Attached files
| file | filename |
|---|---|
| EX-99.2 - EXHIBIT 99.2 - INVESTOR PRES - MAY 2017 - FLS - VECTREN CORP | exhibit992-investorpresent.htm |
| 8-K - 8-K - INVESTOR PRESENTATION - MAY 2017 - VECTREN CORP | a8-kxinvestorpresentationx.htm |
May 9‐11, 2017
Management Representatives
Dave Parker
Director, Investor
Relations
Carl Chapman
Chairman, President & CEO
Susan Hardwick
Exec. Vice President & CFO
Vectren | NY/Boston Investor Meetings | May 20172
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 | NY/Boston Investor Meetings | May 20173
Consolidated Q1 2017 Results
Consistent Earnings Growth Continues
In millions, except per share amounts
2017 2016
Utility Group 65.9$ 61.1$
Nonutility Group
Infrastructure Services (VISCO) (9.3) (12.6)
Energy Services (VESCO) (1.2) 0.1
Other Businesses ‐ (0.2)
Nonutility Group (10.5) (12.7)
Corporate and Other ‐ (0.1)
Earnings 55.4$ 48.3$
Utility Group 0.80$ 0.74$
Nonutility Group (0.13) (0.16)
Corporate and Other ‐ ‐
EPS 0.67$ 0.58$
Weighted Avg Shares Outstanding ‐ Basic 82.9 82.8
Ended Mar 31
3 Months
Vectren | NY/Boston Investor Meetings | May 20174
2017 Q1 Results and Highlights
Vectren Q1 consolidated EPS of $0.67
• Utility EPS of $0.80, up 8.1% or $0.06 compared to 2016
– Gas infrastructure investment continues to fuel Utility EPS growth
– Warm weather negatively impacted EPS ~($0.05) vs. normal and
~($0.02) compared to Q1 ‘16
• Nonutility Q1 EPS improved by $0.03 from 2016
– VISCO’s performance benefitted from continued strong utility demand
and favorable construction weather, partially offset by pre‐construction
costs primarily related to a large pipeline project
Despite Mild Weather, Strong Utility Results
Boosted EPS in Q1 2017
$0.45
$0.50
$0.55
$0.60
$0.65
$0.70
Weather
Vectren 2017 Q1 EPS
$0.58
$0.67
($0.03)
$0.04
$0.05
$0.03
$0.03
($0.02)
2016
Actual
VESCO
179D
in 2016
Gas
Infra.
Invest.
SABIC
Lost
Margin
Sm/Lrg
Cust.
Margin
O&M /
Other
2017
Actual
VISCO
($0.01)
Vectren | NY/Boston Investor Meetings | May 20175
2017 Guidance Affirmed
Continues to Reflect Strong Utility Earnings
Growth from Significant Infrastructure Investment Plan
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
Affirming 2017 guidance despite Q1 unfavorable weather EPS impact of
~($0.05) compared to normal
Vectren | NY/Boston Investor Meetings | May 20176
Vectren
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)
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
VVC 5 Year
CAGR of 16%
Vectren | NY/Boston Investor Meetings | May 20178
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…
$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
Vectren | NY/Boston Investor Meetings | May 20179
Long‐Term Targets
Consolidated EPS growth 6‐8%
Dividend growth 6‐8%
Consolidated payout ratio 60‐65%
Utility EPS growth 5‐7%
Vectren’s Long‐Term Outlook Improves
Note: Long‐term EPS growth of approx. $0.06‐0.10/yr. for Nonutility
• $0.02‐$0.03 EPS growth/yr. for VESCO
• $0.04‐$0.07 EPS growth/yr. for VISCO
EPS and Dividend Growth Targets Reflect
Long‐Term Utility Capital Investment Plan of $6.5 Billion
Vectren | NY/Boston Investor Meetings | May 201710
$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.)
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%
Vectren | NY/Boston Investor Meetings | May 201711
Increased Utility CapEx Drives Earnings
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 filed in Feb. 2017 and
IRP filed in Dec. 2016
Vectren | NY/Boston Investor Meetings | May 201712
Utility
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 | NY/Boston Investor Meetings | May 201714
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
Utility Cap Ex 2016A 2017E 2018E 2019E 2020E 2021E 2017E‐2021E 2017E‐2026E
Gas Utilities 359$ 395$ 365$ 370$ 355$ 400$ 1,885$ 3,850$
Electric Utility 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
Vectren | NY/Boston Investor Meetings | May 201715
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
~$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.
Vectren | NY/Boston Investor Meetings | May 201716
Electric Grid Modernization
7‐year investment of more than $500 million
• Plan filed with IN Commission Feb. 23, 2017
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
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 | NY/Boston Investor Meetings | May 201717
2015 Generation Mix
(MWhs)
Energy Efficiency,
Renewables, Other
10%
Coal Base Load
90%
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 was filed with the IN Commission in
Dec. 2016
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
2026 Generation Mix
(MWhs)
Energy Efficiency,
Renewables, Other
15%
Coal
Base Load
30%
Natural Gas
55%
Vectren | NY/Boston Investor Meetings | May 201718
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
Financing Goals Remain Unchanged: Strong Balance Sheet & Cap
Structures, No Incremental Utility Parent Leverage
Vectren | NY/Boston Investor Meetings | May 201719
Corporate Tax Reform
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
Vectren | NY/Boston Investor Meetings | May 201720
Utility Regulatory Update
21
RFPs for gas‐fired generation needs to be issued in ~Q2 2017
• Key criteria will include location, reliability and creditworthiness
Integrated Resource Plan (IRP) – comments from various parties received by Indiana
Commission in April; our comments in response to be submitted in May
Commission Staff report on our IRP will likely come later this summer
Governor Holcomb signed on May 2nd
Ensures net metering customers who generate their own power will be compensated at a fair,
market‐based rate for power they deliver back to the system, ending the existing subsidies over time
Requires a competitive bid for construction of new generation (RFP) over 80 MWs; utility builds and
owns the plant or owns it after construction is complete
Indiana Senate Bill 309
Generation Diversification
Electric Utility Update ‐ Including New Indiana Law Just Signed
Vectren | NY/Boston Investor Meetings | May 2017
Utility Regulatory Update (continued)
22
Feb. ’14: Commission
approved 5‐yr. extension
(‘13‐’17, ~$200M) of
distribution
replacement rider (DRR)
May ’17: Filed annual
DRR update for costs
incurred in 2016;
approval expected later
this summer
Aug. ’14: Initial 7‐year (‘14‐
’20) gas infrastructure plan
approved
Jan. ‘17: Commission issued
5th semi‐annual order
($950M) – no issues; 6th
semi‐annual update case
filed in Apr. ‘17
Apr. ’17: Lost appeal related
to ability to “update” 7‐year
plan
• No material impact to Vectren as
~$65M utility transmission line
project, which was the project at
issue in appeal, was pre‐approved for
recovery in the next gas rate case
Indiana Gas Utilities Ohio Gas Utility Indiana Electric Utility
Mar. ’17: Won appeal of the
4‐year cap on lost margin
recovery related to 2016‐17
energy efficiency plan
• Case remanded back to
Commission for review of
reasonableness of plan as
originally filed; expect Order
by end of 2017
• Plan also includes continued
cost recovery for program and
administrative expenses
Apr. ’17: Filed 2018‐20
energy efficiency plan; plan is
consistent with prior filings;
expect Order by end of 2017
Additional Key Topics ‐ Gas and Electric
Vectren | NY/Boston Investor Meetings | May 2017
Anticipated Timeline for Near‐Term Regulatory Activity
23
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;
Order likely in
early 2019
IRP Filed w/ IN
Commission
December 2016
IN Commission Staff
Comments on IRP
Due ~Summer 2017
Issue RFPs for
Electric Supply
Needs
~Q2 2017
Cert. of Public Need
for Electric Supply
Needs Filed w/ IN
Commission
~Q4 2017; Order
likely in early 2019
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 in 2018
• IN Gas base rate case to be filed in 2020
• IN Electric base rate case to be filed in 2023
4MW Universal Solar
Plan Filed w/ IN
Commission
February 2017
IN Commission Order
on 7-Year (’17-’23)
Electric Grid
Modernization Plan
Due ~September 2017
Vectren | NY/Boston Investor Meetings | May 2017
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
Vectren | NY/Boston Investor Meetings | May 201724
Nonutility
Infrastructure
Services
(VISCO)
Performance
Contracting
Sustainable
Infrastructure
Projects
Energy
Services
(VESCO)
Distribution
Pipeline
Construction
Transmission
Pipeline
Construction
Nonutility
Outlook
$20 $18
$23
$49 $53
$‐
$15
$30
$45
$60
Q1 '13 Q1 '14 Q1 '15 Q1 '16 Q1 '17
In millions
2017 Q1 Nonutility Results
VISCO EPS – 2017 Q1 up $0.04 vs. 2016; TTM of $0.34, up $0.10 vs. TTM 2016 Q1
• Improved Q1 results were driven by continued strong demand from gas utilities for distribution
construction work and favorable weather, tempered by pre‐construction costs largely related to the
approximate 150‐mile, and now $170M transmission project in Ohio, with revenues just starting in
late Q1
– Record backlog of $780M at 3/31/17 driven by Distrib. growth and the $170M Ohio project
VESCO – 2017 Q1 revenues of $53M, exceeding last year’s Q1 record
• Continued strong margins for Energy Services in the quarter; year‐over‐year net income
comparisons in 2017 will reflect 2016 expiration of 179D tax credits
• U.S. DOE continues focus on performance contracting work; ESG one of the contractors selected
$585 $610
$655
$725
$780
$400
$500
$600
$700
$800
Q1 '14 Q1 '15 Q1 '16 Q4 '16 Q1 '17
In millions
VISCO Backlog
26
VESCO Q1 Revenues
VISCO’s Results Reflect Steady Improvement, Including the
Trailing Twelve‐Month (TTM) Comparison
Vectren | NY/Boston Investor Meetings | May 2017
VISCO 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
VISCO gross margin decline primarily reflects slowed transmission
construction activity; recovery expected as activity picks up
Growth Driven By Continued Distribution Activity and
Transmission Sector Recovery
$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
Vectren | NY/Boston Investor Meetings | May 201727
VESCO Outlook
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.
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
Long‐term demand drivers here to stay: energy efficiency, system resiliency and
sustainable infrastructure including renewable/clean generation
$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
~$375M
Vectren | NY/Boston Investor Meetings | May 201728
Closing
Remarks
Top Decile for Dividend Increases
$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
Vectren | NY/Boston Investor Meetings | May 201730
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%
VVC 5 Year
CAGR of 16%
110%
102% 98%
71%
64%
Vectren VVC Peers S&P 500 Dow
Utilities
S&P 500
Utilities
Vectren | NY/Boston Investor Meetings | May 201731
Vectren’s Long‐Term Outlook Improves Again
Long‐Term Targets
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
$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%
EPS and Dividend Growth Targets Reflect
Long‐Term Utility Capital Investment Plan of $6.5 Billion
Vectren | NY/Boston Investor Meetings | May 201732
Appendix
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
Appendix
Vectren | NY/Boston Investor Meetings | May 201734
2017E
Guidance 2016
$ in millions Midpoint Actual
(unchanged)
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
Metrics
Appendix
Vectren | NY/Boston Investor Meetings | May 201735
Infrastructure Services (VISCO)
Metrics
Appendix
$ in millions 2017 2016 2017 2016
Gross Revenue 147.3$ 112.5$ 848.0$ 779.0$
Gross Margin % 5.0% 1.5% 14.0% 14.0%
EBITDA (1) (0.3)$ (4.9)$ 98.2$ 92.9$
Depreciation & Amortization (2) 9.9$ 9.6$ 38.5$ 44.1$
Earnings From Operations (1) (9.3)$ (13.5)$ 60.8$ 51.5$
Interest 3.0$ 3.7$ 11.9$ 15.2$
Net Income (1) (9.3)$ (12.6)$ 28.2$ 19.8$
Earnings Per Share (1) (0.11)$ (0.15)$ 0.34$ 0.24$
Ending Backlog 780$ 655$ 780$ 655$
Footnotes:
Trailing
reflected in bidding
Ended Mar 31
3 Months 12 Months
Ended Mar 31
1) After allocations
2) Lower D&A beginning in 2016 due to adjustments of depreciable lives; lower D&A is being
Vectren | NY/Boston Investor Meetings | May 201736
Infrastructure Services (VISCO)
Metrics – 5 year look
Appendix
2017E
Guidance
Midpoint
$ in millions (unchanged) 2016 2015 2014 2013 2012
Gross Revenue 945$ 813.3$ 843.3$ 779.0$ 783.5$ 663.6$
Gross Margin % 14.0% 14.0% 14.5% 17.5% 18.0% 18.0%
EBITDA (1) 115$ 93.6$ 109.2$ 118.6$ 122.0$ 98.2$
Depreciation & Amortization (2) 40$ 38.2$ 44.5$ 36.2$ 28.8$ 20.7$
Earnings From Operations (1) 75$ 56.2$ 67.1$ 82.6$ 92.8$ 77.8$
Interest 12$ 12.5$ 15.3$ 10.2$ 9.9$ 7.4$
Net Income (1) 35$ 25.0$ 29.7$ 43.1$ 49.0$ 40.5$
Earnings Per Share (1) 0.42$ 0.30$ 0.36$ 0.52$ 0.60$ 0.49$
Ending Backlog 725$ 665$ 625$ 535$ 380$
Footnotes:
2) Lower D&A beginning in 2016 due to adjustments of depreciable lives; lower D&A is being
reflected in bidding
1) After allocations
Vectren | NY/Boston Investor Meetings | May 201737
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 3/31/17 is $430 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 3/31/17 is $350 million compared to $290 million at 12/31/16.
Total estimated backlog as of 3/31/17: $780 million compared to $725 million at 12/31/16 and $655
million at 3/31/16
Estimated Backlog
Appendix
Vectren | NY/Boston Investor Meetings | May 201738
Energy Services (VESCO)
Metrics
Appendix
$ in millions 2017 2016 2017 2016
Revenue 52.8$ 49.4$ 263.4$ 226.1$
Gross Margin as % of Revenue 23% 23% 24% 22%
EBITDA (1) (1.1)$ 0.2$ 12.0$ 8.1$
Interest 0.3$ 0.5$ 1.7$ 1.4$
179D Tax Deductions (2) ‐$ 0.7$ 4.8$ 6.8$
Net Income / (Loss) (1) (1.2)$ 0.1$ 11.2$ 10.6$
Earnings Per Share (1) (0.01)$ ‐$ 0.14$ 0.13$
Ending Backlog (3) 195$ 208$ 195$ 208$
New Contracts (3) 7$ 24$ 223$ 247$
Footnotes:
3) Represents signed construction contracts; does not include multi‐year O&M agreements
Trailing
1) After allocations
2) Net income impact to VESCO, net of related expenses; 179D tax law expired in 2016
12 Months
Ended Mar 31
3 Months
Ended Mar 31
Vectren | NY/Boston Investor Meetings | May 201739
Energy Services (VESCO)
Metrics – 5 year look
Appendix
2017E
Guidance
Midpoint
$ in millions (unchanged) 2016 2015 2014 2013 2012
Revenue 300$ 260.0$ 199.9$ 129.8$ 91.3$ 117.7$
Gross Margin as % of Revenue 21% 24% 22% 24% 27% 27%
EBITDA (1) 13$ 13.3$ 3.5$ (5.9)$ (8.7)$ (1.1)$
Interest 2$ 1.9$ 1.2$ 1.2$ 0.5$ 0.3$
179D Tax Deductions (2) ‐$ 5.5$ 6.1$ 3.7$ 6.4$ 6.2$
Net Income / (Loss) (1) 7$ 12.5$ 7.3$ (3.2)$ 1.0$ 5.7$
Earnings Per Share (1) 0.09$ 0.15$ 0.09$ (0.04)$ 0.01$ 0.07$
Ending Backlog (3) 250$ 234$ 226$ 144$ 72$ 77$
New Contracts (3) 290$ 239$ 258$ 189$ 86$ 104$
Footnotes:
1) After allocations
2) Net income impact to VESCO, net of related expenses; 179D tax law expired in 2016
Vectren | NY/Boston Investor Meetings | May 201740
Key VESCO Projects
$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)
Appendix
Vectren | NY/Boston Investor Meetings | May 201741
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
Appendix
* 50% ownership of 300 MW with Alcoa
Current Portfolio
Vectren | NY/Boston Investor Meetings | May 201742
Integrated Resource Plan (IRP)*
Preferred Portfolio Overview
* Preferred Plan has been filed with 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%
Vectren | NY/Boston Investor Meetings | May 201743
Use of Non‐GAAP Performance Measures and
Per Share Measures
Appendix
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.
Vectren | NY/Boston Investor Meetings | May 201744