Frontier Communications 2008 Annual Report Download - page 95

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State of Vermont could or would allow such an event, assuming that all the members of the VJO defaulted on
January 1, 2009 and remained in default for the duration of the contract (another 7 years), we estimate that our
undiscounted purchase obligation for 2009 through 2015 would be approximately $0.8 billion. In such a
scenario the Company would then own the power and could seek to recover its costs. We would do this by
seeking to recover our costs from the defaulting members and/or reselling the power to other utility providers
or the northeast power grid. There is an active market for the sale of power. We could potentially lose money if
we were unable to sell the power at cost. We caution that we cannot predict with any degree of certainty any
potential outcome.
At December 31, 2008, we have outstanding performance letters of credit as follows:
($ in thousands)
CNA .................................. $20,844
State of New York ..................... 1,042
Total.............................. $21,886
CNA serves as our agent with respect to general liability claims (auto, workers compensation and other
insured perils of the Company). As our agent, they administer all claims and make payments for claims on our
behalf. We reimburse CNA for such services upon presentation of their invoice. To serve as our agent and
make payments on our behalf, CNA requires that we establish a letter of credit in their favor. CNA could
potentially draw against this letter of credit if we failed to reimburse CNA in accordance with the terms of our
agreement. The value of the letter of credit is reviewed annually and adjusted based on claims history.
None of the above letters of credit restrict our cash balances.
F-44
FRONTIER COMMUNICATIONS CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements