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Vectren Corporation News
Vectren Corporation Reports 2007 Results
EVANSVILLE, Ind.,
Fourth quarter net income was
The final year of synfuel operations resulted in earnings of
"We had an excellent year in 2007, achieving solid growth in both our utility operations and our complementary nonutility business groups," said Niel C. Ellerbrook, Vectren's Chairman and CEO. "We continued our focus on providing customer solutions to help lower gas utility bills. Last year, we implemented Conservation Connection gas programs which have helped customers achieve more than
"Looking forward to 2008 and beyond, we expect earnings growth to continue as our utility business will benefit from rate relief implemented in
Summary Results — Utility earnings increased $15.1 million, or $0.19 per share, during the year, due primarily to the base rate increases in the Vectren South gas and electric service territories, the combined impact of increased residential and commercial usage and lost margin recovery, favorable weather, and increased wholesale power marketing margins offset somewhat by higher operating costs including depreciation and a lower effective tax rate in 2006. Of the annual increase, $2.5 million occurred in the fourth quarter and was driven primarily by the base rate increases and higher earnings from wholesale power marketing. — Primary nonutility group results increased $9.2 million, or $0.12 per share. The increase was primarily attributable to higher Miller Pipeline (Miller) earnings and the unfavorable impact of the ProLiance litigation settlement recorded in the fourth quarter of 2006. The increased contribution from Miller of $3.8 million is due largely to more large gas construction projects, pricing increases, and Vectren's 100 percent ownership of Miller in 2007. Earnings from Energy Systems Group and retail gas marketing operations were also favorable year over year. Operating earnings from ProLiance were down year over year by $2.0 million as the favorable impact of their increased storage capacity was more than offset by lower volatility in the wholesale natural gas markets. Coal mining earnings were $2.0 million in 2007 compared to $5.0 million in 2006 due to compliance with new Mine Safety and Health Administration (MSHA) seal and safety guidelines and the associated lost production and higher sulfur content from coal mined under a revised mining plan. Nonutility group earnings for the quarter were nearly flat, excluding the litigation settlement charge recorded in 2006.
Dividend Increased 48th consecutive year
In
2008 Earnings Guidance
The company continues to expect 2008 earnings in the range of
These earnings expectations are based on normal weather in the company's electric and Ohio service territories throughout 2008 and the following year and slightly lower than historic volatility in the wholesale natural gas markets affecting ProLiance. However, changes in these events or other circumstances the company cannot anticipate could materially impact earnings, and could result in earnings for 2008 and the following years significantly above or below this guidance. These targeted ranges are subject to such factors discussed below under "Forward-Looking Statements."
Vectren South Electric Base Rate Order Received
On
Vectren South Gas Base Rate Order Received
On
Vectren North Gas Base Rate Settlement Agreement Reached
On
If the IURC approves the settlement agreement, the company will have in place for its North gas territory weather normalization, a conservation and lost margin recovery tariff, tracking of gas cost expense related to bad debts and unaccounted for gas through the existing gas cost adjustment mechanism, and tracking of pipeline integrity expense. A hearing on the settlement before the IURC was held
Vectren Energy Delivery of Ohio Files for Increase in Base Rates with the Public Utilities Commission of Ohio (PUCO)
In
In addition, the company is seeking extension of the decoupling mechanisms currently in place to encourage customer conservation and is also seeking approval of expanded conservation-oriented programs, such as rebate offerings on high-efficiency natural gas appliances for existing and new home construction, to help customers lower their natural gas bills. The company is also seeking approval of a multi-year bare steel and cast iron capital replacement program.
The company anticipates an order from the PUCO in late 2008.
Conservation Programs Enter Second Year
In
The company's Conservation Connection public education initiative in Indiana involves extensive customer education, including rebates and online energy audit and bill analysis tools, to proactively help customers use less natural gas. Since inception of the programs, nearly
Embedded in the pending Ohio rate case are tools and programs to mirror those underway in Indiana.
Utility Group Discussion
The Utility Group's 2007 earnings for the year ended
In the company's electric and Ohio natural gas service territories that are not protected by weather normalization mechanisms, management estimates an insignificant impact on margin from weather during the fourth quarter of 2007 compared to normal and
Gas Utility Margin
For the quarter and year ended
Electric Utility Margin
Retail & Firm Wholesale Margin
Electric retail and firm wholesale utility margins were
Margin from Wholesale Power Marketing
Wholesale power marketing margins were
Other Operating
For the year ended
Other operating expenses were
Depreciation & Amortization
Depreciation expense was
Taxes Other Than Income Taxes
Taxes other than income taxes were
Utility Group Other-net
Other-net reflects income of
Utility Group Interest Expense
Interest expense was
Utility Group Income Taxes
In 2007, Federal and state income taxes were
Nonutility Group Discussion
All amounts following this section are after tax. Results reported by business group are net of nonutility group corporate expense.
The company's primary nonutility operations contributed earnings of
Energy Marketing and Services
Energy Marketing and Services is comprised of the company's wholesale and retail gas marketing businesses. Net income generated by Energy Marketing and Services for the year ended
ProLiance provided the primary earnings contribution, which totaled
Vectren Source earned
Coal Mining Operations
Coal Mining operations mine and sell coal to the company's utility operations and to third parties through its wholly owned subsidiary Vectren Fuels, Inc. (Fuels).
Coal Mining operations earned
Earnings in 2008 from Coal Mining operations is expected to increase dramatically due to price increases of 4 to 5 percent, the sale of inventory at these higher prices, and the return to full production at Prosperity mine. While Coal Mining expects an increase in safety inspections in 2008 due to the Miner Act, the company is proactively taking steps to mitigate the production impact by implementing process improvements which will increase overall productivity. Finally, construction is going well at the new underground mines and the box-cut is expected to be started in February with production beginning in early 2009.
Energy Infrastructure Services
Energy Infrastructure Services provides underground construction and repair to utility infrastructure through Miller Pipeline Corporation (Miller) and energy performance contracting operations through Energy Systems Group (ESG). Energy Infrastructure's operations contributed earnings of
Miller's 2007 earnings were
ESG's 2007 earnings were
Synfuel-Related Results and Vectren Foundation Contribution
In 2007, the last year of synfuel operations, synfuel-related results were earnings of
Please SEE ATTACHED unaudited schedules for additional financial information
Live Webcast on
Vectren's financial analyst call will be at
About Vectren
Vectren Corporation is an energy holding company headquartered in Evansville, Indiana. Vectren's energy delivery subsidiaries provide gas and/or electricity to over one million customers in adjoining service territories that cover nearly two-thirds of Indiana and west central Ohio. Vectren's nonutility subsidiaries and affiliates currently offer energy- related products and services to customers throughout the Midwest and Southeast. These include gas marketing and related services; coal production and sales and energy infrastructure services. To learn more about Vectren, visit www.vectren.com.
Forward-Looking Statements
All statements other than statements of historical fact included in this news release are forward-looking statements made in good faith by the company and are intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995. Such statements are based on management's beliefs, as well as assumptions made by and information currently available to management and include such words as "believe", "anticipate", "endeavor", "estimate", "expect", "objective", "projection", "forecast", "goal", and similar expressions intended to identify forward- looking statements. Vectren cautions readers that the assumptions forming the basis for forward-looking statements include many factors that are beyond Vectren's ability to control or estimate precisely and actual results could differ materially from those contained in this document.
In addition to any assumptions and other factors referred to specifically in connection with such forward-looking statements, factors that could cause the company's actual results to differ materially from those contemplated in any forward-looking statements include, but are not limited to, factors affecting utility operations such as unusual weather conditions; catastrophic weather-related damage; unusual maintenance or repairs; unanticipated changes to fossil fuel costs; unanticipated changes to gas supply costs, or availability due to higher demand, shortages, transportation problems or other developments; environmental or pipeline incidents; transmission or distribution incidents; unanticipated changes to electric energy supply costs, or availability due to demand, shortages, transmission problems or other developments; or electric transmission or gas pipeline system constraints; increased competition in the energy environment including effects of industry restructuring and unbundling; regulatory factors such as unanticipated changes in rate-setting policies or procedures, recovery of investments and costs made under traditional regulation, and the frequency and timing of rate increases; financial, regulatory or accounting principles or policies imposed by the Financial Accounting Standards Board; the Securities and Exchange Commission; the Federal Energy Regulatory Commission; state public utility commissions; state entities which regulate electric and natural gas transmission and distribution, natural gas gathering and processing, electric power supply; and similar entities with regulatory oversight; economic conditions including the effects of an economic downturn, inflation rates, commodity prices, and monetary fluctuations; increased natural gas commodity prices and the potential impact on customer consumption, uncollectible accounts expense, unaccounted for gas and interest expense; changing market conditions and a variety of other factors associated with physical energy and financial trading activities including, but not limited to, price, basis, credit, liquidity, volatility, capacity, interest rate, and warranty risks; the performance of projects undertaken by the company's nonutility businesses and the success of efforts to invest in and develop new opportunities, including but not limited to, the company's coal mining, gas marketing, and energy infrastructure strategies; direct or indirect effects on the company's business, financial condition, liquidity and results of operations resulting from changes in credit ratings, changes in interest rates, and/or changes in market perceptions of the utility industry and other energy-related industries; employee or contractor workforce factors including changes in key executives, collective bargaining agreements with union employees, aging workforce issues, or work stoppages; legal and regulatory delays and other obstacles associated with mergers, acquisitions and investments in joint ventures; costs, fines, penalties and other effects of legal and administrative proceedings, settlements, investigations, claims, including, but not limited to, such matters involving inadvertent violations of state and federal laws; changes in federal, state or local legislative requirements, such as changes in tax laws or rates, environmental laws, including laws governing greenhouse gases, and other regulations.
More detailed information about these factors is set forth in Vectren's filings with the Securities and Exchange Commission, including Vectren's 2006 annual report on Form 10-K filed on
VECTREN CORPORATION AND SUBSIDIARY COMPANIES CONSOLIDATED STATEMENTS OF INCOME (Millions, except per share amounts) (Unaudited) Three Months Twelve Months Ended December 31 Ended December 31 2007 2006 2007 2006 OPERATING REVENUES: Gas utility $379.4 $383.9 $1,269.4 $1,232.5 Electric utility 126.3 97.8 487.9 422.2 Nonutility revenues 139.1 127.4 524.6 386.9 Total operating revenues 644.8 609.1 2,281.9 2,041.6 OPERATING EXPENSES: Cost of gas sold 255.2 264.1 847.2 841.5 Cost of fuel and purchased power 45.3 35.7 174.8 151.5 Cost of nonutility revenues 77.5 73.9 287.7 248.7 Other operating 122.5 98.9 456.9 341.8 Depreciation and amortization 45.1 44.8 184.8 172.3 Taxes other than income taxes 19.1 19.6 70.0 65.3 Total operating expenses 564.7 537.0 2,021.4 1,821.1 OPERATING INCOME 80.1 72.1 260.5 220.5 OTHER INCOME: Equity in earnings of unconsolidated affiliates 4.2 2.3 22.9 17.0 Other - net 13.7 1.8 36.8 (2.7) Total other income 17.9 4.1 59.7 14.3 INTEREST EXPENSE 26.9 25.7 101.0 95.6 INCOME BEFORE INCOME TAXES 71.1 50.5 219.2 139.2 INCOME TAXES 31.1 15.5 76.0 30.3 MINORITY INTEREST & PREFERRED DIVIDEND REQUIREMENT OF SUBSIDIARIES 0.1 0.1 0.1 0.1 NET INCOME $39.9 $34.9 $143.1 $108.8 AVERAGE COMMON SHARES OUTSTANDING 75.9 75.7 75.9 75.7 DILUTED COMMON SHARES OUTSTANDING 76.7 76.1 76.6 76.2 EARNINGS PER SHARE OF COMMON STOCK BASIC $0.53 $0.46 $1.89 $1.44 DILUTED $0.52 $0.46 $1.87 $1.43 VECTREN UTILITY HOLDINGS AND SUBSIDIARY COMPANIES CONSOLIDATED STATEMENTS OF INCOME (Millions) (Unaudited) Three Months Twelve Months Ended December 31 Ended December 31 2007 2006 2007 2006 OPERATING REVENUES: Gas utility $379.4 $383.9 $1,269.4 $1,232.5 Electric utility 126.3 97.8 487.9 422.2 Other 0.4 0.4 1.7 1.8 Total operating revenues 506.1 482.1 1,759.0 1,656.5 OPERATING EXPENSES: Cost of gas sold 255.2 264.1 847.2 841.5 Cost of fuel and purchased power 45.3 35.7 174.8 151.5 Other operating 67.7 56.2 266.1 239.0 Depreciation and amortization 39.0 38.5 158.4 151.3 Taxes other than income taxes 18.5 19.3 68.1 64.2 Total operating expenses 425.7 413.8 1,514.6 1,447.5 OPERATING INCOME 80.4 68.3 244.4 209.0 OTHER INCOME - NET 3.2 2.8 9.4 7.6 INTEREST EXPENSE 21.8 20.1 80.6 77.5 INCOME BEFORE INCOME TAXES 61.8 51.0 173.2 139.1 INCOME TAXES 24.9 16.6 66.7 47.7 NET INCOME $36.9 $34.4 $106.5 $91.4 VECTREN CORPORATION AND SUBSIDIARY COMPANIES CONSOLIDATED BALANCE SHEETS (Millions - Unaudited) December 31, December 31, 2007 2006 ASSETS Current Assets Cash & cash equivalents $20.6 $32.8 Accounts receivable - less reserves of $3.7 & $3.3, respectively 189.4 198.6 Accrued unbilled revenues 168.2 146.5 Inventories 160.9 163.5 Recoverable fuel & natural gas costs - 1.8 Prepayments & other current assets 160.5 172.7 Total current assets 699.6 715.9 Utility Plant Original cost 4,062.9 3,820.2 Less: accumulated depreciation & amortization 1,523.2 1,434.7 Net utility plant 2,539.7 2,385.5 Investments in unconsolidated affiliates 208.8 181.0 Other investments 77.0 74.5 Nonutility property - net 320.3 294.4 Goodwill - net 238.0 237.8 Regulatory assets 175.3 163.5 Other assets 37.7 39.0 TOTAL ASSETS $4,296.4 $4,091.6 LIABILITIES & SHAREHOLDERS' EQUITY Current Liabilities Accounts payable $187.4 $180.0 Accounts payable to affiliated companies 83.7 89.9 Refundable fuel & natural gas costs 27.2 35.3 Accrued liabilities 171.8 147.2 Short-term borrowings 557.0 464.8 Current maturities of long-term debt 0.3 24.2 Long-term debt subject to tender - 20.0 Total current liabilities 1,027.4 961.4 Long-term Debt - Net of Current Maturities & Debt Subject to Tender 1,245.4 1,208.0 Deferred Income Taxes & Other Liabilities Deferred income taxes 318.1 260.7 Regulatory liabilities 307.2 291.1 Deferred credits & other liabilities 164.2 195.8 Total deferred credits & other liabilities 789.5 747.6 Minority Interest in Subsidiary 0.4 0.4 Common Shareholders' Equity Common stock (no par value) - issued & outstanding 76.5 and 76.1 shares, respectively 532.7 525.5 Retained earnings 688.5 643.6 Accumulated other comprehensive income 12.5 5.1 Total common shareholders' equity 1,233.7 1,174.2 TOTAL LIABILITIES & SHAREHOLDERS' EQUITY $4,296.4 $4,091.6 VECTREN CORPORATION AND SUBSIDIARY COMPANIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Millions - Unaudited) Twelve Months Ended December 31 2007 2006 CASH FLOWS FROM OPERATING ACTIVITIES: Net income $143.1 $108.8 Adjustments to reconcile net income to cash from operating activities: Depreciation & amortization 184.8 172.3 Deferred income taxes & investment tax credits 27.0 1.4 Equity in earnings of unconsolidated affiliates (22.9) (17.0) Provision for uncollectible accounts 16.6 15.3 Expense portion of pension & postretirement periodic benefit cost 9.8 10.7 Other non-cash charges - net 4.8 11.4 Changes in working capital accounts: Accounts receivable & accrued unbilled revenue (29.1) 108.9 Inventories 2.6 (17.6) Recoverable/refundable fuel & natural gas costs (6.3) 41.3 Prepayments & other current assets (3.7) (21.2) Accounts payable, including to affiliated companies 4.9 (71.6) Accrued liabilities 4.6 (23.2) Unconsolidated affiliate dividends 20.8 35.8 Changes in noncurrent assets (21.4) (25.8) Changes in noncurrent liabilities (37.5) (19.3) Net cash flows from operating activities 298.1 310.2 CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from: Long-term debt 16.4 92.8 Stock option exercises 5.2 - Requirements for: Dividends on common stock (96.4) (93.1) Retirement of long-term debt (23.9) (124.4) Other financing activities (0.8) (0.6) Net change in short-term borrowings 92.2 164.9 Net cash flows from financing activities (7.3) 39.6 CASH FLOWS FROM INVESTING ACTIVITIES: Proceeds from: Unconsolidated affiliate distributions 12.7 2.0 Other collections 38.0 3.4 Requirements for: Capital expenditures, excluding AFUDC equity (334.5) (281.4) Unconsolidated affiliate investments (17.5) (16.7) Other investments (1.7) (44.7) Net cash flows from investing activities (303.0) (337.4) Net change in cash & cash equivalents (12.2) 12.4 Cash & cash equivalents at beginning of period 32.8 20.4 Cash & cash equivalents at end of period $20.6 $32.8 VECTREN CORPORATION AND SUBSIDIARY COMPANIES HIGHLIGHTS (millions, except per share amounts) (Unaudited) Three Months Twelve Months Ended December 31 Ended December 31 2007 2006 2007 2006 REPORTED EARNINGS: Utility Group $36.9 $34.4 $106.5 $91.4 Non-utility Group Energy Marketing and Services 6.7 1.9 22.3 14.9 Coal Mining (0.7) 0.7 2.0 5.0 Energy Infrastructure Services 2.8 1.4 9.4 4.6 Other Businesses 0.1 (1.2) 0.3 (1.1) Total Non-utility Operations 8.9 2.8 34.0 23.4 Corporate and Other (0.6) (0.7) (0.4) (0.7) Sub-Total Operations 45.2 36.5 140.1 114.1 Synfuels-related (5.3) (1.6) 3.0 (5.3) Vectren Consolidated $39.9 $34.9 $143.1 $108.8 VECTREN CORPORATION AND SUBSIDIARY COMPANIES SELECTED GAS DISTRIBUTION OPERATING STATISTICS (Unaudited) Three Months Twelve Months Ended December 31 Ended December 31 2007 2006 2007 2006 GAS OPERATING REVENUES (Millions): Residential $259.9 $258.4 $851.1 $813.6 Commercial 99.0 103.3 339.7 339.7 Industrial 18.0 20.0 65.5 67.1 Miscellaneous Revenue 2.5 2.2 13.1 12.1 $379.4 $383.9 $1,269.4 $1,232.5 GAS MARGIN (Millions): Residential $81.7 $78.5 $272.1 $250.4 Commercial 25.6 25.2 85.0 79.8 Industrial 13.4 13.8 48.3 48.0 Miscellaneous 3.5 2.3 16.8 12.8 $124.2 $119.8 $422.2 $391.0 GAS SOLD & TRANSPORTED (MMDth): Residential 23.3 23.7 75.0 67.2 Commercial 10.0 10.3 33.4 30.5 Industrial 23.7 23.7 86.2 84.9 57.0 57.7 194.6 182.6 AVERAGE GAS CUSTOMERS Residential 904,922 903,712 901,173 895,700 Commercial 84,263 84,067 83,934 83,938 Industrial 1,609 1,618 1,610 1,638 990,794 989,397 986,717 981,276 YTD WEATHER AS A PERCENT OF NORMAL: Heating Degree Days (Ohio) 91% 93% 94% 89% VECTREN CORPORATION AND SUBSIDIARY COMPANIES SELECTED ELECTRIC OPERATING STATISTICS (Unaudited) Three Months Twelve Months Ended December 31 Ended December 31 2007 2006 2007 2006 ELECTRIC OPERATING REVENUES (Millions): Residential $36.0 $28.9 $159.2 $130.6 Commercial 29.3 23.9 113.3 96.1 Industrial 34.5 31.2 139.5 128.2 Municipals 7.9 6.0 28.0 26.0 Miscellaneous Revenue 2.5 2.4 8.1 11.5 Total Retail 110.2 92.4 448.1 392.4 Net Wholesale Revenues 16.1 5.4 39.8 29.8 $126.3 $97.8 $487.9 $422.2 ELECTRIC MARGIN (Millions): Residential $26.8 $21.1 $117.5 $96.8 Commercial 20.0 16.2 77.2 66.1 Industrial 18.6 16.8 75.0 70.2 Municipals 4.7 2.7 14.0 12.8 Miscellaneous 2.4 2.4 7.8 11.2 Total Retail 72.5 59.2 291.5 257.1 Net Wholesale Margin 8.5 2.9 21.6 13.6 $81.0 $62.1 $313.1 $270.7 ELECTRICITY SOLD (GWh): Residential 340.2 321.5 1,630.5 1,468.8 Commercial 345.0 315.8 1,412.4 1,320.9 Industrial 596.1 586.5 2,538.5 2,570.4 Municipals 146.8 144.0 616.2 624.3 Miscellaneous Sales 4.8 5.7 18.9 20.1 Total Retail 1,432.9 1,373.5 6,216.5 6,004.5 Wholesale 377.2 135.2 921.3 898.3 1,810.1 1,508.7 7,137.8 6,902.8 AVERAGE ELECTRIC CUSTOMERS Residential 122,412 121,672 122,162 121,179 Commercial 18,465 18,429 18,474 18,378 Industrial 107 108 109 108 All Others 38 36 37 36 141,022 140,245 140,782 139,701 YTD WEATHER AS A PERCENT OF NORMAL: Cooling Degree Days (Indiana) 133% 95% Heating Degree Days (Indiana) 89% 94% 90% 88%
SOURCE Vectren Corporation
