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Vectren Management Discusses Q2 2012 Results - Earnings Call Transcript

Stocks in this article: VVC

Now let me just share a few broad thoughts about Vectren's investment in Coal Mining. Our performance year-to-date, and expected loss for the year, is driven by nearly 2 million tons of lower-than-expected sales due to mild winter and low natural gas prices. While demand softness, due to the inventory build, may carry into 2013, we continue to be confident in the long-term outlook for Illinois Basin coal and believe that delays in the execution of term contracts are directly related to the temporary high coal inventory levels of current and potential customers.

At Central Appalachian, coal production continues to decline, and scrubbers continue to be installed in order to meet the EPA air quality standards. We believe our coal mines are well positioned to capture future sales when demand recovers. Market indicators suggest improving demand in 2013, with supply and demand more in balance by 2014. While I'm not able to give specific guidance for 2013, we are hopeful of greater sales and improvement beyond that in 2014. With that said, we're not satisfied with current results from our Coal Mining segment and are aggressively pursuing new contracts, including spot and export sales, in order to secure better short-term as well as long-term results. As we've previously stated, the execution of additional term contracts will allow us to give greater clarity on the timing of opening the second mine at our Oaktown, Indiana mining complex. In the meantime, we are completing the remaining development work in order to be positioned to open this to mine, and sales contracts will support the additional production. Somewhat offsetting the weakness in the coal mining operations was the continued outstanding performance of our Infrastructure Services business, which continues to exceed our expectations.

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