Progress Energy 2004 Annual Report Download - page 88

earnings in other, net due to the discontinuance of the
hedges. The facility was obtained to be used exclusively
for expansion of its nonregulated generation portfolio.
Borrowings under this facility were secured by the assets
in the generation portfolio. The facility was for up to
$260 million, of which $241 million had been drawn at
December 31, 2003. Borrowings under the facility were
restricted for the operations, construction, repayments
and other related charges of the credit facility for the
development projects. Cash held and restricted to
operations was $24 million at December 31, 2003, and was
included in other current assets. Cash held and restricted
for long-term purposes was $9 million at December 31,
2003, and was included in other assets and deferred debits
on the Consolidated Balance Sheets.
E. Guarantees of Subsidiary Debt
See Note 19 on related party transactions for a discussion
of obligations guaranteed or secured by affiliates.
F. Hedging Activities
Progress Energy uses interest rate derivatives to adjust
the fixed and variable rate components of its debt
portfolio and to hedge cash flow risk related to
commercial paper and to fixed rate debt to be issued in
the future. See discussion of risk management activities
and derivative transactions at Note 18.
14. FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts of cash and cash equivalents and
short-term obligations approximate fair value due to the
short maturities of these instruments. At December 31, 2004,
and 2003, investments in company-owned life insurance
and other benefit plan assets, with carrying amounts of
approximately $220 million and $210 million, respectively,
are included in miscellaneous other property and
investments in the Consolidated Balance Sheets and
approximate fair value due to the short maturity of the
instruments. Other instruments, including short-term
investments, are presented at fair value in accordance
with GAAP. The carrying amount of the Company’s long-
term debt, including current maturities, was $9.870 billion
and $10.802 billion at December 31, 2004 and 2003,
respectively. The estimated fair value of this debt, as
obtained from quoted market prices for the same or
similar issues, was $10.843 billion and $11.917 billion at
December 31, 2004 and 2003, respectively.
External trust funds have been established to fund
certain costs of nuclear decommissioning (See Note 6D).
These nuclear decommissioning trust funds are invested
in stocks, bonds and cash equivalents. Nuclear
decommissioning trust funds are presented on the
Consolidated Balance Sheets at amounts that
approximate fair value. Fair value is obtained from quoted
market prices for the same or similar investments.
15. INCOME TAXES
Deferred income taxes have been provided for temporary
differences. These occur when there are differences
between book and tax carrying amounts of assets and
liabilities. Investment tax credits related to regulated
operations have been deferred and are being amortized
over the estimated service life of the related properties. To
the extent that the establishment of deferred income taxes
under SFAS No. 109, “Accounting for Income Taxes,” (SFAS
No. 109) is different from the recovery of taxes by PEC and
PEF through the ratemaking process, the differences are
deferred pursuant to SFAS No. 71. A regulatory asset or
liability has been recognized for the impact of tax expenses
or benefits that are recovered or refunded in different
periods by the utilities pursuant to rate orders.
Accumulated deferred income tax assets (liabilities) at
December 31 are:
Total deferred income tax liabilities were $2,797 million
and $2,662 million at December 31, 2004 and 2003,
respectively. Total deferred income tax assets were
86
Notes to Consolidated Financial Statements
(in millions) 2004 2003
Current deferred tax asset
Unbilled revenue $35 $18
Other 86 69
Total current deferred tax asset 121 87
Noncurrent deferred tax asset (liability)
Investments 73 8
Supplemental executive retirement plans 31 30
Other post-employment benefits (OPEB) 126 119
Other pension plans (15) (97)
Goodwill 34 46
Accumulated depreciation and
property cost differences (1,374) (1,436)
Deferred costs (13) 26
Deferred storm costs (113) –
Deferred fuel (55) 31
Federal income tax credit carry forward 779 683
State net operating loss carry forward 47 42
Valuation allowance (47) (42)
Miscellaneous other temporary differences, net 43 (16)
Total noncurrent deferred tax liabilities (484) (606)
Less amount included in other assets
and deferred debits 10 9
Net noncurrent deferred tax liabilities $(494) $(615)