Progress Energy 2006 Annual Report Download - page 121

Progress Energy Annual Report 2006
119
(Subordinated Notes). The Trust has no other operations
and its sole assets are the Subordinated Notes and Notes
Guarantee (as discussed below). Funding Corp. is a wholly
owned subsidiary of Florida Progress and was formed for
the sole purpose of providing financing to Florida Progress
and its subsidiaries. Funding Corp. does not engage in
business activities other than such financing and has no
independent operations. Since 1999, Florida Progress has
fully and unconditionally guaranteed the obligations of
Funding Corp. under the Subordinated Notes (the Notes
Guarantee). In addition, Florida Progress guaranteed the
payment of all distributions related to the $300 million
Preferred Securities required to be made by the Trust, but
only to the extent that the Trust has funds available for such
distributions (the Preferred Securities Guarantee). The
Preferred Securities Guarantee, considered together with
the Notes Guarantee, constitutes a full and unconditional
guarantee by Florida Progress of the Trust’s obligations
under the Preferred Securities. The Preferred Securities
and Preferred Securities Guarantee are listed on the New
York Stock Exchange.
The Subordinated Notes may be redeemed at the option of
Funding Corp. at par value plus accrued interest through
the redemption date. The proceeds of any redemption
of the Subordinated Notes will be used by the Trust to
redeem proportional amounts of the Preferred Securities
and common securities in accordance with their terms.
Upon liquidation or dissolution of Funding Corp., holders
of the Preferred Securities would be entitled to the
liquidation preference of $25 per share plus all accrued
and unpaid dividends thereon to the date of payment. The
yearly interest expense is $21 million and is reflected in
the Consolidated Statements of Income.
We have guaranteed the payment of all distributions
related to the Trust’s Preferred Securities. As of
December 31, 2006, the Trust had outstanding 12 million
shares of the Preferred Securities with a liquidation value
of $300 million. Our guarantees are joint and several, full
and unconditional and are in addition to the joint and
several, full and unconditional guarantees previously
issued to the Trust and Funding Corp. by Florida Progress.
Our subsidiaries have provisions restricting the payment
of dividends to the Parent in certain limited circumstances
and, as disclosed in Note 12B, there were no restrictions
on PEC’s or PEF’s retained earnings.
The Trust is a special-purpose entity and in accordance
with the provisions of FIN 46R, we deconsolidated the
Trust on December 31, 2003. The deconsolidation was not
material to our financial statements. Separate financial
statements and other disclosures concerning the Trust
have not been presented because we believe that such
information is not material to investors.
In the following tables, the Parent column includes the
financial results of the parent holding company only.
The Subsidiary Guarantor column includes the financial
results of Florida Progress. The Other column includes the
consolidated financial results of all other nonguarantor
subsidiaries and elimination entries for all intercompany
transactions. All applicable corporate expenses have
been allocated appropriately among the guarantor and
nonguarantor subsidiaries. The financial information may
not necessarily be indicative of results of operations or
financial position had the Subsidiary Guarantor or other
nonguarantor subsidiaries operated as independent
entities. The accompanying condensed consolidating
financial statements have been restated for all periods
presented to reflect the operations of CCO, Gas, PT LLC,
DeSoto, Rowan, Dixie Fuels and other fuels businesses as
discontinued operations as described in Note 3.