Financial Report - Veresen Inc.

Credit Risk
Veresen and its jointly-controlled businesses are exposed to credit risk as revenues are dependent upon the ability of customers to
fulfill their contractual obligations, the failure of which could adversely affect the ability of Veresen and its jointly-controlled businesses
to recover operating and financing costs or make dividends or distributions, as applicable. Alliance’s business is concentrated in the
natural gas transportation industry and its revenue is dependent upon the ability of its shippers to pay their monthly demand charges.
Alliance limits, to some degree, its exposure to this credit risk by requiring its shippers to provide letters of credit or other suitable
security unless they maintain specified credit ratings or can demonstrate equivalent financial strength. As at December 31, 2012,
Alliance held $21.4 million in letters of credit and cash deposits as security from its shippers.
AEGS is primarily dependent upon two customers, both large petrochemical companies with world-scale petrochemical facilities
located in Alberta. AEGS represents a critical component in securing ethane feedstock for these petrochemical facilities.
In the case of the Hythe/Steeprock complex, the Company is primarily dependent on one customer, a major natural gas producer,
with investment-grade credit ratings.
Aux Sable’s earnings and cash flows are primarily dependent upon the long-term NGL Sales Agreement with a large, integrated
energy company.
The counterparty exposures associated with the Company’s power business are diverse and are spread across numerous entities
(including a number of government entities in the case of the Company’s district energy facilities) and individual counterparties.
None of the Company’s financial assets are past due or impaired, nor have any terms been renegotiated. The Company is satisfied
with the credit quality of its financial assets. The maximum exposure to credit risk related to non-derivative financial assets is their
carrying value, as disclosed previously in the table “Financial Instruments”.
Liquidity Risk
Veresen and its businesses manage their liquidity requirements utilizing cash from operations, excess cash and undrawn committed
credit facilities. The Company believes these sources of funding are sufficient to meet its expected liquidity requirements.
All financial liabilities classified as current on the balance sheet are expected to be settled within one year.
Note 19. Segmented Information
Pipelines Midstream Power Corporate (1) Total
Year ended December 31 2012 2011 2012 2011 2012 2011 2012 2011 2012 2011
Equity income (loss) 82.2 87.0 53.4 90.2 2.1 (20.8) (1.9) (1.3) 135.8 155.1
Operating revenues 49.9 47.7 95.7 – 118.6 126.5 – – 264.2 174.2
Operations and maintenance (22.4) (21.6) (36.7) – (53.3) (63.5) – – (112.4) (85.1)
General, administrative and
project development (2.5) (2.2) (1.6) – (20.8) (17.8) (44.6) (31.9) (69.5) (51.9)
Depreciation and amortization (13.3) (12.9) (34.1) – (33.5) (33.4) (2.2) (2.1) (83.1) (48.4)
Interest and other finance (5.2) (5.4) – – (14.1) (14.9) (39.3) (25.6) (58.6) (45.9)
Foreign exchange and other – – – – – (0.1) (0.9) (1.5) (0.9) (1.6)
Net income (loss) before taxes and
non-controlling interest 88.7 92.6 76.7 90.2 (1.0) (24.0) (88.9) (62.4) 75.5 96.4
Taxes (2) – – – – – – (28.8) (43.2) (28.8) (43.2)
Non-controlling interest – – – – (0.1) (0.1) – – (0.1) (0.1)
Net income (loss) 88.7 92.6 76.7 90.2 (1.1) (24.1) (117.7) (105.6) 46.6 53.1
Preferred Share dividends – – – – – – (7.7) – (7.7) –
Net income (loss) attributable
to Common Shares 88.7 92.6 76.7 90.2 (1.1) (24.1) (125.4) (105.6) 38.9 53.1
Total assets (3) 946.9 998.5 1,215.9 229.1 881.9 883.9 99.3 446.6 3,144.0 2,558.1
Capital expenditures (4) 11.1 0.3 11.3 – 48.5 10.7 20.6 7.5 91.5 18.5
(1)
(2)
(3)
(4)
Reflects unallocated amounts applicable to Veresen’s head office activities. Corporate office general and administrative costs for the year ended December 31, 2012
include project development costs of $17.0 million (2011 – $8.3 million).
The Company holds its ownership interests in multiple business lines through partnerships, which are consolidated into various corporate entities. Consequently,
the tax provision is determined on a consolidated basis and, as such, the Company is not able to present income tax by segment.
After giving effect to intersegment eliminations and allocations to businesses.
Reflects capital expenditures related only to wholly-owned and majority-controlled businesses.
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