Vectren 2010 Annual Report Download - page 20

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Nonutility Group
The Company is involved in nonutility activities in four primary business areas: Infrastructure 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 the remaining 50 percent of Miller from a
subsidiary of Duke Energy Corporation, making Miller a wholly owned subsidiary. The results of Miller’s operations, formerly
accounted for using the equity method, have been included in consolidated results since July 1, 2006. Prior to this transaction,
Miller was 100 percent owned by Reliant Services, LLC (Reliant). Reliant provided facilities locating and meter reading services
to the Company’s utilities, as well as other utilities. Reliant exited the meter reading and facilities locating businesses in 2006.
Miller provides services to many utilities, including Vectren’s utilities. Miller generated approximately $236 million in gross
revenues for 2010, compared to $202 million in 2009 and $195 million in 2008. Man hours worked were 2.6 million in 2010,
compared to 2.5 million in both 2009 and 2008.
Energy Services
Performance-based energy contracting operations and renewable energy services are performed through Energy Systems
Group, LLC (ESG). ESG assists schools, hospitals, governmental facilities, and other private institutions to reduce energy and
maintenance costs by upgrading their facilities with energy-efficient equipment. ESG is also involved in creating renewable
energy projects, including projects to process landfill gas into usable natural gas and electricity. During 2009, SIGECO
purchased one such project with IURC approval. ESG’s customer base is located throughout the Midwest and Southeast
United States. ESG generated revenues of approximately $147 million in 2010, compared to $121 million in 2009 and $119
million in 2008. ESG’s back log at December 31, 2010 was $118 million.
Coal Mining
The Coal Mining group mines and sells coal to the Company’s utility operations and to other third parties through its wholly
owned subsidiary, Vectren Fuels. The Company owns three underground mines (Prosperity, Oaktown 1, and Oaktown 2) and
one surface mine (Cypress Creek). All mines are located in Indiana. All coal is high-to-mid sulfur bituminous coal from the
Illinois Basin. The Company engages contract mining companies to perform substantially all mining operations. Coal mining
generated approximately $210 million in revenues in 2010, compared to $193 million in 2009 and $164 million in 2008.
Oaktown Mine Expansion
In April 2006, Vectren Fuels announced plans to open two new underground mines. The first of two underground mines 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 change this time table as it evaluates the impacts of current coal market conditions. Reserves at
the two mines are estimated at about 105 million tons of recoverable number-five coal at 11,200 BTU and less than 6-pound
sulfur dioxide. Once in full production, the two mines are capable of producing about 5 million tons of coal per year.
Management expects to incur approximately $200 million to access the coal reserves. Of the total $200 million expected
investment, the Company has invested $186 million through December 31, 2010, inclusive of $48 million in land and buildings,
$128 million in mine development and equipment, and $10 million in advance royalty payments.
The Oaktown mine infrastructure is located on 1,100 acres near Oaktown in Knox County, Indiana. Oaktown’s location is within
50 miles of multiple coal-fired power plants including a coal gasification plant currently under construction. It is estimated
approximately 25,000 acres of coal will be mined during the life of both mines. Through December 31, 2010, approximately 300
acres of coal have been mined with approximately 24,700 acres remaining. Access to the Oaktown 1 mine was accomplished
via a 90 foot deep box cut and a 2,200 foot slope on a 14 percent grade, reaching coal in excess of 375 feet below the surface.
Access to the Oaktown 2 mine is planned via an 80 foot deep box cut and a 2,600 foot slope on a 14 percent grade, reaching
coal in excess of 400 feet below the surface.
Both Oaktown mines are room and pillar underground mines meaning that main airways and transportation entries are
developed and maintained while remote-controlled continuous miners extract coal from so-called rooms by removing coal from
the seam, leaving pillars to support the roof. Shuttle cars or similar transportation is used to transport coal to a conveyor belt for
transport to the surface. The two mines are separated by a sandstone channel. The coal seam thickness ranges from 4 feet to