Progress Energy 2008 Annual Report Download - page 51

Progress Energy Annual Report 2008
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weighted-average interest rates by expected maturity
dates for the fixed and variable rate long-term debt and
Florida Progress-obligated mandatorily redeemable
securities of trust. The tables also include estimates
of the fair value of our interest rate risk-sensitive
instruments based on quoted market prices for these or
similar issues. For interest rate swaps and interest rate
forward contracts, the tables present notional amounts
and weighted-average interest rates by contractual
maturity dates for 2009 to 2013 and thereafter and the
related fair value. Notional amounts are used to calculate
the contractual cash flows to be exchanged under the
interest rate swaps and the settlement amounts under
the interest rate forward contracts. See Note 17 for more
information on interest rate derivatives.
During 2009, PEC terminated $250 million notional of
anticipated 10-year debt issue hedges on January 12,
2009, in conjunction with PEC’s issuance of $600 million
5.30% First Mortgage Bonds.
During January 2009, the Parent, PEC and PEF each
entered into $50 million notional of anticipated 10-year
debt issue hedges to mitigate exposure to interest rate
risk in anticipation of future debt issuances.
During 2008, PEC terminated $100 million notional
of anticipated 10-year debt issue hedges and
$100 million notional of anticipated 30-year debt issue
hedges on March 10, 2008, in conjunction with PEC’s
issuance of $325 million 6.30% First Mortgage Bonds.
During 2008, PEF entered into a series of forward
starting swaps to mitigate exposure to interest rate
risk in anticipation of future debt issuances. In January
2008, PEF entered into a $100 million notional 10-year
forward starting swap and a $100 million notional
30-year forward starting swap. In May 2008, PEF entered
into combined $100 million notional 10-year forward
starting swaps and $150 million notional 30-year forward
starting swaps. In June 2008, PEF entered into combined
$100 million notional 30-year forward starting swaps. In
June 2008, PEF terminated 10-year and 30-year debt issue
hedges in conjunction with PEF’s issuance of $500 million
5.65% 10-year First Mortgage Bonds and $1.000 billion of
6.40% 30-year First Mortgage Bonds.
(dollars in millions)
December 31, 2008 2009 2010 2011 2012 2013 Thereafter Total
Fair Value
December 31,
2008
Fixed-rate long-term debt $– $306 $1,000 $950 $825 $6,265 $9,346 $9,909
Average interest rate –4.53% 6.96% 6.67% 4.96% 6.21% 6.17%
Variable-rate long-term debt –$100 –$100 – $861 $1,061 $1,061
Average interest rate –5.20% –2.52% –1.90% 2.27%
Debt to affiliated trust(a) – – – – – $309 $309 $290
Interest rate – – – – – 7.10% 7.10%
Interest rate forward contracts(b) $450 –––––$450 $(65)
Average pay rate 4.26% – – – – – 4.26%
Average receive rate (c) – – – – – (c)
(a) FPC Capital I – Quarterly Income Preferred Securities.
(b) $250 million is for anticipated 10-year debt issue hedge maturing on March 1, 2019, and requires mandatory cash settlement on March 1, 2009. The remaining $200 million is for
anticipated 10-year debt issue hedge maturing on April 1, 2019, and requires mandatory cash settlement on April 1, 2009.
(c) Rate is 3-month LIBOR, which was 1.425% at December 31, 2008.