Progress Energy 2006 Annual Report Download - page 118

N O T E S T O C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S
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At December 31, 2006, minimum annual payments,
excluding executory costs such as property taxes,
insurance and maintenance, under long-term
noncancelable operating and capital leases were:
(in millions) Capital Operating
2007 $6 $79
2008 8 63
2009 7 55
2010 8 40
2011 7 19
Thereafter 91 172
Minimum annual payments 127 $428
Less amount representing imputed interest (55)
Present value of net minimum lease
payments under capital leases $72
In 2003, we entered into an operating lease for a
building for which minimum annual rental payments are
approximately $7 million. The lease term expires July
2035 and provides for no rental payments during the last
15 years of the lease, during which period $53 million
of rental expense will be recorded in the Consolidated
Statements of Income.
In 2005, PEF entered into an agreement for a new capital
lease for a building completed during 2006. The lease term
expires March 2047 and provides for annual payments of
approximately $5 million from 2007 through 2026 for a total
of approximately $103 million. The lease term provides for
no payments during the last 20 years of the lease, during
which period approximately $51 million of rental expense
will be recorded.
In 2006, PEF extended the terms of an agreement for
purchased power, which is classified as a capital lease,
for an additional 10 years. Due to the conditions of the
agreement, the capital lease will not be recorded on PEF’s
Balance Sheet until 2007. Therefore this capital lease is
not included in the table above. The agreement calls for
annual payments of approximately $27 million from 2007
through 2024 for a total of approximately $460 million.
Excluding the Utilities, we are also a lessor of land,
buildings and other types of properties we own under
operating leases with various terms and expiration
dates. The leased buildings are depreciated under the
same terms as other buildings included in diversified
business property. Minimum rentals receivable under
noncancelable leases are approximately $9 million,
$7 million, $6 million, $4 million and $2 million for 2007
through 2011, respectively. Rents received under these
operating leases totaled $9 million, $8 million and
$6 million for 2006, 2005 and 2004, respectively.
The Utilities are lessors of electric poles, streetlights
and other facilities. PEC’s minimum rentals under
noncancelable leases are $10 million for 2007 and none
thereafter. PEC’s rents received are contingent upon
usage and totaled $31 million each for 2006 and 2005 and
$32 million for 2004. PEF’s rents received are based on
a fixed minimum rental where price varies by type of
equipment or contingent usage and totaled $72 million for
2006 and $63 million each for 2005 and 2004. PEF’s minimum
rentals under noncancelable leases are not material for
2007 and thereafter.
C. Guarantees
As a part of normal business, we enter into various
agreements providing future financial or performance
assurances to third parties, which are outside the scope
of FASB Interpretation No. 45, “Guarantor’s Accounting
and Disclosure Requirements for Guarantees, Including
Indirect Guarantees of Indebtedness of Others.” These
agreements are entered into primarily to support or enhance
the creditworthiness otherwise attributed to Progress
Energy or our subsidiaries on a stand-alone basis, thereby
facilitating the extension of sufficient credit to accomplish
the subsidiaries’ intended commercial purposes (See Note
18). Our guarantees include performance obligations
under power supply agreements, tolling agreements,
transmission agreements, gas agreements, fuel
procurement agreements and trading operations. Our
guarantees also include standby letters of credit and
surety bonds. At December 31, 2006, we do not believe
conditions are likely for significant performance under
these guarantees. To the extent liabilities are incurred as
a result of the activities covered by the guarantees, such
liabilities are included in the accompanying Consolidated
Balance Sheets.
At December 31, 2006, we have issued guarantees and
indemnifications of certain asset performance, legal,
tax and environmental matters to third parties, including
indemnifications made in connection with sales of
businesses, and for timely payment of obligations in support
of our nonwholly owned synthetic fuels operations. Related
to the sales of businesses, the latest notice period extends
until 2012 for the majority of legal, tax and environmental
matters provided for in the indemnification provisions.
Indemnifications for the performance of assets extend
to 2016. For matters for which we receive timely notice,
our indemnity obligations may extend beyond the notice
period. Certain indemnifications have no limitations as to
time or maximum potential future payments. In 2005, PEC