2004 Crown Investments Corporation of Saskatchewan Annual Report

Notes to Consolidated Financial StatementsDecember 31, 200413. Commitments and ContingenciesThe following significant commitments and contingencies exist at December 31, 2004:a) The Corporation has forward purchase commitments of $1,656.0 million (2003 - $1,768.0 million) forcoal contracted for future minimum deliveries and 1.6 petajoules of natural gas valued at current prices.b) The Corporation has committed to provide $19.8 million (2003 - $29.2 million) in loans and equity forinvestment in Saskatchewan business.c) The Corporation has entered into power purchase agreements expected to cost $4.8 billion until 2027and provide approximately 449 megawatts of electrical power annually.d) The Corporation has indemnified the Government of Canada for its guarantee of NewGrade EnergyInc.’s (NewGrade) long-term debt, to a maximum of $275.0 million. The fair value of the Corporation’sguarantee is $25.9 million (2003 - $35.6 million).e) The Corporation has guaranteed the exchange risk that exists upon default of NewGrade’s U.S.denominated debt to the extent that the default amount would exceed the $360.0 million guaranteedby the GRF. At December 31, 2004, the GRF’s exposure under the guarantee does not exceed$360.0 million. The Corporation does not expect any exposure under this guarantee.f )The Corporation has guaranteed MLPLP’s long-term debt repayments as part of a 2001 financialrestructuring of MLPLP. The remaining guarantee is to a maximum of $54.0 million(2003 - $62.0 million) at December 31, 2004.g) The Corporation has issued letters of credit in the amount of $47.2 million (2003 - $16.0 million).h) The Corporation has entered into natural gas price swaps with counterparties, to fix the purchaseprice for a total of 2.1 petajoules in 2005 and 2006. The natural gas will be held for operations. TheCorporation has entered into natural gas price swaps to fix the final selling price for the 4.8 petajoulescommitted for sale during 2005 and 2006.i) The Corporation has guaranteed $25.0 million (2003 - $21.0 million) of energy savings to variouscustomers through the Corporation’s energy performance contracts. These guarantees are mitigated bythird party guarantees to the Corporation that ensure the energy savings are realized.j) The Corporation has a $5.0 million U.S. dollar guarantee related to certain obligations to its equityinvestment in Gas Sur S.A., established under provisions of the shareholders’ agreement.k) On March 26, 2004, the Corporation entered into an Indemnity and Reimbursement Agreement (theindemnity) with HARO Financial Corporation (HARO), Extendicare Inc., Crown Life Insurance Company(Crown Life), and the Directors and certain Officers of Crown Life. The Corporation indemnified CrownLife and the Directors and certain Officers of Crown Life for 65.2 per cent of the costs, expenses,penalties, interest and reasonable legal fees arising out of any claim, suit or demand in respect of havingdeclared and paid $29.2 million in dividends from Crown Life to HARO. The indemnity is limited to thedividend plus 10 per cent or $32.1 million and terminates on the earlier of the second closing of the saleof Crown Life to Canada Life Assurance Company or April 1, 2010.81