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Progress Energy Annual Report 2007
103
B. Fair Value of Financial Instruments
DEBT
The carrying amount of our long-term debt, including
current maturities, was $9.614 billion and $9.159 billion
at December 31, 2007 and 2006, respectively. The
estimated fair value of this debt, as obtained from
quoted market prices for the same or similar issues, was
$9.897 billion and $9.543 billion at December 31, 2007 and
2006, respectively.
INVESTMENTS
Certain investments in debt and equity securities that
have readily determinable market values, and for which
we do not have control, are accounted for as available-
for-sale securities at fair value in accordance with SFAS
No. 115. These investments include investments held in
trust funds, pursuant to NRC requirements, to fund certain
costs of decommissioning nuclear plants (See Note 5D).
These nuclear decommissioning trust funds are primarily
invested in stocks, bonds and cash equivalents that are
classified as available-for-sale. 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. In addition to the nuclear
decommissioning trust funds, we hold other debt and
equity investments classified as available-for-sale
in miscellaneous other property and investments on
the Consolidated Balance Sheets at amounts that
approximate fair value. Our available-for-sale securities
at December 31, 2007 and 2006 are summarized below.
Net nuclear decommissioning trust fund unrealized gains
are included in regulatory liabilities (See Note 7A).
At December 31, 2007, the fair value of available-for-sale
debt securities by contractual maturity was:
Selected information about our sales of available-for-
sale securities during the years ended December 31
is presented below. Realized gains and losses were
determined on a specific identification basis.
The NRC requires nuclear decommissioning trusts to
be managed by third-party investment managers who
have a right to sell securities without our authorization.
Therefore, we consider available-for-sale securities in
our nuclear decommissioning trust funds to be impaired if
they are in a loss position. These impairments along with
unrealized gains are included in our regulatory liabilities
(See Note 7A) and have no earnings impact. Some
of our benefit investment trusts are also managed by
(in millions) 2007 2006
Nuclear decommissioning trust (See Note 5D) $1,384 $1,287
Investments in equity securities(a) –5
Equity method investments(b) 23 24
Cost investments(c) 88
Benefit investment trusts(d) 82 80
Company-owned life insurance(d) 168 161
Marketable debt securities(e) 171
Total $1,666 $1,636
(a) Certain investments in equity securities that have readily determinable market
values, and for which we do not have control, are accounted for as available-for-
sale securities at fair value in accordance with SFAS No. 115 (See Note 1). These
investments are included in miscellaneous other property and investments in the
Consolidated Balance Sheets.
(b) Investments in unconsolidated companies are included in miscellaneous other
property and investments in the Consolidated Balance Sheets using the equity
method of accounting (See Note 1). These investments are primarily in limited
liability corporations and limited partnerships, and the earnings from these invest-
ments are recorded on a pre-tax basis (See Note 20).
(c) Investments stated principally at cost are included in miscellaneous other prop-
erty and investments in the Consolidated Balance Sheets.
(d) Investments in company-owned life insurance and other benefit plan assets are
included in miscellaneous other property and investments in the Consolidated
Balance Sheets and approximate fair value due to the short maturity of the instru-
ments.
(e) We actively invest available cash balances in various financial instruments, such
as tax-exempt debt securities that have stated maturities of 20 years or more.
These instruments provide for a high degree of liquidity through arrangements
with banks that provide daily and weekly liquidity and 7-, 28- and 35-day auctions
that allow for the redemption of the investment at its face amount plus earned
income. As we intend to sell these instruments within one year or less, generally
within 30 days, from the balance sheet date, they are classified as short-term
investments.
2007
(in millions)
Book
Value
Unrealized
Gains
Estimated
Fair Value
Equity securities $465 $354 $819
Debt securities 574 11 585
Cash equivalents 18 –18
Total $1,057 $365 $1,422
2006
(in millions)
Book
Value
Unrealized
Gains
Estimated
Fair Value
Equity securities $428 $324 $752
Debt securities 606 13 619
Cash equivalents 19 –19
Total $1,053 $337 $1,390
(in millions)
Due in one year or less $8
Due after one through five years 145
Due after five through 10 years 198
Due after 10 years 234
Total $585
(in millions) 2007 2006 2005
Proceeds $1,334 $2,547 $3,755
Realized gains 35 33 26
Realized losses 37 24 31