Eversource 2008 Annual Report Download - page 82

81
series of PCRBs has been held by remarketing agents as a result of failed auctions due
to general market concerns. The interest rate on these PCRBs has been reset by formula
under the applicable documents every 35 days and has been between 0.4 percent and
4 percent since March 2008. The formula is based on a combination of the ratings on
the PCRBs and an index rate, which provides for an interest rate of 0.4 percent as of
December31, 2008. The company is not obligated to purchase these PCRBs, which
mature in 2021, from the remarketing agents.
NU and its subsidiaries’ 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 a consolidated debt to capitalization
ratio. These subsidiaries are in compliance with these covenants at December 31, 2008.
Yankee Gas has certain long-term debt agreements that contain cross-default provisions
that would be triggered if Yankee Gas or any subsidiary default in a payment in excess of
a predetermined amount. These cross-default provisions apply to Yankee Gas’ Series B
and Series E through J debt issuances. PSNH would also be in default under its long-
term debt agreements if it defaulted on any prior lien obligation exceeding $25 million.
PSNH has no prior lien obligations as of December 31, 2008. There are no other debt
issuances for NU and its subsidiaries with cross-default provisions at December 31, 2008.
The weighted average eective interest rate on PSNH’s SeriesA variable-rate PCRBs was
3.07 percent for 2008 and 3.87 percent for 2007. The CL&P PCRB due in 2031 had an
interest rate of 3.35 percent eective through October 1, 2008, at which time the bonds
were reacquired by CL&P and are now in a daily variable interest rate mode.
Long-term debt - First Mortgage Bonds on the accompanying consolidated statements
of capitalization at December 31, 2008 includes the issuance of $300 million and $110
million at CL&P and PSNH, respectively.
Other long-term debt - other on the accompanying consolidated statements of
capitalization at December31, 2008 includes a senior unsecured note issuance of $250
million at NU parent, due 2013 with a coupon of 5.65 percent and the issuance of $100
million in SeriesJ First Mortgage Bonds at Yankee Gas, due 2018 with a coupon of 6.9
percent.
For information regarding fees and interest due for spent nuclear fuel disposal costs, see
Note 7C, “Commitments and Contingencies - Spent Nuclear Fuel Disposal Costs,” to the
consolidated financial statements.
The change in fair value totaling a positive $20.8 million and $4.2 million at December
31, 2008 and 2007, respectively, on the accompanying consolidated statements of
capitalization reflects the NU parent 7.25 percent amortizing note, due 2012 in the
amount of $263 million that is hedged with a fixed to floating interest rate swap.
The change in fair value of the interest component of the debt was recorded as an
adjustment to long-term debt with an equal and osetting adjustment to derivative
assets and liabilities for the change in fair value of the fixed to floating interest rate swap.
12. Dividend Restrictions
NU parent’s ability to pay dividends is not regulated under the Federal Power Act, but may
be aected by certain state statutes, the leverage restriction tied to its consolidated total
debt to total capitalization ratio requirement in its revolving credit agreement, and the
ability of NU’s subsidiaries to pay common dividends to it.
CL&P, PSNH, and WMECO are subject to Section 305 of the Federal Power Act that
makes it unlawful for a public utility to make or pay a dividend from any funds “properly
included in its capital account.” Management believes that this Federal Power Act
restriction, as applied to CL&P, PSNH and WMECO, would not be construed or applied
by the FERC to prohibit the payment of dividends for lawful and legitimate business
purposes from retained earnings. In addition, certain state statutes may impose
additional limitations on such companies and on Yankee Gas. Such state law restrictions
do not restrict payment of dividends from retained earnings or net income. CL&P, PSNH,
WMECO and Yankee Gas also have a revolving credit agreement that imposes leverage
restrictions including consolidated total debt to total capitalization ratio requirements.
The retained earnings balance subject to these leverage restrictions is $1.079 billion for
NU consolidated. PSNH is further required to reserve an additional amount under its
FERC hydroelectric license conditions. Approximately $11 million of PSNH’s retained
earnings is subject to restriction under its FERC hydroelectric license conditions.
At December 31, 2008, NU was in compliance with all such provisions of its credit
agreement that may restrict the payment of dividends.
13. Accumulated Other Comprehensive Income/(Loss)
The accumulated balance for each other comprehensive income/(loss), net of tax, item is
as follows:
December 31, 2007 December 31, 2008 December 31,
(Millions of Dollars) 2006 Change 2007 Change 2008
Qualified cash flow
hedging instruments $5.9 $ (3.6) $2.3 $ (6.9) $ (4.6)
Unrealized gains on
securities 3.0 (0.1) 2.9 (1.7) 1.2
Pension, SERP and other
postretirement plans
benefit obligations
(SFAS No. 158) (4.4) 8.6 4.2 (38.1) (33.9)
Accumulated other
comprehensive
income/(loss) $4.5 $ 4.9 $9.4 $(46.7) $(37.3)
The changes in the components of other comprehensive income/(loss) are reported net
of the following income tax eects:
(Millions of Dollars) 2008 2007 2006
Qualified cash flow hedging instruments $ 4.5 $ 2.5 $ 6.9
Unrealized gains on securities 1.1 0.1 (0.5)
Minimum SERP liability - - (0.3)
Pension, SERP and other postretirement
plans benefit obligations (SFAS No. 158) 24.2 (9.8) 6.1
Accumulated other comprehensive
income/(loss) $29.8 $(7.2) $12.2
Fair value adjustments included in accumulated other comprehensive income/(loss) for
NU’s qualified cash flow hedging instruments are as follows:
At December 31,
(Millions of Dollars, Net of Tax) 2008 2007
Balance at beginning of year $ 2.3 $5.9
Hedged transactions recognized into earnings 0.4 0.2
Change in fair value of interest rate swap agreements (7.0) -
Cash flow transactions entered into for period (0.3) (3.8)
Net change associated with hedging transactions (6.9) (3.6)
Total fair value adjustments included in
accumulated other comprehensive income $(4.6) $2.3