form10q_q22010.htm

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

x     QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2010

OR

o    TRANSITION REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to                    .


Commission File Number
Exact name of registrants as specified in their charters, states of incorporation, addresses of principal executive offices,
and telephone numbers
I.R.S. Employer Identification Number
 
pgn logo
 
     
1-15929
Progress Energy, Inc.
410 South Wilmington Street
Raleigh, North Carolina 27601-1748
Telephone:   (919) 546-6111
State of Incorporation: North Carolina
56-2155481
     
1-3382
Carolina Power & Light Company
d/b/a Progress Energy Carolinas, Inc.
410 South Wilmington Street
Raleigh, North Carolina  27601-1748
Telephone:   (919) 546-6111
State of Incorporation: North Carolina
56-0165465
     
1-3274
Florida Power Corporation
d/b/a Progress Energy Florida, Inc.
299 First Avenue North
St. Petersburg, Florida  33701
Telephone:   (727) 820-5151
State of Incorporation: Florida
59-0247770

NONE
(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether each registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrants were required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Progress Energy, Inc. (Progress Energy)
Yes
x
No
o
Carolina Power & Light Company (PEC)
Yes
x
No
o
Florida Power Corporation (PEF)
Yes
o
No
x

 
 
 

 
 
Indicate by check mark whether each registrant has submitted electronically and posted to its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrants were required to submit and post such files).

Progress Energy
Yes
x
No
o
PEC
Yes
o
No
o
PEF
Yes
o
No
o

Indicate by check mark whether each registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Progress Energy
Large accelerated filer
x
Accelerated filer
o
 
Non-accelerated filer
o
Smaller reporting company
o
         
PEC
Large accelerated filer
o
Accelerated filer
o
 
Non-accelerated filer
x
Smaller reporting company
o
         
PEF
Large accelerated filer
o
Accelerated filer
o
 
Non-accelerated filer
x
Smaller reporting company
o

Indicate by check mark whether each registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Progress Energy
Yes
o
No
x
PEC
Yes
o
No
x
PEF
Yes
o
No
x

At August 2, 2010, each registrant had the following shares of common stock outstanding:

            Registrant
                       Description
                                                    Shares
Progress Energy
Common Stock (Without Par Value)
292,581,000
     
PEC
Common Stock (Without Par Value)
159,608,055 (all of which were held directly by Progress Energy, Inc.)
     
PEF
Common Stock (Without Par Value)
100 (all of which were held indirectly by Progress Energy, Inc.)

This combined Form 10-Q is filed separately by three registrants: Progress Energy, PEC and PEF (collectively, the Progress Registrants). Information contained herein relating to any individual registrant is filed by such registrant solely on its own behalf. Each registrant makes no representation as to information relating exclusively to the other registrants.

PEF meets the conditions set forth in General Instruction H(1)(a) and (b) of Form 10-Q and is therefore filing this form with the reduced disclosure format.

 
 

 

TABLE OF CONTENTS
2
 
5
 
PART I.  FINANCIAL INFORMATION
 
ITEM 1.
6
     
 
Unaudited Condensed Interim Financial Statements:
 
     
 
Progress Energy, Inc. (Progress Energy)
 
 
6
 
7
 
8
     
 
Carolina Power & Light Company d/b/a Progress Energy Carolinas, Inc. (PEC)
 
 
9
 
10
 
11
     
 
Florida Power Corporation d/b/a Progress Energy Florida, Inc. (PEF)
 
 
12
 
13
 
14
     
 
15
     
ITEM 2.
 
66
     
ITEM 3.
109
     
ITEM 4.
113
     
ITEM 4T.
113
     
PART II.  OTHER INFORMATION
 
ITEM 1.
114
     
ITEM 1A.
114
     
ITEM 2.
114
     
ITEM 5.
OTHER INFORMATION
115
     
ITEM 6.
116
     
117

 
1

 

GLOSSARY OF TERMS

We use the words “Progress Energy,” “we,” “us” or “our” with respect to certain information to indicate that such information relates to Progress Energy, Inc. and its subsidiaries on a consolidated basis. When appropriate, the parent holding company or the subsidiaries of Progress Energy are specifically identified on an unconsolidated basis as we discuss their various business activities.
 
The following abbreviations, acronyms or initialisms are used by the Progress Registrants:
 
TERM
DEFINITION
   
2009 Form 10-K
Progress Registrants’ annual report on Form 10-K for the fiscal year ended December 31, 2009
401(k)
Progress Energy 401(k) Savings & Stock Ownership Plan
AFUDC
Allowance for funds used during construction
ARO
Asset retirement obligation
ASLB
Atomic Safety and Licensing Board
Asset Purchase Agreement
Agreement by and among Global, Earthco and certain affiliates, and the Progress Affiliates as amended on August 23, 2000
ASC
FASB Accounting Standards Codification
ASU
Accounting Standards Update
Audit Committee
Audit and Corporate Performance Committee of Progress Energy’s board of directors
BART
Best Available Retrofit Technology
Base Revenues
Non-GAAP measure defined as operating revenues excluding clause recoverable regulatory returns, miscellaneous revenues and fuel and other pass-through revenues
Brunswick
PEC’s Brunswick Nuclear Plant
Btu
British thermal unit
CAA
Clean Air Act
CAIR
Clean Air Interstate Rule
CAMR
Clean Air Mercury Rule
CAVR
Clean Air Visibility Rule
CCRC
Capacity Cost-Recovery Clause
CERCLA or Superfund
Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended
Ceredo
Ceredo Synfuel LLC
CIGFUR
Carolina Industrial Group for Fair Utility Rates II
Clean Smokestacks Act
North Carolina Clean Smokestacks Act
the Code
Internal Revenue Code
CO2
Carbon dioxide
COL
Combined license
Corporate and Other
Corporate and Other segment primarily includes the Parent, Progress Energy Service Company and miscellaneous other nonregulated businesses
CR1 and CR2
PEF’s Crystal River Units No. 1 and No. 2 coal-fired steam turbines
CR3
PEF’s Crystal River Unit No. 3 Nuclear Plant
CR4 and CR5
PEF’s Crystal River Units No. 4 and No. 5 coal-fired steam turbines
CUCA
Carolina Utility Customer Association
CVO
Contingent value obligation
D.C. Court of Appeals
U.S. Court of Appeals for the District of Columbia Circuit
DOE
United States Department of Energy
DSM
Demand-side management
Earthco
Four coal-based solid synthetic fuels limited liability companies of which three were wholly owned
ECCR
Energy Conservation Cost Recovery Clause
ECRC
Environmental Cost Recovery Clause
 
 
 
2

 
 
EE
Energy efficiency
EIP
Equity Incentive Plan
EPACT
Energy Policy Act of 2005
EPC
Engineering, procurement and construction
ESOP
Employee Stock Ownership Plan
FASB
Financial Accounting Standards Board
FDEP
Florida Department of Environmental Protection
FERC
Federal Energy Regulatory Commission
FGT
Florida Gas Transmission Company, LLC
Fitch
Fitch Ratings
the Florida Global Case
U.S. Global, LLC v. Progress Energy, Inc. et al
Florida Progress
Florida Progress Corporation
FPSC
Florida Public Service Commission
FRCC
Florida Reliability Coordinating Council
Funding Corp.
Florida Progress Funding Corporation, a wholly owned subsidiary of Florida Progress
GAAP
Accounting principles generally accepted in the United States of America
GHG
Greenhouse gas
Global
U.S. Global, LLC
GridSouth
GridSouth Transco, LLC
GWh
Gigawatt-hours
Harris
PEC’s Shearon Harris Nuclear Plant
IPP
Progress Energy Investor Plus Plan
kV
Kilovolt
kVA
Kilovolt-ampere
kWh
Kilowatt-hours
Levy
PEF’s proposed nuclear plant in Levy County, Fla.
LIBOR
London Inter Bank Offered Rate
MACT
Maximum achievable control technology
MD&A
Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in PART I, Item 2 of this Form 10-Q
Medicare Act
Medicare Prescription Drug, Improvement and Modernization Act of 2003
MGP
Manufactured gas plant
MW
Megawatts
MWh
Megawatt-hours
Moody’s
Moody’s Investors Service, Inc.
NAAQS
National Ambient Air Quality Standards
NC REPS
North Carolina Renewable Energy and Energy Efficiency Portfolio Standard
NCUC
North Carolina Utilities Commission
NDT
Nuclear decommissioning trust
NEIL
Nuclear Electric Insurance Limited
NERC
North American Electric Reliability Corporation
North Carolina Global Case
Progress Synfuel Holdings, Inc. et al. v. U.S. Global, LLC
the Notes Guarantee
Florida Progress’ full and unconditional guarantee of the Subordinated Notes
NOx
Nitrogen oxides
NRC
United States Nuclear Regulatory Commission
O&M
Operation and maintenance expense
OATT
Open Access Transmission Tariff
OCI
Other comprehensive income
Ongoing Earnings
Non-GAAP financial measure defined as GAAP net income attributable to controlling interests after excluding discontinued operations and the effects of certain identified gains and charges
OPC
Florida’s Office of Public Counsel
 
 
 
3

 
 
OPEB
Postretirement benefits other than pensions
the Parent
Progress Energy, Inc. holding company on an unconsolidated basis
PEC
Carolina Power & Light Company d/b/a Progress Energy Carolinas, Inc.
PEF
Florida Power Corporation d/b/a Progress Energy Florida, Inc.
PESC
Progress Energy Service Company, LLC
Power Agency
North Carolina Eastern Municipal Power Agency
PPACA
Patient Protection and Affordable Care Act and the related Health Care and Education Reconciliation Act
Preferred Securities
7.10% Cumulative Quarterly Income Preferred Securities due 2039, Series A issued by the Trust
Preferred Securities Guarantee
Florida Progress’ guarantee of all distributions related to the Preferred Securities
Progress Affiliates
Five affiliated coal-based solid synthetic fuels facilities
Progress Energy
Progress Energy, Inc. and subsidiaries on a consolidated basis
Progress Registrants
The reporting registrants within the Progress Energy consolidated group. Collectively, Progress Energy, Inc., PEC and PEF
Progress Fuels
Progress Fuels Corporation, formerly Electric Fuels Corporation
PRP
Potentially responsible party, as defined in CERCLA
PSSP
Performance Share Sub-Plan
PUHCA 2005
Public Utility Holding Company Act of 2005
PVI
Progress Energy Ventures, Inc., formerly referred to as Progress Ventures, Inc.
QF
Qualifying facility
RCA
Revolving credit agreement
Reagents
Commodities such as ammonia and limestone used in emissions control technologies
REPS
Renewable energy portfolio standard
RDS
Retiree Drug Subsidy related to benefits under Medicare Part D
Robinson
PEC’s Robinson Nuclear Plant
ROE
Return on equity
RSU
Restricted stock unit
RTO
Regional transmission organization
SCPSC
Public Service Commission of South Carolina
Section 29
Section 29 of the Code
Section 29/45K
General business tax credits earned after December 31, 2005 for synthetic fuels production in accordance with Section 29
Section 316(b)
Section 316(b) of the Clean Water Act
(See Note/s “#”)
For all sections, this is a cross-reference to the Combined Notes to the Financial Statements contained in PART I, Item I of this Form 10-Q
SERC
SERC Reliability Corporation
S&P
Standard & Poor’s Rating Services
SNG
Southern Natural Gas Company
SO2
Sulfur dioxide
Subordinated Notes
7.10% Junior Subordinated Deferrable Interest Notes due 2039 issued by Funding Corp.
Tax Agreement
Intercompany Income Tax Allocation Agreement
Terminals
Coal terminals and docks in West Virginia and Kentucky, which were sold on March 7, 2008
the Trust
FPC Capital I
the Utilities
Collectively, PEC and PEF
VIE
Variable interest entity
Ward
Ward Transformer site located in Raleigh, N.C.
Ward OU1
Operable unit for stream segments downstream from the Ward site
Ward OU2
Operable unit for further investigation at the Ward facility and certain adjacent areas


 
4

 

SAFE HARBOR FOR FORWARD-LOOKING STATEMENTS
 
In this combined report, each of the Progress Registrants makes forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. The matters discussed throughout this combined Form 10-Q that are not historical facts are forward looking and, accordingly, 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. Any forward-looking statement is based on information current as of the date of this report and speaks only as of the date on which such statement is made, and the Progress Registrants undertake no obligation to update any forward-looking statement or statements to reflect events or circumstances after the date on which such statement is made.
 
In addition, examples of forward-looking statements discussed in this Form 10-Q include, but are not limited to, statements made in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” (MD&A) including, but not limited to, statements under the sub-heading “Results of Operations” about trends and uncertainties; “Liquidity and Capital Resources” about operating cash flows, future liquidity requirements and estimated capital expenditures and “Other Matters” about goodwill, changes in the regulatory environment, meeting anticipated demand in our regulated service territories, potential nuclear construction, the effects of new environmental regulations, and our synthetic fuel tax credits.
 
Examples of factors that you should consider with respect to any forward-looking statements made throughout this document include, but are not limited to, the following: the impact of fluid and complex laws and regulations, including those relating to the environment and energy policy; our ability to recover eligible costs and earn an adequate return on investment through the regulatory process; the ability to successfully operate electric generating facilities and deliver electricity to customers; the impact on our facilities and businesses from a terrorist attack; the ability to meet the anticipated future need for additional baseload generation and associated transmission facilities in our regulated service territories and the accompanying regulatory and financial risks; our ability to meet current and future renewable energy requirements; the inherent risks associated with the operation and potential construction of nuclear facilities, including environmental, health, safety, regulatory and financial risks; the financial resources and capital needed to comply with environmental laws and regulations; risks associated with climate change; weather and drought conditions that directly influence the production, delivery and demand for electricity; recurring seasonal fluctuations in demand for electricity; the ability to recover in a timely manner, if at all, costs associated with future significant weather events through the regulatory process; fluctuations in the price of energy commodities and purchased power and our ability to recover such costs through the regulatory process; the Progress Registrants’ ability to control costs, including operations and maintenance expense (O&M) and large construction projects; the ability of our subsidiaries to pay upstream dividends or distributions to Progress Energy, Inc. holding company (the Parent); current economic conditions; the ability to successfully access capital markets on favorable terms; the stability of commercial credit markets and our access to short- and long-term credit; the impact that increases in leverage or reductions in cash flow may have on each of the Progress Registrants; the Progress Registrants’ ability to maintain their current credit ratings and the impacts in the event their credit ratings are downgraded; the investment performance of our nuclear decommissioning trust (NDT) funds; the investment performance of the assets of our pension and benefit plans and resulting impact on future funding requirements; the impact of potential goodwill impairments; our ability to fully utilize tax credits generated from the previous production and sale of qualifying synthetic fuels under Internal Revenue Code Section 29/45K (Section 29/45K); and the outcome of any ongoing or future litigation or similar disputes and the impact of any such outcome or related settlements. Many of these risks similarly impact our nonreporting subsidiaries.
 
These and other risk factors are detailed from time to time in the Progress Registrants’ filings with the SEC. Many, but not all, of the factors that may impact actual results are discussed in the Risk Factors section in the Progress Registrants’ annual report on Form 10-K for the fiscal year ended December 31, 2009 (2009 Form 10-K), which was filed with the SEC on February 26, 2010, and is updated for material changes, if any, in this Form 10-Q and in our other SEC filings. Before purchasing securities of the Progress Registrants, you should carefully consider the risks and other information in the documents the Progress Registrants file with the SEC from time to time. Each of the described risks could result in a decrease in the value of the securities of the Progress Registrants and your investment therein.
 

 
5

 

PART I.  FINANCIAL INFORMATION

ITEM 1.                 FINANCIAL STATEMENTS
 
PROGRESS ENERGY, INC.
 
UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
 
June 30, 2010
 
 
 
 
   
 
   
 
   
 
 
 
 
 
Three months ended June 30,
   
Six months ended June 30,
 
(in millions except per share data)
 
2010
   
2009
   
2010
   
2009
 
Operating revenues
  $ 2,372     $ 2,312     $ 4,907     $ 4,754  
Operating expenses
                               
Fuel used in electric generation
    743       826       1,639       1,780  
Purchased power
    315       257       578       474  
Operation and maintenance
    505       484       985       937  
Depreciation, amortization and accretion
    233       226       479       506  
Taxes other than on income
    133       130       287       273  
Other
    3       10       5       12  
Total operating expenses
    1,932       1,933       3,973       3,982  
Operating income
    440       379       934       772  
Other income
                               
Interest income
    1       2       3       6  
Allowance for equity funds used during construction
    25       36       46       75  
Other, net
    5       13       -       12  
Total other income, net
    31       51       49       93  
Interest charges
                               
Interest charges
    199       181       390       360  
Allowance for borrowed funds used during construction
    (7 )     (12 )     (16 )     (24 )
Total interest charges, net
    192       169       374       336  
Income from continuing operations before income tax
    279       261       609       529  
Income tax expense
    98       86       237       171  
Income from continuing operations before cumulative effect
  of change in accounting principle
    181       175       372       358  
Discontinued operations, net of tax
    (1 )     (1 )     -       (1 )
Cumulative effect of change in accounting principle, net of tax
    -       -       (2 )     -  
Net income
    180       174       370       357  
Net income attributable to noncontrolling interests, net of tax
    -       -       -       (1 )
Net income attributable to controlling interests
  $ 180     $ 174     $ 370     $ 356  
Average common shares outstanding – basic
    290       280       287       278  
Basic and diluted earnings per common share
                               
Income from continuing operations attributable to controlling
  interests, net of tax
  $ 0.62     $ 0.62     $ 1.29     $ 1.28  
Discontinued operations attributable to controlling interests,
  net of tax
    -       -       -       -  
Net income attributable to controlling interests
  $ 0.62     $ 0.62     $ 1.29     $ 1.28  
Dividends declared per common share
  $ 0.620     $ 0.620     $ 1.240     $ 1.240  
Amounts attributable to controlling interests
                               
Income from continuing operations, net of tax
  $ 181     $ 175     $ 370     $ 357  
Discontinued operations, net of tax
    (1 )     (1 )     -       (1 )
Net income attributable to controlling interests
  $ 180     $ 174     $ 370     $ 356  
 
 
See Notes to Progress Energy, Inc. Unaudited Condensed Consolidated Interim Financial Statements.
 

 
6

 

PROGRESS ENERGY, INC.
 
 
(in millions)
 
June 30, 2010
   
December 31, 2009
 
ASSETS
 
 
   
 
 
Utility plant
 
 
   
 
 
Utility plant in service
  $ 29,728     $ 28,918  
Accumulated depreciation
    (11,777 )     (11,576 )
Utility plant in service, net
    17,951       17,342  
Held for future use
    48       47  
Construction work in progress
    1,914       1,790  
Nuclear fuel, net of amortization
    599       554  
Total utility plant, net
    20,512       19,733  
Current assets
               
Cash and cash equivalents
    690       725  
Receivables, net
    999       800  
Inventory
    1,237       1,325  
Regulatory assets
    324       142  
Derivative collateral posted
    194       146  
Income taxes receivable
    21       145  
Prepayments and other current assets
    195       248  
Total current assets
    3,660       3,531  
Deferred debits and other assets
               
Regulatory assets
    2,211       2,179  
Nuclear decommissioning trust funds
    1,341       1,367  
Miscellaneous other property and investments
    437       438  
Goodwill
    3,655       3,655  
Other assets and deferred debits
    321       333  
Total deferred debits and other assets
    7,965       7,972  
Total assets
  $ 32,137     $ 31,236  
CAPITALIZATION AND LIABILITIES
               
Common stock equity
               
Common stock without par value, 500 million shares authorized, 293
  million and 281 million shares issued and outstanding, respectively
  $ 7,304     $ 6,873  
Unearned ESOP shares (- and 1 million shares, respectively)
    -       (12 )
Accumulated other comprehensive loss
    (131 )     (87 )
Retained earnings
    2,684       2,675  
Total common stock equity
    9,857       9,449  
Noncontrolling interests
    2       6  
Total equity
    9,859       9,455  
Preferred stock of subsidiaries
    93       93  
Long-term debt, affiliate
    272       272  
Long-term debt, net
    11,664       11,779  
Total capitalization
    21,888       21,599  
Current liabilities
               
Current portion of long-term debt
    705       406  
Short-term debt
    -       140  
Accounts payable
    954       835  
Interest accrued
    209       206  
Dividends declared
    182       175  
Customer deposits
    316       300  
Derivative liabilities
    250       190  
Accrued compensation and other benefits
    100       167  
Other current liabilities
    387       239  
Total current liabilities
    3,103       2,658  
Deferred credits and other liabilities
               
Noncurrent income tax liabilities
    1,288       1,196  
Accumulated deferred investment tax credits
    113       117  
Regulatory liabilities
    2,479       2,510  
Asset retirement obligations
    1,200       1,170  
Accrued pension and other benefits
    1,330       1,339  
Derivative liabilities
    324       240  
Other liabilities and deferred credits
    412       407  
Total deferred credits and other liabilities
    7,146       6,979  
Commitments and contingencies (Notes 12 and 13)
               
Total capitalization and liabilities
  $ 32,137     $ 31,236  
 
 
 
See Notes to Progress Energy, Inc. Unaudited Condensed Consolidated Interim Financial Statements.
 

 
7

 

PROGRESS ENERGY, INC.
 
 
(in millions)
 
 
   
 
 
Six months ended June 30
 
2010
   
2009
 
Operating activities
 
 
   
 
 
Net income
  $ 370     $ 357  
Adjustments to reconcile net income to net cash provided by operating activities
               
Depreciation, amortization and accretion
    555       576  
Deferred income taxes and investment tax credits, net
    117       13  
Deferred fuel (credit) cost
    (137 )     129  
Allowance for equity funds used during construction
    (46 )     (75 )
Other adjustments to net income
    136       118  
Cash (used) provided by changes in operating assets and liabilities
               
Receivables
    (126 )     (36 )
Inventory
    87       (118 )
Derivative collateral posted
    (40 )     47  
Other assets
    (13 )     41  
Income taxes, net
    152       110  
Accounts payable
    110       (30 )
Other liabilities
    (6 )     (37 )
Net cash provided by operating activities
    1,159       1,095  
Investing activities
               
Gross property additions
    (1,116 )     (1,172 )
Nuclear fuel additions
    (119 )     (60 )
Purchases of available-for-sale securities and other investments
    (3,815 )     (982 )
Proceeds from available-for-sale securities and other investments
    3,792       960  
Other investing activities
    14       (3 )
Net cash used by investing activities
    (1,244 )     (1,257 )
Financing activities
               
Issuance of common stock, net
    405       545  
Dividends paid on common stock
    (354 )     (347 )
Payments of short-term debt with original maturities greater than 90 days
    -       (129 )
Net decrease in short-term debt
    (140 )     (521 )
Proceeds from issuance of long-term debt, net
    591       1,337  
Retirement of long-term debt
    (400 )     (400 )
Other financing activities
    (52 )     (51 )
Net cash provided by financing activities
    50       434  
Net (decrease) increase in cash and cash equivalents
    (35 )     272  
Cash and cash equivalents at beginning of period
    725       180  
Cash and cash equivalents at end of period
  $ 690     $ 452  
Supplemental disclosures
               
Significant noncash transactions
               
Accrued property additions
  $ 274     $ 301  
 
 
See Notes to Progress Energy, Inc. Unaudited Condensed Consolidated Interim Financial Statements.
 

 
8

 

CAROLINA POWER & LIGHT COMPANY
 
d/b/a PROGRESS ENERGY CAROLINAS, INC.
 
UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
 
June 30, 2010
 
 
 
 
   
 
   
 
   
 
 
 
 
 
Three months ended June 30,
   
Six months ended June 30,
 
(in millions)
 
2010
   
2009
   
2010
   
2009
 
Operating revenues
  $ 1,117     $ 1,076     $ 2,380     $ 2,254  
Operating expenses
                               
Fuel used in electric generation
    375       383       858       825  
Purchased power
    76       57       126       114  
Operation and maintenance
    300       283       585       542  
Depreciation, amortization and accretion
    120       118       238       235  
Taxes other than on income
    51       51       111       105  
Other
    (1 )     2       -       2  
Total operating expenses
    921       894       1,918       1,823  
Operating income
    196       182       462       431  
Other income (expense)
                               
Interest income
    1       1       2       3  
Allowance for equity funds used during construction
    15       7       28       16  
Other, net
    4       4       (3 )     (3 )
Total other income, net
    20       12       27       16  
Interest charges
                               
Interest charges
    53       52       103       109  
Allowance for borrowed funds used during construction
    (5 )     (3 )     (9 )     (6 )
Total interest charges, net
    48       49       94       103  
Income before income tax
    168       145       395       344  
Income tax expense
    57       51       146       122  
Income before cumulative effect of change in accounting
  principle
    111       94       249       222  
Cumulative effect of change in accounting principle, net of tax
    -       -       (2 )     -  
Net income
    111       94       247       222  
Net loss attributable to noncontrolling interests, net of tax
    1       1       3       1  
Net income attributable to controlling interests
    112       95       250       223  
Preferred stock dividend requirement
    -       -       (1 )     (1 )
Net income available to parent
  $ 112     $ 95     $ 249     $ 222  
 
 
See Notes to Progress Energy Carolinas, Inc. Unaudited Condensed Consolidated Interim Financial Statements.
 

 
9

 

CAROLINA POWER & LIGHT COMPANY d/b/a PROGRESS ENERGY CAROLINAS, INC.
 
 
(in millions)
 
June 30, 2010
   
December 31, 2009
 
ASSETS
 
 
   
 
 
Utility plant
 
 
   
 
 
Utility plant in service
  $ 16,553     $ 16,297  
Accumulated depreciation
    (7,631 )     (7,520 )
Utility plant in service, net
    8,922       8,777  
Held for future use
    12       11  
Construction work in progress
    1,060       702  
Nuclear fuel, net of amortization
    430       396  
Total utility plant, net
    10,424       9,886  
Current assets
               
Cash and cash equivalents
    206       35  
Receivables, net
    508       442  
Receivables from affiliated companies
    15       33  
Notes receivable from affiliated companies
    2       204  
Inventory
    591       677  
Deferred fuel cost
    101       88  
Income taxes receivable
    26       38  
Prepayments and other current assets
    61       61  
Total current assets
    1,510       1,578  
Deferred debits and other assets
               
Regulatory assets
    894       873  
Nuclear decommissioning trust funds
    859       871  
Miscellaneous other property and investments
    187       199  
Other assets and deferred debits
    92       95  
Total deferred debits and other assets
    2,032       2,038  
Total assets
  $ 13,966     $ 13,502  
CAPITALIZATION AND LIABILITIES
               
Common stock equity
               
Common stock without par value, 200 million shares authorized, 160
  million shares issued and outstanding
  $ 2,125     $ 2,108  
Unearned ESOP shares
    -       (12 )
Accumulated other comprehensive loss
    (41 )     (27 )
Retained earnings
    2,785       2,588  
Total common stock equity
    4,869       4,657  
Noncontrolling interests
    -       3  
Total equity
    4,869       4,660  
Preferred stock
    59       59  
Long-term debt, net
    3,688       3,703  
Total capitalization
    8,616       8,422  
Current liabilities
               
Current portion of long-term debt
    6       6  
Accounts payable
    426       355  
Payables to affiliated companies
    87       72  
Interest accrued
    72       70  
Customer deposits
    101       95  
Derivative liabilities
    48       29  
Accrued compensation and other benefits
    53       86  
Other current liabilities
    122       50  
Total current liabilities
    915       763  
Deferred credits and other liabilities
               
Noncurrent income tax liabilities
    1,327       1,258  
Accumulated deferred investment tax credits
    107       110  
Regulatory liabilities
    1,307       1,293  
Asset retirement obligations
    822       801  
Accrued pension and other benefits
    703       708  
Other liabilities and deferred credits
    169       147  
Total deferred credits and other liabilities
    4,435       4,317  
Commitments and contingencies (Notes 12 and 13)
               
Total capitalization and liabilities
  $ 13,966     $ 13,502  
 
 
 
See Notes to Progress Energy Carolinas, Inc. Unaudited Condensed Consolidated Interim Financial Statements.
 

 
10

 

CAROLINA POWER & LIGHT COMPANY d/b/a PROGRESS ENERGY CAROLINAS, INC.
 
 
(in millions)
 
 
   
 
 
Six months ended June 30
 
2010
   
2009
 
Operating activities
 
 
   
 
 
Net income
  $ 247     $ 222  
Adjustments to reconcile net income to net cash provided by operating activities
               
Depreciation, amortization and accretion
    294       286  
Deferred income taxes and investment tax credits, net
    55       10  
Deferred fuel cost
    21       92  
Allowance for equity funds used during construction
    (28 )     (16 )
Other adjustments to net income
    47       52  
Cash (used) provided by changes in operating assets and liabilities
               
Receivables
    (39 )     42  
Receivables from affiliated companies
    18       13  
Inventory
    85       (60 )
Other assets
    (18 )     32  
Income taxes, net
    12       63  
Accounts payable
    20       (43 )
Payables to affiliated companies
    15       (24 )
Other liabilities
    (12 )     (23 )
Net cash provided by operating activities
    717       646  
Investing activities
               
Gross property additions
    (580 )     (402 )
Nuclear fuel additions
    (106 )     (42 )
Purchases of available-for-sale securities and other investments
    (252 )     (517 )
Proceeds from available-for-sale securities and other investments
    227       492  
Changes in advances to affiliated companies
    202       (75 )
Net cash used by investing activities
    (509 )     (544 )
Financing activities
               
Dividends paid on preferred stock
    (1 )     (1 )
Dividends paid to parent
    (50 )     (200 )
Net decrease in short-term debt
    -       (110 )
Proceeds from issuance of long-term debt, net
    -       595  
Retirement of long-term debt
    -       (400 )
Contributions from parent
    14       15  
Other financing activities
    -       (1 )
Net cash used by financing activities
    (37 )     (102 )
Net increase in cash and cash equivalents
    171       -  
Cash and cash equivalents at beginning of period
    35       18  
Cash and cash equivalents at end of period
  $ 206     $ 18  
Supplemental disclosures
               
Significant noncash transactions
               
Accrued property additions
  $ 158     $ 128  
 
 
See Notes to Progress Energy Carolinas, Inc. Unaudited Condensed Consolidated Interim Financial Statements.
 

 
11

 

FLORIDA POWER CORPORATION
 
d/b/a PROGRESS ENERGY FLORIDA, INC.
 
UNAUDITED CONDENSED INTERIM FINANCIAL STATEMENTS
 
June 30, 2010
 
 
 
 
   
 
   
 
   
 
 
 
 
 
Three months ended June 30,
   
Six months ended June 30,
 
(in millions)
 
2010
   
2009
   
2010
   
2009
 
Operating revenues
  $ 1,252     $ 1,234     $ 2,522     $ 2,496  
Operating expenses
                               
Fuel used in electric generation
    368       443       781       955  
Purchased power
    239       200       452       360  
Operation and maintenance
    208       204       413       406  
Depreciation, amortization and accretion
    110       105       234       265  
Taxes other than on income
    83       80       176       168  
Other
    -       7       -       7  
Total operating expenses
    1,008       1,039       2,056       2,161  
Operating income
    244       195       466       335  
Other income
                               
Interest income
    1       -       1       1  
Allowance for equity funds used during construction
    10       29       18       59  
Other, net
    1       7       3       7  
Total other income, net
    12       36       22       67  
Interest charges
                               
Interest charges
    70       64       134       131  
Allowance for borrowed funds used during construction
    (2 )     (9 )     (7 )     (18 )
Total interest charges, net
    68       55       127       113  
Income before income tax
    188       176       361       289  
Income tax expense
    69       57       140       81  
Net income
    119       119       221       208  
Preferred stock dividend requirement
    -       -       (1 )     (1 )
Net income available to parent
  $ 119     $ 119     $ 220     $ 207  
 
 
See Notes to Progress Energy Florida, Inc. Unaudited Condensed Interim Financial Statements.
 

 
12

 

FLORIDA POWER CORPORATION d/b/a PROGRESS ENERGY FLORIDA, INC.
 
 
(in millions)
 
June 30, 2010
   
December 31, 2009
 
ASSETS
 
 
   
 
 
Utility plant
 
 
   
 
 
Utility plant in service
  $ 12,993     $ 12,438  
Accumulated depreciation
    (4,075 )     (3,987 )
Utility plant in service, net
    8,918       8,451  
Held for future use
    36       36  
Construction work in progress
    854       1,088  
Nuclear fuel, net of amortization
    169       158  
Total utility plant, net
    9,977       9,733  
Current assets
               
Cash and cash equivalents
    113       17  
Receivables, net
    488       356  
Receivables from affiliated companies
    6       8  
Inventory
    647       648  
Regulatory assets
    223       54  
Derivative collateral posted
    174       139  
Deferred tax assets
    78       115  
Prepayments and other current assets
    18       80  
Total current assets
    1,747       1,417  
Deferred debits and other assets
               
Regulatory assets
    1,317       1,307  
Nuclear decommissioning trust funds
    482       496  
Miscellaneous other property and investments
    43       42  
Other assets and deferred debits
    127       105  
Total deferred debits and other assets
    1,969       1,950  
Total assets
  $ 13,693     $ 13,100  
CAPITALIZATION AND LIABILITIES
               
Common stock equity
               
Common stock without par value, 60 million shares authorized,
  100 shares issued and outstanding
  $ 1,747     $ 1,744  
Accumulated other comprehensive (loss) income
    (7 )     3  
Retained earnings
    2,912       2,743  
Total common stock equity
    4,652       4,490  
Preferred stock
    34       34  
Long-term debt, net
    4,481       3,883  
Total capitalization
    9,167       8,407  
Current liabilities
               
Current portion of long-term debt
    -       300  
Notes payable to affiliated companies
    7       221  
Accounts payable
    509       451  
Payables to affiliated companies
    56       62  
Interest accrued
    76       72  
Customer deposits
    215       205  
Derivative liabilities
    179       161  
Accrued compensation and other benefits
    29       53  
Other current liabilities
    247       89  
Total current liabilities
    1,318       1,614  
Deferred credits and other liabilities
               
Noncurrent income tax liabilities
    877       767  
Regulatory liabilities
    1,060       1,103  
Asset retirement obligations
    378       369  
Accrued pension and other benefits
    389       395  
Capital lease obligations
    204       208  
Derivative liabilities
    223       174  
Other liabilities and deferred credits
    77       63  
Total deferred credits and other liabilities
    3,208       3,079  
Commitments and contingencies (Notes 12 and 13)
               
Total capitalization and liabilities
  $ 13,693     $ 13,100  
 
 
 
See Notes to Progress Energy Florida, Inc. Unaudited Condensed Interim Financial Statements.
 

 
13

 

FLORIDA POWER CORPORATION d/b/a PROGRESS ENERGY FLORIDA, INC.
 
 
(in millions)
 
 
   
 
 
Six months ended June 30
 
2010
   
2009
 
Operating activities
 
 
   
 
 
Net income
  $ 221     $ 208  
Adjustments to reconcile net income to net cash provided by operating activities
               
Depreciation, amortization and accretion
    244       280  
Deferred income taxes and investment tax credits, net
    138       (41 )
Deferred fuel (credit) cost
    (158 )     37  
Allowance for equity funds used during construction
    (18 )     (59 )
Other adjustments to net income
    62       47  
Cash (used) provided by changes in operating assets and liabilities
               
Receivables
    (87 )     (76 )
Receivables from affiliated companies
    2       8  
Inventory
    1       (58 )
Derivative collateral posted
    (27 )     38  
Other assets
    (10 )     22  
Income taxes, net
    122       16  
Accounts payable
    98       16  
Payables to affiliated companies
    (6 )     (7 )
Other liabilities
    28       14  
Net cash provided by operating activities
    610       445  
Investing activities
               
Gross property additions
    (543 )     (770 )
Nuclear fuel additions
    (13 )     (18 )
Purchases of available-for-sale securities and other investments
    (3,505 )     (415 )
Proceeds from available-for-sale securities and other investments
    3,508       420  
Other investing activities
    15       (4 )
Net cash used by investing activities
    (538 )     (787 )
Financing activities
               
Dividends paid on preferred stock
    (1 )     (1 )
Dividends paid to parent
    (50 )     -  
Net decrease in short-term debt
    -       (371 )
Proceeds from issuance of long-term debt, net
    591       -  
Retirement of long-term debt
    (300 )     -  
Changes in advances from affiliated companies
    (214 )     406  
Contributions from parent
    -       310  
Other financing activities
    (2 )     (2 )
Net cash provided by financing activities
    24       342  
Net increase in cash and cash equivalents
    96       -  
Cash and cash equivalents at beginning of period
    17       19  
Cash and cash equivalents at end of period
  $ 113     $ 19  
Supplemental disclosures
               
Significant noncash transactions
               
Accrued property additions
  $ 113     $ 172  
 
 
See Notes to Progress Energy Florida, Inc. Unaudited Condensed Interim Financial Statements.
 

 
14

 

PROGRESS ENERGY, INC.
CAROLINA POWER & LIGHT COMPANY d/b/a/ PROGRESS ENERGY CAROLINAS, INC.
FLORIDA POWER CORPORATION d/b/a PROGRESS ENERGY FLORIDA, INC.
COMBINED NOTES TO UNAUDITED CONDENSED INTERIM FINANCIAL STATEMENTS

INDEX TO APPLICABLE COMBINED NOTES TO UNAUDITED CONDENSED INTERIM FINANCIAL STATEMENTS BY REGISTRANT

Each of the following combined notes to the unaudited condensed interim financial statements of the Progress Registrants are applicable to Progress Energy, Inc. but not to each of PEC and PEF. The following table sets forth which notes are applicable to each of PEC and PEF. The notes that are not listed below for PEC or PEF are not, and shall not be deemed to be, part of PEC’s or PEF’s financial statements contained herein.
 
Registrant
Applicable Notes
   
PEC
1 through 9 and 11 through 13
   
PEF
1 through 9 and 11 through 13


 
15

 

PROGRESS ENERGY, INC.
CAROLINA POWER & LIGHT COMPANY d/b/a PROGRESS ENERGY CAROLINAS, INC.
FLORIDA POWER CORPORATION d/b/a PROGRESS ENERGY FLORIDA, INC.
COMBINED NOTES TO UNAUDITED INTERIM FINANCIAL STATEMENTS
 
1.
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
A.
ORGANIZATION
 
In this report, Progress Energy, which includes Progress Energy, Inc. holding company (the Parent) and its regulated and nonregulated subsidiaries on a consolidated basis, is at times referred to as “we,” “us” or “our.” When discussing Progress Energy’s financial information, it necessarily includes the results of Carolina Power & Light Company d/b/a Progress Energy Carolinas, Inc. (PEC) and Florida Power Corporation d/b/a Progress Energy Florida, Inc. (PEF) (collectively, the Utilities). The term “Progress Registrants” refers to each of the three separate registrants: Progress Energy, PEC and PEF. The information in these combined notes relates to each of the Progress Registrants as noted in the Index to Applicable Combined Notes to Unaudited Condensed Interim Financial Statements by Registrant. However, neither of the Utilities makes any representation as to information related solely to Progress Energy or the subsidiaries of Progress Energy other than itself.
 
PROGRESS ENERGY
 
The Parent is a holding company headquartered in Raleigh, N.C. As such, we are subject to regulation by the Federal Energy Regulatory Commission (FERC) under the regulatory provisions of the Public Utility Holding Company Act of 2005 (PUHCA 2005).
 
Our reportable segments are PEC and PEF, both of which are primarily engaged in the generation, transmission, distribution and sale of electricity. The Corporate and Other segment primarily includes amounts applicable to the activities of the Parent and Progress Energy Service Company, LLC (PESC) and other miscellaneous nonregulated businesses (Corporate and Other) that do not separately meet the quantitative disclosure requirements as a reportable business segment. See Note 10 for further information about our segments.
 
PEC
 
PEC is a regulated public utility primarily engaged in the generation, transmission, distribution and sale of electricity in portions of North Carolina and South Carolina. PEC’s subsidiaries are involved in insignificant nonregulated business activities. PEC is subject to the regulatory jurisdiction of the North Carolina Utilities Commission (NCUC), Public Service Commission of South Carolina (SCPSC), the United States Nuclear Regulatory Commission (NRC) and the FERC.
 
PEF
 
PEF is a regulated public utility primarily engaged in the generation, transmission, distribution and sale of electricity in west central Florida. PEF is subject to the regulatory jurisdiction of the Florida Public Service Commission (FPSC), the NRC and the FERC.
 
B.
BASIS OF PRESENTATION
 
These financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) for interim financial information and with the instructions to Form 10-Q and Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for annual financial statements. The December 31, 2009 condensed balance sheet data was derived from audited financial statements but does not include all disclosures required by GAAP. Because the accompanying interim financial statements do not include all of the information and footnotes required by GAAP for annual financial statements, they should be read in conjunction with the audited financial statements and notes thereto included in the Progress Registrants’ annual report on Form 10-K for the fiscal year ended December 31, 2009 (2009 Form 10-K).
 
 
16

 
 
The Utilities collect from customers certain excise taxes levied by the state or local government upon the customers. The Utilities account for sales and use tax on a net basis and gross receipts tax, franchise taxes and other excise taxes on a gross basis.
 
The amount of gross receipts tax, franchise taxes and other excise taxes included in electric operating revenues and taxes other than on income in the statements of income were as follows:
 
 
 
   
 
   
 
   
 
 
 
 
Three months ended June 30,
   
Six months ended June 30,
 
(in millions)
 
2010
   
2009
   
2010
   
2009
 
Progress Energy
  $ 81     $ 77     $ 164     $ 156  
PEC
    27       26       57       52  
PEF
    54       51       107       104  
 
                               
The amounts included in these financial statements are unaudited but, in the opinion of management, reflect all adjustments necessary to fairly present the Progress Registrants’ financial position and results of operations for the interim periods. Unless otherwise noted, all adjustments are normal and recurring in nature. Due to seasonal weather variations, the impact of regulatory orders received, and the timing of outages of electric generating units, especially nuclear-fueled units, the results of operations for interim periods are not necessarily indicative of amounts expected for the entire year or future periods.
 
In preparing financial statements that conform to GAAP, management must make estimates and assumptions that affect the reported amounts of assets and liabilities, the reported amounts of revenues and expenses and the disclosure of contingent assets and liabilities at the date of the financial statements. Actual results could differ from those estimates.
 
Certain amounts for 2009 have been reclassified to conform to the 2010 presentation.
 
C.
CONSOLIDATION OF VARIABLE INTEREST ENTITIES
 
We consolidate all voting interest entities in which we own a majority voting interest and all variable interest entities (VIEs) for which we are the primary beneficiary. We determine whether we are the primary beneficiary of a VIE through a qualitative analysis that identifies which variable interest holder has the controlling financial interest in the VIE. The variable interest holder who has both of the following has the controlling financial interest and is the primary beneficiary: (1) the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance and (2) the obligation to absorb losses of, or the right to receive benefits from, the VIE that could potentially be significant to the VIE. In performing our analysis, we consider all relevant facts and circumstances, including: the design and activities of the VIE, the terms of the contracts the VIE has entered into, the nature of the VIE’s variable interests issued and how they were negotiated with or marketed to potential investors, and which parties participated significantly in the design or redesign of the entity.
 
In June 2009, the Financial Accounting Standards Board (FASB) issued new guidance which made significant changes to the model for determining who should consolidate a VIE and addressed how often this assessment should be performed. The guidance was effective for us on January 1, 2010 (see Note 2). As a result of the adoption, we and PEC deconsolidated two limited partnerships that qualify for federal affordable housing and historic tax credits under Section 42 of the Internal Revenue Code (the Code) and recognized a $(2) million cumulative effect adjustment during the six months ended June 30, 2010.
 
PROGRESS ENERGY
 
Progress Energy, through its subsidiary PEC, is the managing member and primary beneficiary of, and consolidates a limited partnership which qualifies for federal affordable housing and historic tax credits under Section 42 of the Code. Our variable interests are debt and equity investments in the VIE. There were no changes to our assessment