Duke Energy 2012 Annual Report Download - page 258

PART II
238
DUKE ENERGY CORPORATION • DUKE ENERGY CAROLINAS, LLC • PROGRESS ENERGY, INC. • CAROLINA POWER & LIGHT COMPANY d/b/a PROGRESS ENERGY
CAROLINAS, INC. • FLORIDA POWER CORPORATION d/b/a PROGRESS ENERY FLORIDA, INC. • DUKE ENERGY OHIO, INC. • DUKE ENERGY INDIANA, INC.
Combined Notes to Consolidated Financial Statements – (Continued)
As of and For the Year Ended December 31, 2011
(in millions)
Duke
Energy
Duke
Energy
Carolinas
Progress
Energy
Progress
Energy
Carolinas
Progress
Energy
Florida
Duke
Energy
Ohio
Duke
Energy
Indiana
Net interest income recognized related to income taxes $ 12 $ 5 $ 24 $ 6 $ 22 $ — $ —
Net interest expense recognized related to income taxes — — — — — 1 1
Interest receivable related to income taxes 8 5 — — — — —
Interest payable related to income taxes — — 21 8 7 3 3
Year Ended December 31, 2010
(in millions)
Duke
Energy
Duke
Energy
Carolinas
Progress
Energy
Progress
Energy
Carolinas
Progress
Energy
Florida
Duke
Energy
Ohio
Duke
Energy
Indiana
Net interest income recognized related to income taxes $ 26 $ 18 $— $— $— $ 4 $ 5
Net interest expense recognized related to income taxes — — 9 4 5 — —
Duke Energy, Duke Energy Carolinas, Duke Energy Ohio and Duke Energy
Indiana are no longer subject to U.S. federal examination for years before 2004.
The years 2004 and 2005 are in Appeals, waiting for approval from the Joint
Committee. The 2006-2007 years are also in Appeals, waiting for the prior cycle
to close. The IRS is currently auditing the federal income tax returns for years
2008 through 2011.
Progress Energy, Progress Energy Carolinas and Progress Energy Florida
are no longer subject to U.S. federal examination for years before 2007. The IRS
has examined years 2007 through 2009 and examination has been completed.
With few exceptions, Duke Energy and its subsidiaries are no longer
subject to state, local or non-U.S. income tax examinations by tax authorities for
years before 2004.
25. CONDENSED CONSOLIDATING STATEMENTS
Presented below are the Progress Energy Condensed Consolidating
Statements of Operations and Comprehensive Income, Balance Sheets
and Statements of Cash Flows as required by Rule 3-10 of Regulation S-X.
In September 2005, Progress Energy Parent issued a guarantee of certain
payments of two wholly owned indirect subsidiaries, FPC Capital I and Funding
Corp. The guarantees are in addition to the previously issued guarantees of
Progress Energy’s wholly owned subsidiary, Florida Progress.
FPC Capital I, a fi nance subsidiary, was established in 1999 for the
sole purpose of issuing $300 million of 7.10% Cumulative Quarterly Income
Preferred Securities due 2039, Series A (Preferred Securities), and using the
proceeds thereof to purchase from Funding Corp. $300 million of 7.10% Junior
Subordinated Deferrable Interest Notes due 2039 (Subordinated Notes). FPC
Capital I has no other operations and its sole assets are the Subordinated Notes
and Notes Guarantee (as discussed below). Funding Corp. is a wholly owned
subsidiary of Florida Progress and was formed for the sole purpose of providing
fi nancing to Florida Progress and its subsidiaries. Funding Corp. does not
engage in business activities other than such fi nancing and has no independent
operations. Since 1999, Florida Progress has fully and unconditionally
guaranteed the obligations of Funding Corp. under the Subordinated Notes. In
addition, Florida Progress guaranteed the payment of all distributions related to
the Preferred Securities required to be made by FPC Capital I, but only
to the extent that FPC Capital I has funds available for such distributions
(the Preferred Securities Guarantee). The two gwwuarantees considered
together constitute a full and unconditional guarantee by Florida Progress of FPC
Capital I’s obligations under the Preferred Securities. The Preferred Securities
and the Preferred Securities Guarantee were listed on the New York Stock
Exchange until the February 1, 2013 redemption discussed below.
The Subordinated Notes may be redeemed at the option of Funding Corp.
at par value plus accrued interest through the redemption date. The proceeds
of any redemption of the Subordinated Notes will be used by FPC Capital I 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. The annual interest expense related to the Subordinated Notes is
refl ected in the Consolidated Statements of Operations and Comprehensive
Income.
The Progress Energy parent has guaranteed the payment of all
distributions related to FPC Capital I’s Preferred Securities. At December 31, 2012,
FPC Capital I had outstanding 12 million shares of the Preferred Securities with
a liquidation value of $300 million. The Progress Energy parent’s guarantees
are joint and several, full and unconditional, and are in addition to the joint and
several, full and unconditional guarantees previously issued to FPC Capital I
and Funding Corp. by Florida Progress. Progress Energy’s subsidiaries have
provisions restricting the payment of dividends to the Progress Energy parent
in certain limited circumstances, and as disclosed in Note 4, there were no
restrictions on Progress Energy Carolina’s or Progress Energy Florida’s retained
earnings.
On January 2, 2013, Funding Corp. provided to the trustee of the
Subordinated Notes notice of its intent to redeem all of the Subordinated
Notes on February 1, 2013. The trustee then simultaneously notifi ed the
holders of the Preferred Securities that all of the Preferred Securities would
be redeemed on the same redemption date. These redemptions occurred
on February 1, 2013, and, therefore, the Preferred Securities, the Preferred
Securities Guarantee, the Subordinated Notes, and the Notes Guarantee all
ceased to be outstanding or in effect on February 1, 2013.
FPC Capital I is a VIE of which neither Progress Energy nor Duke
Energy is the primary benefi ciary. Separate fi nancial statements and other
disclosures concerning FPC Capital I have not been presented because
Progress Energy believes that such information is not material to investors.