Vectren 2012 Annual Report Download - page 58

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restrictions. Multiple debt agreements contain a covenant that the ratio of consolidated total debt to consolidated total
capitalization will not exceed 65 percent. As of December 31, 2012, the Company was in compliance with all debt covenants.
Available Liquidity in Current Credit Conditions
The Company's A-/A3 investment grade credit ratings have allowed it to access the capital markets as needed, and the
Company believes it will have the ability to continue to do so. Given the Company's intent to maintain a balanced long-term
capitalization ratio, it anticipates funding future capital expenditures and dividends principally through internally generated funds,
which have recently been enhanced by bonus depreciation legislation, and refinancing maturing debt using the capital markets.
However, the resources required for capital investment remain uncertain for a variety of factors including pending legislative and
regulatory initiatives involving gas pipeline infrastructure replacement; coal mine safety; expanded EPA regulations for air, water,
and fly ash; and growth of Infrastructure Services and Energy Services. These regulations may result in the need to raise
additional capital in the coming years. In addition, the Company may expand its businesses through acquisitions and/or joint
venture investment. The timing and amount of such investments depends on a variety of factors, including the availability of
acquisition targets and available liquidity. The Company may also consider disposing of certain assets, investments, or
businesses to enhance or accelerate internally generated cash flow. Specifically for 2013, the Company plans to access the
capital markets to refinance debt maturities or debt that is callable. The Company currently has firm commitments for a debt
issuance totaling $125 million which is more fully described below.
Long-term debt transactions completed in 2012, 2011, and 2010 include issuances by Vectren Capital totaling $225 million and
issuances by Vectren Utility Holdings totaling $250 million. These transactions are more fully described below. (See Financing
Cash Flow.)
Consolidated Short-Term Borrowing Arrangements
At December 31, 2012, the Company has $600 million of short-term borrowing capacity, including $350 million for the Utility
Group and $250 million for the wholly owned Nonutility Group and corporate operations. As reduced by borrowings currently
outstanding, approximately $233 million was available for the Utility Group operations and approximately $88 million was
available for the wholly owned Nonutility Group and corporate operations. Both Vectren Capital’s and Utility Holdings’ short-term
credit facilities were renewed in November 2011 and are available through September 2016. The maximum limit of both
facilities remained unchanged. These facilities are used to supplement working capital needs and also to fund capital
investments and debt redemptions until financed on a long-term basis.
The Company has historically funded the short-term borrowing needs of Utility Holdings’ operations through the commercial
paper market and expects to use the Utility Holdings short-term borrowing facility in instances where the commercial paper
market is not efficient. Following is certain information regarding these short-term borrowing arrangements.
Utility Group Borrowings Nonutility Group Borrowings
(In millions) 2012 2011 2010 2012 2011 2010
Year End
Balance Outstanding $ 116.7 $ 242.8 $ 47.0 $ 162.1 $ 84.3 $ 71.3
Weighted Average Interest Rate 0.40% 0.57% 0.41% 1.35% 1.45% 2.01%
Annual Average
Balance Outstanding $ 77.6 $ 39.6 $ 14.0 $ 151.5 $ 124.9 $ 143.2
Weighted Average Interest Rate 0.47% 0.48% 0.40% 1.44% 1.92% 0.93%
Maximum Month End Balance
Outstanding $ 214.2 $ 242.8 $ 47.0 $ 216.1 $ 180.1 $ 174.6
Throughout 2012, 2011, and 2010, Utility Holdings has placed commercial paper without any significant issues and did not
borrow from its backup credit facility in any of these periods.