Progress Energy 2006 Annual Report Download - page 45

Progress Energy Annual Report 2006
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that exceed this estimate will not be recoverable absent,
among other things, extraordinary circumstances as
found by the FPSC in subsequent proceedings. The current
estimate of in-service cost exceeds the initial project
estimate by approximately 12 percent to 15 percent due
to what we believe to be extraordinary circumstances.
Therefore, we believe that disallowance of these costs
by the FPSC in subsequent proceedings is not probable.
We cannot predict the outcome of this matter.
CAPITAL EXPENDITURES
Total cash from operations provided the funding for our
capital expenditures, including property additions, nuclear
fuel expenditures and diversified business property
additions during 2006.
As shown in the table below, we expect the majority of
our capital expenditures to be incurred at our regulated
operations. We expect to fund our capital requirements
primarily through a combination of internally generated
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 2007 and 2008, primarily due to increased
spending on environmental initiatives and current growth
and maintenance projects. AFUDC represents the costs
of capital funds necessary to finance the construction of
new regulated assets.
Regulated capital expenditures for 2007, 2008 and
2009 in the table above include approximately
$640 million, $610 million and $220 million, respectively,
for environmental compliance capital expenditures.
Forecasted environmental compliance capital
expenditures for 2007, 2008 and 2009 include $320 million,
$220 million and $50 million, respectively, at PEC and
$320 million, $390 million and $170 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 $1.0 billion each at PEC and 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
At December 31, 2006, we had no outstanding borrowings
under our credit facilities. The following table summarizes
our RCAs and available capacity at December 31, 2006:
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.
Our internal financial policy precludes issuing
commercial paper in excess of the supporting lines of
credit. At December 31, 2006, we had no outstanding
commercial paper and a total of $60 million reserved for
letters of credit issued, leaving an additional $1.970 billion
available for future borrowing under our credit lines. In
addition, we have requirements to pay minimal annual
commitment fees to maintain our credit facilities. We
expect to continue to use commercial paper issuances
as a source of liquidity as long as we maintain our current
short-term ratings.
All of the credit facilities include a defined maximum
total debt-to-total capital ratio (leverage). We are
(in millions) Total Outstanding Reserved(a) Available
Progress Energy, Inc.
Five-year (expiring 5/3/11) $1,130 $– $(60) $1,070
PEC
Five-year (expiring 6/28/10) 450 – – 450
PEF
Five-year (expiring 3/28/10) 450 – – 450
Total credit facilities $2,030 $– $(60) $1,970
(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,
2006, Progress Energy, Inc. had a total amount of $60 million of letters of credit
issued, which were supported by the RCA.
(in millions)
Actual Forecasted
2006 2007 2008 2009
Regulated capital expenditures $1,423 $2,250 $2,380 $2,180
Nuclear fuel expenditures 114 180 170 210
AFUDC – borrowed funds (7) (20) (40) (40)
Nonregulated capital and
other expenditures 17 20 10 10
Total $1,547 $2,430 $2,520 $2,360