Progress Energy 2007 Annual Report Download - page 126

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
124
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, 2007,
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 Terminals and the
synthetic fuels businesses as discontinued operations as
described in Note 3B.