Commitments and contingencies


(a)	Contingencies

APUC and its subsidiaries are involved in various claims and litigation arising out of the ordinary course and conduct of its business. Although such matters cannot be predicted with certainty, management does not consider APUC’s exposure to such litigation to be material to these financial statements. Accruals for any contingencies related to these items are recorded in the consolidated financial statements at the time it is concluded that its occurrence is probable and the related liability is estimable.

Condemnation Expropriation Proceedings

Mountain Water was the subject of a condemnation lawsuit filed by the city of Missoula. On August 2, 2016, the Supreme Court of Montana upheld the District Court’s decision that the city of Missoula could proceed with condemnation of Mountain Water’s assets. The fair market value of the condemned property as of May 6, 2014 was assessed by the Commissioners to be U.S. $88,600. Upon taking possession of Mountain Water’s assets on June 22, 2017, the city of Missoula paid U.S. $83,863 to Mountain Water, net of closing adjustments and amounts required to be paid by the City directly to various developers in satisfaction of obligations under Funded By Other (FBO) contracts relating to the assets.

In connection with Liberty Utilities’ indirect acquisition of Mountain Water in January 2016, Liberty Utilities was permitted and continues to hold-back U.S. $14,400 from the purchase price otherwise payable to Carlyle Infrastructure Partners, L.P. (“Carlyle”) and certain other interest holders.

The condemnation of the Mountain Water assets resulted in a gain on long-lived assets of U.S. $4,370.

Liberty Utilities (Apple Valley Ranchos Water) Corp. is the subject of a condemnation lawsuit filed by the town of Apple Valley. A Court will determine the necessity of the taking by Apple Valley and, if established, a jury will determine the fair market value of the assets being condemned. Resolution of the condemnation proceedings is expected to take two to three years. Any taking by government entities would legally require fair compensation to be paid, however, there is no assurance that the value received as a result of the condemnation will be sufficient to recover the Company's net book value of the utility assets taken.


(b)	Commitments

In addition to the commitments related to the proposed acquisitions and development projects disclosed in notes 3 and 8, the following significant commitments exist as of December 31, 2017.

APUC has outstanding purchase commitments for power purchases, gas delivery, service and supply, service agreements, capital project commitments and operating leases.

Detailed below are estimates of future commitments under these arrangements:



	Year 1		Year 2		Year 3		Year 4		Year 5		Thereafter		Total
Power purchase (i)	$	74,025	$	48,344	$	49,940	$	50,214	$	50,495	$	254,380	$	527,398
Gas supply and service agreements (ii)	91,425		66,848		51,809		33,161		28,411		97,489		369,143
Service agreements	47,695		47,211		48,529		48,827		46,548		435,093		673,903
Capital projects	41,054		17,064		65		65		65		16		58,329
Operating leases	9,573		8,974		8,298		8,361		9,718		225,047		269,971
Total	$	263,772	$	188,441	$	158,641	$	140,628	$	135,237	$	1,012,025	$	1,898,744

23.Commitments and contingencies (continued)


(b)	Commitments (continued)


(i)	Power purchase: APUC’s electric distribution facilities have commitments to purchase physical quantities of power for load serving requirements. The commitment amounts included in the table above are based on market prices as of December 31, 2017. However, the effects of purchased power unit cost adjustments are mitigated through a purchased power rate-adjustment mechanism.


(ii)	Gas supply and service agreements: APUC’s gas distribution facilities and thermal generation facilities have commitments to purchase physical quantities of natural gas under contracts for purposes of load serving requirements and of generating power.