Vectren 2008 Annual Report Download - page 55

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53
The Company continues to develop plans to issue additional long-term debt over the next twelve to twenty four
months, assuming its A-/Baa1 investment grade credit ratings will allow it to access the capital markets, as the need
arises. However, while debt markets have improved somewhat, such long-term debt issued during this period could
be more expensive than in recent history. This permanent financing would reduce reliance on unutilized short-term
capacity.
Consolidated Short-Term Borrowing Arrangements
At December 31, 2008, the Company had $905 million of short-term borrowing capacity, including $520 million
for the Utility Group and $385 million for the wholly owned Nonutility Group and corporate operations, of which
approximately $328 million was available for the Utility Group operations and approximately $55 million was
available for the wholly owned Nonutility Group and corporate operations, as reduced for approximately $3 million
in outstanding letters of credit. Of the $520 million in Utility Group capacity, $515 million is available through
November, 2010; and of the $385 million in Nonutility capacity, $120 million is available through September, 2009
and $255 million is available through November, 2010.
Historically, the Company has funded the short-term borrowing needs of Utility Holdings’ operations through the
commercial paper market. In 2008, the Company’s access to longer term commercial paper was significantly
reduced as a result of the continued turmoil and volatility in the financial markets. As a result, the Company has
met working capital requirements through a combination of A2/P2 commercial paper issuances and draws on
Utility Holdings’ $515 million commercial paper back-up credit facilities. In addition, the Company increased its
cash investments by approximately $75 million during the fourth quarter of 2008. These cash positions were
liquidated in January 2009 based upon improvements in the short-term debt and commercial paper markets. Their
liquidation resulted in an increase to the available short-term debt capacity for the Utility Group by $40 million and
for the Nonutility Group by $35 million.
ProLiance Short-Term Borrowing Arrangements
ProLiance, a nonutility energy marketing affiliate of Vectren and Citizens, has its own short-term borrowing
capacity available through a syndicated credit facility. The terms of the facility allow for $300 million of capacity
from April 1 through September 30, and $400 million during the October 1 through March 31 heating season. At
December 31, 2008, approximately $56 million was outstanding. This remaining unutilized capacity, when
coupled with internally generated funds, is expected to provide sufficient liquidity to meet ProLiance's operational
needs. The facility expires June 2009, at which time, ProLiance anticipates having a new credit facility in place to
support its future working capital requirements. Future working capital requirements may be less than the level of
the current credit line given the recent decline in natural gas prices. The current facility is not guaranteed by
Vectren or Citizens.
New Share Issues
The Company may periodically issue new common shares to satisfy the dividend reinvestment plan, stock option
plan and other employee benefit plan requirements. New issuances added additional liquidity of $1.2 million in
2008 and $5.2 million in 2007. In 2009, new issuances required to meet these various plan requirements are
estimated to be approximately $6 million.
Potential Uses of Liquidity
Pension and Postretirement Funding Obligations
The Company’s consolidated financial statements as of December 31, 2008 reported pension plan asset values of
approximately $151 million, compared to asset values as of December 31, 2007 of approximately $212 million, and
since December 31, 2008, market values have remained volatile and have experienced further declines. Asset
values for qualified plans as of December 31, 2008 are approximately 61 percent of the projected benefit obligation.
Management currently estimates that the qualified pension plans may require Company contributions of
approximately $25 to $30 million in 2009 and a lesser level in 2010. During 2008, approximately $12 million in
contributions were made.