Vectren 2010 Annual Report Download - page 99

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97
15. Commitments & Contingencies
Commitments
Future minimum lease payments required under operating leases that have initial or remaining noncancelable lease terms in
excess of one year during the five years following 2010 and thereafter (in millions) are $4.1 in 2011, $2.7 in 2012, $1.8 in 2013,
$1.2 in 2014, $0.5 in 2015, and $0.1 thereafter. Total lease expense (in millions) was $7.3 in 2010, $8.0 in 2009, and $8.8 in
2008.
Firm nonutility purchase commitments for commodities total (in millions) $11.8 in 2011, $2.9 in 2012, $1.4 in 2013, zero in 2014
and 2015. Firm nonutility commitments for transportation and storage capacity total (in millions) $4.2 in 2011, $4.1 in 2012, $3.8
in 2013, $1.8 in 2014, $0.8 in 2015, and $3.2 thereafter.
The Company’s regulated utilities have both firm and non-firm commitments to purchase natural gas, electricity, and coal as well
as certain transportation and storage rights. Costs arising from these commitments, while significant, are pass-through costs,
generally collected dollar-for-dollar from retail customers through regulator-approved cost recovery mechanisms.
Corporate Guarantees
The Company issues corporate guarantees to certain vendors and customers of its wholly owned subsidiaries and
unconsolidated affiliates. These guarantees do not represent incremental consolidated obligations; rather, they represent
parental guarantees of subsidiary and unconsolidated affiliate obligations in order to allow those subsidiaries and affiliates the
flexibility to conduct business without posting other forms of collateral. At December 31, 2010, corporate issued guarantees
support a maximum of $25 million of ESG’s performance contracting commitments and warranty obligations and $29 million of
other project guarantees described below. In addition, the Company has approximately $75 million of other guarantees
outstanding supporting other consolidated subsidiary operations, of which $51 million support the operations of Vectren Source,
a wholly owned non-regulated retail gas marketer and $17 million represent letters of credit supporting other nonutility
operations. Guarantees issued and outstanding on behalf of unconsolidated affiliates approximated $3 million at December 31,
2010. These guarantees relate primarily to arrangements between ProLiance and various natural gas pipeline operators. The
Company has not been called upon to satisfy any obligations pursuant to these parental guarantees and has accrued no
significant liabilities related to these guarantees.
Performance Guarantees & Product Warranties
In the normal course of business, ESG, Miller, and other wholly owned subsidiaries issue performance bonds or other forms of
assurance that commit them to timely install infrastructure, operate facilities, pay vendors or subcontractors, and/or support
warranty obligations. Based on a history of meeting performance obligations and installed products operating effectively, no
significant liability or cost has been recognized for the periods presented.
Specific to ESG, in its role as a general contractor in the performance contracting industry, at December 31, 2010, there are 70
open surety bonds supporting future performance. The average face amount of these obligations is $4.2 million, and the largest
obligation has a face amount of $30.4 million. The maximum exposure of these obligations is less than these amounts for
several factors, including the level of work already completed. At December 31, 2010, over 57 percent of work was completed
on projects with open surety bonds. A significant portion of these commitments will be fulfilled within one year. In instances
where ESG operates facilities, project guarantees extend over a longer period. In addition to its performance obligations, ESG
also warrants the functionality of certain installed infrastructure generally for one year and the associated energy savings over a
specified number of years. The Company has no significant accruals for these warranty obligations as of December 31, 2010.
Legal & Regulatory Proceedings
The Company is party to various legal proceedings, audits, and reviews by taxing authorities and other government agencies
arising in the normal course of business. In the opinion of management, there are no legal proceedings or other regulatory
reviews or audits pending against the Company that are likely to have a material adverse effect on its financial position, results
of operations or cash flows.