80% interest in AST to Calgon Carbon Corporation (“Calgon”) for net proceeds of $56 million in cash. In January 1998, Calgon filed a lawsuit against Florida Progress and the other selling shareholder and amended it in April 1998, alleging misstatement of AST’s 1996 revenues, assets and liabilities, seeking damages and granting Calgon the right to rescind the sale. The lawsuit also accused the sellers of failing to disclose flaws in AST’s manufacturing process and a lack of quality control. Florida Progress believes that the aggregate total of all legitimate warranty claims by customers of AST for which it is probable that Florida Progress will be responsible for under the Stock Purchase Agreement with Calgon is approximately $3.2 million, and accordingly, accrued $3.2 million in the third quarter of 1999 as an estimate of probable loss. Qualifying Facilities Contracts— Florida Power’s purchased power contracts with qualifying facilities employ separate pricing methodologies for capacity payments and energy payments. Florida Power has interpreted the pricing provision in these contracts to allow it to pay an as-available energy price rather than a higher firm energy price when the avoided unit upon which the applicable contract is based would not have been operated. The owners of four qualifying facilities filed suits against Florida Power in state court over the contract payment terms, and one owner also filed suit in federal court. Three of the state court suits have been settled, and the federal case was dismissed. The most recent case to settle involved Dade County/Dade Cogen. In May 1999, the parties reached an agreement to settle their dispute in its entirety, including all of the ongoing litigation. The definitive settlement agreement was approved by the Dade County Commission in December 1999 and by the FPSC in June 2000. In the remaining state court suit, the trial regarding NCP Lake Power (“Lake”) concluded in December 1998. In April 1999, the judge entered an order granting Lake’s breach of contract claim and ruled that Lake is entitled to receive “firm” energy payments during on-peak hours, but for all other hours, Lake is entitled to the “as-available” rate. The Court also ruled that for purposes of calculating damages, the breach of contract occurred at the inception of the contract. In August 1999, a Final Judgment was entered for Lake for

approximately $4.5 million and Lake filed a Notice of Appeal. Oral argument was heard by the 5th District court of Appeals in September 2000, and in an unusual action, the court suggested that the parties again attempt mediation. The parties have agreed to do so and have attempted to schedule a mutually convenient time. Also in this case, in April 1998, Florida Power filed a petition with the FPSC for a Declaratory Statement that the contract between the parties limits energy payments thereunder to the avoided costs based upon an analysis of a hypothetical unit having the characteristics specified in the contract. In October 1998, the FPSC denied the petition, but Florida Power appealed to the Florida Supreme Court. Management does not expect that the results of these legal actions will have a material impact on Florida Power’s financial position, results of operations or liquidity. Florida Power anticipates that all fuel and capacity expenses, including any settlement amounts incurred as a result of the matters discussed above, will be recovered from its customers. Mid-Continent Life Insurance Company (“Mid-Continent”) — As discussed below, a series of events in 1997 significantly jeopardized the ability of Mid-Continent to implement a plan to eliminate a projected reserve deficiency, resulting in the impairment of Florida Progress’ investment in Mid-Continent. Therefore, Florida Progress recorded a provision for loss on investment of $86.9 million in 1997. Florida Progress also recorded an accrual at December 31, 1997, for legal fees associated with defending its position in current Mid-Continent legal proceedings. In the spring of 1997, the Oklahoma State Insurance Commissioner (“Commissioner”) received court approval to seize control as receiver of the operations of Mid-Continent. The Commissioner had alleged that Mid-Continent’s reserves were understated by more than $125 million, thus causing Mid-Continent to be statutorily impaired. The Commissioner further alleged that Mid-Continent had violated Oklahoma law relating to deceptive trade practices in connection with the sale of its “Extra Life” insurance policies and was not entitled to raise premiums, a key element of Mid-Continent’s plan to address the projected reserve deficiency. While sustaining the receivership, the court also ruled that premiums could be raised. Although both sides appealed the decision to the Oklahoma Supreme Court, those appeals were withdrawn in early 1999. In December 1997, the receiver filed a lawsuit against Florida Progress, certain of its directors and officers, and certain former Mid-Continent officers, making a number of allegations and seeking access to Florida Progress’ assets to satisfy policyholder and creditor claims. In April 1998, the court granted motions to dismiss the individual defendants, leaving Florida Progress as the sole remaining defendant in the lawsuit. A new Commissioner was elected in November 1998 and has stated his intention to work with Florida Progress and others to develop a plan to rehabilitate Mid-Continent rather than pursue litigation against Florida Progress. Based on data through December 31, 1998, Florida Progress’ actuarial estimate of the additional assets necessary to fund the reserve, after applying Mid-Continent’s statutory surplus is in the range of $100 million. The amount put forth by the actuary hired by the former Commissioner was in the range of $350 million. Florida Progress believes that any estimate of the projected reserve deficiency would affect only the assets of Mid-Continent, because Florida Progress has legal defenses to any claims asserted against it. Florida Progress is working with the new Commissioner to develop a viable plan to rehabilitate Mid-Continent, which would include the sale of that company or assumption of its policies. In January 1999, five Mid-Continent policyholders filed a purported class action against Mid-Continent and the same defendants named in the case filed by the former Commissioner. The complaint contains substantially the same factual allegations as those made by the former Commissioner. The suit asserts “Extra Life” policyholders have been injured as a result of representations made in connection with the sale of that policy. The suit seeks actual and punitive damages. On April 17, 2000, Florida Progress filed an answer in the purported policyholder class action. That answer denied all material allegations of the petition. On April 27, 2000, Florida Progress filed an amended answer

and third party petition, which asserted claims for indemnity and contribution against John P. Crawford in his capacity as a prior actuary to Mid-Continent and Lewis & Ellis, Inc., the actuarial firm that designed the Mid-Continent “Extra Life” policy. The Commissioner has filed a motion in the rehabilitation court proceeding to enjoin the policyholder action. Proposals for a plan of rehabilitation were received and opened in June 1999. In October 1999, the new Commissioner signed a Letter of Intent, subject to approval by the Oklahoma District Court, with Iowa-based Life Investors Insurance Company of America, a wholly owned subsidiary of AEGON USA, Inc., concerning the assumption of all policies of Mid-Continent. In a letter of intent in connection with the proposed plan of rehabilitation, Florida Progress agreed to assign all of Mid-Continent’s stock to the receiver, and contribute $10 million to help offset future premium rate increases or coverage reductions, provided that, among other things, Florida Progress receives a full release from liability, and the receiver’s action against Florida Progress is dismissed, with prejudice. The $10 million was proposed to be held in escrow by the Commissioner for a period of 10 years and invested for the benefit of the policyholders. Any proposed premium increases would have been offset by this fund until it was exhausted. The Mid-Continent plan was originally scheduled to be considered by the Oklahoma County District Court in December 1999, but the Court postponed its consideration. Florida Progress accrued an additional provision for loss of $10 million in December 1999. The loss was more than offset by the recognition of tax benefits of approximately $11 million, related to the excess of the tax basis over the current book value of the investment in Mid-Continent, and thus, did not have a material impact on Florida Progress’ consolidated financial position, results of operations, or liquidity. This benefit had not been recorded earlier due to uncertainties associated with the timing of the tax deduction. The Court ordered the filing of new proposals by May 22, 2000. The Commissioner recommended the proposal submitted by American Fidelity Assurance Company (“American Fidelity”). In September 2000, the Oklahoma County District Court began a hearing to approve the rehabilitation plan proposed by the Oklahoma Insurance Commissioner, under which American Fidelity would acquire Mid-Continent’s policies. On September 26, 2000, the Court approved acquisition of the Mid-Continent policies by American Fidelity. In addition, Florida Progress reached a settlement to resolve the policyholder litigation relating to Mid-Continent. Under the terms of the settlement, Florida Progress agreed to contribute an additional $7.5 million, plus attorney’s fees and expenses up to $4.875 million, towards protecting policyholders in the event that future premium rate increases are necessary. Florida Progress also agreed with the Commissioner to provide approximately $.6 million to fund welfare benefits for retired Mid-Continent employees. Accordingly Florida Progress accrued $12.8 million in September 2000. The settlement of the policyholder litigation is subject to approval by the Oklahoma County District Court. The additional $7.5 million brings the total contribution by Florida Progress to $17.5 million. In the event that future premium rate increases are necessary, the $17.5 million, plus interest accrued, will offset increases until the fund is exhausted. Dismissal of the 1997 lawsuit filed by the receiver is part of the settlement. The policyholder case has been transferred to the rehabilitation court. Share Exchange Litigation — In August 1999, Florida Progress announced that it entered into an Agreement and Plan of Exchange with Carolina Power & Light Company (“CP&L”), and CP&L Energy, Inc., a wholly owned subsidiary of CP&L. A lawsuit was filed in September 1999, against Florida Progress and its directors seeking class action status, an unspecified amount of damages and injunctive relief, including a declaration that the agreement and plan of exchange was entered into in breach of the fiduciary duties of the Florida Progress board of directors, and enjoining Florida Progress from proceeding with the share exchange. The complaint also seeks an award of costs and attorney’s fees. In September, Florida Progress and the individual defendants filed an answer to the complaint, which denied all material allegations of the complaint. Florida Progress believes this suit is without merit and intends to vigorously defend itself against this action. Management does not expect that the result of this legal action will have a material adverse impact on Florida Progress’ financial position, results of operations or liquidity. Accordingly, no provision for loss has been recorded pertaining to this matter.

		Easement Litigation — In December 1998, Florida Power was served with a class action lawsuit seeking damages, declaratory and injunctive relief for the alleged improper use of electric transmission easements. The plaintiffs contend that the licensing of fiber optic telecommunications lines to third parties or telecommunications companies for other than Florida Power’s internal use along the electric transmission line right-of-way exceeds the authority granted in the easements. In June 1999, plaintiffs amended their complaint to add Progress Telecommunications Corporation, an indirect wholly owned subsidiary of Florida Progress, as a defendant and to add counts for unjust enrichment and constructive trust. In January 2000, the court conditionally certified the class statewide. In a mediation held in March 2000, the parties reached a tentative settlement of this claim, which is subject to the resolution of procedural issues relating to class matters as well as court approval. Management does not expect that the results of these legal actions will have a material impact on Florida Progress’ financial position, results of operations or liquidity. Accordingly, no provision for loss has been recorded pertaining to this matter.
		Other Legal Matters — Florida Progress and Florida Power are involved in various other claims and legal actions arising in the ordinary course of business. In the opinion of management, the ultimate disposition of these matters will not have a material adverse effect upon either company’s consolidated financial position, results of operations or liquidity.
5)		In the opinion of management, the accompanying financial statements include all adjustments deemed necessary to summarize fairly and reflect the financial position and results of operations of Florida Progress and Florida Power for the interim periods presented. Quarterly results are not necessarily indicative of results for the full year. These financial statements should be read in conjunction with the financial statements and notes thereto in the combined Annual Report on Form 10-K of Florida Progress and Florida Power for the year ended December 31, 1999 (the “1999 Form 10-K”).

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

OPERATING RESULTS

Florida Progress’ consolidated earnings for the three-month period ended September 30, 2000 were $150.3 million, or $1.53 per share, compared to earnings of $137.3 million, or $1.40 per share, for the same period in 1999. For the nine-month period ended September 30, 2000, Florida Progress’ consolidated earnings were $336.7 million, or $3.42 per share, a 19 percent increase over earnings of $281.5 million, or $2.87 earnings per share, reported for the same period in 1999.

Earnings for the quarter include after-tax charges of approximately $13 million or $.13 per share related to a proposed lawsuit settlement agreement and merger transaction costs. In addition, third-quarter results include a reduction in income taxes of $16.8 million and $32.5 million, respectively, for the three and nine-month periods ended September 30, 2000. For the same three and nine-month periods in the prior year, results included after-tax charges of $5 million for merger transaction costs and a $6.4 million income tax reduction, which also increased net income for these periods. Excluding these items, Florida Progress’ operating earnings for the third quarter were $146.5 million, or $1.49 per share, compared with $136.3 million, or $1.39 per share, for the third quarter last year.

A reconciliation of Florida Progress’ 2000 third quarter earnings per share is as follows:

1999 Florida Progress Third Quarter EPS					$	1.40
	Florida Power
		Sales of electricity & other revenues	(.02	)
		Operations & maintenance	.06
		Depreciation & other, net	(.03	)
						.01
	Electric Fuels					.19
	Corporate & other					(.07	)
2000 Florida Progress Third Quarter EPS					$	1.53

FLORIDA POWER CORPORATION

Florida Power, reported earnings of $1.24 per share, for the third quarter of 2000, up slightly compared with $1.23 per share for the same period last year. Florida Power’s earnings for the nine-month period ended September 30, 2000 were $2.69 per share compared to earnings of $2.54 per share for the same period last year.

Florida Power’s total retail kilowatt-hour sales increased .7 percent and 3.8 percent, respectively, during the three and nine month periods of 2000, compared with 1999. During the quarter, Florida Power served approximately 30,000 new customers when compared with the same period last year. However, lower sales to industrial customers partially offset the benefit of strong customer growth. Lower industrial sales resulted primarily from reduced demand from phosphate customers. Higher retail base revenues were offset by lower wholesales base revenues, which resulted from the expiration and restructuring of certain contracts.

Operation and maintenance expense was down $9.3 million and $17.7 million during the quarter and year-to-date periods. Most of the decrease is due primarily to the timing of planned maintenance and reliability projects, as well as lower employee benefit costs.

Florida Power’s depreciation and amortization expense increased $48.7 million for the quarter due primarily to $44.4 million of accelerated amortization of the Tiger Bay regulatory asset. The additional amortization did not affect net income because it was offset by the recognition of $44.4 million of revenues deferred pursuant to a regulatory order in the fourth quarter of 1999.

DIVERSIFIED OPERATIONS

Revenues for diversified operations increased $87 million and $253 million, respectively, for the three and nine months ended September 30, 2000 compared to the same periods in the prior year. Cost of sales for Florida Progress’ diversified operations were $115.5 million and $302.3 million higher for the three and nine months ended September 30, 2000 compared to the same periods last year. The increases were due primarily to acquisitions in Electric Fuels’ Rail Services group and increased synfuel operations.

The sale of synthetic fuel results in a loss before the benefit of alternative fuel tax credits. Primarily because of the increase in sales of synthetic fuel for the three and nine month periods ended September 30, 2000 as compared to the same periods in the prior year, overall diversified operations gross profit declined in both periods of the current year.

ELECTRIC FUELS CORPORATION

Electric Fuels earned $.43 per share, in the third quarter, compared with $.24 per share during the same period last year. Electric Fuels’ earnings include a reduction to income taxes of $.17 per share and $.36 per share for the three and nine months ended September 30, 2000 compared to $.06 per share for both the quarter and year-to-date periods last year.

This reduction, as required to reflect interim period tax allocation, relates to the timing of the recognition of alternative fuel tax credits. One effect of the reduction is the recognition of the benefit of alternative fuel tax credits during an interim period different from the period when the synthetic fuel is sold and the cost of sales is recognized. The company’s annual results are not affected.

Earnings at the Energy & Related Services group were up $25.5 million and $62.3 million for the three and nine months ended September 30, 2000 over the same periods in 1999, of which approximately $11 million and $29 million was due to the timing of the recognition of alternative fuel tax credits. The remaining amount of the increase for both periods was due primarily to higher synthetic fuel sales, and the related alternative fuel tax credits, compared with last year.

Income tax expense for the nine month period ended September 30, 2000 reflects the Company’s estimate of its consolidated annual effective tax rate. The rate differs from the U.S. Federal statutory rate of 35% primarily because of the estimated amount of alternative fuel tax credits expected to be generated during 2000.

Electric Fuels’ share of third-quarter sales of the coal-based synthetic fuel were approximately 1.5 million tons, triple the tons sold during the same period last year. Electric Fuels’ share of total synthetic fuel sales for 2000 are expected to be approximately 6 million tons compared with 1.6 million tons sold in 1999.

Earnings from the Inland Marine Transportation group of $3.1 million and $7.9 million were $.2 million lower and $1.7 million higher for the three and nine-month periods ended September 30, 2000 compared to the same periods in 1999. The lower earnings for the quarter were due primarily to higher diesel fuel costs which were up over 60 percent over the same period last year. Earnings for the nine-month period were higher compared to last year due primarily to a larger barge fleet and more favorable weather conditions which more than offset the effect of higher diesel fuel prices.

Earnings from the Rail Services group were essentially zero for the quarter and $2.9 million for the nine month period, down $5.5 million and $8.9 million for these periods when compared to 1999. Rail Services continues to be impacted by weak demand from the major railroad carriers for mechanical and track work and a decline in new railcar construction. In addition, higher interest expense has also contributed to lower earnings.

CORPORATE & OTHER

Corporate and other expenses were $.07 per share and $.12 per share higher during the three and nine months ended September 30, 2000 compared with 1999 due primarily to costs associated with a proposed lawsuit settlement and costs associated with the business combination with Carolina Power & Light. The settlement relates to Mid-Continent and a policyholder class action lawsuit against Florida Progress, and is subject to court approval.

2000 EARNINGS OUTLOOK

For the nine-months ended September 30, 2000, Florida Progress’ operating earnings are $3.21 per share. This amount excludes non-recurring charges of $.15 per share and the interim period effective tax rate adjustments. The current estimate of year 2000 operating earnings per share is between $3.65 and $3.70 per share. The increase over the company’s previous estimate of $3.60 per share is due primarily to a projected increase in synthetic fuel sales for 2000, partially offset by lower expected earnings from its Rail Services group. Florida Progress’ estimate is about 15 percent over 1999’s operating earnings per share of $3.18, which excludes a $.03 per share non-recurring gain.

LIQUIDITY AND CAPITAL RESOURCES

Florida Progress’ capital expenditures are expected to be funded primarily from internally generated funds and debt. During the first nine months of 2000, $186.1 million was spent on the Florida Power construction program and $65.6 million was spent in diversified operations.

The share exchange agreement with CP&L limits Florida Progress’ total capital expenditures, absent CP&L approval. (See prior discussion of this matter in the 1999 Form 10-K, Item 7 “MD&A — Future Cash Requirements.”)

Florida Power’s ratio of earnings to fixed charges was 4.50 for the twelve months ended September 30, 2000. (See Exhibit 12 filed herewith).

In April 1999, FPC Capital I, an affiliated business trust, completed the sale of $300 million of Cumulative Quarterly Income Preferred Securities, which were initially offered to the public at $25 per share. The securities are, in effect, fully and unconditionally guaranteed by Florida Progress. Quarterly distributions are payable at an annual rate of 7.10%. Florida Progress used the net proceeds to repay a portion of certain outstanding short-term bank loans and commercial paper and for other general corporate purposes. (See Note 3 to the Financial Statements.)

In March 2000, Florida Power established an uncommitted bank bid facility allowing it to borrow and re-borrow and have loans outstanding at any time, up to $100 million. The facility was established to temporarily supplement commercial paper borrowings, as needed. As of September 30, 2000, $25 million was outstanding under this bid facility.

In April 2000, Progress Capital Holdings Inc. (“PCH”) updated its private medium-term note (“MTN”) program and now has $400 million of MTNs available for issuance.

PCH has uncommitted bank bid facilities authorizing it to borrow and re-borrow, and have outstanding at any time, up to $300 million. These facilities are used to temporarily supplement commercial paper borrowings, as needed. The bank bid facilities were not drawn on as of September 30, 2000.

In July 2000, PCH established a new $200 million, 364-day revolving bank credit facility. The facility is used to support the issuance of commercial paper. PCH has two additional revolving bank credit facilities: a 364-day, $100 million facility and a $300 million long-term facility that expires in 2003. In connection with the closing of the new $200 million credit facility, PCH increased its commercial paper program from $400 million to $600 million.

Florida Progress and Florida Power believe their available sources of liquidity will be sufficient to fund their long-term and short-term capital requirements. However, due to the pending share exchange with CP&L, Standard & Poor’s Ratings Services, Moody’s Investors Service and Duff & Phelps Credit Rating Co. have announced they are reviewing the rated securities of Florida Power, PCH and FPC Capital I for a possible ratings downgrade.

OTHER — COMBINATION WITH CP&L ENERGY

Florida Progress mailed a Proxy Statement dated July 5, 2000, to its shareholders of record on June 29, 2000, regarding the Annual Meeting of Shareholders held on August 17, 2000. At the meeting, shareholders approved the amended and restated agreement and plan of exchange among Florida Progress and Carolina Power & Light Company and CP&L Energy, Inc., pursuant to which Florida Progress will become a wholly owned subsidiary of CP&L Energy. (See Part II, Item 4 “Submission of Matters to a Vote of Security-Holders.”) A copy of the Proxy Statement, which shareholders should read because it contains important information, is available, without charge, at the Securities and Exchange Commission’s web site at http://www.sec.gov, or by contacting Florida Progress’ Investor Services at P.O. Box 14042, St. Petersburg, FL 33733.

On July 7, 2000, the FPSC opened a docket to review Florida Power’s earnings including the effects of the combination with CP&L Energy. The FPSC Staff recommendation is due in March, 2001 with a decision expected by the FPSC in late March, 2001. The FPSC does not have the authority to approve or disapprove the combination, and the review is not expected to delay the closing of the combination, which is expected to occur in the second half of November or December 2000.

On July 12, 2000, CP&L’s combination with Florida Progress received approval by the Federal Energy Regulatory Commission (“FERC”) and Department of Justice (See Part II, Item 1, paragraph 5). The FERC order approved the acquisition with the requirement that the companies must make a filing on or before October 15, 2000 (as required under FERC Order 2000), to transfer operational control of their transmission facilities to a regional transmission organization (RTO) on or before December 15, 2001. In October 2000, Florida Power , along with Florida Power & Light Company and Tampa Electric Company, filed with the FERC a comprehensive application for approval of an RTO for peninsular Florida. In its review, the Department of Justice found no adverse effects on competition as a result of the combination.

On October 2, 2000, in preparation for the share exchange between CP&L Energy and Florida Progress, the Notice of Share Exchange and Election Form were mailed to Florida Progress shareholders. If Florida Progress shareholders want to state a preference regarding the mix of shares and cash they wish to receive, their Election Forms must be received by the election deadline. The date of the election deadline is two business days prior to the closing of the share exchange. The closing is currently expected to occur in the second half of November or December 2000, following receipt of the final utility regulatory approval from the SEC. The closing date will be announced in a press release delivered to the Dow Jones News Service and posted on the websites of CP&L Energy and Florida Progress as soon as practicable, but in no event less than five business days prior to the closing.

On October 9, 2000, the Insurance Commissioner of the State of Oklahoma issued an order granting Florida Progress’ request for an exemption concerning the completion of the business combination between Florida Progress and CP&L Energy, Inc. The order exempts CP&L Energy from the requirements of the Oklahoma Insurance Code that otherwise would have required the Commissioner’s approval of the change in control of Mid-Continent Life Insurance Company due to the combination with CP&L Energy.

FORWARD-LOOKING STATEMENTS

This report contains certain forward-looking statements including: the expected closing date of the combination with CP&L Energy; the expected liability for cleaning up certain environmental sites; the impact of various legal proceedings on Florida Progress’ financial condition; the effect of interest rate fluctuations on pretax earnings over the next fiscal year; and the 2000 earnings outlook for Florida Progress.

These statements, and any other statements contained in this report that are not historical facts, are forward-looking statements that are based on a series of projections and estimates regarding the economy, the electric utility business and Florida Progress’ other businesses in general, and on factors which impact Florida Progress directly. The estimates relate to the pricing of services, the actions of regulatory bodies, and the effects of competition. The words “should,” “estimates,” “believes,” “expects,” “anticipates,” “plans” and “intends,” and variations of such words, and similar expressions, are intended to identify forward-looking statements that involve risks and uncertainties.

Key factors that have a direct impact on the ability to attain these estimates include continued annual growth in customers; successful cost containment efforts; actions of various other regulatory authorities and the efficient operation of Florida Power’s existing and future generating units. Other key factors include the continued successful operation of synthetic fuel plants, market acceptance of synthetic fuel, competition from competing products,

impact of environmental regulations on potential buyers, favorable determinations by the Internal Revenue Service, and economic and weather conditions affecting the demand for, and supply of, not only electricity but also Electric Fuels’ barge, rail and other services.

Also, in developing its forward-looking statements, Florida Progress and Florida Power have made certain assumptions relating to productivity improvements and the favorable outcome of various commercial, legal and regulatory proceedings and the lack of disruption to its markets.

If Florida Progress’ and Florida Power’s estimates regarding the economy, the electric utility business and other factors differ materially from what actually occurs, or if various legal or regulatory proceedings have unfavorable outcomes, then actual results could vary significantly from the performance projected in the forward-looking statements.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

INTEREST RATE RISK

Florida Progress is exposed to changes in interest rates primarily as a result of its borrowing activities.

A hypothetical 66 basis point increase in interest rates (10% of Florida Progress’ weighted average interest rate at September 30, 2000) affecting Florida Progress’ variable rate debt ($832.6 million at September 30, 2000) would have an immaterial effect on Florida Progress’ pre-tax earnings over the next fiscal year. A hypothetical 10% decrease in interest rates would also have an immaterial effect on the estimated fair value of Florida Progress’ long-term debt at September 30, 2000.

COMMODITY PRICE RISK

Currently at Florida Power, commodity price risk due to changes in market conditions for fuel and purchased power are recovered through the fuel adjustment clause, with no effect on earnings.

Electric Fuels is exposed to commodity price risk through coal and synfuel sales, the scrap steel market and fuel for its marine transportation business. A 10-percent change in the market price of those commodities would have an immaterial effect on the earnings of Florida Progress.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

1.		State of Oklahoma, ex rel. John P. Crawford, Insurance Commissioner v. Mid-Continent Life Insurance Company, District Court of Oklahoma County, State of Oklahoma, Case No. CJ-97-2518-62
		State of Oklahoma, ex rel, John P. Crawford, Insurance Commissioner as Receiver for Mid-Continent Life Insurance Company v. Florida Progress Corporation, a Florida corporation, Jack Barron Critchfield, George Ruppel, Thomas Steven Krzesinski, Richard Korpan, Richard Donald Keller, James Lacy Harlan, Gerald William McRae, Thomas Richard Dlouhy, Andrew Joseph Beal and Robert Terry Stuart, Jr., District Court of Oklahoma County, State of Oklahoma, Case No. CJ-97-2518-62 (part of the same case noted above).
		Michael Farrimond, Pamela S. Farrimond, Angela Fry, Jowhna Hill, and Barbara Hodges, for themselves and all others similarly situated v. Florida Progress Corporation, a Florida corporation, Jack Barron Critchfield, George Ruppel, Thomas Steven Krzesinski, Richard Korpan, Richard Donald Keller, James Lacy Harlan, Gerald William McRae, Thomas Richard Dlouhy, Andrew Joseph Beal and Robert Terry Stuart, Jr., District Court of Oklahoma County, State of Oklahoma, Case No. CJ-99-130-65
		See prior discussion of this matter in the 1999 Form 10-K, Item 3, paragraph 5; the Form 10-Q for the quarter ended March 31, 2000, Part II, Item 1, paragraph 5; and the Form 10-Q for the quarter ended June 30, 2000, Part II, Item 1, paragraph 2. In September 2000, the Oklahoma County District Court began a hearing to approve the rehabilitation plan proposed by Oklahoma Insurance Commissioner Carroll Fisher, under which American Fidelity Assurance Company would acquire Mid-Continent’s policies. On September 26, 2000, the Court approved acquisition of the Mid-Continent policies by American Fidelity. In addition, Florida Progress reached a settlement to resolve the Farrimond litigation against it relating to Mid-Continent. Under the terms of the settlement, Florida Progress agreed to contribute an additional $7.5 million towards protecting policyholders in the event that future premium increases are necessary, plus attorney’s fees and expenses up to $4.875 million. The settlement is subject to approval by the Oklahoma County District Court. The additional $7.5 million brings the total contribution by Florida Progress to $17.5 million. Florida Progress had already agreed in October 1999 to contribute $10 million as part of a settlement with Commissioner Fisher in connection with the rehabilitation plan he proposed. In the event that future premium rate increases are necessary, the $17.5 million, plus interest accrued, will offset increases until the fund is exhausted. Florida Progress also agreed with the Commissioner to provide approximately $.6 million to fund welfare benefits for retired Mid-Continent employees. Dismissal of State of Oklahoma, ex rel John P. Crawford v. Florida Progress et al is part of the settlement. The Farrimond case has been transferred to the rehabilitation court. (See Note 4 to the Financial Statements – Contingencies – Mid-Continent Life Insurance Company.)
2.		In Re: Joint Petition for Determination of Need for an Electrical Power Plant in Volusia County by the Utilities Commission, City of New Smyrna Beach, and Duke Energy New Smyrna Beach Power Company Ltd., L.L.P. Public Service Commission, Docket No. 981042-EM.
		See prior discussion of this matter in the 1999 Form 10-K, Item 3, paragraph 7, and Form 10-Q for the quarter ended March 31, 2000, Part II, Item 1, paragraph 2. In September 2000, the Florida Supreme Court denied the appelees motions for rehearing of the Court’s April 2000 ruling in favor of Florida Power.

3. Sanford Gasification Plant Site, Sanford, Florida (“Sanford Site”). See prior discussion of this matter in the 1999 Form 10-K, Item 3, paragraph 11; the Form 10-Q for the quarter ended March 31, 2000, Part II, Item 1, paragraph 3; and the Form 10-Q for the quarter ended June 30, 2000, Part II, Item 1, paragraph 3. A draft consent decree regarding the cleanup of the soil was received in September. The PRP group is currently reviewing that draft. The PRP group also finalized a second Participant Agreement that assigned approximately 43% of the total cleanup costs to Florida Power for future phases of the cleanup effort. (See Note 4 to the Financial Statements – Contingencies – Contaminated Site Cleanup.) 4. In the Matter of CP&L Holdings, Inc. on Behalf of its Public Utility Subsidiaries and Florida Progress Corporation on behalf of its Public Utility Subsidiaries, Federal Energy Regulatory Commission Docket Nos. EC00-55-000 and ER00-1520-000 See prior discussion of this matter in the Form 10-Q for the quarter ended June 30, 2000, Part II, Item 1, paragraph 5. In August 2000, PG&E National Energy Group, PG&E Generating Company and PG&E Energy Trading-Power, L.P. filed motions with the Federal Energy Regulatory Commission (FERC) in support of Tampa Electric Company’s (TECO’s) Request for Clarification or Rehearing of the FERC order, which authorized the combination of Florida Progress and CP&L Energy with the requirement that the companies make a filing on or before October 15, 2000 to transfer operational control of their transmission facilities. Also in August, the City of Fayetteville, North Carolina filed a Request for Rehearing and a separate Request for Reconsideration with the FERC. On August 23, 2000, the FERC issued a “tolling order” granting rehearing solely for the limited purpose of further consideration. Rehearing requests are sometimes “tolled” in this manner to allow FERC additional time in which to rule. In October 2000, Tampa Electric Company filed with the FERC a notice of withdrawal of its request for clarification or rehearing. In connection therewith, Florida Power, along with Florida Power & Light Company and TECO, also filed with the FERC in October a comprehensive application for approval of an RTO for peninsular Florida. (See Part I, Item 2, Management’s Discussion & Analysis – Other – Combination with CP&L Energy.) 5. In re Form A for the Proposed Merger of FLORIDA PROGRESS CORPORATION with CAROLINA POWER & LIGHT [sic] ENERGY, INC. Insurance Commissioner, State of Oklahoma, Case No. 00-0723-TRN. On October 9, 2000, the Insurance Commissioner of the State of Oklahoma issued an order granting Florida Progress’ request for an exemption concerning the completion of the business combination between Florida Progress and CP&L Energy, Inc. The order exempts CP&L Energy from the requirements of the Oklahoma Insurance Code that otherwise would have required the Commissioner’s approval of the change in control of Mid-Continent Life Insurance Company due to the combination with CP&L Energy. 6. In re: Review of Florida Power Corporation’s earnings, including effects of proposed acquisition of Florida Power Corporation by Carolina Power & Light. Florida Public Service Commission Docket No. 000824-EI. On July 7, 2000, the FPSC opened a docket to review Florida Power’s earnings including the effects of the combination with CP&L Energy. The FPSC Staff recommendation is due in March 2001 with a decision expected by the FPSC in late March 2001. The FPSC does not have the authority to approve or disapprove the combination, and the review is not expected to delay the closing of the combination, which is expected to occur in the second half of November or December 2000.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS

The Annual meeting of Shareholders of Florida Progress was held on August 17, 2000. There were 98,614,831 shares of common stock entitled to vote. The following matters were voted upon at the meeting:

1) Election of Directors

Class I — Terms expiring in 2003

	Votes		Votes
	For		Withheld
Michael P. Graney		85,153,923		2,874,534
Joan D. Ruffier		86,109,025		1,919,432
Robert T. Stuart		85,757,819		2,270,638

2) Approval of the Amended and Restated Agreement and Plan of Exchange, dated as of August 22, 1999, as amended and restated as of March 3, 2000, by and among Florida Progress, Carolina Power & Light Company and CP&L Energy, Inc., formerly known as CP&L Holdings, Inc., including the related Plan of Share Exchange.

For the proposal:			74,579,379
Against the proposal:			2,370,079
Abstentions:			555,280
Broker non-votes:			10,523,719

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits:

		Florida	Florida
Number	Exhibit	Progress	Power
12	Statement Regarding Computation of Ratioof Earnings to Fixed Charges for FloridaPower		X
27.(a)	Florida Progress Financial Data Schedule	X
27.(b)	Florida Power Financial Data Schedule		X
X =	Exhibit is filed for that respective company

(b)		Reports on form 8-K:
		During the third quarter of 2000, Florida Progress and Florida Power filed the following combined reports on Form 8-K:
		Form 8-K dated (date of earliest event reported) July 11, 2000, as filed with the SEC on July 11, 2000, reporting under Item 5 “Other Events” the opening of a new Florida Public Service Commission Docket to review Florida Power’s earnings, including the effects of the business combination between Florida Progress and CP&L Energy.

Form 8-K dated (date of earliest event reported) July 12, 2000, as filed with the SEC on July 14, 2000, reporting under Item 5 “Other Events” the receipt of the approval of the Federal Energy Regulatory Commission, and the expiration of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act, in connection with the pending business combination transaction between Florida Progress and CP&L Energy. Form 8-K dated (date of earliest event reported) August 1, 2000, as filed with the SEC on August 2, 2000, reporting under Item 5 “Other Events” Florida Progress’ and Florida Power’s second quarter 2000 earnings. Form 8-K dated (date of earliest event reported) August 16, 2000, as filed with the SEC on August 17, 2000, reporting under Item 5 “Other Events” the approval by Florida Progress and CP&L shareholders of the proposed combination between the two companies. Form 8-K dated (date of earliest event reported) August 31, 2000, as filed with the SEC on August 31, 2000, reporting under Item 5 “Other Events” the filing of an intervention with the SEC by Edwin Dove in connection with the proposed combination with CP&L. Form 8-K dated (date of earliest event reported) September 27, 2000, as filed with the SEC on September 27, 2000, reporting under Item 5 “Other Events” that a settlement had been reached to resolve policyholder litigation relating to Mid-Continent Life Insurance Company.

In addition, Florida Progress and Florida Power filed the following combined report on Form 8-K subsequent to the third quarter 2000:

Form 8-K dated (date of earliest event reported) October 25, 2000, as filed with the SEC on October 25, 2000, reporting under Item 5 “Other Events” Florida Progress’ and Florida Power’s third quarter 2000 earnings.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

		FLORIDA POWER CORPORATION
Date:	November 1, 2000	By: /s/ John Scardino, Jr. ____________________________________ John Scardino, Jr. Vice President and Controller
Date:	November 1, 2000	By: /s/ Edward W. Moneypenny ___________________________________ Edward W. Moneypenny Senior Vice President and Chief Financial Officer

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

		FLORIDA POWER CORPORATION
Date:	November 1, 2000	By: /s/ John Scardino, Jr. ____________________________________ John Scardino, Jr. Vice President and Controller
Date:	November 1, 2000	By: /s/ Jeffrey R. Heinicka ___________________________________ Jeffrey R. Heinicka Senior Vice President and Chief Financial Officer

Exhibit Index

		Florida		Florida
Number	Exhibit	Progress		Power
12	Statement Regarding computation of Ratio of Earnings to Fixed Charges for Florida Power.			X
27.(a)	Florida Progress Financial Data Schedule		X
27.(b)	Florida Power Financial Data Schedule			X
X =	Exhibit is filed for that respective company.

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