Ex 99.1
PRESS
RELEASE
Vectren Corporation
P.O. Box 209
Evansville, IN 47702-0209
FOR IMMEDIATE RELEASE
April 26, 2005
Vectren Corporation
Reports First Quarter 2005 Increase
Evansville, Indiana - Vectren Corporation (NYSE:VVC) today reported net income
for the three months ended March 31, 2005 of $56.1 million, or $0.74 per share,
compared to net income of $54.8 million, or $0.73 per share, for the three
months ended March 31, 2004. Weather for the quarter was 7 percent warmer than
normal and 3 percent warmer than the prior period.
Company Highlights
o Increased utility earnings during the first quarter of 2005
o Increased results from Coal Mining operations during the first quarter
of 2005
o Implemented new Vectren Ohio gas rates in April 2005
o Affirmed 2005 earnings guidance
Said Niel C. Ellerbrook, Chairman, President and CEO, "We are very pleased with
our first quarter results, despite the warmer than normal weather impacting our
heat sensitive throughput. In the last nine months we have implemented new base
rates for all three of our gas jurisdictions and continue to recover costs
associated with our power generation environmental compliance expenditures. The
nonregulated group also performed well during the quarter, especially our coal
mining group, which achieved increased production levels. We continue to be
confident in our previously disclosed 2005 earnings guidance."
2005 Earnings Guidance
The company affirmed that fiscal 2005 earnings are expected to be in the range
of $1.70 to $1.90 per share. The targeted range is subject to the factors
discussed under "Forward Looking Statements" including normal weather for the
balance of the year, stable economic conditions, and continued growth from the
company's nonregulated businesses.
Utility Group
Utility Group earnings were $48.1 million for the three months ended March 31,
2005, compared to $44.7 million in the prior year. The $3.4 million increase in
the Utility Group earnings is due to the implementation of new gas base rates in
the company's Indiana service territories, higher electric revenues associated
with recovery of pollution control investments and increased wholesale electric
margins. Gas base rate increases added margin of $7.9 million, or $4.7 million
after tax. These increases were partially offset by the impact of warmer weather
on customer usage during this high consumption quarter and increased
depreciation expense and income taxes. For the quarter ended March 31, 2005,
heating weather 7 percent warmer than normal and 3 percent warmer than the prior
year reduced first quarter 2005 margins by an estimated $4.8 million ($2.9
million after tax) and by an estimated $3.0 million ($1.7 million after tax)
when compared to the same period last year.
Gas utility margins for the three months ended March 31, 2005 were $145.8
million, an increase of $6.3 million, or 4 percent, compared to the prior year
period. The rate case orders implemented in the second half of 2004 added
revenues of $7.9 million. This increase in revenues reflects new gas rates
designed to recover the majority of the authorized increase evenly through
higher customer charges and non-weather sensitive usage rates. It is estimated
that the impact of weather decreased margin $2.6 million compared to the same
period last year and was the primary contributor to decreased throughput. The
remaining change is primarily attributable to expense recovery pursuant to Ohio
regulatory trackers.
Electric retail and firm wholesale margins were $56.5 million, an increase of
$2.0 million when compared to 2004. Margin increased $2.6 million due to the
increase in retail electric rates related to the recovery of environmental
compliance expenditures and related operating expenses. The effects of warmer
weather partially offset these increases by $0.4 million compared to the same
period last year.
Electric wholesale margin primarily results from asset optimization activities
derived from generation capacity in excess of that needed to serve native load
and firm wholesale customers. Net wholesale margins increased $2.0 million
compared to 2004 due to an increase in available capacity. The availability of
excess capacity was impacted in 2004 by scheduled outages of owned generation
related to the installation of environmental compliance equipment.
Other operating expenses decreased $0.5 million for the three months ended March
31, 2005 compared to the same period in 2004. The decrease was primarily due to
$1.1 million in lower NOx operating expenses, offset somewhat by increased costs
for scrubber chemicals, gasoline and other costs.
Depreciation expense for the three months ended March 31, 2005 increased $3.8
million compared to 2004. Installation of environmental compliance equipment
accounted for $1.4 million of the increase. In addition, the first quarter of
2004 was $1.8 million lower due to a one-time adjustment of depreciation rates
and amortization of regulatory assets.
Income taxes for three months ended March 31, 2005 increased $4.2 million,
compared to 2004, primarily attributable to higher pre-tax income.
Vectren Energy Delivery of Ohio Rate Settlement Implemented
On April 13, 2005, the Public Utilities Commission of Ohio (PUCO) approved
Vectren Energy Delivery of Ohio's (VEDO) base rate increase for its natural gas
distribution business. The PUCO's order provides for a $15.7 million increase in
VEDO's base distribution rates. As reported previously, new natural gas base
rate increases were implemented for Vectren Energy Delivery's two Indiana
service territories on July 1, 2004 and on December 1, 2004. In all three cases,
the new rates implemented were designed to help mitigate the effects of extreme
weather with a significant portion of the rate increases achieved through higher
customer charges and higher non-weather sensitive usage rates. As such, it is
expected that the allowed increases will generally be realized evenly over the
course of a year.
Nonregulated Group (all amounts following in this section are after tax)
Nonregulated Group earnings were $8.9 million for the three months ended March
31, 2005, as compared to $10.6 million in the prior year. The company's primary
nonregulated business groups, Energy Marketing and Services, Coal Mining, and
Utility Infrastructure Services contributed $9.4 million to 2005 earnings, down
slightly from the $10.0 million contributed in 2004. The slight decrease is
attributable to lower earnings from gas marketing and performance contracting
operations, partially offset by increased earnings from mining operations.
The 2004 contribution from Other Businesses reflects an after tax gain of $5.3
million recognized on the sale of an investment held by Haddington Energy
Partners which was largely offset by a $4.5 million after tax charge related to
the write down of the company's broadband investments.
Energy Marketing and Services
Energy Marketing and Services is comprised of the company's gas marketing
operations, performance contracting operations and retail gas supply operations.
Net income generated by Energy Marketing and Services for the quarter ended
March 31, 2005, was $6.0 million compared to $7.0 million in 2004. In both
periods presented, gas marketing operations, performed through ProLiance Energy,
provided the primary earnings contribution, totaling $6.4 million in 2005, a
slight decrease from the $6.9 million contributed in 2004. This decrease is
attributable to pre-verdict legal fees associated with litigation between
ProLiance and the City of Huntsville, Alabama (Huntsville Utilities). The
remaining decrease in earnings contribution is primarily attributable to the
timing of performance contracting operations. For the quarter, Vectren Source's
retail gas supply operations earned $0.8 million, compared to $0.6 million in
the prior period. Source's earnings contribution was also significantly impacted
by warmer than normal weather.
Coal Mining
The Coal Mining Group mines and sells coal to the Company's utility operations
and to other third parties through its wholly owned subsidiary Vectren Fuels,
Inc. (Fuels). The Coal Mining Group also generates IRS Code Section 29 tax
credits resulting from the production of coal-based synthetic fuels through its
8.3% ownership interest in Pace Carbon Synfuels, LP (Pace Carbon). In addition,
Fuels receives synfuel-related fees from synfuel producers unrelated to Pace
Carbon for a portion of its coal production.
Coal Mining net income for the three months ended March 31, 2005, was $4.4
million, compared to $3.6 million in 2004. Earnings from the Mining operations
were $1.3 million in 2005, compared to $0.7 million in 2004. The contribution
from Mining operations increased despite rising commodity costs, primarily due
to greater production and higher revenue per ton. Synfuel-related results for
the quarter, which include earnings from Pace Carbon and synfuel processing fees
earned by Fuels, increased $0.2 million. This increase reflects higher
production of synthetic fuel produced by Pace Carbon as the result of the
relocation of a previously underperforming plant.
Utility Infrastructure Services
Utility Infrastructure Services provides underground construction and repair to
gas, water, electric and telecommunications companies primarily through its
investment in Reliant Services, LLC (Reliant) and Reliant's 100 percent
ownership in Miller Pipeline. Reliant is a 50 percent owned strategic alliance
and is accounted for using the equity method of accounting.
For the three months ended March 31, 2005, Utility Infrastructure Services'
operated at a seasonal loss of $1.0 million, compared to a loss of $0.6 million
in 2004
Broadband and Other Businesses
Broadband invests in communication services, such as cable television,
high-speed internet, and advanced local and long distance phone services. The
Other Businesses Group includes a variety of operations and investments.
For the three months ended March 31, 2005, other businesses reported a loss of
$(0.5) million, compared to earnings of $0.6 million in 2004. The decrease is
primarily due to the net contribution in 2004 from an after tax gain of $5.3
million recognized on the sale of an investment held by Haddington Energy
Partners, which was largely offset by a $4.5 million after tax charge related to
the write down of the Company's broadband investments.
Corporate
Contributions to various community and civic organizations and corporate and
other expenses in the first quarter 2005 were $0.9 million after tax.
Please SEE ATTACHED unaudited schedules for additional financial information
Live Webcast on April 28, 2005
Vectren management will discuss first quarter 2005 earnings results and provide
an outlook for 2005 during a conference call for analysts scheduled at 2:30 p.m.
EDT (1:30 CDT), Thursday, April 28, 2005. You are invited to listen to the live,
audio only Webcast of the conference call as well as view the accompanying slide
presentation by choosing "Q1 2005 Earnings Webcast" on Vectren's website,
www.Vectren.com. Approximately two hours after the completion of the Webcast,
interested parties may also view the slide presentation and listen to the
Webcast replay at Vectren's website.
About Vectren
Vectren Corporation is an energy and applied technology 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 non-regulated 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 utility infrastructure services. To learn more about Vectren, visit
www.vectren.com.
Safe Harbor for Forward Looking Statements
This document contains forward-looking statements, which are based on
management's beliefs and assumptions that derive from information currently
known by management. Vectren wishes to caution readers that actual results could
differ materially from those contained in this document. Additional detailed
information concerning a number of factors that could cause actual results to
differ materially from the information that is provided to you is readily
available in our annual report on Form 10-K filed with the Securities and
Exchange Commission on March 2, 2005.
Investor Contact Steven M. Schein, (812) 491-4209, sschein@vectren.com
Media Contact Jeffrey W. Whiteside, (812) 491-4205, jwhiteside@vectren.com