Vectren 2010 Annual Report Download - page 48

46
Results of Operations of the Nonutility Group
The Nonutility Group operates in four primary business areas: Infrastructure Services, Energy Services, Coal Mining, and
Energy Marketing. Infrastructure Services provides underground construction and repair. Energy Services provides
performance contracting and renewable energy services. Coal Mining mines and sells coal. Energy Marketing markets and
supplies natural gas and provides energy management services. There are also other legacy businesses that have invested in
energy-related opportunities and services, real estate, and leveraged leases, among other investments. The Nonutility Group
supports the Company’s regulated utilities pursuant to service contracts by providing natural gas supply services, coal, and
infrastructure services. Nonutility Group earnings for the years ended December 31, 2010, 2009, and 2008, follow:
(In millions, except per share amounts) 2010 2009 2008
NET INCOME 9.8$ 25.8$ 18.9$
0.12$ 0.32$ 0.24$
NET INCOME
(
LOSS
)
ATTRIBUTED TO:
Infrastructure Services 3.1$
2.4$ 5.2$
Ener
gy
Services 6.4 8.4 6.2
Coal Minin
g
11.9 13.4
(
4.6
)
Ener
gy
Marketin
g
(
4.2
)
4.1 18.0
Other Businesses
(
7.4
)
(
2.5
)
(
5.9
)
Year Ended December 31,
CONTRIBUTION TO VECTREN BASIC EPS
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 $2.4
million in 2009 and $5.2 million in 2008.
In 2010, Miller’s earnings contribution increased $0.7 million, compared to earnings generated in 2009. Even with cold weather
conditions in the first quarter of 2010 restricting construction levels, results in 2010 compared to 2009 reflect higher revenues
and man hours worked. Man hours increased approximately 4 percent in 2010 compared to both 2009 and 2008. The lower
earnings in 2009 compared to 2008 primarily results from customer cutbacks in spending as a result of the recession. In
addition, startup costs associated with new contracts also negatively impacted year over year results. Lower interest rates
partially offset the lower margins. The year ended December 31, 2008 was a record year in terms of earnings contribution from
Miller.
Utilities continue to replace their aging natural gas and wastewater infrastructure and needs for shale gas infrastructure are
becoming more prevalent. The current low interest rate environment, when coupled with the impacts of bonus depreciation
legislation and proposed regulations to accelerate the replacement of aging gas pipeline infrastructure, positions Miller for future
growth and resulting earnings.
Energy Services
Energy Services provides energy performance contracting and renewable energy services through Energy Systems Group, LLC
(ESG). Inclusive of holding company costs, Energy Services’ operations contributed earnings of $6.4 million in 2010, compared
to $8.4 million in 2009 and $6.2 million in 2008.
Over the last three years, performance contracting operations have continued to grow. At December 31, 2010, ESG’s backlog
was $118 million, a new record level, compared to $70 million at December 31, 2009 and $65 million at December 31, 2008,
reflecting substantial work for 2011 and beyond. Both 2009 and 2008 were favorably impacted by discrete renewable energy
projects. As part of ESG’s ongoing renewable energy project development strategy, results in 2009 include the sale of a 3
megawatt landfill gas facility. With IURC approval, the facility was sold to SIGECO, to further the utility’s strategy of building a
renewable energy portfolio. ESG’s earnings associated with this renewable project match the results of a similar land fill gas
project completed for a third party customer near Atlanta, Georgia in 2008.