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Progress Energy Annual Report 2007
79
of the assignments, PVI made a net cash payment of
$347 million, which represents the net cost to assign the
Georgia Contracts and other related contracts. In the
year ended December 31, 2007, we recorded a charge
associated with the costs to exit the Georgia Contracts,
and other related contracts, of $349 million after-tax
(charge included in the net loss from discontinued
operations in the table below). We used the net proceeds
from the divestiture of CCO and the Georgia Contracts for
general corporate purposes.
The accompanying consolidated financial statements
have been restated for all periods presented to reflect the
operations of CCO as discontinued operations. Interest
expense has been allocated to discontinued operations
based on their respective net assets, assuming a uniform
debt-to-equity ratio across our operations. Pre-tax interest
expense allocated for the years ended December 31, 2007,
2006 and 2005 was $11 million, $36 million and $39 million,
respectively. We ceased recording depreciation upon
classification of the assets as discontinued operations
in December 2006. After-tax depreciation expense during
each of the years ended December 31, 2006 and 2005 was
$14 million. Results of discontinued operations for CCO for
the years ended December 31 were as follows:
B. Terminals Operations and Synthetic Fuels
Businesses
On December 24, 2007, we signed an agreement to sell
coal terminals and docks in West Virginia and Kentucky
(Terminals) for $71 million in gross cash proceeds.
Terminals was previously a component of our former Coal
and Synthetic Fuels segment. The terminals have a total
annual capacity in excess of 40 million tons for transloading,
blending and storing coal and other commodities. Proceeds
from the sale are expected to be used for general corporate
purposes. We expect this transaction to close by the end
of the first quarter of 2008.
The accompanying consolidated financial statements
have been restated for all periods presented to reflect
the operations of Terminals as discontinued operations.
Interest expense has been allocated to discontinued
operations based on their respective net assets,
assuming a uniform debt-to-equity ratio across our
operations. Pre-tax interest expense allocated for the
years ended December 31, 2007, 2006 and 2005 was
$1 million, $1 million and $3 million, respectively. We
ceased recording depreciation upon classification of
the assets as discontinued operations in November 2007.
After-tax depreciation expense during each of the years
ended December 31, 2007, 2006 and 2005 was $2 million,
$4 million and $7 million, respectively.
Historically, we have had substantial operations
associated with the production of coal-based solid
synthetic fuels (Synthetic Fuels) as defined under Section
29 of the Code. The production and sale of these products
qualified for federal income tax credits so long as certain
requirements were satisfied. Synthetic fuels are generally
not economical to produce and sell absent the credits.
On September 14, 2007, we idled production of synthetic
fuels at our majority-owned synthetic fuels facilities due
to the high level of oil prices. On October 12, 2007, based
upon the continued high level of oil prices, unfavorable
oil price projections through the end of 2007, and the
expiration of the synthetic fuels tax credit program at
the end of 2007, we permanently ceased production
of synthetic fuels at our majority-owned facilities. As
a result of the expiration of the tax credit program, all
of our synthetic fuels businesses were abandoned
and all operations ceased as of December 31, 2007.
In accordance with the provisions of SFAS No. 144, a
long-lived asset is abandoned when it ceases to be used.
The accompanying consolidated income statements have
been restated for all periods presented to reflect the
abandoned operations of our synthetic fuels businesses
as discontinued operations.
Results of discontinued operations for the years ended
December 31 for Terminals and Synthetic Fuels were
as follows:
(in millions) 2007 2006 2005
Revenues $407 $754 $627
Loss before income taxes $(449) $(92) $(93)
Income tax benefit 166 35 39
Net loss from discontinued operations (283) (57) (54)
Gain (loss) on disposal of
discontinued operations,
including income tax benefit of
$7 and $123, respectively 18 (226) –
Loss from discontinued operations $(265) $(283) $(54)
(in millions) 2007 2006 2005
Revenues $1,126 $847 $1,220
Earnings (loss) before income taxes and
minority interest $2 $(179) $(171)
Income tax benefit, including tax credits 64 135 336
Minority interest share of losses 17 733
Net earnings (loss) from discontinued
operations $83 $(37) $198