FORM 10-K
89
MDU RESOURCES G ROUP, INC.
In order to borrow under Centennial's credit agreements and the Centennial uncommitted long-term master shelf agreement, Centennial
and certain of its subsidiaries must be in compliance with the applicable covenants and certain other conditions, including covenants not to
permit, as of the end of any fiscal quarter, the ratio of total debt to total capitalization to be greater than 65 percent (for the $400 million
credit agreement) and 60 percent (for the master shelf agreement). The master shelf agreement also includes a covenant that does not
permit the ratio of Centennial's earnings before interest, taxes, depreciation and amortization to interest expense, for the 12-month period
ended each fiscal quarter, to be less than 1.75 to 1. Other covenants include minimum consolidated net worth, limitation on priority debt
and restrictions on the sale of certain assets and on the making of certain loans and investments. Centennial and such subsidiaries were in
compliance with these covenants and met the required conditions at December 31, 2007. In the event Centennial or such subsidiaries do
not comply with the applicable covenants and other conditions, alternative sources of funding may need to be pursued.
Certain of Centennial's financing agreements contain cross-default provisions. These provisions state that if Centennial or any subsidiary of
Centennial fails to make any payment with respect to any indebtedness or contingent obligation, in excess of a specified amount, under any
agreement that causes such indebtedness to be due prior to its stated maturity or the contingent obligation to become payable, the
applicable agreements will be in default. Certain of Centennial's financing agreements and Centennial's practices limit the amount of
subsidiary indebtedness.
Williston Basin Interstate Pipeline Company Williston Basin has an uncommitted long-term master shelf agreement that allows for
borrowings up to $100 million. Under the terms of the master shelf agreement, $80.0 million was outstanding at December 31, 2007 and
2006. The ability to request additional borrowings under this master shelf agreement expires on December 20, 2008.
In order to borrow under its uncommitted long-term master shelf agreement, Williston Basin must be in compliance with the applicable
covenants and certain other conditions, including covenants not to permit, as of the end of any fiscal quarter, the ratio of total debt to total
capitalization to be greater than 55 percent. Other covenants include limitation on priority debt and some restrictions on the sale of certain
assets and the making of certain investments. Williston Basin was in compliance with these covenants and met the required conditions at
December 31, 2007. In the event Williston Basin does not comply with the applicable covenants and other conditions, alternative sources of
funding may need to be pursued.
NOTE 11 -- ASSET RETIREMENT OBLIGATIONS
The Company records obligations related to the plugging and abandonment of natural gas and oil wells, decommissioning of certain electric
generating facilities, reclamation of certain aggregate properties and certain other obligations associated with leased properties.
A reconciliation of the Company's liability, which is included in other liabilities, for the years ended December 31 was as follows:
2007
2006
(In thousands)
Balance at beginning of year
$56,179
$42,857
Liabilities incurred
4,149
4,878
Liabilities acquired
652
1,118
Liabilities settled
(5,896)
(2,963)
Accretion expense
3,081
3,093
Revisions in estimates
6,100
6,321
Other
188
875
Balance at end of year
$64,453
$56,179
The Company believes that any expenses under SFAS No. 143 and FIN 47 as they relate to regulated operations will be recovered in rates
over time and, accordingly, defers such expenses as regulatory assets.
The fair value of assets that are legally restricted for purposes of settling asset retirement obligations at December 31, 2007 and 2006, was
$5.8 million and $5.5 million, respectively.
