Vectren 2010 Annual Report Download - page 22

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20
Energy Marketing
The Energy Marketing group relies heavily on a customer focused, value added strategy in three areas: gas marketing, energy
management, and retail gas supply.
ProLiance
ProLiance, a nonutility energy marketing affiliate of Vectren and Citizens, provides services to a broad range of municipalities,
utilities, industrial operations, schools, and healthcare institutions located throughout the Midwest and Southeast United States.
ProLiance’s customers include Vectren’s Indiana utilities and nonutility gas supply operations and Citizens’ utilities. ProLiance’s
primary businesses include gas marketing, gas portfolio optimization, and other portfolio and energy management services.
Consistent with its ownership percentage, Vectren is allocated 61 percent of ProLiance’s profits and losses; however,
governance and voting rights remain at 50 percent for each member; and therefore, the Company accounts for its investment in
ProLiance using the equity method of accounting. The Company, including its nonutility retail gas marketing operations,
contracted for approximately 69 percent of its natural gas purchases through ProLiance in 2010.
For the year ended December 31, 2010, ProLiance’s revenues, including sales to Vectren companies, were $1.5 billion,
compared to $1.7 billion in 2009 and $2.9 billion in 2008. Summarized financial data regarding ProLiance’s operations are
included in Note 5 to the Consolidated Financial Statements included in Item 8. At December 31, 2010, ProLiance customer
base was 1,789 customers, compared to 1,578 customers in 2009 and 1,449 customers in 2008.
Vectren Source
As of December 31, 2010, Vectren Source provided natural gas and other related products and services in the Midwest and
Northeast United States to over 227,000 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 as part of VEDO’s exit the
merchant function process. As a result of a supplier choice auction held on January 18, 2011 in VEDO’s service territory,
Vectren Source will increase its customer base by approximately 28,000 to over 255,000. Gas sold by Vectren Source
approximated 20,968 MDth in 2010; 18,457 MDth in 2009; and 16,210 MDth in 2008. Average equivalent customers served by
Vectren Source were 203,000 in 2010; 179,000 in 2009; and 157,000 in 2008. Vectren Source generated approximately $143
million in revenues for 2010 compared to $157 million in 2009 and $183 million in 2008.
Other Businesses
The Other Businesses group includes a variety of legacy, wholly owned operations and investments that have invested in
energy-related opportunities and services, real estate, and leveraged leases, among other investments. Investments at
December 31, 2010, include two Haddington Energy Partnerships both approximately 40 percent owned; and wholly owned
subsidiaries, Southern Indiana Properties, Inc. and Energy Realty, Inc.
The Company had an approximate 2 percent equity interest and a convertible subordinated debt investment in Utilicom
Networks, LLC (Utilicom). The Company also had an approximate 19 percent equity interest in SIGECOM Holdings, Inc.
(Holdings), which was formed by Utilicom to hold interests in SIGECOM, LLC (SIGECOM). SIGECOM provided broadband
services, such as cable television, high-speed internet, and advanced local and long distance phone services, to the greater
Evansville, Indiana area. The Company sold its investment in SIGECOM during 2006.
Synthetic Fuel
The Company had an 8.3 percent ownership interest in Pace Carbon Synfuels, LP (Pace Carbon). Pace Carbon produced and
sold coal-based synthetic fuel using Covol technology, and according to US tax law, its members received a tax credit for every
ton of coal-based synthetic fuel sold. In addition, Vectren Fuels, Inc. received processing fees from synfuel producers unrelated
to Pace Carbon for a portion of its coal production. These synfuel related credits and fees ended on December 31, 2007 when
tax laws expired. The partnership was dissolved in 2010.