Progress Energy 2010 Annual Report Download - page 32

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MANAGEMENT’S DISCUSSION AND ANALYSIS
impact the Utilities’ decision or ability to pay dividends
to the Parent or to seek equity contributions from the
Parent, including capital expenditure decisions and the
timing of recovery of fuel and other pass-through costs.
Therefore, we cannot predict the level of dividends or
equity contributions between the Utilities and the Parent
from year to year. The Parent could change its existing
common stock dividend policy based upon these and
other business factors.
Cash from operations, commercial paper issuance,
borrowings under our credit facilities and/or long-
term debt financings are expected to fund capital
expenditures, long-term debt maturities and common
stock฀dividends฀for฀2011.฀We฀do฀not฀expect฀to฀realize฀a฀
material amount of proceeds from the sale of equity in
2011 (See “Financing Activities”).
We have 24 financial institutions that support our
combined $2.0 billion revolving credit facilities for the
Parent, PEC and PEF, thereby limiting our dependence on
any one institution. The credit facilities serve as back-
ups to our commercial paper programs. To the extent
amounts are reserved for commercial paper or letters of
credit outstanding, they are not available for additional
borrowings. At December 31, 2010, the Parent had no
outstanding borrowings under its credit facility, no
outstanding commercial paper and had issued $31 million
of letters of credit, which were supported by the revolving
credit facility. At December 31, 2010, PEC and PEF had
no outstanding borrowings under their respective
credit facilities and no outstanding commercial paper.
Based on these outstanding amounts at December 31,
2010, there was a combined $1.969 billion available for
additional borrowings.
At December 31, 2010, PEC and PEF had limited
counterparty mark-to-market exposure for financial
commodity hedges (primarily gas and oil hedges) due
to spreading our concentration risk over a number of
counterparties. In the event of default by a counterparty,
the exposure in the transaction is the cost of replacing
the agreements at current market rates. At December 31,
2010, the majority of the Utilities’ open financial commodity
hedges were in net mark-to-market liability positions.
See Note 17A for additional information with regard to
our commodity derivatives.
At December 31, 2010, we had limited mark-to-market
exposure to certain financial institutions under pay-fixed
forward starting swaps to hedge cash flow risk with
regard to future financing transactions for the Parent,
PEC and PEF. In the event of default by a counterparty,
the exposure in the transaction is the cost of replacing
the agreements at current market rates. At December 31,
2010, the sums of the Parent’s, PEC’s and PEF’s open pay-
fixed forward starting swaps were each in a net mark-
to-market liability position. See Note 17B for additional
information with regard to our interest rate derivatives.
On July 21, 2010, the Wall Street Reform and Consumer
Protection Act (H.R. 4173) was signed into law. Among
other things, the law includes provisions related to the
swaps and over-the-counter derivatives markets. Under
the law, we expect to be exempt from mandatory clearing
and exchange trading requirements for our commodity
and interest rate hedges because we are an end user
of these products. Capital and margin requirements for
these hedges are expected to be determined as more
detailed rules and regulations are published during
2011. At this time, we do not expect the law to have a
material impact on our financial condition. However, we
cannot determine the impact until the final regulations
are issued.
Our pension and nuclear decommissioning trust funds
are managed by a number of financial institutions,
and the assets being managed are diversified in order
to limit concentration risk in any one institution or
business sector.
We believe our internal and external liquidity resources
will be sufficient to fund our current business plans.
We will continue to monitor the credit markets to
maintain an appropriate level of liquidity. Our ability to
access the capital markets on favorable terms may be
negatively impacted by credit rating actions. Risk factors
associated with the capital markets and credit ratings
are discussed below.
Historical for 2010 as Compared to 2009 and
2009 as Compared to 2008
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, 2010, 2009 and 2008. Net cash
provided by operating activities for the three years ended
December 31, 2010, 2009 and 2008, was $2.537 billion,
$2.271 billion and $1.218 billion, respectively.