Progress Energy Sells Natural Gas Businesses
Progress Energy has announced that it entered into an agreement to sell Winchester Energy and its associated natural gas businesses to a wholly owned subsidiary of Texas-based EXCO Resources Inc. for $1.2 billion in cash.
There is essentially no debt at Winchester Energy; therefore, proceeds from the sale will be available to reduce holding company debt and for other corporate purposes. The transaction is expected to close in fall 2006 and is subject to customary closing provisions and adjustments.
"We view this strategic action as very positive for Progress Energy," said Bob McGehee, chairman and CEO, Progress Energy. "The Winchester Energy and Progress Ventures team have successfully grown this business in recent years. Over the past year, we have explored several alternatives to extract value from this business and have decided that a full exit at this opportune time is the right choice. When combined with our previously announced sale of nonregulated assets, this will strengthen our balance sheet and significantly reduce the overall risk profile of the company," said McGehee.
So far in 2006, the company has announced divestitures totaling more than $1.7 billion, all of which are expected to close before the end of this year. These divestitures are part of the company's previously announced commitment to lower holding company debt by $1.3 billion by the end of 2007.
As a result of this transaction, Progress Energy expects to record a one-time after-tax gain of $400 million, or $1.60 per share, in the third quarter of 2006. After-tax cash proceeds are expected to be $850 million.
"While we are very pleased with the results of this transaction, we recognize that on a stand-alone basis it has a negative impact on core ongoing earnings of $90 million, or 36 cents per share, for the full year 2006," McGehee said. "However, it represents one more step in the overall plan for the company, and we are currently pursuing other strategic alternatives that would potentially offset a significant portion of this core ongoing earnings negativity. We anticipate that our 2006 core ongoing earnings will remain in the previously announced range of $2.45 to $2.65 per share, assuming sufficient progress on additional strategic alternatives this year. "When looking forward to 2007, the company anticipates that core ongoing earnings will benefit significantly from a full year of interest savings as well as from the recurring effects of previously announced sales and expected additional strategic alternatives."
Progress Energy, headquartered in Raleigh, is a Fortune 250 diversified energy company with more than 24,000 megawatts of generation capacity and $10 billion in annual revenues. The company's holdings include two electric utilities serving approximately 3 million customers in North Carolina, South Carolina and Florida. Progress Energy also includes nonregulated operations covering energy marketing and natural gas exploration.
Progress Energy is the 2006 recipient of the Edison Electric Institute's Edison Award, the industry's highest honor, in recognition of its operational excellence.
In 2005, the company also received the prestigious J.D. Power and Associates Founder's Award for dedication, commitment and sustained improvement in customer service.
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