Vectren 2010 Annual Report Download - page 3

2010 brought many changes and
milestones for Vectren and our
colleagues. In late March, we
celebrated our company’s 10-year
anniversary, and two months later,
we witnessed the retirement of our
company’s first CEO, Niel Ellerbrook,
who laid the foundation for shaping our
company and solidifying our imprint as
one of the Midwest’s leading energy
companies. On June 1, I was honored
to take the reigns as CEO, and in
September, we debuted a re-defined
organizational structure and quickly
followed with a strategic plan to chart
our company’s direction and growth
opportunities for the next decade.
In the midst of this transitional year, we
still efficiently and effectively operated
the business and ended 2010 with
another year of solid financial results.
While we saw signs that indicate
the beginning of post-recession
recovery, our continued conservative
approach to managing operating costs
and restricting capital expenditures
remained a priority to ensure we
met both customer and shareholder
expectations. Utility performance was
excellent - fueled by an extremely warm
summer and an increase in industrial
customer usage. Some of our nonutility
companies continued to face the
challenges of the economic downturn;
most notably, weak energy commodity
demand. Despite these challenges, our
nonutility portfolio contributed positively
to 2010 financial performance.
2010 Financial Results
Reported net income was $133.7 million,
or $1.65 per share, compared to 2009
results of $133.1 million, or $1.65 per
share. Vectren’s 2010 utility earnings
certainly drove company performance
with earnings of $123.9 million,
compared to $107.4 million in 2009.
A summer that was 34 percent warmer
than normal and nearly 50 percent
warmer than the prior summer helped
spur electric utility performance, and we
were pleased to see increased demand
from our larger electric customers. This
increased large customer usage was
echoed on the natural gas side of the
business and indicates some economic
recovery has begun.
Vectren’s 2010 nonutility earnings
were $9.8 million, compared to $25.8
million in 2009. While ProLiance Energy
operated at a loss for the year, the
operating businesses of Miller Pipeline,
Energy Systems Group, Vectren Fuels
and Vectren Source combined for
$25.1 million of earnings in 2010 and
generally met our expectations.
Anticipate. Act. Evolve.
As mentioned earlier, the first step in
embarking on my new role as CEO was
to partner with the Board of Directors
and our management team to create
a strategic plan that focused on long-
term growth and pinpointed the shift we
must make to ensure we thrive in this
rapidly evolving energy industry. Key to
keeping pace is being able to anticipate
changes, readily adapt to and, in some
cases, lead this evolution.
The environment is not the same as it
was 10 years ago when Vectren was
formed.
• This is a time of economic distress,
and our customers need help
managing energy costs and focusing
on energy efficiency.
• The need for capital improvements to
replace aging energy infrastructure is
on the rise, yet the need to hold down
customer rates is paramount.
• There is more national focus on air
quality and water regulation and
potentially regulating greenhouse
gases and coal ash.
All of these factors and more set the
tone for the initiatives in our company’s
corporate plan. Although the goals for
our company have not dramatically
changed over the years, the initiatives
needed to get there continue to
evolve. As such, I feel it’s important our
shareholders have a firm understanding
of our revised approach to sustainability
and growth.
Letter to Shareholders
Carl L. Chapman
President and CEO