1.0.0.3 false Commitments and Contingencies false 1 $ false false USD Standard http://www.xbrl.org/2003/iso4217 USD iso4217 0 2 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 0 eme_NotesToFinancialStatementsAbstract eme false na duration string Notes to Financial Statements [Abstract] false false false false false true false false false 1 false false 0 0 false false Notes to Financial Statements [Abstract] false 3 Commitments and Contingencies 1 us-gaap_CommitmentsAndContingenciesDisclosureTextBlock us-gaap true na duration string No definition available. false false false false false false false false false 1 false false 0 0 <table style="font-size:10pt; font-family:'Times New Roman',times,serif;"> <tr> <td> Note 11. Commitments and Contingencies Contractual Obligations Long-term Debt         EME's long-term debt maturities as of September 30, 2009 for the remainder of 2009 and the following four years were: <div style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 20%; WIDTH: 60%; PADDING-TOP: 0pt; POSITION: relative">   <div align="center"> <table cellspacing="0" cellpadding="0" width="100%" border="0"> <tr style="HEIGHT: 0px"> <td style="FONT-FAMILY: times" align="left"></td> <td style="FONT-FAMILY: times" width="12"></td> <td style="FONT-FAMILY: times" align="right" width="7"></td> <td style="FONT-FAMILY: times" width="59"></td> <td style="FONT-FAMILY: times" width="12"></td> </tr> <tr style="HEIGHT: 0px" valign="bottom"> <th style="FONT-FAMILY: times" align="center">   </th> <th style="FONT-FAMILY: times"> </th> <th style="FONT-FAMILY: times" align="center" colspan="2"> (in millions) </th> <th style="FONT-FAMILY: times">  </th></tr> <tr style="HEIGHT: 0px" valign="top" bgcolor="#CCEEFF"> <td style="FONT-FAMILY: times" valign="bottom"> October through December 2009</td> <td style="FONT-FAMILY: times" valign="bottom">  </td> <td style="FONT-FAMILY: times" valign="bottom" align="right"> $</td> <td style="FONT-FAMILY: times" valign="bottom" align="right"> 476</td> <td style="FONT-FAMILY: times" valign="bottom">  </td></tr> <tr style="HEIGHT: 0px" valign="top" bgcolor="white"> <td style="FONT-FAMILY: times" valign="bottom"> 2010</td> <td style="FONT-FAMILY: times" valign="bottom">  </td> <td style="FONT-FAMILY: times" valign="bottom">  </td> <td style="FONT-FAMILY: times" valign="bottom" align="right"> 37</td> <td style="FONT-FAMILY: times" valign="bottom">  </td></tr> <tr style="HEIGHT: 0px" valign="top" bgcolor="#CCEEFF"> <td style="FONT-FAMILY: times" valign="bottom"> 2011</td> <td style="FONT-FAMILY: times" valign="bottom">  </td> <td style="FONT-FAMILY: times" valign="bottom">  </td> <td style="FONT-FAMILY: times" valign="bottom" align="right"> 36</td> <td style="FONT-FAMILY: times" valign="bottom">  </td></tr> <tr style="HEIGHT: 0px" valign="top" bgcolor="white"> <td style="FONT-FAMILY: times" valign="bottom"> 2012</td> <td style="FONT-FAMILY: times" valign="bottom">  </td> <td style="FONT-FAMILY: times" valign="bottom">  </td> <td style="FONT-FAMILY: times" valign="bottom" align="right"> 40</td> <td style="FONT-FAMILY: times" valign="bottom">  </td></tr> <tr style="HEIGHT: 0px" valign="top" bgcolor="#CCEEFF"> <td style="FONT-FAMILY: times" valign="bottom"> 2013</td> <td style="FONT-FAMILY: times" valign="bottom">  </td> <td style="FONT-FAMILY: times" valign="bottom">  </td> <td style="FONT-FAMILY: times" valign="bottom" align="right"> 545</td> <td style="FONT-FAMILY: times" valign="bottom">  </td></tr></table></div> </div>         These amounts have been updated to reflect EME's financing activities completed during the second and third quarters of 2009. In June 2009, EME completed through its subsidiary, Viento Funding II, Inc., a non-recourse financing of its interests in the Wildorado, San Juan Mesa and Elkhorn Ridge wind projects. The financing included a $189 million seven-year term loan and a $13 million letter of credit facility which replaced project letters of credit previously issued under the EME corporate credit facility. Interest under the term loan accrues at LIBOR plus 3.875% initially, with the rate increasing 0.25% on the third and sixth anniversaries of the closing date. Viento Funding II entered into interest rate swap agreements to hedge the majority of the variable interest rate under the term loan. For further details regarding the interest rate swap agreements, see Note 3Derivative Instruments.                  In July 2009, Viento Funding II amended the credit agreement to add a working capital facility. Availability under the working capital facility is initially $3.8 million and steps up semi-annually to $5.2 million by maturity. The agreement restricts the use of proceeds from the working capital facility to operation and maintenance expenditures at these three wind projects.         In September 2009, Midwest Generation and EME repaid $200 million and $163 million, respectively, of borrowings under their respective credit facilities. The outstanding balances under Midwest Generation's working capital facility of $275 million and EME's corporate credit facility of $188 million were reported as current portion of long-term obligations on EME's consolidated balance sheet and were repaid in October 2009. Commitments Capital Improvements         At September 30, 2009, EME's subsidiaries had firm commitments to spend approximately $87 million during the remainder of 2009 and $31 million in 2010 on capital and construction expenditures. The majority of these expenditures relate to non-environmental improvements at both the Illinois Plants and the Homer City facilities and the construction of wind projects. These expenditures are planned to be financed by cash on hand and cash generated from operations. Turbine Commitments         EME has entered into various turbine supply agreements with vendors to support its wind development efforts. As of September 30, 2009, EME has commitments to purchase 419 wind turbines (785 MW) with obligations of $718 million due in 2010. In October 2009, EME extended and reduced payment obligations through two agreements. EME, through its subsidiary, Big Sky Wind, LLC, (Big Sky) entered into turbine financing arrangements totaling approximately $206 million for the purchase of 114 wind turbines (240 MW) for the Big Sky wind project. In October 2009, EME also entered into an amendment to one of its turbine supply agreements which no longer obligates EME to purchase 22 wind turbines (46 MW). EME has deferred all remaining 2009 payments to 2010. EME continues to actively negotiate with its turbine suppliers to match turbine delivery and payment dates to the deployment of turbines at individual wind projects.         As of September 30, 2009, EME has recorded wind turbine deposits of $395 million included in other long-term assets in its consolidated balance sheet. EME has 67 wind turbines (163 MW) in storage to be used for future wind projects with commitments on these turbines of $6 million remaining in 2009 and $8 million in 2010. EME has recorded $191 million in other long-term assets on its consolidated balance sheet related to wind turbines in storage.         EME can elect under one of its existing turbine supply agreements to terminate the agreement for convenience which, if terminated in its entirety, would further reduce turbine commitments by $181 million during 2010. In the event of such termination by EME, a write-off of approximately $45 million would be recognized. Fuel Supply Contracts         At September 30, 2009, Midwest Generation and EME Homer City had fuel purchase commitments with various third-party suppliers for the purchase of coal. Based on the contract provisions, which consist of fixed prices subject to adjustment clauses, these minimum commitments are currently estimated to aggregate $1.0 billion, summarized as follows: remainder of 2009$101 million, 2010$461 million, 2011$255 million, and 2012$212 million. Coal Transportation Agreements         At September 30, 2009, Midwest Generation and EME Homer City had contractual agreements for the transport of coal to their respective facilities. The commitments under these contracts are based on either actual coal purchases or minimum quantities. Accordingly, contractual obligations for transportation based on actual coal purchases are derived from committed coal volumes set forth in fuel supply contracts. These minimum commitments are currently estimated to aggregate $507 million, summarized as follows: remainder of 2009$67 million, 2010$276 million, and 2011$164 million. Standby Letters of Credit         At September 30, 2009, standby letters of credit under EME and its subsidiaries' credit facilities aggregated $119 million and were scheduled to expire as follows: $6 million in 2009 and $113 million in 2010. Guarantees and Indemnities         EME and certain of its subsidiaries have various financial and performance guarantees and indemnifications which are issued in the normal course of business. As discussed below, these contracts include performance guarantees, guarantees of debt and indemnifications. Tax Indemnity Agreements         In connection with the sale-leaseback transactions related to the Homer City facilities in Pennsylvania, the Powerton and Joliet Stations in Illinois and, previously, the Collins Station in Illinois, EME and several of its subsidiaries entered into tax indemnity agreements. Although the Collins Station lease terminated in April 2004, Midwest Generation's tax indemnity agreement with the former lease equity investor is still in effect. Under these tax indemnity agreements, these entities agreed to indemnify the lessors in the sale-leaseback transactions for specified adverse tax consequences that could result in certain situations set forth in each tax indemnity agreement, including specified defaults under the respective leases. The potential indemnity obligations under these tax indemnity agreements could be significant. Due to the nature of these potential obligations, EME cannot determine a maximum potential liability which would be triggered by a valid claim from the lessors. EME has not recorded a liability related to these indemnities. Indemnities Provided as Part of the Acquisition of the Illinois Plants         In connection with the acquisition of the Illinois Plants, EME agreed to indemnify Commonwealth Edison with respect to specified environmental liabilities before and after December 15, 1999, the date of sale. The indemnification claims are reduced by any insurance proceeds and tax benefits related to such claims and are subject to a requirement that Commonwealth Edison takes all reasonable steps to mitigate losses related to any such indemnification claim. Due to the nature of the obligation under this indemnity, a maximum potential liability cannot be determined. This indemnification for environmental liabilities is not limited in term and would be triggered by a valid claim from Commonwealth Edison. Commonwealth Edison has advised EME that Commonwealth Edison believes it is entitled to indemnification for all liabilities, costs, and expenses that it may be required to bear as a result of the litigation discussed below under "ContingenciesMidwest Generation New Source Review Lawsuit." Except as discussed below, EME has not recorded a liability related to the environmental indemnity specified in the acquisition agreement.         Midwest Generation entered into a supplemental agreement with Commonwealth Edison and Exelon Generation Company, LLC on February 20, 2003 to resolve a dispute regarding interpretation of its reimbursement obligation for asbestos claims under the environmental indemnities set forth in the Asset Sale Agreement. Under this supplemental agreement, Midwest Generation agreed to reimburse Commonwealth Edison and Exelon Generation for 50% of specific asbestos claims pending as of February 2003 and related expenses less recovery of insurance costs, and agreed to a sharing arrangement for liabilities and expenses associated with future asbestos-related claims as specified in the agreement. As a general matter, Commonwealth Edison and Midwest Generation apportion responsibility for future asbestos-related claims based upon the number of exposure sites that are Commonwealth Edison locations or Midwest Generation locations. The obligations under this agreement are not subject to a maximum liability. The supplemental agreement had an initial five-year term with an automatic renewal provision for subsequent one-year terms (subject to the right of either party to terminate); pursuant to the automatic renewal provision, it has been extended until February 2010. There were approximately 203 cases for which Midwest Generation was potentially liable and that had not been settled and dismissed at September 30, 2009. Midwest Generation had recorded a $50 million liability at September 30, 2009 related to this matter.         The amounts recorded by Midwest Generation for the asbestos-related liability are based upon a number of assumptions. Future events, such as the number of new claims to be filed each year, the average cost of disposing of claims, as well as the numerous uncertainties surrounding asbestos litigation in the United States, could cause the actual costs to be higher or lower than projected. Indemnity Provided as Part of the Acquisition of the Homer City Facilities         In connection with the acquisition of the Homer City facilities, EME Homer City agreed to indemnify the sellers with respect to specified environmental liabilities before and after the date of sale. Payments would be triggered under this indemnity by a valid claim from the sellers. EME guaranteed the obligations of EME Homer City. Due to the nature of the obligation under this indemnity provision, it is not subject to a maximum potential liability and does not have an expiration date. For discussion of the NOV received by EME Homer City and associated indemnity claims, see "ContingenciesEME Homer City New Source Review Notice of Violation." EME has not recorded a liability related to this indemnity. Indemnities Provided under Asset Sale Agreements         The asset sale agreements for the sale of EME's international assets contain indemnities from EME to the purchasers, including indemnification for taxes imposed with respect to operations of the assets prior to the sale and for pre-closing environmental liabilities. Not all indemnities under the asset sale agreements have specific expiration dates. Payments would be triggered under these indemnities by valid claims from the sellers or purchasers, as the case may be. At September 30, 2009, EME had recorded a liability of $96 million (of which $49 million is classified as a current liability) related to these matters.         In connection with the sale of various domestic assets, EME has from time to time provided indemnities to the purchasers for taxes imposed with respect to operations of the asset prior to the sale. EME has also provided indemnities to purchasers for items specified in each agreement (for example, specific pre-existing litigation matters and/or environmental conditions). Due to the nature of the obligations under these indemnity agreements, a maximum potential liability cannot be determined. Not all indemnities under the asset sale agreements have specific expiration dates. Payments would be triggered under these indemnities by valid claims from the sellers or purchasers, as the case may be. At September 30, 2009, EME had recorded a liability of $2 million related to these matters. Contingencies Midwest Generation New Source Review Lawsuit         On August 3, 2007, Midwest Generation received an NOV from the US EPA alleging that, beginning in the early 1990s and into 2003, Midwest Generation or Commonwealth Edison performed repair or replacement projects at six Illinois coal-fired electric generating stations in violation of the PSD requirements and of the New Source Performance Standards of the CAA, including alleged requirements to obtain a construction permit and to install best available control technology at the time of the projects. The US EPA also alleged that Midwest Generation and Commonwealth Edison violated certain operating permit requirements under Title V of the CAA. Finally, the US EPA alleged violations of certain opacity and particulate matter standards at the Illinois Plants. The NOV did not specify the penalties or other relief that the US EPA sought for the alleged violations. At approximately the same time, Commonwealth Edison received an NOV substantially similar to the Midwest Generation NOV. Midwest Generation, Commonwealth Edison, the US EPA, and the DOJ, along with several Chicago-based environmental action groups, had been in confidential talks designed to explore the possibility of a settlement.         On August 27, 2009, the US EPA and the State of Illinois filed a complaint in the Northern District of Illinois against Midwest Generation, but not Commonwealth Edison, based in part on the allegations in the NOV. In addition to seeking penalties ranging from $25,000 to $37,500 per violation, per day, the complaint calls for an injunction ordering Midwest Generation to install best available control technology at all units subject to the complaint; to obtain new PSD or New Source Review permits for those units; to amend its applications under Title V of the CAA; to conduct audits of its operations to determine whether any additional modifications have occurred; and to offset and mitigate the harm to public health and the environment caused by the alleged CAA violations. By motion dated October 9, 2009, the environmental groups that had been involved in previous settlement discussions asked the court to allow them to intervene in the August 27 action. The parties have been instructed to meet and confer on the proposed intervention. Midwest Generation plans to vigorously defend against the allegations in the complaint.         Midwest Generation cannot predict the outcome of these matters or estimate the impact on its facilities, its results of operations, financial position or cash flows. EME Homer City New Source Review Notice of Violation         On June 12, 2008, EME Homer City received an NOV from the US EPA alleging that, beginning in 1988, EME Homer City (or former owners of the Homer City facilities) performed repair or replacement projects at Homer City Units 1 and 2 without first obtaining construction permits as required by the PSD requirements of the CAA. The US EPA also alleges that EME Homer City has failed to file timely and complete Title V permits. The NOV does not specify the penalties or other relief that the US EPA seeks for the alleged violations. On June 30, 2009, the US EPA issued a request for information to EME Homer City under Section 114 of the CAA. EME Homer City is working on a response to the request. EME Homer City has met with the US EPA and has expressed its intent to explore the possibility of a settlement. If no settlement is reached and the DOJ files suit, litigation could take many years to resolve the issues alleged in the NOV. EME Homer City cannot predict the outcome of this matter or estimate the impact on its facilities, its results of operations, financial position or cash flows.         EME Homer City has sought indemnification for liability and defense costs associated with the NOV from the sellers under the asset purchase agreement pursuant to which EME Homer City acquired the Homer City facilities. The sellers responded by denying the indemnity obligation, but accepting a portion of defense costs related to the claims.         EME Homer City notified the sale-leaseback owner participants of the Homer City facilities of the NOV under the operative indemnity provisions of the sale-leaseback documents. The owner participants of the Homer City facilities, in turn, have sought indemnification and defense from EME Homer City for costs and liability associated with the EME Homer City NOV. EME Homer City responded by undertaking the indemnity obligation and defense of the claims. Environmental Matters and Regulations         The construction and operation of power plants are subject to federal, state and local environmental laws and regulations, which typically require a lengthy and complex process for obtaining licenses, permits and approvals for construction, operation or modification of a project or generating facility. EME believes that it is in substantial compliance with existing environmental regulatory requirements. However, possible developments, such as the promulgation of more stringent environmental laws and regulations, proceedings that may be initiated by environmental and other regulatory authorities, cases in which new theories of liability are recognized, and settlements agreed to by other companies that establish precedent or expectations for the power industry, could affect the costs and the manner in which EME and its subsidiaries conduct their businesses and could require substantial additional capital or operational expenditures or the ceasing of operations at certain of their facilities. There is no assurance that EME's financial position and results of operations would not be materially adversely affected. EME is unable to predict the precise extent to which additional laws and regulations may affect its future operations and capital expenditure requirements. For a more complete discussion of EME's environmental contingencies, refer to "Note 12Commitments and ContingenciesEnvironmental Matters and Regulations" on page 156 of EME's annual report on Form 10-K for the year ended December 31, 2008. For further discussion of EME's environmental and regulatory risks, refer to "Item 1A. Risk FactorsRegulatory and Environmental Risks" on page 32 of EME's annual report on Form 10-K for the year ended December 31, 2008.         With respect to EME's potential liabilities arising under the Comprehensive Environmental Response, Compensation and Liability Act of 1980, commonly referred to as CERCLA, or similar laws for the investigation and remediation of contaminated property, EME accrues a liability to the extent the costs are probable and can be reasonably estimated. Midwest Generation has accrued approximately $5 million at September 30, 2009 for estimated environmental investigation and remediation costs for the Illinois Plants. This estimate is based upon the number of sites, the scope of work and the estimated costs for investigation and/or remediation where such expenditures could be reasonably estimated. Future estimated costs may vary based on changes in regulations or requirements of federal, state, or local governmental agencies, changes in technology, and actual costs of disposal. In addition, future remediation costs will be affected by the nature and extent of contamination discovered at the sites that requires remediation. Given the prior history of the operations at its facilities, EME cannot be certain that the existence or extent of all contamination at its sites has been fully identified. However, based on available information, management believes that future costs in excess of the amounts disclosed on all known and quantifiable environmental contingencies will not be material to EME's financial position.</td></tr></table> Note 11. Commitments and Contingencies Contractual Obligations Long-term Debt         EME's long-term debt false false No definition available. No authoritative reference available. false false 1 2 false UnKnown UnKnown UnKnown false true