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, 2002
                                               ------------------

                                       OR

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

                 For the transition period from       to       .
                                                ------  -------

<TABLE>
<S>     <C>    <C>    <C>    <C>    <C>    <C>

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

      1-8349                                Florida Progress Corporation                                 59-2147112
                                                A Florida Corporation
                                             410 South Wilmington Street
                                            Raleigh, North Carolina 27601
                                              Telephone (919) 546-6111



      1-3274                                  Florida Power Corporation                                  59-0247770
                                                A Florida Corporation
                                                 100 Central Avenue
                                            St. Petersburg, Florida 33701
                                              Telephone (727) 820-5151


                                                         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:  Florida
     Progress Corporation and Florida Power Corporation.  Information  contained
     herein relating to either individual registrant is filed by such registrant
     solely on its own behalf.

                      APPLICABLE ONLY TO CORPORATE ISSUERS:

     Indicate the number of shares  outstanding of each of the issuer's  classes
     of common stock, as of the latest practicable date. As of October 31, 2002,
     each registrant had the following shares of common stock outstanding
<TABLE>
<S>     <C>    <C>    <C>    <C>    <C>    <C>

        Registrant                                Description                                Shares
        ----------                                -----------                                ------
Florida Progress Corporation             Common Stock, without par value             98,616,658 (all of which were
                                                                                     held by Progress Energy, Inc.)
Florida Power Corporation                Common Stock, without par value             100 (all of which were held by
                                                                                     Florida Progress Corporation)
</TABLE>

                                       1
<PAGE>


           FLORIDA PROGRESS CORPORATION AND FLORIDA POWER CORPORATION
              FORM 10-Q - For the Quarter Ended September 30, 2002


Glossary of Terms


Safe Harbor For Forward-Looking Statements


PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

      Florida Progress Corporation
      ----------------------------
      Consolidated Statements of Income
      Consolidated Balance Sheets
      Consolidated Statements of Cash Flows

      Florida Power Corporation
      -------------------------
      Statements of Income
      Balance Sheets
      Statements of Cash Flows

Notes to Financial Statements
    Florida Progress Corporation and Florida Power Corporation


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


Item 3.  Quantitative and Qualitative Disclosures About Market Risk


Item 4.  Controls and Procedures


PART II. OTHER INFORMATION

Item 1.  Legal Proceedings


Item 6.  Exhibits and Reports on Form 8-K


Signatures


Certifications








                                       2
<PAGE>



                                GLOSSARY OF TERMS

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

       TERM                                                   DEFINITION

CR3                                 Florida Power's nuclear generating plant, Crystal River Unit No. 3
DOE                                 United States Department of Energy
EPA                                 United States Environmental Protection Agency
FASB                                Financial Accounting Standards Board
FDEP                                Florida Department of Environmental Protection
FERC                                Federal Energy Regulatory Commission
Florida Power or the utility        Florida Power Corporation
Florida Progress or the Company     Florida Progress Corporation
FPSC                                Florida Public Service Commission
Funding Corp.                       Florida Progress Funding Corporation
IRS                                 Internal Revenue Service
MEMCO                               MEMCO Barge Line, Inc.
MGP                                 Manufactured Gas Plant
MW                                  Megawatt
NRC                                 United States Nuclear Regulatory Commission
PLR                                 Private Letter Ruling
Preferred Securities                7.10% Cumulative Quarterly Income Preferred Securities, Series A, of FPC Capital
                                    I, fully and unconditionally guaranteed by Florida Progress
Preferred Stock                     Florida Power Cumulative Preferred Stock, $100 par value
Progress Capital                    Progress Capital Holdings, Inc.
Progress Energy                     Progress Energy, Inc.
Progress Fuels                      Progress Fuels Corporation, formerly referred to as Electric Fuels Corporation
Progress Rail                       Progress Rail Services Corporation
Progress Telecom                    Progress Telecommunications Corporation
Progress Ventures, Inc.             Legal entity holding certain non-regulated operations and part of Progress
                                    Energy's Progress Ventures business segment
PUHCA                               Public Utility Holding Company Act of 1935, as amended
RTO                                 Regional Transmission Organization
SEC                                 United States Securities and Exchange Commission
Section 29                          Section 29 of the Internal Revenue Service Code
SFAS                                Statements of Financial Accounting Standards
SFAS No. 133                        Statements of Financial Accounting Standards No. 133, Accounting for Derivative
                                    and Hedging Activities
SFAS No. 142                        Statements of Financial Accounting Standards No. 142, Goodwill and Other
                                    Intangible Assets
SFAS No. 143                        Statements of Financial Accounting Standards No. 143, Accounting for Asset
                                    Retirement Obligations
SFAS No. 144                        Statements of Financial Accounting Standards No. 144, Accounting for the
                                    Impairment or Disposal of Long-Lived Assets
SFAS No. 145                        Statements of Financial Accounting Standards No. 145, Rescission of FASB
                                    Statement Nos. 4, 44 and 64, Amendment of FASB Statement No. 13 and Technical
                                    Corrections
SFAS No. 146                        Statements of Financial Accounting Standards No. 146, Accounting for Costs
                                    Associated with Exit or Disposal Activities
The Trust                           FPC Capital I
</TABLE>


                                       3
<PAGE>

SAFE HARBOR FOR FORWARD-LOOKING STATEMENTS

This combined report contains  forward-looking  statements within the meaning of
the safe harbor  provisions of the Private  Securities  Litigation Reform Act of
1995.  The matters  discussed  throughout  this  combined 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.

In  addition,   forward-looking   statements  are  discussed  in   "Management's
Discussion  and  Analysis of  Financial  Condition  and  Results of  Operations"
including,  but not limited to, statements under the sub-heading "Other Matters"
concerning synthetic fuel tax credits and regulatory developments.

Any forward-looking statement speaks only as of the date on which such statement
is made,  and Florida  Progress  (the  Company) and Florida  Power  undertake no
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:  the impact of fluid and  complex  government  laws and  regulations,
including those relating to the environment;  the impact of recent events in the
energy markets that have  increased the level of public and regulatory  scrutiny
in the energy industry and in the capital markets; deregulation or restructuring
in  the  electric  industry  that  may  result  in  increased   competition  and
unrecovered (stranded) costs; the uncertainty regarding the timing, creation and
structure  of  regional  transmission  organizations;  weather  conditions  that
directly  influence  the demand  for  electricity  and  natural  gas;  recurring
seasonal fluctuations in demand for electricity and natural gas; fluctuations in
the price of energy  commodities;  economic  fluctuations and the  corresponding
impact on commercial and industrial  customers of the Company and Florida Power;
the  ability  of  the  Company's  subsidiaries  to  pay  upstream  dividends  or
distributions  to it; the impact on the facilities and businesses of the Company
and Florida Power from a terrorist  attack;  the inherent risks  associated with
the operation of nuclear facilities, including environmental, health, regulatory
and  financial   risks;  the  ability  of  the  Company  and  Florida  Power  to
successfully  access  capital  markets  on  favorable  terms;  the  impact  that
increases in leverage may have on the Company and Florida Power;  the ability of
the Company and Florida Power to maintain  their  current  credit  ratings;  the
impact of  derivative  contracts  used in the normal  course of  business by the
Company and Florida Power; the Company's continued ability to use Section 29 tax
credits  related  to its coal and  synthetic  fuels  businesses;  the  continued
depressed state of the telecommunications  industry and the Company's ability to
realize  future  returns  from  Progress  Telecom;   the  Company's  ability  to
successfully  integrate  newly acquired  businesses,  including  Westchester Gas
Company,   into  its  operations  as  quickly  or  as  profitably  as  expected;
realization of cost savings related to synergies  resulting from  acquisition by
Progress  Energy;  the  success  of our direct and  indirect  subsidiaries;  and
unanticipated  changes in operating expenses and capital  expenditures.  Many of
these risks similarly impact the Company's subsidiaries.

These and other risks are  detailed  from time to time in the SEC reports of the
Company and Florida Power.  You should closely read these SEC reports.  All such
factors are  difficult to predict,  contain  uncertainties  that may  materially
affect actual results,  and may be beyond the control of the Company and Florida
Power.  New  factors  emerge  from  time to  time,  and it is not  possible  for
management  to predict  all such  factors,  nor can it assess the effect of each
such factor on the Company and Florida Power.


                                       4
<PAGE>



                          PART I. FINANCIAL INFORMATION


Item 1. FINANCIAL STATEMENTS

                          Florida Progress Corporation
                    CONSOLIDATED INTERIM FINANCIAL STATEMENTS
                               September 30, 2002

CONSOLIDATED STATEMENTS of INCOME
<TABLE>
<S>     <C>    <C>    <C>    <C>    <C>    <C>

(Unaudited)                                                        Three Months Ended            Nine Months Ended
                                                                       September 30,                September 30,
(In thousands)                                                     2002           2001           2002           2001
----------------------------------------------------------------------------------------------------------------------
Operating Revenues
   Electric                                                   $  863,637    $   906,131     $2,316,001    $ 2,500,265
   Diversified businesses                                        338,382        354,473      1,004,817      1,038,899
----------------------------------------------------------------------------------------------------------------------
      Total Operating Revenues                                 1,202,019      1,260,604      3,320,818      3,539,164
----------------------------------------------------------------------------------------------------------------------
Operating Expenses
   Fuel used in electric generation                              237,021        259,763        636,436        696,766
   Purchased power                                               145,743        154,958        387,473        407,180
   Other operation and maintenance                               139,160        119,931        420,477        350,612
   Depreciation and amortization                                  73,427         95,087        218,004        341,801
   Taxes other than on income                                     61,186         63,234        175,119        180,420
   Diversified businesses                                        588,731        389,366      1,295,072      1,124,735
----------------------------------------------------------------------------------------------------------------------
        Total Operating Expenses                               1,245,268      1,082,339      3,132,581      3,101,514
----------------------------------------------------------------------------------------------------------------------
Operating Income (Loss)                                          (43,249)       178,265        188,237        437,650
----------------------------------------------------------------------------------------------------------------------
Other Income (Expense)
   Interest income                                                 1,744          2,348          5,619          6,275
   Other, net                                                     (3,171)        (3,345)       (12,645)       (14,329)
----------------------------------------------------------------------------------------------------------------------
        Total Other Income (Expense)                              (1,427)          (997)        (7,026)        (8,054)
----------------------------------------------------------------------------------------------------------------------
Income (Loss) before Interest Charges and Income Taxes           (44,676)       177,268        181,211        429,596
----------------------------------------------------------------------------------------------------------------------
Interest Charges
   Net interest charges                                           45,773         46,757        141,083        146,663
   Allowance for borrowed funds used during construction            (899)          (271)        (1,932)          (474)
----------------------------------------------------------------------------------------------------------------------
Net Interest Charges                                              44,874         46,486        139,151        146,189
----------------------------------------------------------------------------------------------------------------------
Income (Loss) from Continuing Operations before Income           (89,550)       130,782         42,060        283,407
Taxes
Income Taxes (Benefit)                                           (32,529)       (50,670)       (67,049)       (75,570)
----------------------------------------------------------------------------------------------------------------------
Income (Loss) from Continuing Operations                         (57,021)       181,452        109,109        358,977
Discontinued Operations, net of tax (Note 12):
  Income (Loss) from discontinued operations                       5,120        (14,120)         5,120        (25,846)
----------------------------------------------------------------------------------------------------------------------
Net Income (Loss)                                             $  (51,901)   $   167,332     $  114,229    $   333,131
----------------------------------------------------------------------------------------------------------------------
</TABLE>

See Notes to Interim Financial Statements.

                                       5
<PAGE>
<TABLE>
<S>     <C>    <C>    <C>    <C>    <C>    <C>

Florida Progress Corporation
CONSOLIDATED BALANCE SHEETS (Unaudited)
(In thousands)                                                       September 30,     December 31,
Assets                                                                    2002             2001
------------------------------------------------------------------------------------------------------
Utility Plant
  Electric utility plant in service                                     $7,374,282      $ 7,151,729
  Accumulated depreciation                                              (4,075,834)      (3,984,308)
------------------------------------------------------------------------------------------------------
        Utility plant in service, net                                    3,298,448        3,167,421
  Held for future use                                                        7,921            8,274
  Construction work in progress                                            316,274          292,883
  Nuclear fuel, net of amortization                                         45,688           62,536
------------------------------------------------------------------------------------------------------
        Total Utility Plant, Net                                         3,668,331        3,531,114
------------------------------------------------------------------------------------------------------
Current Assets
  Cash and cash equivalents                                                 39,559            5,201
  Accounts receivable                                                      404,066          357,038
  Unbilled accounts receivable                                              83,315           63,080
  Receivable from affiliates                                                73,310           26,976
  Taxes receivable                                                               -           14,761
  Deferred income taxes                                                     23,517           32,334
  Inventory                                                                516,410          485,891
  Deferred fuel cost                                                        29,840           15,147
  Prepayments                                                               27,892           10,748
  Other current assets                                                      42,504           48,175
------------------------------------------------------------------------------------------------------
        Total Current Assets                                             1,240,413        1,059,351
------------------------------------------------------------------------------------------------------
Deferred Debits and Other Assets
  Regulatory assets                                                        130,025          157,725
  Unamortized debt expense                                                  23,501           21,021
  Nuclear decommissioning trust funds                                      377,238          406,100
  Diversified business property, net                                       661,521          669,078
  Miscellaneous other property and investments                             103,138          117,535
  Prepaid pension costs                                                    221,215          202,167
  Other assets and deferred debits                                         157,649          147,713
------------------------------------------------------------------------------------------------------
        Total Deferred Debits and Other Assets                           1,674,287        1,721,339
------------------------------------------------------------------------------------------------------
         Total Assets                                                   $6,583,031      $ 6,311,804
------------------------------------------------------------------------------------------------------
Capitalization and Liabilities
------------------------------------------------------------------------------------------------------
Capitalization
  Common stock                                                          $1,615,723      $ 1,409,034
  Retained earnings                                                        527,248          666,201
  Accumulated other comprehensive loss                                      (4,071)          (2,985)
------------------------------------------------------------------------------------------------------
         Total Common Stock Equity                                       2,138,900        2,072,250
  Preferred stock of subsidiaries-not subject to mandatory redemption       33,497           33,497
  Unsecured note with Parent                                               500,000          500,000
  Long-term debt, net                                                    1,715,181        1,989,684
------------------------------------------------------------------------------------------------------
        Total Capitalization                                             4,387,578        4,595,431
------------------------------------------------------------------------------------------------------
Current Liabilities
  Current portion of long-term debt                                        275,202           88,053
  Accounts payable                                                         318,338          285,524
  Payable to affiliates                                                    102,454          116,520
  Notes payable to affiliates                                              325,398          147,583
  Taxes accrued                                                            100,318                -
  Interest accrued                                                          45,191           67,861
  Short-term Obligations                                                   244,600          154,250
  Customer deposits                                                        122,317          118,285
  Accrued taxes other than on income                                        93,412           16,361
  Other current liabilities                                                 89,433          128,004
------------------------------------------------------------------------------------------------------
        Total Current Liabilities                                        1,716,663        1,122,441
------------------------------------------------------------------------------------------------------
Deferred Credits and Other Liabilities
  Accumulated deferred income taxes                                         48,153          165,816
  Accumulated deferred investment tax credits                               48,882           54,387
  Regulatory liabilities                                                    53,965           45,643
  Other liabilities and deferred credits                                   327,790          328,086
------------------------------------------------------------------------------------------------------
        Total Deferred Credits and Other Liabilities                       478,790          593,932
------------------------------------------------------------------------------------------------------
Commitments and Contingencies (Note 12)
------------------------------------------------------------------------------------------------------
         Total Capitalization and Liabilities                           $6,583,031      $ 6,311,804
------------------------------------------------------------------------------------------------------
See Notes to Interim Financial Statements.
</TABLE>

                                       6
<PAGE>


<TABLE>
<S>     <C>    <C>    <C>    <C>    <C>    <C>

Florida Progress Corporation
CONSOLIDATED STATEMENTS of CASH FLOWS                                                         Nine Months Ended
(Unaudited)                                                                                      September 30,
(In thousands)                                                                              2002              2001
-----------------------------------------------------------------------------------------------------------------------
Operating Activities:
Net income                                                                               $ 114,229         $ 333,131
Adjustments to reconcile net income to net cash provided by operating
activities:
      Impairment of long-lived assets                                                      214,617                 -
      Income from discontinued operations                                                   (5,120)           (2,682)
      Estimated loss on disposal of discontinued operations                                      -            28,528
      Depreciation and amortization                                                        284,781           405,552
      Deferred income taxes and investment tax credits, net                               (172,073)              501
      Deferred fuel cost (credit)                                                          (14,694)           32,633
      Changes in working capital, net of effects from sale or acquisition of
       business
         Net increase in accounts receivable                                              (106,951)          (70,919)
         Net increase in inventories                                                       (34,381)         (113,200)
         Net (increase) decrease in prepaids and other current assets                      (11,655)             5,601
         Net increase in accounts payable                                                   15,077            37,510
                Net increase in other current liabilities                                  127,070            20,868
      Other                                                                                 40,523          (81,545)
----------------------------------------------------------------------------------------------------------------------
         Net Cash Provided by Operating Activities                                         451,423           595,978
----------------------------------------------------------------------------------------------------------------------
Investing Activities:
Utility property additions                                                                (317,278)         (222,951)
Diversified business property additions                                                    (96,462)          (66,986)
Nuclear fuel additions                                                                        (120)          (42,783)
Net contributions to nuclear decommissioning fund                                           12,348           (14,976)
Proceeds from sale of discontinued operations                                                8,000                 -
Proceeds from sale of asset                                                                    670             5,532
Acquisition, net of cash acquired                                                          (17,355)                -
Other investing activities                                                                     (16)           (4,224)
----------------------------------------------------------------------------------------------------------------------
          Net Cash Used in Investing Activities                                           (410,213)         (346,388)
----------------------------------------------------------------------------------------------------------------------
Financing Activities:
Proceeds from issuance of long-term debt                                                   236,242           299,058
Net increase in intercompany notes                                                         177,816           125,622
Net increase (decrease) in short-term indebtedness                                          90,350          (294,632)
Retirement of long-term debt                                                              (335,495)         (188,756)
Equity contribution from parent                                                             77,904            39,651
Dividends paid to parent                                                                  (253,182)         (213,837)
Other financing activities                                                                    (487)           (2,224)
----------------------------------------------------------------------------------------------------------------------
           Net Cash Used in Financing Activities                                            (6,852)         (235,118)
----------------------------------------------------------------------------------------------------------------------
Cash Provided by Discontinued Operations                                                         -               277
----------------------------------------------------------------------------------------------------------------------
Net Increase  in Cash and Cash Equivalents                                                  34,358            14,749
----------------------------------------------------------------------------------------------------------------------
Cash and Cash Equivalents at Beginning of the Period                                         5,201            24,200
----------------------------------------------------------------------------------------------------------------------
Cash and Cash Equivalents at End of Period                                               $  39,559         $  38,949
----------------------------------------------------------------------------------------------------------------------
Supplemental Disclosures of Cash Flow Information
Cash paid (received) during the period - interest (net of amount capitalized)            $ 132,219         $ 151,405
                                         income taxes                                    $  42,614         $ (76,300)
See Note 2 for non-cash investing and financing activities.

See Notes to Interim Financial Statements.
</TABLE>

                                       7
<PAGE>




                            Florida Power Corporation
                          INTERIM FINANCIAL STATEMENTS
                               September 30, 2002
<TABLE>
<S>     <C>    <C>    <C>    <C>    <C>    <C>


STATEMENTS of INCOME                                         Three Months Ended          Nine Months Ended
(Unaudited)                                                     September 30,              September 30,
(In thousands)                                               2002          2001         2002         2001
-------------------------------------------------------------------------------------------------------------
Operating Revenues
   Electric                                                $ 863,637    $ 906,131    $2,316,001   $2,500,265
Operating Expenses
   Fuel used in electric generation                          237,021      259,763       636,436      696,766
   Purchased power                                           145,743      154,958       387,473      407,180
   Operation and maintenance                                 139,160      119,931       420,477      350,612
   Depreciation and amortization                              73,427       95,087       218,004      341,801
   Taxes other than on income                                 61,186       63,234       175,119      180,420
-------------------------------------------------------------------------------------------------------------
        Total Operating Expenses                             656,537      692,973     1,837,509    1,976,779
-------------------------------------------------------------------------------------------------------------
Operating Income                                             207,100      213,158       478,492      523,486
-------------------------------------------------------------------------------------------------------------
Other Income (Expense)
   Interest income                                               297          736         1,574        1,513
   Other, net                                                 (1,453)      (1,193)       (3,529)      (6,134)
-------------------------------------------------------------------------------------------------------------
        Total Other Income (Expense)                          (1,156)        (457)       (1,955)      (4,621)
-------------------------------------------------------------------------------------------------------------
Income before Interest Charges and Income Taxes              205,944      212,701       476,537      518,865
-------------------------------------------------------------------------------------------------------------
Interest Charges
   Gross interest charges                                     26,663       28,918        84,026       85,951
   Allowance for borrowed funds used during                     (899)        (271)       (1,932)        (475)
construction
-------------------------------------------------------------------------------------------------------------
Net Interest Charges                                          25,764       28,647        82,094       85,476
-------------------------------------------------------------------------------------------------------------
Income before Income Taxes                                   180,180      184,054       394,443      433,389
Income Taxes                                                  56,028       69,597       135,038      162,259
-------------------------------------------------------------------------------------------------------------
Net Income                                                   124,152      114,457       259,405      271,130
Dividends on Preferred Stock                                     378          378         1,134        1,134
-------------------------------------------------------------------------------------------------------------
Earnings for Common Stock                                 $  123,774    $ 114,079    $  258,271    $ 269,996
-------------------------------------------------------------------------------------------------------------
See Notes to Interim Financial Statements.

                                       8
<PAGE>



Florida Power Corporation
BALANCE SHEETS
(Unaudited)
(In thousands)                                                                   September 30,       December 31,
Assets                                                                               2002                2001
----------------------------------------------------------------------------------------------------------------------
Utility Plant
  Electric utility plant in service                                                 $7,374,282          $ 7,151,729
  Accumulated depreciation                                                          (4,075,834)          (3,984,308)
----------------------------------------------------------------------------------------------------------------------
        Utility plant in service, net                                                3,298,448            3,167,421
  Held for future use                                                                    7,921                8,274
  Construction work in progress                                                        316,274              292,883
  Nuclear fuel, net of amortization                                                     45,688               62,536
----------------------------------------------------------------------------------------------------------------------
        Total Utility Plant, Net                                                     3,668,331            3,531,114
----------------------------------------------------------------------------------------------------------------------
Current Assets
  Cash and cash equivalents                                                             28,725                    -
  Accounts receivable                                                                  207,362              185,562
  Unbilled accounts receivable                                                          83,315               63,080
  Receivable from affiliates                                                            36,605               16,424
  Notes receivable from affiliates                                                           -              119,799
  Deferred income taxes                                                                 23,517               32,334
  Inventory                                                                            204,601              188,630
  Deferred fuel cost                                                                    29,840               15,147
  Prepayments and other current assets                                                   8,963                4,336
----------------------------------------------------------------------------------------------------------------------
        Total Current Assets                                                           622,928              625,312
----------------------------------------------------------------------------------------------------------------------
Deferred Debits and Other Assets
  Regulatory assets                                                                    130,025              157,725
  Unamortized debt expense                                                              14,562               11,844
  Nuclear decommissioning trust funds                                                  377,238              406,100
  Miscellaneous other property and investments                                          40,852               46,442
  Prepaid pension costs                                                                216,893              198,351
  Other assets and deferred debits                                                       8,889               21,274
----------------------------------------------------------------------------------------------------------------------
        Total Deferred Debits and Other Assets                                         788,459              841,736
----------------------------------------------------------------------------------------------------------------------
         Total Assets                                                               $5,079,718          $ 4,998,162
----------------------------------------------------------------------------------------------------------------------
Capitalization and Liabilities
----------------------------------------------------------------------------------------------------------------------
Capitalization
  Common stock                                                                      $1,081,257          $ 1,081,257
  Retained earnings                                                                    955,472              950,387
----------------------------------------------------------------------------------------------------------------------
        Total Common Stock Equity                                                    2,036,729            2,031,644
  Preferred stock of subsidiaries-not subject to mandatory redemption                   33,497               33,497
  Long-term debt, net                                                                1,249,325            1,465,030
----------------------------------------------------------------------------------------------------------------------
        Total Capitalization                                                         3,319,551            3,530,171
----------------------------------------------------------------------------------------------------------------------
Current Liabilities
  Current portion of long-term debt                                                    216,877               32,000
  Accounts payable                                                                     158,857              143,828
  Payable to affiliates                                                                 67,526              189,817
  Notes payable to affiliates                                                           72,381                    -
  Taxes accrued                                                                         28,128                1,768
  Interest accrued                                                                      36,805               54,440
  Short-term obligations                                                               244,600              154,250
  Customer deposits                                                                    122,317              118,285
  Accrued taxes other than on income                                                    82,277                9,202
  Other current liabilities                                                             30,623               57,778
----------------------------------------------------------------------------------------------------------------------
        Total Current Liabilities                                                    1,060,391              761,368
----------------------------------------------------------------------------------------------------------------------
Deferred Credits and Other Liabilities
  Accumulated deferred income taxes                                                    382,030              394,828
  Accumulated deferred investment tax credits                                           48,386               53,875
  Regulatory liabilities                                                                53,965               45,643
  Other liabilities and deferred credits                                               215,395              212,277
----------------------------------------------------------------------------------------------------------------------
        Total Deferred Credits and Other Liabilities                                   699,776              706,623
----------------------------------------------------------------------------------------------------------------------
Commitments and Contingencies (Note 12)
----------------------------------------------------------------------------------------------------------------------
         Total Capitalization and Liabilities                                       $5,079,718          $ 4,998,162
----------------------------------------------------------------------------------------------------------------------
See Notes to Interim Financial Statements.

                                       9
<PAGE>



Florida Power Corporation
STATEMENTS of CASH FLOWS                                                                   Nine Months Ended
(Unaudited)                                                                                  September 30,
(In thousands)                                                                          2002                2001
-------------------------------------------------------------------------------------------------------------------
Operating Activities:
Net income                                                                          $  259,405          $   271,130
Adjustments to reconcile net income to net cash provided by operating
activities:
      Depreciation and amortization                                                    237,440              350,771
      Deferred income taxes and investment tax credits, net                            (13,555)             (22,180)
      Deferred fuel cost (credit)                                                      (14,693)              32,633
      Changes in working capital:
         Net increase in accounts receivable                                           (62,216)             (59,693)
         Net increase in inventories                                                   (15,971)             (24,544)
         Net (increase) decrease in prepaids and other current assets                   (4,627)               5,940
         Net increase (decrease) in accounts payable                                  (107,262)              31,487
         Net increase in other current liabilities                                      58,677              184,425
             Other                                                                       3,058              (87,697)
-------------------------------------------------------------------------------------------------------------------
         Net Cash Provided by Operating Activities                                     340,256              682,272
-------------------------------------------------------------------------------------------------------------------
Investing Activities:
Property additions                                                                    (317,278)            (222,951)
Nuclear fuel additions                                                                    (120)             (42,783)
Net contributions to nuclear decommissioning fund                                       12,348              (14,976)
Other investing activities                                                               5,526                7,617
-------------------------------------------------------------------------------------------------------------------
          Net Cash Used in Investing Activities                                       (299,524)            (273,093)
-------------------------------------------------------------------------------------------------------------------
Financing Activities:
Proceeds from issuance of long-term debt                                               236,242              297,621
Net increase (decrease) in intercompany notes                                          192,180             (117,062)
Net increase (decrease) in short-term indebtedness                                      90,350             (288,806)
Retirement of long-term debt                                                          (276,459)             (81,000)
Dividends paid to parent                                                              (253,186)            (213,836)
Dividends paid on preferred stock                                                       (1,134)              (1,134)
-------------------------------------------------------------------------------------------------------------------
           Net Cash Used in Financing Activities                                       (12,007)            (404,217)
-------------------------------------------------------------------------------------------------------------------
Net Increase in Cash and Cash Equivalents                                               28,725                4,962
-------------------------------------------------------------------------------------------------------------------
Cash and Cash Equivalents at Beginning of the Period                                         -                3,380
-------------------------------------------------------------------------------------------------------------------
Cash and Cash Equivalents at End of Period                                          $   28,725          $     8,342
-------------------------------------------------------------------------------------------------------------------
Supplemental Disclosures of Cash Flow Information
Cash paid during the period - interest (net of amount capitalized)                  $   99,729          $    94,071
                              income taxes (net of refunds)                         $   88,004          $    17,071

See Notes to Interim Financial Statements.
</TABLE>

                                       10
<PAGE>



Florida Progress Corporation and Florida Power Corporation
NOTES TO INTERIM FINANCIAL STATEMENTS


1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     Organization.   Florida  Progress   Corporation  (the  Company  or  Florida
     Progress) is a holding company under the Public Utility Holding Company Act
     of 1935 (PUHCA).  The Company  became  subject to the  regulations of PUHCA
     when it was  acquired  by Progress  Energy,  Inc.  (Progress  Energy or the
     Parent).  Florida  Progress'  two primary  subsidiaries  are Florida  Power
     Corporation  (Florida  Power)  and  Progress  Fuels  Corporation  (Progress
     Fuels).

     Florida  Power is a regulated  public  utility  engaged in the  generation,
     transmission,  distribution and sale of electricity in portions of Florida.
     Florida Power is regulated by the Florida Public Service  Commission (FPSC)
     and the Federal Energy Regulatory Commission (FERC).

     Progress Fuels is a diversified non-utility energy company, whose principal
     business segments are Energy & Related Services and Rail Services. Progress
     Fuels' Rail  Services and the  non-Florida  portion of its Energy & Related
     Services operations report their results one-month in arrears, due to their
     wide-ranging geographical locations.

     Basis of  Presentation.  These  financial  statements have been prepared in
     accordance  with  accounting  principles  generally  accepted in the United
     States of America (generally  accepted  accounting  principles) for interim
     financial information and with the instructions to Form 10-Q and Regulation
     S-X. Accordingly,  they do not include all of the information and footnotes
     required by generally accepted accounting principles for complete financial
     statements.   Because  the  accompanying   consolidated  interim  financial
     statements do not include all of the information and footnotes  required by
     generally  accepted   accounting   principles,   they  should  be  read  in
     conjunction  with the audited  financial  statements  for the period  ended
     December  31,  2001 and notes  thereto  included in Florida  Progress'  and
     Florida Power's Form 10-K for the year ended December 31, 2001.

     The amounts included in the consolidated  interim financial  statements are
     unaudited  but,  in the  opinion of  management,  reflect  all  adjustments
     necessary to fairly present Florida Progress' and Florida Power's financial
     position and results of operations for the interim periods. Due to seasonal
     weather variations and the timing of outages of electric  generating units,
     the  results  of  operations  for  interim   periods  are  not  necessarily
     indicative  of amounts  expected  for the entire year.  Effective  with the
     quarter  ended  September 30, 2002,  the Company will no longer  reclassify
     commercial  paper as long-term debt.  Certain  reclassifications  have been
     made to prior-year amounts to conform to the current year's presentation.

     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.

2.   FUEL ACQUISITION

     On April 26, 2002, Progress Fuels Corporation  acquired 100% of Westchester
     Gas Company. The acquisition  included  approximately 215 producing natural
     gas  wells,   52  miles  of  intrastate  gas  pipeline  and  170  miles  of
     gas-gathering  systems  located  within a  25-miles  radius of  Jonesville,
     Texas, on the Texas-Louisiana border.

     The aggregate  purchase price of  approximately  $153 million  consisted of
     cash  consideration  of  approximately  $22 million and the issuance of 2.5
     million shares of Progress Energy common stock valued at approximately $129
     million.  The purchase price included  approximately $1.7 million of direct
     transaction  costs.  The purchase  price was  primarily  allocated to fixed
     assets based on the  preliminary  fair values of the assets  acquired.  The
     excess of the  purchase  price over the  preliminary  fair value of the net
     identifiable assets and liabilities acquired has been recorded as goodwill.
     Based on this preliminary allocation, goodwill of approximately $33 million
     has been recorded.  The preliminary purchase price allocation is subject to
     adjustment for changes in the  preliminary  assumptions  and analyses used,
     pending  additional   information  including  final  asset  valuations  and
     allocations to gas properties.

     The  acquisition  has been  accounted  for  using  the  purchase  method of
     accounting and, accordingly, the results of operations for Westchester have
     been included in the Company's  consolidated financial statements since the

                                       11
<PAGE>

     date of  acquisition.  The pro forma  results  of  operations  would not be
     materially  different than the reported results of operations for the three
     and nine months ended September 30, 2002, or for the comparable  periods of
     the prior year.

3.   IMPAIRMENT OF LONG-LIVED ASSETS AND OTHER ONE-TIME CHARGES

     Due to  the  decline  of  the  telecommunications  industry  and  continued
     operating  losses,  the Company  initiated a valuation  study to assess the
     recoverability  of  Progress  Telecom's  long-lived  assets.  Based on this
     assessment,  the company  recorded  asset  impairments  and other  one-time
     charges  totaling $233.0 million on a pre-tax basis in the third quarter of
     2002 ($144.0 million  after-tax).  The asset write-downs and other one-time
     charges are included in diversified  business  expenses on the Consolidated
     Statements of Income.  The results of Progress  Telecom are included in the
     Other  segment  (See Note 5). This  write-down  constitutes  a  significant
     reduction in the book value of these long-lived assets.

     The  long-lived  asset  write-downs  of $214.6  million on a pre-tax  basis
     include an  impairment of property,  plant and  equipment and  construction
     work in process.  The impairment charge  represents the difference  between
     the fair value and carrying  amount of these  long-lived  assets.  The fair
     value of these  assets  was  determined  using a  valuation  study  heavily
     weighted  on  the  discounted  cash  flow   methodology  and  using  market
     approaches as supporting  information.  The other one-time charges of $18.4
     million on a pre-tax basis primarily relate to inventory adjustments.

4.   FLORIDA POWER RATE CASE SETTLEMENT

     On March 27, 2002, the parties in Florida  Power's rate case entered into a
     Stipulation and Settlement Agreement (the Agreement) related to retail rate
     matters.   The  Agreement  was  approved  by  the  Florida  Public  Service
     Commission  (FPSC) on April 23, 2002. The Agreement is generally  effective
     from May 1, 2002  through  December 31, 2005;  provided,  however,  that if
     Florida  Power's  base rate  earnings  fall  below a 10%  return on equity,
     Florida Power may petition the FPSC to amend its base rates.

     The Agreement  provides that Florida Power will reduce its retail  revenues
     from the sale of  electricity  by an  annual  amount of $125  million.  The
     Agreement  also  provides  that Florida  Power will operate under a Revenue
     Sharing  Incentive  Plan (the Plan)  through  2005,  and  thereafter  until
     terminated by the FPSC,  that  establishes  annual revenue caps and sharing
     thresholds.  The Plan provides  that retail base rate revenues  between the
     sharing  thresholds  and the retail base rate  revenue caps will be divided
     into  two  shares  -  a  1/3  share  to  be  received  by  Florida  Power's
     shareholders,  and a 2/3 share to be  refunded  to Florida  Power's  retail
     customers;  provided,  however,  that for the year 2002 only, the refund to
     customers  will be limited to 67.1% of the 2/3 customer  share.  The retail
     base rate revenue sharing threshold amounts for 2002 will be $1,296 million
     and will increase $37 million each year thereafter.  The Plan also provides
     that all retail base rate revenues  above the retail base rate revenue caps
     established for each year will be refunded to retail customers on an annual
     basis.  For 2002,  the refund to customers  will be limited to 67.1% of the
     retail base rate revenues that exceed the 2002 cap. The retail base revenue
     caps for 2002 will be $1,356  million and will  increase  $37 million  each
     year  thereafter.  Any amounts  above the retail base  revenue caps will be
     refunded 100 percent to customers.

     The Agreement  also provides that  beginning  with the  in-service  date of
     Florida  Power's  Hines Unit 2 and  continuing  through  December 31, 2005,
     Florida  Power will be allowed to recover  through  the fuel cost  recovery
     clause a return on average  investment and  depreciation  expense for Hines
     Unit 2, to the extent such costs do not exceed the Unit's  cumulative  fuel
     savings over the recovery period.  Hines Unit 2 is a 516 MW  combined-cycle
     unit under  construction  and currently  scheduled  for  completion in late
     2003.

     Additionally,  the  Agreement  provides  that  Florida  Power will effect a
     mid-course  correction of its fuel cost recovery  clause to reduce the fuel
     factor by $50 million for the  remainder  of 2002.  The fuel cost  recovery
     clause will operate as it normally does, including,  but not limited to any
     additional  mid-course  adjustments  that  may  become  necessary,  and the
     calculation of true-ups to actual fuel clause expenses.

     Florida   Power  will   suspend   accruals  on  its  reserves  for  nuclear
     decommissioning  and  fossil  dismantlement   through  December  31,  2005.
     Additionally,  for each  calendar  year  during the term of the  Agreement,
     Florida Power will record a $62.5 million  depreciation  expense reduction,
     and  may,  at  its  option,  record  up to an  equal  annual  amount  as an
     offsetting accelerated depreciation expense. In addition,  Florida Power is
     authorized,  at its discretion,  to accelerate the  amortization of certain
     regulatory assets over the term of the Agreement.  There was no accelerated
     depreciation or amortization expense recorded for the three and nine months
     ended September 30, 2002.

                                       12
<PAGE>

     Under the terms of the  Agreement,  Florida  Power  agreed to continue  the
     implementation of its four-year  Commitment to Excellence  Reliability Plan
     and  expects to achieve a 20%  improvement  in its  annual  System  Average
     Interruption  Duration  Index by no later  than 2004.  If this  improvement
     level is not achieved for calendar  years 2004 or 2005,  Florida Power will
     provide a refund of $3 million  for each year the level is not  achieved to
     10%  of  its  total  retail   customers  served  by  its  worst  performing
     distribution feeder lines.

     The Agreement also provides that Florida Power will refund to customers $35
     million of revenues Florida Power collected during the interim period since
     March 13, 2001.  This one-time  retroactive  revenue refund was recorded in
     the first quarter of 2002 and will be returned to retail  customers over an
     eight-month  period ending December 31, 2002. Any additional  refunds under
     the  Agreement  will be  recorded as they become  probable.  No  additional
     refunds have been accrued at September 30, 2002.


5.   FINANCIAL INFORMATION BY BUSINESS SEGMENT

     The Company's  principal  business  segment is Florida  Power,  an electric
     utility engaged in the generation, purchase, transmission, distribution and
     sale of electricity  primarily in Florida.  The other  reportable  business
     segments are Progress  Fuels' Energy & Related  Services and Rail Services.
     The Inland Marine Transportation business, formerly a business segment, was
     sold in November 2001 (See Note 12). The Energy & Related Services includes
     coal and synthetic fuel operations, natural gas production and sales, river
     terminal  services and  off-shore  marine  transportation.  Rail  Services'
     operations  include railcar repair,  rail parts  reconditioning  and sales,
     railcar leasing and sales,  rail and track material sales,  and scrap metal
     recycling.  These  activities  include  maintenance and  reconditioning  of
     salvageable scrap components of railcars,  locomotive repair,  right-of-way
     maintenance and operating  manufacturing  facilities for new rail cars. The
     other  category  consists  primarily  of Progress  Telecom,  the  Company's
     telecommunications  subsidiary,  the  Company's  investment  in FPC Capital
     Trust,  which holds the  Preferred  Securities,  and the  holding  company,
     Florida Progress Corporation. Progress Telecommunications markets wholesale
     fiber-optic  based  capacity  service in the Eastern United States and also
     markets wireless structure attachments to wireless communication  companies
     and  governmental  entities.  Florida  Progress  allocates a portion of its
     operating expenses to business segments.

     Financial data for business  segments for the periods  covered in this Form
     10-Q are presented in the table below:


<TABLE>
<S>     <C>    <C>    <C>    <C>    <C>    <C>
                                                                  Energy and          Rail
(In thousands)                                     Utility     Related Services   Services (a)      Other      Consolidated
------------------------------------------------------------------------------------------------------------------------------
Three months ended September 30, 2002:
  Revenues                                        $ 863,637            $ 93,950      $194,611       $49,821       $1,202,019
  Intersegment  revenues                             --                 135,029         1,282      (136,311)        --
  Income (loss) from continuing operations          123,774              35,380          (579)     (215,596)         (57,021)
  Total assets                                    5,079,718             832,588       579,947        90,778        6,583,031
==============================================================================================================================

                                                                  Energy and      Rail Services
                                                   Utility     Related Services                     Other      Consolidated
------------------------------------------------------------------------------------------------------------------------------
Three months ended September 30, 2001:
  Revenues                                        $ 906,131            $ 99,416     $ 219,554       $35,503       $1,260,604
  Intersegment  revenues                             --                  88,014           477       (88,491)        --
    Income (loss) from continuing operations        114,079              39,098        (2,165)       30,440          181,452
  Total assets                                    5,044,029             550,141       828,384       114,930        6,537,484
==============================================================================================================================


                                       13
<PAGE>




                                                                   Energy and          Rail
                                                   Utility      Related Services   Services (a)      Other      Consolidated
------------------------------------------------------------------------------------------------------------------------------
Nine months ended September 30, 2002:
  Revenues                                      $ 2,316,001            $248,253     $ 574,514     $ 182,050      $ 3,320,818
  Intersegment  revenues                           --                   394,848         2,632      (397,480)        --
  Income (loss) from continuing operations          258,271             103,846         1,667      (254,675)         109,109
  Total assets                                    5,079,718             832,588       579,947        90,778        6,583,031
==============================================================================================================================

                                                                  Energy and      Rail Services
                                                   Utility      Related Services                     Other      Consolidated
------------------------------------------------------------------------------------------------------------------------------
Nine months ended September 30, 2001:
  Revenues                                      $ 2,500,265           $ 275,904     $ 669,580       $93,415      $ 3,539,164
  Intersegment  revenues                           --                   280,426         1,055      (281,481)        --
    Income (loss) from continuing operations        269,996             106,521       (13,953)       (3,587)         358,977
  Total assets                                    5,044,029             550,141       828,384       114,930        6,537,484
==============================================================================================================================
(a)Rail Services' total segment assets at September 30, 2002, decreased from the
prior year due to asset sales and impairments  recorded in the fourth quarter of
2001.
</TABLE>

6.   IMPACT OF NEW ACCOUNTING STANDARDS

     During the second quarter of 2001, the Financial Accounting Standards Board
     (FASB)  issued   interpretations  of  Statements  of  Financial  Accounting
     Standards No. 133,  "Accounting  for  Derivative  and Hedging  Activities,"
     (SFAS No. 133)  indicating  that options in general  cannot qualify for the
     normal purchases and sales exception, but provided an exception that allows
     certain electricity contracts, including certain capacity-energy contracts,
     to be excluded from the  mark-to-market  requirements  of SFAS No. 133. The
     interpretations were effective July 1, 2001. Those  interpretations did not
     require   the   Company   to   mark-to-market   any  of   its   electricity
     capacity-energy contracts currently outstanding. In December 2001, the FASB
     revised the  criteria  related to the  exception  for  certain  electricity
     contracts,  with the  revision to be effective  April 1, 2002.  The revised
     interpretation  did not result in any significant  changes to the Company's
     assessment of mark-to-market  requirements for its current contracts. If an
     electricity or fuel supply contract in its regulated  businesses is subject
     to mark-to-market accounting,  there generally would be no income statement
     effect of the mark-to-market because such contracts are generally reflected
     in fuel adjustment  clauses so that the contract's  mark-to-market  gain or
     loss  would  be  recorded  as  a  regulatory   asset  or   liability.   Any
     mark-to-market gains or losses in its non-regulated businesses would affect
     income unless those contracts qualify for hedge accounting treatment.

     The  application  of the new rules is still  evolving and further  guidance
     from the FASB is expected,  which could  additionally  impact the Company's
     financial statements.

     See Note 7 for  more  information  on SFAS No.  142,  "Goodwill  and  Other
     Intangible Assets.

     The  FASB   issued  SFAS  No.  143,   "Accounting   for  Asset   Retirement
     Obligations,"  in  July  2001.  This  statement  provides   accounting  and
     disclosure   requirements  for  retirement   obligations   associated  with
     long-lived assets and is effective January 1, 2003. This statement requires
     that the  present  value of  retirement  costs for which the  Company has a
     legal obligation be recorded as liabilities with an equivalent amount added
     to the asset cost and depreciated over an appropriate period. The liability
     is then accreted over time by applying an interest  method of allocation to
     the  beginning  liability.  The  Company is in the  process of  identifying
     retirement  obligations.  Areas that are being  reviewed  include  electric
     transmission and  distribution,  gas production and  distribution,  nuclear
     decommissioning,  all  generating  facilities,  coal mines,  synthetic fuel
     facilities,  terminals and telecommunication assets. The Company is also in
     the process of quantifying the obligations  that have been identified under
     the  measurement  rules  described in the standard.  Florida Power does not
     expect  there  to be any  impact  on  earnings  from  this  statement.  For
     unregulated  companies,  the Company  currently cannot predict the earnings
     impact.

     Effective  January 1, 2002, the Company  adopted SFAS No. 144,  "Accounting
     for the Impairment or Disposal of Long-Lived Assets." SFAS No. 144 provides
     guidance for the  accounting  and  reporting of  impairment  or disposal of
     long-lived assets. The statement  supersedes SFAS No. 121,  "Accounting for
     the  Impairment  of  Long-Lived  Assets  and for  Long-Lived  Assets  to be
     Disposed Of." It also supersedes the accounting and reporting provisions of
     APB Opinion No. 30,  "Reporting  the Results of  Operations - Reporting the
     Effects of Disposal of a Segment of a Business, and Extraordinary,  Unusual

                                       14
<PAGE>

     and Infrequently Occurring Events and Transactions" related to the disposal
     of a segment  of a  business.  Adoption  of this  statement  did not have a
     material effect on the Company's financial statements.

     In April 2002, the FASB issued SFAS No. 145  "Rescission of FASB Statements
     No.  4, 44 and 64,  Amendment  of FASB  Statement  No.  13,  and  Technical
     Corrections"   This   standard   will   require   gains  and  losses   from
     extinguishment of debt to be classified as extraordinary items only if they
     meet the criteria of unusual and  infrequent in Opinion 30,  "Reporting the
     Results of Operations - Reporting the Effects of Disposal of a Segment of a
     Business, and Extraordinary,  Unusual and Infrequently Occurring Events and
     Transactions."  Any gain or loss on extinguishment  will be recorded in the
     most  appropriate  line item to which it relates  within net income  before
     extraordinary  items.  SFAS No. 145 is effective for fiscal years beginning
     after  May  15,  2002;   however,   certain   sections  are  effective  for
     transactions  occurring  after May 15, 2002.  The Company does not have any
     transactions  that are affected by this statement as of September 30, 2002.
     For Florida  Power,  any  expenses  or call  premiums  associated  with the
     reacquisition  of debt obligations are amortized over the remaining life of
     the original debt using the straight-line method consistent with ratemaking
     treatment.

     In June 2002, the FASB issued SFAS No. 146 "Accounting for Costs Associated
     with Exit or  Disposal  Activities."  This  statement  supercedes  Emerging
     Issues Task Force (EITF) Issue No. 94-3 "Liability  Recognition for Certain
     Employee   Termination  Benefits  and  Other  Costs  to  Exit  an  Activity
     (including  Certain  Costs  Incurred  in a  Restructuring)".  SFAS No.  146
     requires  that a liability for a cost  associated  with an exit or disposal
     activity be recognized  when the liability is incurred.  Under EITF 94-3, a
     liability is recognized at the date an entity commits to an exit plan. SFAS
     No. 146 also  establishes  that the liability  should initially be measured
     and  recorded  at fair  value.  The  provisions  of SFAS  No.  146  will be
     effective for any exit and disposal  activities  covered under the scope of
     the standard and initiated after December 31, 2002.

7.   GOODWILL AND OTHER INTANGIBLE ASSETS

     Effective January 1, 2002, the Company adopted SFAS No. 142,  "Goodwill and
     Other  Intangible  Assets."  This  statement  clarifies  the  criteria  for
     recording of other intangible  assets  separately from goodwill.  Effective
     January 1, 2002,  goodwill is no longer  subject to  amortization  over its
     estimated useful life.  Instead,  goodwill is subject to at least an annual
     assessment  for  impairment by applying a two-step  fair-value  based test.
     This assessment could result in periodic impairment charges.

     The  Company  has  completed  the first  step of the  initial  transitional
     goodwill  impairment test, which indicated that the Company's  goodwill was
     not impaired as of January 1, 2002.

     The changes in the  carrying  amount of goodwill  for the nine months ended
     September 30, 2002, are as follows:

             (in thousands)
             Balance as of January 1, 2002              $11,101
             Acquisitions                                32,506
                                                   -------------
             Balance as of September 30, 2002           $43,607

     The acquired goodwill relates to the acquisition of Westchester Gas Company
     in April 2002 (see Note 2). As of September 30, 2002, all goodwill has been
     assigned to the Energy and Related Services segment.

     As required by SFAS No. 142, the results for the prior year's  periods have
     not been restated.  A  reconciliation  of net income as if SFAS No. 142 had
     been  adopted  is  presented  below  for the three  and nine  months  ended
     September 30, 2001, and the years ended December 31, 2001, 2000 and 1999.

<TABLE>
<S>     <C>    <C>    <C>    <C>    <C>    <C>

(in thousands)                  Three Months Ended   Nine Months Ended    Year Ended    Year Ended    Year Ended
                                September 30, 2001   September 30, 2001      2001          2000          1999
                                -------------------------------------------------------------------------------------------
Reported net income                 $ 167,332           $ 333,131         $ 244,331      $ 144,241     $ 314,897
Add back: Goodwill amortization           529               1,702             2,394          3,001         5,509
                                    ---------          ----------         ---------      ---------     ---------
Adjusted net income                 $ 167,861           $ 334,833         $ 246,725      $ 147,242     $ 320,406
</TABLE>

     The Company has no other significant  intangible assets as of September 30,
     2002,  and  December  31,  2001.  Florida  Power  has  no  goodwill  and no
     significant  intangible  assets as of September 30, 2002,  and December 31,
     2001.


                                       15
<PAGE>

8.   COMPREHENSIVE INCOME

     Florida  Progress  comprehensive  loss for the three months ended September
     30,  2002 was $58.4  million and  comprehensive  income for the nine months
     ended  September  30,  2002 was $108.0  million.  Comprehensive  income for
     Florida  Progress for the three and nine months ended  September  30, 2001,
     was  $181.2  million  and  $346.7  million,  respectively.  Items  of other
     comprehensive  income  for  the  three  and  nine-month  periods  consisted
     primarily of foreign currency translation  adjustments.  Florida Power does
     not have any items of other comprehensive income.

9.   FINANCING ACTIVITIES

     In February  2002,  $50 million of Progress  Capital  Holdings,  Inc. (PCH)
     medium-term  notes,  5.78%  Series,  matured.  Progress  Energy funded this
     maturity through the issuance of commercial paper.

     On July 1, 2002,  $30 million of Florida  Power  medium-term  notes,  6.54%
     Series, matured. Florida Power funded this maturity through the issuance of
     commercial paper.

     On July 11, 2002, Florida Power announced the redemption of $108.55 million
     principal  amount of Citrus  County  Pollution  Control  Refunding  Revenue
     Bonds,  Series 1992 A Due January 1, 2027, $90 million  principal amount of
     Citrus County Pollution Control Refunding Revenue Bonds,  Series 1992 B Due
     February 1, 2022,  and $10.115  million  principal  amount of Pasco  County
     Pollution  Control  Refunding  Revenue Bonds,  Series 1992A Due February 1,
     2022,  at 102% of the  principal  amount of such  bonds  and $32.2  million
     principal amount of Pinellas County  Pollution  Control  Refunding  Revenue
     Bonds,  Series 1991 Due December 1, 2014 at 101% of the principal amount of
     such bonds. These redemptions were finalized on August 12, 2002.

     On July 16, 2002,  Florida Power issued $108.55 million principal amount of
     Citrus County Pollution Control Revenue  Refunding Bonds,  Series 2002A Due
     January  1,  2027,  $100.115  million  principal  amount of  Citrus  County
     Pollution Control Revenue Refunding Bonds, Series 2002B Due January 1, 2022
     and $32.2  million  principal  amount of Citrus  County  Pollution  Control
     Revenue  Refunding Bonds,  Series 2002C Due January 1, 2018.  Proceeds from
     this issuance were used to redeem Florida Power's pollution control revenue
     refunding bonds above.

10.  RISK MANAGEMENT ACTIVITIES AND DERIVATIVE TRANSACTIONS

     Progress Fuels periodically enters into derivative instruments to hedge its
     exposure to price fluctuations on natural gas sales.  During 2002, Progress
     Fuels has executed  cash flow hedges on  approximately  17.3 Bcf of natural
     gas sales for the  fourth  quarter  of 2002 and  entire  year  2003.  These
     instruments  did not have a material  impact on the Company's  consolidated
     financial position or results of operations.

11.  COMPANY-OBLIGATED   MANDATORILY   REDEEMABLE  CUMULATIVE  QUARTERLY  INCOME
     PREFERRED  SECURITIES  (QUIPS) OF A SUBSIDIARY TRUST HOLDING SOLELY FLORIDA
     PROGRESS GUARANTEED SUBORDINATED DEFERRABLE INTEREST NOTES

     In April  1999,  FPC  Capital  I (the  Trust),  an  indirect  wholly  owned
     subsidiary of the Company,  issued 12 million  shares of $25 par cumulative
     Company-obligated  mandatorily  redeemable preferred securities  (Preferred
     Securities) due 2039, with an aggregate  liquidation  value of $300 million
     and an annual distribution rate of 7.10%, payable quarterly. Currently, all
     12  million  shares  of the  Preferred  Securities  that  were  issued  are
     outstanding.  Concurrent with the issuance of the Preferred Securities, the
     Trust issued to Florida Progress Funding Corporation (Funding Corp.) all of
     the common  securities  of the Trust  (371,135  shares),  for $9.3 million.
     Funding Corp. is a direct wholly owned subsidiary of the Company.

     The existence of the Trust is for the sole purpose of issuing the Preferred
     Securities  and the common  securities  and using the  proceeds  thereof to
     purchase  from  Funding  Corp.  its 7.10%  Junior  Subordinated  Deferrable
     Interest Notes  (subordinated  notes) due 2039,  for a principal  amount of
     $309.3  million.  The  subordinated  notes  and  the  Notes  Guarantee  (as
     discussed below) are the sole assets of the Trust. Funding Corp.'s proceeds
     from the sale of the  subordinated  notes were advanced to Progress Capital
     Holdings, Inc. (PCH), and used for general corporate purposes including the
     repayment  of a portion of certain  outstanding  short-term  bank loans and
     commercial paper.

     The Company has fully and  unconditionally  guaranteed  the  obligations of
     Funding  Corp.  under the  subordinated  notes  (the Notes  Guarantee).  In
     addition,  the Company  has  guaranteed  the  payment of all  distributions

                                       16
<PAGE>

     required to be made by the Trust, but only to the extent that the Trust has
     funds available for such distributions  (Preferred  Securities  Guarantee).
     The  Preferred  Securities  Guarantee,  considered  together with the Notes
     Guarantee, constitutes a full and unconditional guarantee by the Company of
     the Trust's obligations under the Preferred Securities.

     The  subordinated  notes may be  redeemed  at the option of  Funding  Corp.
     beginning in 2004 at par value plus accrued interest through the redemption
     date. The proceeds of any redemption of the subordinated notes will be used
     by the Trust to redeem proportional amounts of the Preferred Securities and
     common  securities  in accordance  with their terms.  Upon  liquidation  or
     dissolution of Funding Corp.,  holders of the Preferred Securities would be
     entitled to the  liquidation  preference  of $25 per share plus all accrued
     and unpaid dividends thereon to the date of payment.

     These  Preferred  Securities  are  classified as long-term  debt on Florida
     Progress' consolidated balance sheets.

12.  COMMITMENTS AND CONTINGENCIES

     Contingencies

     1)   IRS Audit

          One of Progress Fuels' synthetic fuel entities, Colona Synfuel Limited
          Partnership,  L.L.L.P.,  is  being  audited  by the  Internal  Revenue
          Service (IRS). The audit of Colona was not unexpected.  The Company is
          audited  regularly  in the  normal  course  of  business  as are  most
          similarly   situated   companies.   The  Company  has  been  allocated
          approximately  $217 million in tax credits to date for this  synthetic
          fuel entity.  In September  2002, all of the Company's  majority-owned
          synthetic  fuel  entities  were  accepted  into the  IRS's  Pre-Filing
          Agreement  (PFA)  program.   The  PFA  program  allows   taxpayers  to
          voluntarily   accelerate  the  IRS  exam  process  in  order  to  seek
          resolution  of  specific  issues.  Either  the  Company or the IRS can
          withdraw from the program at any time, and issues not resolved through
          the  program  may  proceed to the next level of the IRS exam  process.
          While the ultimate  outcome is  uncertain,  the Company  believes that
          participation  in the PFA  program  will  likely  shorten the tax exam
          process.

          In  management's  opinion,  the  Company  is  complying  with  all the
          necessary  requirements  to be allowed such credits and believes it is
          likely, although it cannot provide certainty,  that it will prevail if
          challenged  by the  IRS on any  credits  taken.  The  timing  for  the
          ultimate disposition of this audit is uncertain.

     2)   Claims and Uncertainties

          The  Company  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 federal and state laws. The lead or sole regulatory  agency that
          is responsible  for a particular  former coal tar site depends largely
          upon the state in which the site is  located.  There are  several  MGP
          sites to which  Florida  Power has some  connection.  In this  regard,
          Florida  Power,  with  other  potentially   responsible   parties,  is
          participating in investigating  and, if necessary,  remediating former
          coal tar sites with several regulatory  agencies,  including,  but not
          limited to, the U.S.  Environmental  Protection  Agency  (EPA) and the
          FDEP. In addition,  the Company is periodically notified by regulators
          such as the EPA and various  state  agencies of their  involvement  or
          potential  involvement in site, other than MGP sites, that may require
          investigation and/or remediation.

          There are two  former  MGP sites and 10 other  active  waste  sites or
          categories of sites  associated  with Florida Power that have required
          or are anticipated to require  investigation and/or remediation costs.
          As of September  30,  2002,  Florida  Power has accrued  approximately
          $11.1  million for probable and  reasonably  estimable  costs at these
          sites.  Florida  Power  believes  that the  maximum  liability  it can
          currently estimate on these sites is $17.0 million.  Florida Power has
          filed for recovery of  approximately  $4.0 million of these costs.  As
          more  activity  occurs at these sites,  Florida  Power will assess the
          need to adjust the accruals.  These  accruals have been recorded on an
          undiscounted  basis.  Florida  Power  measures its liability for these
          sites  based  on  available   evidence  including  its  experience  in
          investigation and/or remediation of contaminated sites, which includes
          assessing  and  developing   cost-sharing   arrangements   with  other
          potentially  responsible parties. A rollforward of the balance in this
          accrual is not provided due to the  immateriality  of this activity in
          the periods presented.

                                       17
<PAGE>

          As part of the sale of the Inland Marine Transportation segment to AEP
          Resources in 2001, Florida Progress  established an accrual to address
          liabilities  which may  result  from known and  unknown  environmental
          liabilities  but  primarily  to  address  contamination  in  soil  and
          potentially  groundwater  at one site.  The balance in this accrual is
          $9.9 million at September 30, 2002.  Florida  Progress  estimates that
          its maximum  contractual  liability to AEP Resources  associated  with
          Inland Marine  Transportation  segment is $60 million.  These accruals
          have  been  determined  on an  undiscounted  basis.  Florida  Progress
          measures its  liability  for this site based on estimable and probable
          remediation scenarios. A rollforward of the balance in this accrual is
          not provided due to the immateriality of this activity for the periods
          presented.  The Company  believes that it is reasonably  possible that
          additional costs, which cannot be currently estimated, may be incurred
          related  to the  environmental  indemnification  provision  beyond the
          amounts  accrued.  The  Company  cannot  predict  the  outcome of this
          matter.

          The Company is also  currently in the process of  assessing  potential
          costs and  exposures  at other sites it has been  notified  of. As the
          assessments are developed and analyzed,  the Company will accrue costs
          for  the  sites  to the  extent  the  costs  are  probable  and can be
          reasonably estimated.

          There  has  been  and  may be  further  proposed  federal  legislation
          requiring  reductions  in air emissions  for nitrogen  oxides,  sulfur
          dioxide,  carbon  dioxide and mercury  setting forth national caps and
          emission  levels  over an  extended  period  of  time.  This  national
          multi-pollutant  approach would have significant  costs which could be
          material to the Company's  consolidated  financial position or results
          of  operations.  Some  companies may seek recovery of the related cost
          through rate  adjustments  or similar  mechanisms.  The Company cannot
          predict the outcome of this matter.

          The EPA has been  conducting an  enforcement  initiative  related to a
          number of  coal-fired  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.  Florida Power was asked to provide  information to the
          EPA as  part  of this  initiative  and  cooperated  in  providing  the
          requested  information.  The EPA  has  initiated  enforcement  actions
          against other utilities as part of this initiative, some of which have
          resulted in or may result in settlement agreements,  ranging from $1.0
          billion to $1.4  billion.  A utility  that was not  subject to a civil
          enforcement  action  settled its New Source Review issues with the EPA
          for $300 million.  These  settlement  agreements have generally called
          for  expenditures  to be made over extended time periods,  and some of
          the  companies  may seek  recovery of the related  costs  through rate
          adjustments. The Company 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.  The U.S. Supreme Court has upheld,
          in part, the District of Columbia  Circuit Court of Appeals  decision.
          Designation of areas that do not attain the standard is proceeding and
          further  litigation  and  rulemaking  on this and other aspects of the
          standard are  anticipated.  The Company  cannot predict the outcome of
          this matter.

          Florida  Power has filed claims with the Company's  general  liability
          insurance carriers to recover costs arising out of actual or potential
          liabilities.  Some claims have  settled and others are still  pending.
          While  management  cannot  predict the outcome of these  matters,  the
          outcome is not  expected  to have a material  effect on the  financial
          position or results of operations.

     Legal Matters

     1)   Age Discrimination Suit

          Florida Power and Florida  Progress  have been named  defendants in an
          age discrimination  lawsuit.  The number of plaintiffs remains at 116,
          but four of those  plaintiffs have had their federal claims  dismissed
          and 74 others  have had their  state age  claims  dismissed.  While no
          dollar  amount  was  requested,   each   plaintiff   seeks  back  pay,
          reinstatement  or front pay through  their  projected  dates of normal
          retirement,  costs and  attorneys'  fees. In October 1996, the Federal
          Court  approved an  agreement  between  the  parties to  provisionally
          certify this case as a class action suit under the Age  Discrimination
          in Employment Act. Florida Power filed a motion to decertify the class
          and in August 1999,  the Court  granted  Florida  Power's  motion.  In
          October  1999,  the judge  certified  the question of whether the case
          should be tried as a class  action to the  Eleventh  Circuit  Court of
          Appeals for immediate appellate review. In December 1999, the Court of

                                       18
<PAGE>

          Appeals agreed to review the judge's order  decertifying the class. In
          anticipation of a potential  ruling  decertifying  the case as a class
          action,   plaintiffs  filed  a  virtually  identical  lawsuit,   which
          identified all opt-in plaintiffs as named plaintiffs. On July 5, 2001,
          the Eleventh  Circuit  Court of Appeals ruled that as a matter of law,
          disparate   claims  cannot  be  brought   under  the  Americans   with
          Disabilities  Act (ADEA).  This ruling has the effect of  decertifying
          the case as a class action. On October 3, 2001, the plaintiffs filed a
          petition in the United States Supreme  Court,  requesting a hearing of
          the case,  on the issue of  whether  disparate  claims  can be brought
          under the ADEA. On December 3, 2001,  the United States  Supreme Court
          agreed  to hear the case.  Oral  arguments  on the issue  were held on
          March 20, 2002. On April 1, 2002, the U.S.  Supreme Court issued a per
          curiam  affirmed  order in the  case  stating  they had  improvidently
          granted  the oral  argument  and they  would  uphold the ruling of the
          Eleventh  Circuit  Court of Appeals.  Therefore,  the case will remain
          decertified.  As a result of the decertification,  the trial court has
          grouped the plaintiffs  cases to be tried. The trial for the first set
          of  twelve  plaintiffs  began on July 22,  2002.  The jury  entered  a
          verdict in favor of Florida Power in that trial on August 9, 2002. The
          next group of plaintiffs' to be tried was named, but no trial date was
          set.  The  parties  attended  a second  mediation  on  October  31 and
          November 1, 2002.  The Company was able to reach a settlement  of this
          matter with all but three plaintiffs, the details of which are subject
          to a confidentiality agreement.

     2)   Franchise Litigation

          Six cities, with a total of approximately 49,000 customers,  have sued
          Florida  Power in various  circuit  courts in  Florida.  The  lawsuits
          principally  seek 1) a  declaratory  judgment that the cities have the
          right to purchase Florida Power's electric distribution system located
          within  the  municipal  boundaries  of the  cities,  2) a  declaratory
          judgment that the value of the distribution  system must be determined
          through arbitration,  and 3) injunctive relief requiring Florida Power
          to continue to collect from Florida Power's customers and remit to the
          cities,  franchise fees during the pending litigation,  and as long as
          Florida Power continues to occupy the cities' rights-of-way to provide
          electric  service,  notwithstanding  the  expiration  of the franchise
          ordinances  under which Florida Power had agreed to collect such fees.
          Three circuit  courts have entered  orders  requiring  arbitration  to
          establish the purchase price of Florida Power's electric  distribution
          facilities within three cities. Two appellate courts have upheld those
          circuit court  decisions and authorized  cities to determine the value
          of Florida Power's  facilities within the cities through  arbitration.
          To date,  no city has  attempted  to  actually  exercise  the right to
          purchase any portion of Florida Power's electric  distribution system.
          An  arbitration  in one of the cases  was held in  August  2002 and an
          award was issued in October 2002 setting the value of Florida  Power's
          distribution  system within one city at approximately $22 million.  At
          this  time,  whether  and  when  there  will  be  further  proceedings
          following  this award cannot be determined.  Additional  arbitration's
          have been  scheduled to occur in the fourth quarter of 2002 and second
          quarter of 2003.  The  Company  cannot  predict  the  outcome of these
          matters.

     3)   Other Legal Matters

          Florida  Progress  and Florida  Power are  involved  in various  other
          claims and legal actions  arising in the ordinary  course of business,
          some of which involve substantial amounts. Where appropriate, accruals
          have  been  made in  accordance  with  SFAS  No.  5,  "Accounting  for
          Contingencies,"  to  provide  for  such  matters.  In the  opinion  of
          management,  the ultimate disposition of these matters will not have a
          material adverse effect upon either company's  consolidated  financial
          position, results of operations or liquidity.

13.  DISCONTINUED OPERATIONS

     On July 23, 2001,  Progress Energy  announced the disposition of the Inland
     Marine Transportation  segment of the Company,  which was operated by MEMCO
     Barge  Line,   Inc.  Inland  Marine   provides   transportation   of  coal,
     agricultural  and other dry-bulk  commodities  as well as fleet  management
     services. Progress Energy entered into a contract to sell MEMCO Barge Line,
     Inc.,  to AEP  Resources,  Inc.,  a  wholly-owned  subsidiary  of  American
     Electric Power. On November 1, 2001, the Company  completed the sale of the
     Inland Marine Transportation segment.

     The results of operations for the three and nine months ended September 30,
     2001,  have been  restated for the  discontinued  operations  of the Inland
     Marine  Transportation  segment.  The net  income  of these  operations  is
     reported  in the  Consolidated  Statements  of  Income  under  discontinued
     operations.

                                       19
<PAGE>

     Results for  discontinued  operations  for the three and nine months  ended
     September 30, 2001, were as follows:
<TABLE>
<S>     <C>    <C>    <C>    <C>    <C>    <C>

(in thousands)                                                         Three Months ended      Nine Months ended
                                                                       September 30, 2001      September 30, 2001
                                                                       -------------------     -------------------
Revenues                                                               $           39,313      $          114,620
                                                                       ===================     ===================
Earnings before income taxes                                           $                -      $            4,530
Income taxes                                                                            -                   1,848
                                                                       -------------------     -------------------
Net earnings                                                                            -                   2,682
Estimated loss on disposal of discontinued operations,
    Including provision of $5,468 for pre-tax operating income
    During phase-out period, (net of applicable income tax
    Benefit of $9,028 and $7,797 for the three and nine months
    ended September 30,2001, respectively)                                        (14,120)                (28,528)
                                                                       -------------------     -------------------
Loss from discontinued operations                                      $          (14,120)     $          (25,846)
                                                                       ===================     ===================

</TABLE>

     The discontinued  operations in the  Consolidated  Statements of Income for
     the  three  and nine  months  ended  September  30,  2002,  represents  the
     after-tax  gain  from the  resolution  of  approximately  $8.0  million  of
     contingencies in the purchase agreement of the Inland Marine Transportation
     segment.


                                       20
<PAGE>



ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS

OPERATING RESULTS

Florida Progress' consolidated earnings from continuing operations for the three
and nine months  ended  September  30,  2002,  were a loss of $57.0  million and
income of $109.1 million respectively,  compared to income of $181.5 million and
$359.0  million for the  comparable  periods ended  September 30, 2001. The year
over year  comparisons  were most  significantly  impacted by the recognition of
asset  impairments  and other one time  charges of $144.0  million,  net of tax,
recognized  in the Progress  Telecom  business in the third  quarter of 2002. In
addition,  the current year results were negatively affected by intra-period tax
adjustments.  These factors and other key business drivers are discussed in more
detail in the following business segment reviews.

FLORIDA POWER CORPORATION

Florida Power  reported  earnings for common stock for the three and nine months
ended  September 30, 2002 of $123.8  million and $258.3  million,  respectively,
compared to earnings of $114.1 million and $270.0 million, respectively, for the
same  periods in the prior year.  Additionally,  Florida  Power  results for the
three and nine months  ended  September  30, 2002 were  favorably  impacted by a
$13.4  million tax  benefit  reallocation  from the  holding  company to Florida
Power. See Other Businesses section below for additional  information on the tax
benefit reallocation.

Florida Power's earnings for the three and nine months ended September 30, 2002,
were  negatively  affected  by  the  outcome  of the  Florida  Power  rate  case
settlement,  which  included  a  one-time  retroactive  revenue  refund of $35.0
million,  $21.0 million  after tax,  recorded in the first quarter of 2002 and a
decrease  in  retail  rates,   which  was  partially  offset  by  reductions  in
depreciation  in  accordance  with the  settlement.  See  Note 4 to the  Interim
Financial Statements for additional information on the settlement.  In addition,
Florida Power results for the three months and nine months ended were negatively
affected by increases in operations  and  maintenance  expense as described more
fully below.

Florida Power's electric  revenues for the three and nine months ended September
30, 2002 and 2001 and the percentage change by customer class are as follows (in
millions):
<TABLE>
<S>     <C>    <C>    <C>    <C>    <C>    <C>

-------------------------------------------------------------------------------------------------------------------
                                          Three Months Ended September 30,        Nine Months Ended September 30,
                                        ---------------------------------------------------------------------------
            Customer Class                 2002      % Change       2001       2002       % Change        2001
-------------------------------------------------------------------------------------------------------------------
Residential                                $469.8      (5.7)%       $498.2   $1,244.7       (3.0)%       $1,283.2
Commercial                                  199.5      (8.0)         216.9      549.7       (3.3)           568.2
Industrial                                   52.6      (4.0)          54.8      157.7       (5.8)           167.5
Governmental                                 45.1      (7.2)          48.6      128.5       (1.6)           130.6
Retroactive Retail Revenue Refund               -        -               -      (35.0)        -                 -
---------------------------------------------------             -----------------------              --------------
    Total Retail Revenues                   767.0      (6.3)         818.5    2,045.6       (4.8)         2,149.5
Wholesale                                    57.8     (19.9)          72.2      166.1      (28.4)           232.0
Unbilled                                      8.4        -            (7.3)      20.2         -             (12.1)
Miscellaneous                                30.4      33.9           22.7       84.1      (35.8)           130.9
---------------------------------------------------             -----------------------              --------------
    Total Electric Revenues                $863.6      (4.7)%       $906.1   $2,316.0       (7.4)%       $2,500.3
-------------------------------------------------------------------------------------------------------------------


                                       21
<PAGE>

Florida  Power's  electric  energy  sales for the three  and nine  months  ended
September 30, 2002 and 2001, and the percentage  change by customer class are as
follows (in thousands of mWh):

-------------------------------------------------------------------------------------------------------------------
                                          Three Months Ended September 30,        Nine Months Ended September 30,
                                        ---------------------------------------------------------------------------
                                           2002      % Change       2001       2002       % Change        2001
-------------------------------------------------------------------------------------------------------------------
Residential                                 5,503       2.5%         5,370     14,078        1.7%          13,841
Commercial                                  3,207       1.4          3,164      8,519        1.8            8,367
Industrial                                    983       5.3            934      2,859       (2.2)           2,923
Governmental                                  759       1.2            750      2,095        2.6            2,042
---------------------------------------------------               ---------------------              --------------
    Total Retail Energy Sales              10,452       2.3         10,218     27,551        1.4           27,173
Wholesale                                   1,020     (22.7)         1,320      2,975      (18.8)           3,666
Unbilled                                      214        -            (181)       689         -              (122)
---------------------------------------------------               ---------------------              --------------
    Total mWh sales                        11,686       2.9%        11,357     31,215        1.6%          30,717
-------------------------------------------------------------------------------------------------------------------
</TABLE>

As a result of the  settlement of the Florida Power rate case,  effective May 1,
2002, Florida Power reduced its rates by 9.25%. The effect of this reduction was
to reduce  revenue  by $30.9  million  for the third  quarter  of 2002 and $51.4
million for the nine months ended  September 30, 2002, when compared to the same
periods in the prior year.  Partially  offsetting  the decrease in rates and the
one-time refund from the settlement detailed above were the impacts of favorable
weather and customer growth. In addition,  revenues for the first nine months of
2002  decreased  when  compared  to the same period in the prior year due to the
recognition  of $63  million of deferred  revenue in the first  quarter of 2001,
which is included in  miscellaneous  revenues in the table above.  In 2001,  the
deferred  revenues  were  offset by  accelerated  amortization  of the Tiger Bay
regulatory  asset,  discussed below, and therefore,  had no net earnings impact.
Wholesale  electric  revenues and sales decreased from the prior year due to the
completion of specific contracts.

Fuel used in generation and purchased  power  decreased  $32.0 million and $80.0
million for the three and nine months ended  September  30, 2002,  respectively,
when compared to $414.7 million and $1,103.9 million, respectively, for the same
periods  in the  prior  year,  primarily  due to lower  oil and gas  prices  and
purchased power costs, partially offset by an increase in coal prices and volume
from higher system requirements.  In addition, the decrease for the three months
ended  September 30, 2002, was due to the lowered  recovery of fuel expense as a
result of the mid-course correction of Florida Power's fuel cost recovery clause
as part of the  settlement.  Fuel and  purchased  power  expenses are  recovered
primarily through cost recovery clauses and, as such, have no material impact on
operating results.

Operations and maintenance  expense increased by $19.2 million and $69.9 million
for the three and nine months  ended  September  30,  2002,  respectively,  when
compared to  operations  and  maintenance  expense of $119.9  million and $350.6
million,  respectively,  for the same periods in the prior year.  These  amounts
have  increased  due to a decreased  pension  credit in the  current  year ($6.5
million and $22.8  million  lower for the three and nine months ended  September
30, 2002);  increased other employee benefit costs,  primarily driven by medical
costs  (approximately  $6.1  million  and $15.6  million  for the three and nine
months ended September 30, 2002);  increased spending related to Florida Power's
Commitment to Excellence  program which is aimed at improving system reliability
and customer  satisfaction ($2.9 million and $8.5 million for the three and nine
months ended September 30, 2002); and increased support charges from the Service
Company as a result of higher vacancy rates in the prior year.

Depreciation  and  amortization  expense  decreased by $21.7  million and $123.8
million for the three and nine months ended  September  30, 2002,  respectively,
when compared to expense of $95.1 million and $341.8 million,  respectively, for
the same  periods in the prior  year.  The  Florida  Power rate case  settlement
provides for ongoing  reductions in depreciation,  nuclear  decommissioning  and
fossil  dismantlement costs that reduced the amount of depreciation  recorded by
$19.5  million and $58.7  million for the three and nine months ended  September
30, 2002,  respectively.  In addition,  the first half of 2001  depreciation and
amortization  includes $63 million of accelerated  amortization on the Tiger Bay
regulatory asset associated with deferred revenue from 2000.

PROGRESS FUELS CORPORATION

Progress  Fuels  makes  up  the  majority  of  Florida   Progress'   diversified
operations.  The results of  operations  for Progress  Fuels' Energy and Related
Services and Rail Services units are discussed below.

Energy and Related  Services - Earnings at the Energy and Related Services Group
decreased  $3.7  million for the three  months ended  September  30,  2002,  and
decreased  $2.7  million for the nine months  ended  September  30,  2002,  when
compared to the same periods in the prior year. The Energy and Related  Services
segment sold 1.7 million and 5.3 million  tons of  synthetic  fuel for the three
and nine months ended September 30, 2002, respectively,  compared to 2.4 million

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<PAGE>

and 6.2 million tons, respectively,  for the same periods in the prior year. The
sales resulted in tax credits of $44.8 million and $144.5 million being recorded
for the three and nine months ended September 30, 2002,  respectively,  compared
to tax credits of $63.1 million and $166.3 million,  respectively,  for the same
periods in the prior year. The synthetic fuel production and related tax credits
are lower in 2002 than 2001  because  the  production  schedule in 2002 has been
evenly  distributed based on anticipated  full-year  production  whereas in 2001
excess  production  in the first nine months of the year  mandated  lower fourth
quarter  production.  The  production  and sale of the synthetic fuel from these
facilities  qualifies  for  tax  credits  under  Section  29 of  the  Code.  See
"Synthetic  Fuels" under OTHER MATTERS below for additional  discussion of these
tax credits.

The Energy and  Related  Services  operations  include  the  operations  of Mesa
Hydrocarbons, Inc. (Mesa), which owns natural gas reserves and operates wells in
Colorado and sells natural gas. These  operations also include the activities of
the  recently  acquired  Westchester  Gas  Company.  See  Note 2 to the  Interim
Financial  Statements for additional  information on this acquisition.  Progress
Fuels periodically  enters into derivative  instruments to hedge its exposure to
price fluctuations on natural gas sales. During 2002, Progress Fuels has entered
into cash flow hedges for approximately 81 percent and 56 percent, respectively,
of Mesa and  Westchester's  total  projected  natural  gas sales for the  fourth
quarter of 2002 and the entire year 2003.  See Note 10 to the Interim  Financial
Statements for more information on these instruments.

Rail Services - Rail Services'  operations  represent the activities of Progress
Rail Services Corporation (Progress Rail) and include railcar repair, rail parts
reconditioning and sales, scrap metal recycling and other rail related services.

Rail  Services  generated a loss of $0.6  million for the three months ended and
income of $1.7 million for the nine months ended September 30, 2002, compared to
losses of $2.2  million and $14.0  million for the  comparable  periods in 2001.
Rail   Service's  year  to  year  results  were  impacted  by  a  weak  business
environment,  which resulted in $24.1 million decreased revenues for the quarter
and a decrease of $93.5  million for the nine months  ended  September  30, 2002
when  compared to 2001 (actual  third  quarter 2001  revenues of $220.0,  actual
September  2001 year to date  revenues of $670.6  million).  In  addition,  Rail
Services'  transition  from  acting as a scrap  reseller  in 2001 to acting as a
scrap  resale  agent  in  2002  and  asset  sales  in 2001  decreased  revenues.
Corresponding  decreases  in  operating  costs and the impact of  targeted  cost
cutting measures offset the revenue reductions.

OTHER

The other group  includes  telecommunications,  holding  company  and  financing
expenses.  The increased loss over the three months (2002 loss of $215.6 million
compared to 2001 income of $30.4  million)  and nine months (2002 loss of $254.7
million  compared to 2001 loss of $3.6  million) of 2001 is due primarily to the
recognition   of  asset   impairments   and  other   one-time   charges  in  the
telecommunications  business  unit and by  intra-period  income  tax  allocation
adjustments. Generally accepted accounting principles require companies to apply
a levelized  effective tax rate to interim  periods that is consistent  with the
estimated annual  effective tax rate.  Income tax expense was increased by $60.2
million  and $79.2  million for the three and nine months  ended  September  30,
2002,  respectively,  in order to maintain an effective tax rate consistent with
the estimated annual rate. Income tax expense was increased by $38.2 million and
$17.8  million  for  the  three  and  nine  months  ended  September  30,  2001,
respectively.  The tax credits  associated  with the  Company's  synthetic  fuel
operations  lower the overall  effective  tax rate.  These  credits,  along with
seasonal  earnings  variations  and the  impact of the  Progress  Telecom  asset
impairment,  can also cause large swings in the  effective  tax rate for interim
periods.  Therefore,  this adjustment will vary each quarter, but have no effect
on net income for the year.

Progress  Telecom had net losses of $147.0  million  and $156.6  million for the
three and nine months ended September 30, 2002,  respectively.  This compares to
net losses of $2.8 million and $6.9  million for the same  periods in 2001.  The
decrease  in earnings  in 2002,  when  compared  to 2001,  is  primarily  due to
long-lived  asset  impairments  and other  one-time  after tax charges of $144.0
million.  See Note 3 to the Interim Financial  Statements for further discussion
of these charges.  This  write-down  constitutes a significant  reduction in the
book value of these  assets and the ongoing  operations  are  expected to have a
negligible  impact on the Company's net income.  Excluding the one-time charges,
Progress Telecom's third quarter 2002 loss of $3.0 million compares to the prior
year's comparable period loss of $2.8 million.  A loss for the nine months ended
September 30, 2002 (excluding the one-time charges) of $12.6 million compares to
a loss of $6.9 million for the comparable  period in 2001. The earnings declines
resulted   primarily  from   additional   depreciation  on  fiber  assets  being
capitalized  and  depreciated  in the first  half of 2002,  partially  offset by
declines  in  depreciation  in  the  third  quarter  resulting  from  the  asset
impairments.

Progress Energy and its  subsidiaries are subject to regulation under the Public
Utility Holding Company Act (PUHCA) of 1935, as amended,  of the SEC.  According
to a recent SEC order,  Progress Energy's tax benefit not related to acquisition
interest expense is to be allocated to profitable  subsidiaries.  Therefore, the

                                       23
<PAGE>

tax benefit that was previously held in the Parent's holding  company,  has been
allocated to the  profitable  subsidiaries  effective  with the third quarter of
2002. This allocation  increased Florida Progress holding company tax expense by
$3.3 million for the three months ended September 30, 2002.

LIQUIDITY AND CAPITAL RESOURCES

Statements of Cash Flows and Financing Activities

Cash  provided by operating  activities  decreased  $144.6  million for the nine
months ended  September 30, 2002, when compared to the  corresponding  period in
the prior year.  The  decrease in cash from  operating  activities  for the 2002
period is due to a decrease in  operating  income from the impact of the Florida
Power rate case  settlement  and to changes in the  balances of certain  current
assets and liabilities due to operational fluctuations.

Net cash used in  investing  activities  increased  $71.8  million  for the nine
months ended  September 30, 2002, when compared to the  corresponding  period in
the prior year.  This is  primarily  due to  increased  expenditures  on Florida
Power's construction program and the acquisition of Westchester Gas Company (See
Note 2 to the  Interim  Financial  Statements).  During the first nine months of
2002,  $317.3  million was spent on the Florida Power  construction  program and
$96.5  million  was  spent  in  diversified   operations.   The  acquisition  of
Westchester Gas Company resulted in a net cash outflow of $17.4 million.

Net cash used in  financing  activities  decreased  $228.3  million for the nine
months ended  September 30, 2002, when compared to the  corresponding  period in
the prior year.  The decrease is primarily due to the Company  paying off $294.6
million of short-term  indebtedness  in the prior year. This decrease was offset
with increases in the net equity  transactions  with the parent and intercompany
borrowings in the current year.

In February  2002,  $50 million of Progress  Capital  Holding (PCH)  medium-term
notes, 5.78% Series,  matured.  Progress Energy funded this maturity through the
issuance of commercial paper.

On March 28, 2002, Standard & Poor's affirmed Progress Energy's corporate credit
rating of BBB+ and Florida  Power's  rating but revised the outlook for Progress
Energy to negative from stable.  S&P stated that its change in outlook  reflects
the increased business risk at Progress Energy's Progress Ventures business unit
and  lower-than-projected  credit protection measures. On September 4, 2002, S&P
reaffirmed  Progress  Energy's and Florida Power's credit ratings and maintained
the negative outlook for Progress Energy.

On April 10, 2002,  Moody's  Investors  Service  revised its outlook to negative
from stable on Progress  Energy's senior unsecured debt rating of Baa1.  Moody's
maintained a stable outlook for both Florida Power and CP&L. Moody's stated that
its change in outlook to negative was in response to the increased level of debt
incurred by Progress Energy,  primarily to finance the expansion of its Progress
Ventures  unregulated  generation  portfolio.   On  October  18,  2002,  Moody's
announced  that it had placed  Progress  Energy's  senior  unsecured debt rating
(Baa1) on review for possible downgrade.  As its basis for review, Moody's cited
primarily  Progress  Energy's  recent  writedown of the value of its  long-lived
telecommunications  assets  and the  related  delay  in its  deleveraging  plan.
Moody's  further  indicated  that it did not expect its review to result in more
than a one notch downgrade of Progress  Energy's  senior  unsecured debt rating.
Moody's  confirmed its ratings of Progress  Energy's  commercial paper (P-2) and
the  ratings  of  its  two  operating  utilities,   CP&L  (senior  secured--A-3,
commercial  paper--P-2,  stable outlook) and Florida Power (senior secured--A-1,
commercial paper--P-1, stable outlook).

The  change in outlook by the rating  agency  has not  materially  affected  the
Company's access to liquidity nor the cost of its short-term borrowings.

On July 1, 2002, $30 million of Florida Power medium-term  notes,  6.54% Series,
matured.  Florida Power funded this maturity  through the issuance of commercial
paper.

On July 11, 2002,  Florida  Power  announced the  redemption of $108.55  million
principal amount of Citrus County  Pollution  Control  Refunding  Revenue Bonds,
Series 1992 A Due January 1, 2027, $90 million principal amount of Citrus County
Pollution Control  Refunding Revenue Bonds,  Series 1992 B Due February 1, 2022,
and $10.115 million principal amount of Pasco County Pollution Control Refunding
Revenue  Bonds,  Series  1992A Due  February 1, 2022,  at 102% of the  principal
amount of such  bonds and $32.2  million  principal  amount of  Pinellas  County
Pollution Control  Refunding Revenue Bonds,  Series 1991 Due December 1, 2014 at
101% of the principal amount of such bonds.  These redemptions were finalized on
August 12, 2002.

                                       24
<PAGE>

On July 16, 2002,  Florida  Power issued  $108.55  million  principal  amount of
Citrus  County  Pollution  Control  Revenue  Refunding  Bonds,  Series 2002A Due
January 1, 2027,  $100.115  million  principal amount of Citrus County Pollution
Control  Revenue  Refunding  Bonds,  Series  2002B Due January 1, 2022 and $32.2
million  principal amount of Citrus County Pollution  Control Revenue  Refunding
Bonds,  Series 2002C Due January 1, 2018.  Proceeds from this issuance were used
to redeem Florida Power's pollution control revenue refunding bonds above.

Future Commitments

As of September 30, 2002, both Florida Progress' and Florida Power's contractual
cash  obligations and other commercial  commitments have not changed  materially
from what was reported in the 2001 Annual Report on Form 10-K.

OTHER MATTERS

Florida Power Rate Case Settlement

On March 27,  2002,  the parties in Florida  Power's  rate case  entered  into a
Stipulation  and  Settlement  Agreement (the  Agreement)  related to retail rate
matters. The Agreement was approved by the FPSC on April 23, 2002. The Agreement
is generally  effective  from May 1, 2002 through  December 31, 2005;  provided,
however,  that if Florida  Power's base rate earnings fall below a 10% return on
equity, Florida Power may petition the FPSC to amend its base rates.

See Note 4 to the Interim Financial Statements for additional information on the
Agreement.

Fuel Acquisition

On April 26, 2002,  Progress Fuels  finalized the acquisition of Westchester Gas
Company,  which includes approximately 215 producing natural gas wells, 52 miles
of intrastate gas pipeline and 170 miles of gas-gathering systems. The aggregate
purchase price of approximately  $153 million consisted of cash consideration of
approximately  $22  million and the  issuance of 2.5 million  shares of Progress
Energy common stock valued at  approximately  $129 million.  The purchase  price
included  approximately $1.7 million of direct transaction costs. The properties
are located within a 25-mile radius of Jonesville, Texas, on the Texas-Louisiana
border.  This transaction  added 140 billion cubic feet (Bcf) of gas reserves to
Progress Fuels' fuel business.  See Note 2 to the Interim  Financial  Statements
for additional information on this acquisition.

Synthetic Fuels Tax Credits

The Company,  through Progress Fuels and its  subsidiaries,  produces  synthetic
fuel from coal.  The production and sale of the synthetic fuel qualifies for tax
credits  under  Section 29 of the Internal  Revenue Code (Section 29) if certain
requirements  are  satisfied,  including a requirement  that the synthetic  fuel
differs significantly in chemical composition from the coal used to produce such
synthetic  fuel. All of the Company's  synthetic fuel  facilities  have received
favorable  private letter rulings from the Internal  Revenue  Service (IRS) with
respect to their operations. These tax credits are subject to review by the IRS,
and if the  Company  failed  to  prevail  through  the  administrative  or legal
process,  there could be a significant  tax liability owed for previously  taken
Section 29 credits,  with a significant  impact on earnings and cash flows.  Tax
credits  for the nine months  ended  September  30,  2002 and 2001,  were $144.5
million and $166.3 million,  respectively,  offset by operating  losses,  net of
tax, of $59.9 million and $84.0 million, respectively, for the same periods. One
synthetic fuel entity, Colona Synfuel Limited Partnership,  L.L.L.P., from which
the  Company has been  allocated  approximately  $217  million in tax credits to
date, is being audited by the IRS. The audit of Colona was not  unexpected.  The
Company  is  audited  regularly  in the normal  course of  business  as are most
similarly  situated  companies.  Total Section 29 credits  generated to date are
approximately $547 million.

In September 2002, all of the Company's  majority-owned  synthetic fuel entities
were accepted into the IRS's Pre-Filing Agreement (PFA) program. The PFA program
allows taxpayers to voluntarily accelerate the IRS exam process in order to seek
resolution of specific  issues.  Either the Company or the IRS can withdraw from
the program at any time, and issues not resolved through the program may proceed
to the  next  level of the IRS exam  process.  While  the  ultimate  outcome  is
uncertain,  the Company  believes  that  participation  in the PFA program  will
likely shorten the tax exam process.

In  management's  opinion,  the Company is  complying  with the  private  letter
rulings and all the  necessary  requirements  to be allowed such  credits  under
Section 29 and believes it is likely, although it cannot provide certainty, that
it will  prevail if  challenged  by the IRS on any  credits  taken.  The current
Section 29 tax credit program expires in 2007.

                                       25

<PAGE>

Standard Market Design

On July 31, 2002, the Federal  Energy  Regulatory  Commission  (FERC) issued its
Notice  of  Proposed  Rulemaking  in Docket  No.  RM01-12-000,  Remedying  Undue
Discrimination through Open Access Transmission Service and Standard Electricity
Market  Design (SMD NOPR).  The  proposed  rules set forth in the SMD NOPR would
require,  among other things, that 1) all transmission owning utilities transfer
control of their  transmission  facilities  to an  independent  third party;  2)
transmission   service  to  bundled  retail  customers  be  provided  under  the
FERC-regulated   transmission  tariff,  rather  than  state-mandated  terms  and
conditions;  3) new terms and  conditions  for  transmission  service be adopted
nationwide,  including new provisions for pricing  transmission  in the event of
transmission congestion; 4) new energy markets be established for the buying and
selling of electric  energy;  and 5) load  serving  entities be required to meet
minimum criteria for generating reserves. If adopted as proposed,  the rules set
forth in the SMD NOPR would  materially  alter the manner in which  transmission
and generation  services are provided and paid for. Progress Energy is reviewing
the SMD NOPR and expects to file comments thereto,  portions of which are due on
November 15, 2002 and January 10, 2003.  FERC also has indicated that it expects
to issue  final  rules  during the third  quarter of 2003.  The  Company  cannot
predict the outcome of this  rulemaking  or the possible  outcome of any further
proceedings, including appeals, related to this matter.

Regional Transmission Organizations

The GridFlorida  applicants  filed a revised RTO proposal with the FPSC on March
20, 2002  incorporating  certain  changes  required by the FPSC's  December 2001
order.  The FPSC then  conducted  a series of  workshops  and  meetings to allow
parties an opportunity to comment on the applicants' March 20 compliance filing.
As a result of these comments, the GridFlorida applicants filed modifications to
certain aspects of the compliance filing on June 21, 2002. On September 3, 2002,
the FPSC issued an order  addressing the compliance of the applicants'  modified
filing  with the  FPSC's  December  2001  order  through  final  agency  action,
requiring  additional  revisions  to the  applicants'  modified  filing  through
proposed  agency action,  and  scheduling an expedited  hearing for late October
2002 to consider  the  applicants'  revised  market  design  proposal  and other
proposed agency action revisions  protested by the parties.  On October 3, 2002,
the Office of Public  Counsel  filed a Notice of Appeal to the  Florida  Supreme
Court  regarding the FPSC's  September 3rd order. At a public meeting on October
15, 2002, the FPSC voted to hold further  proceedings in the GridFlorida  docket
in abeyance pending the outcome of the Office of Public Counsel's appeal.

The actual  structure of GridFlorida or any  alternative  combined  transmission
structure,  as well as the  date it may  become  operational,  depends  upon the
resolution  of  all  regulatory   approvals  and  technical  issues.  Given  the
regulatory  uncertainty  of the ultimate  timing,  structure  and  operations of
GridFlorida or an alternate combined transmission structure,  the Company cannot
predict  whether  their  creation will have any material  adverse  effect on its
future consolidated results of operations, cash flows or financial condition.

Franchise Litigation

Six cities,  with a total of approximately  49,000 customers,  have sued Florida
Power in various circuit courts in Florida.  The lawsuits  principally seek 1) a
declaratory  judgment that the cities have the right to purchase Florida Power's
electric  distribution  system  located  within the municipal  boundaries of the
cities, 2) a declaratory judgment that the value of the distribution system must
be determined  through  arbitration,  and 3) injunctive relief requiring Florida
Power to continue to collect from  Florida  Power's  customers  and remit to the
cities,  franchise  fees during the pending  litigation,  and as long as Florida
Power continues to occupy the cities' rights-of-way to provide electric service,
notwithstanding  the expiration of the franchise  ordinances under which Florida
Power had agreed to collect such fees.  Three circuit courts have entered orders
requiring  arbitration  to  establish  the  purchase  price of  Florida  Power's
electric distribution  facilities within three cities. Two appellate courts have
upheld those circuit  court  decisions  and  authorized  cities to determine the
value of Florida Power's  facilities within the cities through  arbitration.  To
date,  no city has  attempted  to actually  exercise  the right to purchase  any
portion of Florida Power's electric  distribution  system. An arbitration in one
of the cases was held in August  2002 and an award was  issued in  October  2002
setting  the value of Florida  Power's  distribution  system  within one city at
approximately $22 million.  At this time, whether and when there will be further
proceedings following this award cannot be determined.  Additional arbitration's
have been scheduled to occur in the fourth quarter of 2002 and second quarter of
2003. The Company cannot predict the outcome of these matters.

Nuclear Matters

Pressurized Water Reactors

On March 18, 2002 the  Nuclear  Regulatory  Commission  (NRC) sent a bulletin to
companies that hold licenses for  pressurized  water reactors  (PWRs)  requiring
information on the  structural  integrity of the reactor vessel head and a basis

                                       26
<PAGE>

for  concluding  that the vessel head will continue to perform its function as a
coolant pressure boundary. The Company filed responses as required.  Inspections
of the vessel  heads at the  Company's  PWR plants  have been  performed  during
previous  outages.  In October 2001 at the Crystal River plant (CR3), one nozzle
was found to have a crack  and was  repaired;  however,  no  degradation  of the
reactor vessel head was identified. Current plans are to replace the vessel head
at CR3 during its next regularly scheduled refueling outage in 2003.

On August 9,  2002,  the NRC issued an  additional  Bulletin  dealing  with head
leakage due to cracks near the control rod nozzles.  The NRC has asked licensees
to commit to high  inspection  standards to ensure the more  susceptible  plants
have no cracks.  For CR3,  the Company has  responded  to the NRC that  previous
inspections  are  sufficient  until the reactor  head is replaced in the fall of
2003.

Security

On February 25, 2002,  the NRC issued  orders  formalizing  many of the security
enhancements  made at the Company's  nuclear plants since September 2001.  These
orders include  additional  restrictions on access,  increased security presence
and closer  coordination with the Company's partners in intelligence,  military,
law enforcement and emergency  response at the federal,  state and local levels.
These  interim  security  measures were required to be completed at each nuclear
site by August 31, 2002. The Company  completed the requirements by the deadline
and expects the NRC to perform an inspection for compliance in the near future.

As the NRC, other governmental  entities,  and the industry continue to consider
security  issues,  it is possible that more  extensive  security  plans could be
required.

Union Contract

Approximately   2,100   employees  at  Florida  Power  are  represented  by  the
International  Brotherhood  of  Electrical  Workers  (IBEW).  The current  union
contract was ratified in December 1999 and expires on December 1, 2002.  Florida
Power is currently in negotiations with the IBEW, but cannot predict the outcome
or impact of this matter.


ITEM 3.   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

INTEREST RATE RISK

Florida Progress Corporation

Certain market risks are inherent in Florida  Progress'  financial  instruments,
which arise from  transactions  entered  into in the normal  course of business.
Florida  Progress'  primary exposures are changes in interest rates with respect
to  long-term  debt,   commercial  paper  reclassified  as  long-term  debt  and
fluctuations in the return on marketable  securities with respect to its nuclear
decommissioning  trust funds. Florida Progress' exposure to return on marketable
securities for the decommissioning  trust funds has not changed materially since
December  31,  2001.  In  addition,  Florida  Progress'  exposure  to changes in
interest  rates from the Company's  fixed rate long-term  debt, FPC  mandatorily
redeemable  securities of trust and unsecured  note with parent at September 30,
2002, was not materially different than at December 31, 2001.

Progress  Fuels  periodically  enters into  derivative  instruments to hedge its
exposure to price fluctuations on natural gas sales. During 2002, Progress Fuels
has executed cash flow hedges on approximately 17.3 Bcf of natural gas sales for
the fourth quarter of 2002 and entire year 2003. These  instruments did not have
a material impact on the Company's consolidated financial position or results of
operations.

Effective with the quarter ended  September 30, 2002, the Company will no longer
reclassify commercial paper as long-term debt. At December 31, 2001, the Company
had  reclassified  $154  million  of  commercial  paper to  long-term  debt.  At
September 30, 2002, the exposure to changes in interest rates from the Company's
commercial  paper  facilities was not materially  different than at December 31,
2001.

Florida Power Corporation

Certain  market risks are  inherent in Florida  Power's  financial  instruments,
which arise from  transactions  entered  into in the normal  course of business.
Florida Power's primary  exposures are changes in interest rates with respect to

                                       27
<PAGE>

long-term debt, commercial paper reclassified as long-term debt and fluctuations
in  the  return  on   marketable   securities   with   respect  to  its  nuclear
decommissioning  trust funds.  Florida Power's  exposure to return on marketable
securities for the decommissioning  trust funds has not changed materially since
December 31, 2001. In addition,  Florida Power's exposure to changes in interest
rates  from its  fixed  rate  long-term  debt at  September  30,  2002,  was not
materially different than at December 31, 2001.

Effective  with the quarter  ended  September  30, 2002,  Florida  Power will no
longer  reclassify  commercial  paper as long-term  debt.  At December 31, 2001,
Florida Power had  reclassified  $154 million of  commercial  paper to long-term
debt.  At  September  30, 2002,  the exposure to changes in interest  rates from
Florida Power's commercial paper facilities was not materially different than at
December 31, 2001.


ITEM 4.   CONTROLS AND PROCEDURES

Florida Progress Corporation

Within the 90 days prior to the filing  date of this  report,  Florida  Progress
carried out an evaluation,  under the supervision and with the  participation of
its management,  including  Florida  Progress' chief executive officer and chief
financial  officer,  of the effectiveness of the design and operation of Florida
Progress'  disclosure  controls and procedures pursuant to Rule 13a-14 under the
Securities  Exchange Act of 1934. Based upon that evaluation,  Florida Progress'
chief  executive   officer  and  chief  financial  officer  concluded  that  its
disclosure  controls and  procedures  are  effective in timely  alerting them to
material  information  relating to Florida Progress  (including its consolidated
subsidiaries) required to be included in its periodic SEC filings.

Since the date of the  evaluation,  there  have been no  significant  changes in
Florida Progress' internal controls or in other factors that could significantly
affect these controls.

Florida Power Corporation

Within  the 90 days  prior to the  filing  date of this  report,  Florida  Power
carried out an evaluation,  under the supervision and with the  participation of
its management,  including  Florida  Power's chief  executive  officer and chief
financial  officer,  of the effectiveness of the design and operation of Florida
Power's  disclosure  controls and  procedures  pursuant to Rule 13a-14 under the
Securities  Exchange Act of 1934.  Based upon that  evaluation,  Florida Power's
chief  executive   officer  and  chief  financial  officer  concluded  that  its
disclosure  controls and  procedures  are  effective in timely  alerting them to
material  information  relating to Florida  Power  (including  its  consolidated
subsidiaries) required to be included in its periodic SEC filings.

Since the date of the  evaluation,  there  have been no  significant  changes in
Florida Power's internal  controls or in other factors that could  significantly
affect these controls.

PART II.  OTHER INFORMATION

ITEM 1.   LEGAL PROCEEDINGS

1.   Wanda L. Adams, et al. v. Florida Power  Corporation  and Florida  Progress
     Corporation,  U.S.  District  Court,  Middle  District  of  Florida,  Ocala
     Division, Case No. 95-123-C.V.-OC-10.

See prior  discussion of this matter in the 2001 Form 10-K, Item 3, paragraph 2.
On October 3, 2001, the plaintiffs filed a petition in the United States Supreme
Court,  requesting  a hearing  of the case,  on the issue of  whether  disparate
claims can be brought  under the  Americans  with  Disabilities  Act (ADEA).  On
December 3, 2001, the United States Supreme Court agreed to hear the case.  Oral
arguments on the issue were held on March 20, 2002.  On April 1, 2002,  the U.S.
Supreme  Court issued a per curiam  affirmed  order in the case stating they had
improvidently  granted the oral argument and they would uphold the ruling of the
Eleventh Circuit Court of Appeals.  Therefore, the case will remain decertified.
As a result of the  decertification,  the trial court has grouped the plaintiffs
cases to be tried.  The trial  for the first set of twelve  plaintiffs  began on
July 22,  2002.  The jury  entered a verdict in favor of  Florida  Power in that
trial on August 9, 2002.  The next group of  plaintiffs'  to be tried was named,
but no trial date was set. The parties attended a second mediation on October 31
and November 1, 2002.  The Company was able to reach a settlement of this matter
with  all  but  three  plaintiffs,  the  details  of  which  are  subject  to  a
confidentiality agreement.

                                       28

<PAGE>

ITEM 6.   EXHIBITS AND REPORTS ON FORM 8-K
<TABLE>
<S>     <C>    <C>    <C>    <C>    <C>    <C>

(a)  Exhibits:

                                                                                  Florida
         Exhibit                                                                  Progress    Florida Power
         Number                            Description                          Corporation   Corporation
         -------                           -----------                          -----------   -------------
         10(i)          Progress Energy, Inc. 2002 Equity Incentive Plan             X             X
                        (Amended and Restated Effective July 10, 2002)
         10(ii)         2002 Performance Share Sub-Plan (effective July              X             X
                        9, 2002), Exhibit A to the Progress Energy, Inc.
                        2002 Equity Incentive Plan


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

         Florida Progress Corporation


                           Financial
              Item         Statements
            Reported       Included              Date of Event            Date Filed

               9               No                August 13, 2002          August 13, 2002


         Florida Power Corporation

                           Financial
              Item         Statements
            Reported       Included              Date of Event            Date Filed

               9               No                August 13, 2002          August 13, 2002

</TABLE>



                                       29
<PAGE>



                                   SIGNATURES


     Pursuant to the  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.



                                           FLORIDA PROGRESS CORPORATION
                                           FLORIDA POWER CORPORATION
                                           (Registrants)




Date:  November 14, 2002                   By:  /s/ Peter M. Scott III
                                           ---------------------------
                                           Peter M. Scott III
                                           Executive Vice President and
                                           Chief Financial Officer





                                           By:  /s/ Robert H. Bazemore, Jr.
                                           --------------------------------
                                           Robert H. Bazemore, Jr.
                                           Vice President and Controller
                                           Chief Accounting Officer




                                       30
<PAGE>



                            CERTIFICATION PURSUANT TO
                             18 U.S.C. SECTION 1350,
                             AS ADOPTED PURSUANT TO
                  SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002


I, William Cavanaugh III, certify that:

1.   I have  reviewed  this  quarterly  report on Form 10-Q of Florida  Progress
     Corporation;

2.   Based on my knowledge,  this  quarterly  report does not contain any untrue
     statement of a material fact or omit to state a material fact  necessary to
     make the statements  made, in light of the  circumstances  under which such
     statements  were made, not misleading with respect to the period covered by
     this quarterly report;

3.   Based on my  knowledge,  the  financial  statements,  and  other  financial
     information  included  in this  quarterly  report,  fairly  present  in all
     material respects the financial  condition,  results of operations and cash
     flows of the  registrant  as of, and for,  the  periods  presented  in this
     quarterly report;

4.   The  registrant's  other  certifying  officers  and I are  responsible  for
     establishing and maintaining disclosure controls and procedures (as defined
     in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

     a)   designed  such  disclosure  controls  and  procedures  to ensure  that
          material  information  relating  to  the  registrant,   including  its
          consolidated subsidiaries,  is made known to us by others within those
          entities,  particularly  during  the  period in which  this  quarterly
          report is being prepared;
     b)   evaluated the  effectiveness of the registrant's  disclosure  controls
          and procedures as of a date within 90 days prior to the filing date of
          this quarterly report (the "Evaluation Date"); and
     c)   presented  in  this  quarterly   report  our  conclusions   about  the
          effectiveness  of the disclosure  controls and procedures based on our
          evaluation as of the Evaluation Date;

5.   The registrant's other certifying  officers and I have disclosed,  based on
     our most recent  evaluation,  to the  registrant's  auditors  and the audit
     committee of  registrant's  board of directors (or persons  performing  the
     equivalent function):

     a)   all  significant  deficiencies  in the design or operation of internal
          controls  which could  adversely  affect the  registrant's  ability to
          record,  process,   summarize  and  report  financial  data  and  have
          identified for the  registrant's  auditors any material  weaknesses in
          internal controls; and
     b)   any fraud, whether or not material,  that involves management or other
          employees who have a  significant  role in the  registrant's  internal
          controls; and

6.   The  registrant's  other  certifying  officers and I have indicated in this
     quarterly report whether or not there were significant  changes in internal
     controls  or in other  factors  that could  significantly  affect  internal
     controls  subsequent to the date of our most recent  evaluation,  including
     any corrective actions with regard to significant deficiencies and material
     weaknesses.



Date: November 14, 2002                    /s/ William Cavanaugh III
                                           -------------------------
                                           William Cavanaugh III
                                           Chairman and Chief Executive Officer

                                       31
<PAGE>



                            CERTIFICATION PURSUANT TO
                             18 U.S.C. SECTION 1350,
                             AS ADOPTED PURSUANT TO
                  SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002


I,   Peter M. Scott III, certify that:

1.   I have  reviewed  this  quarterly  report on Form 10-Q of Florida  Progress
     Corporation;

2.   Based on my knowledge,  this  quarterly  report does not contain any untrue
     statement of a material fact or omit to state a material fact  necessary to
     make the statements  made, in light of the  circumstances  under which such
     statements  were made, not misleading with respect to the period covered by
     this quarterly report;

3.   Based on my  knowledge,  the  financial  statements,  and  other  financial
     information  included  in this  quarterly  report,  fairly  present  in all
     material respects the financial  condition,  results of operations and cash
     flows of the  registrant  as of, and for,  the  periods  presented  in this
     quarterly report;

4.   The  registrant's  other  certifying  officers  and I are  responsible  for
     establishing and maintaining disclosure controls and procedures (as defined
     in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

     a)   designed  such  disclosure  controls  and  procedures  to ensure  that
          material  information  relating  to  the  registrant,   including  its
          consolidated subsidiaries,  is made known to us by others within those
          entities,  particularly  during  the  period in which  this  quarterly
          report is being prepared;
     b)   evaluated the  effectiveness of the registrant's  disclosure  controls
          and procedures as of a date within 90 days prior to the filing date of
          this quarterly report (the "Evaluation Date"); and
     c)   presented  in  this  quarterly   report  our  conclusions   about  the
          effectiveness  of the disclosure  controls and procedures based on our
          evaluation as of the Evaluation Date;

5.   The registrant's other certifying  officers and I have disclosed,  based on
     our most recent  evaluation,  to the  registrant's  auditors  and the audit
     committee of  registrant's  board of directors (or persons  performing  the
     equivalent function):

     a)   all  significant  deficiencies  in the design or operation of internal
          controls  which could  adversely  affect the  registrant's  ability to
          record,  process,   summarize  and  report  financial  data  and  have
          identified for the  registrant's  auditors any material  weaknesses in
          internal controls; and
     b)   any fraud, whether or not material,  that involves management or other
          employees who have a  significant  role in the  registrant's  internal
          controls; and

6.   The  registrant's  other  certifying  officers and I have indicated in this
     quarterly report whether or not there were significant  changes in internal
     controls  or in other  factors  that could  significantly  affect  internal
     controls  subsequent to the date of our most recent  evaluation,  including
     any corrective actions with regard to significant deficiencies and material
     weaknesses.



Date: November 14, 2002                    /s/ Peter M. Scott III
                                           ----------------------
                                           Peter M. Scott III
                                           Executive Vice President and
                                           Chief Financial Officer

                                       32
<PAGE>

                            CERTIFICATION PURSUANT TO
                             18 U.S.C. SECTION 1350,
                             AS ADOPTED PURSUANT TO
                  SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002


I,   H. William Habermeyer, Jr., certify that:

1.   I have  reviewed  this  quarterly  report  on Form  10-Q of  Florida  Power
     Corporation;

2.   Based on my knowledge,  this  quarterly  report does not contain any untrue
     statement of a material fact or omit to state a material fact  necessary to
     make the statements  made, in light of the  circumstances  under which such
     statements  were made, not misleading with respect to the period covered by
     this quarterly report;

3.   Based on my  knowledge,  the  financial  statements,  and  other  financial
     information  included  in this  quarterly  report,  fairly  present  in all
     material respects the financial  condition,  results of operations and cash
     flows of the  registrant  as of, and for,  the  periods  presented  in this
     quarterly report;

4.   The  registrant's  other  certifying  officers  and I are  responsible  for
     establishing and maintaining disclosure controls and procedures (as defined
     in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

     a)   designed  such  disclosure  controls  and  procedures  to ensure  that
          material  information  relating  to  the  registrant,   including  its
          consolidated subsidiaries,  is made known to us by others within those
          entities,  particularly  during  the  period in which  this  quarterly
          report is being prepared;
     b)   evaluated the  effectiveness of the registrant's  disclosure  controls
          and procedures as of a date within 90 days prior to the filing date of
          this quarterly report (the "Evaluation Date"); and
     c)   presented  in  this  quarterly   report  our  conclusions   about  the
          effectiveness  of the disclosure  controls and procedures based on our
          evaluation as of the Evaluation Date;

5.   The registrant's other certifying  officers and I have disclosed,  based on
     our most recent  evaluation,  to the  registrant's  auditors  and the audit
     committee of  registrant's  board of directors (or persons  performing  the
     equivalent function):

     a)   all  significant  deficiencies  in the design or operation of internal
          controls  which could  adversely  affect the  registrant's  ability to
          record,  process,   summarize  and  report  financial  data  and  have
          identified for the  registrant's  auditors any material  weaknesses in
          internal controls; and
     b)   any fraud, whether or not material,  that involves management or other
          employees who have a  significant  role in the  registrant's  internal
          controls; and

6.   The  registrant's  other  certifying  officers and I have indicated in this
     quarterly report whether or not there were significant  changes in internal
     controls  or in other  factors  that could  significantly  affect  internal
     controls  subsequent to the date of our most recent  evaluation,  including
     any corrective actions with regard to significant deficiencies and material
     weaknesses.



Date: November 14, 2002                    /s/ H. William Habermeyer, Jr.
                                           ------------------------------
                                           H. William Habermeyer, Jr.
                                           President and Chief Executive Officer


                                       33
<PAGE>



                            CERTIFICATION PURSUANT TO
                             18 U.S.C. SECTION 1350,
                             AS ADOPTED PURSUANT TO
                  SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002


I, Peter M. Scott III, certify that:

1.   I have  reviewed  this  quarterly  report  on Form  10-Q of  Florida  Power
     Corporation;

2.   Based on my knowledge,  this  quarterly  report does not contain any untrue
     statement of a material fact or omit to state a material fact  necessary to
     make the statements  made, in light of the  circumstances  under which such
     statements  were made, not misleading with respect to the period covered by
     this quarterly report;

3.   Based on my  knowledge,  the  financial  statements,  and  other  financial
     information  included  in this  quarterly  report,  fairly  present  in all
     material respects the financial  condition,  results of operations and cash
     flows of the  registrant  as of, and for,  the  periods  presented  in this
     quarterly report;

4.   The  registrant's  other  certifying  officers  and I are  responsible  for
     establishing and maintaining disclosure controls and procedures (as defined
     in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

     a)   designed  such  disclosure  controls  and  procedures  to ensure  that
          material  information  relating  to  the  registrant,   including  its
          consolidated subsidiaries,  is made known to us by others within those
          entities,  particularly  during  the  period in which  this  quarterly
          report is being prepared;
     b)   evaluated the  effectiveness of the registrant's  disclosure  controls
          and procedures as of a date within 90 days prior to the filing date of
          this quarterly report (the "Evaluation Date"); and
     c)   presented  in  this  quarterly   report  our  conclusions   about  the
          effectiveness  of the disclosure  controls and procedures based on our
          evaluation as of the Evaluation Date;

5.   The registrant's other certifying  officers and I have disclosed,  based on
     our most recent  evaluation,  to the  registrant's  auditors  and the audit
     committee of  registrant's  board of directors (or persons  performing  the
     equivalent function):

     a)   all  significant  deficiencies  in the design or operation of internal
          controls  which could  adversely  affect the  registrant's  ability to
          record,  process,   summarize  and  report  financial  data  and  have
          identified for the  registrant's  auditors any material  weaknesses in
          internal controls; and
     b)   any fraud, whether or not material,  that involves management or other
          employees who have a  significant  role in the  registrant's  internal
          controls; and

6.   The  registrant's  other  certifying  officers and I have indicated in this
     quarterly report whether or not there were significant  changes in internal
     controls  or in other  factors  that could  significantly  affect  internal
     controls  subsequent to the date of our most recent  evaluation,  including
     any corrective actions with regard to significant deficiencies and material
     weaknesses.



Date: November 14, 2002                    /s/ Peter M. Scott III
                                           ----------------------
                                           Peter M. Scott III
                                           Executive Vice President and
                                           Chief Financial Officer

                                       34