Dow Chemical 2013 Annual Report Download - page 130

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The following tables provide a summary of the final expiration, maximum future payments and recorded liability reflected in
the consolidated balance sheets for each type of guarantee:
Guarantees at December 31, 2013
In millions
Final
Expiration
Maximum Future
Payments
Recorded
Liability
Guarantees 2021 $ 5,074 $ 137
Residual value guarantees 2021 708 27
Total guarantees $ 5,782 $ 164
Guarantees at December 31, 2012
In millions
Final
Expiration
Maximum Future
Payments (1)
Recorded
Liability
Guarantees 2021 $ 1,544 $ 48
Residual value guarantees (2) 2021 637 31
Total guarantees $ 2,181 $ 79
(1) The Company was indemnified by a third party for $49 million if required to perform
under a $98 million guarantee.
(2) Does not include the residual value guarantee related to the Company's variable interest
in an owner trust; see Note 19.
During the first six months of 2013, the Company entered into guarantee agreements (“Guarantees”) related to project financing
for Sadara Chemical Company (“Sadara”), a nonconsolidated affiliate. On April 2, 2013, Sadara issued an Islamic bond
(“Sukuk”) in the amount of SAR 7.5 billion (approximately $2 billion). On June 16, 2013, Sadara entered into definitive
agreements with certain export credit agencies, commercial banks and the Public Investment Fund of the Kingdom of Saudi
Arabia for approximately $10.5 billion of project financing (“Additional Project Financing”). The Additional Project Financing
closed on June 28, 2013. The total of the Sukuk and Additional Project Financing (collectively "Total Project Financing")
obtained by Sadara is approximately $12.5 billion. At December 31, 2013, Sadara had $5.8 billion of Total Project Financing
outstanding. The Company's guarantee of the Sukuk and the Additional Project Financing is in proportion to the Company's 35
percent ownership interest in Sadara, or up to approximately $4.4 billion when the project financing is fully drawn. The
Guarantees will be released upon completion of construction of the Sadara complex and satisfactory fulfillment of certain other
conditions, including passage of an extensive operational testing program, which is currently anticipated for the end of 2017.
Asset Retirement Obligations
Dow has 201 manufacturing sites in 36 countries. Most of these sites contain numerous individual manufacturing operations,
particularly at the Company’s larger sites. Asset retirement obligations are recorded as incurred and reasonably estimable,
including obligations for which the timing and/or method of settlement are conditional on a future event that may or may not be
within the control of the Company. The retirement of assets may involve such efforts as remediation and treatment of asbestos,
contractually required demolition, and other related activities, depending on the nature and location of the assets; and retirement
obligations are typically realized only upon demolition of those facilities. In identifying asset retirement obligations, the
Company considers identification of legally enforceable obligations, changes in existing law, estimates of potential settlement
dates and the calculation of an appropriate discount rate to be used in calculating the fair value of the obligations. Dow has a
well-established global process to identify, approve and track the demolition of retired or to-be-retired facilities; and no assets
are retired from service until this process has been followed. Dow typically forecasts demolition projects based on the
usefulness of the assets; environmental, health and safety concerns; and other similar considerations. Under this process, as
demolition projects are identified and approved, reasonable estimates are determined for the time frames during which any
related asset retirement obligations are expected to be settled. For those assets where a range of potential settlement dates may
be reasonably estimated, obligations are recorded. Dow routinely reviews all changes to items under consideration for
demolition to determine if an adjustment to the value of the asset retirement obligation is required.
The Company has recognized asset retirement obligations for the following activities: demolition and remediation activities at
manufacturing sites in the United States, Canada, Brazil, China, Argentina, Australia, Japan, India and Europe; and capping
activities at landfill sites in the United States, Canada, Brazil and Europe. The Company has also recognized conditional asset
retirement obligations related to asbestos encapsulation as a result of planned demolition and remediation activities at
manufacturing and administrative sites in the United States, Canada, Brazil, China, Argentina, Australia, Japan, India and
Europe. The aggregate carrying amount of conditional asset retirement obligations recognized by the Company (included in the
asset retirement obligations balance shown below) was $34 million at December 31, 2013 ($34 million at December 31, 2012).