Content
Earnings
|
Year ended December 31, |
2008 |
2007 |
(millions of dollars) |
||
|
Earnings before the impact of tax changes |
1.1 |
2.3 |
|
Revalue future taxes due to tax rate changes |
– |
0.1 |
|
Future taxes due to Tax Fairness Plan |
– |
0.2 |
|
Earnings |
1.1 |
2.6 |
Earnings for the year ended December 31, 2008, were $1.1 million compared with earnings for the year ended December 31, 2007, of $2.6 million. The $1.5 million decrease in earnings is attributed to an unrealized non-cash derivative loss of $0.9 million, downtime experienced at the NRGreen facilities during the year, interest expense on the new NRGreen credit facility and a lower wind resource on the wind power projects. In contrast, prior year earnings were positively impacted by $0.3 million due to the future tax rate reduction in 2007 and an increase in future tax recoveries arising from the Tax Fairness Plan, which effectively changed the future tax rate from 0% to 29.5% starting in 2011. Future tax recoveries in the Green Power segment arose from differences between the accounting value and the fair value of the property, plant and equipment on the acquisition of the wind power projects.
The Green Power segment has entered into derivative instruments to mitigate cash-flow fluctuations associated with revenue generated on its wind power projects by fixing the price of power. A portion of the derivative instruments has not been designated as a hedge for accounting purposes. As a result, changes in the fair value of this portion are reflected in earnings each period.
NRGreen experienced equipment failures at its facilities during the year, which led to downtime resulting in lower earnings. All facilities are covered by warranty and at December 31, 2008, claims have been submitted, or are in the process of being submitted, for all equipment failures. Warranty and insurance claims of $0.2 million related to the 2007 Kerrobert shutdown were received in the fourth quarter of 2008.