Vectren Corporation has added a news release to its Investor Relations website.
Title: Vectren Corporation Reports 2008 Results
Issues 2009 Guidance
EVANSVILLE, Ind., Feb. 18 /PRNewswire-FirstCall/ -- Vectren Corporation
(NYSE: VVC) today reported 2008 net income of $129.0 million, or $1.65 per
share, compared to $143.1 million, or $1.89 per share, in 2007. Fourth
quarter net income was $37.1 million, or $0.46 per share, compared to $39.9
million, or $0.53 per share, in 2007.
Summary Results
-- Utility Group annual 2008 earnings were $111.1 million, or $1.42 per
share, compared to $106.5 million, or $1.40 per share, in 2007.
Quarterly Utility Group earnings were $30.7 million, or $0.38 per
share, compared to $36.9 million, or $0.49 per share, in the comparable
period in 2007.
-- Nonutility Group annual 2008 earnings were $18.9 million, or $0.24 per
share, compared to earnings of $37.0 million, or $0.49 per share, in
2007. For the fourth quarter, Nonutility Group earnings were $6.8
million, or $0.08 per share, compared to $3.6 million, or $0.05 per
share, in 2007. The 2008 annual Nonutility Group results include a
($5.9) million after tax, or ($0.08) per share, impairment charge
related to certain legacy investments in commercial real estate
recorded in the third quarter.
"Our 2008 results were down as compared to 2007 due to lower performance
by our nonutility group," said Niel C. Ellerbrook, Vectren's Chairman and CEO.
"We are pleased with the improved utility results even as we continued to
implement additional maintenance and reliability programs that were
contemplated in recent base rate cases. The nonutility businesses reflect
lower results from Coal Mining and, to a lesser extent, ProLiance. Coal
Mining results were negatively impacted by lower production and increased
costs. Looking forward to 2009, Coal Mining results are expected to
significantly improve as contracts representing 70 percent of 2009 expected
production have been updated to higher prices."
2009 Earnings Guidance
The company expects 2009 consolidated earnings to be within a range of
$1.65 to $1.95 per share. Within this overall range, the projected earnings
from the Utility Group are $1.20 to $1.40 per share and projected earnings
from the Nonutility Group are $0.40 to $0.60 per share.
The above consolidated earnings expectations have been reduced by $0.20 to
$0.25 per share to reflect expected deterioration in the economy and credit
markets. Further deterioration beyond what is currently anticipated could
negatively impact actual results. These earnings expectations are based on
normal weather in the company's electric business and reflect that weather
impacts in the gas territories are largely mitigated as a result of rate
design and/or weather mechanisms in place in those jurisdictions. Further,
these earnings expectations assume no impairment charge related to the
company's investment in Liberty Gas Storage (see discussion below). Changes
in these events or other circumstances could materially impact earnings and
result in earnings for 2009 significantly above or below this guidance. These
targeted ranges are subject to such factors discussed below under "Forward-
Looking Statements."
Dividend Increased 49th Consecutive Year
In October 2008, Vectren's board of directors declared a 3.1 percent
increase to the common stock dividend, raising the quarterly dividend to
33-1/2 cents per share and establishing a new annual rate of $1.34 per share.
This increase marked the 49th consecutive year that dividends paid have
increased. In January 2009, Vectren's board of directors announced a
quarterly dividend of 33 1/2 cents, payable March 2, 2009 to shareholders of
record at the close of business on February 13, 2009.
Available Liquidity under Current Credit Conditions
During 2008 the company completed permanent financing transactions,
including the issuance of $125 million in long-term debt; $125 million in
common stock; and an expansion of $120 million in the level of short-term
borrowing capacity for its nonutility operations. These transactions have
increased the level of unutilized short-term borrowing capacity. This
unutilized short-term debt capacity, when coupled with expected internally
generated funds and any additional long-term financings undertaken, should
provide sufficient liquidity to fund anticipated capital expenditures,
investments, and debt security redemptions.
The company continues to develop plans to issue additional long-term debt
over the next twelve to twenty four months, assuming its A-/Baa1 investment
grade credit ratings will allow it to access the capital markets, as the need
arises. However, while debt markets have improved somewhat, such long-term
debt issued during this period could be more expensive than in recent history.
This permanent financing would reduce reliance on unutilized short-term
capacity.
At December 31, 2008, the company had $905 million of short-term borrowing
capacity, including $520 million for the Utility Group and $385 million for
the wholly owned Nonutility Group and corporate operations, of which
approximately $328 million was available for the Utility Group operations and
approximately $55 million was available for the wholly owned Nonutility Group
and corporate operations. In addition, the company increased its cash
investments by approximately $75 million during the fourth quarter of 2008.
These cash positions were liquidated in January 2009 based upon improvements
in the short-term debt and commercial paper markets. Their liquidation
resulted in an increase to the available short-term debt capacity for the
Utility Group by $40 million and for the Nonutility Group by $35 million. Of
the $520 million in Utility Group capacity, $515 million is available through
November, 2010; and of the $385 million in Nonutility capacity, $120 million
is available through September, 2009 and $255 million is available through
November, 2010.
2009 Ice Storm
On January 27, 2009, a major ice storm in the company's southern Indiana
territory resulted in an extended disruption of electricity to approximately
75,000 of the company's 141,000 electric customers. Electricity was restored
to substantially all customers within one week. Management estimates the
total cost of restoration could approximate $15 to $20 million, the majority
of which is expected to be capitalized as utility plant.
Vectren Ohio Rate Case Order Received
On January 7, 2009, the Public Utilities Commission of Ohio issued an
order approving the stipulation reached in the VEDO rate case. The order
provides for a rate increase of nearly $14.8 million, an overall rate of
return of 8.89 percent on rate base of about $235 million; an opportunity to
recover costs of a program to accelerate replacement of cast iron and bare
steel pipes, as well as certain service risers; and base rate recovery of an
additional $2.9 million in conservation program spending.
The order also adjusts the rate design that will be used to collect the
agreed-upon revenue from VEDO's residential customers. The order authorizes
the use of a straight fixed variable rate design which places all, or most, of
the fixed cost recovery in the customer service charge. Using a phased in
approach, revenues based on volumes sold will be entirely replaced with a
fixed charge after one year. A straight fixed variable design mitigates some
weather risk as well as the effects of declining usage, similar to the
company's lost margin recovery mechanism, which expired when this new rate
design went into effect in February 2009. In 2008, results include
approximately $4.3 million of revenue from the existing lost margin recovery
mechanism that will not continue once this base rate increase is in effect.
With this rate order the company has in place, for its Ohio gas territory,
rates that allow for the phased implementation of a straight fixed variable
rate design that mitigates both weather risk and lost margin; tracking of bad
debt and percent of income payment plan (PIPP) expenses; base rate recovery of
pipeline integrity management expense; timely recovery of costs associated
with the accelerated replacement of bare steel and cast iron pipes, as well as
certain service risers; and expanded conservation programs now totaling up to
$5 million in annual expenditures.
Utility Group Discussion
In 2008, the Utility Group's annual earnings were $111.1 million compared
to $106.5 million in 2007. The 4 percent increase in utility earnings is due
primarily to a full year of base rate changes in the Indiana service
territories and increased earnings from wholesale power operations. Increases
were offset somewhat by increased operating costs associated with maintenance
and reliability programs contemplated in the base rate cases and favorable
weather in 2007. Utility Group earnings were $30.7 million and $36.9 million
for the fourth quarter of 2008 and 2007, respectively. The quarterly earnings
decrease is primarily due to higher operating expenses, particularly certain
maintenance and reliability programs and higher bad debt expense.
In the company's electric and Ohio natural gas service territories that
are not protected by weather normalization mechanisms, management estimates
the impact of weather on margin experienced during 2008 to be approximately
$1.2 million favorable compared to normal and $4.3 million unfavorable
compared to the prior year. For the fourth quarter, management estimates a
$1.2 million favorable impact from weather on margin compared to normal and a
$1.1 million favorable impact compared to the prior year quarter.
Gas Utility Margin
Gas utility margins were $449.6 million for the year ended December 31,
2008 and $133.2 million in the fourth quarter of 2008. Following are
reconciliations of the increases from 2007:
Annual Quarter
2007 Gas Utility Margin $422.2 $124.2
Vectren North base rate increase, effective
February 14, 2008 11.8 3.5
Vectren South base rate increase, effective
August 1, 2007 3.6 -
Residential and commercial customer usage due to
Ohio weather colder than the prior year 3.2 1.6
Dollar for dollar recovery in margin of operating
costs, including revenue and usage taxes 7.8 3.2
All other changes 1.0 0.7
Total increase in Gas Utility Margin 27.4 9.0
2008 Gas Utility Margin $449.6 $133.2
Electric Utility Margin
Retail & Firm Wholesale Margin
Electric retail and firm wholesale utility margins were $308.8 million for
the year ended December 31, 2008 and $71.9 million in the fourth quarter of
2008. Following are reconciliations of the changes from 2007:
Annual Quarter
2007 Retail and Firm Wholesale Electric Margin $292.2 $73.2
Vectren South base rate increase, effective
August 15, 2007, net 27.0 -
Residential and commercial customer usage due to weather (7.5) (0.5)
All other changes, primarily lower usage (2.9) (0.8)
Total increase in Retail and Firm Wholesale
Electric Margin 16.6 (1.3)
2008 Retail and Firm Wholesale Electric Margin $308.8 $71.9
Margin from Wholesale Activities
Wholesale margins were $32.5 million for the year and $10.3 million for
the quarter, which represent increases of $11.6 million and $2.5 million,
respectively.
During 2008, margin from off-system sales retained by the company
increased $6.3 million for the year and $0.3 million for the quarter. The
company experienced higher wholesale power marketing margins due to the
increase in off peak volumes available for sale off system, driven primarily
by expiring municipal contracts, and increases in wholesale prices. The base
rate case effective August 17, 2007, requires that wholesale margin from off-
system sales earned above or below $10.5 million be shared equally with
customers, and 2008 results reflect the impact of that sharing
The remainder of the annual and quarterly increases, $5.3 million and $2.2
million, respectively, relate to higher transmission revenues. Beginning in
June 2008, the company began earning a return on electric transmission
projects constructed by the company in its service territory that benefit
reliability throughout the region, and these returns are the primary reason
for the increases.
Other Operating
Other operating expenses were $300.3 million for the year ended December
31, 2008 and $82.6 million in the fourth quarter of 2008. Following are
reconciliations of the changes from 2007:
Annual Quarter
2007 Other Operating Costs $266.1 $67.7
Operating costs recovered dollar for dollar in margin 4.2 1.7
Costs resulting from increased maintenance contemplated
in rate cases, including the amortization of prior
deferred costs and other activities 35.3 13.2
All other cost reductions, including lower performance
based compensation (5.3) -
Total Increase in Other Operating Costs 34.2 $14.9
2008 Other Operating Costs $300.3 $82.6
Depreciation & Amortization
Depreciation expense was $165.5 million for 2008 and $42.3 million for the
fourth quarter, an annual increase of $7.1 million compared to 2007.
Amortization in 2008 includes $3.8 million of incremental amortization
associated with prior electric demand side management costs pursuant to the
August 15, 2007 electric base rate order. The remaining annual increase, as
well as the $3.3 million quarterly increase, was primarily due to increased
utility plant in service.
Taxes Other Than Income Taxes
Taxes Other Than Income Taxes were $72.3 million for 2008 and $20.5
million for the fourth quarter, an increase of $4.2 million and $2.0 million,
respectively, compared to 2007. Higher utility receipts, excise, and usage
taxes account for $4.0 million of the increase and $1.5 million of the
quarterly increase as a result of volatility in revenues and gas volumes sold.
Utility Group Other-net
Other-net reflects income of $4.0 million in 2008 compared to income of
$9.4 million in 2007. Of the annual decrease totaling $(5.4) million, $(4.1)
million occurred in the fourth quarter. The decreases are primarily due to
lower returns associated with investments that fund deferred compensation
arrangements and lower interest income.
Utility Group Interest Expense
Interest expense of $79.9 million for 2008 and $20.4 for the quarter
decreased $(0.7) million year over year and decreased $(1.4) million in the
fourth quarter as lower average short-term debt levels and lower average
short-term interest rates were partially offset by higher long-term balances
and interest rates.
Utility Group Income Taxes
Federal and state income taxes were $67.6 million for the 2008 year and
$18.0 million for the fourth quarter, an annual increase of $0.9 million and a
quarterly decrease of $(6.9) million compared to 2007. Both the annual and
quarterly changes are impacted primarily by fluctuations in pre-tax income and
a lower effective tax rate in 2008.
Nonutility Group Discussion
All amounts included in this section are after tax. Results reported by
business group are net of nonutility group corporate expense.
The company's primary nonutility operations contributed earnings of $24.8
million compared to $33.7 million in 2007. During the quarter primary
nonutility operations contributed earnings of $8.5 million and were generally
flat compared to the $8.8 million contributed in 2007. Primary nonutility
operations are Energy Marketing and Services companies, Coal Mining
operations, and Energy Infrastructure Services companies.
For 2008 compared to 2007, primary nonutility group results decreased $8.9
million. Coal Mining operated at a loss and results were approximately $(6.6)
million lower than the prior year due primarily to higher operating costs and
lower productivity. ProLiance's earnings were $(3.6) million lower than the
prior year due to lower operating results as well as a reserve for the FERC
matter discussed below. The results from the other primary nonutility
operations also reflect increased earnings from performance contracting and
renewable energy construction operations performed through Energy Systems
Group and retail gas marketing operations performed through Vectren Source.
Miller Pipeline's (Miller) results were generally flat compared to the prior
year, which was a record year for Miller.
Other nonutility businesses operated at a loss of $(5.9) million in 2008,
compared to earnings of $0.3 million in 2007. Other nonutility businesses
include legacy investments, including investments in commercial real estate.
As a result of the economy impacting commercial real estate values, during
2008, the company recorded an impairment charge associated with its commercial
real estate investments totaling $(5.9) million after tax, or $(0.08) per
share. After the charge, the remaining carrying value of these commercial
real estate holdings is approximately $21 million.
In 2007, the last year of synfuel operations, synfuel-related results
generated earnings of $3.0 million and a loss of $(5.3) million, respectively,
for the year and quarter ended December 31, 2007.
Energy Marketing and Services
Energy Marketing and Services is comprised of the company's wholesale and
retail gas marketing businesses. Results from Energy Marketing and Services
for the year ended December 31, 2008, were earnings of $18.0 million compared
to a $22.3 million in 2007. Quarterly earnings in 2008 were $5.6 million
compared to earnings of $6.7 million in 2007.
During 2008, ProLiance's earnings contribution was $19.3 million compared
to $22.9 million in 2007. The $(3.6) million decrease reflects lower
operating results and a reserve for the FERC matter discussed below.
ProLiance's storage capacity was 42 BCF at December 31, 2008 compared to 40
BCF at December 2007. In the fourth quarter ProLiance's earnings contribution
was $3.6 million compared to $5.3 million in 2007.
Vectren Source earned approximately $1.9 million in 2008 compared to $1.2
million in 2007. Results in 2008 were impacted by a $0.5 million gain on the
sale of its Georgia customer base. In the fourth quarter, earnings were
generally flat at $1.7 million. Vectren Source's customer count at December
31, 2008, was approximately 170,000 customers. This customer base reflects
nearly 40,000 equivalent customers in the company's Ohio service territory as
part of the process of exiting the merchant function and a loss of customers
due to exiting the Georgia market. Vectren Source began providing services to
these Ohio customers on October 1, 2008. Customer count at the end of 2007
was approximately 161,000.
Investment in Liberty Gas Storage
Liberty Gas Storage, LLC (Liberty) is a joint venture between a subsidiary
of ProLiance and a subsidiary of Sempra Energy (SE). ProLiance is the
minority member with a 25 percent interest, which it accounts for using the
equity method. Liberty holds a long-term lease of storage and mineral rights
associated with existing salt dome storage caverns in southern Louisiana, near
Sulphur. Liberty also owns a second site near Hackberry, Louisiana with three
additional existing salt dome storage caverns. The members anticipated it
would provide high deliverability storage services via the salt dome caverns
at both locations and, once developed under current plans, there would be
approximately 35 billion cubic feet of working gas capacity at the two sites.
ProLiance has a long term contract for approximately 5 Bcf of working gas
capacity. The total project investment at the Sulphur site at December 31,
2008 is approximately $200 million. ProLiance's portion of the investment is
approximately $50 million.
On October 27, 2008, SE confirmed to ProLiance that the completion of
Liberty's development at the Sulphur site has been delayed by subsurface and
well-completion problems. Corrective measures are ongoing and should they
prove to be unsuccessful, the salt-cavern facility may not go into service, or
may have reduced capacity when placed in service. ProLiance has tested its
investment in Liberty for impairment assuming the corrective measures
currently being deployed are successful and has determined that its investment
is not impaired at December 31, 2008. However, the success of these
corrective measures may not be known until later in 2009. Based on
information received from SE concerning the maximum estimated possible
exposure, ProLiance estimates that a maximum of $35 million of its total
investment would be at risk (the company's proportionate share of the
investment would be $21 million). The company believes that such a charge,
should it occur, would not have a material adverse effect on either the
company's, or ProLiance's, financial position, cash flows, or liquidity, but
it could be material to net income in any one accounting period. Further, it
is not expected that the delay in Liberty's development will impact
ProLiance's ability to meet the needs of its customers.
FERC Matter
ProLiance self reported to the Federal Energy Regulatory Commission (FERC)
in October 2007 possible non-compliance with the FERC's capacity release
policies. ProLiance has taken corrective actions to assure that current and
future transactions are compliant. ProLiance is committed to full regulatory
compliance and is cooperating fully with the FERC regarding these issues.
ProLiance believes that it has adequately reserved for this matter. Although
the outcome of any legal or regulatory proceedings resulting from these
matters cannot be predicted, the final resolution of these matters is not
expected to have a material impact on the company's consolidated operating
results, financial position or cash flows.
Coal Mining
Coal Mining mines and sells coal to the company's utility operations and
to third parties through its wholly owned subsidiary Vectren Fuels, Inc.
(Fuels).
Coal Mining operated at a loss of $(4.6) million in 2008 compared to
earnings of $2.0 million in 2007. The decrease in earnings in 2008 compared
to 2007 was primarily due to lower production and increased roofing structure
costs as a result of revised regulatory guidelines from the Mine Safety and
Health Administration (MSHA) which necessitated changes in the mining plan.
In addition, 2008 has been impacted by unfavorable geologic conditions at the
company's surface mine, which has resulted in more costs to enhance the BTU
content of mined coal, and higher diesel fuel costs. In the 2008 quarter,
Coal Mining operated at a loss of $(3.0) million compared to a loss of $(0.7)
million in 2007.
Construction continues on schedule at the new Oaktown underground mines.
Production at the first mine is expected to begin mid 2009, with the second
mine opening in late 2010. Oaktown reserves are currently 88 million tons.
Of the total $170 million investment management estimates to access the
reserves, the company has invested $68 million through December 31, 2008. The
reserves at these new mines bring total coal reserves to over 120 million tons
at December 31, 2008. The market for Illinois Basin coal reflects limited
supply and increased demand, which has resulted in substantially higher coal
prices. Contracts reflecting these higher prices are in place on 70 percent
of 2009 planned production.
Energy Infrastructure Services
Energy Infrastructure Services provides underground construction and
repair to utility infrastructure through Miller Pipeline Corporation (Miller)
and energy performance contracting and renewable energy services through
Energy Systems Group (ESG). Energy Infrastructure's operations contributed
earnings of $11.4 million in 2008 compared to $9.4 million in 2007. In the
fourth quarter of 2008, these operations contributed $5.9 million compared to
$2.8 million in 2007.
Miller's 2008 earnings were $6.2 million compared to $6.1 million in 2007,
and in the fourth quarter were $2.6 million compared to $1.4 million in 2007.
The quarterly increase is primarily due to two minor acquisitions and the
timing of gas construction projects. As a result of the recession, earnings
in 2009 are likely to be impacted by less capital spending by Miller's large
customers for their infrastructure programs.
ESG's earnings were $6.7 million in 2008 compared to $4.0 million in 2007,
and in the fourth quarter were $3.8 million compared to $1.5 million in 2007.
The increases are primarily due to the continued focus on energy conservation
and sustainability measures by ESG's customers as evidenced by approximately
$50 million in new 2008 fourth quarter sales contracts. Both the 2008 annual
results and the fourth quarter were further favorably impacted by Energy
Efficient Commercial Building federal income tax deductions, commonly referred
to as Internal Revenue Code Section 179D deductions, associated with the
installation of energy efficient equipment. These deductions continue through
2013. At December 31, 2008, ESG's backlog was $65 million, compared to $52
million at December 31, 2007. The national focus on a comprehensive energy
strategy as evidenced by the Energy Independence and Security Act of 2007 and
legislation supported by the new administration is likely to continue to
favorably impact ESG's future earnings.
Please SEE ATTACHED unaudited schedules for additional financial
information
Live Webcast on February 19, 2009
Vectren's financial analyst call will be at 2:00 p.m. (ET), February 19,
2009 at which time management will discuss financial results and 2009 earnings
guidance. To participate in the call, analysts are asked to dial 1-888-818-
6237 and present the conference call ID# 81139532. All interested parties may
listen to the live webcast accompanied by a slide presentation at
www.vectren.com. A replay of the webcast will be made available at the same
location approximately two hours following the conclusion of the meeting.
About Vectren
Vectren Corporation is an energy holding company headquartered in
Evansville, Indiana. Vectren's energy delivery subsidiaries provide gas
and/or electricity to over one million customers in adjoining service
territories that cover nearly two-thirds of Indiana and west central Ohio.
Vectren's nonutility subsidiaries and affiliates currently offer energy-
related products and services to customers throughout the Midwest and
Southeast. These include gas marketing and related services; coal production
and sales and energy infrastructure services. To learn more about Vectren,
visit www.vectren.com.
Forward-Looking Information
A "safe harbor" for forward-looking statements is provided by the Private
Securities Litigation Reform Act of 1995 (Reform Act of 1995). The Reform Act
of 1995 was adopted to encourage such forward-looking statements without the
threat of litigation, provided those statements are identified as forward-
looking and are accompanied by meaningful cautionary statements identifying
important factors that could cause the actual results to differ materially
from those projected in the statement. Certain matters described in
Management's Discussion and Analysis of Results of Operations and Financial
Condition are forward-looking statements. Such statements are based on
management's beliefs, as well as assumptions made by and information currently
available to management. When used in this filing, the words "believe",
"anticipate", "endeavor", "estimate", "expect", "objective", "projection",
"forecast", "goal" and similar expressions are intended to identify forward-
looking statements. In addition to any assumptions and other factors referred
to specifically in connection with such forward-looking statements, factors
that could cause the company's actual results to differ materially from those
contemplated in any forward-looking statements include, among others, the
following:
Factors affecting utility operations such as unusual weather conditions;
catastrophic weather-related damage; unusual maintenance or repairs;
unanticipated changes to fossil fuel costs; unanticipated changes to gas
transportation and storage costs, or availability due to higher demand,
shortages, transportation problems or other developments; environmental or
pipeline incidents; transmission or distribution incidents; unanticipated
changes to electric energy supply costs, or availability due to demand,
shortages, transmission problems or other developments; or electric
transmission or gas pipeline system constraints. Increased competition in the
energy industry, including the effects of industry restructuring and
unbundling. Regulatory factors such as unanticipated changes in rate-setting
policies or procedures, recovery of investments and costs made under
traditional regulation, and the frequency and timing of rate increases.
Financial, regulatory or accounting principles or policies imposed by the
Financial Accounting Standards Board; the Securities and Exchange Commission;
the Federal Energy Regulatory Commission; state public utility commissions;
state entities which regulate electric and natural gas transmission and
distribution, natural gas gathering and processing, electric power supply; and
similar entities with regulatory oversight. Economic conditions including the
effects of an economic downturn, inflation rates, commodity prices, and
monetary fluctuations. Economic conditions surrounding the current recession,
which may be more prolonged and more severe than cyclical downturns, including
significantly lower levels of economic activity; uncertainty regarding energy
prices and the capital and commodity markets; decreases in demand for natural
gas, electricity, coal, and other nonutility products and services; impacts on
both gas and electric large customers; lower residential and commercial
customer counts; higher operating expenses; and further reductions in the
value of certain nonutility real estate and other legacy investments.
Increased natural gas and coal commodity prices and the potential impact on
customer consumption, uncollectible accounts expense, unaccounted for gas and
interest expense. Changing market conditions and a variety of other factors
associated with physical energy and financial trading activities including,
but not limited to, price, basis, credit, liquidity, volatility, capacity,
interest rate, and warranty risks. Direct or indirect effects on the
company's business, financial condition, liquidity and results of operations
resulting from changes in credit ratings, changes in interest rates, and/or
changes in market perceptions of the utility industry and other energy-related
industries. The performance of projects undertaken by the company's
nonutility businesses and the success of efforts to invest in and develop new
opportunities, including but not limited to, the company's coal mining, gas
marketing, and energy infrastructure strategies. Factors affecting coal
mining operations including MSHA guidelines and interpretations of those
guidelines; geologic, equipment, and operational risks; sales contract
negotiations and interpretations; supplier and contract miner performance; the
availability of key equipment, contract miners and commodities; availability
of transportation; and the ability to access/replace proven and probable coal
reserves. Employee or contractor workforce factors including changes in key
executives, collective bargaining agreements with union employees, aging
workforce issues, work stoppages, or pandemic illness. Legal and regulatory
delays and other obstacles associated with mergers, acquisitions and
investments in joint ventures. Costs, fines, penalties and other effects of
legal and administrative proceedings, settlements, investigations, claims,
including, but not limited to, such matters involving compliance with state
and federal laws and interpretations of these laws. Changes in or additions
to federal, state or local legislative requirements, such as changes in or
additions to tax laws or rates, environmental laws, including laws governing
greenhouse gases, mandates of sources of renewable energy, and other
regulations.
More detailed information about these factors is set forth in Vectren's
filings with the Securities and Exchange Commission, including Vectren's 2008
annual report on Form 10-K to be filed on or about February 19, 2009. The
company undertakes no obligation to publicly update or revise any forward-
looking statements, whether as a result of changes in actual results, changes
in assumptions, or other factors affecting such statements.
VECTREN CORPORATION
AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF INCOME
(Millions, except per share amounts)
(Unaudited)
Three Months Twelve Months
Ended December 31 Ended December 31
2008 2007 2008 2007
OPERATING REVENUES:
Gas utility $430.3 $379.4 $1,432.7 $1,269.4
Electric utility 121.9 126.3 524.2 487.9
Nonutility revenues 155.1 139.1 527.8 524.6
Total operating revenues 707.3 644.8 2,484.7 2,281.9
OPERATING EXPENSES:
Cost of gas sold 297.1 255.2 983.1 847.2
Cost of fuel and purchased
power 39.7 45.3 182.9 174.8
Cost of nonutility revenues 83.8 77.5 282.2 287.7
Other operating 137.9 122.5 506.3 456.9
Depreciation and amortization 49.8 45.1 192.3 184.8
Taxes other than income taxes 20.6 19.1 74.5 70.0
Total operating expenses 628.9 564.7 2,221.3 2,021.4
OPERATING INCOME 78.4 80.1 263.4 260.5
OTHER INCOME:
Equity in earnings of
unconsolidated affiliates 8.4 4.2 37.4 22.9
Other income/(expense)- net (0.3) 13.7 2.1 36.8
Total other income 8.1 17.9 39.5 59.7
INTEREST EXPENSE 25.4 26.9 97.8 101.0
INCOME BEFORE INCOME TAXES 61.1 71.1 205.1 219.2
INCOME TAXES 24.0 31.1 76.1 76.0
MINORITY INTEREST - 0.1 - 0.1
NET INCOME $37.1 $39.9 $129.0 $143.1
AVERAGE COMMON SHARES OUTSTANDING 80.6 75.9 78.3 75.9
DILUTED COMMON SHARES OUTSTANDING 81.0 76.7 78.9 76.6
EARNINGS PER SHARE OF COMMON STOCK
BASIC $0.46 $0.53 $1.65 $1.89
DILUTED $0.46 $0.52 $1.63 $1.87
VECTREN UTILITY HOLDINGS
AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF INCOME
(Millions)
(Unaudited)
Three Months Twelve Months
Ended December 31 Ended December 31
2008 2007 2008 2007
OPERATING REVENUES:
Gas utility $430.3 $379.4 $1,432.7 $1,269.4
Electric utility 121.9 126.3 524.2 487.9
Other - 0.4 1.8 1.7
Total operating revenues 552.2 506.1 1,958.7 1,759.0
OPERATING EXPENSES:
Cost of gas sold 297.1 255.2 983.1 847.2
Cost of fuel and purchased power 39.7 45.3 182.9 174.8
Other operating 82.6 67.7 300.3 266.1
Depreciation and amortization 42.3 39.0 165.5 158.4
Taxes other than income taxes 20.5 18.5 72.3 68.1
Total operating expenses 482.2 425.7 1,704.1 1,514.6
OPERATING INCOME 70.0 80.4 254.6 244.4
OTHER INCOME (EXPENSE) - NET (0.9) 3.2 4.0 9.4
INTEREST EXPENSE 20.4 21.8 79.9 80.6
INCOME BEFORE INCOME TAXES 48.7 61.8 178.7 173.2
INCOME TAXES 18.0 24.9 67.6 66.7
NET INCOME $30.7 $36.9 $111.1 $106.5
VECTREN CORPORATION
AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEETS
(Millions - Unaudited)
Dec. 31, Dec. 31,
2008 2007
ASSETS
Current Assets
Cash & cash equivalents $93.2 $20.6
Accounts receivable - less reserves of
$5.6 & $3.7, respectively 226.7 189.4
Accrued unbilled revenues 197.0 168.2
Inventories 131.0 160.9
Recoverable fuel & natural gas costs 3.1 -
Prepayments & other current assets 124.6 160.5
Total current assets 775.6 699.6
Utility Plant
Original cost 4,335.3 4,062.9
Less: accumulated depreciation & amortization 1,615.0 1,523.2
Net utility plant 2,720.3 2,539.7
Investments in unconsolidated affiliates 179.1 208.8
Other utility and corporate investments 25.7 26.3
Other nonutility investments 45.9 50.7
Nonutility property - net 390.2 320.3
Goodwill - net 240.2 238.0
Regulatory assets 216.7 175.3
Other assets 39.2 37.7
TOTAL ASSETS $4,632.9 $4,296.4
LIABILITIES & SHAREHOLDERS' EQUITY
Current Liabilities
Accounts payable $266.1 $187.4
Accounts payable to affiliated companies 75.2 83.7
Refundable fuel & natural gas costs 4.1 27.2
Accrued liabilities 175.0 171.8
Short-term borrowings 519.5 557.0
Current maturities of long-term debt 0.4 0.3
Long-term debt subject to tender 80.0 -
Total current liabilities 1,120.3 1,027.4
Long-term Debt - Net of Current Maturities &
Debt Subject to Tender 1,247.9 1,245.4
Deferred Income Taxes & Other
Liabilities
Deferred income taxes 353.4 318.1
Regulatory liabilities 315.1 307.2
Deferred credits & other liabilities 244.2 164.2
Total deferred credits & other liabilities 912.7 789.5
Minority Interest in Subsidiary 0.4 0.4
Common Shareholders' Equity
Common stock (no par value) - issued & outstanding
81.0 and 76.3 shares, respectively 659.1 532.7
Retained earnings 712.8 688.5
Accumulated other comprehensive income/(loss) (20.3) 12.5
Total common shareholders' equity 1,351.6 1,233.7
TOTAL LIABILITIES & SHAREHOLDERS' EQUITY $4,632.9 $4,296.4
VECTREN CORPORATION
AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Millions - Unaudited)
For the twelve months ended
December 31,
2008 2007
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $129.0 $143.1
Adjustments to reconcile net income to cash from
operating activities:
Depreciation & amortization 192.3 184.8
Deferred income taxes & investment tax credits 79.6 27.0
Equity in earnings of unconsolidated affiliates (37.4) (22.9)
Provision for uncollectible accounts 16.9 16.6
Expense portion of pension & postretirement
periodic benefit cost 7.8 9.8
Other non-cash charges - net 25.4 4.8
Changes in working capital accounts:
Accounts receivable & accrued unbilled revenue (83.0) (29.1)
Inventories 26.4 2.6
Recoverable/refundable fuel & natural
gas costs (26.2) (6.3)
Prepayments & other current assets 9.8 (3.7)
Accounts payable, including to affiliated
companies 65.7 4.9
Accrued liabilities 16.5 4.6
Unconsolidated affiliate dividends 15.5 20.8
Changes in noncurrent assets 19.6 (21.4)
Changes in noncurrent liabilities (34.7) (37.5)
Net cash flows from operating activities 423.2 298.1
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from:
Common stock issuance 124.9 -
Long-term debt 171.4 16.4
Stock option exercises 0.8 5.2
Requirements for:
Dividends on common stock (102.6) (96.4)
Retirement of long-term debt (104.9) (23.9)
Other financing activities - (0.8)
Net change in short-term borrowings (37.8) 92.2
Net cash flows from financing activities 51.8 (7.3)
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from:
Unconsolidated affiliate distributions 0.2 12.7
Other collections 6.4 38.0
Requirements for:
Capital expenditures, excluding AFUDC equity (391.0) (334.5)
Unconsolidated affiliate investments (0.6) (17.5)
Other investments (17.4) (1.7)
Net cash flows from investing activities (402.4) (303.0)
Net change in cash & cash equivalents 72.6 (12.2)
Cash & cash equivalents at beginning of period 20.6 32.8
Cash & cash equivalents at end of period $93.2 $20.6
VECTREN CORPORATION
AND SUBSIDIARY COMPANIES
HIGHLIGHTS
(millions, except per share amounts)
(Unaudited)
Three Months Twelve Months
Ended December 31 Ended December 31
2008 2007 2008 2007
REPORTED EARNINGS:
Utility Group $30.7 $36.9 $111.1 $106.5
Non-utility Group
Energy Marketing and Services 5.6 6.7 18.0 22.3
Coal Mining (3.0) (0.7) (4.6) 2.0
Energy Infrastructure Services 5.9 2.8 11.4 9.4
Other Businesses (1.7) 0.1 - 0.3
Commercial Real Estate
Impairment Charge - - (5.9) -
Total Non-utility Operations 6.8 8.9 18.9 34.0
Corporate and Other (0.4) (0.6) (1.0) (0.4)
Sub-Total Operations 37.1 45.2 129.0 140.1
Synfuels-related - (5.3) - 3.0
Vectren Consolidated $37.1 $39.9 $129.0 $143.1
VECTREN CORPORATION
AND SUBSIDIARY COMPANIES
SELECTED GAS DISTRIBUTION
OPERATING STATISTICS
(Unaudited)
Three Months Twelve Months
Ended December 31 Ended December 31
2008 2007 2008 2007
GAS OPERATING REVENUES (Millions):
Residential $295.5 $259.9 $958.9 $851.1
Commercial 114.1 99.2 392.7 339.9
Industrial 18.9 17.8 68.8 64.7
Other Revenue 1.8 2.5 12.3 13.7
$430.3 $379.4 $1,432.7 $1,269.4
GAS MARGIN (Millions):
Residential $89.5 $83.6 $292.2 $275.1
Commercial 27.7 25.7 92.9 85.8
Industrial 14.2 13.5 52.2 48.7
Other 1.8 1.4 12.3 12.6
$133.2 $124.2 $449.6 $422.2
GAS SOLD & TRANSPORTED (MMDth):
Residential 26.5 23.3 79.2 75.0
Commercial 11.7 10.0 35.6 33.4
Industrial 24.0 23.7 91.5 86.2
62.2 57.0 206.3 194.6
AVERAGE GAS CUSTOMERS
Residential 904,163 904,922 901,131 901,173
Commercial 84,107 84,263 83,940 83,934
Industrial 1,622 1,609 1,614 1,610
989,892 990,794 986,685 986,717
YTD WEATHER AS A PERCENT OF NORMAL:
Heating Degree Days (Ohio) 105% 91% 102% 94%
VECTREN CORPORATION
AND SUBSIDIARY COMPANIES
SELECTED ELECTRIC
OPERATING STATISTICS
(Unaudited)
Three Months Twelve Months
Ended December 31 Ended December 31
2008 2007 2008 2007
ELECTRIC OPERATING REVENUES (Millions):
Residential $37.2 $37.5 $171.0 $161.3
Commercial 30.7 30.6 127.1 115.1
Industrial 33.1 37.0 150.5 142.8
Municipals - 3.2 1.0 21.4
Other Revenue 2.8 2.6 7.7 8.2
Total Retail 103.8 110.9 457.3 448.8
Net Wholesale Revenues 18.1 15.4 66.9 39.1
$121.9 $126.3 $524.2 $487.9
ELECTRIC MARGIN (Millions):
Residential $28.8 $28.3 $129.0 $119.6
Commercial 22.0 21.3 89.6 79.0
Industrial 18.4 21.0 82.9 78.3
Municipals - 0.1 - 7.4
Other 2.7 2.5 7.3 7.9
Total Retail 71.9 73.2 308.8 292.2
Net Wholesale Margin 10.3 7.8 32.5 20.9
$82.2 $81.0 $341.3 $313.1
ELECTRICITY SOLD (GWh):
Residential 331.4 340.2 1,513.8 1,630.5
Commercial 323.5 345.0 1,336.7 1,412.4
Industrial 549.6 596.1 2,409.1 2,538.5
Municipals - 146.8 44.3 616.2
Other Sales - Street Lighting 5.5 4.8 19.5 18.9
Total Retail 1,210.0 1,432.9 5,323.4 6,216.5
Wholesale 401.5 377.2 1,512.9 921.3
1,611.5 1,810.1 6,836.3 7,137.8
AVERAGE ELECTRIC CUSTOMERS
Residential 122,576 122,412 122,522 122,162
Commercial 18,385 18,465 18,422 18,474
Industrial 103 107 103 109
Other 34 38 34 37
141,098 141,022 141,081 140,782
YTD WEATHER AS A PERCENT OF NORMAL:
Cooling Degree Days (Indiana) 100% 133%
Heating Degree Days (Indiana) 104% 89% 102% 90%
SOURCE Vectren Corporation
-0- 02/18/2009
/CONTACT: Investors, Steven M. Schein, +1-812-491-4209,
sschein@vectren.com; or Media, Jeffrey W. Whiteside, +1-812-491-4205,
jwhiteside@vectren.com, both for Vectren Corporation/
/Web site: http://www.vectren.com /
(VVC)
CO: Vectren Corporation
ST: Ohio, Indiana
IN: OIL UTI
SU: ERN CCA ERP
TI-EG
-- CLW067 --
7569 02/18/2009 18:13 EST http://www.prnewswire.com