Progress Energy 2008 Annual Report Download - page 27

Progress Energy Annual Report 2008
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We believe our internal and external liquidity resources
will be sufficient to fund our current business plans. Risk
factors associated with credit facilities and credit ratings
are discussed below.
Historical for 2008 as Compared to 2007 and
2007 as Compared to 2006
CASH FLOWS FROM OPERATIONS
Net cash provided by operations is the primary source
used to meet operating requirements and a portion of
capital expenditures. The Utilities produced substantially
all of our consolidated cash from operations for the
years ended December 31, 2008, 2007 and 2006. Net cash
provided by operating activities for the three years ended
December 31, 2008, 2007 and 2006, was $1.218 billion,
$1.252 billion and $2.001 billion, respectively.
Net cash provided by operating activities for 2008
decreased when compared with 2007. The $34 million
decrease in operating cash flow was primarily due to a
$450 million decrease in the recovery of fuel costs due
to the 2008 under-recovery driven by rising fuel costs,
compared to an over-recovery of fuel costs during
the corresponding period in 2007; $340 million of cash
collateral paid to counterparties on derivative contracts
in 2008 compared to $55 million in net refunds of cash
collateral in 2007, primarily at PEF; and a $226 million
increase in inventory purchases, primarily coal, driven
by higher prices. These impacts were partially offset by a
$419 million increase from accounts receivable, primarily
related to our divested CCO operations and former
synthetic fuels businesses; the $347 million payment
made in 2007 to exit the Georgia Contracts (See Note
3C); a $117 million increase from accounts payable; and a
$106 million increase from income taxes, net. The increase
from accounts receivable was primarily driven by the
settlement of $234 million of derivative receivables related
to derivative contracts for our former synthetic fuels
businesses (See Note 17A). The increase from income
taxes, net was largely due to $252 million in income tax
payments made in 2007 related to the sale of Gas (See
Note 3D), partially offset by income tax impacts at PEC.
The change in accounts payable was primarily related to
our divested operations.
Net cash provided by operating activities for 2007
decreased when compared with 2006. The $749 million
decrease in operating cash flow was primarily due to
$472 million in income tax impacts, largely driven by income
tax payments related to the sale of Gas; the $347 million
payment made to exit the Georgia Contracts (See Note 3C);
a $279 million decrease in the recovery of fuel costs; and
$65 million in premiums paid for derivative contracts in our
synthetic fuels businesses. These impacts were partially
offset by a $157 million decrease in inventory purchases
in 2007, primarily related to coal purchases at the Utilities;
$106 million of working capital changes related to the
divestiture of CCO; and $47 million in net refunds of cash
collateral previously paid to counterparties on derivative
contracts in 2007 compared to $47 million in net cash
payments in 2006 at PEF. The decrease in recovery of fuel
costs is due to a $335 million decrease at PEF driven by the
2006 recovery of previously under-recovered fuel costs,
partially offset by a $56 million increase in the recovery
at PEC driven by the 2007 recovery of previously under-
recovered fuel costs.
In 2008, 2007 and 2006, the Utilities filed requests with their
respective state commissions seeking rate increases for
fuel cost recovery, including amounts for previous under-
recoveries.
INVESTING ACTIVITIES
Net cash (used) provided by investing activities for the
three years ended December 31, 2008, 2007 and 2006,
was $(2.541) billion, $(1.457) billion and $127 million,
respectively.
Property additions at the Utilities, including nuclear fuel,
were $2.534 billion and $2.199 billion in 2008 and 2007,
respectively, or approximately 100 percent of consolidated
capital expenditures in both 2008 and 2007. Capital
expenditures at the Utilities are primarily for capacity
expansion and normal construction activity and ongoing
capital expenditures related to environmental compliance
programs.
Excluding proceeds from sales of discontinued operations
and other assets, net of cash divested of $72 million in
2008 and $675 million in 2007, cash used in investing
activities increased by $481 million. The increase in 2008
was primarily due to a $341 million increase in gross
property additions at the Utilities, primarily at PEF, and
a $95 million decrease in net purchases of available-
for-sale securities and other investments. The increase
in capital expenditures for utility property additions
at PEF was primarily driven by a $360 million increase
in environmental compliance expenditures and a
$109 million increase in nuclear project expenditures,
partially offset by a $65 million decrease related to
repowering the Bartow plant to more efficient natural gas-
burning technology and a $52 million decrease related
to the Hines 4 facility. Available-for-sale securities and
other investments include marketable debt securities and
investments held in nuclear decommissioning trusts.