Attached files
| file | filename |
|---|---|
| EX-99.2 - EXHIBIT 99.2 - INVESTOR PRES - MAR 2017 - FLS - VECTREN CORP | exhibit992-investorpresent.htm |
| 8-K - 8-K - 2017 INVESTOR PRESENTATION - MAR 2017 - VECTREN CORP | a8-kxinvestorpresentationx.htm |
February/March 2017
2016 Earnings Review & Business Outlook
Management Representatives
Vectren |IR Presentation | February 2017 2
Dave Parker
Director, Investor
Relations
Carl Chapman
Chairman, President & CEO
Susan Hardwick
Exec. Vice President & CFO
Forward-Looking Statements
All statements other than statements of historical fact 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”, “likely”, 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. Forward-looking
statements speak only as of the date on which our statement is made, and we assume no duty to
update them. More detailed information about these factors is set forth in Vectren’s filings with
the Securities and Exchange Commission, including Vectren’s 2016 annual report on Form 10-K
filed on February 23, 2017.
Vectren also uses non-GAAP measures to describe its financial results. More information can be
found in the Appendix related to the use of such measures.
Dave Parker – Director, Investor Relations
d.parker@vectren.com
812-491-4135
Vectren |IR Presentation | February 2017 3
2016 Review &
Long-Term Outlook
1.2M
Utility
Customers
Vectren Energy Delivery of Indiana– North (Gas)
Vectren Energy Delivery of Indiana– South (Gas & Electric)
Vectren Energy Delivery of Ohio (Gas)
Consolidated 2016 Results
5 Vectren |IR Presentation | February 2017
Consistent Earnings Growth Continues
In millions, except per share amounts
2016 2015 2016 2015
Utility Group 51.3$ 46.6$ 173.6$ 160.9$
Nonutility Group
Infrastructure Services (VISCO) 15.1 10.1 25.0 29.7
Energy Services (VESCO) 3.8 7.7 12.5 7.3
Other Businesses (0.2) 0.3 (0.6) (0.7)
Nonutility Group 18.7 18.1 36.9 36.3
Corporate and Other (0.4) 0.5 1.1 0.1
Earnings 69.6$ 65.2$ 211.6$ 197.3$
Utility Group 0.62$ 0.56$ 2.10$ 1.95$
Nonutility Group 0.23 0.22 0.44 0.44
Corporate and Other (0.01) 0.01 0.01 -
EPS 0.84$ 0.79$ 2.55$ 2.39$
Weighted Avg Shares Outstanding - Basic 82.9 82.7 82.8 82.7
Ended Dec 31 Ended Dec 31
3 Months 12 Months
2016 Highlights
Vectren consolidated 2016 EPS of $2.55
• Utility EPS of $2.10, up 7.7% compared to 2015
• Favorable weather impacted EPS $0.02 vs. normal
Strong utility earnings growth driven by gas infrastructure investment
programs and margin growth from large customers
Utility earned overall allowed ROE for the 5th year in a row
Filed Integrated Resource Plan (IRP) in December 2016
Record year of earnings for VESCO and VISCO Distribution
Dividend increased 5% in Nov. 2016 to $1.68/sh., annualized
• 57 consecutive years of dividend increases
$2.39
$0.15 Flat $0.01 $2.55
2015
Actual
Utility
Corp &
Other
Nonutility
2016
Actual
Vectren Consolidated EPS Vectren Utility EPS
Another Year of Consistent Earnings Growth; 2016 EPS Up 6.7%
$1.95
$2.10 $0.13 $0.02
Weather
2015
Actual
2016
Actual
Infrastr.
Investment
Vectren |IR Presentation | February 2017 6
Delivering Strong Results by Executing on our Strategies
Achievements over the past 5 years…
VVC EPS CAGR of 8% while maintaining financial discipline – steadily improving ROE
that is higher than most peers
Extended record of growing dividends to 57 years
• Accelerated dividend growth – 5.3% average annualized increase last 3 years
Maintained strong balance sheet; S&P steady at A-, Moody’s up one notch to A2 (’14)
Reduced nonutility risk by exiting volatile commodity-based businesses (‘11-’14)
$1.73
$1.94
$2.12
$2.28
$2.39
$2.55
9.8%
10.6%
11.3%
11.9% 12.0%
12.3%
2011 2012 2013* 2014* 2015 2016
* Excludes ProLiance in 2013 & Coal Mining in 2014 - years of disposition
Vectren EPS and Earned ROE
5 Year EPS
CAGR of 8%
110%
102%
98%
71%
64%
Vectren VVC Peers S&P 500 Dow
Utilities
S&P 500
Utilities
5-Yr Total Return Comparison
As of 12/31/16
5-Year Total Shareholder Return CAGR of 16% Exceeds 9-11% Target
Vectren |IR Presentation | February 2017 7
VVC 5 Year
CAGR of 16%
Disciplined Utility Growth Key To Vectren’s Success
Management has demonstrated we can successfully manage significant growth
• Utility CapEx needs have doubled to over $500M/yr.; driven by gas infrastructure investments
• IN & OH legislative and regulatory solutions allow for a high % of current CapEx recovery
• Remain highly focused on customer bill impacts
CapEx substantially funded by cash flow from operations; credit metrics remain solid
Culture of performance management and effective strategic sourcing is now
embedded and led to controllable O&M CAGR of <1%
Earned overall allowed ROE for 5 straight years
$248 $263
$351 $399
$504
10.1% 10.0% 10.2%
10.7%
11.0%
2012 2013 2014 2015 2016
Utility CapEx & Earned ROE
Regulatory Execution, Effective Capital Deployment, and
Continuous Operational Improvement Fueled Successful Growth
Achievements over the past 5 years…
Vectren |IR Presentation | February 2017 8
$1.50
$1.68 $1.72
$1.80
$1.95
$2.10
2011 2012 2013 2014 2015 2016
Utility EPS
5 Year CAGR
of 7%
$ in millions
Long-Term Targets New Previous
Consolidated EPS growth 6-8% 5-7%
Dividend growth 6-8% 5-7%
Consolidated payout ratio 60-65% 60%
Utility EPS growth 5-7% 4-6%
Vectren’s Long-Term Outlook Improves
Vectren |IR Presentation | February 2017 9
Raising EPS and Dividend Growth Targets to 6-8% to Reflect
Long-Term Utility Capital Investment Plan
Note: Long-term EPS growth of approx. $0.06-0.10/yr. for Nonutility
• $0.02-$0.03 EPS growth/yr. VESCO
• $0.04-$0.07 EPS growth/yr. VISCO
$1.73
$2.55 $2.60
$1.70
$2.20
$2.70
$3.20
$3.70
2011 2016 2017E Future
EPS
Key drivers of long-term EPS growth expectations of 6-8%:
Gas utility infrastructure investments continue to grow earnings
2017 begins ramp up of electric modernization investments; generation investments to come
Steady VISCO Distribution growth continues; Transmission recovery post-2017
VESCO growth focused on energy efficiency/security and renewables/clean energy
Continue to control costs through performance management and strategic sourcing
Vectren’s Long-Term Outlook Improves (cont.)
Vectren |IR Presentation | February 2017 10
Long Cycle of Infrastructure Spend in the U.S. will Drive
Growth Across All of Vectren’s Businesses
VVC Actual and Expected EPS Growth
Long-Term EPS
CAGR: 6-8%
2011-2026 CAGR: 6-8%
2011-2017E
CAGR: 7%
Increased Utility CapEx Drives Earnings
Vectren |IR Presentation | February 2017 11
Accelerated Rate Base Growth Enhances Long- and
Short-Term EPS Performance
$0
$2,000
$4,000
$6,000
$8,000
2011 2016 2021E 2026E
Utility Shared Electric Gas
2021-’26 CAGR: ~7.5%
(Gas & Electric)
$ in millions
2016-’21 CAGR: ~6.5%
(Mostly Gas) 2011-’16 CAGR: ~5%
(Mostly Gas)
Overall 10-Yr CAGR: ~7%
Gas: ~8% Electric: ~5.5%
Growth targets supporting Vectren’s 6-8% EPS CAGR:
Robust utility growth of 5-7% including equity issuances to help finance planned
capital investment
• Forecasting a rate base CAGR of ~7% the next 10 years
EPS growth expectation of $0.06-0.10/yr. for Nonutility
• $0.04-0.07/yr. for VISCO and $0.02-0.03/yr. for VESCO
Rate Base Growth Accelerates*
* Reflects electric infrastructure plan just filed and IRP
filing currently under review
2017 EPS Guidance 2016 Actual
Utility $2.10 - $2.15 $2.10
Nonutility/Corp $0.45 - $0.50 $0.45
Consolidated $2.55 - $2.65 $2.55
2017 Guidance
Vectren |IR Presentation | February 2017 12
Initiating 2017 Consolidated EPS Guidance of $2.55 - $2.65
$2.20
$2.30
$2.40
$2.50
$2.60
$2.70
179D
Key Drivers of 2017 Guidance
Vectren |IR Presentation | February 2017 13
2017 guidance mid-point reflects 3% growth off of 2016 weather-
normalized EPS of $2.53, even with lower SABIC margin
As planned, Electric EPS to decline by ~$0.14 due to lower customer margin related
to SABIC; also, electric modernization recovery won’t begin in 2017
Gas utility infrastructure investments continue to grow earnings
VESCO revenue growth of ~15% expected; earnings to decline due to end of 179D
tax benefit and normalized margins
VISCO Distribution poised for strong revenue and earnings growth
VISCO Transmission should have much improved 2017 results due to large project
Initiating 2017 Consolidated EPS Guidance of $2.55 - $2.65
Vectren 2017E EPS
$2.55
$2.60
($0.14)
($0.02)
$0.12
$0.06
$0.08
($0.05) 2016
Actual
Weather
Utility
Gas
Inv.
SABIC
Utility
Lrg.
Cust.
Margin
Nonutility,
excl.
179D;
Corp/Other
2017E
Midpoint
Utility Long-
Term Outlook
Transforming Our Utility…
Diversify generation
portfolio (IRP-driven)
Improve system
optionality/efficiencies
Reduce carbon
emissions by almost
60% by 2024 (base
year 2005)
Generation
Diversification
Further improve
safety & reliability
Reduce frequency
& duration of
outages
Enhance customer
experience
including AMI
Grid
Modernization
Continue to execute
gas infrastructure
upgrade and
replacement plans
Further improve
safety & reliability
Gas
Infrastructure
…for a Smart Energy Future
Vectren |IR Presentation | February 2017 15
Vectren |IR Presentation | February 2017 16
Higher Expected Utility EPS CAGR of 5-7% Driven by 10-Year
Investment Plans for Gas & Electric Businesses of $6.5 Billion
Generation
Diversification:
~$1.2 billion of
CapEx (‘17-’26),
~$0.8 billion in ‘22-’26
Gas
Infrastructure:
~$3.9 billion of
CapEx (‘17-’26)
Electric Grid
Modernization:
~$1.1 billion of
CapEx (’17-’26)
Smart Energy Future – 10-Year CapEx Plan Overview $ in millions 5-Yr Total 10-Yr Total
U ility Cap Ex 2016A 2017E 2018E 2019E 2020E 2021E 2017E-2021E 2017E-2026E
Gas Utilities 359$ 395$ 365$ 370$ 355$ 400$ 1,885$ 3,850$
El ctric Ut lity 106 125 140 155 170 310 900 2,300
Utility Shared Assets & Other 39 50 35 30 25 50 190 400
Utility Consolidated 504$ 570$ 540$ 555$ 550$ 760$ 2,975$ 6,550$
CapEx Recovered via Mechanisms/Deferral 75% 75%
Summary of Electric Investments (incl. in table above)
Electric Grid Modernization 520$ 1,100$
Generation Diversification 380 1,200
Subtotal 900$ 2,300$
Forecast
Laying Out 10-Year Utility CapEx Plan for First Time;
Aligns with Extended Regulatory & Strategic Planning Horizon
Gas Infrastructure
Continue to execute on approved gas infrastructure
plans, including:
• Ohio 5-year gas infrastructure plan approved in Feb.
2014 - $200 million capital investment
• Indiana 7-year gas infrastructure plan approved in
Aug. 2014 - $950 million capital investment
Driven by existing or pending pipeline safety regulations
and existing transmission and distribution integrity
management program requirements
Vectren |IR Presentation | February 2017 17
~$3.9 Billion in Investment
for Continued Gas
Infrastructure Investment
Generates approx. $50 million
in increased state and local
government tax revenue effects
through 2020
Results in an economic ripple effect
that will lead to $700 million in
additional spending over the 7-year
period
Supports approx. 1,875 jobs
annually
How the Community benefits from
Indiana 7-Year Infrastructure Plan
How our Customers benefit
Continued reliability and safety
Since 2013, we have invested
approx. $325 million to
replace 500 miles of aging Bare
Steel and Cast Iron (BSCI) pipeline
infrastructure throughout our
service territories in Indiana and
Ohio.
Electric Grid Modernization
7-year investment of more than $500 million
• Plan to be filed with IN Commission Feb. 23rd
Plan consists of 800+ projects aimed at enhancing the
safety and reliability of our electric system and
modernizing our electric grid
Reliability programs represent over 80% of total 7-year
capital investment
• $55 million - Transmission Line Rebuilds
Reduces risk of emergency repair or replacement that
could lead to unplanned outages
• $70 million - Substation Transformer Replacements
Reduces risk associated with unplanned outages and
enhances customers safety
• $40 million - Pole Inspections & Replacements
Improves the overall electric system performance and
strengthens it against storm damage
Vectren |IR Presentation | February 2017 18
Aging Infrastructure Requires
~$1.1 Billion of Investment to
Maintain Safe and Reliable
Service and Enhance Grid
How our Customers benefit
Continued reliability and safety
Shorter power outages
Fewer estimated customer bills
More control over energy use
Supports approximately 1,000 jobs
annually
How the Community benefits
Generates approx. $20 million in
state and local government tax
revenue effects through 2023
Results in an economic impact of
$640 million over the 7-year
period
Faster response when turning
electric service on and off
Vectren |IR Presentation | February 2017 19
50% reduction in carbon emissions by 2024 from 2012
levels and 60% reduction in carbon emissions from 2005
Renewables and ongoing Energy Efficiency account for
approximately ~15% of total energy by 2026
Diversification provides flexibility to adapt to changes in
customer needs and technology
IRP Preferred Plan is currently under review by the IN
Commission
Generation Diversification
Integrated Resource Plan
Benefits All Stakeholders
How our Customers benefit
Add 54MW of solar generation
by 2019
Add ~900MW combined cycle
gas plant to portfolio by 2024
Continue energy efficiency /
demand response initiatives
2015 Generation Mix
(MWhs)
Energy Efficiency,
Renewables, Other
10%
Coal Base Load
90%
2026 Generation Mix
(MWhs)
Energy Efficiency,
Renewables, Other
15%
Coal
Base Load
30%
Natural Gas
55%
Financing Utility Investment
Long history of high investment-grade credit ratings will continue
• Current S&P rating of A- (VVC), Moody’s rating of A2 (VUHI); Both stable
Utility funds ~85-90% of Vectren’s dividend; Continue to target utility payout of 70%
Appropriate mix of long-term debt and equity as needed
• Significant cash flow from operations and enhanced by use of timely recovery through
regulatory mechanisms
• Nonutility cash flow also to be utilized as available to fund CapEx plan at utility
• Appropriate mix of financing to be employed to maintain adequate regulatory capital
structure and maintain solid credit metrics
• Expectations for the next 5 years:
o Cash from operations of $2.0-2.5B
o Incremental utility long-term debt of ~$800M
o Transfer of available cash flow from nonutility of $100-200M
o 6-8% EPS growth target fully considers likely equity needs as generation investment begins
to accelerate
Evaluation of timing and possible use of equity forwards for any needed equity
financing is ongoing
• Tax reform could impact timing and size of financing needs
Vectren |IR Presentation | February 2017 20
Financing Goals Remain Unchanged: Strong Balance Sheet & Cap
Structures, No Incremental Utility Parent Leverage
Corporate Tax Reform
Vectren |IR Presentation | February 2017 21
Assuming loss of interest deductibility, full expensing of CapEx, and a 20%
corporate tax rate:
Expect that utility rates will be reset to reflect any reduction in tax expense
• Any favorable nonutility impact likely reflected in competitive bidding activity going forward
Revaluation of existing deferred taxes would occur at effective date of new tax rate
• Utility impacts reflected as amounts due to customer
• Nonutility impacts would be favorable at implementation
Very little parent co. debt limits recurring exposure to loss of interest deductibility
Loss of AMT credit carryforward would be expected at effective date of the new
tax rate, partially offset by revaluation of existing nonutility deferred taxes
Cash flow benefits from full CapEx expensing when investment ramps up later in
the 10-yr forecast period
No impact to long-term growth targets expected
Proposed Tax Reform Not Expected to Materially
Impact Long-Term Outlook
Anticipated Near-Term Regulatory Activity
22 Vectren |IR Presentation | February 2017
Limited Base Rate Activity Expected for Next Several Years
7-Year (’17-’23)
Electric Grid Modernization
Plan Filed w/ IN Commission
February 2017
Key
Activities
IN Commission Approved
5th Semi-Annual Gas
Infrastructure Filing
January 2017
File Ohio Base Rate
Case
Q1 2018
IRP Filed w/ IN
Commission
December 2016
IN Commission Staff
Comments on IRP
Due ~May 2017
IN Commission Order on
7-Year (’17-’23) Electric
Grid Modernization Plan
Due ~September 2017
Cert. of Public Need
for New Generation
to be Filed w/ IN
Commission
Q4 2017
Key Observations:
Recovery mechanisms allow for timely recovery of investments and costs
requiring fewer base rate cases
Rate cases to be filed as required by mechanisms/legislation and unlikely before
• OH Gas base rate case to be filed 2018
• IN Gas base rate case to be filed 2021
• IN Electric base rate case to be filed 2024
4MW Universal Solar
Plan Filed w/ IN
Commission
February 2017
Utility Regulatory Update
(1) ~$65M utility service laterals project was not approved for 7-yr plan recovery in 4th semi-annual
filing, but was pre-approved for rate base treatment in next gas rate case; VVC appealed, related
to ability to “update” the plan - outcome expected in 2017
(2) Received a notice of violation (NOV) from the EPA in Nov. 2011 pertaining to A.B. Brown power
plant; Commission approval for ~$40M granted in June 2016; Appeal filed by interveners in July
2016; In Feb. 2017, the Commission’s order was upheld by the IN Court of Appeals.
23
Commission approved
5-yr. extension (‘13-’17,
~$200M) of distribution
replacement rider (DRR)
in Feb. ’14
Annual DRR update for
costs incurred in 2015
filed in May ’16 and
approved in Aug. ‘16
Initial 7-year (‘14-’20)
gas infrastructure plan
approved Aug. ‘14
Jan. ‘17: Commission
issued 5th semi-annual
order – no issues
• $950M approved1
Indiana Gas Utilities Ohio Gas Utility Indiana Electric Utility
7-year (‘17-23) electric
grid modernization plan
filed with Commission on
Feb. 22, 2017
• >$500M of CapEx
Commission granted
approval for ~$70M of
MATS- and NOV-related
equipment, incl. Feb. ‘17
approval2 of NOV equip.
2016-17 energy efficiency
programs approved, incl.
lost margin recovery
limited to ~4 years;
appealed limitation
Vectren |IR Presentation | February 2017
Constructive Regulatory and Legislative Environments in
Indiana & Ohio Support Required Capital Investment
Favorable Utility Environments
24 Vectren |IR Presentation | February 2017
Constructive Regulatory and Legislative Environments in
Indiana & Ohio Support Required Capital Investment
Electric
IN-South IN-North Ohio IN-South
Infrastructure Investment Recovery (1)
Recovery of Federal Mandates Under SB 251
Infrastructure Environmental CapEx Recovery Under SB 29
Non-DRR CapEx Deferral Under House Bill 95
Decoupling or Lost Margin Recovery
Margin Straight Fixed Variable Rate Design
Normal Temperature Adjustment
Gas Cost and Fuel Cost Recovery
Unaccounted for Gas
Costs Bad Debt Expense
DSM/Energy Efficiency/MISO Transmission Costs
DRR: Distribution Replacement Rider
DSM: Demand Side Management
(1) Under SB 560 in Indiana; Under DRR in Ohio
Gas
25 Vectren |IR Presentation | February 2017
Nonutility
Infrastructure
Services
(VISCO)
Performance
Contracting
Sustainable
Infrastructure
Projects
Energy
Services
(VESCO)
Distribution
Pipeline
Construction
Transmission
Pipeline
Construction
Nonutility Results
& 2017 Outlook
VISCO 2016 Results and Outlook
Distribution’s record 2016 earnings driven by record # of deployed resources
Very profitable, but down year in 2016 for Transmission; 2nd half 2016
favorably impacted by more projects, including a large project
Backlog up to $725 million at 12/31/16 as Transmission wins large project
• Awarded ~150-mile, ~$150M Ohio pipeline project to be completed in 2017
• Distribution growth tied to gas utilities’ infrastructure programs
$535
$625
$665
$635
$725
$450
$500
$550
$600
$650
$700
$750
Q4 '13 Q4 '14 Q4 '15 Q3 '16 Q4 '16
In millions
VISCO Backlog
Continued Distribution Growth and Large Transmission Project
to Drive Improvement in 2017
Vectren |IR Presentation | February 2017 26
2,500
3,000
3,500
4,000
4,500
2012 2013 2014 2015 2016 2017E
VISCO Employee Count (at peak)
VISCO Sector Outlook
Distribution construction activity continues to accelerate driven by gas utility
pipe replacement programs
Transmission construction should begin recovery in 2018; approval of several
large proposed pipeline projects could accelerate sector recovery
• Significant amount of announced pipeline projects totaling approximately 12,000
miles with estimated completion dates thru ~2020
VISCO gross margin decline primarily reflects slowed transmission
construction activity; recovery expected as activity picks up
Construction Queue Supports Improving Sector Outlook
Vectren |IR Presentation | February 2017 27
$421
$664
$784 $779
$843 $813
$945
5%
10%
15%
20%
25%
30%
$-
$200
$400
$600
$800
$1,000
$1,200
2011 2012 2013 2014 2015 2016 2017E
Gross Margin
%
Gross Revenue
– (millions)
Revenue/GM Trend
VESCO 2016 Results and Outlook
Strong results across most markets & geographic regions and favorable mix
of projects drove margin of 24% and record 2016 revenues of $260M
179D earnings were $5.5M in 2016; Net of related expenses, the EPS impact
to Vectren was ~$0.05 per share in 2016; Tax law ended in 2016
Revenue expected to grow to ~$300M in 2017 and margins expected to
return to more typical levels at ~21%; large Coronado project begins this yr.
Vectren |IR Presentation | February 2017 28
$82
$77 $72
$144
$226
$234 $250
$-
$50
$100
$150
$200
$250
$300
2011 2012 2013 2014 2015 2016 2017E
In millions VESCO Ending Backlog
VESCO Poised for Significant Revenue Growth Again in 2017
Sales
funnel of
~$345M
Key VESCO Projects
Vectren |IR Presentation | February 2017 29
$16M project includes
comprehensive energy and
infrastructure improvements at
18 schools plus the Central
Office and Central Annex
Signifies overall resurgence of
K-12 market in the southeast
totaling five contracts worth
$34M with several more in the
sales funnel
$70M Energy Savings
Performance Contract (ESPC)
Project
Additional 23-year Operations
and Maintenance contract for
$64M
Project scope includes base-
wide steam decentralization
and compressed air distribution
system upgrades
2nd project in New York
First of several planned projects
for infrastructure improvements
at wastewater treatment plant
$9M project includes new
influent weather improvements
for 300,000 gallon storm water
storage tank and associated
infrastructure
Improvements will help protect
Mohawk River
Demonstrates Success/Strength Across All Sectors
Naval Base Coronado
(Federal)
Bradley Co. (TN) Schools
(Public)
Town of Niskayuna, NY
(Sustainable Infrastructure)
Closing
Remarks
Top Decile for Dividend Increases
31 Vectren |IR Presentation | February 2017
$0.80
$1.00
$1.20
$1.40
$1.60
$1.80 2014 - 2016
CAGR: 5.3%
2000 - 2013
CAGR: 2.9%
Annualized dividend increased 5% to $1.68 per share in Nov. 2016
57 Consecutive Years of Dividend Increases
Proven Track Record of Achieving Targets
Achievements over the past 5 years…
VVC EPS CAGR of 8% while maintaining financial discipline - earned ROE >peers
• Utility has earned overall allowed ROE for five straight years
Extended record of growing dividends to 57 consecutive years
• Accelerated dividend growth – 5.3% average annualized increase last 3 years
Maintained strong balance sheet; S&P steady at A-, Moody’s up one notch to A2 (’14)
Reduced nonutility risk by exiting volatile commodity-based businesses (‘11-’14)
$1.73
$1.94
$2.12
$2.28
$2.39
$2.55
9.8%
10.6%
11.3%
11.9% 12.0%
12.3%
2011 2012 2013* 2014* 2015 2016
* Excludes ProLiance in 2013 & Coal Mining in 2014 - years of disposition
Vectren EPS and Earned ROE
5 Year EPS
CAGR of 8%
5-Yr Total Return Comparison
As of 12/31/16
5-Year Total Shareholder Return of 110%
Vectren |IR Presentation | February 2017 32
VVC 5 Year
CAGR of 16%
110%
102%
98%
71%
64%
Vectren VVC Peers S&P 500 Dow
Utilities
S&P 500
Utilities
Vectren’s Long-Term Outlook Improves Again
Vectren |IR Presentation | February 2017 33
Raising EPS and Dividend Growth Targets to 6-8% to Reflect
Long-Term Utility Capital Investment Plan
Long-Term Targets New Previous
Consolidated EPS growth 6-8% 5-7%
Dividend growth 6-8% 5-7%
Consolidated payout ratio 60-65% 60%
Utility EPS growth 5-7% 4-6%
Note: Long-term EPS growth of approx. $0.06-0.10/yr. for Nonutility
$1.73
$2.55 $2.60
$1.70
$2.20
$2.70
$3.20
$3.70
2011 2016 2017E Future
EPS
VVC Actual and Expected EPS Growth
Long-Term EPS
CAGR: 6-8%
2011-2026 CAGR: 6-8%
2011-2017E
CAGR: 7%
Appendix
2017E
Guidance 2016
$ in millions Midpoint Actual
Margin 957$ 928$
O & M - Non-Pass thru 280 278
O & M - Pass thru 62 56
Depreciation 233 219
Other Taxes 64 58
Interest 74 70
Other Income 30 26
Income Taxes 98 99
Net Income 176$ 174$
Utility
Long-term customer growth expectations of: Gas, 0.5-1.0%; Electric, 0.5%
Continue to control costs through continuous improvement efforts
Targeting long-term CAGR of <1% for non-pass-thru O&M
Some annual variability, including planned electric generation maintenance and
performance-based compensation
Vectren |IR Presentation | February 2017 35
Appendix
Metrics
2017E
Guidance
$ in millions Midpoint 2016 2015 2016 2015
Gross Revenue 945$ 813.3$ 843.3$ 247.7$ 200.9$
Gross Margin % 14.0% 14.0% 14.5% 17.0% 16.0%
EBITDA
(1)
115$ 93.6$ 109.2$ 36.5$ 30.7$
Depreciation & Amortization (2) 40$ 38.2$ 44.5$ 9.7$ 11.8$
Earnings From Operations
(1)
75$ 56.2$ 67.7$ 27.4$ 19.7$
Interest 12$ 12.5$ 15.3$ 3.0$ 3.9$
Net Income (1) 35$ 25.0$ 29.7$ 15.1$ 10.1$
Earnings Per Share
(1)
0.42$ 0.30$ 0.36$ 0.18$ 0.12$
Ending Backlog 725$ 665$ 725$ 665$
Footnotes:
depreciation study; no net income impact due to utilization of lower costs in bids
Ended Dec 31
12 Months 3 Months
Ended Dec 31
1) After allocations
2) Lower D&A in 2016 due to adjustments of depreciable lives in accordance with updated
Infrastructure Services (VISCO)
Metrics
36
Appendix
Vectren |IR Presentation | February 2017
Infrastructure Services (VISCO)
General Description of Types of Customer Contracts for Infrastructure Services
Infrastructure Services operates primarily under two types of contracts – blanket contracts and bid
contracts. Blanket contracts are ones which a customer is not committed to specific volumes of services,
but where we have been or expect to be chosen to perform work needed by a customer in a given time
frame (typically awarded on a yearly basis). Bid contracts are ones which a customer will commit to a
specific service to be performed for a specific price, whether in total for a project or on a per unit basis
(e.g., per dig or per foot).
General Description of Backlog for Infrastructure Services
For blanket work, backlog represents an estimate of the amount of gross revenue that we expect to
realize from work to be performed in the next 12 months on existing contracts or contracts we
reasonably expect to be renewed or awarded based upon recent history or discussions with customers.
For bid work, backlog represents the value remaining on contracts awarded or that we reasonably expect
to be awarded, but are not yet completed.
While there is a reasonable basis to estimate backlog, there can be no assurance as to our customers’
eventual demand for our services each year or, therefore, the accuracy of our estimate of backlog.
Backlog for Infrastructure Services estimated as follows:
For blanket work, estimated backlog as of 12/31/16 is $435 million. The estimate of the amount of gross
revenue that we expect to realize from work to be performed in the next 12 months is multiplied by 80%
to factor in such unknowns as weather and potential budgetary restrictions of customers.
For bid work, estimated backlog as of 12/31/16 is $290 million compared to $190 million at 12/31/15.
Total estimated backlog as of 12/31/16: $725 million compared to $635 million at 9/30/16 and $665
million at 12/31/15
Estimated Backlog
Appendix
37 Vectren |IR Presentation | February 2017
Energy Services (VESCO)
38
Metrics
Vectren |IR Presentation | February 2017
Appendix
2017E
Guidance
$ in millions Midpoint 2016 2015 2016 2015
Revenue 300$ 260.0$ 199.9$ 68.2$ 65.9$
Gross Margin as % of Revenue 21% 24% 22% 25% 22%
EBITDA (1) 13$ 13.3$ 3.5$ 1.3$ 1.8$
Interest 2$ 1.8$ 1.2$ 0.4$ 0.3$
179D Tax Deductions (2) -$ 5.5$ 6.1$ 2.9$ 6.1$
Net Income / (Loss)
(1)
7$ 12.5$ 7.3$ 3.8$ 7.7$
Earnings Per Share
(1)
0.09$ 0.15$ 0.09$ 0.05$ 0.09$
Ending Backlog
(3)
250$ 234$ 226$ 234$ 226$
New Contracts (3) 290$ 239$ 258$ 113$ 107$
Footnotes:
3) Represents signed construction contracts; does not include multi-year O&M agreements.
1) After allocations
2) Net income impact to VESCO, net of related expenses; EPS impact to Vectren of approx. $0.05 per share in 2016 and
$0.05 per share in 2015, net of related expenses. 179D tax law expired in 2016.
3 Months
Ended Dec 31
12 Months
Ended Dec 31
A.B. Brown 1 A.B. Brown 2 F.B. Culley 2 F.B. Culley 3 Warrick 4*
Year of Installation 1979 1986 1966 1973 1970
MW 245 245 90 270 150
10-Yr Net Capacity Factor 60.7% 62.6% 38.4% 66.1% 69.2%
2015 Avg. Heat Rate (BTU/kWh) 11,174 10,881 15,582 10,592 10,918
Pollution Controls
SO2
Flue gas
desulphurization
Flue gas
desulphurization
Flue gas
desulphurization
Flue gas
desulphurization
Flue gas
desulphurization
NOx
Selective catalytic
reduction
Selective catalytic
reduction
Low NOx Burner
Selective catalytic
reduction
Selective catalytic
reduction
Particulate Matter Fabric Filter
Electrostatic
precipitator
Electrostatic
precipitator
Fabric Filter
Electrostatic
precipitator
MATS Injection Injection Injection Injection Injection
SO3 Injection Injection N/A Injection Injection
Coal-Fired Generation
39
Appendix
* 50% ownership of 300 MW with Alcoa
Vectren |IR Presentation | February 2017
Current Portfolio
Integrated Resource Plan (IRP)*
Preferred Portfolio Overview
Vectren |IR Presentation | February 2017 40
* Preferred Plan is currently under review by the IN Commission; also, dialogue is
ongoing with Alcoa relative to plans for the Warrick 4 unit
Appendix
2015 Portfolio Resource Mix
(MWhs)
Energy Efficiency,
Renewables, Other
10%
Coal Base Load
90%
2026 Portfolio Resource Mix
(MWhs)
Energy Efficiency,
Renewables, Other
15%
Coal
Base Load
30%
Natural Gas
55%
Use of Non-GAAP Performance Measures and
Per Share Measures
41
Appendix
Vectren |IR Presentation | February 2017
Contribution to Vectren's Basic EPS
Per share earnings contributions of the Utility Group, Nonutility Group, and Corporate and Other are presented
and are non-GAAP measures. Such per share amounts are based on the earnings contribution of each group
included in the Company’s consolidated results divided by the Company’s basic average shares outstanding
during the period. The earnings per share of the groups do not represent a direct legal interest in the assets and
liabilities allocated to the groups; instead they represent a direct equity interest in the Company's assets and
liabilities as a whole. These non-GAAP measures are used by management to evaluate the performance of
individual businesses. In addition, other items giving rise to period over period variances, such as weather, may
be presented on an after tax and per share basis. These amounts are calculated at a statutory tax rate divided by
the Company’s basic average shares outstanding during the period. Accordingly, management believes these
measures are useful to investors in understanding each business’ contribution to consolidated earnings per
share and in analyzing consolidated period to period changes and the potential for earnings per share
contributions in future periods. Per share amounts of the Utility Group and the Nonutility Group are reconciled
to the GAAP financial measure of basic EPS by combining the two. Any resulting differences are attributable to
results from Corporate and Other operations. The non-GAAP financial measures disclosed by the Company
should not be considered a substitute for, or superior to, financial measures calculated in accordance with GAAP,
and the financial results calculated in accordance with GAAP.