Vectren 2010 Annual Report Download

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2010 Annual Report and Form 10-K
ANTICIPATE. ACT. EVOLVE.

Table of contents

  • Page 1
    ANTICIPATE. ACT. EVOLVE. 2010 Annual Report and Form 10-K

  • Page 2
    ...value Market price at year-end $ 1.65 $ 1.365 $ 1.38 $ 17.61 $25.38 $ 1.65* $ 1.65 $ 1.31 $ 1.34 $ 16.69 $ 25.01 $ 1.345 $ 1.36 $ 17.23 $ 24.68 *Twelve months ended December 31, 2009, includes an $11.9 million, or $0.15 per share, after-tax charge related to Liberty Gas Storage investment. Utility...

  • Page 3
    ... initiatives in our company's operating businesses of Miller Pipeline, corporate plan. Although the goals for Energy Systems Group, Vectren Fuels our company have not dramatically and Vectren Source combined for changed over the years, the initiatives $25.1 million of earnings in 2010 and needed to...

  • Page 4
    ... 7 ,000 miles of electric lines. 3,500 natural gas regulator stations. 130 electric substations. Our utility infrastructure is vast, including materials needed to operate, enhance and maintain it. Through a focus on strategic sourcing, we're finding ways to enhance vendor purchases and effectively...

  • Page 5
    ... operating costs, limited growth in the number of utility customers and the ever-present need to invest capital dollars in utility infrastructure, the question quickly arises: how do we continue to meet shareholder expectations regarding earnings while holding down customer rates? Chief in the plan...

  • Page 6
    Aging infrastructure - natural gas, oil, wastewater and water. Many of the pipelines and mains that span hundreds of...elevate the level of safety and reliability of this critical infrastructure. As such, Vectren's Infrastructure Services group is positioned to take advantage of this nationwide need ...

  • Page 7
    ... Indiana, Ohio and New York. These customers are located within the service territories of seven different utilities, including Vectren Energy Delivery of Ohio (Vectren Ohio). Furthermore, Source again successfully bid in Vectren Ohio's standard choice offer auction and won the right to supply gas...

  • Page 8
    ... smaller, hybrid vehicles to living closer to work. As a key service provider, it's critical that Vectren not only adapt to customer needs but also be a catalyst for change. We're creating the energy infrastructure for natural gas and/or all-electric vehicles - We're helping to revitalize innercity...

  • Page 9
    ... as a leading energy services provider, growing the company from just five employees in 1994 to more than 225 employees today. Ron Jochum, Vectren's long-time vice president of power supply, will retire April 1, 2011. Ron has been key in managing Vectren's electric generation ï¬,eet and spearheaded...

  • Page 10
    ... to customers throughout the United States. Vectren Corporation Natural Gas: Vectren North Vectren South Vectren Ohio Infrastructure Services: Miller Pipeline Energy Services: Energy Systems Group Utility operations Electric: Vectren South Nonutility operations Coal Mining: Vectren Fuels See...

  • Page 11
    ... Commission file number: 1-15467 VECTREN CORPORATION (Exact name of registrant as specified in its charter) INDIANA (State or other jurisdiction of incorporation or organization) One Vectren Square (Address of principal executive offices) Registrant's telephone number, including area code: 812...

  • Page 12
    ... period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes  No â-¡ Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data...

  • Page 13
    ... OUCC: Indiana Office of the Utility Consumer Counselor PUCO: Public Utilities Commission of Ohio Throughput: combined gas sales and gas transportation volumes Access to Information Vectren Corporation makes available all SEC filings and recent annual reports free of charge through its website at...

  • Page 14
    ... ...Changes in and Disagreements with Accountants on Accounting and Financial Disclosure ...Controls and Procedures, including Management's Assessment of Internal Controls over Financial Reporting ...Other Information ...Part III 10 11 12 13 14 Directors, Executive Officers and Corporate Governance...

  • Page 15
    ... Vectren Energy Delivery of Ohio. The Company, through Vectren Enterprises, Inc. (Enterprises), is involved in nonutility activities in four primary business areas: Infrastructure Services, Energy Services, Coal Mining, and Energy Marketing. Infrastructure Services provides underground construction...

  • Page 16
    ... description of the Utility Group's Gas Utility and Electric Utility operating segments. Gas Utility Services At December 31, 2010, the Company supplied natural gas service to approximately 994,800 Indiana and Ohio customers, including 909,300 residential, 83,800 commercial, and 1,700 industrial...

  • Page 17
    ... delivery component of natural gas service from VEDO. Vectren Source, the Company's wholly owned nonutility retail gas marketer, was a successful bidder in both auctions. In the last phase, which was not approved in the April 2008 order, it is contemplated that all of the Company's Ohio residential...

  • Page 18
    ... MW, and in 2009 SIGECO purchased a landfill gas electric generation project which provides 3 MW. Electric generation for 2010 was fueled by coal (98 percent) and natural gas (2 percent). Oil was used only for testing of gas/oil-fired peaking units. The Company generated approximately 5,136 GWh in...

  • Page 19
    ... supplier. The Company implemented a choice program for its gas customers in Ohio in January 2003. At December 31, 2010, over 109,000 customers in Vectren's Ohio service territory have opted to purchase natural gas from a supplier other than VEDO. In addition, VEDO's service territory continues...

  • Page 20
    ... Services, Energy Services, Coal Mining, and Energy Marketing. Infrastructure Services Infrastructure Services provides underground construction and repair to utility infrastructure through its wholly owned subsidiary, Miller Pipeline, LLC (Miller). Effective July 1, 2006, the Company purchased...

  • Page 21
    ... per hour, although the addition to the wash plant will not be utilized until the Oaktown 2 mine is opened. The two mines are connected to a railway equipped to handle 110 to 120 car unit trains. Coal is also transported via truck to its customers, which include Vectren's power supply operations and...

  • Page 22
    ...equivalent residential and commercial customers. This customer base reflects approximately 100,000 customers in VEDO's service territory that have either voluntarily opted to choose their natural gas supplier or are supplied natural gas by Vectren Source but remain customers of the regulated utility...

  • Page 23
    ... company, and its assets consist primarily of investments in its subsidiaries. Dividends on Vectren's common stock depend on the earnings, financial condition, capital requirements and cash flow of its subsidiaries, principally Utility Holdings and Enterprises, and the distribution or other payment...

  • Page 24
    ... capital markets to obtain financing when necessary or desirable. Vectren's gas and electric utility sales are concentrated in the Midwest. The operations of the Company's regulated utilities are concentrated in central and southern Indiana and west central Ohio and are therefore impacted by changes...

  • Page 25
    ...straight fixed variable rate design in a January 2009 PUCO order mitigates most weather risk related to Ohio residential gas sales. Risks related to the regulation of Vectren's utility businesses, including environmental regulation, could affect the rates the Company charges its customers, its costs...

  • Page 26
    ...damage infrastructure. Such changes could impact the Company in a number of ways including the number and/or type of customers in the Company's service territories; the demand for energy resulting in the need for additional investment in generation assets or the need to retire current infrastructure...

  • Page 27
    ... laws or rates; and changing market conditions. Vectren's nonutility businesses support its regulated utilities pursuant to service contracts by providing natural gas supply services, coal, and infrastructure services. In most instances, Vectren's ability to maintain these service contracts depends...

  • Page 28
    ... and financial markets and summer and winter time horizons. Therefore, recovery of the these contracts' fixed costs is dependent on a number of factors, including the health of the economy, weather, and changes in the availability and location of natural gas supply and related transmission assets...

  • Page 29
    .... The investment performance of pension plan holdings and other factors impacting pension plan costs could impact Vectren's liquidity and results of operations. The costs associated with the Company's retirement plans are dependent on a number of factors, such as the rates of return on plan assets...

  • Page 30
    ...those retail gas marketers now supplying the Ohio operations with natural gas, and those suppliers are responsible for the demand charges. The Ohio operations' gas delivery system includes 5,500 miles of distribution and transmission mains, all of which are located in Ohio. Electric Utility Services...

  • Page 31
    ... market purchases were made during the quarter ended December 31, 2010. Dividend Policy Common stock dividends are payable at the discretion of the board of directors, out of legally available funds. The Company's policy is to distribute approximately 65 percent of earnings over time. On an annual...

  • Page 32
    ...following selected financial data is derived from the Company's audited consolidated financial statements and should be ... stock Diluted earnings per share on common stock Dividends per share on common stock Balance Sheet Data: Total assets Long-term debt, net Common shareholders' equity $ $ $ 2010...

  • Page 33
    ... denote areas of management's forward looking focus. The Utility Group generates revenue primarily from the delivery of natural gas and electric service to its customers. The primary source of cash flow for the Utility Group results from the collection of customer bills and the payment for goods and...

  • Page 34
    ... of Miller Pipeline, Energy Systems Group, Vectren Fuels, and Vectren Source combined for $25.1 million of earnings contribution in 2010. All other results in 2009 compared to 2008 increased by $12.9 million due primarily to increased earnings from Coal Mining operations. Results from Coal Mining...

  • Page 35
    ...distribution business, which provides electric distribution services primarily to southwestern Indiana, and the Company's power generating and wholesale power operations. In total, these regulated operations supply natural gas and/or electricity to over one million customers. Utility Group operating...

  • Page 36
    ... adjustment in charges for electric energy to reflect changes in the cost of fuel. The net energy cost of purchased power, subject to an approved variable benchmark based on NYMEX natural gas prices, is also timely recovered through the FAC. GCA and FAC procedures involve periodic filings and IURC...

  • Page 37
    ... sold to residential and commercial customers driven by weather and changing consumption patterns. However, the impact on margin has been generally offset as planned by rate design strategies and the implementation of new base rates in two of the three gas service territories. Large customer volumes...

  • Page 38
    .... In addition in 2010, the Company began recognizing a return on and of investments made to replace distribution risers and bare steel and cast iron infrastructure per a PUCO order. Electric Utility Margin (Electric utility revenues less Cost of fuel & purchased power) Electric utility margin and...

  • Page 39
    ... on electric transmission projects constructed by the Company in its service territory that meet the criteria of MISO's regional transmission expansion plans. Margin associated with these projects, including the reconciliation of recovery mechanisms, and other transmission system operations, totaled...

  • Page 40
    ... Reconciliation Act of 2010 signed by the President as of the end of March 2010. Like tax law changes in the past, it is expected that the impact of this change will be reflected in customer rates in the future. As a result, the Company has recorded a $5.1 million regulatory asset related to this...

  • Page 41
    ... has yet to release data subsequent to 2005. Emissions from other Company operations, including those from its natural gas distribution operations, are monitored internally using the Department of Energy 1605(b) Standard, and the Company will report these other emissions generated in 2010 to the EPA...

  • Page 42
    ... in the Company's Indiana and Ohio gas utility service territories; ï,· The recent settlement agreement between the Company and the OUCC regarding electric demand side management initiatives; ï,· Evaluating potential carbon requirements with regard to new generation, other fuel supply sources, and...

  • Page 43
    ... electricity, and as such, the Company believes recovery should be timely reflected in rates charged to customers. Customer rates may also be impacted should decisions be made to reduce the level of sales to municipal and other wholesale customers in order to meet emission targets. Ash Ponds & Coal...

  • Page 44
    ...that it owned and/or operated and were not enrolled in the IDEM's VRP. In October 2003, SIGECO filed applications to enter four of the manufactured gas plant sites in IDEM's VRP. The remaining site is currently being addressed in the VRP by another Indiana utility. SIGECO added those four sites into...

  • Page 45
    ... rates addresses capital investments, a modified electric rate design that facilitates a partnership between Vectren South and customers to pursue energy efficiency and conservation, and new energy efficiency programs to complement those currently offered for natural gas customers. On July 30, 2010...

  • Page 46
    ... on January 19, 2011. Consistent with current practice, customers will continue to receive a single bill for the commodity as well as the delivery component of natural gas service from VEDO. Vectren Source, the Company's wholly owned nonutility retail gas marketer, was a successful bidder in both...

  • Page 47
    ... the Company's investment in certain new electric transmission projects meeting MISO's transmission expansion plan criteria. One such project currently under construction meeting these expansion plan criteria is an interstate 345 Kv transmission line that will connect Vectren's A.B. Brown Generating...

  • Page 48
    ... 18.0 (5.9) $ $ $ Infrastructure Services Infrastructure Services provides underground construction and repair to utility infrastructure through Miller Pipeline, LLC (Miller). Inclusive of holding company costs, Infrastructure's operations contributed earnings of $3.1 million in 2010, compared to...

  • Page 49
    ... and priced. Oaktown Mines The first of two new underground mine investments, located near Vincennes, Indiana, began full operations in 2010. The second mine is currently expected to open in 2012. However, Vectren Fuels may continue to adjust this timing as it evaluates the impacts of market...

  • Page 50
    ... new mine safety legislation. The Company is currently assessing the impact new laws and regulations may have on its investments. Energy Marketing Energy Marketing is comprised of the Company's gas marketing operations, energy management services, and retail gas supply operations. Operating...

  • Page 51
    ... 31, 2008. The 2010 customer count reflects nearly 100,000 customers in VEDO's service territory that have either voluntarily opted to choose their natural gas supplier or are supplied natural gas by Vectren Source but remain customers of the regulated utility as part of VEDO's exit the merchant...

  • Page 52
    ... companies accounted for using the equity method of accounting. During the second quarter of 2010, the Company recorded its share of the decline in fair value and also impaired a note receivable associated with Haddington's investment in a liquefied natural gas facility. In total, the charge...

  • Page 53
    ... have increased the impairment charge by $2.5 million. The Company examined these investments for impairment throughout 2010 and 2009, noting that current capitalization rates and other assumptions indicate no further impairment. However, the commercial real estate markets remain soft and uncertain...

  • Page 54
    ... of cash flows. A 100 basis point increase in the discount rate utilized to calculate the Gas Utility Services segment's fair value also would have resulted in no impairment charge. The Company also annually tests non-amortizing intangible assets for impairment and amortizing intangible assets are...

  • Page 55
    .... The Company currently foresees no issues with accessing the capital markets to execute the refinancing. Long-term debt transactions completed in 2010 and 2009 include issuances by Vectren Capital totaling $275 million and a $100 million issuance by Vectren Utility Holdings. SIGECO also remarketed...

  • Page 56
    available for the wholly owned Nonutility Group and corporate operations. These facilities are used to supplement working capital needs and also to fund capital investments and debt redemptions until financed on a long-term basis. Both Vectren Capital's and Utility Holdings' short-term credit ...

  • Page 57
    ... of other project guarantees described below. In addition, the Company has approximately $75 million of other guarantees outstanding supporting other consolidated subsidiary operations, of which $51 million support the operations of Vectren Source, a wholly owned nonutility retail gas marketer and...

  • Page 58
    ...be more consistent with expenditures made in 2010 and total (in millions): $244, $231, $243, $245, and $243, respectively. Planned Nonutility Group capital expenditures for mine development and recurring infrastructure investments, including contractual purchase commitments, for the five-year period...

  • Page 59
    ...Flow The Company's primary source of liquidity to fund working capital requirements has been cash generated from operations, which totaled $384.8 million in 2010, compared to $449.6 million in 2009 and $423.2 million in 2008. The $64.8 million decrease in operating cash flow in 2010 compared to 2009...

  • Page 60
    ... factor equal to the federal funds rate, less a 35 basis point fixed spread, and 2) structured quarterly decreases to the forward sale price that align with expected Company dividend payments. Vectren transferred the proceeds to Utility Holdings, and Utility Holdings used the proceeds to repay short...

  • Page 61
    ... 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...

  • Page 62
    ... invest in and develop new opportunities, including but not limited to, the Company's infrastructure, energy services, coal mining, and energy marketing strategies. Factors affecting coal mining operations including MSHA guidelines and interpretations of those guidelines, as well as additional mine...

  • Page 63
    ... Vectren Source, a nonutility retail gas marketer, coal mining operations, and the operations at ProLiance. Open positions in terms of price, volume, and specified delivery points may occur and are managed using methods described below with frequent management reporting. These subsidiaries, as well...

  • Page 64
    ... and degree of market risk that may be undertaken. The Company's customer receivables from gas and electric sales and gas transportation services are primarily derived from residential, commercial, and industrial customers located in Indiana and west central Ohio. The Company manages credit risk...

  • Page 65
    ... Vectren Corporation's management is responsible for establishing and maintaining adequate internal control over financial reporting. Those control procedures underlie the preparation of the consolidated balance sheets, statements of income, cash flows, and common shareholders' equity, and related...

  • Page 66
    REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Shareholders of Vectren Corporation: We have audited the accompanying consolidated balance sheets of Vectren Corporation and subsidiaries (the "Company") as of December 31, 2010 and 2009, and the related ...

  • Page 67
    ... REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Shareholders of Vectren Corporation: We have audited the internal control over financial reporting of Vectren Corporation and subsidiaries (the "Company") as of December 31, 2010, based on criteria established in Internal Control...

  • Page 68
    VECTREN CORPORATION AND SUBSIDIARY COMPANIES CONSOLIDATED BALANCE SHEETS (In millions) At December 31, 2010 2009 ASSETS Current Assets Cash & cash equivalents Accounts receivable - less reserves of $5.3 & $5.2, respectively Accrued unbilled revenues Inventories Recoverable fuel & natural gas costs ...

  • Page 69
    VECTREN CORPORATION AND SUBSIDIARY COMPANIES CONSOLIDATED BALANCE SHEETS (In millions) At December 31, 2010 2009 LIABILITIES & SHAREHOLDERS' EQUITY Current Liabilities Accounts payable Accounts payable to affiliated companies Refundable fuel & natural gas costs Accrued liabilities Short-term ...

  • Page 70
    VECTREN CORPORATION AND SUBSIDIARY COMPANIES CONSOLIDATED STATEMENTS OF INCOME (In millions, except ...2010 OPERATING REVENUES Gas utility Electric utility Nonutility Total operating revenues OPERATING EXPENSES Cost of gas sold Cost of fuel & purchased power Cost of nonutility revenues Other operating...

  • Page 71
    ... cost Other non-cash charges - net Changes in working capital accounts: Accounts receivable & accrued unbilled revenue Inventories Recoverable/refundable fuel & natural gas costs Prepayments & other current assets Accounts payable, including to affiliated companies Accrued liabilities Unconsolidated...

  • Page 72
    VECTREN CORPORATION AND SUBSIDIARY COMPANIES CONSOLIDATED STATEMENTS OF COMMON SHAREHOLDERS' EQUITY (In millions, except per share amounts) Accumulated Other Retained Comprehensive Amount Earnings Income (Loss) Shares 76.3 $ 532.7 $ 688.5 $ 12.5 $ Common Stock 129.0 (2.4) (0.2) (30.2) Balance at ...

  • Page 73
    ... Vectren Energy Delivery of Ohio. The Company, through Vectren Enterprises, Inc. (Enterprises), is involved in nonutility activities in four primary business areas: Infrastructure Services, Energy Services, Coal Mining, and Energy Marketing. Infrastructure Services provides underground construction...

  • Page 74
    ...payments, the Company records additional allowances as needed. Inventories In most circumstances, the Company's inventory components are recorded using an average cost method; however, natural gas in storage at the Company's Indiana utilities and coal inventory at the Company's nonutility coal mines...

  • Page 75
    ... utility operations affecting Ohio customers are subject to regulation by the PUCO. The Company's accounting policies give recognition to the ratemaking and accounting practices authorized by these agencies. Refundable or Recoverable Gas Costs & Cost of Fuel & Purchased Power All metered gas rates...

  • Page 76
    ...exempted from mark-to-market accounting. Most energy contracts executed by the Company are subject to the NPNS exclusion or are not considered derivatives. Such energy contracts include Real Time and Day Ahead purchase and sale contracts with the MISO, natural gas purchases from ProLiance and others...

  • Page 77
    ...the Company's electric transmission facilities as well as that of other Midwest utilities. Since April 1, 2005, the Company has been an active participant in the MISO energy markets, bidding its owned generation into the Day Ahead and Real Time markets and procuring power for its retail customers at...

  • Page 78
    ... Receipts Taxes Excise taxes and a portion of utility receipts taxes are included in rates charged to customers. Accordingly, the Company records these taxes received as a component of operating revenues, which totaled $33.8 million in 2010, $36.3 million in 2009, and $45.0 million in 2008. Expense...

  • Page 79
    ...$ SIGECO and Alcoa Generating Corporation (AGC), a subsidiary of ALCOA, own the 300 MW Unit 4 at the Warrick Power Plant as tenants in common. SIGECO's share of the cost of this unit at December 31, 2010, is $176.2 million with accumulated depreciation totaling $59.2 million. The construction work...

  • Page 80
    ... 5. Investment in ProLiance Holdings, LLC ProLiance Holdings, LLC (ProLiance), a nonutility energy marketing affiliate of Vectren and Citizens Energy Group (Citizens), provides services to a broad range of municipalities, utilities, industrial operations, schools, and healthcare institutions located...

  • Page 81
    ... Interstate Pipeline operated by Sempra Pipelines & Storage, and will connect area LNG regasification terminals to an interstate natural gas transmission system and storage facilities. ProLiance's investment in Liberty is $36.7 million at December 31, 2010, after reflecting the charge discussed...

  • Page 82
    ...to affiliated companies in the Consolidated Balance Sheets. Vectren received regulatory approval on April 25, 2006, from the IURC for ProLiance to provide natural gas supply services to the Company's Indiana utilities through March 2011. On November 3, 2010, a settlement agreement was filed with the...

  • Page 83
    ... values. Intangible assets are presented net of accumulated amortization totaling $3.4 million for customer-related assets and $0.3 million for market-related assets at December 31, 2010 and $2.8 million for customer-related assets and $0.2 million for market-related assets at December 31, 81

  • Page 84
    ... future rates Other - net Net noncurrent deferred tax liability Current deferred tax (assets)/liabilities: Deferred fuel costs-net Demand side management programs Alternative minimum tax carryforward Other - net Net current deferred tax asset Net deferred tax liability At December 31, 2010 2009...

  • Page 85
    ...affect the annual effective tax rate but would accelerate the payment of cash to the taxing authority. Thus, it is not expected that any changes to these tax positions would have a significant impact on earnings. The Company recognized expense related to interest and penalties totaling approximately...

  • Page 86
    ...expected that the impact of this change will be reflected in customer rates in the future. As a result, the Company has recorded a $5.1 million regulatory asset related to this matter in its financial statements at December 31, 2010. 9. Retirement Plans & Other Postretirement Benefits At December 31...

  • Page 87
    ...75% 8.25% N/A Health care cost trend rate assumptions do not have a material effect on the service and interest cost components of benefit costs. The Company's plans limit its exposure to increases in health care costs to annual changes in the Consumer Price Index (CPI). Any increase in health care...

  • Page 88
    ... to satisfy retirement payments due these retirees, the shortfall must be funded by the Company. The composite investment return, net of manger fees and other charges for the year ended December 31, 2010 was 5.37 percent. The Company values this illiquid investment using long-term interest rate and...

  • Page 89
    ... of year Unrealized gains related to investments still held at reporting date Purchases, sales and settlements, net Fair value, end of year $ $ 2010 3.6 $ 2009 3.5 0.2 (0.1) 3.7 $ 0.2 (0.1) 3.6 Funded Status The funded status of the plans as of December 31, 2010 and 2009 follows: Pension...

  • Page 90
    .... In addition, the Company expects to make payments totaling approximately $0.7 million directly to SERP participants and approximately $4.6 million directly to those participating in other postretirement plans. Estimated retiree pension benefit payments, including the SERP, projected to be required...

  • Page 91
    ... $179 million was available for the wholly owned Nonutility Group and corporate operations. Both Vectren Capital's and Utility Holdings' short-term credit facilities were renewed on September 30, 2010 and are available through September 2013. During the renewal process, the Company lowered the level...

  • Page 92
    ..., 6.28% 2035, 6.10% 2036, 5.95% 2039, 6.25% Total Utility Holdings Indiana Gas Fixed Rate Senior Unsecured Notes 2013, Series E, 6.69% 2015, Series E, 7.15...08% Total Indiana Gas SIGECO First Mortgage Bonds 2015, 1985 Pollution Control Series A, current adjustable rate 0.33%, tax exempt, 2010 weighted...

  • Page 93
    ... Agreement pursuant to which institutional investors purchased from Utility Holdings $100 million in 6.28 percent senior unsecured notes due April 7, 2020 (2020 Notes). The 2020 Notes are guaranteed by Utility Holdings' three utilities: SIGECO, Indiana Gas, and VEDO. These guarantees are full and...

  • Page 94
    ... December 31, 2010. Debt that may be put to the Company within one year or debt that is supported by lines of credit that expire within one year are classified as Long-term debt subject to tender in current liabilities. Utility Holdings 2008 Debt Issuance In March 2008, Utility Holdings issued $125...

  • Page 95
    ... Corporation guarantees Vectren Capital's long-term and short-term debt, which totaled $410 million and $71 million, respectively, at December 31, 2010. Utility Holdings' currently outstanding long-term and short-term debt is jointly and severally guaranteed by Indiana Gas, SIGECO, and VEDO. Utility...

  • Page 96
    ... Holdings, LLC's accumulated comprehensive income related to use of cash flow hedges. (See Note 5 for more information on ProLiance.) 14. Share-Based Compensation & Deferred Compensation Arrangements The Company has various share-based compensation programs to encourage executives, key non-officer...

  • Page 97
    ... Stock Unit Plans The Company periodically grants restricted stock and/or restricted stock units to executives and other key non-officer employees. The vesting of those grants is contingent upon meeting a total return and/or return on equity performance objectives. In addition non-employee directors...

  • Page 98
    ... earnings related to the investment activities in Vectren phantom stock associated with these plans during the years ended December 31, 2010, 2009, and 2008, was a cost of $1.6 million, a benefit of $1.5 million and a cost of $0.6 million, respectively. The Company has certain investments currently...

  • Page 99
    ..., $4.1 in 2012, $3.8 in 2013, $1.8 in 2014, $0.8 in 2015, and $3.2 thereafter. The Company's regulated utilities have both firm and non-firm commitments to purchase natural gas, electricity, and coal as well as certain transportation and storage rights. Costs arising from these commitments, while...

  • Page 100
    ... standard, SIGECO received regulatory approval to purchase a 3 MW landfill gas generation facility from a related entity. The facility was purchased in 2009 and is directly interconnected to the Company's distribution system. In 2009, the Company also executed a long term purchase power commitment...

  • Page 101
    ... electricity, and as such, the Company believes recovery should be timely reflected in rates charged to customers. Customer rates may also be impacted should decisions be made to reduce the level of sales to municipal and other wholesale customers in order to meet emission targets. Ash Ponds & Coal...

  • Page 102
    ...that it owned and/or operated and were not enrolled in the IDEM's VRP. In October 2003, SIGECO filed applications to enter four of the manufactured gas plant sites in IDEM's VRP. The remaining site is currently being addressed in the VRP by another Indiana utility. SIGECO added those four sites into...

  • Page 103
    ... rates addresses capital investments, a modified electric rate design that facilitates a partnership between Vectren South and customers to pursue energy efficiency and conservation, and new energy efficiency programs to complement those currently offered for natural gas customers. On July 30, 2010...

  • Page 104
    ... to receive a single bill for the commodity as well as the delivery component of natural gas service from VEDO. Vectren Source, the Company's wholly owned nonutility retail gas marketer, was a successful bidder in both auctions. The PUCO provided for an Exit Transition Cost rider, which allows the...

  • Page 105
    ... ended December 31, 2010, 2009, and 2008, respectively. These revenues result from other MISO members' use of the Company's transmission system as well as the recovery of the Company's investment in certain new electric transmission projects meeting MISO's transmission expansion plan criteria. 18...

  • Page 106
    ... Utility Services segment provides electric distribution services primarily to southwestern Indiana, and includes the Company's power generating and wholesale power operations. Regulated operations supply natural gas and /or electricity to over one million customers. In total, the Utility Group...

  • Page 107
    ...Interest Expense Utility Group Gas Utility Services Electric Utility Services Other Operations Total Utility Group Nonutility Group Infrastructure Services Energy Services Coal Mining Energy Marketing Other Businesses Total Nonutility Group Corporate & Other Consolidated Interest Expense 2010 Year...

  • Page 108
    ... Total Nonutility Group Corporate & Other Consolidated Income Taxes Capital Expenditures Utility Group Gas Utility Services Electric Utility Services Other Operations Non-cash costs & changes in accruals Total Utility Group Nonutility Group Infrastructure Services Energy Services Coal Mining Energy...

  • Page 109
    ... & current assets Total prepayments & other current assets Investments in unconsolidated affiliates consist of the following: $ $ At December 31, 2010 2009 40.7 $ 38.7 3.8 21.7 31.5 20.6 25.2 14.1 101.2 $ 95.1 (In millions) ProLiance Holdings, LLC Haddington Energy Partnerships Other non-utility...

  • Page 110
    Goodwill by operating segment follows: (In millions) Utility Group Gas Utility Services Nonutility Group Infrastructure Services Energy Services Consolidated goodwill Accrued liabilities in the Consolidated Balance Sheets consist of the following: At December 31, 2010 2009 $ 205.0 34.9 2.1 242.0 $...

  • Page 111
    ... 31, 2010 and 2009, the Company has accruals related to utility and nonutility plant purchases totaling approximately $13.9 million and $12.4 million, respectively. 21. Impact of Recently Issued Accounting Guidance Variable Interest Entities In June 2009, the FASB issued new accounting guidance...

  • Page 112
    ... that information required to be disclosed in reports filed or submitted under the Exchange Act is: 1) recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms, and 2) accumulated and communicated to management, including the Chief Executive Officer...

  • Page 113
    ...retired May 31, 2010, as the Company's CEO. Ellerbrook will continue to serve in the role of non-executive chairman for the Company through May of 2011. As part of the Company's succession planning process, the board of directors chose Carl L. Chapman, Vectren's president and chief operating officer...

  • Page 114
    .... The At-Risk Compensation plan was approved by Vectren Corporation common shareholders after the merger forming Vectren and was reapproved at the 2006 annual meeting of shareholders. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE Information required by Part III...

  • Page 115
    ... filed electronically with the SEC are listed below. Exhibits for the Company are listed in the Index to Exhibits. Vectren Corporation Form 10-K Attached Exhibits The following Exhibits are included in this Annual Report on Form 10-K. Exhibit Number 31.1 31.2 32 Document Chief Executive Officer...

  • Page 116
    ... 2000, (Filed and designated in Current Report on Form 8-K filed December 27, 2000, File No. 1-6494, as Exhibit 4.) Indenture dated October 19, 2001, among Vectren Utility Holdings, Inc., Indiana Gas Company, Inc., Southern Indiana Gas and Electric Company, Vectren Energy Delivery of Ohio, Inc., and...

  • Page 117
    ... as Exhibit 4.1). Form of Fifth Supplemental Indenture, among Vectren Utility Holdings, Inc., Indiana Gas Company, Inc., Southern Indiana Gas & Electric Company, Vectren Energy Delivery of Ohio, Inc., and U.S. Bank Trust National Association. (Filed and designated in Form 8-K, dated October 16, 2006...

  • Page 118
    ... are provided in the amount of three times base salary and bonus for Messrs. Benkert, Chapman, and Christian and two times for Mr. Doty. Coal Supply Agreement for Warrick 4 Generating Station between Southern Indiana Gas and Electric Company and Vectren Fuels, Inc., effective January 1, 2009. (Filed...

  • Page 119
    ... 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. VECTREN CORPORATION Dated February 17, 2011 /s/ Carl L. Chapman Carl L. Chapman, President, Chief Executive Officer, and Director Pursuant to the requirements of the Securities...

  • Page 120
    ...Daniel Sadlier /s/ Michael L. Smith Michael L. Smith /s/ Jean L. Wojtowicz Jean L. Wojtowicz Director February 17, 2011 Director February 17, 2011 Director February 17, 2011 Director February 17, 2011 Director February 17, 2011 Director February 17, 2011 Director February 17, 2011 118

  • Page 121
    ... TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 CHIEF EXECUTIVE OFFICER CERTIFICATION I, Carl L. Chapman, certify that: 1. 2. I have reviewed this Annual Report on Form 10-K of Vectren Corporation; Based on my knowledge, this report does not contain any untrue statement of a material fact or omit...

  • Page 122
    ...TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 CHIEF FINANCIAL OFFICER CERTIFICATION I, Jerome A. Benkert, Jr., certify that: 1. 2. I have reviewed this Annual Report on Form 10-K of Vectren Corporation; Based on my knowledge, this report does not contain any untrue statement of a material fact or...

  • Page 123
    ... of 1934 and (ii) the information contained in this report fairly presents, in all material respects, the financial condition and results of operations of Vectren Corporation. Signed this 17th day of February, 2011. /s/ Jerome A. Benkert, Jr. (Signature of Authorized Officer) Jerome A. Benkert, Jr...

  • Page 124
    ... Utility Nonutility Total Total assets Utility Operating Statistics Gas distribution Operating revenues Margin Average customers (in thousands) Electric Operating revenues Margin Average customers (in thousands) Weather as a percent of normal Heating degree days (Ohio) Cooling degree days (Indiana...

  • Page 125
    ... gas and electric utilities provides a more comparable business mix and risk profile. For the 2011 Peer Group, this decision removed the following pure gas companies: AGL Resources, Atmos Energy, Laclede Group, New Jersey Resources, Nicor, Northwest Natural Gas, Piedmont Natural Gas, South...

  • Page 126
    ... Petitt Vice President - VUHI, Marketing and Conservation Eric J. Schach Vice President - VUHI, Energy Delivery John R. Talley President - ProLiance Energy Jerrold L. Ulrey Vice President - VUHI, Regulatory Affairs and Fuels Tamara R. Wilson President - Vectren Source VUHI - Vectren Utility Holdings...

  • Page 127
    ... The Investor Relations section of www.vectren.com provides instant access to the latest news releases and historical archives of annual reports, SEC filings, financial presentations and much more. A paper copy of the Vectren Corporation and/or Vectren Utility Holdings, Inc., 2010 Annual Report on...

  • Page 128
    ... One Vectren Square Evansville, Indiana 47708 (812) 491-4000 www.vectren.com Get Involved The Indiana Utility Shareholder Association is a shareholder-run organization focused on state and national issues that specifically impact utility shareholder value. The IUSA will be holding meetings...