Eversource 2004 Annual Report Download - page 81

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Essentially all utility plant of CL&P, PSNH, NGC, and Yankee Energy
System, Inc. is subject to the liens of each company’s respective first
mortgage bond indenture.
CL&P has $315.3 million of pollution control notes secured by second
mortgage liens on transmission assets, junior to the liens of its first
mortgage bond indentures.
CL&P has $62 million of tax-exempt Pollution Control Revenue Bonds
(PCRBs) with bond insurance and secured by the first mortgage bonds.
For financial reporting purposes, this debt is not considered to be first
mortgage bonds unless CL&P failed to meet its obligations under the
PCRBs.
PSNH entered into financing arrangements with the Business Finance
Authority (BFA) of the state of New Hampshire, pursuant to which, the
BFA issued five series of PCRBs and loaned the proceeds to PSNH.
At December 31, 2004 and 2003, $407.3 million of the PCRBs were
outstanding. PSNH’s obligation to repay each series of PCRBs is
secured by bond insurance and the first mortgage bonds. Each such
series of first mortgage bonds contains similar terms and provisions
as the applicable series of PCRBs. For financial reporting purposes,
these first mortgage bonds would not be considered outstanding unless
PSNH failed to meet its obligations under the PCRBs.
NU’s long-term debt agreements provide that certain of its subsidiaries
must comply with certain financial and non-financial covenants as are
customarily included in such agreements, including but not limited to,
debt service coverage ratios and interest coverage ratios. The parties to
these agreements currently are and expect to remain in compliance with
these covenants.
Long-term debt — first mortgage bonds at December 31, 2004 includes
the issuance of $280 million, $125 million and $50 million of long-term
debt related to CL&P, Yankee Gas and PSNH during 2004, respectively.
The weighted-average effective interest rate on the variable-rate pollution
control notes ranged from 1.24 percent to 1.26 percent for 2004 and
0.99 percent to 1.08 percent for 2003.
The interest rate of 3.35 percent is effective through October 1, 2008
at which time the bonds will be remarketed, and the interest rate will
be adjusted.
Other long-term debt — other at December 31, 2004, includes the issuance
of $7.5 million and $50 million of long-term debt related to SESI and
WMECO during 2004. In 2004, SESI sold $30 million of receivables related
to the energy savings contract projects. The transfer of receivables to
the unaffiliated third party qualified as a sale under SFAS No. 140.
Accordingly, the $30 million sold at December 31, 2004 is not included
as debt in the consolidated financial statements.
For information regarding fees and interest due for spent nuclear fuel
disposal costs, see Note 1X, “Marketable Securities,” and Note 6C,
“Commitments and Contingencies - Spent Nuclear Fuel Disposal
Costs,” to the consolidated financial statements.
The fair value of the NU parent 7.25 percent amortizing note, due 2012
in the amount of $263 million is hedged with a fixed to floating interest
rate swap. The change in fair value of the debt was recorded as an
adjustment to long-term debt with an equal and offsetting adjustment to
derivative assets for the change in fair value of the fixed to floating interest
rate swap.
11. Dividend Restrictions
The Federal Power Act, the Public Utility Holding Act of 1935 (the Act),
and certain state statutes limit the payment of dividends by CL&P,
PSNH, and WMECO to their respective retained earnings balances.
Yankee Gas is also subject to the restrictions under the 1935 Act.
Certain consolidated subsidiaries also have dividend restrictions
imposed by their long-term debt agreements. These restrictions limit
the amount of retained earnings available for NU common dividends. At
December 31, 2004, retained earnings available for payment of dividends
totaled $343.5 million.
NGC is subject to certain dividend payment restrictions under its bond
covenants.
The Utility Group credit agreement also limits dividend payments subject
to the requirements that each subsidiaries’ total debt to total capitalization
ratio does not exceed 65 percent.
12. Accumulated Other Comprehensive Income/(Loss)
The accumulated balance for each other comprehensive income/(loss)
item is as follows:
C urrent
December 31, Period December 31,
( Millions of Dollars) 2003 Change 2004
Qualified cash flow
hedging instruments $24.8 $(28.3) $(3.5)
Unrealized gains on securities 2.0 1.2 3.2
Minimum supplemental
executive retirement pension
liability adjustments (0.8) (0.1) (0.9)
Accumulated other
comprehensive income $26.0 $(27.2) (1.2)
Current
December 31, Period December 31,
( Millions of Dollars) 2002 Change 2003
Qualified cash flow
hedging instruments $15.5 $ 9.3 $24.8
Unrealized (losses)/gains on securities (0.1) 2.1 2.0
Minimum supplemental
executive retirement pension
liability adjustments (0.5) (0.3) (0.8)
Accumulated other
comprehensive income $14.9 $11.1 $26.0
The changes in the components of other comprehensive income/(loss)
are reported net of the following income tax effects:
(Millions of Dollars) 2004 2003 2002
Qualified cash flow
hedging instruments $14.4 $(6.4) $(33.1)
Unrealized (losses)/gains
on securities (0.7) (1.4) 3.3
Minimum supplemental
executive retirement pension
liability adjustments —— —
Accumulated other
comprehensive income $13.7 $(7.8) $(29.8)