Progress Energy 2010 Annual Report Download - page 113

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Progress Energy Annual Report 2010
PEF made payments of $63 million, $243 million and
$117 million for 2010, 2009 and 2008, respectively, toward
long lead equipment and engineering related to the Levy
EPC. Additionally, PEF has other construction obligations
related to various capital projects including new
generation, transmission and environmental compliance.
Total payments under PEF’s other construction-related
contracts were $84 million, $376 million and $761 million
for 2010, 2009 and 2008, respectively.
The future construction obligations presented in the
previous table for Progress Energy excludes the EPC
agreement. The EPC agreement includes provisions
for termination. For termination without cause, the EPC
agreement contains exit provisions with termination
fees, which may be significant, that vary based on the
termination circumstances. As discussed in Note 7C in
PEF’s 2010 nuclear cost-recovery filing, PEF identified a
schedule shift in the Levy project that resulted from the
NRC’s 2009 determination that certain schedule-critical
work that PEF had proposed to perform within the scope
of฀its฀Limited฀Work฀Authorization฀request฀submitted฀with฀
the฀COL฀application฀will฀not฀be฀authorized฀until฀the฀NRC฀
issues the COL. Consequently, excavation and foundation
preparation work anticipated in the initial schedule cannot
begin until the COL is issued, resulting in a project shift of
at least 20 months. Since then, regulatory and economic
conditions identified in the 2010 nuclear cost-recovery
filing have changed such that major construction
activities on the Levy project are being postponed
until after the NRC issues the COL, expected in 2013 if
the current licensing schedule remains on track. We
executed an amendment to the EPC agreement in 2010 due
to the schedule shifts. Prior to the amendment, estimated
payments and associated escalations were $8.608 billion
for the multi-year contract and did not assume any joint
ownership. Because we have executed an amendment to
the EPC agreement and anticipate negotiating additional
amendments upon receipt of the COL, we cannot
currently predict the timing of when those obligations will
be satisfied or the magnitude of any change. Additionally,
in light of the schedule shifts in the Levy nuclear project,
PEF may incur fees and charges related to the disposition
of outstanding purchase orders on long lead time
equipment for the Levy nuclear project, which could be
material. In June 2010, PEF completed its long lead time
equipment฀ disposition฀ analysis฀ to฀ minimize฀ the฀ impact฀
associated with the schedule shift. As a result of the
analysis, PEF will continue with selected components of
the long lead time equipment. Work has been suspended
on the remaining long lead time equipment items, which
have total remaining estimated payments and associated
escalations of approximately $1.250 billion included in
the previously discussed $8.608 billion. PEF has been in
suspension negotiations with the selected equipment
vendors, which we anticipate concluding by the end of
the first quarter of 2011. In its April 30, 2010 nuclear cost-
recovery filing, PEF included for rate-making purposes
a point estimate of potential Levy disposition fees and
charges of $50 million, subject to true-up. However, the
amount of disposition fees and charges, if any, cannot be
determined until suspension negotiations are completed.
We cannot predict the outcome of this matter.
OTHER PURCHASE OBLIGATIONS
We have various other contractual obligations primarily
related to PESC service contracts for operational services,
PEC service agreements related to its Richmond County,
N.C., Wayne County, N.C., and New Hanover County,
N.C., generating facilities, and PEF service agreements
related to the Hines Energy Complex and the Bartow
Plant. Our payments under these agreements were
$124 million, $56 million and $110 million for 2010, 2009
and 2008, respectively.
PEC has various other purchase obligations, including
obligations for parts and equipment, limestone supply
and fleet vehicles. Total purchases under these contracts
were $55 million, $14 million and $18 million for 2010, 2009
and 2008, respectively.
On October 1, 2010, PEC entered into long-term service
agreements for its Richmond County, N.C., Wayne
County, N.C., and New Hanover County, N.C., generating
facilities, covering projected maintenance events for
each facility through 2033, 2028 and 2029, respectively.
The total cost to PEC associated with these agreements
is estimated to be approximately $379 million over the
term of the agreements. Expected future payments under
these agreements are $6 million, $7 million, $11 million,
$16 million and $36 million for 2011 through 2015,
respectively, with approximately $303 million payable
thereafter. Total purchases under these agreements
were not material for 2010.
Among PEF’s other purchase obligations, PEF has long-
term service agreements for the Hines Energy Complex
and the Bartow Plant, emission obligations and fleet
vehicles. Total payments under these contracts were
$35 million, $22 million and $58 million for 2010, 2009
and 2008, respectively. Future obligations are primarily
comprised of the long-term service agreements.