Financial Report - Veresen Inc.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Note 13. Other Long-Term Liabilities
2012 2011
Asset retirement obligations 34.1 20.8
Transportation contracts 6.9 9.4
Other 7.6 7.2
48.6 37.4
Less: current portion (2.4) (2.4)
46.2 35.0
Asset Retirement Obligations
At December 31, 2012, $20.1 million of the consolidated asset retirement obligation (“ARO”) relates to AEGS (2011 – $18.9 million).
This represents management’s estimate of the cost to abandon the ethane transportation pipeline and the timing of the costs
to be incurred. Estimated cash flows were discounted at AEGS’ weighted average credit-adjusted risk free rate of return of 6.3%
(2011 – 6.3%) and an inflation rate of 2.3% (2011 – 2.3%). The total undiscounted amount of future cash flows required to settle the
obligation is estimated to be $110.9 million (2011 – $110.9 million). The estimated ARO costs reflect such activities as dismantling,
demolition and disposal of a portion of the pipeline as well as remediation and restoration of the surface land. Payments to settle
the obligation are not expected to occur prior to 2040.
The Company recognized an $11.4 million ARO relating to the Hythe/Steeprock complex upon acquisition in February 2012. At
December 31, 2012, $12.0 million of the consolidated ARO relates to Hythe/Steeprock. This represents management’s estimate of
the cost to abandon the gathering and processing facilities, pipelines and storage facilities, and the timing of the costs to be incurred.
Estimated cash flows were discounted at Hythe/Steeprock’s weighted average credit-adjusted risk free rate of return of 6.2% and
an inflation rate of 2.0%. The total undiscounted amount of future cash flows required to settle the obligation is estimated to be
$99.9 million. Expenditures to settle the obligation are not expected to occur prior to 2044.
2012 2011
Asset retirement obligations, January 1 20.8 18.6
Liabilities recognized in the current year 11.4 1.0
Accretion expense 1.9 1.2
Asset retirement obligations, December 31 34.1 20.8
Transportation Contracts
The obligation under the transportation contracts relates to proceeds received by Veresen in connection with its acquisitions of
additional interests in Alliance Canada Marketing and its assumption of the associated liability arising from the firm transportation
contracts. This liability is being amortized on a straight-line basis over the remaining term of the transportation contracts.
Other
Other long-term liabilities primarily represent $7.5 million of accruals for LTIP (2011 – $7.2 million). Payments made under the LTIP
in 2012 were $6.8 million (2011 – $1.8 million).
Note 14. Taxes
Components of Taxes
The following is a summary of the significant components of the Company’s tax expense:
2012 2011
Current tax expense 18.2 28.1
Deferred tax expense (recovery)
Origination and reversal of temporary differences 42.2 (3.3)
Change in loss carry-forwards (28.7) 18.0
Change in valuation allowance (2.9) 0.4
Total deferred tax expense 10.6 15.1
Total tax expense 28.8 43.2
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