Eversource 2002 Annual Report Download - page 60

F. Nuclear Decommissioning and Plant Closure Costs
In conjunction with the Millstone, Seabrook and VYNPC nuclear generation
asset divestitures, the applicable liabilities and nuclear decommissioning
trusts were transferred to the purchasers and the purchasers agreed to
assume responsibility for decommissioning their respective units.
During 2002, NU, along with the other joint owners, were notified by
the Yankee Companies that the estimated cost of decommissioning the
units owned by CYAPC,YAEC and MYAPC increased in total by
approximately $380 million over prior estimates due to higher anticipated
costs for spent fuel storage, security and liability and property insurance.
NU’s share of this increase would total $171.6 million. Following rate
cases to be filed by the Yankee Companies with the FERC, NU will seek
recovery of the higher decommissioning costs from retail customers
through the appropriate state regulatory agency. At December 31, 2002
and 2001, NU’s remaining estimated obligations, for decommissioning
for the units owned by CYAPC,YAEC and MYAPC, which have been
shut down were $354.5 million and $216.6 million, respectively.
G. Consolidated Edison, Inc. Merger Litigation
Certain gain and loss contingencies exist with regard to the litigation
related to the merger agreement between NU and Consolidated
Edison, Inc. (Con Edison).
On March 5, 2001, Con Edison advised NU that it was unwilling to close
its merger with NU on the terms set forth in the parties’October 13, 1999
Agreement and Plan of Merger, as amended and restated as of January 11,
2000 (the Merger Agreement). On March 12, 2001, NU filed suit
against Con Edison in the United States District Court for the Southern
District of New York (the District Court) seeking damages in excess of
$1 billion arising from Con Edison’s breach of the Merger Agreement.
On May 11, 2001, Con Edison filed an amended complaint seeking
damages for breach of contract, fraudulent inducement and negligent
misrepresentation. Con Edison has claimed that it is entitled to recover
a portion of the merger synergy savings estimated to have a net present
value of in excess of $700 million. NU disputes both Con Edison’s
entitlement to any damages as well as its method of computing its
alleged damages.
The companies have completed discovery in the litigation. Motions for
summary judgment were argued before the District Court on February 4,
2002. No trial date has been set. At this stage of the litigation, management
can predict neither the outcome of this matter nor its ultimate effect on NU.
For further information regarding this litigation, see NU’s 2002 report
on Form 10-K, Item 3, “Legal Proceedings.”
9. Fair Value of Financial Instruments
The following methods and assumptions were used to estimate the fair
value of each of the following financial instruments:
Cash and Cash Equivalents: The carrying amounts approximate fair value
due to the short-term nature of cash and cash equivalents.
SERP Investments: Investments held for the benefit of the SERP are
recorded at fair market value based upon quoted market prices. The
investments having a cost basis of $17.9 million and $7.4 million held
for benefit of the SERP were recorded at their fair market values at
December 31, 2002 and 2001, of $17.8 million and $9 million, respectively.
For information regarding the SERP liabilities, see Note 4E, “Employee
Benefits – Supplemental Executive Retirement and Other Plans” to the
consolidated financial statements.
Preferred Stock, Long-Term Debt and Rate Reduction Bonds: The fair value
of NU’s fixed-rate securities is based upon the quoted market price for
those issues or similar issues. Adjustable rate securities are assumed to
have a fair value equal to their carrying value. The carrying amounts of
NU’s financial instruments and the estimated fair values are as follows:
At December 31, 2002
(Millions of Dollars) Carrying Amount Fair Value
Preferred stock not subject
to mandatory redemption $ 116.2 $ 84.0
Long-term debt –
First mortgage bonds 771.0 810.0
Other long-term debt 1,577.2 1,597.8
Rate reduction bonds 1,899.3 2,080.6
At December 31, 2001
(Millions of Dollars) Carrying Amount Fair Value
Preferred stock not subject
to mandatory redemption $ 116.2 $ 62.4
Long-term debt –
First mortgage bonds 795.9 847.2
Other long-term debt 1,552.1 1,554.6
Rate reduction bonds 2,018.4 2,061.8
Other Financial Instruments: The carrying value of financial instruments
included in current assets and current liabilities, including investments
in securitizable assets, approximates their fair value.
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