Vectren 2008 Annual Report Download - page 78

Download and view the complete annual report

Please find page 78 of the 2008 Vectren annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 123

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123

76
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.
ProLiance Lawsuit Settlement in 2006
On November 22, 2006, ProLiance settled a 2002 civil lawsuit between the City of Huntsville, Alabama and
ProLiance. The $21.6 million settlement related to a dispute over a contractual relationship with Huntsville
Utilities during 2000-2002. As an equity investor in ProLiance, Vectren recorded its share of these charges which
totaled $6.6 million after tax in 2006.
Undistributed Earnings
As of December 31, 2008, undistributed earnings of unconsolidated affiliates approximated $162 million and are
primarily comprised of the undistributed earnings of ProLiance.
4. Nonutility Real Estate and Other Legacy Holdings
Within the Nonutility business segment, there are legacy investments involved in energy-related infrastructure and
services, real estate, leveraged leases, and other ventures. As of December 31, 2008, total remaining legacy
investments included in the Other Businesses portfolio total $71.8 million. Further separation of that investment by
type of investment follows:
December 31, 2008
Value Included In
(in millions)
Remaining
Carrying Value
Other
Nonutility
Investments
Investments in
Unconsolidated
Affiliates
Commercial Real Estate Investments 21.0$ 21.0$ -$
Leveraged Leases 17.3 17.3 -
Haddington Energy Partnerships 14.3 0.4 13.9
Affordable Housing Projects 9.6 0.1 9.5
Other investments 9.6 7.1 2.5
71.8$ 45.9$ 25.9$
Commercial Real Estate Charge
The current economic recession has impacted the value of commercial real estate investments within this portfolio,
and the prospect for recovery of that value has diminished. During 2008, the Company assessed its commercial
real estate investments for impairment and identified the need to reduce their carrying values. That assessment was
conducted using SFAS No. 114, “Accounting by Creditors for Impairment of a Loan”; APB 18, “The Equity
Method of Accounting for Investments in Common Stock”; and SFAS No. 144, “Accounting for the Impairment or
Disposal of Long-Lived Assets”; and their related amendments and interpretations. The impairment charge totaled
$10.0 million. Of the $10.0 million charge $5.2 million is included in Other-net and $4.8 million is included in
Other operating expenses.