Vectren 2013 Annual Report Download - page 61

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59
Corporate Guarantees
The Company issues parent level 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, 2013, parent level guarantees support
a maximum of $25 million of ESG’s performance contracting commitments and warranty obligations and $45 million of other
project guarantees. The broader scope of ESG’s performance contracting obligations, including those not guaranteed by the
parent company, are described below. In addition, the parent company has approximately $25 million of other guarantees
outstanding supporting other consolidated subsidiary operations, of which $19 million represent letters of credit supporting other
nonutility operations. As disclosed in Note 7 to the Consolidated Financial Statements included in Item 8, a guarantee issued
and outstanding to an unrelated party in connection with ProLiance's disposition of certain of the net assets of ProLiance Energy
totaled $15.3 million at December 31, 2013. Although there can be no assurance that these guarantees will not be called upon,
the Company believes that the likelihood the Company will be called upon to satisfy any obligations pursuant to these
guarantees is remote.
Performance Guarantees & Product Warranties
In the normal course of business, wholly owned subsidiaries, including ESG, 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, 2013, there are 57
open surety bonds supporting future performance. The average face amount of these obligations is $4.4 million, and the largest
obligation has a face amount of $57.3 million. The maximum exposure from these obligations is limited by the level of work
already completed and guarantees issued to ESG by various subcontractors. At December 31, 2013, approximately 47 percent
of work was completed on projects with open surety bonds. A significant portion of these open surety bonds will be released
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, 2013. In addition, ESG has an $8 million stand-alone letter of credit facility and as of December
31, 2013, $3.4 million was outstanding.
Planned Capital Expenditures & Investments
During 2013 capital expenditures and other investments approximated $411 million, of which approximately $268 million related
to Utility Group expenditures. This compares to 2012 where consolidated investments were approximately $370 million with
$250 million attributed to the Utility Group and 2011 where consolidated investments were approximately $320 million with $230
million attributed to the Utility Group. Planned Utility Group capital expenditures, including contractual purchase commitments,
for the five-year period 2014 - 2018 are expected to total approximately (in millions): $365, $365, $355, $345, and $355,
respectively. This plan contains the best estimate of the resources required for known regulatory compliance; however, many
environmental and pipeline safety standards are subject to change in the near term. Such changes could materially impact
planned capital expenditures.
Planned Nonutility Group capital expenditures for recurring infrastructure investments, including contractual purchase
commitments, for the five-year period 2014 - 2018 are expected to total (in millions): $110, $100, $80, $90, and $70,
respectively.