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