Eversource 2009 Annual Report Download - page 140

FS-55
For the year ended December 31, 2009, the realized and unrealized gains/(losses) related to changes in fair value of the swap and
Long-term debt as well as pre-tax Interest expense, recorded in Net income, were as follows:
For the Year Ended December 31, 2009
(Millions of Dollars) Swap Hedged Debt
Income Statement Classification
Changes in fair value $ 1.6 $ (1.6)
Interest recorded in Net income - 9.1
There were no cash flow hedges outstanding as of or during the year ended December 31, 2009 and no ineffectiveness was recorded
during this period. From time to time, NU, including CL&P, PSNH and WMECO, enters into forward starting interest rate swap
agreements on proposed debt issuances that qualify and are designated as cash flow hedges. Cash flow hedges are recorded at fair
value, and the changes in the fair value of the effective portion of those contracts are recognized in Accumulated other comprehensive
income/(loss). Cash flow hedges impact Net income when hedge ineffectiveness is measured and recorded, when the forecasted
transaction being hedged is improbable of occurring or when the transaction is settled. When a cash flow hedge is terminated, the
settlement amount is recorded in Accumulated other comprehensive income/(loss) and is amortized into Net income over the term of
the underlying debt instrument.
Pre-tax gains/(losses) amortized from Accumulated other comprehensive income/(loss) into Interest expense on the accompanying
consolidated statement of income were as follows:
(Millions of Dollars) For the Year Ended
December 31, 2009
CL&P $ (0.7)
PSNH (0.2)
WMECO 0.1
Yankee Gas (0.1)
NU Parent 0.5
NU $ (0.4)
For further information, see Note 14, "Accumulated Other Comprehensive Income/(Loss)," to the consolidated financial statements.
Credit Risk
Certain derivative contracts that are accounted for at fair value, including PSNH's electricity procurement contracts, CL&P's bilateral
agreements and NU Enterprises' electricity sourcing contracts, contain credit risk contingent features. These features require these
companies or, in NU Enterprises' case, NU parent to maintain investment grade credit ratings from the major rating agencies and to
post cash or standby LOCs as collateral for contracts in a net liability position over specified credit limits. NU parent provides standby
LOCs under its revolving credit agreement for NU subsidiaries to post with counterparties. The following summarizes the fair value of
derivative contracts that are in a liability position and subject to credit risk contingent features and the fair value of cash collateral and
standby LOCs posted with counterparties as of December 31, 2009:
(Millions of Dollars)
Fair Value
Subject
to Credit Risk
Contingent
Features
Cash
Collateral
Posted
Standby
LOCs
Posted
PSNH $ (26.4) $ - $ 25.0
NU Enterprises (20.0) 2.1 -
NU $ (46.4) $ 2.1 $ 25.0
Additional collateral is required to be posted by NU Enterprises, CL&P or PSNH, respectively, if NU parent's, CL&P's or PSNH's
respective unsecured debt credit ratings are downgraded below investment grade. As of December 31, 2009, no additional cash
collateral would be required to be posted if credit ratings were downgraded below investment grade. However, if PSNH's or NU parent's
senior unsecured debt were downgraded to below investment grade, additional standby LOCs in the amount of $1.8 million and $17.8
million would be required to be posted on derivative contracts for PSNH and Select Energy, respectively.
For further information, see Note 1P, "Summary of Significant Accounting Policies - Special Deposits and Counterparty Deposits," to the
consolidated financial statements.