Xcel Energy 2013 Annual Report Download - page 150

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Xcel Energy has determined that certain independent power producing entities are variable interest entities. Xcel Energy is not subject
to risk of loss from the operations of these entities, and no significant financial support has been, or is in the future, required to be
provided other than contractual payments for energy and capacity set forth in the PPAs.
Xcel Energy has evaluated each of these variable interest entities for possible consolidation, including review of qualitative factors
such as the length and terms of the contract, control over O&M, control over dispatch of electricity, historical and estimated future fuel
and electricity prices, and financing activities. Xcel Energy has concluded that these entities are not required to be consolidated in its
consolidated financial statements because it does not have the power to direct the activities that most significantly impact the entities’
economic performance. The Xcel Energy utility subsidiaries had approximately 3,338 MW and 3,324 MW of capacity under long-
term PPAs as of Dec. 31, 2013, and 2012, respectively, with entities that have been determined to be variable interest entities. These
agreements have expiration dates through the year 2033.
Fuel Contracts — SPS purchases all of its coal requirements for its Harrington and Tolk electric generating stations from TUCO under
contracts for those facilities that expire in 2016 and 2017, respectively. TUCO arranges for the purchase, receiving, transporting,
unloading, handling, crushing, weighing, and delivery of coal to meet SPS’ requirements. TUCO is responsible for negotiating and
administering contracts with coal suppliers, transporters and handlers.
No significant financial support has been, or is in the future, required to be provided to TUCO by SPS, other than contractual
payments for delivered coal. However, the fuel contracts create a variable interest in TUCO due to SPS’ reimbursement of certain fuel
procurement costs. SPS has determined that TUCO is a variable interest entity. SPS has concluded that it is not the primary
beneficiary of TUCO because SPS does not have the power to direct the activities that most significantly impact TUCO’s economic
performance.
Low-Income Housing Limited Partnerships — Eloigne and NSP-Wisconsin have entered into limited partnerships for the construction
and operation of affordable rental housing developments which qualify for low-income housing tax credits. Xcel Energy Inc. has
determined Eloigne and NSP-Wisconsin’s low-income housing limited partnerships to be variable interest entities primarily due to
contractual arrangements within each limited partnership that establish sharing of ongoing voting control and profits and losses that
does not consistently align with the partners’ proportional equity ownership. These limited partnerships are designed to qualify for
low-income housing tax credits, and Eloigne and NSP-Wisconsin generally receive a larger allocation of the tax credits than the
general partners at inception of the arrangements. Xcel Energy Inc. has determined that Eloigne and NSP-Wisconsin have the power
to direct the activities that most significantly impact these entities’ economic performance, and therefore Xcel Energy Inc. consolidates
these limited partnerships in its consolidated financial statements.
Equity financing for these entities has been provided by Eloigne, NSP-Wisconsin and the general partner of each limited partnership,
and Xcel Energy’s risk of loss is limited to its capital contributions, adjusted for any distributions and its share of undistributed profits
and losses; no significant additional financial support has been, or is in the future, required to be provided to the limited partnerships
by Eloigne or NSP-Wisconsin. Mortgage-backed debt typically comprises the majority of the financing at inception of each limited
partnership and is paid over the life of the limited partnership arrangement. Obligations of the limited partnerships are generally
secured by the housing properties of each limited partnership, and the creditors of each limited partnership have no significant
recourse to Xcel Energy Inc. or its subsidiaries. Likewise, the assets of the limited partnerships may only be used to settle obligations
of the limited partnerships, and not those of Xcel Energy Inc. or its subsidiaries.
Amounts reflected in Xcel Energy’s consolidated balance sheets for the Eloigne and NSP-Wisconsin low-income housing limited
partnerships include the following:
(Thousands of Dollars) Dec. 31, 2013 Dec. 31, 2012
Current assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 7,982 $ 3,380
Property, plant and equipment, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65,451 72,489
Other noncurrent assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,654 6,044
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 75,087 $ 81,913
Current liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 11,388 $ 8,458
Mortgages and other long-term debt payable . . . . . . . . . . . . . . . . . . . . . . . 38,049 37,720
Other noncurrent liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 707 7,678
Total liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 50,144 $ 53,856
Technology Agreements — Xcel Energy has a contract that extends through June 2019 with International Business Machines Corp.
(IBM) for information technology services. The contract is cancelable at Xcel Energy’s option, although Xcel Energy would be
obligated to pay 50 percent of the contract value for early termination. Xcel Energy capitalized or expensed $90.3 million, $86.5
million and $93.6 million associated with the IBM contract in 2013, 2012, and 2011, respectively.