Vectren Corporation. AGA Financial Forum May 4-6, 2008

Transcription

1 Vectren Corporation AGA Financial Forum May 4-6, 2008

2 2 Forward-Looking Statements A safe harbor for forward-looking statements is provided by the Private Securities Litigation Reform Act of 1995 (Reform Act of 1995). The Reform Act of 1995 was adopted to encourage such forward-looking statements without the threat of litigation, provided those statements are identified as forward-looking and are accompanied by meaningful cautionary statements identifying important factors that could cause the actual results to differ materially from those projected in the statement. Certain matters described in Management s Discussion and Analysis of Results of Operations and Financial Condition are forward-looking statements. Such statements are based on management s beliefs, as well as assumptions made by and information currently available to management. When used in this filing, the words believe, anticipate, endeavor, estimate, expect, objective, projection, forecast, goal and similar expressions are intended to identify forward-looking statements. 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, among others, the following: 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 transportation and storage 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 industry, including the 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 realization of synfuel income tax credits and 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 compliance with state and federal laws and interpretations of these laws. Changes in federal, state or local legislative requirements, such as changes in tax laws or rates, environmental laws, including laws governing greenhouse gases, mandates of sources of renewable energy, 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 annual report on Form 10-K filed on February 20, The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of changes in actual results, changes in assumptions, or other factors affecting such statements. Vectren Contact: Steven M. Schein, VP Investor Relations / / sschein@vectren.com

3 3 Vectren At A Glance NYSE Symbol: VVC Over 1.1 million utility customers Sensible nonutility portfolio $4.2 billion in assets $2.4 billion in revenues - $3.7 billion with ProLiance consolidated $2.1 billion market cap S&P: A- / Moody s: Baa1 Annualized dividend of $1.30 Dividends increased 48 consecutive years Utility Net Income - $113.6 million 12 months ended 3/31/08 Gas Utility Electric 51% Gas 49% Electric Utility Consolidated 35% Net Income - 35% $137.0 million 12 months ended 3/31/08 Nonutility 30% Nonutility 17% Utility 83% Percentages exclude nonrecurring nonutility items

4 4 Corporate Structure Vectren Corporation Vectren Utility Holdings, Inc. Vectren Enterprises Vectren North Indiana Gas Vectren South SIGECO - Gas Energy Marketing and Services Coal Mining Energy Infrastructure Services Other Investments Vectren South SIGECO - Electric ProLiance Energy (61%) Vectren Source Prosperity Mine Cypress Creek Mine Miller Pipeline Energy Systems Group Vectren Ohio VEDO Oaktown 1&2 Mines (under development)

5 5 Improving Results and Stabilizing Earnings Utility Strategies Promote customer conservation Consistent, stable earnings growth Net Utility Plant growth over 5% Timely rate relief/earnings stabilization Maintain strong capital structure Control O&M / Earn allowed returns Nonutility Strategies Linked to core utility business Reinvest earnings Acquire gas storage capacity Develop and market new coal reserves Expand replacement of aging infrastructure Advance energy efficiency opportunities Our Goals Increase utility earnings at an average annual rate of 3.5% to 4% Increase nonutility earnings at an average annual rate of 10+% Increase Vectren EPS at an average annual rate of 5+% Continue superior dividend record 48 consecutive years of increased dividends Provide a total return to shareholders of 9+% (EPS growth plus yield)

6 6 1 st Quarter 2008 Consolidated Results Net Income for 3 Months Ended: EPS for 3 Months Ended: Amounts in millions except per share data 3/31/2008 3/31/2007 3/31/2008 3/31/2007 Utility Operations $58.0 $50.9 $0.76 $0.67 Nonutility Group Corporate & Other (0.3) Net Income (Excluding Synfuels) $64.0 $66.7 $0.84 $0.88 Avg. Shares Outstanding NOTE: 2007 was the last year for synfuel operations - synfuel-related results generated earnings of $3.4 million, or $0.04 per share in the first quarter of Utility earnings were $58.0 million, an increase of $7.1 million, or $0.09 per share Increase primarily attributable to impacts of regulatory initiatives, including base rate increases in Indiana service territories, and increased earnings from the sale of wholesale power The increase was partially offset by higher operating costs related to increasing maintenance and reliability costs contemplated in the base rate cases Nonutility earnings were $6.3 million, a decrease of ($9.3) million, or ($0.13) per share The decrease was primarily attributable to lower ProLiance and Coal Mining earnings Operating earnings from ProLiance decreased ($7.4) million, or ($0.10) per share as a result of lower price volatility in the wholesale natural gas markets Coal Mining earnings decreased ($2.5) million or ($0.03) per share as a result of the continued impact of changing safety guidelines impacting production and costs

7 Nonutility Overview

8 8 The Right Nonutility Businesses Nonutility Business Operations Vectren Enterprises (1) Traverse City Lansing Chicago Dayton Columbus Indianapolis York Baltimore South River Energy Marketing and Services Coal Mining Energy Infrastructure Services Kansas City Ft. Worth Houston St. Louis Little Rock Evansville Nashville Birmingham Greenville Mobile Louisville Cincinnati Johnson City Atlanta Richmond Raleigh New Smyrna Beach ProLiance Energy (61%) Vectren Source Prosperity Mine Cypress Creek Mine Oaktown 1&2 Mines (under development) Miller Pipeline Energy Systems Group Offices Clearwater ProLiance Energy Miller Pipeline Energy Systems Group (1) Enterprises also has other investments in energy-related opportunities and services, real estate and leveraged leases, among other investments.

9 9 1 st Quarter 2008 Nonutility EPS Reconciliation 03/31/07 $0.21 Energy Marketing and Services (0.09) Coal Mining (0.03) Energy Infrastructure Services (0.02) Other Businesses /31/08 $0.08 Nonutility earnings were $6.3 million, or $0.08 per share, a decrease of ($0.13) per share ProLiance earnings contributed $7.8 million in 2008 compared to $15.2 million in 2007, a decrease of ($0.10) per share as the result of lower volatility in the wholesale gas markets Coal Mining incurred a loss of ($0.9) million compared to earnings of $1.6 million in 2007 as the result of lost production and increased costs, somewhat offset by increased prices Energy Infrastructure Services incurred a seasonal loss of ($3.2) million compared to a loss of ($2.0) million in The higher loss reflects a lower beginning backlog for Energy Systems Group (ESG) and timing of new orders awarded to both Miller Pipeline and ESG but not yet released Nonutility results for the second quarter are expected to reflect continued lower volatility in the wholesale gas markets

10 Energy Marketing & Services Outlook Expected Net Income from Energy Marketing to be in the range of $12.5 million to $17.5 million 1 st Qtr ProLiance results were lower due to less price volatility and asset optimization opportunities Colder weather resulted in high storage withdrawals limiting cash to NYMEX opportunities LNG shipments were less than expected lowering intra-month (short term) price volatility Financial trading influenced by oil prices versus fundamentals Gas storage is a valuable component of the natural gas value chain with strong future asset optimization opportunities Growth in the power sector will increase gas demand LNG summer deliveries expected to grow to meet rising gas demand, creating storage opportunities High prices generally result in greater volatility ProLiance has sufficient storage and transport capacity under contract to optimize 7 Bcf of new storage capacity has been added for the upcoming storage season, totaling 47 Bcf by year end Transportation assets in place to take advantage of locational arbitrages Plan to keep the storage program flexible to take advantage of market opportunities Liberty Gas Storage construction continues with Phase 1 scheduled to be available this summer

11 Coal Mining Outlook Expected Net Income from Coal Mining to be in the range of $2 million to $4 million 1 st Qtr Coal Mining results were a loss due to mining costs rising faster than revenue New MSHA roof control guidelines have added significant costs Additional MSHA mandated safety measures are being implemented Fuel costs are up by over 50% from 2007 Prosperity Mine is taking steps to increase productivity and lower unit costs One working section has been moved and another move is scheduled for the second quarter Two working sections have deployed technology to increase continuous miner efficiency, two others are scheduled for deployment this year Roof control plans have been re-engineered and are awaiting approvals Production increased ~ 55,000 tons between March and April with an additional 20,000 tons per month expected in May and future months Market prices for 2009 Illinois Basin coal deliveries have significantly increased Work continues on the new Oaktown underground mining complex with first production scheduled for late Q Oaktown will add ~ 1.5 million tons in 2009 and ramp up to ~ 5 million tons by 2011 Less than 20% of Vectren s 2009 planned production is priced with negotiations on-going

12 Energy Infrastructure Services Outlook Expected Net Income from Energy Infrastructure Services to be in the range of $9 million to $11 million Miller Pipeline Offers gas pipeline/wastewater construction and repair services One of the largest gas distribution pipeline contractors in the United States Record 2007 earnings of $6.1 million Gas distribution and pipeline integrity programs and resulting bare steel/cast iron replacement will fuel growth over next several years Energy Systems Group (ESG) Offers performance-based and renewable energy contracting services Development of energy efficiency facility improvements that pay for themselves from energy/operational savings Record 2007 earnings of $4.0 million State and federal Renewable Portfolio Standards (RPS) and increased focus on conservation by the public sector will fuel growth over the next several years

13 Utility Overview

14 14 Low-risk Platform Positioned For Growth Vectren Utility Service Areas Vectren Utility Holdings North (Indiana Gas) South (SIGECO) Ohio (VEDO) Gas Gas Gas Electric North 569,000 gas customers South 141,000 electric customers 112,000 gas customers Ohio 319,000 gas customers

15 15 1 st Quarter 2008 Utility EPS Reconciliation 03/31/07 $0.67 Weather - Ohio & Electric 0.01 Net Margin resulting from regulatory strategies 0.08 Wholesale Power Marketing 0.02 Interest (0.01) Income taxes (0.01) 03/31/08 $ % of Vectren s gas margins are weather normalized Ohio weather was 3% colder than the prior year quarter and increased margins an estimated $1.2 million, or $0.01 per share Net margin increased $0.08 per share as the result of the South electric and gas cases implemented in August 2007, the North gas case implemented in February 2008 and lost margin recovery, net of cost increases included in the rate cases Wholesale Power Marketing margins increased $2.0 million reflecting greater volumes available to be sold off system due to the expiration of firm wholesale municipal contracts and higher prices O & M increased $6.8 million which included an increase of $2.1 million in pass through costs recovered in O & M and rate case-related spending and amortization of $5.0 million Utility results for the second quarter are expected to reflect the continued ramp up of increased maintenance and reliability costs contemplated in the base rate cases

16 16 Regulatory Update $ in millions Annual Return Ratemaking Rate Order Revenue Rate on Equity of Base Rate Case Date Increase Base Equity Ratio Return Vectren South Gas 8/1/2007 $7.7 $ % 47% 7.20% Vectren South Electric 8/15/2007 $60.8 $1, % 47% 7.32% Vectren North Gas 2/13/2008 $26.9 $ % 49% 7.80% Vectren Ohio Gas Pending $27.3 $ % 52% 9.36% Settlement agreements reached on last 3 rate cases Vectren Ohio gas order expected late 2008 New & expanded reliability & maintenance programs supported by the regulatory process Aging workforce, safety and training Proactive maintenance and inspection programs, including line clearance Turbine and scrubber maintenance PUCO approved to begin steps to exit merchant function in Ohio

17 17 Rate Design & Recovery Mechanisms Gas Electric South North Ohio South Environmental CWIP Recovery Under SB 29 Recovery of MISO Transmission Investments Gas Cost and Fuel Cost Recovery Lost Margin Recovery Mechanisms (Decoupling) Normal Temperature Adjustment (NTA) (1) Bad Debt Expense - tracked Bad Debts Related to Gas Costs - tracked Unaccounted for Gas - tracked Recovery of Bare Steel/Cast Iron Replacement Costs (1) (1) Ohio rate request includes weather protection and a bare steel/cast iron tracking mechanism. Favorable regulatory treatment for major investments Timely recovery of environmental expenditures Transmission investments approved by MISO related to Regional Expansion Criteria and Benefit Process (RECB) expected to be recovered at FERC approved rates tracked timely Bare Steel/Cast Iron multi-year replacement programs South and North Gas - Accrual for AFUDC and deferral of depreciation expense post in service Stability in earnings Indiana residential and commercial gas margins weather protected All gas territories residential and commercial gas margins protected from lost margins due to conservation Mitigated impact of volatile gas markets with bad debts and unaccounted for gas cost recovery mechanisms

18 18 Growing Net Utility Plant $400 Net Utility Plant 5.6% 3-yr CAGR $3,000 Current Rate Base ($ in millions) Cap Ex & Depr - $mm $350 $300 $250 $200 $150 $100 $2,500 $2,000 $1,500 $1,000 Net Utility Plant - $mm South Electric $1,044 North Gas 797 Ohio Gas 233 South Gas 122 VUHI Net Plant Shared 163 $2,359 $50 $0 $500 $ Cap Ex Depreciation Net Utility Plant Expected capital spending permits appropriate reinvestment of earnings and will continue to drive earnings growth

19 Summary

20 20 Liquidity and Credit Ratings As of Mar. 31, 2008 Vectren Credit Facilities Utility - $520 million ($384 million available) Nonutility - $260 million ($91 million available) ProLiance Stand-Alone Credit Facility Strong Credit Ratings VUHI S&P Moody s Unsecured Debt A- Baa1 Commercial Paper A2 P2 Available at peak - $400 million Debt Transactions - March 2008 $125 million, 6.25% 31-year senior unsecured debt issued $103 million of tax-exempt auction rate, long-term debt tendered $62 million remarketed - remaining $41 million to be remarketed at a later date Equity Forward 4.6 million shares sold in Feb. $28.33 Sold equity to permanently finance capital invested in Vectren South gas and electric utility Equity issuance supports credit ratings and regulatory initiatives Receipt of approximately $125 million in net proceeds expected mid 2008

21 21 Consistent Dividend Growth Dividends Paid $1.40 $1.20 $1.07 $ Year CAGR of 3.5% $1.19 $1.15 $1.23 $1.27 $1.00 $0.80 $ consecutive years with increased dividends 3.2% increase payable Dec. 3, 2007 Current quarterly dividend - $0.325 (Annualized - $1.30) Sustainable EPS growth Target ~ 65% payout ratio over time

22 Earnings Guidance December April Earnings Per Share 2008 Guidance 2008 Guidance Utility $ 1.35 to $ 1.45 $ 1.46 to $ 1.54 Nonutility 0.52 to to 0.42 Corporate & Other (0.02) to (0.02) (0.02) to (0.01) Vectren $ 1.85 to $ 2.05 $ 1.75 to $ 1.95 December April Nonutility Net Income (in millions) 2008 Guidance 2008 Guidance Energy Marketing and Services $ 26.0 to $ 30.0 $ 12.5 to $ 17.5 Coal Mining 6.0 to to 4.0 Energy Infrastructure Services 9.0 to to 11.0 Primary Businesses Net Income 41.0 to to 32.5 Other Businesses to 1.0 Nonutility Net Income (1) $ 41.0 to $ 49.0 $ 24.5 to $ 33.5 Nonutility EPS contribution $ 0.52 to $ 0.62 $ 0.31 to $ 0.42 (1) Includes holding company allocations Consolidated earnings are expected to be in the range of $1.75 to $1.95, a decrease of ($0.10) per share Utility earnings expected to be in the range of $1.46 to $1.54, an increase of ~ $0.10 per share Nonutility earnings expected to be in the range of $0.31 to $0.42, a decrease of ~ ($0.20) per share Second quarter 2008 Utility results are expected to be similar to 2007 and expected second quarter 2008 Nonutility results are expected to be lower, reflecting less income contribution from ProLiance

23 23 Investment Highlights High Quality, Stable Utility Earnings New rates and regulatory initiatives are the key drivers for increased utility earnings South electric and gas rates were implemented in August 2007 New North gas rates were implemented in February 2008 Certain operating costs including revenue & usage taxes recovered dollar for dollar in margin Lost margin recovery (decoupling tariff) and other trackers continue to stabilize utility earnings PUCO approved exit of merchant function in Ohio - lowering risk to the utility Utility earnings expected to contribute over 80% of consolidated earnings in 2008 Sensible nonutility portfolio with continuing opportunities Strong balance sheet with available liquidity Superior record of dividend growth 48 consecutive years of increased dividends Attractive dividend yield

24 Appendix

25 Appendix Stabilizing Gas Margin Industrial 5% Total Gas Margin 12 months ended 12/31/07 Residential and Commercial Gas Margin Protection Normal Temperature Adjustment Commercial 27% Residential 68% 26% 74% Weather Sensitive - Ohio Protected - Indiana North & South Conservation/Decoupling Tariffs Weather protected margin includes base load consumption and fixed service charges 100% Protected - All Territories 25

26 26 Appendix Competitive Power Generation Facilities Generation Portfolio 5 Coal-fired base units 1,000 MW Burn 3+ million tons of coal annually Affiliate agreements in place for 90% of coal needs 6 Gas-fired peak-use turbines 295 MW Purchased capacity contract of 100 MW through 2009 Requested IURC authority to build a 100 MW gasfired turbine peaking unit to be in service by 2010 IURC approved purchase of 30 MW of wind energy to be in service June 2008 Burning Indiana coal to generate low-cost, environment friendly power $307 million of emissions-control equipment in service and another $102 million project under construction By coal-fired plants will be 100% scrubbed for sulfur dioxide (SO2), 90% controlled for nitrogen oxide (NOx) and mercury emissions will be reduced to meet the CAMR mercury reduction standards described in the original 2005 emissions reduction regulations. Wholesale Power Marketing Functions within the regulated electric utility operation Markets surplus power from generating units primarily through MISO 50/50 sharing of margins above or below $10.5 million WPM Margins off-system sales $16.9 million

27 27 Appendix VUHI Capital Expenditures Forecast 3-Yr Total Amounts are in millions South Electric $131 $181 $152 $159 $492 South Gas North Gas Ohio Gas VUHI Shared Assets VUHI Consolidated $299 $306 $275 $289 $870 Major Expenditures New Electric Transmission $42 $42 $29 $62 $133 Bare Steel/Cast Iron MW Gas Peaker Environmental yr CapEx of nearly $900 million or ~ 40% of current net utility plant Net utility plant 5.6% 3-yr CAGR SB-29 recovery for environmental ~ 50% of new transmission expenditures expected to be recovered timely at FERC approved rates of 12.38% Bare Steel/Cast Iron treatment included in Indiana North and South orders

28 28 Appendix ProLiance Energy Storage & Transportation Optimization ~80% of earnings stream from owned and leased storage capacity Arbitrage opportunity impacted by price spread values, price volatility, physical storage capabilities and available storage and transportation capacity Gas Marketing Bundled gas services, including base load, peaking sales, risk management and ancillary services Retail services to nearly 1,400 commercial and industrial customers Bcf Year-end Storage Capacity 4 Year CAGR of 17% Wholesale services to utilities, municipals, power generators and other marketers (members gas supply agreements through 2011) Excellent reputation for customer service rated 4 th out of 31 marketers in 2007 MastioGale Customer Value Index Major Pipeline Access Midstream Investments Two intrastate pipelines (Ohio Valley Hub & Heartland Gas Pipeline) Three storage fields (White River, Lee 8 & Liberty, including the planned expansion) Successful marketer established in 1995 JV 61% owned by VVC governance 50/ employees - based in Indianapolis, IN ANR Columbia Gas Columbia Gulf Midwestern Gas Panhandle Eastern Southern Natural Operations in 17 states & access to 24 interstate pipelines Balanced book approach - VaR capped at $2.5 million Standalone $300 million credit facility + $100 million surge Tennessee Gas Texas Gas Texas Eastern Trunkline Gas

29 29 Appendix ProLiance Energy Liberty Storage Investment Partnership 25% and 75% Liberty Gas Storage Capital investment of $200 million Expected to be operational 2 nd quarter 2008 Total leased storage capacity of 17 Bcf by end of 2008 Over 80% contracted for first three years ProLiance has contracted for 5 Bcf Expected 12-13% after-tax IRR on investment and ProLiance storage lease Liberty expansion in the planning stage Expected to be in service in 2010 Total leased storage capacity expanded by 10 to 12 Bcf New Kinder Liberty Expansion Cameron LNG BCF/day Existing/Under Construction Louisiana Pipeline New Creole Trail Pipeline Creole Trail LNG

30 30 Appendix Coal Mining Tons (mm) Annual Tons ~ 3 million tons supplied annually to Vectren s generating plants Affiliate agreements in place through % 2008 coal 4-5% over 2007 prices Regulatory support for Indiana coal generation Mined Sold to VVC Prosperity Mine underground mine ~33 million tons of reserves mid-sulfur 3.5 lbs SO2 ~3 million tons mined per year Cypress Creek Mine surface ~1 million tons of reserves high-sulfur 7.5 lbs SO2 ~1.3 million tons mined per year Depleted mid 2009 Oaktown Mines #1 & #2 underground ~84 million tons of reserves high-sulfur 6.0 lbs SO2 Ground breaking in Dec ~5 million tons projected to be mined annually when fully operational Incremental 4 million tons by 2011 to support the growing demand for Illinois Basin coal

31 31 Appendix Coal Mining Oaktown Mines Oaktown #2 Wabash River Hutsonville Merom (S) Newton (S) Oaktown Edwardsport (PS) Vincennes Washington Petersburg (S) Ratts Prosperity Gibson (SU) Legend Power plant (S) Scrubbed plant (SU) Scrubber under construction (PS) Planned Scrubbing/IGCC Mine site Mine Slope Indiana Southern Rail Road CSX Rail Road Cities Oaktown #1 Competitive location land acquisition complete 13 power plants within 50 miles of Prosperity and/or Oaktown 1 & 2 Adjacent to low-cost mainline rail service Brown (S) Evansville Henderson (S) Warrick (SU) Culley (S) Rockport (PS) Q Executed Option on Reserves Q Ordered Initial Equipment Q State Mining Permits Approval Q Break Ground on Oaktown #1 Q Break Ground on Oaktown #2 Q Oaktown #1 Operational Q Oaktown #2 Operational

32 32 Appendix Miller Pipeline Gas Pipeline/Waste Water Construction and Repair One of the largest gas distribution pipeline contractors in the United States Over 50 years in construction business and over 1,400 employees Major customers include Vectren, NiSource, Duke, LG&E, Alagasco and Citizens Gas Focused on Midwest, East Coast and Southeast regions Record 2007 earnings of $6.1 million Revenues have grown from $106 million in 2004 to $162 million in % 3 year CAGR Gas distribution and pipeline integrity programs and resulting bare steel/cast iron replacement will fuel growth over next several years

33 33 Appendix Energy Systems Group Performance-based and renewable energy contracting services Development of energy efficiency facility improvements that pay for themselves from energy/operational savings Increase recurring revenues by expanding federal contracts and long-term operating contracts Develop additional renewable natural gas & waste to energy projects Live Oak $25 million landfill project metro Atlanta Record 2007 earnings of $4.0 million Over 180 employees in 15 states Major customers include hospitals, universities, governments and schools (HUGS) State and federal Renewable Portfolio Standards (RPS) and increased focus on conservation by the public sector will fuel growth over the next several years

34 34 Appendix Nonutility CapEx and Investments Forecast $ in millions Energy Marketing and Services (1) $ 0.7 $ 0.9 $ 0.9 $ 0.6 Coal Mining Energy Infrastructure Services Other Businesses $ 39.4 $ $ 55.0 $ ) Does not include unconsolidated investments at ProLiance Reinvest earnings into existing operating companies Look for opportunistic acquisition opportunities Coal mining includes $125 million investment for the development of the two new underground mines ~ $100 million included in forecast

35 35 Appendix 1 st Quarter 2008 Nonutility Metrics ProLiance Energy 3/31/08 3/31/07 Projected 2008 Gross Margin $31.0 $50.1 $75.0 to $85.0 Margin from Asset Optimization 87% 81% 80% to 85% EBITDA $23.4 $43.9 $50.0 to $60.0 Vectren Net Income (1) $7.8 $15.2 $15.0 to $19.0 Firm Storage Capacity (Bcf) - End of Period $ in millions (1) Excludes holding company allocations 47 Mining Operations 3/31/08 3/31/07 Projected 2008 Revenue $38.3 $39.2 $165.0 to $175.0 Cost of Sales $39.0 $36.1 $155.0 to $165.0 DD&A $4.1 $4.1 $18.0 to $20.0 EBITDA $3.1 $6.8 $24.0 to $28.0 Net Income (1) ($0.6) $1.7 $3.0 to $5.0 Tons Produced to 4.0 Mine Yield - Prosperity 53% 57% 55% to 60% Mine Ratio - Cypress Creek 11:1 10:1 10:1 to 12:1 Avg Realized Price/Ton (w/o freight) $35.56 $31.80 $33.50 to $35.50 Cost of Sales/Ton (w/o freight) $36.18 $29.09 $31.50 to $33.50 $ in millions, except per ton (1) Excludes holding company allocations

36 36 Appendix 1 st Quarter 2008 Nonutility Metrics Miller Pipeline 3/31/08 3/31/07 Projected 2008 Net Revenue $28.3 $27.7 $175.0 to $195.0 Gross Margin as % of Revenue 2% 2% 13% to 15% EBITDA ($0.1) $0.3 $21.0 to $23.0 Net Income (1) ($1.7) ($1.7) $5.0 to $6.0 $ in millions (1) Excludes holding company allocations Energy Systems Group 3/31/08 3/31/07 Projected 2008 Revenue $16.2 $18.2 $120.0 to $130.0 Gross Margin as % of Revenue 21% 23% 23% to 25% EBITDA ($1.6) ($0.3) $9.5 to $11.5 Net Income (1) ($1.1) ($0.3) $5.0 to $6.0 Backlog $42.8 $63.3 $45.0 to $55.0 New Performance Contracts $4.5 $12.4 $100.0 to $120.0 $ in millions (1) Excludes holding company allocations