Eversource 2006 Annual Report Download - page 71

NU 2006 ANNUAL REPORT 69
3. Assets Held for Sale and Discontinued Operations
In 2005, NU decided to exit all of the NU Enterprises businesses.
Asummary of the NU Enterprises businesses held for sale status as of
December 31, 2006 and 2005, as well as the discontinued operations
status for all periods presented including date sold, is as follows:
Held for Sale Status as of
December 31, December 31, Discontinued
2006 2005 Operations Sale Date
Wholesale Marketing No No No Not Sold
Retail Marketing Sold No No June 2006
NGC (including certain
components of NGS) Sold No Yes November 2006
Mt. Tom Sold No Yes November 2006
NGS No No No Not Sold
SESI Sold Yes Yes May 2006
Woods Electrical –
Services Sold Yes Yes April 2006
Woods Electrical –
Other No No No Not Sold
SECI-NH Sold Sold Yes November 2005
Woods Network Sold Sold Yes November 2005
Boulos No No No Not Sold
SECI-CT No No No Not Sold
Assets Held for Sale: In 2005, NU decided to exit NU Enterprises’
wholesaleand retail marketing and competitivegeneration businesses,
which includes NGC and Mt. Tom, and determined that these
businesses did not meet the held for sale criteria under applicable
accounting guidanceat December 31, 2005.
In the firstquarter of 2006, management determined that the retail
marketing and competitive generation businesses met held for sale
criteria under applicable accounting guidance, and should be recorded
at the lower of their carrying amount or fair value less cost to sell.
The retail marketing business was reduced to its fair value less cost to
sell through a $53 million pre-tax charge, which was recorded in other
operating expenses.
At December 31, 2006, Select Energy had current derivative assets and
liabilities totaling $0.2 million and $0.1 million, respectively, related to
administrative agreements for one remaining sourcing contract for
which Select Energy has not yet received consent from the counterparty
and a small number of retail gas sales contracts where the customer
has not yet consented to the assignment to Hess.
For the years ended December 31, 2006 and 2005, NU recorded a pre-
tax net gain from the sale of discontinued operations of $502.7 million
and a pre-tax net loss from the sale of discontinued operations of
$1.1 million, respectively. Included in the 2006 net gain is the gain
on the sale of NGC and Mt. Tom of $511.1 million, partially offset by
an $8.4 million loss on the sale of SESI. The sale of Woods Electrical –
Services had a de minimis impact on earnings in 2006. The 2005 loss
consists of a $0.8 million loss on the sale of Woods Network and a
$0.3 million loss on the sale of SECI-NH.
In addition, for the year ended December 31, 2006, NU recorded a
pre-tax gain on the sale of the Massachusetts service location of
SECI-CT of $1.7 million and a pre-tax loss on the sale of Select Energy
NewYork, Inc. of $0.3 million, which are recorded as other operating
expenses on the consolidated statement of income/(loss).
At December 31, 2006, management continues to believe the
wholesale marketing business, NGS, Woods Electrical – Other, Boulos,
and SECI-CT do not meet the held for sale criteria under applicable
accounting guidance and therefore continue to be included in
continuing operations.
The businesses above are included as part of the NU Enterprises
reportable segment in Note 16, “Segment Information.” The major
classes of assets and liabilities that are held for sale at December 31,
2006 and, 2005 are as follows (amounts at December 31, 2005 are not
comparable to amounts at December 31, 2006 as the assets held for
sale portfolio has changed or the businesses have been sold prior to
December 31, 2006):
At December 31,
(Millions of Dollars) 2006 2005
Assets:
Retail derivative contracts $0.2 $—
Other assets —22.3
Long-term contract receivables —79.5
Total assets 0.2 101.8
Liabilities:
Retail derivative contracts 0.1 —
Other liabilities —15.2
Long-term debt —86.3
Total liabilities 0.1 101.5
Net assets $0.1 $ 0.3
Discontinued Operations: NU’s consolidated statements of
income/(loss) present NGC, Mt. Tom, SESI, and Woods Electrical –
Services as discontinued operations for all periods presented.
These businesses were sold in 2006. In addition, SECI-NH and Woods
Network arepresented as discontinued operations. These businesses
weresold in 2005. Under discontinued operations presentation,
revenues and expenses of the businesses classified as discontinued
operations areclassified net of tax in income from discontinued
operations on the consolidated statements of income/(loss) and all
prior periods arereclassified. Summarized financial information for
the discontinued operations is as follows:
For the Years Ended December 31,
(Millions of Dollars) 2006 2005 2004
Operating revenue $174.0 $326.4 $366.7
Income before income tax expense 44.8 24.3 76.8
Gain/(loss) from sale of
discontinued operations 502.7 (1.1) —
Income tax expense 203.1 9.1 30.0
Net income 344.4 14.1 46.8
Included in discontinued operations are $161 million, $222.2 million
and $222 million for the years ended December 31, 2006, 2005 and
2004, respectively, of intercompany revenues that are not eliminated
in consolidation due to the separate presentation of discontinued
operations. Of these amounts, $160.7 million, $209.7 million and
$195.4 million for the years ended December 31, 2006, 2005 and 2004,
respectively, represent revenues on intercompany contracts between
the generation operations of NGC and Mt. Tom and Select Energy.
NGC’s and Mt. Tom’s revenues and earnings related to these contracts
are included in discontinued operations while Select Energy’s related
expenses and losses are included in continuing operations. Included in
discontinued operations is approximately $11 million pre-tax related to
the resolution of contingencies for businesses sold.