Attached files
| file | filename |
|---|---|
| 8-K - 8-K - INVESTOR PRESENTATION - FEB 2018 - VECTREN CORP | a8-kxinvestorpresentationx.htm |
| EX-99.2 - EXHIBIT 99.2 - INVESTOR PRESENTATION - FEB 2018 - FLS - VECTREN CORP | exhibit992-invpresxfeb2018.htm |
February/March 2018
2017 Earnings Review & Business Outlook
Management Representatives
2
Dave Parker
Director, Investor Relations
Carl Chapman
Chairman, President & CEO
Susan Hardwick
Exec. Vice President & CFO
Vectren | Investor Presentation | February/March 2018
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 2017 annual report on Form 10-K
filed on February 21, 2018.
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
3 Vectren | Investor Presentation | February/March 2018
2017 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)
Vectren | Investor Presentation | February/March 2018 4
Consolidated 2017 Results
5 Vectren | Investor Presentation | February/March 2018
In millions, except per share amounts
2017 2016 2017 2016
Utility Group 53.6$ 51.3$ 175.8$ 173.6$
Nonutility Group
Infrastructure Services (VISCO) 3.7 15.1 32.3 25.0
Energy Services (VESCO) 5.9 3.8 10.7 12.5
Other Businesses (1.5) (0.2) (1.9) (0.6)
Nonutility Group 8.1 18.7 41.1 36.9
Corporate and Other (0.5) (0.4) (0.9) 1.1
Earnings 61.2$ 69.6$ 216.0$ 211.6$
Utility Group 0.65$ 0.62$ 2.12$ 2.10$
Nonutility Group 0.10 0.23 0.49 0.44
Corporate and Other (0.01) (0.01) (0.01) 0.01
EPS 0.74$ 0.84$ 2.60$ 2.55$
Weighted Avg Shares Outstanding 83.0 82.9 83.0 82.8
Ended Dec 31 Ended Dec 31
3 Months 12 Months
Highlights of a Successful 2017
6
VISCO
Corp/
Other
Nonutility
Vectren 2017 vs. 2016 EPS Comparison
$2.55
$2.60
$0.12 $0.09
($0.14)
($0.02)
2016
Actual
VESCO’s
179D
benefit in
2016
Gas
Infrastr.
Invest.
SABIC
Lost
Margin
Weather/
Other
2017
Actual
($0.07)
Vectren | Investor Presentation | February/March 2018
($0.04)
Gas
Customer
Margin
$0.06
Continued Consistent Earnings Growth
Vectren consolidated 2017 EPS of $2.60
• 2017 EPS includes impact of tax benefit from revaluation of deferred taxes due to tax
reform; results also reflect expense associated with multi-year funding of the Vectren
Foundation
Utility EPS of $2.12, as expected
• Earned overall allowed ROE for the 6th year in a row
• Gas infrastructure investment continues to fuel EPS growth
• SABIC lost margin due to transition to cogeneration as expected
Successful start to approved 7-year electric grid modernization plan
Record revenues for VISCO and VESCO
Dividend increased 7.1% in Nov. 2017; 58 consecutive years of increases
$0.05
VESCO
Key Regulatory Initiatives Achieved
7
Execution Continues on our Utility Growth Strategies
Vectren | Investor Presentation | February/March 2018
Final IRP comments rec’d;
No significant issues
RFP process completed
Joint-ownership of
300MW unit with Alcoa
extended through 2023
CPCN filing for
Generation Transition
Plan made Feb 2018
Approval of CPCN & 50
MW universal solar –
expected 1H2019
Generation
Transition
Commission
approved our 7-
year grid
modernization
plan; supports
~$450M CapEx
First semi-annual
electric infrastr.
filing approved
Grid
Modernization
Work continues on
~$1.2 billion of
approved IN/OH gas
investments
IN Commission
approved our 7th
semi-annual gas
infrastructure filing
Gas
Infrastructure
Completed
In Progress
179D
Initiating 2018 EPS Guidance of $2.80 - $2.90
8
2018 EPS Guidance 2017 Actual
Utility $2.20 - $2.25 $2.12
Nonutility/Corp $0.60 - $0.65 $0.48
Consolidated $2.80 - $2.90 $2.60
Vectren | Investor Presentation | February/March 2018
Vectren 2017 EPS Bridge to Midpoint 2018E
Utility
Long-Term Targets Affirmed
Consolidated EPS growth 6-8%
Dividend growth 6-8%
Consolidated payout ratio 60-65%
Utility EPS growth 5-7%
Note: Long-term EPS growth of approx. $0.06-0.10/yr. for Nonutility
EPS Guidance Reflects Nearly 10% Growth Over 2017,
Includes Nonutility Benefit From Lower Corporate Tax Rate
$2.60
$2.85
($0.04) $0.15
$0.11
2017
Actual
Infrastructure
Investment
Power Plant
Outages/
Maint. O&M
Nonutility
Benefit of
Tax Reform
2018E
Guidance
Midpoint
$2.90 - $2.92 1
1 Guidance excludes 179D retroactive tax benefit for 2017, expected to
add ~$0.05 - $0.07 to 2018E; not currently expected to recur in
subsequent years
1
1
Nonutility
Growth
$0.08
($0.05)
Extremely
Unfavorable
Construction
Weather
Nonutility
$0.05 - $0.07 1
2018E
Guidance
Midpoint
$2.85
9 Vectren | Investor Presentation | February/March 2018
Utility Long-
Term Outlook
Transforming Our Utility…
Diversify generation
portfolio (IRP-driven)
Improve system
optionality/efficiencies
Reduce carbon
emissions by ~60% by
2024 (base year 2005)
Generation
Transition
Further improve
safety & reliability
Reduce frequency &
duration of outages
Enhance customer
experience, incl.
AMI (AMI complete
by end of 2018)
Grid
Modernization
Continue to execute
gas infrastructure
upgrade and
replacement plans
Further improve
safety & reliability
Gas
Infrastructure
…for a Smart Energy Future
Vectren | Investor Presentation | February/March 2018 10
Generation Transition Plan
11
Aging Fleet Replaced By Efficient, Clean and Diverse Energy Sources
Vectren | Investor Presentation | February/March 2018
By 2024, carbon emissions to decline by 60%
from 2005 levels as a result of Vectren’s
proposed generation transition plan
A total of 54 MWs of new renewable generation,
continued energy efficiency efforts and
retirement/exit of over 800 MWs of primarily
coal-fired generation
90% 80%
99%
35%
0%
20%
40%
60%
80%
100%
Sulfur
Dioxide
Nitrogen
Oxide
Particulate
Matter
Carbon
Dioxide*
Vectren’s Emissions Reductions
2005 2017 2024
CO2 Emission Reductions
Proposed Generation Transition Plan
2024: Filed Generation Transition Plan
2018 2019 2020 2021 2022 2023
Add 4 MWs Solar
and Battery
Backup
Retire 50
MWs Nat
Gas Gen
Add 50 MWs
Universal Solar
Retire 20
MWs Nat
Gas Gen
Culley 3
Retrofit Complete
Exit Warrick 4 JV,
150 MWs Coal
Gen
Retire 580
MWs Coal
Gen
Add 800-900 MW
CC Nat Gas Gen
Energy Efficiency
*3-year average reduction (2015-2017) vs. 2005
Generation Transition Plan - New Plant
12 Vectren | Investor Presentation | February/March 2018
Key
Activities
CPCN for Electric
Supply Needs Filed
w/ IN Commission
Feb. 20, 2018
Application for 50 MW
of Universal Solar
Filed ~1H 2018
Order for CPCN
~1H 2019
Preliminary Details, Expected Regulatory Timing
Order for 50 MW of
Universal Solar
~1H 2019
800-900 MW Combined-Cycle Natural Gas Plant (self-build, Vectren-owned)
• Cost of ~$900 million, including new natural gas pipeline to serve the plant
• Construction begins late 2019, in service by MISO capacity year or mid-year 2023
• Location: site of our current A.B. Brown power plant, Posey County in SW Indiana
Additional 50 MW of Universal Solar Generation (3rd party build, Vectren-owned)
• Cost of ~$75 million
• Construction begins in 1H2019, in-service by mid-year 2020
• Location: Vectren service territory in SW Indiana
• Adds to 4 MW of universal solar expected to be in service in 2018
Generation
Transition Hearings
w/ IN Commission
Q3 2018
Other Parties Likely
to File Testimony w/
IN Commission
Q2 2018
Base rate case expected to be
filed in 2020 as required at
end of 7-year infrastructure
plan
Last Base Rate Case Decision:
• South – Aug. 2007;
Allowed ROE 10.15%
• North – Feb. 2008;
Allowed ROE 10.2%
Estimated Rate Base
(12/31/2017)
• South - $0.3B
• North - $1.3B
Indiana
Gas Utilities
Indiana
Electric Utility
Ohio
Gas Utility
13
Base rate case expected to be
filed in 2023 as required at end
of 7-year infrastructure plan
Last Base Rate Case Decision:
May 2011; Allowed ROE: 10.4%
Estimated Rate Base
(12/31/2017): $1.4B
Base rate case pre-filing notice
filed Feb. 21, 2018; coincides
with end of 5-year extension of
the Distribution Replacement
Rider (DRR)
• Extension of DRR
• Tax Reform benefit
returned to customers
• Other rate base additions;
cost of service review
Last Base Rate Case Decision:
Jan. 2009; Currently allowed
ROE: 10.6% (Black box
settlement)
Rate Base (12/31/2017): $0.6B
Vectren | Investor Presentation | February/March 2018
Regulatory Activity Planned in the Future
Ohio Base Rate Case Pre-Filing Notice Filed Feb. 21
Other
Shared Assets & FERC
Estimated plant balance for Utility
Shared Assets (12/31/2017): $0.2B
Estimated FERC Electric
Transmission Rate Base
(12/31/2017): $0.1B
Note: Estimated Rate Base amounts reflect net investment since last rate case decisions
Natural Gas,
$3.8B
Utility
Shared,
$0.3B
Electric
T&D, $1.1B
Generation,
$1.3B
10-Year CapEx of $6.5B
Significant Utility CapEx Drives Earnings
Accelerated Rate Base Growth Enhances Long- and
Short-Term EPS Performance
2017 2027E
Utility Shared Electric Gas
$3.9B
$7.1B
10-Yr Rate Base CAGR: ~6%
Rate base CAGR of ~6% over the next 10 years; foundation for 5-7% EPS
growth
• Natural Gas ~7%, Electric ~5%
Vectren | Investor Presentation | February/March 2018 14
Expected Utility EPS CAGR of 5-7% Driven by 10-Year
Investment Plans for Gas & Electric Businesses of $6.5 Billion
Generation
Transition:
~$1.3 billion of
CapEx (‘18-’27)
Gas
Infrastructure:
~$3.8 billion of
CapEx (‘18-’27)
Electric Grid
Modernization:
~$1.1 billion of
CapEx (’18-’27)
Smart Energy Future – 10-Year CapEx Plan Overview
$ in millions 5-Yr Total 10-Yr Total
Utility C p Ex* 2017A 2018E 2019E 2020E 2021E 2022E 2018E-2022E 2018E-2027E
Gas Utiliti s 391$ 365$ 335$ 340$ 395$ 410$ 1,845$ 3,815$
Electric Utility 105 180 220 180 300 450 1,330 2,350
U ility Shared Assets & Other 58 45 40 40 40 65 230 385
Utility onsolidated 554$ 590$ 595$ 560$ 735$ 925$ 3,405$ 6,550$
CapEx Recovered via Mechanisms/Deferral 75% 75%
Summary of Electric Investments (incl. in table above)
Electric Grid Modernization 560$ 1,100$
Generation Transition 770 1,250
Total Electric 1,330$ 2,350$
Forecast
10-Year Utility CapEx Plan Aligns with Extended
Regulatory & Strategic Planning Horizon
15 Vectren | Investor Presentation | February/March 2018
Uses Sources
Financing Utility Investment
Financing plan reflects sound regulatory
approach and contemplates any needed long-
term debt and equity at the utilities
• Continuing to evaluate the use of equity forwards
for public issuances timed with rate cases
Significant cash flow from operations,
enhanced by timely recovery on a significant
portion of CapEx
• Tax reform reduces utility cash from operations,
but additional cash available from nonutility to
help fund utility CapEx
Long history of high investment-grade credit
ratings
• Current S&P rating of A- (VVC), Moody’s rating of
A2 (VUHI); Both stable
– Vectren not included in Moody’s recent
ratings/outlook downgrades
Utility funds ~85-90% of Vectren’s dividend;
Continue to target utility payout of 70%
Vectren | Investor Presentation | February/March 2018 16
Majority of Utility CapEx Funded by Cash from Operations
CapEx
$3.4B
Utility FFO
$1.8 - $2.2B
Utility Funded
Dividends
$0.7B
Incremental*
Debt
$1.0 – 1.2B
Nonutility
cash flow
$100 -
$300M
5-Year Expectations (’18-’22)
* Incremental debt excludes refinanced debt
Expected Impact of Tax Reform:
Utility expected to pass tax savings on to customers; statewide proceedings have begun in
IN and OH
Elimination of bonus depreciation and lower tax rate reduces utility cash flow from
operations, as anticipated
Expect nonutility EPS benefit ~$0.11 in 2018 as a result of lower effective corporate tax
rate; 21% from 35%
Given competitive nature of the businesses, need further clarity on level of higher
VISCO/VESCO earnings due to lower tax rate and if sustainable in the long term
Marginal impact to previously announced five-year Cap Ex financing plans
• Modest increase in long-term debt need
• Lower utility cash flow from operations due to lower revenue related to lower taxes
collected from customers
• Higher cash flow from nonutility operations from lower tax rate helps offset lower
utility cash flow
No change to long-term growth targets; opportunity for upside as impact of tax reform
settles in competitive nonutility businesses
Tax Cuts and Jobs Act of 2017
No Change to Long-Term Outlook Currently
17 Vectren | Investor Presentation | February/March 2018
18 Vectren | Investor Presentation | February/March 2018
Nonutility
Infrastructure
Services
(VISCO)
Performance
Contracting
Sustainable
Infrastructure
Projects
Energy
Services
(VESCO)
Distribution
Pipeline
Construction
Transmission
Pipeline
Construction
Nonutility Results
& 2018 Outlook
$130
$200
$260
$282
$330
2014 2015 2016 2017 2018E
In millions
2017 Nonutility Results
VISCO 2017 EPS of $0.39 – up $0.09 compared to 2016
• Improved results were driven by a pick up in large transmission project activity
– Record revenues driven by Distribution growth and pipeline projects
VESCO 2017 EPS of $0.13 – up ~$0.05 from 2016, excl. 179D benefit in 2016
• Record revenues and continued strong margins in 2017 drove record operating results; earnings
down slightly due to expiration of 179D tax deductions in 2016
• Sales funnel of ~$430M at 12/31/17 remains high, positioned well for revenue growth in 2018
• New contract signings in 2017 were below expectations as some signings slipped into early 2018
19
VESCO Revenues
Solid Year of Results for VISCO and VESCO
Vectren | Investor Presentation | February/March 2018
$421
$664
$784 $779
$843 $813
$996
5%
10%
15%
20%
25%
30%
$-
$200
$400
$600
$800
$1,000
$1,200
2011 2012 2013 2014 2015 2016 2017
Gross Margin
%
Gross Revenue
– (millions)
VISCO Revenue/GM Trend
VISCO 2018 Outlook
Strong backlog of approx. $725M expected to lead to strong revenue performance in
2018; backlog the same as one year ago even without a large pipeline project
Distribution construction activity continues to accelerate driven by gas utility pipe
replacement programs
Transmission construction market continues to improve; some recovery of gross margins
expected over time as activity picks up
Expect to Surpass $1B in Revenue in 2018;
Steady Growth from Distribution and Transmission
Vectren | Investor Presentation | February/March 2018 20
2,500
3,000
3,500
4,000
4,500
2012 2013 2014 2015 2016 2017
VISCO Employee Count (at peak)
$535
$625
$665
$725 $725
Q4 '13 Q4 '14 Q4 '15 Q4 '16 Q4 '17
In millions
VISCO Backlog
VESCO 2018 Outlook
Expecting strong results across most markets & geographic regions in 2018
Early 2018 new contract signings are off to a good start after slowness in closing projects in 2017
In Feb. 2018, 179D tax deductions were extended for one year retroactively for 2017 (expired in
2016); estimated ~$0.05-$0.07 of EPS benefit in 2018 related to 2017; while efforts continue to
extend 179D benefit into the future, excluded 179D from 2018 guidance and growth targets
Long-term performance contracting and sustainable infrastructure opportunities remain strong
• Expect growing demand from VESCO’s customers in the areas of energy efficiency, energy
security, and sustainable infrastructure, including renewable energy
VESCO Poised for Solid Revenue Growth Again in 2018
21 Vectren | Investor Presentation | February/March 2018
City of Bloomington, IN
(Example Project - Public Sector)
$13.3M solar installation project includes 5MW of
solar panels across the City including facilities for
Public Works, Parks and Recreation, and Utilities.
Project will increase the City’s solar capacity by
sevenfold to produce 14% of the government’s
electricity use and over 9% of the City’s overall
energy consumption.
The City’s carbon footprint will be reduced by 4,700
metric tons of carbon dioxide annually.
Closing
Remarks
Long History of Dividend Stability and Growth
23
$0.80
$1.00
$1.20
$1.40
$1.60
$1.80 2014 - 2017
CAGR: 5.4%
2000 - 2013
CAGR: 2.9%
Annualized dividend increased 7.1% to $1.80 per share in Nov. 2017
Dividend Increased 7.1% in November 2017
58 Consecutive Years of Dividend Increases
Vectren | Investor Presentation | February/March 2018
Long Track Record of Utility Growth
Regulatory execution
Well-managed capex growth
Focus on customer bills
Solid cash flow and credit metrics
Culture of continuous improvement / cost
control
$248 $263
$351 $399
$497
$554
10.1% 10.0% 10.2%
10.7%
11.0%
10.5%
2012 2013 2014 2015 2016 2017
Utility CapEx & Earned ROE
Consistent Earnings Growth While Earning our Allowed ROE
$1.50 $1.68
$1.72
$1.80
$1.95
$2.10
$2.12
2011 2012 2013 2014 2015 2016 2017
Utility EPS
6-Year CAGR
of 6%
$ in millions
24 Vectren | Investor Presentation | February/March 2018
Long History of Consistent Growth and Execution
$1.73
$1.94
$2.12
$2.28
$2.39
$2.55 $2.60
9.8%
10.6%
11.3%
11.9% 12.0%
12.3% 12.0%
2011 2012 2013* 2014* 2015 2016 2017
* Excludes ProLiance in 2013 & Coal Mining in 2014 - years of disposition
Vectren EPS and Earned ROE
6-Year EPS
CAGR of 7%
164%
117% 108%
91%
81%
Vectren VVC Peers S&P 500 Dow
Utilities
S&P 500
Utilities
5-Year Total Return Comparison
As of 12/31/2017
VVC 5-Year
CAGR of 21%
Vectren | Investor Presentation | February/March 2018 25
Vectren Achieved 5-Year Total Shareholder Return of 164%
Recognized in 2017 as a Top Long-Term Investment Among EEI Peers
L ng-Term Targets Affirmed
Consolidated EPS growth 6-8%
Dividend growth 6-8%
Consolidated payout ratio 60-65%
Utility EPS growth 5-7%
Note: Long-term EPS growth of approx. $0.06-0.10/yr. for Nonutility
Key drivers of long-term EPS growth expectations of 6-8%:
Utility infrastructure investments continue to grow earnings; generation investments to come
Steady VISCO Distribution growth; Transmission recovery continues
VESCO growth focused on energy efficiency/security and renewables/clean energy
Continue to control costs through performance management and strategic sourcing
Potential upside to long-term EPS growth if nonutility group retains some benefit from lower
tax rate
Long-Term Outlook Remains Strong
Long Cycle of Infrastructure Spend in the U.S. will Drive
Growth Across All of Vectren’s Businesses
26 Vectren | Investor Presentation | February/March 2018
1 Guidance excludes 179D retroactive tax benefit for 2017,
expected to add ~$0.05 - $0.07 to 2018E
Vectren 2017 EPS Bridge to Midpoint 2018E
Utility
$2.60
$2.85
($0.04) $0.15
$0.11
2017
Actual
Infrastructure
Investment
Power Plant
Outages/
Maint. O&M
Nonutility
Benefit of
Tax Reform
2018E
Guidance
Midpoint
$2.90 - $2.92 1
Nonutility
Growth
$0.08
($0.05)
Extremely
Unfavorable
Construction
Weather
Nonutility
$0.05 - $0.07 1
2018E
Guidance
Midpoint
$2.85
Appendix
Q4 2017 Results and Highlights
28
VISCO Other
Nonutility
Vectren Q4 EPS Comparison
$0.84
$0.74
$0.01
($0.13)
($0.03) $0.05
Q4 2016
Actual VESCO
incl. 179D
expiration
in 2016
Gas Infra.
Invest.
SABIC
Lost
Margin
O&M/
Other
Q4 2017
Actual
Vectren | Investor Presentation | February/March 2018
($0.02)
Vectren Q4 consolidated EPS of $0.74
• Utility EPS of $0.65, up $0.03 compared to Q4 2016
– Gas infrastructure investment (+$0.01); cost control efforts, weather, incentive
compensation and other (all total +$0.05); and, as expected, SABIC margin lost
due to cogeneration (-$0.03)
• Nonutility EPS of $0.10 declined by $0.13 compared to Q4 2016 as expected,
reflecting large pipeline project in Q4 2016
– Tax benefit from revaluation of nonutility operations’ deferred taxes offset by
nonutility share of funding the Vectren Foundation
$0.02
Appendix
Utility
Metrics
29 Vectren | Investor Presentation | February/March 2018
Appendix
$ in millions 2017 (1) 2016 2017 (1) 2016
Gross Margin 251.7$ 248.0$ 939.3$ 927.5$
O&M - Non-Pass thru 67.7 68.7 282.3 277.9
O&M - Pass thru 14.9 14.1 52.4 55.7
Depreciation & Amortization 60.1 56.3 234.5 219.1
Other Taxes 15.8 15.4 55.9 58.3
Interest 19.1 17.5 72.6 69.7
Other Income 7.4 6.4 30.6 26.3
Income Taxes 27.9 31.1 96.4 99.5
Net Income 53.6 51.3 175.8 173.6
Earnings Per Share 0.65$ 0.62$ 2.12$ 2.10$
Footnote:
1) 2017 results exclude benefit from revaluation of deferred income taxes and
charge related to funding of Vectren Foundation
Ended Dec 31
3 Months 12 Months
Ended Dec 31
Utility
Metrics
30 Vectren | Investor Presentation | February/March 2018
Appendix
Long-term customer growth expectations: 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
2018E (1)
Guidance
$ in millions Midpoint 2017 (2) 2016 2015 2014 2013
Gross Margin 932$ 939$ 928$ 901$ 899$ 868$
O&M - Non-Pass thru 287 282$ 278$ 279$ 293$ 285$
O&M - Pass thru 68 52$ 56$ 60$ 62$ 48$
Depreciation & Amortization 247 235$ 219$ 209$ 203$ 196$
Other Taxes 65 56$ 58$ 57$ 60$ 57$
Interest 83 73$ 70$ 66$ 67$ 65$
Other Income 40 31$ 26$ 19$ 17$ 10$
Income Taxes 37 96$ 99$ 88$ 83$ 85$
Net Income 185 176$ 174$ 161$ 148$ 142$
Earnings Per Share 2.23$ 2.12$ 2.10$ 1.95$ 1.80$ 1.72$
Footnotes:
1) 2018 guidance reflects the lower corporate income tax rate
2) 2017 results exclude benefit from revaluation of deferred income taxes and charge related to funding
of Vectren Foundation
Favorable Utility Environments
Constructive Regulatory and Legislative Environments in
Indiana & Ohio Support Required Capital Investment
Electric
IN-South IN-North Ohio IN-South
Infrastructure Investment Recovery (1)
Infrastructure Recovery of Federal Mandates Under SB 251
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
31 Vectren | Investor Presentation | February/March 2018
Appendix
State Utility Commissioners
32
Constructive Regulatory Environments
Appendix
Indiana Utility Regulatory Commission
(IURC)
Public Utilities Commission of Ohio
(PUCO)
Five commissioners
Appointed by Governor
Four-year terms
Commission Rating
Strong (S&P)
Average (SNL)
Five commissioners
Appointed by Governor
Five-year terms
Commission Rating*
Strong (S&P)
Average (SNL)
* Vectren is gas-only in OH; SNL rating may be lower due
to competitive electric market in OH
Commissioner Party
First
Appointed Term Ends
Jim Huston, interim chair R Sept. 2014 Mar. 2021
Angela Weber R Mar. 2014 Mar. 2018
David Ziegner D Aug. 1990 Apr. 2019
Sarah Freeman D Sept. 2016 Jan. 2022
Vacant
Commissioner Party
First
Appointed Term Ends
Asim Haque, chair I Jun. 2013 Apr. 2021
Beth Trombold I Feb. 2013 Apr. 2018
Thomas Johnson R Apr. 2014 Apr. 2019
Lawrence Friedeman D Feb. 2017 Apr. 2020
Daniel Conway R Feb. 2017 Apr. 2022
Vectren | Investor Presentation | February/March 2018
Electric Generation Review
33
Environmental & Sustainability
Renewable Energy Key Pollution Controls
Landfill Gas – 3.2 MW,
Blackfoot Clean Energy Facility
in Winslow, IN (‘09)
Wind energy – up to 80 MW,
purchased under two 20-year
contracts through Benton
County, IN wind farms (‘10)
Voluntary clean power plan
standard in Ind. of 10% by 2025
100% scrubbed for sulfur
dioxide (SO2)
90% controlled for nitrogen
oxide (NOx)
Mercury (Hg) emissions
reduced to meet requirements
Particulate matter removed at
average of 99% efficiency
90% 80%
99%
35%
0%
20%
40%
60%
80%
100%
Sulfur Dioxide Nitrogen Oxide Particulate
Matter
Carbon Dioxide*
Vectren’s Emissions Reductions
(SO2) (NOX) (CO2)
* 3-year average reduction
(2015-2017) vs. 2005
Electric Supply Sources
Coal-fired base load – 5
units totaling 1,000 MW
(95% of ’17 gen.)
Renewables (wind PPA
and landfill gas) – 83 MW
(nearly 5% of ’17 gen.)
Gas-fired peaking turbines
– 6 units totaling 245 MW
(<1% of ’17 gen.)
Vectren | Investor Presentation | February/March 2018
Appendix
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 (2008-17) 53.9% 57.4% 27.8% 62.2% 70.0%
2017 Avg. Heat Rate (BTU/kWh) 11,576 11,007 12,662 10,549 10,896
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
* 50% ownership of 300 MW with Alcoa
Current Portfolio
34 Vectren | Investor Presentation | February/March 2018
Appendix
Infrastructure Services (VISCO)
Metrics
35 Vectren | Investor Presentation | February/March 2018
Appendix
$ in millions 2017
(2)
2016 2017
(2)
2016
Gross Revenue 231.4$ 247.7$ 996.1$ 813.3$
Gross Margin % 9.5% 16.5% 13.0% 14.0%
EBITDA
(1)
15.5$ 36.5$ 102.8$ 93.6$
Depreciation & Amortization 9.9$ 9.7$ 39.7$ 38.2$
Earnings From Operations (1) 6.2$ 27.4$ 66.0$ 56.2$
Interest 3.3$ 3.0$ 13.1$ 12.5$
Net Income (1) 3.7$ 15.1$ 32.3$ 25.0$
Earnings Per Share
(1)
0.05$ 0.18$ 0.39$ 0.30$
Ending Backlog 725$ 725$
Footnotes:
1) After allocations
2) 2017 results exclude benefit from revaluation of deferred income taxes
and charge related to funding of Vectren Foundation
Ended Dec 31
3 Months 12 Months
Ended Dec 31
Infrastructure Services (VISCO)
Metrics (5)
36 Vectren | Investor Presentation | February/March 2018
Appendix
2018E
(4)
Guidance
$ in millions Midpoint 2017 (3) 2016 2015 2014 2013 2012 2011 (5) 2010
Gross Revenue 1,005$ 996.1$ 813.3$ 843.3$ 779.0$ 783.5$ 663.6$ 421.3$ 235.6$
Gross Margin % 13.5% 13.0% 14.0% 14.5% 17.5% 18.0% 18.0% 14.0% 9.0%
EBITDA (1) 115$ 102.8$ 93.6$ 109.2$ 118.6$ 122.0$ 98.2$ 47.9$ 17.8$
Depreciation & Amortization
(2)
40$ 39.7$ 38.2$ 44.5$ 36.2$ 28.8$ 20.7$ 14.9$ 8.8$
Earnings From Operations (1) 76$ 66.0$ 56.2$ 67.1$ 82.6$ 92.8$ 77.8$ 36.6$ 9.7$
Interest 12$ 13.1$ 12.5$ 15.3$ 10.2$ 9.9$ 7.4$ 7.2$ 3.2$
Net Income
(1)
45$ 32.3$ 25.0$ 29.7$ 43.1$ 49.0$ 40.5$ 14.9$ 3.1$
Earnings Per Share
(1)
0.54$ 0.39$ 0.30$ 0.36$ 0.52$ 0.60$ 0.49$ 0.18$ 0.04$
Ending Backlog 725$ 725$ 665$ 625$ 535$ 380$ N/A N/A
Blanket 480$ 435$ 475$ 500$ 460$ 280$
Bid 245$ 290$ 190$ 125$ 75$ 100$
Footnotes:
5) Acquired Minnesota Limited, Inc. March 31, 2011; multi-year metrics provided to show impact of MLI acquisition
4) 2018 guidance reflects the lower corporate income tax rate
3) 2017 results exclude benefit from revaluation of deferred income taxes and charge related to funding of Vectren Foundation
1) After allocations
2) Lower D&A beginning in 2016 due to adjustments of depreciable lives; lower D&A is being reflected in bidding
Infrastructure Services (VISCO)
Pipeline construction and
maintenance in natural gas, oil,
and liquids industry
President – Ted Crowe, 39 years
industry experience
Seasoned management team
Geographic focus: Midwest,
Northeast and Northern US
Primary construction services –
mainline and gathering pipeline;
compressor stations; pump
stations; terminal work; tank
farms; pipeline maintenance;
hydrostatic testing
Minnesota Limited
Transmission
Miller Pipeline
Distribution
Miller Pipeline
Water/Wastewater
37
Business Profile
Pipeline construction and
maintenance in natural gas
distribution industry
President – Kevin Miller, 41
years industry experience
Seasoned management team
Geographic focus: Midwest,
Southern, Eastern and Western
US
Primary construction services –
new mains and services;
replacement mains and services;
external and internal joint
repair; vacuum excavation and
horizontal directional drilling
Pipeline construction and repair
in water and wastewater
pipeline markets
President – Chris Schuler, 31
years industry experience
Seasoned management team
Geographic focus: Midwest and
Southern US
Primary services – water
pipeline construction;
wastewater rehab utilizing cured
in place pipe, fold in form pipe;
internal joint repair and
horizontal directional drilling
Appendix
Vectren | Investor Presentation | February/March 2018
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 12/31/17 was $480 million compared to $435 million at
12/31/16. 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 12/31/17 is $245 million compared to $290 million at 12/31/16.
Total estimated backlog as of 12/31/17: $725 million compared to $725 million at 12/31/16.
Estimated Backlog
Appendix
38 Vectren | Investor Presentation | February/March 2018
Energy Services (VESCO)
39
Metrics
Vectren | Investor Presentation | February/March 2018
Appendix
$ in millions 2017 (4) 2016 2017 (4) 2016
Revenue 88.7$ 68.2$ 281.8$ 260.0$
Gross Margin as % of Revenue 25% 25% 24% 24%
EBITDA (1) 8.8$ 1.3$ 15.1$ 13.3$
Interest -$ 0.4$ 0.5$ 1.8$
179D Tax Deductions
(2)
-$ 2.9$ -$ 5.5$
Net Income
(1)
5.9$ 3.8$ 10.7$ 12.5$
Earnings Per Share
(1)
0.07$ 0.05$ 0.13$ 0.15$
EPS excluding 179D
(1)
0.07$ 0.01$ 0.13$ 0.08$
Ending Backlog (3) 180$ 234$
New Contracts (3) 83$ 113$ 201$ 239$
Footnotes:
3) Represents signed construction contracts; does not include multi-year O&M agreements
2) Net income impact to VESCO, net of related expenses; EPS impact to VESCO of approx. $0.07 per
share in 2016, net of related expenses (no impact in 2017 - 179D tax law expired in 2016); EPS impact in
2016 at VVC consolidated level of approx. $0.05, net of compensation-related costs
4) 2017 results exclude benefit from revaluation of deferred income taxes and charge related
to funding of Vectren Foundation
1) After allocations
12 Months
Ended Dec 31
3 Months
Ended Dec 31
40
Metrics
Vectren | Investor Presentation | February/March 2018
Appendix
Energy Services (VESCO)
2018E (5)
Guidance
$ in millions Midpoint 2017 (4) 2016 2015 2014 2013
Revenue 330$ 281.8$ 260.0$ 199.9$ 129.8$ 91.3$
Gross Margin as % of Revenue 22% 24% 24% 22% 24% 27%
EBITDA
(1)
16$ 15.1$ 13.3$ 3.5$ (5.9)$ (8.7)$
Interest 1$ 0.5$ 1.8$ 1.2$ 1.2$ 0.5$
179D Tax Deductions (2) -$ -$ 5.5$ 6.1$ 3.7$ 6.4$
Net Income / (Loss) (1) 10$ 10.7$ 12.5$ 7.3$ (3.2)$ 1.0$
Earnings Per Share (1) 0.12$ 0.13$ 0.15$ 0.09$ (0.04)$ 0.01$
Ending Backlog (3) 175$ 180$ 234$ 226$ 144$ 72$
New Contracts (3) 300$ 201$ 239$ 258$ 189$ 86$
Footnotes:
3) Represents signed construction contracts; does not include multi-year O&M agreements
5) 2018 guidance reflects the lower corporate income tax rate
4) 2017 results exclude benefit from revaluation of deferred income taxes and charge related to funding of
Vectren Foundation
1) After allocations
2) Net income impact to VESCO, net of related expenses; EPSimpact to VESCO of approx. $0.07 per share in 2016,
net of related expenses; EPS impact in 2016 at VVC consolidated level of approx. $0.05, net of compensation-
related costs;179D tax law expired in 2016, but in Feb. '18 was retroactively extended one year thru 2017; expect
2018E EPS at VVC level, net of related expenses, to benefit ~$0.05-$0.07 from the extension; excluded from 2018
guidance metrics since not currently expected to recur in subsequent years
Energy Services (VESCO)
Performance
Contracting
Sustainable
Infrastructure
Operations &
Maintenance
41
Business Profile
Appendix
Vectren | Investor Presentation | February/March 2018
Public & Federal Sectors
Design and construction of
efficiency projects where savings
are used to finance the
improvements
Excess savings often used to fund
deferred maintenance projects
Solid reputation among
customers for innovative
solutions and quality work
Key Drivers
Aging infrastructure
Need to reduce operating costs
Lack of capital budgets
Escalating electricity prices
Sustainability initiatives
Strong public policy support
Efficiency is the cheapest
resource
Public, Private and Federal Sectors
Design and construction of larger
scale capital projects
Combined heat and power (CHP)
Anaerobic digesters, landfill gas and
other renewable energy projects
Compressed natural gas (CNG)
transportation fuel infrastructure
Key Drivers
Prospect of increasing electric rates
and stable natural gas prices
Desire for control of energy prices
Electric grid reliability concerns
Increasing environmental
regulations (air, water, organic
waste)
Advances in technology (microgrids,
renewables, and storage)
Corporate and institutional
sustainability initiatives
Public & Federal Sectors
Focus on plants and projects built by
VESCO – currently 13 locations; five
under construction
Steam, electricity, chilled water and
power conditioning
Accounts for approximately 20% of
VESCO’s work force
Contributes $25M - $30M of revenue
annually; some recent large projects
will add to this total in coming years
Key Drivers
Customer convenience and risk
reduction (focus on core business)
VESCO reduces risks associated with
any savings or operations guarantees
Attractive recurring revenue stream
Fed projects often require long-term
operations & maintenance
agreements
42 Vectren | Investor Presentation | February/March 2018
Tax Cuts and Jobs Act of 2017
Summary of Impacts to 2017 Results – GAAP to Non-GAAP Reconciliation
Appendix
(In millions, except EPS)
GAAP
Measure
Deferred Tax
Revaluation
(Gain) / Loss
Operating Expense
Charge
Non-GAAP
Measure
Consolidated
Net Income 216.0$ (45.3)$ 45.3$ 216.0$
Basic EPS 2.60$ (0.55)$ 0.55$ 2.60$
Utility Group
Net Income 175.8$ (23.2)$ 23.2$ 175.8$
Basic EPS 2.12$ (0.28)$ 0.28$ 2.12$
Utility Group Segments
Gas Utility - Net Income 115.5$ (27.3)$ -$ 88.2$
Electric Utility - Net Income 75.2$ -$ -$ 75.2$
Other Utility Operations - Net Income (14.9)$ 4.1$ 23.2$ 12.4$
Nonutility Group
Net Income 41.1$ (22.3)$ 22.1$ 40.9$
Basic EPS 0.49$ (0.27)$ 0.27$ 0.49$
Corp & Other
Net Income (0.9)$ 0.2$ -$ (0.7)$
Basic EPS (0.01)$ -$ -$ (0.01)$
Other Operating Expense
Consolidated 1,115.9$ -$ (69.7)$ 1,046.2$
Utility Group 370.4$ -$ (35.7)$ 334.7$
Income Tax Expense
Consolidated 46.4$ 45.3$ 24.4$ 116.1$
Utility Group 60.7$ 23.2$ 12.5$ 96.4$
Nonutility Group (13.5)$ 22.3$ 11.9$ 20.7$
Corp & Other (0.8)$ (0.2)$ -$ (1.0)$
Twelve Months Ended December 31, 2017
Use of Non-GAAP Performance Measures and Per
Share Measures
43
Contribution to Vectren's 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.
Vectren | Investor Presentation | February/March 2018
Appendix