Financial Report - Veresen Inc.

We and our businesses employ various inspection and monitoring methods to manage the integrity of our facilities and to minimize
system disruptions. Further, we and our businesses maintain safety policies, disaster recovery procedures and insurance coverage
at industry acceptable levels in the case of an incident. However, there can be no assurance that these measures will be effective in
preventing events that adversely impact the operations of our businesses or that insurance proceeds will be adequate to cover lost
earnings and cash flows.
Competition
All of our businesses participate in competitive markets and compete with other companies. Substantially all of our businesses have
entered into long-term contractual agreements with varying maturities that serve to reduce the potential impact of this competition.
However, we can give no assurances that such agreements will remain in effect or will be replaced with agreements on substantially
the same terms. As a result, our future earnings and cash flows are exposed to competitive market forces, particularly at the time
any of our existing contracts mature.
We also compete with other businesses for growth and business opportunities, which could impact our ability to grow through acquisitions.
Environmental, Health and Safety
Our businesses are subject to extensive federal, provincial, state, and local environmental, health and safety laws and regulations
typical for the industries and jurisdictions within which they operate, including requirements for compliance obligations pertaining to
discharges to air, land and water. Our facilities could experience environmental, health and safety incidents including spills, emission
exceedences, or other unplanned events that could result in:
• fines or penalties;
• operational interruptions;
• physical injury to our employees, contractors, or general public;
• environmental contamination clean-up costs; and
• additional costs being incurred to achieve compliance.
We are also exposed to potential changes in future laws and regulations, such as those related to nitrous oxides and greenhouse gas
emissions, which could result in more stringent and costly compliance requirements. The Global Warming Act (AB 32) requires gas-fired
electricity generation facilities located in California to mitigate 100 percent of their greenhouse gas emissions. Beginning in January
2013, our Ripon and San Gabriel facilities will be required to comply with AB 32. We are actively pursuing mitigation strategies aimed
at reducing our compliance costs related to greenhouse gas emission reductions, including participating in the November 2012 and
February 2013 auctions for greenhouse gas allowances. We were successful in securing allowances that will enable us to meet our first
and second quarter 2013 greenhouse gas obligations. As the greenhouse gas cap and trade program and the implementation of AB 32
remain in early stages, the cost implications associated with greenhouse gas mitigation over the life of the Ripon and San Gabriel
facilities are not fully known at this time.
Our businesses may also be subject to opposition by special interest groups which could result in schedule delays and increased costs.
These special interest groups have the ability to participate in various regulatory processes and proceedings in an effort to influence
the outcome.
As part of the consultative process, our businesses work with Aboriginal groups, local landowners, special interest groups, counties,
and municipalities. Stakeholder engagement is aimed at providing interested members of the public with information regarding our
businesses and addresses their concerns. Stakeholder consultation does not assure that all risks associated with community opposition
can be mitigated.
We are unaware of any outstanding orders, fines, penalties or litigation for our businesses related to EH&S.
Our Board of Directors has established an EH&S Committee to provide corporate oversight regarding EH&S compliance for our
businesses. Alliance and Aux Sable also have EH&S Committees which report to their respective board of directors. Through regular
reporting, the EH&S Committees ensure compliance with our EH&S corporate policy, including compliance with all applicable laws and
regulations and maintaining a healthy and safe work environment for our employees, and the communities within which we operate.
To support this commitment, we have established policies, programs, practices, including performance targets and reporting to senior
management. Our policies, programs and practices are managed by experienced personnel and periodically reviewed and modified to
ensure they conform with current laws, regulations, and industry practices.
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