Progress Energy 2007 Annual Report Download - page 96

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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PEF was one of three major investor-owned Florida
utilities that formed the GridFlorida RTO in 2000. A
cost-benefit study conducted during 2005 concluded
that the GridFlorida RTO was not cost effective for
FPSC jurisdictional customers and shifted benefits to
nonjurisdictional customers. In light of these findings,
during 2006 the FPSC and the FERC closed their respective
docketed proceedings and GridFlorida was dissolved. PEF
fully recovered its development costs in GridFlorida from
retail ratepayers through base rates.
E. Nuclear License Renewals
The NRC operating license for Robinson expires in 2030
and the licenses for Brunswick expire in 2036 for Unit
No. 1 and 2034 for Unit No. 2. On November 14, 2006, PEC
filed an application for a 20-year extension from the NRC
on the operating license for Harris, which would extend
the operating license through 2046, if approved. PEC
anticipates a decision from the NRC in 2008. The NRC
operating license held by PEF for CR3 currently expires
in December 2016. PEF expects to submit an application
requesting a 20-year extension of this license in the first
quarter of 2009.
8. GOODWILL AND INTANGIBLE ASSETS
We perform annual goodwill impairment tests in
accordance with SFAS No. 142, “Goodwill and Other
Intangible Assets” (SFAS No. 142). Goodwill was tested
for impairment for both the PEC and PEF segments in the
second quarters of 2007 and 2006; each test indicated no
impairment. Under SFAS No. 142, all goodwill is assigned
to our reporting units that are expected to benefit from the
synergies of the business combination.
Goodwill impairment tests were performed at our CCO-
Georgia Operations reporting unit level, which was
comprised of four nonregulated generating plants
(Georgia Operations). As a result of our evaluation of
certain business opportunities that impacted the future
cash flows of our Georgia Operations, we performed the
annual goodwill impairment test during the first quarter
of 2006. We estimated the fair value of that reporting
unit using the expected present value of future cash
flows. As a result of that test, we recognized a pre-tax
goodwill impairment charge of $64 million ($39 million
after-tax) during the first quarter of 2006, which has been
reclassified to discontinued operations, net of tax on the
Consolidated Statements of Income (See Note 3A).
We apply SFAS No. 144 for the accounting and reporting
of impairment or disposal of long-lived assets. On May 22,
2006, we idled our synthetic fuels facilities due to
significant uncertainty surrounding future synthetic
fuels production. With the idling of these facilities, we
performed an evaluation of the intangible assets, which
were comprised primarily of capitalized acquisition costs
(See Note 9 for impairment of related long-lived assets).
The impairment test considered numerous factors
including, among other things, continued high oil prices
and the then-current idled state of our synthetic fuels
facilities. We estimated the fair value using the expected
present value of future cash flows. Based on the results
of the impairment test, we recorded a pre-tax impairment
charge of $27 million ($17 million after-tax) during the
quarter ended June 30, 2006, which has been reclassified
to discontinued operations, net of tax on the Consolidated
Statements of Income. This charge represented the
entirety of the synthetic fuels intangible assets; these
assets had been reported within our former Coal and
Synthetic Fuels segment (See Note 3B).
9. IMPAIRMENTS OF LONG-LIVED ASSETS
AND INVESTMENTS
We apply SFAS No. 144 for the accounting and reporting
of impairment or disposal of long-lived assets. In 2006,
we recorded pre-tax long-lived asset and investment
impairments and other charges of $65 million, of which
$64 million has been reclassified to discontinued
operations, net of tax on the Consolidated Statements
of Income.
A. Long-Lived Assets
Due to rising current and future oil prices, in the third
and fourth quarters of 2005 we tested our synthetic fuels
plant assets for impairment. These tests indicated that the
assets were recoverable and no impairment charge was
recorded. See Note 22D for additional information.
Concurrent with the synthetic fuels intangibles impairment
evaluation discussed in Note 8, we also performed an
impairment evaluation of related long-lived assets during
the second quarter of 2006. Based on the results of the
impairment test, we recorded a pre-tax impairment
charge of $64 million ($38 million after-tax) during the
quarter ended June 30, 2006, which has been reclassified
to discontinued operations, net of tax on the Consolidated
Statements of Income, as discussed in Note 3B. This
charge represents the entirety of the asset carrying value
of our synthetic fuels manufacturing facilities, as well as
a portion of the asset carrying value associated with the