National Grid 2012 Annual Report Download - page 60

59
Financial Guarantees
The Company has guaranteed the principal and interest payments on certain outstanding debt. Additionally, the
Company has issued financial guarantees in the normal course of business, on behalf of its subsidiaries, to various third
party creditors. At March 31, 2012, the following amounts would have to be paid by us in the event of non-payment by
the primary obligor at the time payment is due:
Amount of
Exposure Expiration Dates
(in millions of dollars)
Guarantees for Subsidiaries:
Industrial Development Revenue Bonds (i) 128$ 2027
KeySpan Ravenswood LLC Lease (ii) 486 2040
Reservoir Woods (iii) 262 2029
Surety Bonds (iv) 148 Revolving
Commodity Guarantees and Other (v) 119 2013 - 2042
Letters of Credit (vi) 101 July 2012 - Dec 2012
1,244$
The following is a description of the Company’ s outstanding subsidiary guarantees:
(i) KeySpan has fully and unconditionally guaranteed the payment obligations of its subsidiaries with regard
to $128 million of Industrial Development Revenue Bonds issued through the Nassau County and Suffolk
County Industrial Development Authorities for the construction of two electric-generation peaking plants
on Long Island. The face value of these notes is included in long-term debt on the consolidated balance
sheet.
(ii) The Company had guaranteed all payment and performance obligations of a former subsidiary (KeySpan
Ravenswood LLC) associated with a merchant electric generating facility leased by that subsidiary under a
sale/leaseback arrangement. The subsidiary and the facility were sold in 2008. However, the original lease
remains in place and we will continue to make the required payments under the lease through 2040. The
cash consideration from the buyer of the facility included the remaining lease payments on a net present
value basis. At March 31, 2012, the Company’ s obligation related to the lease was $256 million and is
reflected in other deferred liabilities in the accompanying balance sheets.
(iii) The Company has fully and unconditionally guaranteed $262 million in lease payments through 2029
related to the lease of office facilities at Reservoir Woods in Waltham, MA.
(iv) The Company has agreed to indemnify the issuers of various surety and performance bonds associated with
certain construction projects being performed by certain current and former subsidiaries. In the event that
the subsidiaries fail to perform their obligations under contracts, the injured party may demand that the
surety make payments or provide services under the bond. We would then be obligated to reimburse the
surety for any expenses or cash outlays it incurs. Although the Company is not guaranteeing any new bonds
for any of the former subsidiaries, the Company’ s indemnity obligation supports the contractual obligation
of these former subsidiaries. The Company has also received from a former subsidiary an indemnity bond
issued by a third party insurance company, the purpose of which is to reimburse the Company in an amount
up to $80 million in the event it is required to perform under all other indemnity obligations previously
incurred by the Company to support such company’ s bonded projects existing prior to divestiture.
(v) The Company has guaranteed commodity-related payments for certain subsidiaries. These guarantees are
provided to third parties to facilitate physical and financial transactions involved in the purchase and
transportation of natural gas, oil and other petroleum products for electric production and marketing
activities. The guarantees cover actual purchases by these subsidiaries that are still outstanding as of March
31, 2012.