Vectren Corporation ( VVC)

Q3 2011 Earnings Call

November 4, 2011 10:00 a.m. ET


Robert Goocher – VP, Investor Relations

Carl Chapman – President, CEO

Jerry Benkert – EVP, CFO


Steven Wang – Carlson Capitals

Andrew Philips – RGO Capital



Good morning. My name is Melinda and I’ll be your conference operator today. At this time, I would like to welcome everyone to the Vectren Corporation Third Quarter Earnings Conference Call. (Operator Instructions) Thank you. Robert Goocher, Treasurer and VP of Investor Relations, you may begin your conference.

Robert Goocher

Thank you, Operator. Good morning and thanks to all of you for joining us on the call to review our 2011 third quarter and year-to-date results. This call is being webcast, and shortly following its conclusion a replay will be available on our website at in the Investor Relations section.

This morning we released our third quarter earnings and also filed our 10-Q for the quarter. Copies of our earnings release, today’s slide presentation and the 10-Q could all be found on our website.

As further described in slide two I would like to remind you that many of the statements made on this call will be forward-looking statements. Actual results may differ materially from those discussed in this presentation.

Jerry Benkert, Executive Vice President and CFO will kick off today’s discussion by providing a few comments on Vectren’s third quarter and year-to-date results. He will then provide an update of our 2011 earnings guidance and insights into our utility results. Then, Carl Chapman, Vectren's Chairman, President and CEO, will provide his thoughts on the performance of our non-utility businesses including our recent acquisition of Minnesota Limited and then finish with a few summary remarks. Following Carl’s comments, we’ll be happy to take your questions. Also joining us on today's call is Ron Christian, Executive Vice President and Chief Legal and External Affairs Officer.

With that, I'll turn it over to Jerry.

Jerry Benkert

Thanks, Robert. I would like to welcome everyone to today's call. As always, we really appreciate you joining us. Overall, we are pleased with our 2011 year-to-date results. Looking at slides three and four, our utility operations continue to provide a solid contribution earnings leading the way year-to-date.

Our non-utility portfolio other than ProLiance also has performed very well in 2011. Highlighted by the increased earnings we are seeing year-to-date and particularly in the third quarter from infrastructure services and coal mining. ProLiance on the other hand continues to struggle on the ongoing weak natural gas market facing gas marketers. Carl will comment further on these market conditions and the significant progress that ProLiance has made to improve future performance.

I will discuss where we did stand on our 2011 earnings guidance here in a few minutes, but first I want to touch up on a few recent highlights listed on slide three.

I am pleased to report that on Wednesday our Board declared a 1.4% dividend increase bringing Vectren’s quarterly dividend to $0.35 per share or $1.40 per share annualized effective December 01, 2011. This marks the 52 nd consecutive year that annual dividends have increased. A record we are proud to maintain because of the contribution our dividend adds to total shareholder return for our investors. In addition we believe our current yield of approximately 5% remains very attractive.

On the financing front, in October, we successfully priced $100 million of utility related long term debt and interest rate at 5%. With this, later this month, we will be able to call at par $96 million of 5.95% long term debt. As you recall back in March we priced $150 million of utility long term debt at a weighted average interest rate of 5.12% and with a delayed draw feature in order to receive the proceeds at the end of this month which coincides with a $250 million 6.58 (ph) debt maturity on December 1 st.

Given the very low levels of short term debt currently outstanding supporting our utility operations we plan to refinance the remaining $100 million with short term debt. In total, the net impact of these financing actions will achieve annualized savings of nearly $9 million in 2012 and beyond, which will help our utility businesses offset rising costs expected in other areas of their operations such as depreciation and chemical cost for example.

Finally, on the state regulatory front we are pleased to receive Indiana Commission approval for extension of decoupling and energy efficiency programs for our natural gas customers through December 2015. In August we also received commission approval to implement additional electric customer and energy efficiency programs as well, as related to margin stabilization. Both actions by the Indiana Commission in the quarter demonstrate a regulatory environment that remains constructive for us.

Turning to slide five our consolidated guidance for 2011 including the results of ProLiance is nearer to a range of $1.60 to a $1.80 per share. We are lowering the top end of our range by $0.05 per share to reflect the larger expected loss at ProLiance though it was substantially offset by the higher expected contribution from our infrastructure services business.

Carl will have more to say on that topic in a few minutes, but suffice it to say that we are very pleased with the 2011 year-to-date results from infrastructure services including the positive contribution being made by Minnesota Limited that we acquired on March 31 st. We’re now projecting a $0.25 to $0.35 per share loss for ProLiance based upon the year-to-date results and the assumption that current difficult market conditions will persist for the fourth quarter.

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