Vectren 2013 Annual Report Download - page 16

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Infrastructure Services
Infrastructure Services provides underground pipeline construction and repair to utility infrastructure through its wholly owned
subsidiaries Miller Pipeline, LLC (Miller) and Minnesota Limited, LLC (Minnesota Limited). The Company, through its wholly
owned subsidiary Vectren Infrastructure Services Company, Inc., purchased Minnesota Limited on March 31, 2011 (see Note 5
in the Company’s Consolidated Financial Statements included in Item 8). Infrastructure Services provides services to many
utilities, including the Company’s utilities, as well as other industries. Infrastructure Services generated approximately $784
million in gross revenues for 2013, compared to $664 million in 2012 and $421 million in 2011. Revenues in 2013 and 2012
have increased as a result of increased demand for services provided by both Miller and Minnesota Limited.
Backlog represents the amount of gross revenue the Company expects to realize from work to be performed in the future on
uncompleted contracts, including new contractual agreements on which work has not begun. Infrastructure Services operates
primarily under two types of contracts, blanket contracts and fixed price contracts. Using blanket contracts, customers are not
contractually committed to specific volumes or specific time frames for project completion. These contracts are typically
awarded on an annual basis. Under fixed price contracts, customers are contractually committed to a specific service to be
performed for a specific price, whether in total for a project or on a per unit basis. At December 31, 2013, Infrastructure Services
had an estimated backlog of blanket contracts of $458 million and a backlog of fixed price contracts of $77 million, for a total
backlog of $535 million. The estimated backlog at December 31, 2012 was $278 million for blanket contracts and $101 million
for fixed price contracts, for a total of $379 million.
The backlog amounts above reflect estimates of revenues to be realized under blanket contracts. Projects included in backlog
can be subject to delays or cancellation as a result of regulatory requirements, adverse weather conditions, customer
requirements, among other factors, which could cause actual revenue amounts to differ significantly from the estimates and/or
revenues to be realized in periods other than originally expected.
Energy Services
Performance-based energy contracting operations and sustainable infrastructure projects 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 developing
sustainable infrastructure 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 $91 million in 2013, compared to $118 million in 2012 and $162 million in 2011. ESG’s backlog at
December 31, 2013 was $72 million, compared to $77 million at December 31, 2012.
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 $293 million in gross revenues in 2013, compared to $236 million in 2012 and $286 million in
2011.
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 second mine began operations during 2013. Reserves at the two
mines are estimated at about 94 million tons of recoverable number-five coal at 11,200 BTU and less than 6-pound sulfur
dioxide. At 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