Progress Energy 2010 Annual Report Download - page 115

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Progress Energy Annual Report 2010
thereafter. PEC’s rents received are contingent upon
usage and totaled $33 million, $34 million, $33 million for
2010, 2009 and 2008, respectively. PEF’s rents received
are based on a fixed minimum rental where price varies
by type of equipment or contingent usage and totaled
$85 million, $84 million and $81 million for 2010, 2009 and
2008, respectively. PEF’s minimum rentals receivable
under noncancelable leases are not material for 2011
and thereafter.
C. Guarantees
As a part of normal business, we enter into various
agreements providing future financial or performance
assurances to third parties. Such agreements include
guarantees, standby letters of credit and surety bonds.
At December 31, 2010, we do not believe conditions
are likely for significant performance under these
guarantees. To the extent liabilities are incurred as a
result of the activities covered by the guarantees, such
liabilities are included in the accompanying Consolidated
Balance Sheets.
At December 31, 2010, we have issued guarantees and
indemnifications of and for certain asset performance,
legal, tax and environmental matters to third parties,
including indemnifications made in connection with
sales of businesses. At December 31, 2010, our estimated
maximum exposure for guarantees and indemnifications
for which a maximum exposure is determinable was
$307 million. Related to the sales of businesses, the
latest specified notice period extends until 2013 for the
majority of legal, tax and environmental matters provided
for in the indemnification provisions. Indemnifications
for the performance of assets extend to 2016. For certain
matters for which we receive timely notice, our indemnity
obligations may extend beyond the notice period. Certain
indemnifications have no limitations as to time or maximum
potential future payments. At December 31, 2010 and
2009, we had recorded liabilities related to guarantees
and indemnifications to third parties of approximately
$31 million and $34 million, respectively. During the year
ended December 31, 2010, our accruals and expenditures
related to guarantees and indemnifications were not
material. As current estimates change, additional losses
related to guarantees and indemnifications to third
parties, which could be material, may be recorded in the
future.
In addition, the Parent has issued $300 million in
guarantees for certain payments of two wholly owned
indirect subsidiaries (See Note 23).
D. Other Commitments and Contingencies
ENVIRONMENTAL
We are subject to federal, state and local regulations
regarding environmental matters (See Note 21).
SPENT NUCLEAR FUEL MATTERS
Pursuant to the Nuclear Waste Policy Act of 1982, the
Utilities entered into contracts with the DOE under which
the DOE agreed to begin taking spent nuclear fuel by no
later than January 31, 1998. All similarly situated utilities
were required to sign the same standard contract.
The DOE failed to begin taking spent nuclear fuel by
January 31, 1998. In January 2004, the Utilities filed a
complaint in the United States Court of Federal Claims
against the DOE, claiming that the DOE breached the
Standard Contract for Disposal of Spent Nuclear Fuel
by failing to accept spent nuclear fuel from our various
facilities on or before January 31, 1998. Approximately 60
cases involving the government’s actions in connection
with spent nuclear fuel are currently pending in the Court
of Federal Claims. The Utilities have asserted nearly
$91 million in damages incurred between January 31, 1998,
and December 31, 2005, the time period set by the court
for damages in this case. The Utilities may file subsequent
damage claims as they incur additional costs.
In 2008, the Utilities received a ruling from the United
States Court of Federal Claims awarding $83 million in the
claim against the DOE for failure to abide by a contract
for federal disposition of spent nuclear fuel. A request for
reconsideration filed by the United States Department of
Justice resulted in an immaterial reduction of the award.
Substantially all of the award relates to costs incurred
by PEC. On August 15, 2008, the Department of Justice
appealed the United States Court of Federal Claims ruling
to the D.C. Court of Appeals. On July 21, 2009, the D.C.
Court of Appeals vacated and remanded the calculation
of damages back to the Trial Court but affirmed the portion
of damages awarded that were directed to overhead
costs and other indirect expenses. The Department of
Justice requested a rehearing en banc but the D.C. Court
of Appeals denied the motion on November 3, 2009. In the
event that the Utilities recover damages in this matter,
such recovery will primarily offset capital assets and
therefore is not expected to have a material impact on
the Utilities’ results of operations. However, the Utilities
cannot predict the outcome of this matter.