Vectren 2009 Annual Report Download - page 4

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2 Vectren 2009
Letter To Shareholders:
A year ago, we introduced Live Smart, a new brand
promise to help our customers reduce their energy
usage and related costs, lower our own energy
consumption and increase our efforts in conservation
and sustainability. And today, it is needed more
than ever. In 2009, we remained a champion of that
philosophy in both our utility and nonutility businesses.
We launched our high-efciency natural gas appliance
rebate program in Ohio, partnered with subsidiary
Energy Systems Group (ESG) to bring online our electric
utility’s rst 100-percent-owned renewable electric-
generation project and began recycling nearly all of
our electric utility’s coal ash.
In living smart and working smart, we made the best
of a difcult year. The economic downturn had us
focused even more on scal responsibility, and we
aggressively managed operating costs and tightened
capital dollars to ensure we met both shareholder and
customer expectations. The recession dampened utility
performance with reduced industrial demand, decreased
excess power sales and lower residential load. Our
nonutility companies were also negatively impacted by
the economy. However, there were bright spots in both
our utility and nonutility operations that helped boost our
2009 nancial performance, as well as many positives
that are setting the stage for a solid 2010.
2009 Financial Results
Overall, we were pleased with our 2009 results.
Reported net income was $133.1 million, or $1.65 per
share, compared to 2008 results of $129.0 million, or
$1.65 per share. These results include an $11.9 million
after-tax charge related to an investment by ProLiance
Energy (ProLiance) in Liberty Gas Storage, LLC (Liberty).
Excluding the Liberty charge, 2009 earnings were
$145.0 million, or $1.80 per share.
Vectren’s 2009 utility earnings were $107.4 million,
compared to $111.1 million in 2008. The $3.7 million
decrease reects lower large customer usage and lower
wholesale power sales – both results of the recession –
mild cooling weather and an increase in depreciation
expense associated with rate base growth. Offsetting
these declines were increased revenues associated
with regulatory initiatives, lower operating expenses
and some return in the market values associated with
investments related to benet plans.
Vectren’s 2009 nonutility earnings, excluding the
Liberty charge, were $37.7 million, compared to $18.9
million in 2008. The improvement of $18.8 million year-
over-year primarily reects a $15.4 million increase in
earnings from our primary nonutility operations: Energy
Marketing and Services, Coal Mining and Energy
Infrastructure Services. The largest contributor to the
increase was Coal Mining operations, in which results
improved to $13.4 million, an $18.0 million increase
over the prior year, primarily from new contract pricing
effective Jan. 1, 2009. These higher revenues were
partially offset by increased costs per ton and lower
sales volumes due to the recession.
Vectren’s Utilities
Natural Gas
The backbone of our company, our utilities, began
2009 by receiving approval for a rate increase and
a straight-xed-variable rate design in Vectren’s
Ohio service territory. The approval of this rate
design, which moves more volumetric charges into
a xed monthly rate, was pivotal in launching our
customer energy efciency programs, collectively
known as Conservation Connection, to our Ohio
residential and small commercial customers in April.
The new programs ended 2009 having provided
more than 3,900 rebates and energy saving
measures to Ohio customers.
In Indiana, the natural gas Conservation Connection
initiatives continued their strong performance. Now
more than three years old, roughly 51,000 rebates
have been issued through our energy efciency
programs. Collectively, customers have saved more than
8.0 million therms, or $9.0 million, based on average
retail rates. These programs remain on track to reduce
annual demand by 6.8 million therms by the conclusion
of the fth year, which is the equivalent energy needed
to heat nearly 8,000 homes each year.