Vectren 2012 Annual Report Download - page 59

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57
ProLiance Short-Term Borrowing Arrangements
ProLiance, a nonutility energy marketing affiliate of the Company, has separate borrowing capacity available through a
syndicated credit facility. On May 18, 2012, ProLiance entered into a two year asset based credit facility with a total capacity of
$120 million. The level of capacity is also subject to outstanding letters of credit and current inventory and receivable balances.
As of December 31, 2012, approximately $77 million in borrowings were outstanding. The 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 $7.2 million in 2012, $7.9 million in 2011, and
$14.0 million in 2010.
Potential Uses of Liquidity
Pension & Postretirement Funding Obligations
As of December 31, 2012, assets related to the Company’s qualified pension plans were approximately 82 percent of the
projected benefit obligation on a GAAP basis and 115 percent of the target liability for ERISA purposes. Management currently
estimates contributing approximately $10 million to qualified pension plans in 2013.
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, 2012, parent level guarantees support
a maximum of $25 million of ESG’s performance contracting commitments and warranty obligations and $28 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 $24 million of other guarantees
outstanding supporting other consolidated subsidiary operations, of which $18 million represent letters of credit supporting other
nonutility operations. Guarantees issued and outstanding on behalf of unconsolidated affiliates approximated $3 million at
December 31, 2012. 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, 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, 2012, there are 62
open surety bonds supporting future performance. The average face amount of these obligations is $5.2 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, 2012, approximately 56 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