Xcel Energy 2000 Annual Report Download - page 26

As of Dec. 31, 2000, Xcel Energy provided guarantees for EMI of approximately $27 million. Approximately $12 million of these guarantees related to energy
conservation projects in which EMI has guaranteed certain energy savings to the customer. As energy savings are realized each year due to these projects,
the value of the guarantee decreases until it reaches zero in 2017. Approximately $15 million of the guarantees relates to EMI’s line of credit with US Bank.
The Bank of New York has provided a letter of credit, at the request of Xcel Energy, of approximately $1.0 million to fulfill debt service reserve requirements
as support for a Young Gas Storage Co., Ltd. loan. Young Gas Storage entered into a $30.7-million credit agreement with various lending institutions in
March 1999 with a maturity of March 2014. The loan was incurred for the development and construction of an underground natural gas storage facility
in northeastern Colorado. Separately, Xcel Energy has guaranteed up to $4.5 million to cover costs of expenses related to the project.
NSP-Minnesota has sold a portion of its other receivables to a third party. The portion of the receivables sold consisted of customer loans to local and state
government entities for energy efficiency improvements under various conservation programs offered by NSP-Minnesota. Under the sales agreements, NSP-
Minnesota is required to guarantee repayment to the third party of the remaining loan balances. At Dec. 31, 2000, the outstanding balance of the loans was
approximately $18.1 million. Based on prior collection experience of these loans, NSP-Minnesota believes that losses under the loan guarantees, if any,
would have an immaterial impact on the results of operations.
In connection with an agreement for the sale of electric power, SPS guaranteed certain obligations of a customer totaling approximately $27.8 million at
Dec. 31, 2000. These obligations related to the construction of certain utility property that, in the event of default by the customer, would revert to SPS.
In June 2000, Xcel Energy entered into a guarantee on behalf of BNP Paribas in connection with a letter of credit provided by BNP Paribas at the request of
SPS in the amount of $5 million, expiring March 2002. The letter of credit is required to indemnify former SPS board of directors.
Derivatives
As of Dec. 31, 2000, NRG had four interest rate swap agreements with notional amounts totaling approximately $533 million. If the swaps had been
discontinued on Dec. 31, 2000, NRG would have owed the counterparties approximately $31 million. NRG believes that its exposure to credit risk due
to nonperformance by the counterparties to the hedging contracts is insignificant. These swaps are described below.
•A swap effectively converts a $16-million issue of non-recourse variable rate debt into fixed-rate debt. The swap expires in September 2002
and is secured by the Camas Power Boiler assets.
•A swap converts $178 million of non-recourse variable rate debt into fixed-rate debt. The swap expires in December 2014 and is secured by
the Crockett Cogeneration assets.
•A swap converts £188 million, the equivalent of $281 million, of non-recourse variable rate debt into fixed-rate debt. The swap expires in
June 2019 and is secured by the Killingholme assets.
•A swap converts variable rate debt to fixed rate debt. The notional amount is AUD 105 million, the equivalent of $59 million as of Dec. 31, 2000.
The swap expires in September 2012 and is secured by the Flinders Power assets.
SPS has an interest rate swap with a notional amount of $25 million, converting variable rate debt to a fixed-rate. Young Gas Storage and Quixx Linden
projects, which are unconsolidated equity investments of Xcel Energy, have interest rate swaps converting project debt from variable rate to fixed rate.
These two amortizing swaps had a total notional amount of $39.5 million on Dec. 31, 2000. The approximate termination cost of Xcel Energy’s portion of
these three swaps was $4.5 million at Dec. 31, 2000.
Xcel Energy’s regulated energy marketing operation uses a combination of energy futures and forward contracts, along with physical supply to hedge market
risks in the energy market. At Dec. 31, 2000, the notional value of these contracts was approximately $90.4 million. If these contracts had been terminated
on Dec. 31, 2000, Xcel Energy would have realized a net gain of approximately $18.7 million. Management believes the risk of counterparty nonperformance
with regards to any of the hedging transactions is not significant.
NRG’s Power Marketing subsidiary uses energy futures and forward contracts, along with physical supply, to hedge market risk in the energy market. At
Dec. 31, 2000, the net notional amount of these contracts was approximately $309.3 million. If the contracts had been terminated on Dec. 31, 2000, NRG
would have received approximately $52.8 million. Management believes the risk of counterparty nonperformance with regards to any of the hedging
transactions is not significant.
e prime uses various financial instruments as hedging mechanisms against future energy-related contractual obligations. e prime had financial derivatives
related to its retail business with a notional value of $8.3 million at Dec. 31, 2000. If these contracts had been terminated at Dec. 31, 2000, e prime would have
realized a net gain of $3.9 million. In addition, e prime’s wholesale portfolio had a net notional value of ($0.5) million, based on a combination of physical and
financial transactions. If these contracts had been terminated on Dec. 31, 2000, e prime would have received $3.3 million from the counterparties. Management
believes the risk of counterparty nonperformance with regards to any of the hedging transactions is not significant.
NRG had one foreign currency hedge outstanding at Dec. 31, 2000. The contract had a notional value of $8.8 million and hedged expected cash flows from the
Killingholme project in England. The currency hedge expired on Jan. 31, 2001. If the contract had been terminated on Dec. 31, 2000, NRG would have paid the
counterparties $0.7 million. Management believes the risk of counterparty nonperformance with regards to any of the hedging transactions is not significant.
XCEL ENERGY INC. AND SUBSIDIARIES
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS