Xcel Energy 2002 Annual Report Download - page 46

(Millions of dollars) Impairment Disposal
Project Location Loss Gain (Loss) Status
Collinsville Australia $ – $ (3.6) Sale final 2002
EDLAustralia $ – $(14.2) Sale final 2002
ECKG Czech Republic $ – $ (2.1) Sale final 2003
SRW Cogeneration United States $ – $(48.4) Sale final 2002
Mt. Poso United States $ – $ (1.0) Sale final 2002
Kingston Canada $ – $ 9.9 Sale final 2002
Kondapalli India $ (12.7) $ – Sale pending
Loy Yang Australia $(111.4) $ – Operating
NEO MESI United States $ – $ 2.0 Sale final 2002
Other $(14.7) $ –
Total $(138.8) $(57.4)
During fourth quarter 2002, NRG and the other owners of the Loy Yang project engaged in a joint marketing of the project for possible sale.
Based on a new market valuation and negotiations with a potential purchaser, NRG recorded a write-down of $58 million in the fourth
quarter of 2002, in addition to the $54 million previously recorded in 2002. At Dec. 31, 2002, the carrying value of the investment in Loy
Yang is approximately $72.9 million. Accumulated other comprehensive loss at Dec. 31, 2002, includes a reduction for foreign currency
translation losses of approximately $77 million related to Loy Yang. The foreign currency translation losses will continue to be included
as a component of accumulated other comprehensive loss until NRG commits to a plan to dispose of its investment.
other equity investment losses
Yorkshire Power Group Sale In August 2002, Xcel Energy announced it had sold its 5.25-percent interest in Yorkshire Power Group
Limited for $33 million to CE Electric UK. Xcel Energy and American Electric Power Co. each held a 50-percent interest in Yorkshire,
a UK retail electricity and gas supplier and electricity distributor, before selling 94.75 percent of Yorkshire to Innogy Holdings plc in
April 2001. The sale of the 5.25-percent interest resulted in an after-tax loss of $8.3 million, or 2 cents per share, in the third quarter of
2002. The loss is included in write-downs and disposal losses from investments on the Consolidated Statements of Operations.
4. nrg acquisition and restructuring plan
During 2002, Xcel Energy acquired all of the 26 percent of NRG shares not then owned by Xcel Energy through a tender offer and
merger involving a tax-free exchange of 0.50 shares of Xcel Energy common stock for each outstanding share of NRG common stock.
The transaction was completed on June 3, 2002.
The exchange of NRG common shares for Xcel Energy common shares was accounted for as a purchase. The 25,764,852 shares of Xcel
Energy stock issued were valued at $25.14 per share, based on the average market price of Xcel Energy shares for three days before and
after April 4, 2002, when the revised terms of the exchange were announced and recommended by the independent members of the NRG
board. Including other costs of acquisition, this resulted in a total purchase price to acquire NRG’s shares of approximately $656 million.
The process to allocate the purchase price to underlying interests in NRG assets and to determine fair values for the interests in assets
acquired resulted in approximately $62 million of amounts being allocated to fixed assets related to projects where the fair values were
in excess of carrying values, to prepaid pension assets and to other assets. The preliminary purchase price allocation is subject to change
as the final purchase price allocation and asset valuation process is completed.
In December 2001, Moody’s Investor Service (Moody’s) placed NRG’s long-term senior unsecured debt rating on review for possible
downgrade. In February 2002, in response to this threat to NRG’s investment grade rating, Xcel Energy announced a financial
improvement plan for NRG, which included an initial step of acquiring 100 percent of NRG through a tender offer and merger
involving a tax-free exchange of 0.50 shares of Xcel Energy common stock for each outstanding share of NRG common stock. The
transaction was completed on June 3, 2002. In addition, the initial plan included financial support to NRG from Xcel Energy, marketing
certain NRG generating assets for possible sale, canceling and deferring capital spending for NRG projects and combining certain of
NRG’s functions with Xcel Energy’s systems and organization. During 2002, Xcel Energy provided NRG with $500 million of cash
infusions. Throughout this period, Xcel Energy was in discussions with credit agencies and believed that its actions would be sufficient
to avoid a downgrade of NRG’s credit rating.
However, even with NRG’s efforts to avoid a downgrade, on July 26, 2002, Standard & Poor’s (S&P) downgraded NRG’s senior unsecured
bonds below investment grade, and, three days later, Moody’s also downgraded NRG’s senior unsecured debt rating below investment
grade. Over the next few months, NRG senior unsecured debt, as well as the secured NRG Northeast Generating LLC bonds, the secured
NRG South Central Generating LLC bonds and secured LSP Energy (Batesville) bonds were downgraded multiple times. After NRG
failed to make the payment obligations due under certain unsecured bond obligations on Sept. 16, 2002, both Moody’s and S&P lowered
their ratings on NRG’s unsecured bonds once again. Currently, unsecured bond obligations carry a rating of between CCC and D at S&P
and between Ca and C at Moody’s, depending on the specific debt issue.
page 60 xcel energy inc. and subsidiaries
notes to consolidated financial statements