Progress Energy 2004 Annual Report Download - page 44

The following table shows Progress Energy’s capital
structure at December 31:
The amount and timing of future sales of company
securities will depend on market conditions, operating
cash flow, asset sales and the specific needs of the
Company. The Company may from time to time sell
securities beyond the amount needed to meet capital
requirements in order to allow for the early redemption of
long-term debt, the redemption of preferred stock, the
reduction of short-term debt or for other general
corporate purposes.
Credit Rating Matters
The major credit rating agencies have currently rated the
Company’s securities as follows:
These ratings reflect the current views of these rating
agencies, and no assurances can be given that these
ratings will continue for any given period of time.
However, the Company monitors its financial condition as
well as market conditions that could ultimately affect its
credit ratings.
On February 11, 2005, Moody’s credit rating agency
announced that it lowered the ratings of PEF, Progress
Capital Holdings and FPC Capital Trust I and changed their
rating outlooks to stable from negative. Moody’s affirmed
the ratings of Progress Energy and PEC. The rating outlooks
continue to be stable at PEC and negative at Progress
Energy. Moody’s stated that it took this action primarily due
to declining cash flow coverages and rising leverage,
higher O&M costs, uncertainty regarding the timing of
hurricane cost recovery, regulatory risks associated with
the upcoming rate case in Florida and ongoing capital
requirements to meet Florida’s growing demand.
On October 19, 2004, S&P changed Progress Energy’s
outlook from stable to negative. S&P cited the uncertainties
regarding the timing of the recovery of hurricane costs, the
Company’s debt reduction plans and the IRS audit of the
Company’s Earthco synthetic fuels facilities as the reasons
for the change in outlook. On October 25, 2004, S&P
reduced the short-term debt rating of Progress Energy, PEC
and PEF to A-3 from A-2, as a result of their change in
outlook discussed above.
On October 20, 2004, Moody’s changed its outlook for
Progress Energy from stable to negative and placed the
ratings of PEF under review for possible downgrade.
PEC’s ratings were affirmed by Moody’s.
Moody’s cited the following reasons for its change in the
outlook for Progress Energy: financial ratios that are weak
for its current rating category; rising O&M, pension,
benefit and insurance costs; and delays in executing its
deleveraging plan. With respect to PEF, Moody’s cited
declining cash flow coverages and rising leverage over
the last several years, expected funding needs for a large
capital expenditure program, risks with regard to its
upcoming 2005 rate case and the timing of hurricane cost
recovery as reasons for putting its ratings under review.
The changes by S&P and Moody’s do not trigger any debt
or guarantee collateral requirements, nor do they have
any material impact on the overall liquidity of Progress
Energy or any of its affiliates. To date, Progress Energy’s,
PEC’s and PEF’s access to the commercial paper markets
has not been materially impacted by the rating agencies’
actions. However, the changes have increased the
interest rate incurred on its short-term borrowings by
0.25% to 0.875%.
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Management’s Discussion and Analysis
Moody’s
Investors Service
Standard &
Poor’s
Fitch
Ratings
Progress Energy, Inc.
Outlook Negative Negative Stable
Corporate credit rating n/a BBB n/a
Senior unsecured debt Baa2 BBB- BBB-
Commercial paper P-2 A-3 n/a
Progress Energy Carolinas, Inc.
Corporate credit rating n/a BBB n/a
Commercial paper P-2 A-3 F2
Senior secured debt A3 BBB A-
Senior unsecured debt Baa1 BBB BBB+
Progress Energy Florida, Inc.
Corporate credit rating n/a BBB n/a
Commercial paper P-2 A-3 F2
Senior secured debt A2 BBB A-
Senior unsecured debt A3 BBB BBB+
FPC Capital I
Preferred stock* Baa2 BB+ n/a
Progress Capital Holdings, Inc.
Senior unsecured debt* Baa1 BBB- n/a
*Guaranteed by Florida Progress Corporation.
2004 2003
Common stock 41.7% 40.5%
Preferred stock and minority interest 0.7% 0.7%
Total debt 57.6% 58.8%