Eversource 2006 Annual Report Download - page 89

NU 2006 ANNUAL REPORT 87
the implementation of standard market design on March 1, 2003,
which is still pending before the court, 2) the recovery of approximately
$25.8 million of CL&P’s station service billings from NRG, which is
currently the subject of an arbitration, and 3) the recovery of, among
other claimed damages, approximately $17.5 million of capital costs
and expenses incurred by Yankee Gas related to an NRG subsidiary’s
generating plant construction project that has ceased. While it is
unable to determine the ultimate outcome of these issues, management
does not expect their resolution will have a material adverse effect on
NU’s consolidated earnings, financial position or cash flows.
G. Consolidated Edison, Inc. Merger Litigation
Certain gain and loss contingencies exist with regard to the merger
agreement between NU and Consolidated Edison, Inc. (Con Edison)
and related litigation.
In 2001, Con Edison advised NU that it was unwilling to close its
merger with NU on the terms set forth in the parties’ 1999 merger
agreement (Merger Agreement). In March of 2001, NU filed suit against
Con Edison seeking damages in excess of $1 billion.
In a 2005 opinion, a panel of three judges at the Second Circuit held
that the shareholders of NU had no right to sue Con Edison for its
alleged breach of the parties’ Merger Agreement. NU’s request for a
rehearing was denied in 2006. This ruling left intact the remaining
claims between NU and Con Edison for breach of contract, which
include NU’s claim for recovery of costs and expenses of approximately
$32 million and Con Edison’s claim for damages. NU opted not to seek
review of this ruling by the United States Supreme Court. In April of
2006, NU filed its motion for partial summary judgment on Con
Edison’s damage claim. NU’s motion asserts that NU is entitled to a
judgment in its favor with respect to this claim based on the undisputed
material facts and applicable law. The matter is fully briefed and
awaiting a decision. At this time, NU cannot predict the outcome of
this matter or its ultimate effect on NU.
H. Guarantees and Indemnifications
NU provides credit assurances on behalf of subsidiaries in the form
of guarantees and LOCs in the normal course of business. In addition,
NU has provided guarantees and various indemnifications on behalf
of external parties as a result of the second quarter sales of SESI to
Ameresco, Inc. and the retail marketing business to Hess and the
fourth quarter sale of the competitive generation business to ECP.
The following table summarizes NU’s maximum exposure at
December 31, 2006, in accordance with FIN 45, “Guarantor’s
Accounting and Disclosure Requirements for Guarantees, Including
Indirect Guarantees of Indebtedness of Others,” expiration dates, and
fair value of amounts recorded:
Fair Value
Maximum of Amounts
Exposure Expiration Recorded
Company Description (in millions) Date(s) (in millions)
On behalf of external parties:
SESI General indemnifications in connection Not Specified (1) None $—
with the sale of SESI including completeness
and accuracy of information provided,
compliance with laws, and various claims
Specific indemnifications in connection Not Specified (1) Through project 0.2
with the sale of SESI for estimated costs to completion
complete or modify specific projects
Indemnifications to lenders for payment $2.8 2017–2018 0.1
of shortfalls in the event of early termination
of government contracts
Surety bonds covering certain projects $89.5 Through project —
completion
Hess (Retail Marketing) General indemnifications in connection with Not Specified (1) None —
the sale including compliance with laws,
validity of contract information, completeness
and accuracy of information provided, absence
of default on contracts, and various claims
ECP General indemnifications in connection with Not Specified (1) None —
the sale of the generating assets of NGC and
Mt. Tom including compliance with laws, validity
of contract information, completeness and
accuracy of information provided, absence of
default on contracts, and various claims