Borrowing Arrangements

Long-Term Debt

Long-term senior unsecured obligations and first mortgage bonds outstanding by subsidiary follow:



	At December 31,
(In millions)	2017		2016
Utility Holdings
Fixed Rate Senior Unsecured Notes
2018, 5.75%	$	100.0	$	100.0
2020, 6.28%	100.0		100.0
2021, 4.67%	55.0		55.0
2023, 3.72%	150.0		150.0
2026, 5.02%	60.0		60.0
2028, 3.20%	45.0		45.0
2032, 3.26%	100.0		—
2035, 6.10%	75.0		75.0
2035, 3.90%	25.0		25.0
2041, 5.99%	35.0		35.0
2042, 5.00%	100.0		100.0
2043, 4.25%	80.0		80.0
2045, 4.36%	135.0		135.0
2047, 3.93%	100.0		—
2055, 4.51%	40.0		40.0
Total Utility Holdings	1,200.0		1,000.0
Indiana Gas
Fixed Rate Senior Unsecured Notes
2025, Series E, 6.53%	10.0		10.0
2027, Series E, 6.42%	5.0		5.0
2027, Series E, 6.68%	1.0		1.0
2027, Series F, 6.34%	20.0		20.0
2028, Series F, 6.36%	10.0		10.0
2028, Series F, 6.55%	20.0		20.0
2029, Series G, 7.08%	30.0		30.0
Total Indiana Gas	96.0		96.0
SIGECO
First Mortgage Bonds
2022, 2013 Series C, current adjustable rate 1.565%, tax-exempt	4.6		4.6
2024, 2013 Series D, current adjustable rate 1.565%, tax-exempt	22.5		22.5
2025, 2014 Series B, current adjustable rate 1.565%, tax-exempt	41.3		41.3
2029, 1999 Series, 6.72%	80.0		80.0
2037, 2013 Series E, current adjustable rate 1.565%, tax-exempt	22.0		22.0
2038, 2013 Series A, 4.00%, tax-exempt	22.2		22.2
2043, 2013 Series B, 4.05%, tax-exempt	39.6		39.6
2044, 2014 Series A, 4.00% tax-exempt	22.3		22.3
2055, 2015 Series Mt. Vernon, 2.375%, tax-exempt	23.0		23.0
2055, 2015 Series Warrick County, 2.375%, tax-exempt	15.2		15.2
Total SIGECO	292.7		292.7



	At December 31,
(In millions)	2017			2016
Vectren Capital Corp.
Fixed Rate Senior Unsecured Notes
2017, 3.48%	—			75.0
2019, 7.30%	60.0			60.0
2022, 3.33%	75.0			75.0
2025, 4.53%	50.0			50.0
2030, 3.90%	75.0			75.0
Total Vectren Capital Corp.	260.0			335.0
Total long-term debt outstanding	1,848.7			1,723.7
Current maturities of long-term debt	(100.0		)	(124.1		)
Debt issuance costs	(9.4		)	(9.0		)
Unamortized debt premium & discount-net	(0.6		)	(0.7		)
Total long-term debt-net	$	1,738.7		$	1,589.9

Utility Holdings Long-Term Debt Issuance

On July 14, 2017, Utility Holdings entered into a private placement Note Purchase Agreement pursuant to which institutional investors agreed to purchase the following tranches of notes: (i) $100 million of 3.26 percent Guaranteed Senior Notes, Series A, due August 28, 2032 and (ii) $100 million of 3.93 percent Guaranteed Senior Notes, Series B, due November 29, 2047. The notes are jointly and severally guaranteed by Indiana Gas, SIGECO, and VEDO, wholly owned subsidiaries of Utility Holdings.

The Series A note proceeds were received on August 28, 2017 and the Series B proceeds were received on November 29, 2017.

SIGECO Variable Rate Tax-Exempt Bonds

On September 14, 2017, the Company, through SIGECO, executed a Bond Purchase and Covenants Agreement (Purchase and Covenants Agreement) providing SIGECO the ability to remarket and/or refinance approximately $152 million of tax-exempt bonds at a variable rate based on one month LIBOR through May 1, 2023 (except for one bond that matures on January 1, 2022).

Bonds remarketed through the Bond Purchase and Covenants Agreement included three issuances that were mandatorily tendered to the Company on September 14, 2017. These were


•	2013 Series C Notes with a principal of $4.6 million and a final maturity date of January 1, 2022;


•	2013 Series D Notes with a principal of $22.5 million and a final maturity date of March 1, 2024; and


•	2013 Series E Notes with a principal of $22.0 million and final maturity date of May 1, 2037.

Through the Purchase and Covenants Agreement, on September 22, 2017 SIGECO also extended the mandatory tender date of its variable rate 2014 Series B Notes with a principal of $41.3 million and final maturity date of July 1, 2025. (The original tender date was September 24, 2019).

The Purchase and Covenants Agreement provides the option, subject to satisfaction of customary conditions precedent, for the lenders to purchase from SIGECO and for SIGECO to convert to a variable rate other currently outstanding fixed rate, tax-exempt bonds that are callable at SIGECO's option in March 2018 (2013 Series A Notes totaling $22.2 million due March 1, 2038) and May 2018 (2013 Series B Notes totaling $39.6 million due by May 1, 2043).

The Company, through SIGECO, executed forward starting interest rate swaps during 2017 providing that on January 1, 2020, the Company will begin hedging the variability in interest rates on the 2013 Series A, B, and E Notes, as described in Note 10, through final maturity dates. The swaps contain customary terms and conditions and generally provide offset for changes in the one month LIBOR rate. Other interest rate variability that may arise through the Purchase and Covenants Agreement, such as variability caused by changes in tax law or SIGECO’s credit rating, among others, may result in an actual interest rate above or below the anticipated fixed rate. Regulatory orders require SIGECO to include the impact of its interest rate risk management activities, such as gains and losses arising from these swaps, in its cost of capital utilized in rate cases and other periodic filings.

Vectren Capital Unsecured Note Retirements

On December 15, 2017 and March 11, 2016, Vectren Capital senior unsecured notes matured totaling $75 million and $60 million, respectively. Interest rates on the matured bonds were 3.48 percent and 6.92 percent, respectively. The repayment of debt was funded from the Company's cash on hand and Nonutility short-term borrowing arrangements.

SIGECO Bond Retirement

On June 1, 2016, a $13 million SIGECO bond matured. The First Mortgage Bond, which was a portion of an original $25 million public issuance sold on June 1, 1986, carried a fixed interest rate of 8.875 percent. The repayment of debt was funded from the Company’s commercial paper program.

Mandatory Tenders

At December 31, 2017, certain series of SIGECO bonds, aggregating $124.0 million are subject to mandatory tenders prior to the bonds' final maturities. $38.2 million will be tendered in 2020 and $85.8 million will be tendered in 2023.

Call Options

At December 31, 2017, certain series of SIGECO bonds, aggregating $84.1 million may be called at SIGECO's option. $61.8 million is callable in 2018, as previously noted, and $22.3 million is callable in 2019.

Future Long-Term Debt Sinking Fund Requirements and Maturities

The annual sinking fund requirement of SIGECO's first mortgage bonds is 1 percent of the greatest amount of bonds outstanding under the Mortgage Indenture. This requirement may be satisfied by certification to the Trustee of unfunded property additions in the prescribed amount as provided in the Mortgage Indenture. SIGECO met the 2017 sinking fund requirement by this means and, expects to also meet this requirement in 2018 in this manner. Accordingly, the sinking fund requirement is excluded from Current liabilities in the Consolidated Balance Sheets. At December 31, 2017, $1.5 billion of SIGECO's utility plant remained unfunded under SIGECO's Mortgage Indenture. SIGECO’s gross utility plant balance subject to the Mortgage Indenture approximated $3.4 billion at December 31, 2017.

Consolidated maturities of long-term debt during the five years following 2017 (in millions) are $100 in 2018, $60 in 2019, $100 in 2020, $55 in 2021, $80 in 2022, and $1,444 thereafter.

Debt Guarantees

Vectren Corporation guarantees Vectren Capital’s debt, but does not guarantee Utility Holdings' debt. Vectren Capital's long-term debt outstanding at December 31, 2017 was $260 million. Vectren Capital had $70 million short-term obligations outstanding at December 31, 2017. Utility Holdings’ outstanding long-term and short-term borrowing arrangements are jointly and severally guaranteed by its wholly owned subsidiaries and regulated utilities Indiana Gas, SIGECO, and VEDO. Utility Holdings’ long-term debt and short-term obligations outstanding at December 31, 2017 approximated $1.2 billion and $180 million, respectively.

Covenants

Both long-term and short-term borrowing arrangements contain customary default provisions; restrictions on liens, sale-leaseback transactions, mergers or consolidations, and sales of assets; and restrictions on leverage, among other 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, 2017, the Company was in compliance with all debt covenants.

Short-Term Borrowings

On July 14, 2017, Utility Holdings closed on renegotiated credit agreements with existing lenders. These credit agreements mature on July 14, 2022 and replaced bank credit agreements that had an original maturity date of October 31, 2019. Utility Holdings' new credit facility totals $400 million with a $10 million swing line sublimit and a $20 million letter of credit sublimit. The Utility Holdings credit agreement is jointly and severally guaranteed by its wholly owned subsidiaries Indiana Gas, SIGECO, and VEDO and is a backup facility for Utility Holdings' commercial paper program. Vectren Capital's new credit facility totals $200 million with a $40 million swing line sublimit and a $80 million letter of credit sublimit. The Vectren Capital credit agreement funds the short-term borrowing needs of the Company's corporate and nonutility operations and is guaranteed by Vectren Corporation.

The total $600 million of short-term borrowing capacity between the two lines remains unchanged; however, the Utility Holdings credit agreement commitment was increased by $50 million as compared to the prior credit agreement, and the Vectren Capital credit agreement commitment was decreased by $50 million as compared to the prior credit agreement.

As reduced by borrowings currently outstanding, approximately $220 million was available for the Utility Group operations and $130 million was available for the wholly owned Nonutility Group and corporate operations at December 31, 2017.

The Company has historically funded the short-term borrowing needs of Utility Holdings’ operations through the commercial paper market but maintains the ability to use the Utility Holdings' short-term borrowing facility when necessary. Throughout the years presented, Utility Holdings has successfully placed commercial paper as needed. Following is certain information regarding these short-term borrowing arrangements:



	Utility Group Borrowings									Nonutility Group Borrowings
(In millions)	2017			2016			2015			2017			2016			2015
As of Year End
Balance Outstanding	$	179.5		$	194.4		$	14.5		$	70.0		$	—		$	—
Weighted Average Interest Rate	1.92		%	1.05		%	0.55		%	2.68		%	N/A			N/A
Annual Average
Balance Outstanding	$	172.4		$	59.8		$	53.8		$	12.2		$	0.2		$	24.8
Weighted Average Interest Rate	1.30		%	0.71		%	0.38		%	2.44		%	1.60		%	1.33		%
Maximum Month End Balance Outstanding	$	238.7		$	194.4		$	121.5		$	70.0		$	6.3		$	69.1