Edgar Filing: VECTREN UTILITY HOLDINGS INC

vuhi_10q.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2009

[_]	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________________ to __________________

Commission file number: 1-16739

VECTREN UTILITY HOLDINGS, INC.

(Exact name of registrant as specified in its charter)

INDIANA		35-2104850
(State or other jurisdiction of incorporation or organization)		(IRS Employer Identification No.)

One Vectren Square, Evansville, IN 47708

(Address of principal executive offices)

(Zip Code)

812-491-4000

(Registrant's telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. þ Yes rNo

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

r Yes rNo

Table of Contents

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer r Accelerated filer r

Non-accelerated filer þ (Do not check if a smaller reporting company) Smaller reporting company r

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

rYes þNo

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.

Common Stock- Without Par Value	10	October 30, 2009
Class	Number of Shares	Date

Access to Information

Vectren Corporation makes available all SEC filings and recent annual reports, including those of its wholly owned subsidiaries, free of charge through its website at www.vectren.com as soon as reasonably practicable after electronically filing or furnishing the reports to the SEC, or by request, directed to Investor Relations at the mailing address, phone number, or email address that follows:

Mailing Address:

One Vectren Square

Evansville, Indiana 47708

Phone Number:

(812) 491-4000

Investor Relations Contact:

Steven M. Schein

Vice President, Investor Relations

sschein@vectren.com

Definitions

AFUDC: allowance for funds used during construction	MMBTU: millions of British thermal units
ASC: Accounting Standards Codification	MW: megawatts
FASB: Financial Accounting Standards Board	MWh / GWh: megawatt hours / thousands of megawatt hours (gigawatt hours)
FERC: Federal Energy Regulatory Commission	NPNS: Normal Purchase of Normal Sale
IDEM: Indiana Department of Environmental Management	OCC: Ohio Office of the Consumer Counselor

IURC: Indiana Utility Regulatory Commission	OUCC: Indiana Office of the Utility Consumer Counselor
MCF / BCF: thousands / billions of cubic feet	PUCO: Public Utilities Commission of Ohio
MDth / MMDth: thousands / millions of dekatherms	USEPA: United States Environmental Protection Agency
MISO: Midwest Independent System Operator	Throughput: combined gas sales and gas transportation volumes

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Table of Contents

Item Number		Page Number
	PART I. FINANCIAL INFORMATION
1	Financial Statements (Unaudited)
	Vectren Utility Holdings, Inc. and Subsidiary Companies
	Consolidated Condensed Balance Sheets	4-5
	Consolidated Condensed Statements of Income	6
	Consolidated Condensed Statements of Cash Flows	7
	Notes to Unaudited Consolidated Condensed Financial Statements	8
2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	24
3	Quantitative and Qualitative Disclosures About Market Risk	38
4	Controls and Procedures	38

	PART II. OTHER INFORMATION
1	Legal Proceedings	38
1A	Risk Factors	39
6	Exhibits	39
	Signatures	40

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PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

VECTREN UTILITY HOLDINGS, INC. AND SUBSIDIARY COMPANIES

CONSOLIDATED CONDENSED BALANCE SHEETS

(Unaudited – In millions)


	September 30,		December 31,
	2009		2008

ASSETS

Current Assets
Cash & cash equivalents	$	14.2	$	52.5
Accounts receivable - less reserves of $4.5 &
$4.5, respectively		67.7		164.0
Receivables due from other Vectren companies		0.8		4.7
Accrued unbilled revenues		33.1		167.2
Inventories		114.0		84.6
Recoverable fuel & natural gas costs		-		3.1
Prepayments & other current assets		80.3		103.1
Total current assets		310.1		579.2

Utility Plant
Original cost		4,530.8		4,335.3
Less: accumulated depreciation & amortization		1,689.3		1,615.0
Net utility plant		2,841.5		2,720.3

Investments in unconsolidated affiliates		0.2		0.2
Other investments		27.9		24.1
Nonutility property - net		174.6		182.4
Goodwill - net		205.0		205.0
Regulatory assets		117.8		115.7
Other assets		4.2		11.2
TOTAL ASSETS	$	3,681.3	$	3,838.1

The accompanying notes are an integral part of these consolidated condensed financial statements.

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VECTREN UTILITY HOLDINGS, INC. AND SUBSIDIARY COMPANIES

CONSOLIDATED CONDENSED BALANCE SHEETS

(Unaudited – In millions)


	September 30,		December 31,
	2009		2008

LIABILITIES & SHAREHOLDER'S EQUITY

Current Liabilities
Accounts payable	$	97.0	$	212.5
Accounts payable to affiliated companies		20.4		72.8
Payables to other Vectren companies		33.8		69.0
Refundable fuel & natural gas costs		34.1		4.1
Accrued liabilities		119.8		147.7
Short-term borrowings		-		191.9
Long-term debt subject to tender		10.0		80.0
Total current liabilities		315.1		778.0

Long-Term Debt - Net of Current Maturities &
Debt Subject to Tender		1,296.5		1,065.1

Deferred Income Taxes & Other Liabilities
Deferred income taxes		402.8		332.1
Regulatory liabilities		322.1		315.1
Deferred credits & other liabilities		86.7		104.9
Total deferred credits & other liabilities		811.6		752.1

Commitments & Contingencies (Notes 9 - 11)

Common Shareholder's Equity
Common stock (no par value)		768.6		763.0
Retained earnings		489.4		479.8
Accumulated other comprehensive income		0.1		0.1
Total common shareholder's equity		1,258.1		1,242.9

TOTAL LIABILITIES & SHAREHOLDER'S EQUITY	$	3,681.3	$	3,838.1

The accompanying notes are an integral part of these consolidated condensed financial statements.

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VECTREN UTILITY HOLDINGS, INC. AND SUBSIDIARY COMPANIES

CONSOLIDATED CONDENSED STATEMENTS OF INCOME

(Unaudited – In millions)


	Three Months				Nine Months
	Ended September 30,				Ended September 30,
	2009		2008		2009		2008
OPERATING REVENUES
Gas utility	$	93.4	$	143.9	$	759.9	$	1,002.4
Electric utility		143.0		147.9		400.7		402.3
Other		0.4		0.6		1.2		1.8
Total operating revenues		236.8		292.4		1,161.8		1,406.5

OPERATING EXPENSES
Cost of gas sold		28.0		80.2		440.6		686.0
Cost of fuel & purchased power		50.1		48.7		147.4		143.2
Other operating		69.9		69.2		227.9		217.7
Depreciation & amortization		45.9		41.6		134.8		123.2
Taxes other than income taxes		10.8		11.7		46.2		51.8
Total operating expenses		204.7		251.4		996.9		1,221.9

OPERATING INCOME		32.1		41.0		164.9		184.6

OTHER INCOME - NET		2.1		0.7		6.1		4.9

INTEREST EXPENSE		20.2		19.6		58.9		59.5

INCOME BEFORE INCOME TAXES		14.0		22.1		112.1		130.0

INCOME TAXES		5.3		8.5		40.6		49.6

NET INCOME	$	8.7	$	13.6	$	71.5	$	80.4

The accompanying notes are an integral part of these consolidated condensed financial statements.

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VECTREN UTILITY HOLDINGS, INC. AND SUBSIDIARY COMPANIES

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS

(Unaudited – In millions)



	Nine Months Ended September 30,
	2009			2008
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$ 71.5			$ 80.4
Adjustments to reconcile net income to cash from operating activities:
Depreciation & amortization		134.8			123.2
Deferred income taxes & investment tax credits		51.3			39.0
Expense portion of pension & postretirement periodic benefit cost		3.1			1.9
Provision for uncollectible accounts		14.7			11.8
Other non-cash charges - net		7.3			8.9
Changes in working capital accounts:
Accounts receivable, including to Vectren companies
& accrued unbilled revenue		219.6			162.1
Inventories		(29.4	)		(72.2	)
Recoverable/refundable fuel & natural gas costs		33.1			(49.0	)
Prepayments & other current assets		38.9			(43.6	)
Accounts payable, including to Vectren companies
& affiliated companies		(191.7	)		12.9
Accrued liabilities		(25.5	)		78.3
Changes in noncurrent assets		(5.1	)		3.2
Changes in noncurrent liabilities		(38.7	)		(14.8	)
Net cash flows from operating activities		283.9			342.1
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from:
Proceeds from long term debt		161.1			171.1
Additional capital contribution from parent		5.5			124.9
Requirements for:
Dividends to parent		(61.9	)		(62.4	)
Retirement of long-term debt, including premiums paid		(2.5	)		(104.0	)
Net change in short-term borrowings		(191.9	)		(272.7	)
Net cash flows from financing activities		(89.7	)		(143.1	)
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from other investing activities		0.2			2.5
Requirements for:
Capital expenditures, excluding AFUDC equity		(231.9	)		(204.1	)
Other investing activities		(0.8	)		(1.1	)
Net cash flows from investing activities		(232.5	)		(202.7	)
Net change in cash & cash equivalents		(38.3	)		(3.7	)
Cash & cash equivalents at beginning of period		52.5			11.7
Cash & cash equivalents at end of period	$	14.2		$	8.0

The accompanying notes are an integral part of these consolidated condensed financial statements.

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VECTREN UTILITY HOLDINGS, INC. AND SUBSIDIARY COMPANIES

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(UNAUDITED)

1.	Organization and Nature of Operations

Vectren Utility Holdings, Inc. (the Company or Utility Holdings), an Indiana corporation, was formed on March 31, 2000 to serve as the intermediate holding company for Vectren Corporation’s (Vectren) for three operating public utilities: Indiana Gas Company, Inc. (Indiana Gas or Vectren North), Southern Indiana Gas and Electric Company (SIGECO or Vectren South), and the Ohio operations (VEDO or Vectren Ohio). Utility Holdings also has other assets that provide information technology and other services to the three utilities. Vectren, an Indiana corporation, is an energy holding company headquartered in Evansville, Indiana and was organized on June 10, 1999. Both Vectren and Utility Holdings are holding companies as defined by the Energy Policy Act of 2005 (Energy Act).

Indiana Gas provides energy delivery services to over 550,000 natural gas customers located in central and southern Indiana. SIGECO provides energy delivery services to over 140,000 electric customers and approximately 110,000 gas customers located near Evansville in southwestern Indiana. SIGECO also owns and operates electric generation to serve its electric customers and optimizes those assets in the wholesale power market. Indiana Gas and SIGECO generally do business as Vectren Energy Delivery of Indiana. The Ohio operations provide energy delivery services to approximately 312,000 natural gas customers located near Dayton in west central Ohio. The Ohio operations are owned as a tenancy in common by Vectren Energy Delivery of Ohio, Inc. (VEDO), a wholly owned subsidiary of Utility Holdings (53 percent ownership), and Indiana Gas (47 percent ownership). The Ohio operations generally do business as Vectren Energy Delivery of Ohio.

2.	Basis of Presentation

The interim consolidated condensed financial statements included in this report have been prepared by the Company, without audit, as provided in the rules and regulations of the Securities and Exchange Commission and include a review of subsequent events through November 6, 2009, the date the financial statements were issued. Certain information and note disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States have been omitted as provided in such rules and regulations. The information in this report reflects all adjustments which are, in the opinion of management, necessary to fairly state the interim periods presented, inclusive of adjustments that are normal and recurring in nature. These consolidated condensed financial statements and related notes should be read in conjunction with the Company’s audited annual consolidated financial statements for the year ended December 31, 2008, filed with the Securities and Exchange Commission on March 2, 2009, on Form 10-K. Because of the seasonal nature of the Company’s utility operations, the results shown on a quarterly basis are not necessarily indicative of annual results.

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates.

3.	Subsidiary Guarantor and Consolidating Information

The Company’s three operating utility companies, SIGECO, Indiana Gas, and VEDO are guarantors of Utility Holdings’ $515 million in short-term credit facilities, of which none were outstanding at September 30, 2009, and Utility Holdings’ $921 million unsecured senior notes outstanding at September 30, 2009. The guarantees are full and unconditional and joint and several, and Utility Holdings has no subsidiaries other than the subsidiary guarantors. However, Utility Holdings does have operations other than those of the subsidiary guarantors. Pursuant to Item 3-10 of Regulation S-X, disclosure of the results of operations and balance sheets of the subsidiary guarantors separate from the parent company’s operations is required. Following are consolidating financial statements including information on the combined operations of the subsidiary guarantors separate from the other operations of the parent company. Pursuant to a tax sharing agreement with Vectren, consolidating tax effects are recorded at the parent (Utility Holdings) level. All other income taxes are calculated on a separate return basis.

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Condensed Consolidating Balance Sheet as of September 30, 2009 (in millions):


ASSETS	Subsidiary		Parent
	Guarantors		Company		Eliminations			Consolidated
Current Assets
Cash & cash equivalents	$	4.6	$	9.6	$	-		$	14.2
Accounts receivable - less reserves		67.4		0.3		-			67.7
Intercompany receivables		60.0		100.1		(160.1	)		-
Receivables due from other Vectren companies		0.3		0.5		-			0.8
Accrued unbilled revenues		33.1		-		-			33.1
Inventories		109.6		4.4		-			114.0
Prepayments & other current assets		69.7		16.5		(5.9	)		80.3
Total current assets		344.7		131.4		(166.0	)		310.1
Utility Plant
Original cost		4,530.8		-		-			4,530.8
Less: accumulated depreciation & amortization		1,689.3		-		-			1,689.3
Net utility plant		2,841.5		-		-			2,841.5
Investments in consolidated subsidiaries		-		1,176.9		(1,176.9	)		-
Notes receivable from consolidated subsidiaries		-		771.0		(771.0	)		-
Investments in unconsolidated affiliates		0.2		-		-			0.2
Other investments		22.5		5.4		-			27.9
Nonutility property - net		4.1		170.5		-			174.6
Goodwill - net		205.0		-		-			205.0
Regulatory assets		93.0		24.8		-			117.8
Other assets		9.4		-		(5.2	)		4.2
TOTAL ASSETS	$	3,520.4	$	2,280.0	$	(2,119.1	)	$	3,681.3


LIABILITIES & SHAREHOLDER'S EQUITY	Subsidiary		Parent
	Guarantors		Company		Eliminations			Consolidated
Current Liabilities
Accounts payable	$	93.5	$	3.5	$	-		$	97.0
Accounts payable to affiliated companies		20.4		-		-			20.4
Intercompany payables		20.3		-		(20.3	)		-
Payables to other Vectren companies		33.7		0.1		-			33.8
Refundable fuel & natural gas costs		34.1		-		-			34.1
Accrued liabilities		105.0		20.7		(5.9	)		119.8
Short-term borrowings		-		-		-			-
Intercompany short-term borrowings		79.9		59.9		(139.8	)		-
Long-term debt subject to tender		10.0		-		-			10.0
Total current liabilities		396.9		84.2		(166.0	)		315.1
Long-Term Debt
Long-term debt - net of current maturities &
debt subject to tender		376.8		919.7		-			1,296.5
Long-term debt due to VUHI		771.0		-		(771.0	)		-
Total long-term debt - net		1,147.8		919.7		(771.0	)		1,296.5
Deferred Income Taxes & Other Liabilities
Deferred income taxes		394.0		8.8		-			402.8
Regulatory liabilities		317.9		4.2		-			322.1
Deferred credits & other liabilities		86.9		5.0		(5.2	)		86.7
Total deferred credits & other liabilities		798.8		18.0		(5.2	)		811.6
Common Shareholder's Equity
Common stock (no par value)		781.8		768.6		(781.8	)		768.6
Retained earnings		395.0		489.4		(395.0	)		489.4
Accumulated other comprehensive income		0.1		0.1		(0.1	)		0.1
Total common shareholder's equity		1,176.9		1,258.1		(1,176.9	)		1,258.1

TOTAL LIABILITIES & SHAREHOLDER'S EQUITY	$	3,520.4	$	2,280.0	$	(2,119.1	)	$	3,681.3

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Condensed Consolidating Balance Sheet as of December 31, 2008 (in millions):



ASSETS	Subsidiary		Parent
	Guarantors		Company		Eliminations			Consolidated
Current Assets
Cash & cash equivalents	$	9.7	$	42.8	$	-		$	52.5
Accounts receivable - less reserves		163.5		0.5		-			164.0
Intercompany receivables		104.2		275.9		(380.1	)		-
Receivables due from other Vectren companies		4.5		0.2		-			4.7
Accrued unbilled revenues		167.2		-		-			167.2
Inventories		78.7		5.9		-			84.6
Recoverable fuel & natural gas costs		3.1		-		-			3.1
Prepayments & other current assets		82.9		38.5		(18.3	)		103.1
Total current assets		613.8		363.8		(398.4	)		579.2
Utility Plant
Original cost		4,335.3		-		-			4,335.3
Less: accumulated depreciation & amortization		1,615.0		-		-			1,615.0
Net utility plant		2,720.3		-		-			2,720.3
Investments in consolidated subsidiaries		-		1,167.4		(1,167.4	)		-
Notes receivable from consolidated subsidiaries		-		698.9		(698.9	)		-
Investments in unconsolidated affiliates		0.2		-		-			0.2
Other investments		18.5		5.6		-			24.1
Nonutility property - net		4.3		178.1		-			182.4
Goodwill - net		205.0		-		-			205.0
Regulatory assets		90.5		25.2		-			115.7
Other assets		14.2		0.2		(3.2	)		11.2
TOTAL ASSETS	$	3,666.8	$	2,439.2	$	(2,267.9	)	$	3,838.1


LIABILITIES & SHAREHOLDER'S EQUITY	Subsidiary		Parent
	Guarantors		Company		Eliminations			Consolidated
Current Liabilities
Accounts payable	$	205.5	$	7.0	$	-		$	212.5
Accounts payable to affiliated companies		72.8		-		-			72.8
Intercompany payables		9.5		0.4		(9.9	)		-
Payables to other Vectren companies		53.6		15.4		-			69.0
Refundable fuel & natural gas costs		4.1		-		-			4.1
Accrued liabilities		146.4		19.6		(18.3	)		147.7
Short-term borrowings		0.4		191.5		-			191.9
Intercompany short-term borrowings		266.3		103.9		(370.2	)		-
Long-term debt subject to tender		80.0		-		-			80.0
Total current liabilities		838.6		337.8		(398.4	)		778.0
Long-Term Debt
Long-term debt - net of current maturities &
debt subject to tender		243.1		822.0		-			1,065.1
Long-term debt due to VUHI		698.9		-		(698.9	)		-
Total long-term debt - net		942.0		822.0		(698.9	)		1,065.1
Deferred Income Taxes & Other Liabilities
Deferred income taxes		308.9		23.2		-			332.1
Regulatory liabilities		310.4		4.7		-			315.1
Deferred credits & other liabilities		99.5		8.6		(3.2	)		104.9
Total deferred credits & other liabilities		718.8		36.5		(3.2	)		752.1
Common Shareholder's Equity
Common stock (no par value)		776.3		763.0		(776.3	)		763.0
Retained earnings		391.0		479.8		(391.0	)		479.8
Accumulated other comprehensive income		0.1		0.1		(0.1	)		0.1
Total common shareholder's equity		1,167.4		1,242.9		(1,167.4	)		1,242.9

TOTAL LIABILITIES & SHAREHOLDER'S EQUITY	$	3,666.8	$	2,439.2	$	(2,267.9	)	$	3,838.1

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Condensed Consolidating Statement of Income for the three months ended September 30, 2009 (in millions):


	Subsidiary		Parent		Eliminations &
	Guarantors		Company		Reclassifications			Consolidated
OPERATING REVENUES
Gas utility	$	93.4	$	-	$	-			93.4
Electric utility		143.0		-		-			143.0
Other		-	$	10.7		(10.3	)		0.4
Total operating revenues		236.4		10.7		(10.3	)		236.8
OPERATING EXPENSES
Cost of gas		28.0		-		-			28.0
Cost of fuel & purchased power		50.1		-		-			50.1
Other operating		80.1		-		(10.2	)		69.9
Depreciation & amortization		39.1		6.7		0.1			45.9
Taxes other than income taxes		10.4		0.4		-			10.8
Total operating expenses		207.7		7.1		(10.1	)		204.7
OPERATING INCOME		28.7		3.6		(0.2	)		32.1
OTHER INCOME (EXPENSE) - NET
Equity in earnings of consolidated companies		-		7.8		(7.8	)		-
Other income – net		1.7		12.9		(12.5	)		2.1
Total other income - net		1.7		20.7		(20.3	)		2.1
Interest expense		18.6		14.3		(12.7	)		20.2
INCOME BEFORE INCOME TAXES		11.8		10.0		(7.8	)		14.0
Income taxes		4.0		1.3		-			5.3
NET INCOME	$	7.8	$	8.7	$	(7.8	)	$	8.7

Condensed Consolidating Statement of Income for the three months ended September 30, 2008 (in millions):


	Subsidiary			Parent		Eliminations &
	Guarantors			Company		Reclassifications			Consolidated
OPERATING REVENUES
Gas utility	$	143.9		$	-	$	-			143.9
Electric utility		147.9			-		-			147.9
Other		-			11.7		(11.1	)		0.6
Total operating revenues		291.8			11.7		(11.1	)		292.4
OPERATING EXPENSES
Cost of gas		80.2			-		-			80.2
Cost of fuel & purchased power		48.7			-		-			48.7
Other operating		79.0			1.0		(10.8	)		69.2
Depreciation & amortization		35.7			5.8		0.1			41.6
Taxes other than income taxes		11.3			0.4		0.0			11.7
Total operating expenses		254.9			7.2		(10.7	)		251.4
OPERATING INCOME		36.9			4.5		(0.4	)		41.0
OTHER INCOME (EXPENSE) - NET
Equity in earnings of consolidated companies		-			11.4		(11.4	)		-
Other income (expense) – net		(0.1	)		13.3		(12.5	)		0.7
Total other income (expense) - net		(0.1	)		24.7		(23.9	)		0.7
Interest expense		18.5			14.0		(12.9	)		19.6
INCOME BEFORE INCOME TAXES		18.3			15.2		(11.4	)		22.1
Income taxes		6.9			1.6		-			8.5
NET INCOME	$	11.4		$	13.6	$	(11.4	)	$	13.6

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Condensed Consolidating Statement of Income for the nine months ended September 30, 2009 (in millions):


	Subsidiary		Parent		Eliminations &
	Guarantors		Company		Reclassifications			Consolidated
OPERATING REVENUES
Gas utility	$	759.9	$	-	$	-		$	759.9
Electric utility		400.7		-		-			400.7
Other		-		32.1		(30.9	)		1.2
Total operating revenues		1,160.6		32.1		(30.9	)		1,161.8
OPERATING EXPENSES
Cost of gas sold		440.6		-		-			440.6
Cost of fuel & purchased power		147.4		-		-			147.4
Other operating		258.3		-		(30.4	)		227.9
Depreciation & amortization		115.0		19.8		-			134.8
Taxes other than income taxes		45.2		1.0		-			46.2
Total operating expenses		1,006.5		20.8		(30.4	)		996.9
OPERATING INCOME		154.1		11.3		(0.5	)		164.9
OTHER INCOME (EXPENSE)
Equity in earnings of consolidated companies		-		65.8		(65.8	)		-
Other income – net		5.2		38.1		(37.2	)		6.1
Total other income		5.2		103.9		(103.0	)		6.1
Interest expense		54.9		41.7		(37.7	)		58.9
INCOME BEFORE INCOME TAXES		104.4		73.5		(65.8	)		112.1
Income taxes		38.6		2.0		-			40.6
NET INCOME	$	65.8	$	71.5	$	(65.8	)	$	71.5

Condensed Consolidating Statement of Income for the nine months ended September 30, 2008 (in millions):


	Subsidiary		Parent		Eliminations &
	Guarantors		Company		Reclassifications			Consolidated
OPERATING REVENUES
Gas utility	$	1,002.4	$	-	$	-		$	1,002.4
Electric utility		402.3		-		-		$	402.3
Other		-		35.2		(33.4	)		1.8
Total operating revenues		1,404.7		35.2		(33.4	)		1,406.5
OPERATING EXPENSES
Cost of gas sold		686.0		-		-			686.0
Cost of fuel & purchased power		143.2		-		-			143.2
Other operating		250.1		-		(32.4	)		217.7
Depreciation & amortization		106.3		16.7		0.2			123.2
Taxes other than income taxes		50.7		1.0		0.1			51.8
Total operating expenses		1,236.3		17.7		(32.1	)		1,221.9
OPERATING INCOME		168.4		17.5		(1.3	)		184.6
OTHER INCOME (EXPENSE)
Equity in earnings of consolidated companies		-		71.2		(71.2	)		-
Other income (expense) – net		2.7		37.8		(35.6	)		4.9
Total other income (expense)		2.7		109.0		(106.8	)		4.9
Interest expense		54.3		42.1		(36.9	)		59.5
INCOME BEFORE INCOME TAXES		116.8		84.4		(71.2	)		130.0
Income taxes		45.6		4.0		-			49.6
NET INCOME	$	71.2	$	80.4	$	(71.2	)	$	80.4

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Condensed Consolidating Statement of Cash Flows for the nine months ended September 30, 2009 (in millions):

	Subsidiary			Parent
	Guarantors			Company			Eliminations			Consolidated

NET CASH FLOWS FROM OPERATING ACTIVITIES	$	280.6		$	3.3		$	-		$	283.9

CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from
Additional capital contribution from parent		5.5			5.5			(5.5	)		5.5
Long-term debt - net of issuance costs & hedging proceeds		136.2			99.5			(74.6	)		161.1
Requirements for:
Dividends to parent		(61.9	)		(61.9	)		61.9			(61.9	)
Retirement of long-term debt, including premiums paid		(2.5	)		(2.5	)		2.5			(2.5	)
Net change in intercompany short-term borrowings		(186.5	)		(44.0	)		230.5			-
Net change in short-term borrowings		(0.4	)		(191.5	)		-			(191.9	)