Progress Energy 2004 Annual Report Download - page 40

Utility property additions for the Company’s regulated
electric operations were $1.0 billion or approximately 75%
of consolidated capital expenditures in 2004 and
$1.0 billion or approximately 58% of consolidated capital
expenditures in 2003, excluding proceeds from asset sales.
Capital expenditures for the regulated electric operations
are primarily for normal construction activity and ongoing
capital expenditures related to environmental compliance
programs. Capital expenditures for the nonregulated
operations are primarily for natural gas development
activities and normal construction activity.
Excluding proceeds from sales of subsidiaries and other
investments, cash used in investing activities decreased
approximately $887 million in 2004 when compared with
2003. The decrease is due primarily to the acquisition of a
nonregulated generation contract and acquisition of gas
assets in 2003 and net proceeds from short-term
investments in 2004, compared to net purchases of short-
term investments in 2003.
Excluding proceeds from sales of subsidiaries and other
investments, cash used in investing activities was
$2.1 billion in 2003, down approximately $119 million when
compared with 2002. The decrease is due primarily to
lower utility property additions due to completion of
Hines 2 construction at PEF and lower acquisitions of
nonregulated assets.
During 2004, sales of subsidiaries and other investments
primarily included proceeds from the sale of Railcar Ltd.
assets of approximately $75 million and proceeds of
approximately $251 million related to the sale of natural
gas assets in the Forth Worth basin of Texas. Progress
Energy used the proceeds from these sales to reduce
indebtedness, including $241 million to pay off the
Progress Genco Ventures, LLC, bank facility.
During 2003, the Company realized approximately
$450 million of net cash proceeds from the sale of NCNG
and ENCNG. The Company also received net proceeds
of approximately $97 million in October 2003 for the
sale of its Mesa gas properties in Colorado. Progress
Energy used the proceeds from these sales
to reduce indebtedness, primarily commercial paper,
then outstanding.
During 2003, the Company acquired approximately 200
natural gas–producing wells for a cash purchase price
of $168 million. The Company also acquired a long-term
full-requirements power supply agreement with Jackson
Electric Membership Corporation for a cash payment of
$188 million.
During 2002, the Company purchased two electric
generation projects for a cash purchase price of
$348 million.
Financing Activities
Net cash provided by financing activities for the three
years ending December 31, 2004, 2003 and 2002 were
$(720) million, $(192) million and $581 million, respectively.
See Note 13 for details of debt and credit facilities.
For 2004 and 2003, cash from operations exceeded net cash
used in investing activities by $735 million and $178 million,
respectively, due primarily to asset sales, which allowed
for a net decrease in cash provided by financing activities.
For 2002, net cash used in investing activity exceeded cash
from operations by $574 million, which resulted in net cash
from financing activities of $581 million.
In addition to the financing activities discussed under
“Overview,” the financing activities of the Company included:
2005
•In March 2005, Progress Energy, Inc.’s five-year credit
facility was amended to increase the maximum total
debt to total capital ratio from 65% to 68% in
anticipation of the potential impacts of proposed
accounting rules for uncertain tax positions. See Notes 2
and 23E.
•On January 31, 2005, Progress Energy, Inc. entered into
a new $600 million revolving credit agreement, which
expires December 30, 2005. This facility was added to
provide additional liquidity during 2005 due in part to
the uncertainty of the timing of storm restoration cost
recovery from the hurricanes in Florida during 2004.
The credit agreement includes a defined maximum
total debt to total capital ratio of 68% and a minimum
interest coverage ratio of 2.5 to 1. The credit
agreement also contains various cross-default and
other acceleration provisions. On February 4, 2005,
$300 million was drawn under the new facility to
reduce commercial paper and pay off the remaining
amount of RCA loans outstanding.
•In January 2005, the Company used proceeds from the
issuance of commercial paper to pay off $260 million of
revolving credit agreement (RCA) loans.
2004
•During the fourth quarter of 2004, Progress Energy and
its subsidiaries PEC and PEF borrowed a net total of
$475 million under certain revolving credit facilities.
The borrowed funds were used to pay off maturing
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Management’s Discussion and Analysis