Eversource 1999 Annual Report Download - page 45

3. SHORT-TERM DEBT
Limits: The amount of short-term borrowings that may be
incurred by NU and the NU system operating companies is sub-
ject to periodic approval by either the SEC under the 1935 Act
or by the respective state regulators. SEC authorization allowed
NU, CL&P, WMECO, and NAEC, as of January 1, 1999, to
incur total short-term borrowings up to a maximum of $400
million, $375 million, $250 million, and $60 million, respectively.
In addition, the charters of CL&P and WMECO contain pre-
ferred stock provisions restricting the amount of unsecured debt
those companies may incur. As of December 31, 1999, CL&P’s
and WMECO’s charters permit CL&P and WMECO to incur
$322 million and $132 million, respectively, of unsecured debt.
PSNH is authorized under a NHPUC order to incur short-term
borrowings up to a maximum of $68.3 million.
Credit Agreements: On November 19, 1999, CL&P and
WMECO entered into a new 364-day revolving credit facility for
$500 million, replacing the previous $313.75 million facility
which was to expire on November 21, 1999. The revolving credit
facility will be used to bridge gaps in working capital and pro-
vide short-term liquidity. CL&P and WMECO may draw up to
$300 million and $200 million, respectively, under the facility
which is secured by second mortgages on Millstone 2 and 3. Unless
extended, the new credit facility will expire on November 17,
2000. At December 31, 1999 and 1998, there were $213 mil-
lion and $30 million, respectively, in borrowings under
these facilities.
To support the working capital needs of NU and its unregulated
subsidiaries, NU replaced its $25 million 364-day revolving
credit facility which was to expire on November 21, 1999, with
a new 364-day unsecured revolving credit facility (NU Credit
Agreement) on November 19, 1999. This new facility provides a
total commitment of $350 million which is available subject
to two overlapping sub-limits. First, subject to the notional amount
of any letters of credit outstanding, amounts up to $200 mil-
lion are available for advances. Second, subject to the advances
outstanding, letters of credit may be issued in notional amounts
up to $250 million. Unless extended, this credit facility will expire
on November 17, 2000. As of December 31, 1999 and 1998,
there were $65 million and no borrowings under the NU Credit
Agreement and the previous credit facility, respectively. In regard
to credit support, NU had $29 million in letters of credit issued
under this agreement as of December 31, 1999.
In addition, NU provides credit assurance in the form of
guarantees, letters of credit, performance guarantees and other
assurances for the financial performance obligations of certain
of its unregulated subsidiaries. NU currently has authorization
from the SEC to provide up to $500 million of guarantees, but
is limited under certain loan agreements to $350 million of
such arrangements without creditor approval. As of December
31, 1999, NU had provided approximately $190 million of
such credit assurances.
Under the credit agreements discussed above, the respective
borrowers may borrow at fixed or variable rates plus an applicable
margin based upon the companies’ most senior secured debt
as rated by the lower of Standard and Poor’s or Moody’s Investor
Service (Moody’s). The weighted average interest rate on the
NU system companies’ notes payable to banks outstanding on
December 31, 1999 and 1998, was 7.928 percent and 6.53
percent, respectively. Maturities of short-term debt obligations
were for periods of three months or less.
These credit agreements provide that the parties to these
agreements must comply with certain financial and nonfinancial
covenants as are customarily included in such agreements,
including, but not limited to, common equity ratios, interest
coverage ratios and dividend payment restrictions.
4. LEASES
CL&P and WMECO finance their nuclear fuel for Millstone 2
and their respective shares of the nuclear fuel for Millstone 3
under the Niantic Bay Fuel Trust (NBFT) capital lease agreement.
This capital lease agreement has an expiration date of June 1,
2040. At December 31, 1999 and 1998, the present value of
the capital lease obligation to the NBFT was $157 million and
$178.7 million, respectively. In connection with the planned
nuclear divestiture, CL&P and WMECO anticipate that the NBFT
capital lease agreement will be terminated and the NBFT’s
obligation under the $180 million Series G Intermediate Term
Note agreement will be assigned to CL&P and WMECO.
CL&P and WMECO make quarterly lease payments for the
cost of nuclear fuel consumed in the reactors based on a units-of-
production method at rates which reflect estimated kilowatt-hours
of energy provided plus financing costs associated with the fuel
in the reactors. Upon permanent discharge from the reactors,
ownership of the nuclear fuel transfers to CL&P and WMECO.
The NU system companies also have entered into lease agree-
ments, some of which are capital leases, for the use of data
processing and office equipment, vehicles, nuclear control room
simulators, and office space. The provisions of these lease agree-
ments generally provide for renewal options.
Capital lease rental payments charged to operating expense
were $20.8 million in 1999, $31 million in 1998 and $19 million
in 1997. Interest included in capital lease rental payments was
$13.7 million in 1999, $18.3 million in 1998 and $13.6 mil-
lion in 1997. Operating lease rental payments charged to expense
were $7.5 million in 1999, $15.7 million in 1998 and $17.3
million in 1997.
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