Vectren 2011 Annual Report Download - page 7

our system while at the same time being mindful of the impact to customer bills.
Our nation’s emphasis on the need to address aging pipelines combined with
the surge of shale gas drilling throughout the U.S. has certainly opened a door of
opportunity for our Infrastructure Services division. In fact, the spotlight on safe,
reliable infrastructure led us to acquire Minnesota Limited, a large Midwestern
transmission pipeline construction contractor serving the natural gas and petroleum
industries, in March 2011. Minnesota Limited joined wholly owned subsidiary Miller
Pipeline (Miller) in this business division. 2011 was an outstanding year for these
companies, and the investment in Minnesota Limited is already reaping rewards. In
fact, the combined earnings of the two Infrastructure Services companies of $14.9
million compared nicely to Miller’s 2010 earnings of $3.1 million.
These two companies share a common history in beginning as family-owned and
operated companies and have built success around cultures that value employees,
quality and superior customer satisfaction. They, too, put safety as a high priority
from on-the-job employee safety to the infrastructure they install. Through the
acquisition, these businesses have gained an expanded service territory with little
customer or geographic overlap, resources to compete for larger projects and
a more diverse revenue stream within the construction markets served. The two
continue working together to find more operational efficiencies, and we’re excited
about the long-term growth opportunities that lie ahead.
We can’t conclude our safety discussion without discussing Vectren Fuels, our
coal mining subsidiary. With two underground mines in full production, Prosperity
and Oaktown 1, and a third mine targeted to open later this year, Oaktown 2, the
emphasis on employee safety naturally dominates this industry. As we continued
to ramp up operations at Oaktown 1 in 2011, we were challenged by safety
compliance, especially as our mine operators integrated a growing employee
population, some of whom are relatively new to the coal industry. By the end of the
year, we saw safety performance improve – reaching best-in-class in Indiana by
the fourth quarter of 2011, and we continue implementing initiatives and incentives
to achieve this level of safety performance consistently. At the same time, safety
statistics at our Prosperity mine remain an area of focus, especially coming off a
best-in-class performance at that mine in 2010.
On the production side, the Oaktown 1 mine helped bolster total coal mining
production to 5.1 million tons for the year and led to a year-over-year revenue
increase of $76 million. As such, earnings increased from $11.9 million in 2010
to $16.6 million in 2011. Expected coal production and sales in 2012 is 6 million
tons, with approximately 75% of that production sold. As the second Oaktown
mine begins production, we expect to hit contract employment levels of nearly 800
workers at the three mines. More so, we expect to fully realize the benefits of this
significant investment for years to come in providing Indiana coal to a number of
power plants throughout the region. At the same time, we remain cognizant that the
market price of coal will ultimately heavily influence annual results, as will activities
and changing regulations of the Mine Safety and Health Administration.
For our utility
business, 2011
proved to be the
best year on
record for job
safety.
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