Progress Energy 2010 Annual Report Download - page 14

10
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Management’s Discussion and Analysis of Financial
Condition and Results of Operations (MD&A) contains
forward-looking statements that involve estimates,
projections, goals, forecasts, assumptions, risks
and uncertainties that could cause actual results or
outcomes to differ materially from those expressed in the
forward-looking statements. Please review “Safe Harbor
for Forward-Looking Statements” for a discussion of
the factors that may impact any such forward-looking
statements made herein. As used in this report, Progress
Energy, which includes the Parent and its regulated and
nonregulated subsidiaries on a consolidated basis, is at
times referred to as “we,” “us” or “our.”
MD&A includes financial information prepared in
accordance with accounting principles generally
accepted in the United States of America (GAAP), as
well as certain non-GAAP financial measures, “Ongoing
Earnings” and “Base Revenues,” discussed below.
Generally, a non-GAAP financial measure is a numerical
measure of financial performance, financial position
or cash flows that excludes (or includes) amounts that
are included in (or excluded from) the most directly
comparable measure calculated and presented in
accordance with GAAP. The non-GAAP financial
measures should be viewed as a supplement to, and
not a substitute for, financial measures presented in
accordance with GAAP. Non-GAAP measures as
presented herein may not be comparable to similarly
titled measures used by other companies. Additionally,
we may collectively refer to our electric utility
subsidiaries, Progress Energy Carolinas (PEC) and
Progress Energy Florida (PEF), as the “Utilities.” MD&A
should be read in conjunction with the Progress Energy
Consolidated Financial Statements. Certain amounts
for 2009 and 2008 have been reclassified to conform to
the 2010 presentation.
INTRODUCTION
Our reportable business segments are PEC and PEF,
and their primary operations are the generation,
transmission, distribution and sale of electricity in
portions of North Carolina and South Carolina and in
portions of Florida, respectively. The “Corporate and
Other” segment primarily includes the operations of the
Parent, Progress Energy Service Company, LLC (PESC)
and other miscellaneous nonregulated businesses that
do not separately meet the quantitative requirements as
a separate reportable business segment.
Merger
On January 8, 2011, Duke Energy Corporation (Duke
Energy) and Progress Energy entered into an Agreement
and Plan of Merger (the Merger Agreement). Pursuant
to the Merger Agreement, Progress Energy will be
acquired by Duke Energy in a stock-for-stock transaction
(the Merger) and continue as a wholly owned subsidiary
of Duke Energy. Consummation of the Merger is subject
to customary conditions, including, among other
things, approval of the shareholders of each company,
expiration or termination of the applicable Hart-Scott-
Rodino Act waiting period, and receipt of all approvals, to
the extent required, from the Federal Energy Regulatory
Commission (FERC), the Federal Communications
Commission, the Nuclear Regulatory Commission (NRC),
the North Carolina Utilities Commission (NCUC), the
Kentucky Public Service Commission, the South Carolina
Public Service Commission (SCPSC), the Florida Public
Service Commission (FPSC), the Indiana Utility Regulatory
Commission and the Ohio Public Utilities Commission.
See Note 25 for additional information related to the
Merger.
The Merger Agreement includes certain restrictions,
limitations and prohibitions as to actions we may or
may not take in the period prior to consummation of
the Merger as discussed below. At this time, we do not
anticipate modifying our 2011 strategy discussed below
but cannot predict the impact consummation of the
Merger will have on our long-term strategy. The combined
company’s expected balance sheet and credit metrics
are anticipated to enhance our growth opportunities and
strategic options.
We do not expect the Merger to have a significant impact
on our cash requirements and sources of liquidity during
2011, except that we do not expect to issue a material
amount of equity. Pursuant to the Merger Agreement,
only limited equity issuances through certain employee
benefit plans and stock option plans are permitted.
Additionally, the Merger Agreement restricts our ability,
without Duke Energy’s consent, to increase the common
stock dividend rate until consummation or termination of
the Merger Agreement. Total capital spending and the
extent to which we can obtain financing through long-
term debt issuances are also limited.
The Parent’s credit facility expires May 3, 2012, and the
combined shelf registration statement for the Parent,
PEC and PEF expires November 18, 2011. The timing and