Vectren 2010 Annual Report Download - page 52

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50
Other Businesses
Within the Nonutility business segment, there are legacy investments involved in energy-related opportunities and services, real
estate, leveraged leases, and other ventures. As of December 31, 2010, remaining legacy investments included in the Other
Businesses portfolio total $52.7 million, of which $40.9 million are included in Other nonutility investments and $11.8 million are
included in Investments in unconsolidated affiliates. Further separation of that remaining investment by type of investment
follows: commercial real estate $19.8 million; leveraged leases $17.9 million; affordable housing projects $7.2 million;
Haddington Energy Partners $3.4 million; and other investments $4.4 million. As of December 31, 2009, investments totaled
$64.5 million.
Other Businesses losses were $7.4 million in 2010, compared to a loss of $2.5 million in 2009 and a loss of $5.9 million in 2008.
Results in 2010 reflect a $4.0 million after tax charge related to a decline in the fair value of an energy-related investment
originally made in 2004 by Haddington Energy Partners. The lower results in 2010 also reflect a first quarter $2.9 million after
tax charge related to the reduction in value of a note receivable recorded in 2002 related to a previously exited business.
Results in 2008 reflect a write-down associated with commercial real estate investments.
Haddington Energy Partnerships
The Company has an approximate 40 percent ownership interest in Haddington Energy Partners, LP (Haddington I) and
Haddington Energy Partners II, LP (Haddington II). These Haddington ventures have interests in two remaining mid-stream
energy related investments. Both Haddington ventures are investment companies accounted for using the equity method of
accounting.
During the second quarter of 2010, the Company recorded its share of the decline in fair value and also impaired a note
receivable associated with Haddington’s investment in a liquefied natural gas facility. In total, the charge was approximately
$6.5 million, of which, $6.1 million is reflected in Equity in earnings of unconsolidated affiliates and $0.4 million is reflected in
Other-net. At December 31, 2010, the Company’s remaining $3.4 million investment in the Haddington ventures is related to
payments to be received associated with the sale of a compressed air storage facility sold in 2009. The Company has no
further commitments to invest in either Haddington I or II.
2008 Commercial Real Estate Charge
The recession impacted the value of commercial real estate investments within this portfolio. During 2008, the Company
assessed its commercial real estate investments for impairment and identified the need to reduce their carrying values. The
2008 impairment charge totaled $10.0 million, $5.9 million after tax, or $0.08 per basic earnings per share. Of the $10.0 million
charge, $5.2 million is included in Other-net and $4.8 million is included in Other operating expenses. The charge impacted the
carrying values of primarily notes receivable collateralized by commercial real estate and an office building. The Company took
possession of the office building when a leveraged lease expired in 2008; the building is currently for sale.
Impact of Recently Issued Accounting Guidance
Variable Interest Entities
In June 2009, the FASB issued new accounting guidance regarding variable interest entities (VIE’s). This new guidance is
effective for annual reporting periods beginning after November 15, 2009. This guidance requires a qualitative analysis of which
holder of a variable interest controls the VIE and if that interest holder must consolidate a VIE. Additionally, it requires additional
disclosures and an ongoing reassessment of who must consolidate a VIE. The Company adopted this guidance on January 1,
2010. The adoption did not have any impact on the consolidated financial statements.
Fair Value Measurements & Disclosures
In January 2010, the FASB issued new accounting guidance on improving disclosures about fair market value. This guidance
amends prior disclosure requirements involving fair value measurements to add new requirements for disclosures about
transfers into and out of Levels 1 and 2 and separate disclosures about purchases, sales, issuances, and settlements relating to
Level 3 measurements. The guidance also clarifies existing fair value disclosures in regard to the level of disaggregation and
about inputs and valuation techniques used to measure fair value. The guidance also amends prior disclosure requirements
regarding postretirement benefit plan assets to require that disclosures be provided by classes of assets instead of major
categories of assets. This guidance is effective for the first reporting period beginning after December 15, 2009. The Company