Progress Energy 2008 Annual Report Download - page 21

Progress Energy Annual Report 2008
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CCO – GEORGIA OPERATIONS
On March 9, 2007, our subsidiary PVI entered into a
series of transactions to sell or assign substantially all
of its Competitive Commercial Operations (CCO) physical
and commercial assets and liabilities. Assets divested
included approximately 1,900 MW of gas-fired generation
assets in Georgia. The sale of the nonregulated generation
assets closed on June 11, 2007, for a net sales price of
$615 million. We recorded an estimated after-tax loss of
$226 million in December 2006. Based on the terms of the
final agreement and post-closing adjustments, during the
years ended December 31, 2008 and 2007, we incurred
an additional $2 million after-tax loss and reversed
$18 million after tax of the impairment recorded in 2006,
respectively.
Additionally, on June 1, 2007, PVI closed the transaction
involving the assignment of a contract portfolio consisting
of full-requirements contracts with 16 Georgia electric
membership cooperatives (the Georgia Contracts),
forward gas and power contracts, gas transportation,
structured power and other contracts to a third party.
This represented substantially all of our nonregulated
energy marketing and trading operations. As a result
of the assignments, PVI made a net cash payment of
$347 million, which represented 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. We
used the net proceeds from the divestiture of CCO and the
Georgia Contracts for general corporate purposes.
CCO’s operations generated net losses from discontinued
operations of $3 million, $283 million and $57 million in
2008, 2007 and 2006, respectively. Net losses from
discontinued operations in 2007 primarily represent the
$349 million after-tax charge associated with exit costs,
partially offset by unrealized mark-to-market gains related
to dedesignated natural gas hedges. These hedges were
dedesignated because management determined that it
was no longer probable that the forecasted transactions
underlying certain derivative contracts covering
approximately 95 billion cubic feet of natural gas would
be fulfilled. Therefore, cash flow hedge accounting was
discontinued. Net losses from discontinued operations in
2006 primarily represent the $64 million pre-tax impairment
loss ($42 million after-tax) on goodwill recognized in the
first quarter of 2006.
NATURAL GAS DRILLING AND PRODUCTION
On October 2, 2006, we sold our natural gas drilling and
production business (Gas) for approximately $1.1 billion
in net proceeds. Gas included Winchester Production
Company, Ltd., Westchester Gas Company, Texas Gas
Gathering and Talco Midstream Assets Ltd.; all were
subsidiaries of Progress Fuels. Proceeds from the sale
were used primarily to reduce holding company debt and
for other corporate purposes.
Based on the net proceeds associated with the sale, we
recorded an after-tax net gain on disposal of $300 million
during the year ended December 31, 2006. We recorded
an after-tax loss of $2 million during the year ended
December 31, 2007, primarily related to working capital
adjustments.
Gas operations generated net earnings from discontinued
operations of $4 million and $82 million for the years ended
December 31, 2007 and 2006, respectively. Net earnings
from discontinued operations during 2006 were impacted
by increased production, higher market prices and mark-
to-market gains on gas hedges.
CCO – DESOTO AND ROWAN GENERATION FACILITIES
On May 8, 2006, we entered into definitive agreements
to divest of two subsidiaries of PVI, DeSoto County
Generating Co., LLC (DeSoto) and Rowan County Power,
LLC (Rowan), including certain existing power supply
contracts to Southern Power Company, a subsidiary
of Southern Company, for gross purchase prices of
approximately $80 million and $325 million, respectively.
We used the proceeds from the sales to reduce debt and
for other corporate purposes.
The sale of DeSoto closed in the second quarter of 2006
and the sale of Rowan closed during the third quarter
of 2006. Based on the gross proceeds associated with
the sales, we recorded an after-tax loss on disposal of
$67 million during the year ended December 31, 2006.
DeSoto and Rowan operations generated combined net
earnings from discontinued operations of $10 million for
the year ended December 31, 2006.
PROGRESS TELECOM, LLC
On March 20, 2006, we completed the sale of PT LLC to
Level 3 Communications, Inc. We received gross proceeds
comprised of cash of $69 million and approximately
20 million shares of Level 3 Communications, Inc. common
stock valued at an estimated $66 million on the date of the
sale. Our net proceeds from the sale of $70 million, after
consideration of minority interest, were used to reduce