Progress Energy plans to release by the end of the month its engineering proposal to repair the Crystal River nuclear plant. But the utility cannot yet answer a far bigger question: Where will it get the $1.3 billion to actually fix the facility?
Bill Johnson, Progress Energy's president and chief executive, said during a quarterly conference call with investors Thursday that he is "very confident that we will start (repairs) by the end of the year, if the decision is to repair.''
Progress' insurer, the Nuclear Electric Insurance Limited, continues to balk at paying for damage to the plant's 42-inch-thick concrete nuclear containment building. Johnson made no mention of any alternative financing plan if the insurance does not pay.
"We have not yet received a definitive determination from NEIL about insurance coverage," Johnson said, echoing his repeated statements over the past six months. "Our negotiations with NEIL continue."
Customers will have to pay much of the more than $1 billion Progress is paying to replace the low-cost power the Crystal River plant used to generate.
The containment building cracked during a project to replace the plant's old steam generators. Progress decided to manage the project itself instead of hiring one of two firms that successfully handled similar projects at other plants around the country.
Thursday's conference call highlighted the numerous hurdles the utility faces over the next several months, including federal approval of its pending merger with Duke Energy and its hopes of rebounding from falling earnings.
Progress announced its net income for the first quarter of 2012 fell $34 million below the same period a year ago. The company reported its net income for the first quarter totaled $150 million, or 51 cents a share, compared to $184 million, or 62 cents a share, in 2011.
Johnson explained in a statement about the earnings that "the extremely mild weather through the first quarter of 2012 — although certainly a welcome respite for our customers — resulted in significantly lower energy sales in the Carolinas."
Despite that decline, Johnson and Mark Muhlhern, Progress' chief financial officer, spoke optimistically about Progress' prospects over the remaining three quarters of the year.
The company sees some "encouraging trends in growth and usage as the economy continues to heal," Muhlhern said.
Some of those signs were in Florida, where the company gained 11,000 customers in the first quarter, compared to 8,000 in the first quarter of last year.
But Florida is also where Progress faces some of its biggest challenges.
In addition to the broken Crystal River plant, the utility announced this week that it was raising the estimated cost of its proposed Levy County nuclear plant.
Progress now projects the plant will cost as much as $24 billion, up from the last estimate of $22.4 billion. When it was originally proposed in 2006, the project was expected to cost between $4 billion to $6 billion.
What may help Progress is its pending merger with Duke Energy.
Johnson said the utilities are working on an agreement with regulators in the Carolinas. Federal regulators also must approve the merger, but so far have twice rejected the deal.
The merger could play a key role in determining whether Progress' plan to build the two-reactor nuclear plant in Levy County ever materializes.
Ivan Penn can be reached at [email protected] or (727) 892-2332.