Fitch Downgrades Progress Energy Carolinas & Florida; Rates Progress Energy 'BBB-'.

Business Editors

NEW YORK--(BUSINESS WIRE)--Feb. 14, 2003

Fitch Ratings has downgraded the ratings of Progress Energy Carolinas, Inc. (formerly known as Carolina Power and Light, CP&L) and Progress Energy Florida, Inc. (formerly known as Florida Power Company, FPC) as listed below. The ratings are removed from Rating Watch Negative. Fitch has also assigned an initial 'BBB-' senior unsecured debt rating to the parent, Progress Energy, Inc. (Progress Energy). The Rating Outlook for each of the three entities is Stable.

The 'BBB-' senior unsecured debt rating assigned to Progress Energy reflects the high debt leverage at the parent and investment in unregulated businesses, while also considering the consistent performance of the regulated utilities CP&L and FPC. The Stable Outlook reflects the absence of any near term liquidity pressures and the scaling back of prior growth plans.

Substantial parent level acquisition and diversified business related debt continues to burden consolidated financial measures. Fitch does not anticipate significant debt reduction beyond the repayment of $500 million of acquisition debt in 2004 with proceeds from the recently announced sale of North Carolina Natural Gas. Longer term debt reduction will depend on more favorable market conditions to enable the sale of other non-core assets, primarily the rail business.

Progress Energy's most significant unregulated subsidiary, Progress Ventures, is comprised of merchant generation, energy marketing and trading and a fuels business. While a significant portion of the merchant generation portfolio is under contract for terms of 2 to 6 years, the remaining portfolio will continue to be challenged by depressed power prices. During 2003, the company will be bringing on line an additional 900 megawatts (mw) of merchant capacity. Other unregulated activities include Progress Telecom, a wholesale provider of voice and data transport services. While this business has not performed well, it is not expected to be a use of cash going forward.

The financial condition and risk profile of CP&L and FPC are relatively strong for the assigned ratings but are constrained by the parent rating. Both continue to operate as integrated utilities providing electric generation, transmission and distribution services and restructuring legislation is not expected in either state in the near term. Fuel adjustment mechanisms and company-owned generation substantially reduce commodity price exposure. Both companies benefit to some extent from growing service territories.

FPC's financial performance has been particularly strong with earnings before interest, taxes, depreciation and amortization (EBITDA) coverage of interest expense of approximately 7 times (x) while debt to EBITDA has remained below 2x. Prospectively, debt leverage is expected to increase somewhat at FPC based on expected capital expenditure and dividend requirements. The recent rate settlement reached in Florida required a onetime initial refund of $35 million in 2002 and ongoing annual reductions of $125 million. However, the settlement provides reasonable opportunity for FPC to increase earnings and cash flow through a revenue sharing mechanism. CP&L is currently more leveraged than FPC with debt to EBITDA in the range of 2.5 times (x), although EBITDA interest coverage of nearly 6x is also strong. CP&L has substantial interests in four nuclear generating units.

Driving CP&L's increased capital expenditures in recent years are generation projects to meet its retail load growth. CP&L's ratings also consider the effects of recently enacted emissions legislation in North Carolina which will result in higher costs, although the legislation does provide a mechanism for compliance cost recovery.

Progress Energy is a diversified energy company with 21,800 mw of generating capacity both regulated (18,700MW) and merchant (3,100MW). The regulated utility subsidiaries together serve 2.9 million electric and gas customers in Florida and the Carolinas. Unregulated subsidiaries include Progress Rail, Progress Telecom and Progress Ventures.

The new ratings are as follows:

Progress Energy Carolinas (formerly Carolina Power & Light Company)

--First mortgage bonds to 'A-' from 'A+';

--Senior unsecured debt to 'BBB+' from 'A';

--Pollution control revenue bonds to 'BBB+' from 'A';

--Preferred stock to 'BBB' from 'A-';

--Short-term to 'F2' from 'F1';

--Rating Outlook Stable.

Progress Energy Florida (formerly Florida Power Company)

--First mortgage bonds to 'A-' from 'AA-';

--Senior unsecured debt to 'BBB+' from 'A+';

--Pollution control revenue bonds to 'BBB+' from 'A+';

--Medium-term notes to 'BBB+' from 'A+';

--Preferred stock to 'BBB' from 'A+';

--Short-term to 'F2' from 'F1+';

--Rating Outlook Stable.

Progress Energy, Inc.

--Senior unsecured assigned 'BBB-';

--Rating Outlook Stable.

These ratings were initiated by Fitch as a service to users of its ratings and are based on public information.