Progress Energy 2008 Annual Report Download - page 26

MANAGEMENT’S DISCUSSION AND ANALYSIS
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did not pay dividends to the Parent in 2008, PEC expects to
pay dividends to the Parent in 2009. There are a number of
factors that impact the Utilities’ decision or ability to pay
dividends to the Parent or to seek equity contributions
from the Parent, including capital expenditure decisions
and the timing of recovery of fuel and other pass-through
costs. Therefore, we cannot predict the level of dividends
that the Utilities may pay to the Parent from year to year.
We do not currently expect changes to the Parent’s
common stock dividend policy.
Cash from operations, commercial paper issuance,
borrowings under our credit facilities, long-term debt
financings, equity offerings, and limited ongoing sales
of common stock from our Investor Plus Stock Purchase
Plan, employee benefit and stock option plans are
expected to fund capital expenditures and common stock
dividends for 2009. For the fiscal year 2009, we expect
to realize approximately $600 million in the aggregate
from the sale of stock through marketed and ongoing
equity sales.
We have addressed the challenges presented by current
financial market conditions and will continue to monitor
the credit markets to maintain an appropriate level of
liquidity. Despite the tightened credit market that began
with the extreme market turmoil in the third quarter of
2008, we have been able to issue additional equity and
short- and long-term debt.
As shown in the table that follows, we have a number
of financial institutions that support our combined
$2.030 billion revolving credit facilities for the Parent,
PEC and PEF, thereby limiting our dependence on any
one institution. The credit facilities serve as back-
ups to our commercial paper programs. To the extent
amounts are reserved for commercial paper or letters of
credit outstanding, they are not available for additional
borrowings. At December 31, 2008, the Parent had
$600 million of outstanding borrowings under its credit
facility. In addition, at December 31, 2008, the Parent, PEC
and PEF had outstanding commercial paper balances of
$69 million, $110 million and $371 million, respectively,
and the Parent had issued $30 million of letters of
credit, which were supported by the revolving credit
agreement (RCA). Based on these outstanding amounts
at December 31, 2008, there was $850 million available for
additional borrowings. During February 2009, the Parent
repaid $100 million of the outstanding balance under its
credit facility.
(in millions) Total Commitment
Credit Provider Progress
Energy Parent PEC PEF
JPMorgan Chase Bank, N.A. $225.0 $141.0 $44.0 $40.0
Bank of Tokyo-Mitsubishi
UFJ, Ltd., New York Branch 200.0 95.0 45.0 60.0
Barclays Bank PLC 190.5 100.0 20.5 70.0
Bank of America, N.A. 190.0 98.0 22.0 70.0
Citibank, N.A. 180.0 111.0 34.0 35.0
Wachovia Bank, N.A. 175.5 53.0 82.5 40.0
Royal Bank of Scotland plc 169.0 92.0 77.0 –
The Bank of New York Mellon 120.0 35.0 40.0 45.0
SunTrust Bank 115.0 50.0 20.0 45.0
Morgan Stanley Bank 100.0 50.0 50.0 –
William Street Commitment
Corporation 100.0 100.0 – –
Deutsche Bank AG, New York
Branch 95.0 50.0 –45.0
UBS Loan Finance LLC 80.0 80.0 – –
BNP Paribas 50.0 50.0 – –
Branch Banking & Trust Co. 25.0 25.0 – –
First Tennessee Bank N.A. 15.0 –15.0 –
Total commitment $2,030.0 $1,130.0 $450.0 $450.0
At December 31, 2008, PEC and PEF had limited
counterparty mark-to-market exposure for financial
commodity hedges (primarily gas and oil hedges) due
to spreading our concentration risk over a number of
partners. In the event of default by a counterparty, the
exposure in the transaction is the cost of replacing the
agreements at current market rates. At December 31, 2008,
all of the Utilities’ open financial commodity hedges were
in net mark-to-market liability positions. See Note 17A
for additional information with regard to our commodity
derivatives.
At December 31, 2008, we had limited mark-to-market
exposure to certain financial institutions under pay-
fixed forward starting swaps to hedge cash flow risk
with regard to future financing transactions for both the
Parent and PEC. In the event of default by a counterparty,
the exposure in the transaction is the cost of replacing
the agreements at current market rates. At December 31,
2008, all of the Parent’s and PEC’s open pay-fixed forward
starting swaps were in a net mark-to-market liability
position. See Note 17B for additional information with
regard to our interest rate derivatives.
Our pension trust funds and nuclear decommissioning
trust funds are managed by a number of financial
institutions, and the assets being managed are diversified
in order to limit concentration risk in any one institution
or business sector.