FINANCIAL INSTRUMENTS

6 Months Ended

Jun. 30, 2011

FINANCIAL INSTRUMENTS

NOTE 11. FINANCIAL INSTRUMENTS

Fair Value Measurements

The following methods and assumptions were used to estimate the fair value of each class of financial instruments:

• For cash and cash equivalents, restricted funds, and marketable securities, the carrying value of these amounts is a reasonable estimate of their fair value. The fair value of restricted funds held in trust is based on quoted market prices of the investments held by the trustee.

• Fair values for long-term debt and project debt are determined using quoted market prices.

• The fair value of the Note Hedge and the Cash Conversion Option are determined using an option pricing model based on observable inputs such as implied volatility, risk free interest rate, and other factors. The fair value of the Note Hedge is adjusted to reflect counterparty risk of non-performance, and is based on the counterparty’s credit spread in the credit derivatives market. The contingent interest features related to the Debentures and the 3.25% Notes are valued quarterly using the present value of expected cash flow models incorporating the probabilities of the contingent events occurring.

The estimated fair value amounts have been determined using available market information and appropriate valuation methodologies. However, considerable judgment is necessarily required in interpreting market data to develop estimates of fair value. Accordingly, the estimates presented herein are not necessarily indicative of the amounts that we would realize in a current market exchange. The fair-value estimates presented herein are based on pertinent information available to us as of June 30, 2011. However, such amounts have not been comprehensively revalued for purposes of these financial statements since June 30, 2011, and current estimates of fair value may differ significantly from the amounts presented herein.

The following table presents information about the fair value measurement of our assets and liabilities as of June 30, 2011:

					Fair Value Measurements at Reporting Date Using
	As of June 30, 2011				Quoted Prices  in Active Markets for Identical Assets (Level 1)		Significant  Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Financial Instruments Recorded at Fair Value on a Recurring Basis:	Carrying Amount		Estimated Fair Value
			(In thousands)
Assets:
Cash and cash equivalents:
Bank deposits and certificates of deposit	$	203,021	$	203,021	$	203,021	$	—	$	—
Money market funds		32,040		32,040		32,040		—		—
Total cash and cash equivalents:		235,061		235,061		235,061		—		—
Restricted funds held in trust:
Bank deposits and certificates of deposit		3,679		3,679		3,679		—		—
Money market funds		133,671		133,671		133,671		—		—
U.S. Treasury/Agency obligations (a)		15,953		15,953		15,953		—		—
State and municipal obligations		9,866		9,866		9,866		—		—
Commercial paper/Guaranteed investment contracts/Repurchase agreements		55,792		56,210		56,210		—		—
Total restricted funds held in trust:		218,961		219,379		219,379		—		—
Restricted funds — other:
Bank deposits and certificates of deposit (b)		21,804		21,804		21,804		—		—
Money market funds (c)		15,155		15,155		15,155		—		—
Total restricted funds other:		36,959		36,959		36,959		—		—
Investments:
Mutual and bond funds (b)		1,925		1,876		1,876		—		—
Investments available for sale:
U.S. Treasury/Agency obligations (d)		5,448		5,448		5,448		—		—
Residential mortgage-backed securities (d)		5,166		5,166		5,166		—		—
Other government obligations (d)		4,185		4,185		4,185		—		—
Corporate investments (d)		12,735		12,735		12,735		—		—
Equity securities (c)		1,354		1,354		1,354		—		—
Total investments:		30,813		30,764		30,764		—		—
Derivative Asset — Note Hedge		88,542		88,542		—		88,542		—
Total assets:	$	610,336	$	610,705	$	522,163	$	88,542	$	—
Liabilities:
Derivative Liability — Energy Hedges	$	805	$	805	$	—	$	805	$	—
Derivative Liability — Cash Conversion Option		90,724		90,724		—		90,724		—
Derivative Liabilities — Contingent interest features of the Notes and Debentures		0		0		—		0		—
Total liabilities:	$	91,529	$	91,529	$	—	$	91,529	$	—
Financial Instruments Recorded at Carrying Amount:
Assets:
Accounts receivables (e)	$	271,999	$	271,999
Liabilities:
Long-term debt (excluding Cash Conversion Option)	$	1,452,295	$	1,513,701
Project debt	$	733,985	$	749,073

(a) The U.S. Treasury/Agency obligations in restricted funds held in trust are primarily comprised of Federal Home Loan Mortgage Corporation securities at fair value.

(b) Included in other noncurrent assets in the condensed consolidated balance sheets.

(c) Included in prepaid expenses and other current assets in the condensed consolidated balance sheets.

(d) Included in investments in fixed maturities at market in the condensed consolidated balance sheets.

(e) Includes $24.2 million of noncurrent receivables in other noncurrent assets in the condensed consolidated balance sheets.

The following table presents information about the fair value measurement of our assets and liabilities as of December 31, 2010:

					Fair Value Measurements at Reporting Date Using
	As of December 31, 2010				Quoted Prices  in Active Markets for Identical Assets (Level 1)		Significant  Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Financial Instruments Recorded at Fair Value on a Recurring Basis:	Carrying Amount		Estimated Fair Value
	(In thousands)
Assets:
Cash and cash equivalents:
Bank deposits and certificates of deposit	$	48,165	$	48,165	$	48,165	$	—	$	—
Money market funds		78,274		78,274		78,274		—		—
Total cash and cash equivalents:		126,439		126,439		126,439		—		—
Restricted funds held in trust:
Bank deposits and certificates of deposit		3,892		3,885		3,885		—		—
Money market funds		117,183		117,183		117,183		—		—
U.S. Treasury/Agency obligations (a)		56,340		56,335		56,335		—		—
State and municipal obligations		7,144		7,144		7,144		—		—
Commercial paper/Guaranteed investment contracts/Repurchase agreements		48,433		48,698		48,698		—		—
Total restricted funds held in trust:		232,992		233,245		233,245		—		—
Restricted funds — other:
Bank deposits and certificates of deposit (b)		21,721		21,721		21,721		—		—
Money market funds (c)		10,876		10,876		10,876		—		—
U.S. Treasury/Agency obligations (c)		499		499		499		—		—
Residential mortgage-backed securities (c)		1,382		1,382		1,382		—		—
Other government obligations (c)		991		991		991		—		—
Corporate investments (c)		509		509		509		—		—
Total restricted funds other:		35,978		35,978		35,978		—		—
Investments:
Mutual and bond funds (b)		2,328		2,602		2,602		—		—
Investments available for sale:
U.S. Treasury/Agency obligations (d)		6,069		6,069		6,069		—		—
Residential mortgage-backed securities (d)		4,470		4,470		4,470		—		—
Other government obligations (d)		2,375		2,375		2,375		—		—
Corporate investments (d)		16,108		16,108		16,108		—		—
Equity securities (c)		1,284		1,284		1,284		—		—
Total investments:		32,634		32,908		32,908		—		—
Derivative Asset — Note Hedge		112,400		112,400		—		112,400		—
Total assets:	$	540,443	$	540,970	$	428,570	$	112,400	$	—
Liabilities:
Derivative Liability — Energy Hedges	$	436	$	436	$	—	$	436	$	—
Derivative Liability — Cash Conversion Option		115,994		115,994		—		115,994		—
Derivative Liabilities — Contingent interest features of the 3.25% Notes and Debentures		0		0		—		0		—
Total liabilities:	$	116,430	$	116,430	$	—	$	116,430	$	—
Financial Instruments Recorded at Carrying Amount:
Assets:
Accounts receivables (e)	$	292,752	$	292,752
Liabilities:
Long-term debt (excluding Cash Conversion Option)	$	1,448,417	$	1,497,208
Project debt	$	803,303	$	823,310

(a) The U.S. Treasury/Agency obligations in restricted funds held in trust are primarily comprised of Federal Home Loan Mortgage Corporation securities at fair value.

(b) Included in other noncurrent assets in the condensed consolidated balance sheets.

(c) Included in prepaid expenses and other current assets in the condensed consolidated balance sheets.

(d) Included in investments in fixed maturities at market in the condensed consolidated balance sheets.

(e) Includes $24.9 million of noncurrent receivables in other noncurrent assets in the condensed consolidated balance sheets.

Investments

Our insurance subsidiaries’ fixed maturity debt and equity securities portfolio are classified as “available-for-sale” and are carried at fair value. Equity securities that are traded on a national securities exchange are stated at the last reported sales price on the day of valuation. Debt securities values are determined by third party matrix pricing based on the last days trading activity. Changes in fair values are credited or charged directly to Accumulated Other Comprehensive Income (“AOCI”) in the condensed consolidated statements of equity as unrealized gains or losses, respectively. Investment gains or losses realized on the sale of securities are determined using the specific identification method. Realized gains and losses are recognized in the condensed consolidated statements of income based on the amortized cost of fixed maturities and the cost basis for equity securities on the date of trade, subject to any previous adjustments for other-than-temporary declines. Other-than-temporary declines in fair value are recorded as realized losses in the condensed consolidated statements of income to the extent they relate to credit losses, and to AOCI to the extent they are related to other factors. The cost basis of the security is also reduced. We consider the following factors in determining whether declines in the fair value of securities are other-than-temporary:

• the significance of the decline in fair value compared to the cost basis;

• the time period during which there has been a significant decline in fair value;

• whether the unrealized loss is credit-driven or a result of changes in market interest rates;

• a fundamental analysis of the business prospects and financial condition of the issuer; and

• our ability and intent to hold the investment for a period of time sufficient to allow for any anticipated recovery in fair value.

Other investments, such as investments in companies in which we do not have the ability to exercise significant influence, are carried at the lower of cost or estimated realizable value.

The cost or amortized cost, unrealized gains, unrealized losses and the fair value of our investments categorized by type of security, were as follows (in thousands):

	As of June 30, 2011								As of December 31, 2010
	Cost or Amortized Cost		Unrealized Gain		Unrealized Loss		Fair Value		Cost or Amortized Cost		Unrealized Gain		Unrealized Loss		Fair Value
Current investments:
Fixed maturities	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Equity securities — insurance business		993		365		4		1,354		993		302		11		1,284
Total current investments	$	993	$	365	$	4	$	1,354	$	993	$	302	$	11	$	1,284
Noncurrent investments:
Fixed maturities — insurance business:
U.S. government obligations	$	305	$	1	$	—	$	306	$	307	$	—	$	4	$	303
U.S. government agencies		5,077		70		5		5,142		5,713		72		19		5,766
Residential mortgage-backed securities		5,099		79		12		5,166		4,417		92		39		4,470
Other government obligations		3,942		272		29		4,185		2,331		87		43		2,375
Corporate investments		12,338		445		48		12,735		15,769		454		115		16,108
Total fixed maturities — insurance business		26,761		867		94		27,534		28,537		705		220		29,022
Mutual and bond funds		1,925		—		49		1,876		2,328		274		—		2,602
Total noncurrent investments	$	28,686	$	867	$	143	$	29,410	$	30,865	$	979	$	220	$	31,624

The following table sets forth a summary of temporarily impaired investments held by our insurance subsidiary (in thousands):

	As of June 30, 2011				As of December 31, 2010
Description of Investments	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
U.S. Treasury and other direct U.S. Government obligations	$	1,055	$	5	$	1,215	$	23
Federal agency mortgage-backed securities		2,013		12		2,070		39
Other government obligations		977		29		936		43
Corporate bonds		3,657		48		3,266		115
Total fixed maturities		7,702		94		7,487		220
Equity securities		110		4		167		11
Total temporarily impaired investments	$	7,812	$	98	$	7,654	$	231

The number of U.S. Treasury and federal agency obligations, mortgage-backed securities, other government obligations, and corporate bonds temporarily impaired are 3, 3, 2, and 14, respectively. As of June 30, 2011, all of the temporarily impaired fixed maturity investments had maturities greater than 12 months.

Our fixed maturities held by our insurance subsidiary include mortgage-backed securities and collateralized mortgage obligations, collectively (“MBS”) representing 18.8%, and 15.4% of the total fixed maturities as of June 30, 2011 and December 31, 2010, respectively. Our MBS holdings are issued by the Federal National Mortgage Association, the Federal Home Loan Mortgage Corporation, or the Government National Mortgage Association all of which are rated “AAA” by Moody’s Investors Services. MBS and callable bonds, in contrast to other bonds, are more sensitive to market value declines in a rising interest rate environment than to market value increases in a declining interest rate environment.

The expected maturities of fixed maturity securities, by amortized cost and fair value are shown below (in thousands):

	As of June 30, 2011
	Amortized Cost		Fair Value
Available-for-sale:
One year or less	$	3,106	$	3,154
Over one year to five years		19,532		20,276
Over five years to ten years		4,123		4,104
More than ten years		—		—
Total fixed maturities	$	26,761	$	27,534

The following reflects the change in net unrealized gain on securities included as a separate component of AOCI in the condensed consolidated statements of equity (in thousands, net of tax):

	For the Three  Months Ended June 30,						For the Six Months Ended June 30,
	2011			2010			2011			2010
Fixed maturities, net	$	214		$	—		$	288		$	10
Equity securities, net		(1	)		(74	)		70			(48	)
Mutual and bond funds		—			(53	)		(49	)		75
Change in net unrealized gain on available-for-sale securities		213			(127	)		309			37
Money market funds — restricted		51			29			56			41
Change in net unrealized gain on securities	$	264		$	(98	)	$	365		$	78

The components of net unrealized gain on securities consist of the following (in thousands, net of tax):

	For the Three  Months Ended June 30,					For the Six Months Ended June 30,
	2011		2010			2011		2010
Net unrealized holding gain arising during the period	$	81	$	(135	)	$	177	$	29
Reclassification adjustment for net realized losses included in net income		132		8			132		8
Net unrealized gain on available-for-sale securities		213		(127	)		309		37
Net unrealized holding gain arising during the period — restricted		51		29			56		41
Net unrealized gain on securities	$	264	$	(98	)	$	365	$	78