Eversource 2009 Annual Report Download - page 159

FS-74
Company Description
Maximum
Exposure
(in millions)
Expiration
Date(s)
Boulos Surety bonds covering ongoing projects $24.0 Through project
completion
NGS Performance guarantee and insurance bonds $18.6 (5) July 2010 -
2020 (5)
Select Energy Performance guarantees for wholesale contracts $84.4 (6) 2013
Letters of credit $2.0 November 2010
(1) No maximum exposure is specified in the related sale agreements.
(2) The fair value of the amounts recorded for these indemnifications was $0.2 million as of December 31, 2009.
(3) The fair value of the amounts recorded for these indemnifications was $0.1 million as of December 31, 2009.
(4) Surety bond expiration dates reflect bond termination dates, the majority of which will be renewed or extended.
(5) Included in the maximum exposure is $17.4 million related to a performance guarantee of NGS obligations for which no maximum
exposure is specified in the agreement. The maximum exposure was calculated as of December 31, 2009 based on limits of
NGS's liability contained in the underlying service contract and assumes that NGS will perform under that contract through its
expiration in 2020. The remaining $1.2 million of maximum exposure relates to insurance bonds with no expiration date that are
billed annually on their anniversary date.
(6) Maximum exposure is as of December 31, 2009 assuming quantities under purchase contracts guaranteed have no value;
however, actual exposures vary with underlying commodity prices.
CL&P, PSNH and WMECO have no guarantees of the performance of third parties.
Many of the underlying contracts that NU parent guarantees, as well as certain surety bonds, contain credit ratings triggers that would
require NU parent to post collateral in the event that NU's unsecured debt credit ratings are downgraded below investment grade.
F. Litigation and Legal Proceedings (All Companies)
NU (including CL&P, PSNH and WMECO) are involved in legal, tax and regulatory proceedings regarding matters arising in the ordinary
course of business, which involve management's assessment to determine the probability of whether a loss will occur and, if probable,
its best estimate of probable loss. The Company records and discloses losses when these losses are probable and reasonably
estimable, discloses matters when losses are probable but not estimable, and expenses legal costs related to the defense of loss
contingencies as incurred.
8. Fair Value of Financial Instruments (All Companies)
The following methods and assumptions were used to estimate the fair value of each of the following financial instruments:
Preferred Stock, Long-Term Debt and Rate Reduction Bonds: The fair value of CL&P's preferred stock is based upon pricing models
that incorporate interest rates and other market factors, valuations or trades of similar securities and cash flow projections. The fair
value of fixed-rate long-term debt securities and RRBs is based upon pricing models that incorporate quoted market prices for those
issues or similar issues adjusted for market conditions, credit ratings of the respective companies and treasury benchmark yields.
Adjustable rate securities are assumed to have a fair value equal to their carrying value. Carrying amounts and estimated fair values
are as follows:
As of December 31,
2009 2008
NU NU
(Millions of Dollars)
Carrying
Amount
Fair
Value
Carrying
Amount
Fair
Value
Preferred stock not subject
to mandatory redemption $ 116.2 $ 86.8 $116.2 $86.3
Long-term debt -
First mortgage bonds 2,657.7 2,713.5 2,312.0 2,399.4
Other long-term debt 1,893.6 1,938.0 1,829.5 1,690.6
Rate reduction bonds 442.4 487.3 686.5 689.4