Progress Energy hit by court ruling for fuel deal agreed to by predecessor Florida Progress

Sometimes you can get nipped for events long before your arrival... Progress Energy Inc. released their third quarter earnings Friday that would have produced $342 million or $1.22 a share but instead yielded $247 million or 88 cents a share.

Why? Largely because of a big charge the electric company took related to a breach-of-contract lawsuit that started at Florida Progress -- well before Progress Energy even bought the St. Petersburg energy company. Progress was sued for breach of contract by U.S. Global, a Fort Lauderdale investment company that claimed it was entitled to a commission for selling up to 50 percent of Progress Energy's interest in synthetic fuel facilities under an agreement reached with Florida Progress, according to a Dow Jones story. Progress sold the facilities without using U.S. Global as a broker. A jury awarded U.S. Global $78 million in damages earlier this month.

Beginning in 1998, a U.S. Global business now called USG Synfuel co-developed four coal-based synthetic fuel facilities. These facilities mix coal with a chemical reagent to trigger a chemical change in the coal creating a new synthetic fuel with improved combustibility and pollution characteristics. Companies like Florida Progress, and successor Progress Energy, used the synthetic fuel mostly for its tax credits. So when the tax credits ran out, the company's interest in producing synthetic fuel also waned.

The case appears to be U.S. Global, LLC v. Progress Energy, Inc. et alfiled in the Circuit Court for Broward County, Fla., in March 2003. There are several related pieces of litigation.

In a conference call with analysts (here is the transcript), Progress Energy CEO Bill Johnson said the company may appeal the Florida court decision. Progress Energy discontinued and exited the synthetic fuels business in 2007. Said Johnson:

"This is a legacy issue associated with the synthetic fuels facilities required by Florida Progress before the merger of nearly a decade ago. So we’re obviously disappointed in this verdict and the award...  We intend to file post-trial motions and are evaluating our grounds for an appeal."

-- Robert Trigaux, Times Business Columnist

Publix holds its own among nation's top ten private companies

Wake up and good morning. Publix Super Markets remains one of the top 10 private companies in America, according to Forbes magazine annual rankings. But of the nation's top 25 private companies, Forbes' 25th annual survey reflects plenty of instability. Seven companies on this year’s list are operating in Chapter 11 bankruptcy. (Photo: Inside a Publix store, St. Petersburg Times files.)

The top 10, in order, are: Cargill, Koch Industries, Chrysler, GMAC Financial Services, Bechtel, Mars, HCA, PricewaterhouseCoopers, Publix Super Markets and Ernst & Young.

Publix, based in Lakeland, boasts $24 billion in annual revenues and an eye-popping 144,000 employees. It is the only one of the top 10 based in Florida but you recognize most of the other companies as active in the state.

Get beyond Publix and Florida enjoys a few other good-sized private businesses. Listed in order of their rank on the Forbes list (which includes only firms with revenue greater than $2 billion) are:

* 30  JM Family Enterprises, Deerfield Beach, diversified auto manufacturing/distribution. Revenue: $10 billion, Employees: 4,000. (Includes Southeast Toyota.) Here are details from Forbes.

* 38  Southern Wine & Spirits, Miami, beverage/wine/distiller supplier. Revenue: $8.4 billion, Employees 11,000. Here are details from Forbes.

* 80  Oxbow Group, West Palm Beach, nonmetallic mineral mining. Revenue: $4.5 billion, Employees: 1,100. (Run by billionaire Bill Koch.) Here are details from Forbes.

-- Robert Trigaux, Times Business Columnist

  

PSC showdown Friday: Can Progress Energy charge customers upfront for nuke plant costs?

Wake up and good morning. What once seemed a slam dunk deal for Progress Energy -- building a new nuclear power plant complex in rural Levy County north of Tampa Bay -- is now very much up in the air. Tomorrow, Friday (Oct. 16), the Florida Public Service Commission is set to vote on whether to approve Progress Energy and and FPL's request to charge their customers in advance for their plans to build four new nuclear reactors in Florida. (Progress Energy plans two in Levy County (see rendering) and FPL also seeks two in South Florida.)

Estimated (and no doubt still escalating) costs for these plants: $35 billion. Florida is one of a few states that allows utilities to pass the planning costs such as design and engineering costs for nuclear reactors as they’re incurred as an incentive to build the plants years before obtaining the federal licenses required.

But resistance is growing. Critics say investors, not consumers, should bear more of the risk of nuclear power plants. And economic circumstances have stalled some of the initial momentum for new nuclear power. Enough so to ask: will Progress Energy itself ultimately decide the nuke plants are no longer worth the growing controversy in the state?

Customers are not happy with Progress Energy Florida, especially now that electricity rates have soared so rapidly. And the President George Bush era of "let 'er rip" support of new nuclear power is fading. Or at least slowing.

This week, a former federal energy regulator, environmentalists and others asked Florida leaders to delay their pursuit of nuclear power in light of lower electricity demand and the rising costs of building new reactors, the Florida Sun-Sentinel reports. The group, the Southern Alliance for Clean Energy, issued the following statement:

"The Florida PSC should not vote Friday to rubber stamp staff recommendations that would impose a $200 million front-end bite on ratepayers before a single kilowatt of power is produced by new nuclear reactors, particularly since the economic slowdown has already eliminated the need for
four nuclear reactors on the scale that both Progress and FPL are proposing."

I recall the first visit in 2006 to the St. Petersburg Times by Progress Energy Florida chief (at the time) Jeff Lyash to explain its reasons for seeking a new nuclear power plant. Lyash's message? "It's important to have a new nuclear plant in Florida." Here's a story on that visit.

What he meant, of course, is that Florida was a growing state and there will be big energy demands in the future to be met. Building nukes takes a decade or more, so it's time to get going, he said. (Photo: A main intersection in rural Levy County near the proposed Progress Energy nuke plant site. By Keri Wiginton, St. Petersburg Times.)

Since then, issues have become muddy. The 2006 boom times quickly fizzled into a deep recession which raised questions about the overall electricity needs for the state. Progress Energy, like many other utilities seeking new nukes, quoted an initial price tag for the nuke plants that quickly escalated and eventually tripled, punching some big holes in the company's credibility in selling the idea.

Then it became clear that much of the plant's extensive upfront costs would be paid for via higher rates charged customers who would not see the payback (if ever, for older customers) until 2017 or perhaps later. And finally, the alternative energy industry gained ground -- backed by both Florida Gov. Charlie Crist and President Barack Obama -- reviving debates on what forms of energy and conservation will prove most cost effective and environmentally friendly.

And it all lands in the Florida PSC's lap in 24 hours.

-- Robert Trigaux, Times Business Columnist

 

Tampa's Walter Energy embraces metallurigical coal as global economy slows

Wake up and good morning. Funny how things change so fast in this crazy economy. Here's Tampa's Walter Industries tossing out its old name last month as too vague and unfocused, and adopting the new name Walter Energy to redirect investors to its new hyper-focus on mining metallurgical coal used to make steel.

Then comes reports from coal country over in Alabama that the global economy does not want so much specialty coal because global construction is down because of the recession. States the headline on Sunday's Tuscaloosa (Ala.) News story: As steelmakers cut production, and coal stockpiles increase, Alabama miners are nervous about the future.

The Tuscaloosa story quotes Walter's coal unit, still called Jim Walter Resources, as operating two of the country’s deepest underground coal mines near Brookwood, Ala. But employment there remains steady even though the mines are down to a five-day workweek, according to company and union officials. (Photo by Blake Sims of the Birmingham Post Heraldshows the main elevator shaft at one of Walter's Brookwood mines.) Walter Energy's Web site says it still has full time jobs to fill in Brookwood. And Walter's stock price (ticker: WLT) in recent months has been slowly creeping up.

Known as Blue Creek coal, the coal mined by Walter has very low sulfur content with a high heat value, making it ideal for coking — a process that removes coal’s impurities so it can be used in steelmaking. Most of Jim Walter’s coal is exported, company spokesman Dennis Hall told the Tuscaloosa paper. "The global steel market is down and that has affected us."

-- Robert Trigaux, Times Business Columnist