Xcel Energy 2011 Annual Report Download - page 137

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Indemnification Agreements
In connection with the purchase and sale agreement of certain electric distribution assets in Lubbock, Texas, SPS agreed to
indemnify the purchaser for losses arising out of any breach of the representations, warranties and covenants under the related
asset purchase agreement and for losses arising out of certain other matters, including pre-closing unknown liabilities. SPS’
indemnification obligation is capped at $87 million, in the aggregate. The indemnification provisions for most representations and
warranties expired in October 2011. The remaining representations and warranties, which relate to due organization and
transaction authorization, survive indefinitely. SPS has not recorded a liability related to this indemnity.
In connection with the acquisition of the 201 MW Nobles wind project, NSP-Minnesota agreed to indemnify the seller for losses
arising out of a breach of certain representations and warranties. NSP-Minnesota’s indemnification obligation is capped at $20
million, in the aggregate. The indemnification obligation expires in March 2013. NSP-Minnesota has not recorded a liability
related to this indemnity.
In connection with the acquisition of 900 MW of gas-fired generation from subsidiaries ofCalpine Development Holdings Inc.,
PSCo agreed to indemnify the seller for losses arising out of a breach of certain representations and warranties. The aggregate
liability for PSCo pursuant to these indemnities is not subject to a capped dollar amount. The indemnification obligation expires
in December 2012. PSCo has not recorded a liability related to this indemnity.
Xcel Energy Inc. and its subsidiaries provide other indemnifications through contracts entered into in the normal course of
business. These are primarily indemnifications against adverse litigation outcomes in connection with underwriting agreements,
as well as breaches of representations and warranties, including due organization, transaction authorization and income tax
matters with respect to assets sold. Xcel Energy Inc.’s and its subsidiaries’ obligations under these agreements may be limited in
terms of time and amount. The maximum potential amount of future payments under these indemnifications cannot be reasonably
estimated as the obligated amounts of these indemnifications often are not explicitly stated.
Environmental Contingencies
Xcel Energy has been or is currently involved with the cleanup of contamination from certain hazardous substances at several
sites. In many situations, the subsidiary involved believes it will recover some portion of these costs through insurance claims.
Additionally, where applicable, the subsidiary involved is pursuing, or intends to pursue, recovery from other PRPs and through
the regulated rate process. New and changing federal and state environmental mandates can also create added financial liabilities
for Xcel Energy, which are normally recovered through the regulated rate process. To the extent any costs are not recovered
through the options listed above, Xcel Energy would be required to recognize an expense.
Site Remediation — The Comprehensive Environmental Response, Compensation and Liability Act of 1980 and other
comparable federal and state environmental laws impose liability, without regard to the legality of the original conduct, on certain
classes of persons where hazardous substances or other regulated materials have been released to the environment. Xcel Energy
Inc.’s subsidiaries may sometimes pay all or a portion of the cost to remediate sites where past activities of their predecessors or
other parties have caused environmental contamination. Environmental contingencies could arise from various situations,
including sites of former MGPs operated by Xcel Energy Inc.’s subsidiaries or their predecessors, or other entities; and third-party
sites, such as landfills, for which one or more of Xcel Energy Inc.’s subsidiaries are alleged to be a PRP that sent hazardous
materials and wastes to that site.
MGP Sites
Ashland MGP Site — NSP-Wisconsin has been named a PRP for contamination at a site in Ashland, Wis. The Ashland/Northern
States Power Lakefront Superfund Site (the Ashland site) includes property owned by NSP-Wisconsin, which was a site
previously operated by a predecessor company as a MGP facility (the Upper Bluff), and two other properties: an adjacent city
lakeshore park area (Kreher Park), on which an unaffiliated third party previously operated a sawmill and conducted creosote
treating operations; and an area of Lake Superior’s Chequamegon Bay adjoining the park (the Sediments).
The EPA issued its Record of Decision (ROD) in September 2010, which documents the remedy that the EPA has selected for the
cleanup of the Ashland site. In April 2011, the EPA issued special notice letters identifying several entities, including NSP-
Wisconsin, as PRPs, for future cleanup at the site. The special notice letters requested that those PRPs participate in negotiations
with the EPA regarding how the PRPs intend to conduct or pay for the cleanup. On June 30, 2011, NSP-Wisconsin submitted a
settlement offer to the EPA related to the future cleanup of the Ashland site. On July 14, 2011, the EPA informed NSP-Wisconsin
and the other PRPs that it was rejecting all of their individual offers and can now choose to initiate enforcement actions at any
time. Despite this decision, the EPA also indicated a willingness to continue settlement negotiations with NSP-Wisconsin.
Settlement negotiations are ongoing.