SEC Company Response from NIAGARA MOHAWK POWER — Nov 30, 2005
NIAGARA MOHAWK POWER CORP /NY/ (CIK 0000071932)
Date: Nov. 30, 2005 · CIK: 0000071932 · Accession: 0000071297-05-000052
AI Filing Summary & Sentiment
File numbers found in text: 001-2987
Referenced dates: October 21, 2005, September 28, 2005
Letter
November 30, BY EDGAR Mr. Robert Babula Staff Accountant Division of Corporation Finance U.S. Securities and Exchange Commission 100 F Street, N.E. Washington, D.C.
Re: Niagara Mohawk Power Corporation (the "Company") Form 10-K for the fiscal year ended March 31, 2005 (File No. 001-2987)
Dear Mr. Babula:
On November 15, 2005, on behalf of the staff (the "Staff") of the U.S. Securities and Exchange Commission, you provided an additional comment on the above-referenced report in a telephone call to Paul Bailey. The comment related to the Company's responses in its letter dated October 21, 2005 to comments 5 and 12 in the Staff's letter dated September 28, 2005 (the "Comment Letter"). This letter contains the Company's response to that comment.
For convenience, we have transcribed the Staff's comment below in boldfaced italics and provided our response immediately below it.
Note D - Commitments and Contingencies, page
Legal Matters - Retail Bypass, page 41
In your letter to the Staff dated October 21, 2005, you indicated in your responses to comments 5 and 12 that the Company had established a reserve of $32 million in connection with one station service customer's accounts receivable balance, and that it reversed this reserve in the first quarter of fiscal 2006. Please describe the original journal entry that established the reserve.
RESPONSE:
The Company's parent, Niagara Mohawk Holdings, Inc. was merged with a wholly owned subsidiary of National Grid USA on January 31, 2002. The Company accounted for the merger as an acquisition under the purchase method of accounting and, as a result, measured and recorded its assets and liabilities at their fair values as of the merger date. Affiliates of NRG Energy, Inc. (NRG) owed the Company $19 million for station service as of that date, but NRG's financial condition was then uncertain, and the fair value of its receivable was estimated as zero. Consequently, the Company established a $19 million reserve on its "opening", or acquisition-dated, balance sheet, thereby increasing goodwill by $19 million.
Subsequently, the Company continued to provide NRG with station service and established an additional $13 million of reserves for the related charges, which management believed were unlikely to be collected because of NRG's continued uncertain financial condition and its May 2003 bankruptcy filing. The Company established these reserves by reversing or debiting the revenues that gave rise to the receivables.
* * *
If you have any questions or require additional information regarding our responses, please direct them to me at 508-389-2000 or by fax at 508-389-2605 or to Paul Bailey, Controller, at 508-389-2000 or by fax at 508-389-2925.
Yours truly,
/s/ John G. Cochrane
John G. Cochrane Chief Financial Officer Niagara Mohawk Power Corporation
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filename1.htm
300 ERIE BOULEVARD WEST,
SYRACUSE, NEW YORK 13202
November 30,
2005
BY
EDGAR
Mr. Robert
Babula
Staff
Accountant
Division of Corporation
Finance
U.S. Securities and Exchange
Commission
100 F Street,
N.E.
Washington, D.C.
20549
Re: Niagara
Mohawk Power Corporation (the
"Company")
Form
10-K for the fiscal year ended March 31, 2005 (File No.
001-2987)
Dear Mr.
Babula:
On November 15, 2005, on behalf of the
staff (the "Staff") of the U.S. Securities and Exchange Commission,
you provided an additional comment on the above-referenced report in a telephone
call to Paul Bailey. The comment related to the Company's responses
in its letter dated October 21, 2005 to comments 5 and 12 in the Staff's
letter dated September 28, 2005 (the "Comment Letter"). This
letter contains the Company's response to that
comment.
For convenience, we have transcribed
the Staff's comment below in boldfaced italics and provided our response
immediately below it.
Note
D - Commitments and Contingencies, page
39
Legal Matters -
Retail Bypass, page 41
In
your letter to the Staff dated October 21, 2005, you indicated in your responses
to comments 5 and 12 that the Company had established a reserve of $32 million
in connection with one station service customer's accounts receivable
balance, and that it reversed this reserve in the first quarter of fiscal 2006.
Please describe the original journal entry that established the
reserve.
RESPONSE:
The Company's parent, Niagara Mohawk Holdings,
Inc. was merged with a wholly owned subsidiary of National Grid USA on January
31, 2002. The Company accounted for the merger as an acquisition under the
purchase method of accounting and, as a result, measured and recorded its assets
and liabilities at their fair values as of the merger date. Affiliates of
NRG Energy, Inc. (NRG) owed the Company $19 million for station service as of
that date, but NRG's financial condition was then uncertain, and the fair
value of its receivable was estimated as zero. Consequently, the Company
established a $19 million reserve on its "opening", or
acquisition-dated, balance sheet, thereby increasing goodwill by $19 million.
Subsequently, the Company continued to provide NRG with
station service and established an additional $13 million of reserves for the
related charges, which management believed were unlikely to be collected because
of NRG's continued uncertain financial condition and its May 2003
bankruptcy filing. The Company established these reserves by reversing or
debiting the revenues that gave rise to the receivables.
* * *
If you have any questions or require additional
information regarding our responses, please direct them to me at 508-389-2000 or
by fax at 508-389-2605 or to Paul Bailey, Controller, at 508-389-2000 or by fax
at 508-389-2925.
Yours
truly,
/s/ John G.
Cochrane
John G.
Cochrane
Chief Financial
Officer
Niagara Mohawk Power
Corporation