FORM 10-K
84
MDU RESOURCES G ROUP, INC.
PART II
NOTE 4 -- EQUIT Y METHOD INVESTMENTS
Investments in companies in which the Company has the ability to exercise significant influence over operating and financial policies are
accounted for using the equity method. The Company's equity method investments at December 31, 2007, include the Brazilian
Transmission Lines.
In August 2006, MDU Brasil acquired ownership interests in companies owning three electric transmission lines. The interests involve the
ENTE (13.3-percent ownership interest), ERTE (13.3-percent ownership interest) and ECTE (25-percent ownership interest) electric
transmission lines, which are primarily in northeastern and southern Brazil. The contracts provide for revenues denominated in the Brazilian
Real, annual inflation adjustments and change in tax law adjustments and have between 23 and 25 years remaining under the contracts.
Alusa, Brascan and CEMIG hold the remaining ownership interests, with CELESC also having an ownership interest in ECTE. The functional
currency for the Brazilian Transmission Lines is the Brazilian Real.
In February 2004, Centennial International acquired 49.99 percent of Carib Power. Carib Power, through a wholly owned subsidiary, owns a
225-MW natural gas-fired electric generating facility in Trinidad and Tobago. On February 26, 2007, the Company sold its interest in Carib
Power. The sale did not have a significant effect on the Company's results of operations.
In September 2004, Centennial Resources, through indirect wholly owned subsidiaries, acquired a 50 percent ownership interest in
Hartwell, which owns a 310-MW natural gas-fired electric generating facility near Hartwell, Georgia. On July 10, 2007, the Company sold its
ownership interest in Hartwell, and realized a gain of $10.1 million ($6.1 million after tax) from the sale which is recorded in earnings from
equity method investments on the Consolidated Statements of Income.
In June 2005, the Company completed the sale of its 49 percent interest in MPX to Petrobras, the Brazilian state-controlled energy
company. The Company realized a gain of $15.6 million from the sale in 2005.
At December 31, 2007 and 2006, the Company's equity method investments had total assets of $398.4 million and $583.6 million,
respectively, and long-term debt of $211.2 million and $321.5 million, respectively. The Company's investment in its equity method
investments was approximately $59.0 million and $102.0 million, including undistributed earnings of $6.9 million and $8.5 million, at
December 31, 2007 and 2006, respectively.
NOTE 5 -- GOODWILL AND OTHER INTANGIBLE ASSETS
The changes in the carrying amount of goodwill for the year ended December 31, 2007, were as follows:
Balance
Goodwill
Balance
as of
Acquired
as of
January 1,
During
December 31,
2007
the Year*
2007
(In thousands)
Electric
$
--
$
--
$
--
Natural gas distribution
--
171,129
171,129
Construction services
86,942
4,443
91,385
Pipeline and energy services
1,159
--
1,159
Natural gas and oil production
--
--
--
Construction materials and contracting
136,197
25,828
162,025
Other
--
--
--
Total
$224,298
$201,400
$425,698
*Includes purchase price adjustments that were not material related to acquisitions in a prior period.
The changes in the carrying amount of goodwill for the year ended December 31, 2006, were as follows:
Balance
Goodwill
Balance
as of
Acquired
as of
January 1,
During
December 31,
2006
the Year*
2006
(In thousands)
Electric
$
--
$
--
$
--
Natural gas distribution
--
--
--
Construction services
80,970
5,972
86,942
Pipeline and energy services
1,159
--
1,159
Natural gas and oil production
--
--
--
Construction materials and contracting
133,264
2,933
136,197
Other
--
--
--
Total
$215,393
$8,905
$224,298
*Includes purchase price adjustments that were not material related to acquisitions in a prior period.
For more information on the goodwill impairment related to the discontinued operations at Innovatum in 2006, see Note 3.
