Fitch Rates Progress Energy Florida's $1.5B 1st Mtge Bonds 'A+'

2008-06-11 23:47:35 -

- Fitch has assigned a rating of 'A+' to the two series of new first mortgage bonds issued by Florida Power Corporation (d/b/a Progress Energy Florida; PEF). The new issues consist of a 5.65% $500 million bond that matures June 15, 2018 and a 6.40% $1 billion first mortgage bond that matures June 15, 2038. The proceeds of the bonds will be used to redeem or retire upon maturity the $450 million PEF notes due Nov. 14, 2008, to repay money pool borrowings that total $145 million as of June 6, 2008 and for general corporate purposes. The Rating Outlook for PEF is Stable.

PEF's ratings are supported by constructive regulation, strong cash flow that benefits from rate adjustment mechanisms, and future opportunities to increase the rate base that include: an up-rate of the Crystal River plant, environmental investments, transmission and distribution, and potential nuclear construction.

Fitch's rating concerns include significant utility capital spending needs in a rising cost environment and upward pressure on fuel and operating costs during a base rate freeze that extends to Dec. 31, 2009 unless extended at PEF's sole option to mid-2010. During the settlement period, base rates can be adjusted for new generation capacity additions. In the near term, generation capacity additions will increase dependence on natural gas. While PEF's credit ratios are consistent with guidelines for the rating category, PEF has to spend significant amounts on environmental compliance and is challenged by lower demand growth stemming from the housing related economic downturn.

PEF's Stable Rating Outlook incorporates the expectation that internal cash flow will be supplemented with a balanced mix of debt and equity to fund the capital plan and operating costs will be effectively controlled.

Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.

Fitch Ratings, New York
Sharon Bonelli, +1-212-908-0581
Ellen Lapson, CFA, +1-212-908-0504
Brian Bertsch, +1-212-908-0549 (Media Relations)