Progress Energy 2007 Annual Report Download - page 46

MANAGEMENT’S DISCUSSION AND ANALYSIS
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funds, long-term debt, preferred stock and/or common
equity. In addition, we have $2.030 billion in credit facilities
that support the issuance of commercial paper. Access
to the commercial paper market provides additional
liquidity to help meet working capital requirements.
We anticipate our regulated capital expenditures will
increase in 2008 and 2009, primarily due to increased
spending on environmental initiatives and current growth
and maintenance projects. AFUDC – borrowed funds
represents the debt costs of capital funds necessary to
finance the construction of new regulated plant assets.
Regulated capital expenditures for 2008, 2009 and 2010
in the table above include approximately $730 million,
$350 million and $130 million, respectively, for environmental
compliance capital expenditures. Forecasted
environmental compliance capital expenditures for
2008, 2009 and 2010 include $180 million, $70 million
and $80 million, respectively, at PEC and $550 million,
$280 million and $50 million, respectively, at PEF. We
currently estimate that total future capital expenditures
for the Utilities to comply with current environmental
laws and regulations addressing air and water quality,
which are eligible for regulatory recovery through either
base rates or cost-recovery clauses, could be in excess
of $700 million at PEC and in excess of $1.9 billion at PEF
through 2018, which is the latest compliance target date
for current air and water quality regulations. See “Other
Matters – Environmental Matters” for further discussion of
our environmental compliance costs and related recovery
of costs.
All projected capital and investment expenditures are
subject to periodic review and revision and may vary
significantly depending on a number of factors including,
but not limited to, industry restructuring, regulatory
constraints, market volatility and economic trends.
CREDIT FACILITIES AND REGISTRATION STATEMENTS
The following table summarizes our RCAs and available
capacity at December 31, 2007:
All of the revolving credit facilities supporting the
credit were arranged through a syndication of financial
institutions. There are no bilateral contracts associated
with these facilities. See Note 12 for additional discussion
of our credit facilities.
The RCAs provide liquidity support for issuances of
commercial paper and other short-term obligations. We
expect to continue to use commercial paper issuances as
a source of liquidity as long as we maintain our current
short-term ratings. Fees and interest rates under Progress
Energy’s RCA are based upon the credit rating of Progress
Energy’s long-term unsecured senior noncredit-enhanced
debt, currently rated as Baa2 by Moody’s and BBB by
S&P. Fees and interest rates under PEC’s RCA are based
upon the credit rating of PEC’s long-term unsecured
senior noncredit-enhanced debt, currently rated as A3
by Moody’s and BBB by S&P. Fees and interest rates
under PEF’s RCA are based upon the credit rating of PEF’s
long-term unsecured senior noncredit-enhanced debt,
currently rated as A3 by Moody’s and BBB by S&P.
All of the credit facilities include a defined maximum total
debt-to-total capital ratio (leverage). We are currently in
compliance with these covenants and were in compliance
with these covenants at December 31, 2007. See Note
12 for a discussion of the credit facilities’ financial
covenants. At December 31, 2007, the calculated ratios,
pursuant to the terms of the agreements, are as disclosed
in Note 12.
(in millions) Total Outstanding Reserved(a) Available
Progress Energy, Inc.
Five-year (expiring 5/3/11) $1,130 $– $220 $910
PEC
Five-year (expiring 6/28/10) 450 – – 450
PEF
Five-year (expiring 3/28/10) 450 – – 450
Total credit facilities $2,030 $– $220 $1,810
(a) To the extent amounts are reserved for commercial paper or letters of credit
outstanding, they are not available for additional borrowings. At December 31,
2007, Progress Energy, Inc. had a total amount of $19 million of letters of credit
issued, which were supported by the RCA.
(in millions)
Actual Forecasted
2007 2008 2009 2010
Regulated capital expenditures $1,874 $2,420 $2,080 $1,670
Nuclear fuel expenditures 228 260 290 270
AFUDC – borrowed funds (16) (40) (50) (40)
Other capital expenditures 10 20 20 20
Total before potential
nuclear construction 2,096 2,660 2,340 1,920
Potential nuclear construction(a) 94 160 520 850
Total $2,190 $2,820 $2,860 $2,770
(a) Expenditures for potential nuclear construction are net of AFUDC – borrowed
funds and include land, development, licensing, equipment and associated
transmission. Forecasted potential nuclear construction expenditures are
dependent upon, and may vary significantly based upon, the decision to
build; final contract negotiations; timing and escalation of project costs;
and the percentages, if any, of joint ownership. These expenditures, which
are primarily at PEF, are subject to cost-recovery provisions in the Utilities’
respective jurisdictions (see discussion under “Other Matters – Nuclear”).