Vectren 2012 Annual Report Download - page 20

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18
industries. Infrastructure Services generated approximately $664 million in gross revenues for 2012, compared to $421 million
in 2011 and $236 million in 2010. Revenues in 2012 and 2011 have increased as a result of the acquisition of Minnesota
Limited and increased demand for services provided by both Miller and Minnesota Limited.
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. ESG’s customer base is located
throughout the Midwest, Mid-Atlantic, Southern and Southwestern United States. ESG generated revenues of approximately
$118 million in 2012, compared to $162 million in 2011 and $147 million in 2010. ESG’s backlog at December 31, 2012 was $77
million, compared to $82 million at December 31, 2011.
Coal Mining
The Coal Mining group owns coal mines and sells coal to the Company’s utility operations and to other third parties through its
wholly owned subsidiary, Vectren Fuels, Inc. The Company owns three underground mines (Prosperity, Oaktown 1, and
Oaktown 2) and one reclaimed 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 operate the coal mines. Coal
mining generated approximately $236 million in revenues in 2012, compared to $286 million in 2011 and $210 million in 2010.
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 development of the second mine was substantially completed in
2012 but is not expected to begin production until demand for its coal increases. Reserves at the two mines are estimated at
about 100 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.
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. It is estimated approximately 25,000 acres of coal will be mined during the life of
both mines. Through December 31, 2012, approximately 1,425 acres of coal have been mined with approximately 23,575 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 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 Oaktown mines are separated by a sandstone channel. The coal seam thickness ranges from
4 feet to over 9 feet. The mine’s wash plant was originally sized to process 800 tons per hour and has been expanded to 1,600
tons 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 the Company’s power supply operations and other third party utilities. The total plant and development costs to date for
the Oaktown mining complex are $271 million, inclusive of advance royalty payments. The remaining unamortized plant
balance as of December 31, 2012 approximates $221 million, inclusive of $44 million in land and buildings, $174 million in mine
development and equipment, and $3 million in advance royalty payments. Reserves, absent expansion, are expected to be
completely exhausted over the next 20 years.