National Grid 2005 Annual Report Download - page 45

Download and view the complete annual report

Please find page 45 of the 2005 National Grid annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 61

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
At March 31, 2005, management projects that Niagara Mohawk will make the following payments
in connection with its swap contracts for the fiscal years 2006 through 2008, subject to changes
in market prices and indexing provisions:
Niagara Mohawk uses New York Mercantile Exchange (NYMEX) gas futures to hedge the gas
commodity component of its indexed swap contracts. These instruments, as used, do not qualify
for hedge accounting status under SFAS 133. Cash flow hedges that are qualified under SFAS
133 are as follows: NYMEX gas futures for the purchases of natural gas and NYMEX electric
swap contracts hedging the purchases of electricity.
The following table represents the open positions at March 31, 2005 and the results on operations
of these instruments for the year ended March 31, 2005.
At March 31, 2004, Niagara Mohawk recorded a deferred gain on the futures contracts hedging
the IPP swaps and non-MRA IPP of $21.5 million, offset by the balance sheet item “Derivative
Instruments” for $20.3 million with the resulting $2.1 having settled through cash for the hedge
month of April 2004. For the twelve months ended March 31, 2004 settlement of NYMEX futures
contracts resulted in a decrease to purchased power expense of $17.3 million.
The gains and losses on the derivatives that are deferred and reported in accumulated other com-
prehensive income will be reclassified as purchased energy expense in the periods in which
expense is impacted by the variability of the cash flows of the hedged item. For the twelve months
ended March 31, 2005, the net gain of $8 million from hedging instruments, as shown in the table
above, was recorded to gas purchases offset by a corresponding increase in the cost of a compa-
rable amount of gas. For the twelve months ended March 31, 2004, a net loss of $4.2 million was
recorded to gas purchases offset by a corresponding decrease in the cost of a comparable
amount of gas.
45
National Grid USA / Annual Report
Projected
Payment
Year Ended (in thousands
March 31, of dollars)
2006 203,558$
2007 196,324
2008 182,834
2009 36,236
618,952$
Year Ended
Accumulated March 31, 2005
Accumulated
Deferred Gain/(Loss)
Regulatory
OCI**, Income Tax Reclass to
Derivative Instrument Asset* Deferral net of tax on OCI** Commodity Costs
Qualified for Hedge Accounting
NYMEX futures - gas supply 7,233.4$ -$ (11,861.7)$ (7,907.8)$ 7,950.1$
NYMEX electric swaps - electric supply 1,067.4$ -$ (950.3)$ (633.5)$ 43.3$
Non-qualified for Hedge Accounting
NYMEX futures - IPP swaps/non-MRA IPP 27,019.7$ (29,865.8)$ -$ -$ 19,376.6$
* Differences between asset/(liability) and regulatory or OCI deferral represent contracts settled for the
following month.
** Other comprehensive income (OCI)
(in thousands of dollars)
Balances as of March 31, 2005