Progress Energy 2004 Annual Report Download - page 42

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•PEF issued and redeemed $241 million in pollution
control obligations and paid at maturity $30 million in
medium-term notes.
•Progress Capital Holdings, Inc., paid at maturity
$50 million in medium-term notes.
•Progress Genco Ventures, LLC, obtained a $440 million
bank facility, including $50 million for working
capital. During the year, $130 million of the facility
was terminated. The amount outstanding at
December 31, 2002, was $225 million.
•In November 2002, the Company issued 14.7 million
shares of common stock for net cash proceeds of
approximately $600 million, which were primarily used
to retire commercial paper. For 2002, the dividends paid
on common stock were approximately $480 million.
Future liquidity and capital resources
The Company’s two electric utilities produced over 100%
of consolidated cash from operations in 2004. It is
expected that the two electric utilities will continue to
produce a majority of the consolidated cash flows from
operations over the next several years as its nonregulated
investments, primarily generation assets, improve asset
utilization and increase their operating cash flows.
PEF notified the FPSC in January 2005 of its intent to file for
an increase in its base rates effective January 1, 2006. If
approved by the FPSC, an increase in PEF’s base rates
would increase future operating cash flows. PEF has
faced significant cost increases over the past decade and
expects its operational costs to continue to increase.
These costs include the costs associated with completion
of the Hines 3 generation facility, extraordinary hurricane
damage costs including capital costs not expected to be
directly recoverable, the need to replenish the depleted
storm reserve and the expected infrastructure investment
necessary to meet high customer expectations, coupled
with the demands placed on PEF as a result of strong
customer growth. If the FPSC does not approve PEF’s
request to increase base rates, the Company’s results of
operations and financial condition could be negatively
impacted. The Company cannot predict the outcome of
this matter.
In addition, Fuels’ synthetic fuel operations do not
currently produce positive operating cash flow due to
the difference in timing of when tax credits are
recognized for financial reporting purposes and when
tax credits are realized for tax purposes. See Note 23E
for further discussion.
Capital Expenditures
Total cash from operations provided the funding for the
Company’s capital expenditures, including property
additions, nuclear fuel expenditures and diversified
business property additions during 2004, excluding
proceeds from asset sales of $366 million.
As shown in the table below, Progress Energy expects
the majority of its capital expenditures to be incurred at
its regulated operations. See Note 8F for a discussion of
expected impacts on future capital expenditures due to
changes in capitalization practice for regulated
operations. The Company anticipates its regulated
capital expenditures will increase in 2005 due to
increased spending on Clean Air initiatives. Forecasted
nonregulated expenditures relate primarily to Progress
Fuels and its gas operations, mainly for drilling new wells.
Regulated capital expenditures in the table above
include total expenditures from 2005 through 2006 of
approximately $65 million expected to be incurred at PEC
fossil-fueled electric generating facilities to comply with
Section 110 of the Clean Air Act, referred to as the NOx
SIP Call.
The Company also expects to incur expenditures of
approximately $15 million ($10 million at PEC and
$5 million at PEF) from 2005 through 2007 and additional
expenditures of approximately $70 million to $100 million
($10 million to $20 million at PEC and $60 million to
$80 million at PEF) from 2008 through 2009 for compliance
with the Section 316(b) requirements of the Clean Water
Act (See Note 22).
In June 2002, legislation was enacted in North Carolina
requiring the state’s electric utilities to reduce the
emissions of nitrogen oxide (NOx) and sulfur dioxide
(SO2) from coal-fired power plants. PEC expects its
capital costs to meet these emission targets will be
approximately $895 million by 2013. For the years 2005
through 2007, the Company expects to incur
approximately $475 million of total capital costs
40
Management’s Discussion and Analysis
Actual Forecasted
(in millions)
2004 2005 2006 2007
Regulated capital
expenditures $998 $1,030 $1,040 $1,090
Nuclear fuel expenditures 101 120 90 150
AFUDC – borrowed funds (6) (10) (10) (10)
Nonregulated capital
expenditures 236 190 180 190
Total $1,329 $1,330 $1,300 $1,420