Progress Energy 2008 Annual Report Download - page 118

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
116
23. CONDENSED CONSOLIDATING
STATEMENTS
Presented below are the Condensed Consolidating
Statements of Income, Balance Sheets and Cash
Flows as required by Rule 3-10 of Regulation S-X. In
September 2005, we issued our guarantee of certain
payments of two wholly owned indirect subsidiaries,
FPC Capital I (the Trust) and Florida Progress Funding
Corporation (Funding Corp.). Our guarantees are in addition
to the previously issued guarantees of our wholly owned
subsidiary, Florida Progress.
The Trust, a finance subsidiary, was established in 1999 for
the sole purpose of issuing $300 million of 7.10% Cumulative
Quarterly Income Preferred Securities due 2039, Series
A (Preferred Securities) and using the proceeds thereof
to purchase from Funding Corp. $300 million of 7.10%
Junior Subordinated Deferrable Interest Notes due 2039
(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 annual
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, 2008,
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 11B, 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 these condensed consolidating statements, the Parent
column includes the financial results of the parent holding
company only. The Subsidiary Guarantor column includes the
consolidated financial results of Florida Progress only. The
Non-guarantor Subsidiary column includes the consolidated
financial results of our wholly owned subsidiary PEC. The
Other column includes the consolidated financial results
of all other non-guarantor subsidiaries, and elimination
entries for all intercompany transactions. All applicable
corporate expenses have been allocated appropriately
among the guarantor and non-guarantor subsidiaries. The
financial information may not necessarily be indicative of
results of operations or financial position had the Subsidiary
Guarantor or other non-guarantor subsidiaries operated as
independent entities.