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Progress Energy Annual Report 2007
81
Based on the net proceeds associated with the sale and
after consideration of minority interest, we recorded an
after-tax net gain on disposal of $28 million during the year
ended December 31, 2006.
The accompanying consolidated financial statements
reflect the operations of PT LLC 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 was
$1 million for the year ended December 31, 2005. We
ceased recording depreciation upon classification of
the assets as discontinued operations in January 2006.
After-tax depreciation expense during the years ended
December 31, 2006, and 2005 was $1 million and $8 million,
respectively. Results of discontinued operations for PT
LLC for the years ended December 31 were as follows:
In connection with the sale, PEC and PEF provided
indemnification against costs associated with certain
asset performances to Level 3. See general discussion of
guarantees at Note 22C. The ultimate resolution of these
matters could result in adjustments to the gain on sale in
future periods.
F. Dixie Fuels and Other Fuels Business
On March 1, 2006, we sold Progress Fuels’ 65 percent
interest in Dixie Fuels Limited (Dixie Fuels) to Kirby
Corporation for $16 million in cash. Dixie Fuels
operates a fleet of four ocean-going dry-bulk barge
and tugboat units. Dixie Fuels primarily transports coal
from the lower Mississippi River to Progress Energy’s
Crystal River facility. We recorded an after-tax gain of
$2 million on the sale of Dixie Fuels during the year ended
December 31, 2006. During the year ended December 31,
2007, we recorded an additional gain of $2 million primarily
related to the expiration of indemnifications.
The accompanying consolidated financial statements
reflect Dixie Fuels and the other fuels business 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 was $1 million for each of the
years ended December 31, 2006, and 2005. We ceased
recording depreciation upon classification of the assets
as discontinued operations. After-tax depreciation
expense during the years ended December 31, 2006,
and 2005 was $1 million and $2 million, respectively.
Results of discontinued operations for Dixie Fuels
and other fuels businesses for the years ended
December 31 were as follows:
G. Coal Mining Businesses
Progress Fuels owned five subsidiaries engaged in the
coal mining business. These businesses were previously
included in our former Coal and Synthetic Fuels business
segment. On May 1, 2006, we sold certain net assets of
three of our coal mining businesses to Alpha Natural
Resources, LLC for gross proceeds of $23 million plus a
$4 million working capital adjustment. As a result, during
the year ended December 31, 2006, we recorded an after-
tax loss of $10 million on the sale of these assets.
On December 24, 2007, we signed an agreement to sell the
remaining net assets of the coal mining business for gross
cash proceeds of $23 million. These assets include Powell
Mountain Coal Co. and Dulcimer Land Co., which consist of
about 30,000 acres in Lee County, Va. and Harlan County, Ky.
The property contains an estimated 40 million tons of high
quality coal reserves. We expect this transaction to close
by the end of the first quarter of 2008.
The accompanying consolidated financial statements
reflect the coal mining operations as discontinued
operations. Interest expense has been allocated to
(in millions) 2006 2005
Revenues $18 $76
Earnings before income taxes and minority interest $7 $11
Income tax expense (4) (3)
Minority interest share of earnings (5) (4)
Net (loss) earnings from discontinued operations (2) 4
Gain on disposal of discontinued operations, includ-
ing income tax expense of $8 and
minority interest of $35 28 –
Earnings from discontinued operations $26 $4
(in millions) 2007 2006 2005
Revenues $– $20 $32
Earnings before income taxes $– $11 $8
Income tax expense –(4) (3)
Net earnings from discontinued operations –7 5
Gain on disposal of discontinued operations,
including income tax expense of $1 and $1,
respectively 22 –
Earnings from discontinued operations $2 $9 $5