UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D. C. 20549

                                    FORM 10-Q


             [ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934


                For the quarterly period ended September 30, 2000


                                       OR


                 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR
                 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


          For the transition period from ___________ to _____________.


<TABLE>
<CAPTION>
                        Exact name of registrants as specified in their
   Commission           charters, state of incorporation, address of principal          I.R.S. Employer
   File Number          executive offices, and telephone number                      Identification Number

<S>                     <C>                                                          <C>
         1-15929                            CP&L Energy, Inc.                              56-2155481
                                         411 Fayetteville Street
                                   Raleigh, North Carolina 27601-1748
                                        Telephone: (919) 546-6411
                                 State of Incorporation: North Carolina



         1-3382                      Carolina Power & Light Company                        56-0165465
                                         411 Fayetteville Street
                                   Raleigh, North Carolina 27601-1748
                                        Telephone: (919) 546-6411
                                 State of Incorporation: North Carolina


                                                       NONE
                (Former name, former address and former fiscal year, if changed since last report)
</TABLE>


         Indicate by check mark whether the registrant (1) has filed all reports
         required to be filed by Section 13 or 15(d) of the Securities Exchange
         Act of 1934 during the preceding 12 months (or for such shorter period
         that the registrant was required to file such reports), and (2) has
         been subject to such filing requirements for the past 90 days.
         Yes  X  . No    .
            ----     ----

         This combined Form 10-Q is filed separately by two registrants: CP&L
         Energy, Inc. (CP&L Energy) and Carolina Power & Light Company (CP&L).
         Information contained herein relating to either individual registrant
         is filed by such registrant solely on its own behalf. Each registrant
         makes no representation as to information relating exclusively to the
         other registrant.


         As of October 31, 2000, shares of Common Stock outstanding for each
         registrant were as listed:

<TABLE>
<CAPTION>
                                                     Description of
             Registrant                              Common Stock                               Shares
             -----------------------------------------------------------------------------------------------------
<S>                                                  <C>                                        <C>
           CP&L Energy, Inc.                         Common Stock (Without Par Value)           159,597,655

           Carolina Power & Light Company            Common Stock (Without Par Value)           159,608,055
                                                     (All held by CP&L Energy, Inc.)
</TABLE>

<PAGE>

              CP&L ENERGY, INC. AND CAROLINA POWER & LIGHT COMPANY
              FORM 10-Q - For the Quarter Ended September 30, 2000



         Glossary of Terms

         Safe Harbor For Forward-Looking Statements

         PART I. FINANCIAL INFORMATION

         Item 1.  Financial Statements

                  Consolidated Financial Statements:
                        CP&L Energy, Inc.
                        -----------------------------
                        Consolidated Statements of Income
                        Consolidated Balance Sheets
                        Consolidated Statements of Cash Flows

                        Carolina Power & Light Company
                        --------------------------------
                        Consolidated Statements of Income
                        Consolidated Balance Sheets
                        Consolidated Statements of Cash Flows

                  Supplemental Data Schedule

               Notes to Consolidated Financial Statements
                  CP&L Energy, Inc. and Carolina Power & Light Company

         Item 2.  Management's Discussion and Analysis of Financial Condition
         and Results of Operation

         Item 3.  Quantitative and Qualitative Disclosures About Market Risk

         PART II. OTHER INFORMATION

         Item 1.  Legal Proceedings

         Item 2.  Changes in Securities and Use of Proceeds

         Item 4.  Submission of Matters to a Vote of Security Holders

         Item 5.  Other Information

         Item 6.  Exhibits and Reports on Form 8-K

         Signatures

         Exhibit Index


                                       2
<PAGE>

                                GLOSSARY OF TERMS

The following abbreviations or acronyms used in the text of this combined Form
10-Q are defined below:

<TABLE>
<CAPTION>
     TERM                           DEFINITION

<S>                            <C>
Amended Agreement              Amended and Restated Agreement and Plan of Share Exchange dated as of March
                               3, 2000.

AOC                            Administrative Order on Consent

APEC                           Albemarle-Pamlico Economic Development Corporation

Bain                           Bain Capital, Inc. and affiliates

BellSouth                      BellSouth Corporation

BellSouth Carolinas PCS        BellSouth Carolinas, PCS L.P.

BellSouth PCI                  BellSouth Personal Communications, Inc.

Caronet                        Caronet, Inc.

CP&L                           Carolina Power & Light Company

CP&L Energy                    CP&L Energy, Inc.

CVO                            Contingent value obligations

DOE                            Department of Energy

Dt                             Dekatherm

DWM                            North Carolina Department of Environment and Natural Resources, Division of
                               Waste Management

EEI                            Edison Electric Institute

EMF                            Experience Modification Factor

ENCNG                          Eastern North Carolina Natural Gas

EPS                            Earnings per share

Energy Ventures                CPL Energy Ventures, Inc.

EPA                            Environmental Protection Agency

ESOP                           Employee Stock Ownership Plan

FERC                           Federal Energy Regulatory Commission

Final Stock Price              Average of the closing sale price per share of
                               CP&L Energy common stock as reported on the New
                               York Stock Exchange composite tape for the twenty
                               consecutive trading days ending with the fifth
                               trading day immediately preceding the closing
                               date for the exchange

FPC                            Florida Progress Corporation
</TABLE>

                                       3
<PAGE>
                            GLOSSARY OF TERMS - cont.

<TABLE>
<CAPTION>
<S>                            <C>
HSR Act                        Hart-Scott-Rodino Antitrust Improvements Act of 1976

Interpath                      Interpath Communications, Inc.

IRS                            Internal Revenue Service

KWh                            Kilowatt-hour

LIBOR                          London Inter Bank Offering Rate

MD&A                           Management's Discussion and Analysis of Financial Condition and Results of
                               Operations

MGP                            Manufactured Gas Plant

Monroe Power                   Monroe Power Company

MW                             Megawatt

NCNG                           North Carolina Natural Gas Corporation

NCUC                           North Carolina Utilities Commission

NOx SIP Call                   EPA rule which requires 22 states including
                               North and South Carolina to further reduce
                               nitrogen oxide emissions.

NRC                            Nuclear Regulatory Commission

NSP                            Northern States Power


Plan                           CP&L 1997 Equity Incentive Plan


PLRs                           Private Letter Rulings

Pollution control bonds        Pollution control revenue refunding bonds

Power Agency                   North Carolina Eastern Municipal Power Agency

RTO                            Regional Transmission Organization

SAB 101                        Staff Accounting Bulletin 101 "Revenue Recognition in Financial Statements"

SCE&G                          South Carolina Electric & Gas

SCPSC                          Public Service Commission of South Carolina

SEC                            United States Securities and Exchange Commission

SFAS No. 71                    Statement of Financial Accounting Standards No. 71, Accounting for the
                               Effects of Certain Types of Regulation

SFAS No. 133                   Statement of Financial Accounting Standards No. 133, Accounting for
                               Derivative and Hedging Activities
</TABLE>


                                       4
<PAGE>
                            GLOSSARY OF TERMS - cont.

<TABLE>
<CAPTION>
<S>                            <C>
SFAS No. 138                   Statement of Financial Accounting Standards No. 138, Accounting for Certain
                               Derivative Instruments and Certain Hedging Activities - an Amendment of
                               FASB Statement No. 133

SRS                            Strategic Resource Solutions Corp.

the Agreement                  The agreement to settle and merger plan by and among Caronet, Inc., DukeNet

                               communications, Inc., BellSouth Personal Communications, Inc., BellSouth
                               Corporation, BellSouth Carolinas PCS, L.P., and Carolina Power & Light
                               Company


the Committee                  The Committee on Organization and Compensation


the Merger                     The merger of BellSouth Carolinas PCS into BellSouth PCI


Transco                        Transcontinental Interstate Pipeline
</TABLE>

                                       5
<PAGE>

         SAFE HARBOR FOR FORWARD-LOOKING STATEMENTS

         The matters discussed throughout this Form 10-Q that are not historical
         facts are forward-looking and, accordingly, involve estimates,
         projections, goals, forecasts, assumptions, risks and uncertainties
         that could cause actual results or outcomes to differ materially from
         those expressed in the forward-looking statements.

         Examples of forward-looking statements discussed in this Form 10-Q,
         PART 1, ITEM 2, "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
         CONDITION AND RESULTS OF OPERATIONS", include, but are not limited to,
         statements under the heading "Other Matters" concerning the effects of
         electric utility industry restructuring.

         Any forward-looking statement speaks only as of the date on which such
         statement is made, and neither CP&L Energy, Inc. (CP&L Energy) nor
         Carolina Power & Light Company (CP&L) undertakes any obligation to
         update any forward-looking statement or statements to reflect events or
         circumstances after the date on which such statement is made.

         Examples of factors that you should consider with respect to any
         forward-looking statements made throughout this document include, but
         are not limited to, the following:

         o   Governmental policies and regulatory actions (including those of
             the Federal Energy Regulatory Commission, the Environmental
             Protection Agency, the Nuclear Regulatory Commission, the
             Department of Energy, the North Carolina Utilities Commission and
             the Public Service Commission of South Carolina);

         o   general industry trends;

         o   operation of nuclear power facilities;

         o   availability of nuclear waste storage facilities;

         o   nuclear decommissioning costs;

         o   changes in the economy of areas served by CP&L or NCNG;

         o   legislative and regulatory initiatives that impact the speed and
             degree of industry restructuring;

         o   ability to obtain adequate and timely rate recovery of costs,
             including potential stranded costs arising from industry
             restructuring;

         o   competition from other energy and gas suppliers;

         o   the success of CP&L Energy's direct and indirect subsidiaries;

         o   weather conditions and catastrophic weather-related damage;

         o   market demand for energy;

         o   inflation;

         o   capital market conditions;

         o   the proposed share exchange with Florida Progress Corporation;

         o   failure of the potential benefits of CP&L's conversion to a holding
             company structure to materialize;

         o   ability to use tax credits associated with the operations of the
             synthetic fuel plants;

         o   ability to access and utilize the natural gas expansion fund
             established by the North Carolina Utilities Commission;

         o   unanticipated changes in operating expenses and capital
             expenditures;

         o   legal and administrative proceedings.

         All such factors are difficult to predict, contain uncertainties that
         may materially affect actual results, and may be beyond the control of
         CP&L Energy and CP&L. New factors emerge from time to time, and it is
         not possible for management to predict all of such factors, nor can it
         assess the effect of each such factor on CP&L Energy and CP&L.


                                       6
<PAGE>

                          PART I. FINANCIAL INFORMATION


Item 1.          Financial Statements

                                CP&L Energy, Inc.
                    CONSOLIDATED INTERIM FINANCIAL STATEMENTS
                                   (Unaudited)
                               SEPTEMBER 30, 2000

<TABLE>
<CAPTION>
                                                                         Three Months Ended              Nine Months Ended
STATEMENTS OF INCOME                                                        September 30                    September 30
(In thousands except per share amounts)                                2000            1999           2000            1999
------------------------------------------------------------------------------------------------------------------------------
<S>                                                             <C>              <C>            <C>             <C>
Operating Revenues
  Electric                                                      $       938,839  $     947,233  $  2,497,216   $   2,419,791
  Natural gas                                                            75,645         48,041       223,093          48,041
  Diversified businesses                                                 69,716         29,482       133,334          82,648
------------------------------------------------------------------------------------------------------------------------------
       Total Operating Revenues                                       1,084,200      1,024,756     2,853,643        2,550,480
------------------------------------------------------------------------------------------------------------------------------
Operating Expenses
  Fuel used in electric generation                                      175,090        161,495       472,479         443,377
  Purchased power                                                        98,173        120,938       253,498         303,121
  Gas purchased for resale                                               62,736         38,026       166,471          38,026
  Other operation and maintenance                                       169,912        183,576       533,128         491,362
  Depreciation and amortization                                         134,099        126,447       400,722         368,287
  Taxes other than on income                                             39,883         39,419       112,729         110,089
  Harris Plant deferred costs, net                                        3,085          1,970        11,181           5,458
  Diversified businesses                                                104,630         43,922       207,551         125,018
------------------------------------------------------------------------------------------------------------------------------
      Total Operating Expenses                                          787,608        715,793     2,157,759       1,884,738
------------------------------------------------------------------------------------------------------------------------------
Operating Income                                                        296,592        308,963       695,884         665,742
------------------------------------------------------------------------------------------------------------------------------
Other Income (Expense)
  Interest income                                                         2,687          2,303         7,997           6,866
  Other, net                                                            197,363        (17,189)      195,385         (33,918)
------------------------------------------------------------------------------------------------------------------------------
      Total Other Income (Expense)                                      200,050        (14,886)      203,382         (27,052)
------------------------------------------------------------------------------------------------------------------------------
Interest Charges
  Long-term debt                                                         50,703         45,926       155,625         132,320
  Other interest charges                                                  5,092          3,060        14,372           8,863
  Allowance for borrowed funds used during construction                  (4,728)        (2,976)      (15,657)         (7,768)
------------------------------------------------------------------------------------------------------------------------------
      Net Interest Charges                                               51,067         46,010       154,340         133,415
------------------------------------------------------------------------------------------------------------------------------
Income before Income Taxes                                              445,575        248,067       744,926         505,275
Income Taxes                                                            148,492        100,955       255,124         204,275
------------------------------------------------------------------------------------------------------------------------------
Net Income                                                       $      297,083  $     147,112  $    489,802     $   301,000
==============================================================================================================================


Average Common Shares Outstanding                                       153,324        151,581       153,230         146,807
Basic Earnings per Common Share                                 $          1.94  $        0.97  $       3.20    $       2.05
Diluted Earnings per Common Share                               $          1.93  $        0.97  $       3.19    $       2.05
Dividends Declared per Common Share                             $         0.515  $       0.500  $      1.545    $      1.500


==============================================================================================================================
</TABLE>

The accompanying notes as they relate to CP&L Energy, Inc. are an integral part
of these Consolidated Interim Financial Statements.


                                       7
<PAGE>

<TABLE>
<CAPTION>
CP&L Energy, Inc.
BALANCE SHEETS                                                          September 30     September 30     December 31
(In thousands)                                                               2000             1999            1999
------------------------------------------------------------------------------------------------------------------------
<S>                                                                    <C>               <C>            <C>
                                ASSETS
Utility Plant
  Electric utility plant in service                                    $  10,956,135     $  10,571,157  $   10,633,823
  Gas utility plant in service                                               365,610           352,571         354,773
  Accumulated depreciation                                                (5,383,255)       (4,898,618)     (4,975,405)
------------------------------------------------------------------------------------------------------------------------
         Utility plant in service, net                                     5,938,490         6,025,110       6,013,191
  Held for future use                                                          8,028            11,984          11,282
  Construction work in progress                                              790,957           475,967         536,017
  Nuclear fuel, net of amortization                                          171,741           185,874         204,323
------------------------------------------------------------------------------------------------------------------------
       Total Utility Plant, Net                                            6,909,216         6,698,935       6,764,813
------------------------------------------------------------------------------------------------------------------------
Current Assets
  Cash and cash equivalents                                                  252,261            76,651          79,871
  Accounts receivable                                                        511,121           482,474         446,367
  Taxes receivable                                                                 -                 -           3,770
  Inventory                                                                  266,501           230,498         247,913
  Deferred fuel cost                                                         113,864            79,623          81,699
  Prepayments                                                                 15,974            17,218          42,631
  Other current assets                                                       149,179           145,436         177,082
------------------------------------------------------------------------------------------------------------------------
         Total Current Assets                                              1,308,900         1,031,900       1,079,333
------------------------------------------------------------------------------------------------------------------------
Deferred Debits and Other Assets
  Income taxes recoverable through future rates                              230,395           240,059         229,008
  Harris Plant deferred costs                                                 47,207            57,253          56,142
  Unamortized debt expense                                                    20,112            16,546          10,924
  Nuclear decommissioning trust funds                                        440,207           358,707         379,949
  Diversified business property, net                                         276,014           189,730         239,982
  Miscellaneous other property and investments                               432,468           231,193         252,454
  Goodwill, net                                                              285,818           290,816         288,970
  Other assets and deferred debits                                           169,044           179,984         192,444
------------------------------------------------------------------------------------------------------------------------
         Total Deferred Debits and Other Assets                            1,901,265         1,564,288       1,649,873
------------------------------------------------------------------------------------------------------------------------
            Total Assets                                               $  10,119,381     $   9,295,123  $    9,494,019
========================================================================================================================
                    CAPITALIZATION AND LIABILITIES

Capitalization
  Common stock equity                                                  $   3,676,881     $   3,410,638  $    3,412,647
  Preferred stock of subsidiary - redemption not required                     59,334            59,376          59,376
  Long-term debt, net                                                      3,489,512         2,800,068       3,028,561
------------------------------------------------------------------------------------------------------------------------
         Total Capitalization                                              7,225,727         6,270,082       6,500,584
------------------------------------------------------------------------------------------------------------------------
Current Liabilities
  Current portion of long-term debt                                            7,140           150,000         197,250
  Accounts payable                                                           298,982           314,748         269,053
  Taxes accrued                                                              160,492            90,503               -
  Interest accrued                                                            40,913            29,610          47,607
  Dividends declared                                                          80,697            78,579          80,939
  Short-term obligations                                                           -           100,000         168,240
  Other current liabilities                                                  131,732           139,065         130,036
------------------------------------------------------------------------------------------------------------------------
         Total Current Liabilities                                           719,956           902,505         893,125
------------------------------------------------------------------------------------------------------------------------
Deferred Credits and Other Liabilities
  Accumulated deferred income taxes                                        1,600,158         1,642,591       1,632,778
  Accumulated deferred investment tax credits                                195,907           206,303         203,704
  Other liabilities and deferred credits                                     377,633           273,642         263,828
------------------------------------------------------------------------------------------------------------------------
         Total Deferred Credits and Other Liabilities                      2,173,698         2,122,536       2,100,310
------------------------------------------------------------------------------------------------------------------------
            Commitments and Contingencies (Note 6)
========================================================================================================================
            Total Capitalization and Liabilities                       $  10,119,381     $   9,295,123  $    9,494,019
========================================================================================================================

SCHEDULES OF COMMON STOCK EQUITY
(In thousands)
  Common stock (without par value, authorized 500,000,000; issued and  $   1,743,979     $   1,744,728  $    1,745,455
               outstanding 159,597,655, 159,589,744 and
               159,599,650 shares, respectively)
  Unearned ESOP common stock                                                (127,211)         (142,077)       (140,153)
  Retained earnings                                                        2,060,113         1,807,987       1,807,345
------------------------------------------------------------------------------------------------------------------------
         Total Common Stock Equity                                     $   3,676,881     $   3,410,638  $    3,412,647
========================================================================================================================
</TABLE>

The accompanying notes as they relate to CP&L Energy, Inc. are an integral part
of these Consolidated Interim Financial Statements.

                                       8
<PAGE>

<TABLE>
<CAPTION>
CP&L Energy, Inc.                                                               Nine Months Ended
STATEMENTS OF CASH FLOWS                                                           September 30
(In thousands)                                                               2000                1999
------------------------------------------------------------------------------------------------------------
<S>                                                                  <C>                           <C>
Operating Activities
  Net income                                                         $          489,802      $      301,000
  Adjustments to reconcile net income to net cash provided by
  operating activities
      Depreciation and amortization                                             470,509             437,019
      Harris Plant deferred costs                                                 8,935               2,767
      Deferred income taxes                                                     (74,760)            (30,442)
      Investment tax credit                                                      (7,798)             (7,699)
      Gain on sale of investment                                               (200,000)                  -
      Deferred fuel cost (credit)                                               (26,215)            (36,977)
      Net increase in receivables, inventories,
       prepaid expense and other current assets                                 (7,698)            (133,184)
      Net increase in payables and accrued expenses                             209,761             108,679
      Other                                                                      35,095             115,050
------------------------------------------------------------------------------------------------------------
        Net Cash Provided by Operating Activities                               897,631             756,213
------------------------------------------------------------------------------------------------------------

Investing Activities
  Gross property additions                                                     (634,014)           (528,097)
  Nuclear fuel additions                                                        (46,936)            (54,718)
  Proceeds from sale of investment                                              200,000                   -
  Proceeds from sale of assets                                                   12,825                   -
  Contributions to nuclear decommissioning trust                                (25,603)            (25,707)
  Increase in cash restricted for redemption of long-term debt                    4,051                   -
  Net cash flow of company-owned life insurance program                          (4,858)             (6,668)
  Investment in non-utility activities                                         (120,443)           (139,062)
------------------------------------------------------------------------------------------------------------
        Net Cash Used in Investing Activities                                  (614,978)           (754,252)
------------------------------------------------------------------------------------------------------------

Financing Activities
  Proceeds from issuance of long-term debt                                      783,052             400,970
  Net increase in short-term indebtedness                                           695              38,000
  Net increase (decrease) in outstanding payments                                38,885             (68,583)
  Retirement of long-term debt                                                 (695,147)           (113,291)
  Redemption of preferred stock                                                     (42)                  -
  Dividends paid on common and preferred stock                                 (237,706)           (217,133)
  Other                                                                               -               3,979
------------------------------------------------------------------------------------------------------------
        Net Cash (Used in) Provided by Financing Activities                    (110,263)             43,942
------------------------------------------------------------------------------------------------------------
Net Increase in Cash and Cash Equivalents                                       172,390              45,903
Increase in Cash from Acquisition                                                     -               1,876
Cash and Cash Equivalents at Beginning of the Period                             79,871              28,872
------------------------------------------------------------------------------------------------------------
Cash and Cash Equivalents at End of the Period                       $          252,261      $       76,651
============================================================================================================
Supplemental Disclosures of Cash Flow Information
Cash paid during the period - interest                               $          155,023      $      142,355
                              income taxes                           $          157,172      $      174,573
============================================================================================================
</TABLE>

The accompanying notes as they relate to CP&L Energy, Inc. are an integral part
of these Consolidated Interim Financial Statements.

                                       9
<PAGE>
                      PART I. FINANCIAL INFORMATION (cont.)

Item 1.          Financial Statements (cont.)
------           ----------------------------

                         Carolina Power & Light Company
                    CONSOLIDATED INTERIM FINANCIAL STATEMENTS
                                   (Unaudited)
                               SEPTEMBER 30, 2000

<TABLE>
<CAPTION>
                                                                         Three Months Ended               Nine Months Ended
STATEMENTS OF INCOME                                                        September 30                    September 30
(In thousands)                                                         2000            1999           2000             1999
-------------------------------------------------------------------------------------------------------------------------------
<S>                                                             <C>              <C>            <C>             <C>
Operating Revenues
  Electric                                                      $       938,839  $     947,233  $  2,497,216    $   2,419,791
  Natural gas                                                                 -         48,041       147,448           48,041
  Diversified businesses                                                  4,273         29,482        67,891           82,648
-------------------------------------------------------------------------------------------------------------------------------
       Total Operating Revenues                                         943,112      1,024,756     2,712,555        2,550,480
-------------------------------------------------------------------------------------------------------------------------------
Operating Expenses
  Fuel used in electric generation                                      175,090        161,495       472,479          443,377
  Purchased power                                                        98,173        120,938       253,498          303,121
  Gas purchased for resale                                                    -         38,026       103,734           38,026
  Other operation and maintenance                                       153,721        183,576       516,937          491,362
  Depreciation and amortization                                         128,923        126,447       395,548          368,287
  Taxes other than on income                                             38,672         39,419       111,517          110,089
  Harris Plant deferred costs, net                                        3,085          1,970        11,181            5,458
  Diversified businesses                                                 14,773         43,922       117,694          125,018
-------------------------------------------------------------------------------------------------------------------------------
      Total Operating Expenses                                          612,437        715,793     1,982,588        1,884,738
-------------------------------------------------------------------------------------------------------------------------------
Operating Income                                                        330,675        308,963       729,967          665,742
-------------------------------------------------------------------------------------------------------------------------------
Other Income (Expense)
  Interest income                                                         3,655          2,303         8,965            6,866
  Other, net                                                            195,100        (16,447)      194,606          (31,693)
-------------------------------------------------------------------------------------------------------------------------------
      Total Other Income (Expense)                                      198,755        (14,144)      203,571          (24,827)
-------------------------------------------------------------------------------------------------------------------------------
Interest Charges
  Long-term debt                                                         50,703         45,926       155,625          132,320
  Other interest charges                                                  4,949          3,060        14,229            8,863
  Allowance for borrowed funds used during construction                  (4,414)        (2,976)      (15,343)          (7,768)
-------------------------------------------------------------------------------------------------------------------------------
      Net Interest Charges                                               51,238         46,010        154,511         133,415
-------------------------------------------------------------------------------------------------------------------------------
Income before Income Taxes                                              478,192        248,809       779,027          507,500
Income Taxes                                                            186,278        100,955       292,910          204,275
-------------------------------------------------------------------------------------------------------------------------------
Net Income                                                              291,914        147,854       486,117          303,225
Preferred Stock Dividend Requirements                                       741            742         2,225            2,225
-------------------------------------------------------------------------------------------------------------------------------
Earnings for Common Stock                                       $       291,173  $     147,112  $    483,892    $     301,000
===============================================================================================================================
</TABLE>

The accompanying notes as they relate to Carolina Power & Light Company are an
integral part of these Consolidated Interim Financial Statements.

                                       10
<PAGE>

<TABLE>
<CAPTION>
Carolina Power & Light Company
BALANCE SHEETS                                                          September 30   September 30   December 31
(In thousands)                                                              2000          1999           1999
-------------------------------------------------------------------------------------------------------------------
<S>                                                                    <C>           <C>            <C>
                                ASSETS

Utility Plant
  Electric utility plant in service                                    $  10,956,135 $   10,571,157 $  10,633,823
  Gas utility plant in service                                                     -        352,571       354,773
  Accumulated depreciation                                                (5,244,184)    (4,898,618)   (4,975,405)
-------------------------------------------------------------------------------------------------------------------
         Utility plant in service, net                                     5,711,951      6,025,110     6,013,191
  Held for future use                                                          7,105         11,984        11,282
  Construction work in progress                                              733,261        475,967       536,017
  Nuclear fuel, net of amortization                                          171,741        185,874       204,323
-------------------------------------------------------------------------------------------------------------------
       Total Utility Plant, Net                                            6,624,058      6,698,935     6,764,813
-------------------------------------------------------------------------------------------------------------------
Current Assets
  Cash and cash equivalents                                                  214,820         76,651        79,871
  Accounts receivable                                                        508,255        482,474       446,367
  Notes receivable from affiliate                                            131,260              -             -
  Taxes receivable                                                                 -              -         3,770
  Inventory                                                                  244,574        230,498       247,913
  Deferred fuel cost                                                         105,305         79,623        81,699
  Prepayments                                                                 19,339         17,218        42,631
  Other current assets                                                        69,697        145,436       177,082
-------------------------------------------------------------------------------------------------------------------
         Total Current Assets                                              1,293,250      1,031,900     1,079,333
-------------------------------------------------------------------------------------------------------------------
Deferred Debits and Other Assets
  Income taxes recoverable through future rates                              232,021        240,059       229,008
  Harris Plant deferred costs                                                 47,207         57,253        56,142
  Unamortized debt expense                                                    15,986         16,546        10,924
  Nuclear decommissioning trust funds                                        440,207        358,707       379,949
  Diversified business property, net                                          83,048        189,730       239,982
  Miscellaneous other property and investments                               391,190        231,193       252,454
  Goodwill, net                                                                    -        290,816       288,970
  Other assets and deferred debits                                           117,998        179,984       192,444
-------------------------------------------------------------------------------------------------------------------
         Total Deferred Debits and Other Assets                            1,327,657      1,564,288     1,649,873
-------------------------------------------------------------------------------------------------------------------
            Total Assets                                               $   9,244,965 $    9,295,123 $   9,494,019
===================================================================================================================
                    CAPITALIZATION AND LIABILITIES

Capitalization
  Common stock equity (without par value, authorized 200,000,000,
         issued and outstanding 159,608,055, 159,589,744 and
         159,599,650 shares, respectively)                             $   3,003,068 $    3,410,638 $   3,412,647
  Preferred stock - redemption not required                                   59,334         59,376        59,376
  Long-term debt, net                                                      3,489,512      2,800,068     3,028,561
-------------------------------------------------------------------------------------------------------------------
         Total Capitalization                                              6,551,914      6,270,082     6,500,584
-------------------------------------------------------------------------------------------------------------------
Current Liabilities
  Current portion of long-term debt                                                -        150,000       197,250
  Accounts payable                                                           234,454        314,748       269,053
  Taxes accrued                                                              214,397         90,503             -
  Interest accrued                                                            37,167         29,610        47,607
  Dividends declared                                                          83,675         78,579        80,939
  Short-term obligations                                                           -        100,000       168,240
  Other current liabilities                                                  121,430        139,065       130,036
-------------------------------------------------------------------------------------------------------------------
         Total Current Liabilities                                           691,123        902,505       893,125
-------------------------------------------------------------------------------------------------------------------
Deferred Credits and Other Liabilities
  Accumulated deferred income taxes                                        1,537,351      1,642,591     1,632,778
  Accumulated deferred investment tax credits                                193,971        206,303       203,704
  Other liabilities and deferred credits                                     270,606        273,642       263,828
-------------------------------------------------------------------------------------------------------------------
         Total Deferred Credits and Other Liabilities                      2,001,928      2,122,536     2,100,310
-------------------------------------------------------------------------------------------------------------------
            Commitments and Contingencies (Note 6)
===================================================================================================================
            Total Capitalization and Liabilities                       $   9,244,965 $    9,295,123 $   9,494,019
===================================================================================================================
</TABLE>

The accompanying notes as they relate to Carolina Power & Light Company are an
integral part of these Consolidated Interim Financial Statements.

                                       11
<PAGE>

<TABLE>
<CAPTION>
Carolina Power & Light Company                                                         Nine Months Ended
STATEMENTS OF CASH FLOWS                                                                 September 30
(In thousands)                                                                     2000               1999
------------------------------------------------------------------------------------------------------------------
<S>                                                                        <C>                           <C>
Operating Activities
  Net income                                                               $         486,117        $     303,225
  Adjustments to reconcile net income to net cash provided by
  operating activities
      Depreciation and amortization                                                  465,475              437,019
      Harris Plant deferred costs                                                      8,935                2,767
      Deferred income taxes                                                          (73,516)             (30,442)
      Investment tax credit                                                           (7,749)              (7,699)
      Gain on sale of investment                                                    (200,000)                   -
      Deferred fuel cost (credit)                                                    (26,215)             (36,977)
      Net increase in receivables, inventories,
       prepaid expense and other current assets                                     (35,848)             (133,184)
      Net increase in payables and accrued expenses                                  238,751              108,679
      Other                                                                           56,601              115,050
-------------------------------------------------------------------------------------------------------------------
        Net Cash Provided by Operating Activities                                    912,551              758,438
-------------------------------------------------------------------------------------------------------------------
Investing Activities
  Gross property additions                                                          (613,985)            (528,097)
  Nuclear fuel additions                                                             (46,936)             (54,718)
  Proceeds from sale of investment                                                   200,000                    -
  Contributions to nuclear decommissioning trust                                     (25,603)             (25,707)
  Increase in cash restricted for redemption of long-term debt                         4,051                    -
  Net cash flow of company-owned life insurance program                               (4,858)              (6,668)
  Investment in non-utility activities                                              (141,072)            (139,062)
-------------------------------------------------------------------------------------------------------------------
        Net Cash Used in Investing Activities                                       (628,403)            (754,252)
-------------------------------------------------------------------------------------------------------------------

Financing Activities
  Proceeds from issuance of long-term debt                                           783,052              400,970
  Net (decrease) increase in short-term indebtedness                                  (6,445)              38,000
  Net increase (decrease) in outstanding payments                                     21,069              (68,583)
  Retirement of long-term debt                                                      (695,147)            (113,291)
  Redemption of preferred stock                                                          (42)                   -
  Dividends paid on common stock                                                    (237,706)            (217,133)
  Dividend paid on preferred stock                                                    (2,225)              (2,225)
  Other                                                                                    -                3,979
-------------------------------------------------------------------------------------------------------------------
        Net Cash (Used in) Provided by Financing Activities                         (137,444)              41,717
-------------------------------------------------------------------------------------------------------------------
Net Increase in Cash and Cash Equivalents                                            146,704               45,903
-------------------------------------------------------------------------------------------------------------------
Increase in Cash from Acquisition                                                          -                1,876
Decrease in Cash from Stock Distribution (see Note 1)                                (11,755)                   -
Cash and Cash Equivalents at Beginning of the Period                                  79,871               28,872
-------------------------------------------------------------------------------------------------------------------
Cash and Cash Equivalents at End of the Period                             $         214,820        $      76,651
===================================================================================================================
Supplemental Disclosures of Cash Flow Information
Cash paid during the period - interest                                     $         158,940        $     142,355
                              income taxes                                 $         187,340        $     174,573
===================================================================================================================
</TABLE>

The accompanying notes as they relate to Carolina Power & Light Company are an
integral part of these Consolidated Interim Financial Statements.


                                       12
<PAGE>

<TABLE>
<CAPTION>
CP&L Energy, Inc.                                                   Three Months Ended            Nine Months Ended
SUPPLEMENTAL  DATA                                                     September 30                 September 30
                                                                   2000           1999           2000          1999
------------------------------------------------------------------------------------------------------------------------
<S>                                                           <C>            <C>            <C>           <C>
Operating Revenues (in thousands)
Electric
    Retail                                                    $     743,431  $     754,985  $  2,000,325  $  1,937,404
    Wholesale                                                       175,262        172,127       443,737       430,247
    Miscellaneous revenue                                            20,146         20,121        53,154        52,140
------------------------------------------------------------------------------------------------------------------------
         Total Electric                                             938,839        947,233     2,497,216     2,419,791
Natural gas                                                          75,645         48,041       223,093        48,041
Diversified businesses                                               69,716         29,482       133,334        82,648
------------------------------------------------------------------------------------------------------------------------

            Total Operating Revenues                          $   1,084,200  $   1,024,756  $  2,853,643  $  2,550,480
========================================================================================================================


Energy Sales
 Electric (millions of kWh)
  Retail
     Residential                                                      3,784          4,001        10,845        10,417
     Commercial                                                       3,257          3,221         8,731         8,342
     Industrial                                                       3,766          3,711        10,957        10,822
     Other retail                                                       415            410         1,093         1,048
------------------------------------------------------------------------------------------------------------------------
          Total retail                                               11,222         11,343        31,626        30,629
  Wholesale                                                           3,561          4,166        10,572        11,208
------------------------------------------------------------------------------------------------------------------------
     Total Electric                                                  14,783         15,509        42,198        41,837
------------------------------------------------------------------------------------------------------------------------

========================================================================================================================
Natural Gas Delivered (thousands of dt)                              12,119         12,737        42,960        12,737
========================================================================================================================

Energy Supply (millions of kWh)
  Generated - coal                                                    7,674          8,224        22,018        21,616
              nuclear                                                 5,975          5,598        17,072        16,743
              hydro                                                      71             80           404           435
              combustion turbines                                       309            355           625           422
  Purchased                                                           1,447          1,890         3,778         4,210
------------------------------------------------------------------------------------------------------------------------

            Total Energy Supply (Company Share)                      15,476         16,147        43,897        43,426
========================================================================================================================

Detail of Income Taxes (in thousands)
    Income tax expense (credit) - current                     $     174,746  $     101,191  $    337,681  $    242,416
                                  deferred                          (23,655)         2,363       (74,760)      (30,442)
                                  investment tax credit              (2,599)        (2,599)       (7,797)       (7,699)
------------------------------------------------------------------------------------------------------------------------

               Total Income Tax Expense                       $     148,492  $    100,955   $    255,124  $    204,275
========================================================================================================================
</TABLE>

See CP&L Energy, Inc. notes to Consolidated Interim Financial Statements


                                       13
<PAGE>


              CP&L ENERGY, INC. and CAROLINA POWER & LIGHT COMPANY

               NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS

1. ORGANIZATION AND BASIS OF PRESENTATION

         Organization. On June 19, 2000, Carolina Power & Light Company (CP&L)
         was reorganized into a holding company structure and all of the shares
         of common stock of CP&L were exchanged for an equal number of shares of
         common stock of CP&L Energy, Inc. (CP&L Energy). The outstanding
         preferred stock and debt securities of CP&L were not affected by the
         holding company restructuring and remain outstanding as securities of
         CP&L. The holding company structure will allow greater organizational
         flexibility, including a clearer separation of regulated businesses
         from each other and from unregulated business such as energy services,
         telecommunications and electric generation projects for wholesale
         markets.

         CP&L is a public service corporation primarily engaged in the
         generation, transmission, distribution and sale of electricity in
         portions of North and South Carolina.

         Basis of Presentation. This Quarterly Report on Form 10-Q is a combined
         report of CP&L Energy and CP&L, a regulated electric utility subsidiary
         of CP&L Energy. For periods prior to the reorganization, CP&L Energy's
         consolidated financial statements have been prepared from CP&L's
         consolidated financial statements, except that certain items have been
         reclassified to reflect CP&L Energy's structure.

         In the opinion of management, the accompanying unaudited consolidated
         financial statements reflect all adjustments necessary to fairly
         present CP&L Energy's and CP&L's financial position and results of
         operations for the interim periods. These consolidated interim
         financial statements do not contain the complete detail or footnote
         disclosure which would be included in full year financial statements
         and, therefore, should be read in conjunction with the consolidated
         financial statements included in CP&L's Annual Report on Form 10-K for
         the Year Ended December 31, 1999. Due to temperature variations between
         seasons of the year and the timing of outages of electric generating
         units, especially nuclear-fueled units, the results of operations for
         interim periods are not necessarily indicative of amounts expected for
         the entire year. Certain amounts for 1999 have been reclassified to
         conform to the 2000 presentation, with no effect on previously reported
         net income or common stock equity.

         In preparing financial statements that conform with generally accepted
         accounting principles, management must make estimates and assumptions
         that affect the reported amounts of assets and liabilities, disclosure
         of contingent assets and liabilities at the date of the financial
         statements and amounts of revenues and expenses reflected during the
         reporting period. Actual results could differ from those estimates.


         On July 1, 2000, CP&L distributed its ownership interest in the stock
         of North Carolina Natural Gas Corporation (NCNG), Strategic Resource
         Solutions Corp. (SRS), Monroe Power Company (Monroe Power) and CPL
         Energy Ventures, Inc. (Energy Ventures) to CP&L Energy. As a result,
         those companies are direct subsidiaries of CP&L Energy and are not
         included in CP&L's results of operations and financial position since
         that date.


2. FLORIDA PROGRESS CORPORATION

         CP&L, Florida Progress Corporation (FPC), a Florida corporation, and
         CP&L Energy, entered into an Amended and Restated Agreement and Plan of
         Share Exchange dated as of August 22, 1999, amended and restated as of
         March 3, 2000 (the Amended Agreement).

         Under the terms of the Amended Agreement, all outstanding shares of
         common stock, no par value, of FPC common stock would be acquired by
         CP&L Energy in a statutory share exchange with an approximate value of
         $5.0 billion, which is subject to change based on CP&L Energy's stock
         price and on the value of the contingent value obligations (CVO)
         discussed below. Each share of FPC common stock, at the election of the
         holder, will be exchanged for (i) $54.00 in cash and one CVO, or (ii)
         the number of shares of common stock, no par value, of CP&L Energy
         equal to the ratio determined by dividing $54.00 by the average of the
         closing sale price per share of CP&L Energy common stock (Final Stock
         Price), as reported on the New York Stock Exchange composite tape for
         the twenty consecutive trading days ending with the fifth trading day
         immediately preceding the closing date for the exchange, and one CVO,
         or (iii) a combination of cash and CP&L Energy common stock, and one
         CVO; provided, however, that shareholder elections shall be subject to
         allocation and proration to achieve a mix of the aggregate exchange
         consideration that is 65% cash and 35% common stock. The number of
         shares of CP&L Energy common stock that will be issued as stock
         consideration will vary if the Final Stock Price is within a range of
         $37.13 to $45.39, but not outside that range. Thus, the maximum number
         of shares of CP&L Energy common stock into which one share of FPC
         common stock could be exchanged would be 1.4543 and the minimum would
         be 1.1897. FPC shareholders will

                                       14
<PAGE>

         receive one CVO for each share of FPC stock owned. Each CVO will
         represent the right to receive contingent payments that may be made by
         CP&L Energy based on certain cash flows that may be derived from future
         operations of four synthetic fuel plants, purchased by FPC in October
         1999. In conjunction with this proposed share exchange, CP&L Energy
         plans to issue debt to fund the cash portion of the exchange.

         The transaction has been approved by the Boards of Directors of FPC,
         CP&L and CP&L Energy. Consummation of the exchange is subject to the
         satisfaction or waiver of certain closing conditions including, among
         others, the approval by the shareholders of FPC and the approval of the
         issuance of CP&L Energy common stock in the exchange by the
         shareholders of CP&L Energy; the approval or regulatory review by the
         Federal Energy Regulatory Commission (FERC), the Securities and
         Exchange Commission (SEC), the Nuclear Regulatory Commission (NRC), the
         North Carolina Utilities Commission (NCUC), and certain other federal
         and state regulatory bodies; the expiration or early termination of the
         waiting period under the Hart-Scott-Rodino Antitrust Improvements Act
         of 1976 (HSR Act); and other customary closing conditions. In addition,
         FPC's obligation to consummate the exchange is conditioned upon the
         Final Stock Price being not less than $30.00. CP&L, CP&L Energy and FPC
         have agreed to certain undertakings and limitations regarding the
         conduct of their respective businesses prior to the closing of the
         transaction. The transaction is expected to be completed by the end of
         2000.

         Either FPC or CP&L Energy and CP&L may terminate the Amended Agreement
         under certain circumstances, including if the exchange has not been
         consummated on or before December 31, 2000; provided that if certain
         conditions have not been satisfied on December 31, 2000, but all other
         conditions have been satisfied or waived then such date shall be June
         30, 2001. In the event that FPC or CP&L Energy terminate the Amended
         Agreement in certain limited circumstances, FPC would be required to
         pay CP&L Energy a termination fee of $150 million, plus CP&L Energy's
         reasonable out-of-pocket expenses which are not to exceed $25 million
         in the aggregate.

         On May 23, 2000, the NRC approved the change in control of FPC that
         will result from the share exchange. On July 12, 2000, the FERC
         approved the change of control over FPC's jurisdictional facilities
         resulting from the share exchange. Also, on July 12, 2000, the
         Department of Justice terminated the waiting period under the HSR Act
         and completed its antitrust review. On February 3, 2000, CP&L Energy
         filed an application with the NCUC for authorization of the share
         exchange with FPC and the issuance of common stock in connection with
         the transaction. A hearing was held on this matter on July 18, 2000. As
         part of the settlement with the NCUC Public Staff, CP&L agreed to
         reduce rates to all of its non-Real Time Pricing customers by $3
         million in 2002, $4.5 million in 2003, $6 million in 2004 and $6
         million in 2005. By order issued August 22, 2000 the NCUC approved the
         proposed settlement and the Company's application. CP&L also agreed to
         write off and forego recovery of $10 million of unrecovered fuel costs
         in its 2000 fuel cost recovery proceeding. On March 14, 2000, CP&L
         Energy and FPC filed an application with the SEC requesting approval of
         the share exchange under the Public Utility Holding Company Act. On
         July 28, 2000, the parties filed an amended application with the SEC,
         and the SEC issued its notice of the merger application on August 4,
         2000. CP&L Energy and CP&L expect to obtain the final regulatory
         approvals and close the transaction by the end of 2000. However, CP&L
         Energy and CP&L cannot predict the outcome of this matter.

3. FINANCIAL INFORMATION BY BUSINESS SEGMENT

         CP&L Energy provides services through the following business segments:
         electric, natural gas and other.

         Through June 30, 2000, the business segments, operations and assets of
         CP&L Energy and CP&L were substantially the same. Subsequent to July 1,
         2000, CP&L's operations consist primarily of the CP&L Energy electric
         segment and the gain on the sale of assets described in note 9 to the
         Consolidated Interim Financial Statements.

         The electric segment generates, transmits, distributes and sells
         electric energy in portions of North and South Carolina. Electric
         operations are subject to the rules and regulations of the FERC, the
         NCUC and the Public Service Commission of South Carolina (SCPSC).

         The natural gas segment transmits, distributes and sells gas in
         portions of North Carolina. Gas operations are subject to the rules and
         regulations of the NCUC.

         The other segment primarily includes telecommunication services, energy
         management services, propane and miscellaneous non-regulated
         activities.

         For reportable segments presented in the accompanying table, segment
         earnings (losses) before taxes include intersegment sales accounted for
         at prices representative of unaffiliated party transactions.


                                       15
<PAGE>

<TABLE>
<CAPTION>
         (in thousands)                             Electric       Natural         Other       Eliminations    Segment
                                                                     Gas                                        Totals
         ==================================================================================================================
<S>                                                   <C>             <C>           <C>       <C>              <C>
         Three Months Ended 9/30/00
         Revenues

              Unaffiliated                            $938,839        $73,411       $69,716              -     $1,081,966
              Intersegment                                   -          2,234           516          (516)          2,234
                                                  -------------- -------------- ------------- -------------- --------------
                   Total Revenues                     $938,839        $75,645       $70,232         $(516)     $1,084,200

         Depreciation and Amortization                $128,923         $4,845        $6,020              -       $139,788

         Net Interest Charges                          $51,237         $1,898             -       $(2,068)        $51,067

         Earnings(Losses) Before Taxes                $288,812           $894      $451,724     $(295,855)       $445,575

         Total Segment Assets                       $8,650,093       $571,977    $1,109,211     $(211,900)    $10,119,381

         Capital and Investment Expenditures          $220,088        $20,029       $34,533              -       $274,650
         ==================================================================================================================

                                                    Electric       Natural         Other      Eliminations     Segment
                                                                     Gas                                        Totals
         ==================================================================================================================
         Three Months Ended 9/30/99
         Revenues

              Unaffiliated                            $947,233        $48,041       $29,482              -     $1,024,756
              Intersegment                                   -            991         7,450         (8,441)             -
                                                  -------------- -------------- ------------- -------------- --------------
                   Total Revenues                     $947,233        $49,032       $36,932        $(8,441)    $1,024,756

         Depreciation and Amortization                $121,953         $4,494        $4,036              -       $130,483

         Net Interest Charges                          $45,698         $1,390          $287        $(1,078)       $46,297

         Earnings(Losses) Before Taxes                $272,642        $(2,788)     $(21,769)       $   (18)       $248,067

         Total Segment Assets                       $8,563,785       $548,282      $287,626     $(104,570)     $9,295,123

         Capital and Investment Expenditures          $219,582        $14,827       $17,201              -       $251,610
         ==================================================================================================================

                                                    Electric       Natural         Other      Eliminations     Segment
                                                                     Gas                                        Totals
         ==================================================================================================================
         Nine Months Ended 9/30/00
         Revenues

              Unaffiliated                          $2,497,217       $219,158      $132,492             -      $2,848,867
              Intersegment                                   -          4,776        14,327       (14,327)          4,776
                                                  -------------- -------------- ------------- -------------- --------------

                   Total Revenues                   $2,497,217       $223,934      $146,819      $(14,327)     $2,853,643

         Depreciation and Amortization                $385,931        $14,461       $19,524            -         $419,916

         Net Interest Charges                         $154,902         $5,285          $567       $(5,847)       $154,907

         Earnings(Losses) Before Taxes                $615,219        $16,238      $409,360     $(295,891)       $744,926

         Total Segment Assets                       $8,650,093       $571,977    $1,109,211     $(211,900)    $10,119,381

         Capital and Investment Expenditures          $649,928        $36,526       $68,003             -        $754,457
         ==================================================================================================================

         Nine Months Ended 9/30/99
         Revenues
              Unaffiliated                          $2,419,791        $48,041       $82,648             -      $2,550,480
              Intersegment                                   -            990        20,157       (21,147)             -
                                                  -------------- -------------- ------------- -------------- --------------
                   Total Revenues                   $2,419,791        $49,031      $102,805      $(21,147)     $2,550,480

         Depreciation and Amortization                $363,793         $4,494       $12,182              -       $380,469

         Net Interest Charges                         $133,103         $1,390        $1,067       $(1,078)       $134,482

         Earnings(Losses) Before Taxes                $565,168        $(2,788)     $(57,046)         $(59)       $505,275

         Total Segment Assets                       $8,563,785       $548,282      $287,626     $(104,570)     $9,295,123

         Capital and Investment Expenditures          $512,442        $14,827      $139,890              -       $667,159
         ==================================================================================================================
</TABLE>
                                       16

<PAGE>
   Segment totals for depreciation and amortization expense include
   expenses related to the other segments that are included in diversified
   business operating expenses on a consolidated basis. Segment totals for
   interest expense include expenses related to the other segments that
   are included in other, net on a consolidated basis.

4. FINANCING ACTIVITIES

   During 2000, CP&L has issued a total of $300 million principal amount
   of Senior Notes and $497.64 million principal amount of variable rate
   First Mortgage Bonds. The issuances were as follows:

      a) On April 11, 2000, CP&L issued $300 million principal amount of Senior
         Notes, 7.50% Series Due April 1, 2005.

      b) On June 15, 2000, CP&L issued $67.3 million principal amount of First
         Mortgage Bonds, Pollution Control Series N, Wake County Pollution
         Control Revenue Refunding Bonds (Carolina Power & Light Company
         Project) 2000 Series A Due November 1, 2018.

      c) On June 15, 2000, CP&L issued $55.64 million principal amount of First
         Mortgage Bonds, Pollution Control Series O, Person County Pollution
         Control Revenue Refunding Bonds (Carolina Power & Light Company
         Project) 2000 Series A Due November 1, 2018.

      d) On July 13, 2000, CP&L issued $329.1 million principal amount of First
         Mortgage Bonds, Pollution Control Series P, Q, and S through V, Wake
         County Pollution Control Revenue Refunding Bonds (Carolina Power &
         Light Company Project) 2000 Series B, C, and D through G Due October 1,
         2022.

      e) On July 13, 2000, CP&L issued $45.6 million principal amount of First
         Mortgage Bonds, Pollution Control Series R, Person County Solid Waste
         Disposal Revenue Refunding Bonds (Carolina Power & Light Company
         Project) 2000 Series B Due October 1, 2022.

     In addition, CP&L retired or redeemed $47.25 million principal amount
     of Promissory Notes, $150 million principal amount of First Mortgage
     Bonds and $497.64 million principal amount of variable rate Pollution
     Control Obligations. The following contains details of each retirement
     or redemption:

      a) The retirement on January 15, 2000 of $47.25 million principal amount
         of non-interest bearing Promissory Notes, Series 1993A, which matured
         on that date.

      b) The retirement on February 1, 2000 of $150 million principal amount of
         First Mortgage Bonds, 6-1/8% Series, which matured on that date.

      c) The redemption of Pollution Control Obligations relating to:


         i)  The redemption on June 30, 2000, of $67.3 million principal amount
             of The Wake County Industrial Facility and Pollution Control
             Financing Authority Pollution Control Revenue Bonds (Carolina Power
             & Light Company Project) Series 1985A due May 1, 2015, at 100% of
             the principal amount of such bonds.

         ii) The redemption on July 28, 2000, of $50 million principal amount of
             The Wake County Industrial Facility and Pollution Control Financing
             Authority Pollution Control Revenue Bonds (Carolina Power & Light
             Company Project) Series 1985B due September 1, 2015, at 100% of the
             principal amount of such bonds.

         iii) The redemption on July 28, 2000, of $97.4 million principal amount
             of The Wake County Industrial Facility and Pollution Control
             Financing Authority Pollution Control Revenue Bonds (Carolina Power
             & Light Company Project) Series 1985C due October 1, 2015, at 100%
             of the principal amount of such bonds.

         iv) The redemption on August 1, 2000, of $45.6 million principal amount
             of The Person County Industrial Facility and Pollution Control
             Financing Authority Solid Waste Disposal Revenue Bonds (Carolina
             Power & Light Company Project) Series 1986 due November 1, 2016, at
             100% of the principal amount of such bonds.

         v)  The redemption on August 1, 2000, of $41.7 million principal amount
             of The Wake County Industrial Facility and Pollution Control
             Financing Authority Pollution Control Revenue Bonds (Carolina Power
             & Light Company Project) Series 1987 due March 1, 2017, at 100% of
             the principal amount of such bonds.

         vi) The redemption on August 1, 2000, of $70 million principal amount
             of The Wake County Industrial Facility and Pollution Control
             Financing Authority Pollution Control Revenue Refunding Bonds
             (Carolina Power & Light Company Project) Series 1990A due June 15,
             2014, at 100% of the principal amount of such bonds.

         vii) The redemption on August 1, 2000, of $70 million principal amount
             of The Wake County Industrial Facility and Pollution Control
             Financing Authority Pollution Control Revenue Refunding Bonds
             (Carolina Power & Light Company Project) Series 1990B due June 15,
             2014, at 100% of the principal amount of such bonds.

         viii) The redemption on August 2, 2000, of $55.64 million principal
             amount of The Person County Industrial Facility and Pollution
             Control Financing Authority Pollution Control Revenue Refunding
             Bonds

                                       17
<PAGE>
             (Carolina Power & Light Company Project) Series 1992A due November
             1, 2019, at 100% of the principal amount of such bonds.

5. NUCLEAR DECOMMISSIONING

         In CP&L's retail jurisdictions, provisions for nuclear decommissioning
         costs are approved by the NCUC and the SCPSC and are based on
         site-specific estimates that include the costs for removal of all
         radioactive and other structures at the site. In the wholesale
         jurisdiction, the provisions for nuclear decommissioning costs are
         based on amounts agreed upon in applicable rate agreements. Based on
         the site-specific estimates discussed below, and using an assumed
         after-tax earnings rate of 7.75% and an assumed cost escalation rate of
         4%, current levels of rate recovery for nuclear decommissioning costs
         are adequate to provide for decommissioning of CP&L's nuclear
         facilities.

         CP&L's most recent site-specific estimates of decommissioning costs
         were developed in 1998, using 1998 cost factors, and are based on
         prompt dismantlement decommissioning, which reflects the cost of
         removal of all radioactive and other structures currently at the site,
         with such removal occurring shortly after operating license expiration.
         These estimates, in 1998 dollars, are $281.5 million for Robinson Unit
         No. 2, $299.6 million for Brunswick Unit No. 1, $298.7 million for
         Brunswick Unit No. 2 and $328.1 million for the Harris Plant. The
         estimates are subject to change based on a variety of factors
         including, but not limited to, cost escalation, changes in technology
         applicable to nuclear decommissioning and changes in federal, state or
         local regulations. The cost estimates exclude the portion attributable
         to North Carolina Eastern Municipal Power Agency (Power Agency), which
         holds an undivided ownership interest in the Brunswick and Harris
         nuclear generating facilities. Operating licenses for CP&L's nuclear
         units expire in the year 2010 for Robinson Unit No. 2, 2016 for
         Brunswick Unit No. 1, 2014 for Brunswick Unit No. 2 and 2026 for the
         Harris Plant.

         The Financial Accounting Standards Board is proceeding with its project
         regarding accounting practices related to obligations associated with
         the retirement of long-lived assets, and a revised exposure draft of a
         proposed accounting standard was issued during the first quarter of
         2000. It is uncertain what effects this draft may ultimately have on
         CP&L's accounting for nuclear decommissioning and other asset
         retirement costs.

6. COMMITMENTS AND CONTINGENCIES

         Contingencies existing as of the date of these statements are described
         below. No significant changes have occurred since December 31, 1999,
         with respect to the commitments discussed in Note 16 of the financial
         statements included in CP&L's 1999 Annual Report on Form 10-K.

Contingencies

      1) Applicability of SFAS No. 71. As regulated entities, CP&L and NCNG are
         subject to the provisions of Statement of Financial Accounting
         Standards No. 71, "Accounting for the Effects of Certain Types of
         Regulation" (SFAS No.71). Accordingly, CP&L and NCNG record certain
         assets and liabilities resulting from the effects of the ratemaking
         process, which would not be recorded under generally accepted
         accounting principles for unregulated entities. CP&L and NCNG's ability
         to continue to meet the criteria for application of SFAS No. 71 may be
         affected in the future by competitive forces, deregulation and
         restructuring in the electric and gas utility industries. In the event
         that SFAS No. 71 no longer applies to a separable portion of CP&L and
         NCNG's operations, related regulatory assets and liabilities would be
         eliminated unless an appropriate regulatory recovery mechanism is
         provided. Additionally, these factors could result in an impairment of
         electric and gas utility plant assets as determined pursuant to
         Statement of Financial Accounting Standards No. 121, "Accounting for
         the Impairment of Long-Lived Assets and for Long-Lived Assets to Be
         Disposed Of." CP&L's net regulatory assets totaled $419.6 million,
         $421.5 million and $405.0 million as of September 30, 2000, September
         30, 1999 and December 31, 1999, respectively. NCNG's net regulatory
         assets totaled $12.7 million, $11.5 million and $9.2 million as of
         September 30, 2000, September 30, 1999 and December 31, 1999,
         respectively.

      2) Claims and Uncertainties.

      a) CP&L is subject to federal, state and local regulations addressing air
         and water quality, hazardous and solid waste management and other
         environmental matters.

         Various organic materials associated with the production of
         manufactured gas, generally referred to as coal tar, are regulated
         under various federal and state laws. There are several manufactured
         gas plant (MGP)

                                       18

<PAGE>
         sites to which the electric utility and gas utility have some
         connection. In this regard, both the electric utility and gas utility,
         along with others, are participating in a cooperative effort with the
         North Carolina Department of Environment and Natural Resources,
         Division of Waste Management (DWM). The DWM has established a uniform
         framework to address MGP sites. The investigation and remediation of
         specific MGP sites will be addressed pursuant to an Administrative
         Order on Consent (AOC) between the DWM and the potentially responsible
         party or parties. Both the electric utility and gas utility have signed
         an AOC to investigate and remediate certain sites. Both the electric
         utility and the gas utility continue to identify parties connected to
         individual MGP sites, and to determine their relative relationship to
         other parties at those sites and the degree to which they will
         undertake efforts with others at individual sites. CP&L Energy and CP&L
         do not expect the costs associated with these sites to be material to
         the consolidated results of operations or financial position of CP&L
         Energy and CP&L.

         The electric utility and gas utility are periodically notified by
         regulators such as the North Carolina Department of Environment and
         Natural Resources, the South Carolina Department of Health and
         Environmental Control, and other state and federal agencies including
         the U.S. Environmental Protection Agency (EPA) of involvement or
         potential involvement in sites, other than MGP sites, that may require
         investigation and/or remediation. Although CP&L may incur costs at the
         sites about which it has been notified, based upon the current status
         of the sites, CP&L Energy and CP&L do not expect those costs to be
         material to the consolidated results of operations or financial
         position of CP&L Energy and CP&L.

         The EPA has been conducting an enforcement initiative related to a
         number of coal-fired electric utility power plants in an effort to
         determine whether modifications at those facilities were subject to New
         Source Review requirements or New Source Performance Standards under
         the Clean Air Act. CP&L has been asked to provide information to the
         EPA as part of this initiative and has cooperated in providing the
         requested information. The EPA has initiated enforcement actions, which
         may have potentially significant penalties, against other companies
         that have been subject to this initiative. CP&L cannot predict the
         outcome of this matter.

         The EPA published a final rule approving petitions under section 126 of
         the Clean Air Act, which requires certain sources to make reductions in
         nitrogen oxide emissions. The final rule also includes a set of
         regulations that affect nitrogen oxide emissions from sources included
         in the petitions. CP&L's fossil-fueled electric generating plants are
         included in these petitions. CP&L, other utilities, trade organizations
         and states are participating in litigation challenging the EPA's
         action. CP&L cannot predict the outcome of this matter.


         In 1998, the EPA published a final rule addressing the issue of
         regional transport of ozone. This rule is commonly known as the NOx SIP
         Call. The EPA's rule requires 23 jurisdictions, including North and
         South Carolina, to further reduce nitrogen oxide emissions in order to
         attain a pre-set state NOx emission. The EPA's rule also suggests to
         the states that these additional nitrogen oxide emission reductions be
         obtained from the utility sector. CP&L is evaluating necessary measures
         to comply with the rule and estimates its related capital expenditures
         could be approximately $370 million, which has not been adjusted for
         inflation. Increased operation and maintenance costs relating to the
         NOx SIP Call are not expected to be material to CP&L's results of
         operations. Further controls are anticipated as electricity demand
         increases. CP&L, other utilities, trade organizations and states are
         participating in litigation challenging the NOx SIP Call. The District
         of Columbia Circuit Court of Appeals upheld the EPA's NOx SIP Call.
         Further appeals to the U.S. Supreme Court have been filed. Prior to
         resolution of a potential appeal, the EPA is requiring regulations in
         the states involved in the NOx SIP Call including North and South
         Carolina to comport with the NOx SIP Call. Acceptable state plans can
         be approved in lieu of the final rules the EPA approved as part of the
         126 petitions. North and South Carolina are proceeding to adopt such
         plans. CP&L cannot predict the outcome of this matter.

         In July 1997, the EPA issued final regulations establishing a new
         eight-hour ozone standard. In October 1999, the District of Columbia
         Circuit Court of Appeals ruled against the EPA with regard to the
         federal eight-hour ozone standard. CP&L, other utilities, trade
         organizations and states are participating in a further appeal to the
         U.S. Supreme Court. North Carolina adopted the federal eight-hour ozone
         standard and is proceeding with the implementation process. North
         Carolina has promulgated final regulations, which will require CP&L to
         install nitrogen oxide controls under the State's eight-hour standard.
         These costs fall within the estimate set forth above.

                                       19
<PAGE>

         b) As required under the Nuclear Waste Policy Act of 1982, CP&L entered
         into a contract with the U.S. Department of Energy (DOE) under which
         the DOE agreed to begin taking spent nuclear fuel by no later than
         January 31, 1998. All similarly situated utilities were required to
         sign the same standard contract.

         In April 1995, the DOE issued a final interpretation that it did not
         have an unconditional obligation to take spent nuclear fuel by January
         31, 1998. In Indiana & Michigan Power v. DOE, the Court of Appeals
         vacated the DOE's final interpretation and ruled that the DOE had an
         unconditional obligation to begin taking spent nuclear fuel. The Court
         did not specify a remedy because the DOE was not yet in default.

         After the DOE failed to comply with the decision in Indiana & Michigan
         Power v. DOE, a group of utilities (including CP&L) petitioned the
         Court of Appeals in Northern States Power (NSP) v. DOE, seeking an
         order requiring the DOE to begin taking spent nuclear fuel by January
         31, 1998. The DOE took the position that their delay was unavoidable,
         and the DOE was excused from performance under the terms and conditions
         of the contract. The Court of Appeals did not order the DOE to begin
         taking spent nuclear fuel, stating that the utilities had a potentially
         adequate remedy by filing a claim for damages under the contract.

         After the DOE failed to begin taking spent nuclear fuel by January 31,
         1998, a group of utilities (including CP&L) filed a motion with the
         Court of Appeals to enforce the mandate in NSP v. DOE. Specifically,
         the utilities asked the Court to permit the utilities to escrow their
         waste fee payments, to order the DOE not to use the waste fund to pay
         damages to the utilities, and to order the DOE to establish a schedule
         for disposal of spent nuclear fuel. The Court denied this motion based
         primarily on the grounds that a review of the matter was premature, and
         that some of the requested remedies fell outside of the mandate in NSP
         v. DOE.


         Subsequently, a number of utilities each filed an action for damages in
         the Court of Claims. In a recent decision, the U.S. Circuit Court of
         Appeals (Federal Circuit) ruled that utilities may sue the DOE for
         damages in the Federal Court of Claims instead of having to file an
         administrative claim with the DOE. CP&L is in the process of evaluating
         whether it should file a similar action for damages.


         CP&L also continues to monitor legislation that has been introduced in
         Congress which might provide some limited relief. CP&L cannot predict
         the outcome of this matter.

         With certain modifications and additional approval by the NRC, CP&L's
         spent fuel storage facilities will be sufficient to provide storage
         space for spent fuel generated on CP&L's system through the expiration
         of the current operating licenses for all of CP&L's nuclear generating
         units. Subsequent to the expiration of these licenses, dry storage may
         be necessary. CP&L has initiated the process of obtaining the
         additional NRC approval.

         c) In the opinion of management, liabilities, if any, arising under
         other pending claims would not have a material effect on the financial
         position and results of operations of CP&L Energy, CP&L and NCNG.

      7. EARNINGS PER COMMON SHARE OF CP&L ENERGY

         Restricted stock awards and contingently issuable shares had a dilutive
         effect on earnings per share for the three and nine months ended
         September 30, 2000 and increased the weighted-average number of common
         shares outstanding for dilutive purposes by 481,036 and 407,381 for the
         three and nine months ended September 30, 2000, respectively, and by
         286,739 and 277,299 for the three and nine months ended September 30,
         1999, respectively. The weighted-average number of common shares
         outstanding for dilutive purposes was 153.8 million and 153.6 million
         for the three and nine months ended September 30, 2000, respectively,
         and 151.9 million and 147.1 million for the three and nine months ended
         September 30, 1999, respectively.

         Employee Stock Ownership Plan shares that have not been committed to be
         released to participants' accounts are not considered outstanding for
         the determination of earnings per common share. Those shares totaled
         5,782,376 and 6,458,088 at September 30, 2000 and September 30, 1999,
         respectively.

                                       20
<PAGE>

      8. NEW ACCOUNTING STANDARDS

         In June 2000, the Financial Accounting Standards Board published
         Statement of Financial Accounting Standards (SFAS) No. 138, which
         amended SFAS No. 133, "Accounting for Derivative Instruments and
         Hedging Activities." The amendment to SFAS No. 133 includes expansion
         of the normal purchases and sales exception to most contracts for which
         physical delivery of the asset being sold or purchased is probable.
         Based on CP&L's understanding of the amended normal purchases and sales
         exception, it has not expected SFAS No. 133 to have a significant
         impact on its financial position or results of operations. Recently,
         however, a number of issues have arisen in the industry with regard to
         whether or not certain power contracts fall within the scope of SFAS
         No. 133. These issues are expected to be addressed by the Derivatives
         Implementation Group of the Financial Accounting Standards Board during
         the fourth quarter of 2000. CP&L will continue SFAS No. 133
         implementation efforts during the last quarter of 2000, including
         monitoring developments regarding the recent SFAS No. 133 scope issues
         discussed above.

         In December 1999, the Securities and Exchange Commission issued Staff
         Accounting Bulletin 101 "Revenue Recognition in Financial Statements"
         (SAB 101) to provide guidance regarding the recognition, presentation
         and disclosure of revenue in the financial statements. The Company
         expects to adopt the provisions of SAB 101 (as amended by SAB 101B,
         which deferred the implementation date, by three quarters) on October
         1, 2000. The adoption of SAB 101 is not expected to have a material
         effect on the financial statements of CP&L Energy and CP&L.

      9. SALE OF ASSETS

         On September 12, 2000, Caronet, Inc., a North Carolina corporation that
         is also domesticated in Virginia and a wholly-owned subsidiary of CP&L,
         entered into an Agreement to Settle and Merger Plan (the Agreement) by
         and among DukeNet Communications, Inc., a North Carolina corporation;
         BellSouth Personal Communications, Inc., a Delaware corporation
         (BellSouth PCI); BellSouth Corporation, a Georgia corporation
         (BellSouth), and BellSouth Carolinas PCS, L.P., a Delaware limited
         partnership (BellSouth Carolinas PCS) and CP&L. The transaction closed
         on September 28, 2000. Pursuant to the terms of the Agreement,
         BellSouth PCI acquired the interests of the limited partners in
         BellSouth Carolinas PCS in conjunction with a merger of BellSouth
         Carolinas PCS into BellSouth PCI (the Merger). As consideration for the
         Merger, BellSouth PCI paid the limited partners $20 million for each
         one percent interest in BellSouth Carolinas PCS. Upon consummation of
         the Merger, CP&L received $200 million for Caronet, Inc.'s 10% limited
         partnership interest in BellSouth Carolinas PCS. The sale resulted in
         an after-tax gain of $121.1 million.


     10. RISK MANAGEMENT AND DERIVATIVE INFORMATION

         CP&L uses interest rate swap agreements to hedge its exposure on
         variable rate debt positions. The agreements, with a total notional
         amount of $500 million, were effective in July 2000 and mature in July
         2002. Under these agreements, CP&L receives a floating rate based on
         the three month LIBOR and pays a weighted-average fixed rate of
         approximately 7.17%. The notional amount of the contracts is not
         exchanged and does not represent exposure to credit loss. In the event
         of default by a counterparty, the risk in these transactions is the
         cost of replacing the agreements at current market rates. CP&L only
         enters into swap agreements with strong creditworthy counterparties.
         The fair value of the swaps was a $3.9 million liability position at
         September 30, 2000.

         During September and October 2000, CP&L entered into forward starting
         swaps to hedge its exposure to interest rates with regard to future
         issuances of fixed rate debt. The agreements, with a total notional
         amount of $900 million, will be cash settled at the time that the
         hedged debt is issued. The resulting receipts or payments will be
         recorded as adjustments to interest expense over the life of the
         related debt. These agreements have computational periods of 2, 5 and
         10 years, with $300 million notional amount for each computational
         period. Under the agreements, CP&L receives a floating rate based on
         the three month LIBOR and pays weighted-average fixed rates of
         approximately 6.73%, 6.81% and 6.83% for the 2, 5 and 10 year
         computational periods, respectively. At September 30, 2000, $450
         million notional amount of these forward starting swaps was outstanding
         and had a fair value of $1.2 million liability position. The notional
         amount of the contracts is not exchanged and does not represent
         exposure to credit loss. In the event of default by counterparty, the
         risk in these transactions is the cost of replacing the agreements at
         current market rates. CP&L only enters into swap agreements with strong
         creditworthy counterparties.

                                       21

<PAGE>

         Item 2. Management's Discussion and Analysis of Financial Condition and
         Results of Operations

                              RESULTS OF OPERATIONS
             For the Three and Nine Months Ended September 30, 2000,
           As Compared With the Corresponding Period One Year Earlier

         This is a combined Quarterly Report on Form 10-Q of CP&L Energy, Inc.
         (CP&L Energy) and Carolina Power & Light Company (CP&L). Therefore, the
         Management's Discussion and Analysis of Financial Condition and Results
         of Operations (MD&A) applies to CP&L Energy and CP&L, unless indicated
         otherwise. The MD&A should be read in conjunction with the consolidated
         financial statements included in this report.

         RESULTS OF OPERATIONS - THREE MONTHS ENDED SEPTEMBER 30, 2000

         Net income for CP&L Energy and CP&L for the three months ended
         September 30, 2000, and 1999, was as follows:

         (Dollars in millions)       CP&L Energy                CP&L
                                     -----------                ----
                                    2000      1999         2000       1999
                                    ----      ----         ----       ----

         Net income                $297.1    $147.1       $291.9     $147.9

         CP&L Energy's basic earnings per common share for the third quarter of
         2000 increased to $1.94 per share from $0.97 per share for the same
         period of 1999.

         The increase in earnings was primarily due to a $121.1 million, or
         $0.79 per share, after-tax gain on the sale of the 10% limited
         partnership interest in BellSouth Carolinas PCS in September 2000 and
         the absence of expenses of $0.14 per share related to costs incurred
         for Hurricanes Dennis and Floyd in 1999. Quarterly earnings were offset
         by a write-off of $10.0 million, or $0.04 per share, of deferred fuel
         costs to settle the 2000 NCUC fuel case.

         The following sections explain the significant variance on the
         Statements of Income for CP&L Energy and CP&L as compared to the same
         period in 1999.

         ELECTRIC OPERATING REVENUES
         (Dollars in millions)

         Electric operating revenues for the three months ended September 30,
         2000, and 1999, are as follows:

                                                CP&L
                            ------------------------------------------
                                  2000          1999       % Change
                                  ----          ----       --------

             Retail               $743.4        $755.0          (1.5)
             Wholesale             175.3         172.1           1.9
             Other                  20.1          20.1            -
                            ------------- -------------
             Total                $938.8        $947.2          (0.9)
                            ============= =============

         The fluctuations in electric operating revenues for the three months
         ended September 30, 2000 as compared to the same period in 1999 were
         affected by the following factors (in millions):

                    Customer growth/changes in usage patterns*           $ 27
                    Industrial sales                                        3
                    Weather                                               (37)
                    Price                                                   3
                    Sales to Power Agency                                  (3)
                    Sales to other utilities                               (1)
                                                                           ---
                    Total                                                $ (8)
                                                                           ---

         * Customer growth/changes in usage patterns excludes industrial
         customers.


         Electric operating revenues for CP&L decreased slightly for the quarter
         ended September 30, 2000, as compared to 1999, due to customer growth,
         offset by weather. Customer growth continued in the third quarter, with
         CP&L adding over 8,000 new customers. However, temperatures for the
         quarter were much lower than normal and more than offset growth.
         Industrial sales increased, reflecting that many customers are coming
         out of the economic

                                       22
<PAGE>

         downturn experienced in 1999. The increase was driven by the textile
         industry and lumber & wood industry, which experienced increased market
         demand, while the chemicals and paper industries continued to decline.

         NATURAL GAS OPERATING REVENUES

         Natural gas operating revenues for CP&L Energy increased $27.6 million,
         when compared to the same period in 1999, primarily due to increases in
         the market price of gas, which is a pass-thru charge to the customers.

         CP&L distributed its ownership interest in NCNG to CP&L Energy on July
         1, 2000, and therefore, no longer includes natural gas operating
         revenues in its Consolidated Financial Statements subsequent to that
         date.

         DIVERSIFIED BUSINESSES

         Diversified business revenues for CP&L Energy increased $40.2 million
         for the third quarter when compared to the same period in 1999.
         Strategic Resource Solution Corp.'s (SRS) operating revenues increased
         by $14.8 million due to work completed on performance contracts with
         educational and military customers. Energy Ventures, a new subsidiary
         that has an ownership interest in synthetic fuel plants, was
         established late in the second quarter of 2000 and added $28.4 million
         in operating revenues for the third quarter. Monroe Power, which began
         operations in December 1999, contributed revenues of $7.6 million for
         the quarter. Operating revenues from Caronet, Inc. (Caronet), decreased
         by $10.4 million for the third quarter. Caronet, formerly reported as
         Interpath, contributed net assets used in its application service
         provider business to a newly formed company for a 35% ownership
         interest effective June 28, 2000. Therefore, the application service
         provider revenues are not reflected in the Consolidated Financial
         Statements subsequent to that date.

         Diversified business expenses for CP&L Energy increased $60.7 million
         over the third quarter of 1999. SRS had a $10.2 million increase in
         operating expenses related to performance contracts noted above. Energy
         Ventures operating expenses in the current period were $57.2 million.
         Energy Ventures generates tax credits from the operation of synthetic
         fuel plants, which are discussed in the INCOME TAXES section. Caronet
         expenses decreased by $10.7 million and Monroe Power added $4.5 million
         in operating expenses for the third quarter.

         Diversified business revenues for CP&L decreased $25.2 million, and
         diversified business expenses decreased $29.1 million when compared to
         the same period in 1999, primarily due to the distribution of certain
         subsidiaries to CP&L Energy on July 1, 2000, as detailed in Note 1 to
         the Consolidated Interim Financial Statements.

         FUEL USED IN ELECTRIC GENERATION

         Fuel used in electric generation increased $13.6 million, when compared
         to the same period in 1999, primarily due to deferred fuel adjustments
         of approximately $15.0 million, which were partially offset by a
         decrease in fuel expense of $1.6 million. The deferred fuel adjustments
         included a write-off of unrecovered fuel and a change in the Experience
         Modification Factor (EMF), both in North Carolina. Also included in the
         deferred fuel adjustments was a change in the fuel costs recovery rate.
         Fuel expense decreased as the result of a decrease in generation and a
         shift in generation mix from steam to nuclear.

         PURCHASED POWER

         Purchased power decreased $22.8 million, when compared to the same
         period in 1999, primarily due to a decrease in volume. This reduction
         in volume was affected by cooler weather or fewer degree-days, which
         required fewer market purchases to meet the base load requirements.

         GAS PURCHASED FOR RESALE

         Gas purchased for resale for CP&L Energy increased $24.7 million, when
         compared to the same period in 1999, primarily due to the increase in
         the market price of gas over the previous year.

         CP&L distributed its ownership interest in NCNG to CP&L Energy on July
         1, 2000, and therefore, no longer includes gas purchased for resale in
         its Consolidated Financial Statements subsequent to that date.

         OTHER OPERATION AND MAINTENANCE

         Other operation and maintenance expenses for CP&L Energy decreased
         $13.7 million when compared to the same period in 1999, primarily due
         to a decrease in storm-related expenses. Operation and maintenance
         expenses for the

                                       23
<PAGE>

         third quarter of 1999 included substantial storm costs related to
         Hurricanes Dennis and Floyd. This decrease was partially offset by the
         effects of emission allowances that CP&L Energy began to expense in
         2000. CP&L's other operation and maintenance expenses decreased $29.9
         million, when compared to the same period in 1999, primarily due to the
         decreases detailed for CP&L Energy above as well as the distribution of
         NCNG to CP&L Energy on July 1, 2000, as detailed in Note 1 to the
         Consolidated Interim Financial Statements.

         OTHER INCOME

         Other income increased for the three months ended September 30, 2000
         primarily due to the sale of Caronet's 10% limited partnership interest
         in BellSouth Carolinas PCS for $200.0 million on September 28, 2000.
         Other income also increased due to an increase in non-operating income
         from subsidiary operations during the three months ended September 30,
         2000.

         INCOME TAXES

         Income taxes increased for the three months ended September 30, 2000
         primarily due to the sale of Caronet's 10% limited partnership interest
         in BellSouth Carolinas PCS for $200.0 million on September 28, 2000.
         Taxes related to the sale were approximately $79.0 million. This
         increase was partially offset by the income tax credits generated by
         the synthetic fuels operation of Energy Ventures.

         RESULTS OF OPERATIONS - NINE MONTHS ENDED SEPTEMBER 30, 2000

         Net income for CP&L Energy and CP&L for the nine months ended September
         30, 2000, and 1999, was as follows:

         (Dollars in millions)        CP&L Energy                 CP&L
                                      -----------                 ----
                                  2000       1999         2000           1999
                                  ----       ----         ----           ----
         Net income              $489.8     $301.0       $486.1         $303.2

         CP&L Energy's basic earnings per common share for the nine months
         ending September 30, 2000 increased to $3.20 per share from $2.05 per
         share for the same period of 1999.

         The increase in earnings was primarily due to a $121.1 million, or
         $0.79 per share, after-tax gain on the sale of the 10% limited
         partnership interest in BellSouth Carolinas PCS in September 2000 and
         the absence of expenses of $0.14 per share related to costs incurred
         for Hurricanes Dennis and Floyd in 1999. Earnings were offset by a
         reduction of $15.9 million, or $0.06 per share, for the write-off of
         deferred fuel costs to settle the 2000 NCUC fuel case.

         The following sections explain the significant variance on the
         Statements of Income for CP&L Energy and CP&L as compared to the same
         period in 1999.

         ELECTRIC OPERATING REVENUES
         (Dollars in millions)

         Electric operating revenues for the nine months ended September 30,
         2000, and 1999, are as follows:

                                                   CP&L
                               ------------------------------------------
                                       2000          1999       % Change
                                       ----          ----       --------

                Retail             $2,000.3      $1,937.4            3.2
                Wholesale             443.7         430.2            3.1
                Other                  53.2          52.2            1.9

                               ------------- -------------
                Total              $2,497.2      $2,419.8            3.2
                               ============= =============

                                       24

<PAGE>

         The fluctuations in electric operating revenues for the nine months
         ended September 30, 2000 as compared to last year were affected by the
         following factors (in millions):

                    Customer growth/changes in usage patterns*       $ 86
                    Industrial sales                                    7
                    Weather                                            (5)
                    Price                                             (10)
                    Sales to Power Agency                               6
                    Sales to other utilities                           (7)
                                                                       --
                    Total                                            $ 77
                                                                       --

         *Customer growth/changes in usage patterns excludes normal industrial
         customers.

         ELECTRIC OPERATING REVENUES

         The increase in the customer growth/changes in usage patterns component
         of electric operating revenues reflects continued growth in the number
         of customers served by CP&L. During the nine-month period, industrial
         sales experienced an overall increase primarily related to the textile,
         lumber, and primary metal industries. These increases were largely
         offset by the continued downturn in the chemical industry. Revenues
         decreased due to weather that was milder than normal for the same
         nine-month period last year. The price related decrease reflects
         capacity pricing changes between CP&L and the North Carolina Electric
         Membership Corporation that took effect January 1, 2000, and the
         effects of real-time pricing rate participation by industrial
         customers. The increase in revenue related to sales to North Carolina
         Eastern Municipal Power Agency (Power Agency) is primarily due to
         increased demand. The decrease in sales to other utilities is
         attributable to unit outages, and offering prices that were not
         competitive with the market.

         NATURAL GAS OPERATING REVENUES

         Natural gas operating revenues for CP&L Energy increased $175.1
         million, when compared to the same period in 1999, primarily due to the
         acquisition of NCNG on July 15, 1999. NCNG provides natural gas,
         propane gas and related services to approximately 178,000 customers in
         south-central and eastern North Carolina. The results of operations for
         the nine months ended September 30, 2000 include nine months of natural
         gas operating revenues for NCNG. Additionally, natural gas operating
         revenues have increased due to increases in the market price of gas
         charged to customers.

         CP&L's natural gas operating revenues for the nine months ended
         September 30, 2000 only include activity through July 1, 2000 when CP&L
         distributed its ownership interest in NCNG to CP&L Energy.
         Additionally, the 1999 period only includes activity subsequent to the
         acquisition of NCNG on July 15, 1999.

         DIVERSIFIED BUSINESSES

         Diversified business revenues for CP&L Energy increased $50.7 million
         for the nine months ended September 30, 2000 when compared to the same
         period in 1999. SRS's operating revenues increased by $16.7 million due
         to work completed on performance contracts with educational and
         military customers. Energy Ventures, a new subsidiary that has an
         ownership interest in synthetic fuel plants, was established late in
         the second quarter of 2000 and added $28.4 million in operating
         revenues. Monroe Power, which began operations in December 1999,
         contributed operating revenues of $14.3 million for the current period.
         Operating revenues from Caronet, Inc. (Caronet), decreased by $14.0
         million for the nine months ended September 30, 2000. Caronet, formerly
         reported as Interpath, contributed net assets used in its application
         service provider business to a newly formed company for a 35% ownership
         interest effective June 28, 2000. Therefore, the application service
         provider revenues are not reflected in the Consolidated Financial
         Statements subsequent to that date.

         Diversified business expenses for CP&L Energy increased $82.5 million
         over the first nine months of 1999. SRS had a $5.4 million increase in
         expenses due to performance contracts noted above. Energy Ventures had
         $57.2 million in expenses in the current period. Energy Ventures
         generates tax credits from the operation of synthetic fuel plants,
         which are discussed in the INCOME TAXES section. Caronet expenses
         increased by $6.9 million and Monroe Power had $9.5 million in
         operating expenses in the current period.

         Diversified business revenues for CP&L decreased $14.8 million, and
         diversified business expenses decreased $7.3 million when compared to
         the same period in 1999, primarily due to the distributions of certain
         subsidiaries to CP&L Energy on July 1, 2000, as detailed in Note 1 to
         the Consolidated Interim Financial Statements.

                                       25
<PAGE>

         PURCHASED POWER

         Purchased power decreased $49.6 million, when compared to the same
         period in 1999, primarily due to the termination of contract with Duke
         Energy in June 1999.

         GAS PURCHASED FOR RESALE

         Gas purchased for resale for CP&L Energy increased $128.4 million, when
         compared to the same period in 1999, primarily due to the acquisition
         of NCNG on July 15, 1999. The results of operations for the nine months
         ended September 30, 2000 include nine months of gas purchased for
         resale for NCNG. Additionally, gas purchased for resale increased due
         to the increase in the market price of gas over the previous year.

         CP&L's gas purchased for resale for the nine months ended September 30,
         2000 only includes activity through July 1, 2000 when CP&L distributed
         its ownership interest in NCNG to CP&L Energy. Additionally, the 1999
         period only includes activity subsequent to the acquisition of NCNG on
         July 15, 1999.

         FUEL USED IN ELECTRIC GENERATION

         Fuel used in electric generation increased $29.1 million, when compared
         to the same period in 1999, primarily due to deferred fuel adjustments
         and an increase in fuel expense, which was the result of an increase in
         volume with an increased percentage being produced by a more expensive
         fuel source.

         OTHER OPERATION AND MAINTENANCE

         Other operation and maintenance expenses for CP&L Energy increased
         $41.8 million in the nine months ended September 30, 2000, when
         compared to the same period in 1999, primarily due to the effects of
         emission allowances that CP&L Energy began to expense in 2000 as well
         as NCNG impacts. NCNG was acquired on July 15, 1999 and the results of
         operations of NCNG were included in consolidated financial statements
         of CP&L Energy as of July 15, 1999. Therefore, the results of
         operations for the nine months ended September 30, 2000 include nine
         months of NCNG operation and maintenance expenses. Additionally, other
         operation and maintenance expenses increased due to an increase in
         plant outage costs during 2000 compared to 1999 and due to integration
         costs incurred during 2000 as part of the FPC acquisition. These
         increases in operation and maintenance expenses were partially offset
         by a decrease in storm-related expenses during 2000. CP&L's other
         operation and maintenance expenses increased $25.6 million when
         compared to the same period in 1999, partially due to the increases
         detailed for CP&L Energy above, which were partially offset by a
         decrease in operation and maintenance expenses due to the distribution
         of NCNG to CP&L Energy on July 1, 2000, as detailed in Note 1 to the
         Consolidated Interim Financial Statements.

         DEPRECIATION AND AMORTIZATION

         Depreciation and amortization increased for the nine months ended
         September 30, 2000 primarily due to the approval to accelerate the cost
         recovery of certain nuclear generating assets. This increase is
         partially offset by the absence of depreciation and amortization of
         costs related to Hurricane Fran and the absence of accelerated
         amortization of certain regulatory assets, which expired on December
         31,1999.

         INTEREST CHARGES

         Net interest charges for CP&L Energy increased $20.9 million in the
         nine months ended September 30, 2000, when compared to the same period
         in 1999, primarily due to long-term debt issued during 2000 and an
         increase in interest rates.

         OTHER INCOME

         Other income increased for the nine months ended September 30, 2000
         primarily due to the sale of Caronet's 10% limited partnership interest
         in BellSouth Carolinas PCS for $200.0 million on September 28, 2000.
         Other income also increased due to an increase in non-operating income
         from subsidiary operations during the nine months ended September 30,
         2000

                                       26
<PAGE>
         INCOME TAXES

         Income taxes increased for the nine months ended September 30, 2000
         primarily due to the sale of Caronet's 10% limited partnership interest
         in BellSouth Carolinas PCS for $200.0 million on September 28, 2000.
         Taxes related to the sale were approximately $79.0 million. This
         increase was partially offset by the income tax credits generated by
         the synthetic fuels operation of Energy Ventures.

               MATERIAL CHANGES IN LIQUIDITY AND CAPITAL RESOURCES

         Cash Flow and Financing

         The Company's balance sheet continues to reflect a strong working
         capital position.

         Cash provided by operating activities increased for the nine months
         ended September 30, 2000, as compared to the comparable 1999 period.
         The increase in cash from operating activities for the 2000 period is
         largely the result of higher operating income and changes in the
         balances of certain current assets and liabilities. The changes in
         current assets and liabilities are due to operational fluctuations in
         addition to increased tax liability related to the gain on the sale of
         investment.

         Net cash used in investing activities decreased for the nine months
         ended September 30, 2000, as compared to the prior period. The decrease
         in cash used investing activities was due primarily to the proceeds
         from the sale of investments partially offset by an increase in gross
         property additions. Gross property additions for CP&L Energy totaled
         $634 million, compared to $528 million for the comparable period, and
         gross property additions for CP&L totaled $614 million, compared to
         $528 million for the comparable period. These additions were for
         increased activity related to combustion turbine construction. The
         proceeds from the sale of investment relates to the sale of the 10%
         limited partnership interest in BellSouth Carolinas PCS by Caronet,
         Inc. (see note 9 to the Consolidated Interim Financial Statements).

         In July 2000, CP&L established a $300 million medium term notes, Series
         D program. As of November 14, 2000, there were no medium term notes,
         Series D, issued and outstanding.

         During the nine months ended September 30, 2000, CP&L has issued a
         total of $300 million principal amount of Senior Notes and $497.64
         million principal amount of variable rate First Mortgage Bonds,
         Pollution Control Series. In addition, CP&L retired or redeemed $47.25
         million principal amount of Promissory Notes, $150 million principal
         amount of First Mortgage Bonds and $497.64 million principal amount of
         variable rate Pollution Control Obligations (see note 4 to the
         Consolidated Interim Financial Statements).

         As of September 30, 2000, CP&L's revolving credit facilities totaled
         $750 million, all of which are long-term agreements supporting its
         commercial paper borrowings and other short-term indebtedness. CP&L is
         required to pay minimal annual commitment fees to maintain its credit
         facilities. Consistent with management's intent to maintain its
         commercial paper and other short-term indebtedness on a long-term
         basis, and as supported by its long-term revolving credit facilities,
         CP&L included in long-term debt commercial paper and other short-term
         indebtedness of $750 million, $420 million and $750 million at
         September 30, 2000, September 30, 1999 and December 31, 1999,
         respectively.

         CP&L's access to outside capital depends on its ability to maintain its
         credit ratings. The debt ratings for CP&L are as follows:
<TABLE>
<CAPTION>

          ---------------------------- --------------------- ------------ ---------------
                                                              Moody's
                                                             Investors      Standard &
                                         Duff and Phelps      Service        Poor's
         ----------------------------- --------------------- ------------ ---------------
<S>                                    <C>                       <C>      <C>
         ----------------------------- --------------------- ------------ ---------------

          First Mortgage Bonds          A+ Rating Watch-Down      A2       A-CreditWatch
                                                                           with negative
                                                                           implications
          ---------------------------- --------------------- ------------ ---------------
          ---------------------------- --------------------- ------------ ---------------
          Commercial Paper                       D-1             P-1            A-1
          ---------------------------- --------------------- ------------ ---------------
          ---------------------------- --------------------- ------------ ---------------
          Extendible Commercial Notes            N/A             P-1            A-1
          ---------------------------- --------------------- ------------ ---------------
          ---------------------------- --------------------- ------------ ---------------
          Extendible Notes                       D-1             P-1            A-1
          ---------------------------- --------------------- ------------ ---------------
</TABLE>

                                       27
<PAGE>

         In addition to the above, an anticipated issuance of common stock and
         debt by CP&L Energy is discussed in the "Florida Progress Corporation"
         under OTHER MATTERS.

                                  OTHER MATTERS

         Florida Progress Corporation

         CP&L, Florida Progress Corporation (FPC), a Florida corporation, and
         CP&L Energy, entered into an Amended and Restated Agreement and Plan of
         Share Exchange dated as of August 22, 1999, amended and restated as of
         March 3, 2000 (the Amended Agreement).

         Under the terms of the Amended Agreement, all outstanding shares of
         common stock, no par value, of FPC common stock would be acquired by
         CP&L Energy in a statutory share exchange with an approximate value of
         $5.0 billion, which is subject to change based on CP&L Energy's stock
         price and on the value of the contingent value obligations (CVO)
         discussed below. Each share of FPC common stock, at the election of the
         holder, will be exchanged for (i) $54.00 in cash and one CVO, or (ii)
         the number of shares of common stock, no par value, of CP&L Energy
         equal to the ratio determined by dividing $54.00 by the average of the
         closing sale price per share of CP&L Energy common stock (Final Stock
         Price), as reported on the New York Stock Exchange composite tape for
         the twenty consecutive trading days ending with the fifth trading day
         immediately preceding the closing date for the exchange, and one CVO,
         or (iii) a combination of cash and CP&L Energy common stock, and one
         CVO; provided, however, that shareholder elections shall be subject to
         allocation and proration to achieve a mix of the aggregate exchange
         consideration that is 65% cash and 35% common stock. The number of
         shares of CP&L Energy common stock that will be issued as stock
         consideration will vary if the Final Stock Price is within a range of
         $37.13 to $45.39, but not outside that range. Thus, the maximum number
         of shares of CP&L Energy common stock into which one share of FPC
         common stock could be exchanged would be 1.4543 and the minimum would
         be 1.1897. FPC shareholders will receive one CVO for each share of FPC
         stock owned. Each CVO will represent the right to receive contingent
         payments that may be made by CP&L Energy based on certain cash flows
         that may be derived from future operations of four synthetic fuel
         plants, purchased by FPC in October 1999. In conjunction with this
         proposed share exchange, CP&L Energy plans to issue debt to fund the
         cash portion of the exchange.

         The transaction has been approved by the Boards of Directors of FPC,
         CP&L and CP&L Energy. Consummation of the exchange is subject to the
         satisfaction or waiver of certain closing conditions including, among
         others, the approval by the shareholders of FPC and the approval of the
         issuance of CP&L Energy common stock in the exchange by the
         shareholders of CP&L Energy; the approval or regulatory review by the
         Federal Energy Regulatory Commission (FERC), the Securities and
         Exchange Commission (SEC), the Nuclear Regulatory Commission (NRC), the
         North Carolina Utilities Commission (NCUC), and certain other federal
         and state regulatory bodies; the expiration or early termination of the
         waiting period under the Hart-Scott-Rodino Antitrust Improvements Act
         of 1976 (HSR Act); and other customary closing conditions. In addition,
         FPC's obligation to consummate the exchange is conditioned upon the
         Final Stock Price being not less than $30.00. CP&L, CP&L Energy and FPC
         have agreed to certain undertakings and limitations regarding the
         conduct of their respective businesses prior to the closing of the
         transaction. The transaction is expected to be completed by the end of
         2000.

         Either FPC or CP&L Energy and CP&L may terminate the Amended Agreement
         under certain circumstances, including if the exchange has not been
         consummated on or before December 31, 2000; provided that if certain
         conditions have not been satisfied on December 31, 2000, but all other
         conditions have been satisfied or waived then such date shall be June
         30, 2001. In the event that FPC or CP&L Energy terminate the Amended
         Agreement in certain limited circumstances, FPC would be required to
         pay CP&L Energy a termination fee of $150 million, plus CP&L Energy's
         reasonable out-of-pocket expenses which are not to exceed $25 million
         in the aggregate.

         On May 23, 2000, the NRC approved the change in control of FPC that
         will result from the share exchange. On July 12, 2000, the FERC
         approved the change of control over FPC's jurisdictional facilities
         resulting from the share exchange. Also, on July 12, 2000, the
         Department of Justice terminated the waiting period under the HSR Act
         and completed its antitrust review. On February 3, 2000, CP&L Energy
         filed an application with the NCUC for authorization of the share
         exchange with FPC and the issuance of common stock in connection with
         the transaction. A hearing was held on this matter on July 18, 2000. As
         part of the settlement with the NCUC Public Staff, CP&L agreed to
         reduce rates to all of its non-Real Time Pricing customers by $3
         million in 2002, $4.5 million in 2003, $6 million in 2004 and $6
         million in 2005. By order issued August 22, 2000 the NCUC approved the
         proposed settlement and the Company's application. CP&L also agreed to
         write off and forego recovery of $10 million of unrecovered fuel costs
         in its 2000 fuel cost recovery proceeding. On March 14, 2000, CP&L
         Energy and FPC filed an application with the SEC requesting approval of
         the share exchange under the Public Utility Holding Company Act. On
         July 28, 2000, the parties filed an amended application with the SEC,
         and the SEC issued its notice of the merger application on August 4,
         2000. CP&L Energy and CP&L expect to obtain the final regulatory
         approvals and

                                       28
<PAGE>
         close the transaction by the end of 2000. However, CP&L Energy and CP&L
         cannot predict the outcome of this matter.

         Competition

         Wholesale Competition

         To assist in the development of wholesale competition, the FERC, in
         1996, issued standards for wholesale wheeling of electric power through
         its rules on open access transmission and stranded costs and on
         information systems and standards of conduct (Orders 888 and 889). The
         rules require all transmitting utilities to have on file an open access
         transmission tariff, which contains provisions for the recovery of
         stranded costs and numerous other provisions that could affect the sale
         of electric energy at the wholesale level. CP&L filed its open access
         transmission tariff with the FERC in mid-1996. Shortly thereafter,
         Power Agency and other entities filed protests challenging numerous
         aspects of CP&L's tariff and requesting that an evidentiary proceeding
         be held. The FERC set the matter for hearing and set a discovery and
         procedural schedule. In July 1997, CP&L filed an offer of settlement in
         this matter. The administrative law judge certified the offer to the
         full FERC in September 1997. In February 2000, the FERC issued a basket
         order for several utilities including CP&L to file a compliance filing
         stating whether there were any remaining undisputed issues surrounding
         CP&L's open access transmission tariff. On May 1, 2000, CP&L made the
         compliance filing setting forth the remaining undisputed issues and a
         plan for settling those issues. CP&L made additional compliance filings
         on June 8, 2000 and July 12, 2000 to report the status of negotiations
         with the remaining intervenors. On August 25, 2000, CP&L filed
         modifications to its open access transmission tariff as a result of
         settlement negotiations with the remaining intervenors. CP&L cannot
         predict the outcome of this matter.

         Regional Transmission Organizations (RTO)

         On December 20, 1999, the FERC issued Order No. 2000 on Regional
         Transmission Organizations (RTO), which sets forth four minimum
         characteristics and eight functions for transmission entities,
         including independent system operators and transmission companies, to
         become FERC-approved RTOs. The rule states that public utilities that
         own, operate or control interstate transmission facilities must file by
         October 2000, either a proposal to participate in an RTO or an
         alternative filing describing efforts and plans to participate in an
         RTO. CP&L is participating in an effort with Duke Power and South
         Carolina Electric & Gas (SCE&G) to develop a for-profit transmission
         company to comply with Order No. 2000. The RTO is currently known as
         GridSouth and is expected to operate the transmission systems of CP&L,
         Duke Power, SCE&G and perhaps others. GridSouth held five public
         meetings on the proposed transmission company during August and
         September 2000. GridSouth filed an application for approval from FERC
         on October 16, 2000. CP&L cannot predict the outcome of these matters.

         North Carolina Activities

         On May 16, 2000, the Study Commission on the Future of Electric Service
         in North Carolina issued its report to the General Assembly. The report
         includes the recommendations adopted by the study commission on April
         3, 2000, as well as discussion regarding the recommendations, a summary
         of past study commission meetings, summaries of studies prepared for
         the study commission by its consultants, and other background
         information.

         As proposed by the study commission's April 3, 2000 recommendations,
         the General Assembly acted during its 2000 short session, which
         concluded on July 13, 2000, to extend the authorization and funding of
         the study commission until June 30, 2006. According to its report, the
         study commission will recommend to the 2001 General Assembly, and where
         necessary, the 2003 General Assembly, specific legislation to
         accomplish its recommendations. CP&L cannot predict the outcome of this
         matter.

         Federal Activities

         A draft bill regarding electric industry restructuring passed the House
         Commerce Subcommittee on October 27, 1999, and remains pending before
         the full Commerce Committee, which has yet to reach a consensus on the
         issue of jurisdiction over bundled retail transmission sales. The
         Senate Energy Committee passed a stand-alone reliability bill on June
         20, 2000, after failing to reach a consensus on a comprehensive
         restructuring bill introduced by the chairman of the Committee in
         February. The reliability bill passed the full Senate on June 30 and
         was then sent to the House, where it awaits review and approval. On
         July 18, 2000, a new comprehensive restructuring bill was introduced in
         the Senate, which would require all states to implement retail
         competition by January 1, 2002. No date has been set for consideration
         of the bill. CP&L cannot predict the outcome of this matter.

                                       29
<PAGE>

         Company  Activities

         In October 1999, CP&L and the Albemarle-Pamlico Economic Development
         Corporation (APEC) announced their intention to build an 850-mile,
         $197.5 million, natural gas transmission and distribution system to 14
         currently unserved counties in eastern North Carolina. CP&L will
         operate both the transmission and distribution systems, and APEC will
         help ensure that the new facilities are built in the most advantageous
         locations to promote development of the economic base in the region. In
         conjunction with this proposal, CP&L and APEC filed a joint request
         with the NCUC for $186 million of a $200 million state bond package
         established for natural gas infrastructure to pay for the portion of
         the project that likely could not be recovered from future gas
         customers through rates. CP&L and APEC have executed agreements
         creating Eastern North Carolina Natural Gas (ENCNG), which will be the
         local distribution natural gas company serving the 14 counties in
         question. CP&L and APEC will be the joint owners. The operations of
         ENCNG will be subject to the rules and regulations of the NCUC. On June
         15, 2000, the NCUC issued an order awarding ENCNG an exclusive
         franchise to all 14 counties and granted $38.7 million in bond funding
         for phase one of the project. Phase one, which will cost a total of
         $50.5 million, will bring gas service to 6 of the 14 counties. The NCUC
         will consider approval of bond funding for subsequent phases of the
         project at a later date. CP&L cannot predict the outcome of this
         matter.

         On April 7, 2000, CP&L announced the execution of an agreement to
         purchase 75 million cubic feet per day of firm gas transportation
         service to be provided through the Williams Energy's Sundance Expansion
         Project on the Transcontinental Interstate Pipeline (Transco). This
         service will be used, beginning in mid-2002, to supply the 30-inch
         natural gas pipeline, Sandhills Pipeline that CP&L announced in
         December 1999 it would build. In March 2000, CP&L transferred ownership
         of the pipeline to NCNG. The pipeline will extend from Iredell County
         to Richmond County in North Carolina. The agreement is contingent upon
         FERC approval and both parties can terminate if Transco fails to
         commence service by April 3, 2003. On September 27, 2000, the FERC
         granted Transco a preliminary determination that authorizes
         construction subject to environmental reviews and issuance of a final
         order. CP&L cannot predict the outcome of this matter.

         In April 2000, CP&L signed a 5-1/2 year agreement with Duke Energy,
         whereby CP&L will provide peaking generation capacity. CP&L will
         provide 300 MW of capacity for the first 11 months of the contract,
         beginning July 1, 2000, and will provide 150 MW for the remainder of
         the contract.

         In late 1998 and early 1999, the North Carolina Utilities Commission
         and Public Service Commission of South Carolina approved the
         accelerated cost recovery of the CP&L's nuclear generating assets.
         Pursuant to the orders, the allowed range of accelerated depreciation
         expense was set at a minimum of $106 million to a maximum of $150
         million per year from 2000 through 2004. CP&L has recently filed
         requests with the NCUC and the SCPSC to further accelerate the cost
         recovery of its nuclear generation facilities in 2000 up to the extent
         of the gain on the sale of the 10% limited partnership interest in
         BellSouth Carolinas PCS. As part of these filings, CP&L has also
         requested that the minimum annual depreciation expense for 2001 through
         2004 be reduced to $75 million. If the commissions approve CP&L's
         requests, CP&L would record an additional $125 million in accelerated
         depreciation, or a total of $275 million of accelerated depreciation in
         2000. The additional depreciation would be recorded in the fourth
         quarter and approximately offset the BellSouth PCS gain.

         On September 15, 2000, CP&L signed a power purchase agreement whereby
         Monroe Power will provide 155 MW of capacity and energy to Dynegy Power
         from June 1, 2001 through May 31, 2006. The contract also includes
         terms for a two-year extension put/call option from June 1, 2006
         through May 31, 2008. Additionally, the contract contains a tolling
         agreement whereby Dynegy will provide the natural gas for the project.

         In November 2000, CP&L announced its intention to build its second
         power plant in the state of Georgia on a tract in Effingham County. The
         plant would be owned and operated by Monroe Power Co., a wholly-owned
         subsidiary of CP&L Energy, that currently operates a peaking plant in
         Monroe, GA. The 525-megawatt combustion-turbine plant will be fueled
         primarily by natural gas and will be used to provide peaking capacity
         to the region. The first phase of the construction, used for peaking
         operation, is expected to begin construction in the summer of 2001 and
         become available for commercial operation in June 2002. The second
         phase of the construction which involves conversion of the peaking
         generators to combined-cycle operation is expected to be completed in
         June 2003.

         Interpath Agreement

         Pursuant to a Contribution Agreement effective June 28, 2000 between
         CP&L, Caronet, Inc. (Caronet), the wholly-owned subsidiary of CP&L
         formerly known as Interpath Communications, Inc., a North Carolina and
         Virginia Corporation, and Interpath Communications, Inc. (Interpath), a
         Delaware corporation formed in conjunction with the transaction,
         Caronet contributed the assets used in the application service provider
         business to Interpath. Under the terms of the agreement, Caronet owns
         35% of Interpath's stock (10% voting stock) and Bain Capital, Inc. a
         private

                                       30
<PAGE>


         equity fund, and its affiliates (Bain) own 65% of Interpath's stock. On
         July 6, 2000, Caronet and Bain each invested $25 million of additional
         equity in Interpath.

         Sale of Limited Partnership Interest

         On September 11, 2000, Caronet, Inc., a North Carolina corporation that
         is also domesticated in Virginia and a wholly-owned subsidiary of CP&L
         entered into an Agreement to Settle and Merger Plan (the Agreement) by
         and among DukeNet Communications, Inc., a North Carolina corporation;
         BellSouth Personal Communications, Inc., a Delaware corporation
         (BellSouth PCI); BellSouth Corporation, a Georgia corporation
         (BellSouth), and BellSouth Carolinas PCS, L.P., a Delaware limited
         partnership (BellSouth Carolinas PCS) and CP&L. The transaction closed
         on September 28, 2000. Pursuant to the terms of the Agreement,
         BellSouth PCI acquired the interests of the limited partners in
         BellSouth Carolinas PCS in conjunction with a merger of BellSouth
         Carolinas PCS into BellSouth PCI (the Merger). As consideration for the
         Merger, BellSouth PCI paid the limited partners $20 million for each
         one percent interest in BellSouth Carolinas PCS. Upon consummation of
         the Merger, CP&L received $200 million for Caronet, Inc.'s 10% limited
         partnership interest in BellSouth Carolinas PCS. This sale resulted in
         an after-tax gain of $121.1 million.

         Item 3.  Quantitative and Qualitative Disclosures About Market Risk

         Certain market risks are inherent in CP&L's financial instruments,
         which arise from transactions entered into in the normal course of
         business. CP&L's primary exposures are changes in interest rates with
         respect to long-term debt and commercial paper, and fluctuations in the
         return on marketable securities with respect to its nuclear
         decommissioning trust funds. CP&L's exposure to return on marketable
         securities for the decommissioning trust funds has not changed
         materially since December 31, 1999. The total fixed rate debt at
         September 30, 2000 was $2.026 billion, with an average interest rate of
         7.17% and the total variable rate debt at September 30, 2000 was $1.120
         billion, with an average interest rate of 5.63%. The total commercial
         paper and extendible notes outstanding at September 30, 2000 was $356
         million, with an average interest rate of 6.58%, and $500 million, with
         an average interest rate of 7.23%, respectively.

         CP&L uses interest rate swap agreements to hedge its exposure on
         variable rate debt positions. The agreements, with a total notional
         amount of $500 million, were effective in July 2000 and mature in July
         2002. Under these agreements, CP&L receives a floating rate based on
         the three month LIBOR and pays a weighted-average fixed rate of
         approximately 7.17%. The notional amount of the contracts is not
         exchanged and does not represent exposure to credit loss. In the event
         of default by a counterparty, the risk in these transactions is the
         cost of replacing the agreements at current market rates. CP&L only
         enters into swap agreements with strong creditworthy counterparties.
         The fair value of the swaps was a $3.8 million liability position at
         September 30, 2000.

         During September and October 2000, CP&L Energy entered into forward
         starting swaps to hedge its exposure to interest rates with regard to
         future issuances of fixed rate debt. The agreements, with a total
         notional amount of $900 million, will be cash settled at the time that
         the hedged debt is issued. The resulting receipts or payments will be
         recorded as adjustments to interest expense over the life of the
         related debt. These agreements have computational periods of 2, 5 and
         10 years, with $300 million notional amount for each computational
         period. Under the agreements, CP&L Energy receives a floating rate
         based on the three month LIBOR and pays weighted-average fixed rates of
         approximately 6.73%, 6.87% and 6.88% for the 2, 5 and 10 year
         computational periods, respectively. At September 30, 2000, $450
         million notional amount of these forward starting swaps was outstanding
         and had a fair value of $1.2 million liability position. The notional
         amount of the contracts is not exchanged and does not represent
         exposure to credit loss. In the event of default by counterparty, the
         risk in these transactions is the cost of replacing the agreements at
         current market rates. CP&L only enters into swap agreements with strong
         creditworthy counterparties.


                                       31
<PAGE>
                           PART II. OTHER INFORMATION

         Item 1.  Legal Proceedings

         Legal aspects of certain matters are set forth in Part I, Item 1 Notes
         to the Consolidated Interim Financial Statements, and Note 6:
         Commitments and Contingencies.

         Item 2.  Changes in Securities and Use of Proceeds

         RESTRICTED STOCK AWARDS:

         (a) Securities Delivered. On September 25, 2000, 100,000 restricted
         shares of CP&L Energy's Common Shares were delivered to a certain key
         employee pursuant to the terms of the 1997 Equity Incentive Plan
         (Plan), which was approved by CP&L's shareholders on May 7, 1997.
         Section 9 of the Plan provides for the granting of Restricted Stock by
         the Personnel, Executive Development and Compensation Committee
         (currently the Committee on Organization and Compensation), (the
         Committee) to key employees of CP&L, including its Affiliates and
         Subsidiaries (hereinafter collectively referred to as the "Company").
         The Common Shares delivered pursuant to the Plan were acquired in
         market transactions directly for the account of the recipient and do
         not represent newly issued shares of CP&L Energy.

         (b) Underwriters and Other Purchasers. No underwriters were used in
         connection with the delivery of Common Shares described above. The
         Common Shares were delivered to a certain key employee of the Company.
         The Plan defines "key employee" as an officer or other employee of the
         Company who, in the opinion of the Committee, can contribute
         significantly to the growth and profitability of, or perform services
         of major importance to, the Company.

         (c) Consideration. The Common Shares were delivered to provide an
         incentive to the employee recipient to exert his utmost efforts on the
         Company's behalf and thus enhance the Company's performance while
         aligning the employee's interest with those of the Company's
         shareholders.

         (d) Exemption from Registration Claimed. The Common Shares described in
         this Item were delivered on the basis of an exemption from registration
         under Section 4(2) of the Securities Act of 1933. Receipt of the Common
         Shares required no investment decision on the part of the recipients.
         All award decisions were made by the Committee, which consists entirely
         of non-employee directors.

         Item 4.  Submission of Matters to a Vote of Security Holders

         (a) A special shareholder meeting was held on August 16, 2000.

         (b) The meeting was held to vote upon the issuance of shares of common
         stock of CP&L Energy, Inc. to be delivered to shareholders of Florida
         Progress Corporation (FPC) in connection with an Amended and Restated
         Agreement and Plan of Share Exchange among Carolina Power & Light
         Company, CP&L Energy and FPC dated August 22, 1999, as amended and
         restated as of March 3, 2000.

         (c) The total votes were as follows:

         Total Votes Cast                               112,161,089

         Votes For                 Votes Against                 Votes Withheld
         ---------                 -------------                 --------------
         108,549,033                  2,141,610                      1,470,446


                                       32

<PAGE>
         Item 5. Other Information

         CP&L Energy has a 90% interest in two limited liability companies that
         own facilities that produce synthetic fuel from fine coal feedstock
         under the Internal Revenue Service Code Section 29. The production and
         sale of the synthetic fuel from these facilities qualifies for tax
         credits under Section 29 if certain requirements are satisfied,
         including a requirement that the synthetic fuel differs significantly
         in chemical composition from the fine coal feedstock used to produce
         such synthetic fuel. On October 5, 2000, the limited liability
         companies applied for Private Letter Rulings (PLRs) with the Internal
         Revenue Service (IRS) regarding this and several other issues relating
         to the facilities' qualification for tax credits, but the IRS has yet
         to act on the PLRs. Should the tax credits be denied on future audits,
         and CP&L Energy fails to prevail through the audit process, there could
         be significant tax liability owed that had previously been reduced by
         taking Section 29 credits.

         In Management's opinion, CP&L Energy is complying with all the
         necessary requirements to be allowed such credits under Section 29, but
         cannot provide certainty as to the likelihood of prevailing on any
         credits taken.

         Item 6.  Exhibits and Reports on Form 8-K

         (a) See EXHIBIT INDEX

         (b) Reports on Form 8-K filed during or with respect to the quarter:

             CP&L Energy filed a Current Report on Form 8-K on September 20,
             2000, detailing the Agreement to Settle and Merger Plan entered
             into by Caronet, Inc., a wholly-owned subsidiary of CP&L, to sell
             its 10% limited partnership interest in BellSouth Carolinas.
             Exhibits related to the Agreement to Settle and Merger Plan are
             included therewith.

             CP&L Energy and Carolina Power & Light Company filed a combined
             Current Report on Form 8-K on September 1, 2000, responding to the
             intervention filed by Mr. Edwin Dove on August 18, 2000, under Item
             5 of the Current Report.

             CP&L Energy and Carolina Power & Light Company filed a combined
             Current Report on Form 8-K on October 31, 2000, disclosing the
             remarks made by William Cavanaugh III at the EEI Fall Finance
             Conference in San Francisco, CA on October 31, 2000.

                                       33
<PAGE>


                                   SIGNATURES


         Pursuant to requirements of the Securities Exchange Act of 1934, the
         registrant has duly caused this report to be signed on its behalf by
         the undersigned thereunto duly authorized.


                                                  CP&L ENERGY, INC.
                                                 ------------------
                                                    (Registrant)

                               By   /s/ Peter M. Scott III
                                 -----------------------------------------


                                                 Peter M. Scott III
                                             Executive Vice President and
                                               Chief Financial Officer

                                       CAROLINA POWER & LIGHT COMPANY
                                      ------------------------------------
                                                 (Registrant)


                               By  /s/ Robert H. Bazemore, Jr.
                                 ------------------------------------------


                                             Robert H. Bazemore, Jr.
                                          Vice President and Controller
                                           (Chief Accounting Officer)






Date:     November 14, 2000



                                       34
<PAGE>


                                  EXHIBIT INDEX

    Exhibit Number       Description

    10(i)               Employment Agreement dated August 1, 2000 between CP&L
                        Service Company LLC and William Cavanaugh III.

    10(ii)              Employment Agreement dated August 1, 2000 between
                        Carolina Power & Light Company and William S. "Skip"
                        Orser.

    10(iii)             Employment Agreement dated August 1, 2000 between
                        Carolina Power & Light Company and Tom Kilgore.

    10(iv)              Employment Agreement dated August 1, 2000 between CP&L
                        Service Company LLC and Robert McGehee.

    10(v)               Form of Employment Agreement dated August 1, 2000 (i)
                        between Carolina Power & Light Company and Don K. Davis;
                        and (ii) between CP&L Service Company LLC and Peter M.
                        Scott III and William D. Johnson.

    10(vi)              Form of Employment Agreement dated August 1, 2000 (i)
                        between Carolina Power & Light Company and Fred Day IV,
                        C. S. "Scotty" Hinnant and E. Michael Williams; and (ii)
                        between CP&L Service Company LLC and Cecil L. Goodnight.

    27(a)               Financial Data Schedule - CP&L Energy, Inc.

    27(b)               Financial Data Schedule - Carolina Power & Light Company




                                       35