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SEC Filings
10-Q
SOUTHERN UNION CO filed this Form 10-Q on 05/09/2013
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10.
FAIR VALUE MEASUREMENT:
 
The following table sets forth the Company’s assets and liabilities that are measured at fair value on a recurring basis at the date indicated:
 
 
Fair Value
as of
 
Fair Value Measurements at
March 31, 2013
Using Fair Value Hierarchy
 
 
March 31, 2013
 
Level 1
 
Level 2
 
Level 3
Assets:
 
 
 
 
 
 
 
 
Commodity derivatives
 
$
6

 
$

 
$
6

 
$

Total
 
$
6

 
$

 
$
6

 
$

Liabilities:
 
 

 
 

 
 

 
 

Commodity derivatives
 
$
3

 
$

 
$
3

 
$

Interest-rate swap derivatives
 
72

 

 
72

 

Total
 
$
75

 
$

 
$
75

 
$


The Company’s Level 2 instruments primarily include natural gas and NGL price swaps and NGL processing spread swap derivatives and interest-rate swap derivatives that are valued using pricing models based on an income approach that discounts future cash flows to a present value amount.  The significant pricing model inputs for natural gas and NGL price swaps and NGL processing spread swap derivatives include published NYMEX forward index prices for delivery of natural gas at Henry Hub, Permian Basin and Waha, and NGL at Mont Belvieu.  The significant pricing model inputs for interest-rate swaps include published rates for U.S. Dollar LIBOR interest rate swaps.  The pricing models also adjust for nonperformance risk associated with the counterparty or Company, as applicable, through the use of credit risk adjusted discount rates based on published default rates.  The Company did not have any Level 3 instruments measured at fair value at March 31, 2013 and there were no transfers between hierarchy levels.

The approximate fair value of the Company’s cash and cash equivalents, accounts receivable and accounts payable is equal to book value, due to their short-term nature.

11.
COMMITMENTS AND CONTINGENCIES:
PEPL Holdings Guarantee of Collection
In accordance with the Contribution Agreement pursuant to which the Company contributed SUGS to Regency, Regency issued $600 million of 4.50% Senior Notes due 2023 (the “Regency Debt”), the proceeds of which were used by Regency to fund the cash portion of the consideration, as adjusted, under the Contribution Agreement and pay certain other expenses or disbursements directly related to the closing of the SUGS contribution. In connection with the closing of the SUGS contribution, on April 30, 2013, Regency entered into the guarantee of collection with PEPL Holdings, a subsidiary of the Company, pursuant to which PEPL Holdings provided a guarantee of collection (on a nonrecourse basis to the Company) to Regency and Regency Energy Finance Corp. with respect to the payment of the principal amount of the Regency Debt.
Environmental Matters
The Company’s operations are subject to federal, state and local laws, rules and regulations regarding water quality, hazardous and solid waste management, air quality control and other environmental matters. These laws, rules and regulations require the Company to conduct its operations in a specified manner and to obtain and comply with a wide variety of environmental registrations, licenses, permits, inspections and other approvals.  Failure to comply with environmental laws, rules and regulations may expose the Company to significant fines, penalties and/or interruptions in operations. The Company’s environmental policies and procedures are designed to achieve compliance with such applicable laws and regulations. These evolving laws and regulations and claims for damages to property, employees, other persons and the environment resulting from current or past operations may result in significant expenditures and liabilities in the future. The Company engages in a process of updating and revising its procedures for the ongoing evaluation of its operations to identify potential environmental exposures and enhance compliance with regulatory requirements.

14

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