Edgar Filing: VECTREN UTILITY HOLDINGS INC

vuhi_10q.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended June 30, 2008

[_]	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, Indiana, 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. Yes x No __

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 □ Accelerated filer □

Non-accelerated filer ý (Do not check if a smaller reporting company) Smaller reporting company □

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

Yes □ No ý

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	July 31, 2008
Class	Number of Shares	Date

Definitions

AFUDC: allowance for funds used during construction	MMBTU: millions of British thermal units
APB: Accounting Principles Board	MW: megawatts
EITF: Emerging Issues Task Force	MWh / GWh: megawatt hours / thousands of megawatt hours (gigawatt hours)
FASB: Financial Accounting Standards Board	OCC: Ohio Office of the Consumer Counselor
FERC: Federal Energy Regulatory Commission	OUCC: Indiana Office of the Utility Consumer Counselor
IDEM: Indiana Department of Environmental Management	PUCO: Public Utilities Commission of Ohio
IURC: Indiana Utility Regulatory Commission	SFAS: Statement of Financial Accounting Standards
MCF / BCF: thousands / billions of cubic feet	USEPA: United States Environmental Protection Agency
MDth / MMDth: thousands / millions of dekatherms	Throughput: combined gas sales and gas transportation volumes

Access to Information

Vectren Corporation makes available all SEC filings and recent annual reports free of charge, including those of its wholly owned subsidiaries, through its website at www.vectren.com, 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

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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 Results of Operations and Financial Condition	23
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	38
6	Exhibits	39
	Signatures	39

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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)

	June 30,		December 31,
	2008		2007

ASSETS
Current Assets
Cash & cash equivalents	$	8.2	$	11.7
Accounts receivable - less reserves of $5.0 &
$2.7, respectively		102.3		137.1
Receivables due from other Vectren companies		0.4		17.9
Accrued unbilled revenues		38.9		140.6
Inventories		113.3		134.9
Recoverable fuel & natural gas costs		17.7		-
Prepayments & other current assets		76.8		93.3
Total current assets		357.6		535.5

Utility Plant
Original cost		4,169.9		4,062.9
Less: accumulated depreciation & amortization		1,569.3		1,523.2
Net utility plant		2,600.6		2,539.7

Investments in unconsolidated affiliates		0.2		0.2
Other investments		25.7		24.7
Nonutility property - net		178.5		176.2
Goodwill		205.0		205.0
Regulatory assets		145.3		151.7
Other assets		8.8		10.7
TOTAL ASSETS	$	3,521.7	$	3,643.7

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)


	June 30,		December 31,
	2008		2007

LIABILITIES & SHAREHOLDER'S EQUITY

Current Liabilities
Accounts payable	$	102.9	$	138.7
Accounts payable to affiliated companies		68.1		66.9
Payables to other Vectren companies		24.2		34.2
Refundable fuel & natural gas costs		12.7		27.2
Accrued liabilities		161.1		138.9
Short-term borrowings		46.2		385.9
Total current liabilities		415.2		791.8
Long-Term Debt - Net of Current Maturities &
Debt Subject to Tender		1,146.2		1,062.6
Deferred Income Taxes & Other Liabilities
Deferred income taxes		304.4		286.9
Regulatory liabilities		310.7		307.2
Deferred credits & other liabilities		104.9		104.8
Total deferred credits & other liabilities		720.0		698.9
Commitments & Contingencies (Notes 10 - 12)
Common Shareholder's Equity
Common stock (no par value)		763.0		638.2
Retained earnings		477.1		451.9
Accumulated other comprehensive income		0.2		0.3
Total common shareholder's equity		1,240.3		1,090.4

TOTAL LIABILITIES & SHAREHOLDER'S EQUITY	$	3,521.7	$	3,643.7

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				Six Months
	Ended June 30,				Ended June 30,
	2008		2007		2008		2007
OPERATING REVENUES
Gas utility	$	224.9	$	191.9	$	858.5	$	776.0
Electric utility		127.2		109.9		254.4		218.0
Other		0.6		0.5		1.2		0.9
Total operating revenues		352.7		302.3		1,114.1		994.9

OPERATING EXPENSES
Cost of gas		143.8		114.6		605.8		539.1
Cost of fuel & purchased power		48.5		38.4		94.5		79.0
Other operating		74.5		65.6		148.5		132.8
Depreciation & amortization		40.9		39.8		81.6		79.0
Taxes other than income taxes		13.9		14.1		40.1		38.3
Total operating expenses		321.6		272.5		970.5		868.2

OPERATING INCOME		31.1		29.8		143.6		126.7

OTHER INCOME - NET		2.2		2.2		4.2		4.9
INTEREST EXPENSE		19.1		18.6		39.9		38.0

INCOME BEFORE INCOME TAXES		14.2		13.4		107.9		93.6

INCOME TAXES		5.4		5.4		41.1		34.7

NET INCOME	$	8.8	$	8.0	$	66.8	$	58.9

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)


	Six Months Ended June 30,
	2008			2007
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	66.8		$	58.9
Adjustments to reconcile net income to cash from operating activities:
Depreciation & amortization		81.6			79.0
Deferred income taxes & investment tax credits		17.9			(2.2	)
Expense portion of pension & postretirement periodic benefit cost		1.3			2.1
Provision for uncollectible acccounts		8.0			8.2
Other non-cash charges - net		5.5			1.8
Changes in working capital accounts:
Accounts receivable, including to Vectren companies
& accrued unbilled revenue		146.0			113.1
Inventories		20.7			31.2
Recoverable/refundable fuel & natural gas costs		(32.3	)		6.9
Prepayments & other current assets		15.4			16.0
Accounts payable, including to Vectren companies
& affiliated companies		(40.5	)		(101.1	)
Accrued liabilities		28.8			7.4
Changes in noncurrent assets		4.9			(9.6	)
Changes in noncurrent liabilities		(6.6	)		(5.7	)
Net cash flows from operating activities		317.5			206.0
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from:
Capital contribution from Vectren		124.9			-
Long term debt, net of issuance costs		171.1			-
Requirements for:
Dividends to parent		(41.6	)		(38.3	)
Retirement of long-term debt, including premiums paid		(103.3	)		-
Net change in short-term borrowings		(339.7	)		(55.1	)
Net cash flows from financing activities		(188.6	)		(93.4	)
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from other investing activities		0.4			0.1
Requirements for:
Capital expenditures, excluding AFUDC equity		(132.0	)		(137.9	)
Other investing activities		(0.8	)		-
Net cash flows from investing activities		(132.4	)		(137.8	)
Net change in cash & cash equivalents		(3.5	)		(25.2	)
Cash & cash equivalents at beginning of period		11.7			28.5
Cash & cash equivalents at end of period	$	8.2		$	3.3

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. (Utility Holdings or the Company), an Indiana corporation, serves as the intermediate holding company for Vectren Corporation’s (Vectren) 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 is an energy holding company headquartered in Evansville, Indiana. 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 569,000 natural gas customers located in central and southern Indiana. SIGECO provides energy delivery services to over 141,000 electric customers and approximately 112,000 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 319,000 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. 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 Company believes that the information in this report reflects normal and recurring adjustments necessary to fairly state the results of the interim periods reported. 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, 2007, filed with the Securities and Exchange Commission February 28, 2008 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 $46 million is outstanding at June 30, 2008, and Utility Holdings’ $825 million unsecured senior notes outstanding at June 30, 2008. 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 Article 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.

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Condensed Consolidating Balance Sheet as of June 30, 2008 (in millions):


ASSETS	Subsidiary		Parent		Eliminations &
	Guarantors		Company		Reclassifications			Consolidated
Current Assets
Cash & cash equivalents	$	5.4	$	2.8	$	-		$	8.2
Accounts receivable - less reserves		102.2		0.1		-			102.3
Receivables due from other Vectren companies		26.0		98.6		(124.2	)		0.4
Accrued unbilled revenues		38.9		-		-			38.9
Inventories		113.2		0.1		-			113.3
Recoverable fuel & natural gas costs		17.7		-		-			17.7
Prepayments & other current assets		74.8		9.6		(7.6	)		76.8
Total current assets		378.2		111.2		(131.8	)		357.6
Utility Plant
Original cost		4,169.9		-		-			4,169.9
Less: accumulated depreciation & amortization		1,569.3		-		-			1,569.3
Net utility plant		2,600.6		-		-			2,600.6
Investments in consolidated subsidiaries		-		1,165.0		(1,165.0	)		-
Notes receivable from consolidated subsidiaries		-		700.2		(700.2	)		-
Investments in unconsolidated affiliates		0.2		-		-			0.2
Other investments		20.0		5.7		-			25.7
Nonutility property - net		4.4		174.1		-			178.5
Goodwill		205.0		-		-			205.0
Regulatory assets		119.5		25.8		-			145.3
Other assets		12.3		0.3		(3.8	)		8.8
TOTAL ASSETS	$	3,340.2	$	2,182.3	$	(2,000.8	)	$	3,521.7
LIABILITIES & SHAREHOLDER'S EQUITY	Subsidiary		Parent		Eliminations &
	Guarantors		Company		Reclassifications			Consolidated
Current Liabilities
Accounts payable	$	97.8	$	5.1	$	-		$	102.9
Accounts payable to affiliated companies		68.1		-		-			68.1
Payables to other Vectren companies		39.7		-		(15.5	)		24.2
Refundable fuel & natural gas costs		12.7		-		-			12.7
Accrued liabilities		156.5		12.2		(7.6	)		161.1
Short-term borrowings		0.6		45.6		-			46.2
Short-term borrowings from
other Vectren companies		82.9		25.8		(108.7	)		-
Total current liabilities		458.3		88.7		(131.8	)		415.2
Long-Term Debt
Long-term debt - net of current maturities &
debt subject to tender		323.0		823.2		-			1,146.2
Long-term debt due to Utility Holdings		700.2		-		(700.2	)		-
Total long-term debt - net		1,023.2		823.2		(700.2	)		1,146.2
Deferred Income Taxes & Other Liabilities
Deferred income taxes		286.3		18.1		-			304.4
Regulatory liabilities		305.6		5.1		-			310.7
Deferred credits & other liabilities		101.8		6.9		(3.8	)		104.9
Total deferred credits & other liabilities		693.7		30.1		(3.8	)		720.0
Common Shareholder's Equity
Common stock (no par value)		776.3		763.0		(776.3	)		763.0
Retained earnings		388.5		477.1		(388.5	)		477.1
Accumulated other comprehensive income		0.2		0.2		(0.2	)		0.2
Total common shareholder's equity		1,165.0		1,240.3		(1,165.0	)		1,240.3
TOTAL LIABILITIES & SHAREHOLDER'S EQUITY	$	3,340.2	$	2,182.3	$	(2,000.8	)	$	3,521.7

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Condensed Consolidating Balance Sheet as of December 31, 2007 (in millions):


ASSETS	Subsidiary		Parent		Eliminations &
	Guarantors		Company		Reclassifications			Consolidated
Current Assets
Cash & cash equivalents	$	6.5	$	5.2	$	-		$	11.7
Accounts receivable - less reserves		136.3		0.8		-			137.1
Receivables due from other Vectren companies		0.1		276.6		(258.8	)		17.9
Accrued unbilled revenues		140.6		-		-			140.6
Inventories		133.8		1.1		-			134.9
Recoverable fuel & natural gas costs		-		-		-			-
Prepayments & other current assets		87.3		10.5		(4.5	)		93.3
Total current assets		504.6		294.2		(263.3	)		535.5
Utility Plant
Original cost		4,062.9		-		-			4,062.9
Less: accumulated depreciation & amortization		1,523.2		-		-			1,523.2
Net utility plant		2,539.7		-		-			2,539.7
Investments in consolidated subsidiaries		-		1,147.0		(1,147.0	)		-
Notes receivable from consolidated subsidiaries		-		589.4		(589.4	)		-
Investments in unconsolidated affiliates		0.2		-		-			0.2
Other investments		18.9		5.8		-			24.7
Nonutility property - net		4.8		171.4		-			176.2
Goodwill - net		205.0		-		-			205.0
Regulatory assets		130.3		21.4		-			151.7
Other assets		14.8		0.5		(4.6	)		10.7
TOTAL ASSETS	$	3,418.3	$	2,229.7	$	(2,004.3	)	$	3,643.7

LIABILITIES & SHAREHOLDER'S EQUITY	Subsidiary		Parent		Eliminations &
	Guarantors		Company		Reclassifications			Consolidated
Current Liabilities
Accounts payable	$	132.6	$	6.1	$	-		$	138.7
Accounts payable to affiliated companies		66.9		-		-			66.9
Payables to other Vectren companies		49.6		0.1		(15.5	)		34.2
Refundable fuel & natural gas costs		27.2		-		-			27.2
Accrued liabilities		123.4		20.0		(4.5	)		138.9
Short-term borrowings		-		385.9		-			385.9
Short-term borrowings from
other Vectren companies		243.3		-		(243.3	)		-
Current maturities of long-term debt		-		-		-			-
Long-term debt subject to tender		-		-		-			-
Total current liabilities		643.0		412.1		(263.3	)		791.8
Long-Term Debt
Long-term debt - net of current maturities &
debt subject to tender		364.2		698.4		-			1,062.6
Long-term debt due to VUHI		589.4		-		(589.4	)		-
Total long-term debt - net		953.6		698.4		(589.4	)		1,062.6
Deferred Income Taxes & Other Liabilities
Deferred income taxes		270.0		16.9		-			286.9
Regulatory liabilities		301.8		5.4		-			307.2
Deferred credits & other liabilities		102.9		6.5		(4.6	)		104.8
Total deferred credits & other liabilities		674.7		28.8		(4.6	)		698.9
Cumulative, Redeemable Preferred Stock of a Subsidiary		-		-		-			-
Common Shareholder's Equity
Common stock (no par value)		776.3		638.2		(776.3	)		638.2
Retained earnings		370.4		451.9		(370.4	)		451.9
Accumulated other comprehensive income		0.3		0.3		(0.3	)		0.3
Total common shareholder's equity		1,147.0		1,090.4		(1,147.0	)		1,090.4
TOTAL LIABILITIES & SHAREHOLDER'S EQUITY	$	3,418.3	$	2,229.7	$	(2,004.3	)	$	3,643.7

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


	Subsidiary		Parent			Eliminations &
	Guarantors		Company			Reclassifications			Consolidated
OPERATING REVENUES
Gas utility	$	224.9	$	-		$	-			224.9
Electric utility		127.2		-			-			127.2
Other		-	$	11.7			(11.1	)		0.6
Total operating revenues		352.1		11.7			(11.1	)		352.7
OPERATING EXPENSES
Cost of gas		143.8		-			-			143.8
Cost of fuel & purchased power		48.5		-			-			48.5
Other operating		86.4		(1.0	)		(10.9	)		74.5
Depreciation & amortization		35.4		5.4			0.1			40.9
Taxes other than income taxes		13.6		0.3			-			13.9
Total operating expenses		327.7		4.7			(10.8	)		321.6
OPERATING INCOME		24.4		7.0			(0.3	)		31.1
OTHER INCOME (EXPENSE) - NET
Equity in earnings of consolidated companies		-		5.0			(5.0	)		-
Other income (expense) – net		1.7		12.5			(12.0	)		2.2
Total other income (expense) - net		1.7		17.5			(17.0	)		2.2
Interest expense		17.7		13.7			(12.3	)		19.1
INCOME BEFORE INCOME TAXES		8.4		10.8			(5.0	)		14.2
Income taxes		3.4		2.0			-			5.4
NET INCOME	$	5.0	$	8.8		$	(5.0	)	$	8.8

Condensed Consolidating Statement of Income for the three months ended June 30, 2007 (in millions):


	Subsidiary		Parent		Eliminations &
	Guarantors		Company		Reclassifications			Consolidated
OPERATING REVENUES
Gas utility	$	191.9	$	-	$	-		$	191.9
Electric utility		109.9		-		-			109.9
Other		-		10.5		(10.0	)		0.5
Total operating revenues		301.8		10.5		(10.0	)		302.3
OPERATING EXPENSES
Cost of gas		114.6		-		-			114.6
Cost of fuel & purchased power		38.4		-		-			38.4
Other operating		74.9		-		(9.3	)		65.6
Depreciation & amortization		34.1		5.7		-			39.8
Taxes other than income taxes		13.8		0.3		-			14.1
Total operating expenses		275.8		6.0		(9.3	)		272.5
OPERATING INCOME		26.0		4.5		(0.7	)		29.8
OTHER INCOME (EXPENSE) - NET
Equity in earnings of consolidated companies		-		6.8		(6.8	)		-
Other income (expense) – net		1.8		10.6		(10.2	)		2.2
Total other income (expense) - net		1.8		17.4		(17.0	)		2.2
Interest expense		16.3		13.2		(10.9	)		18.6
INCOME BEFORE INCOME TAXES		11.5		8.7		(6.8	)		13.4
Income taxes		4.7		0.7		-			5.4
NET INCOME	$	6.8	$	8.0	$	(6.8	)	$	8.0

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


	Subsidiary		Parent			Eliminations &
	Guarantors		Company			Reclassifications			Consolidated
OPERATING REVENUES
Gas utility	$	858.5	$	-		$	-		$	858.5
Electric utility		254.4		-			-			254.4
Other		-		23.4			(22.2	)		1.2
Total operating revenues		1,112.9		23.4			(22.2	)		1,114.1
OPERATING EXPENSES
Cost of gas		605.8		-			-			605.8
Cost of fuel & purchased power		94.5		-			-			94.5
Other operating		171.1		(1.0	)		(21.6	)		148.5
Depreciation & amortization		70.6		10.8			0.2			81.6
Taxes other than income taxes		39.4		0.6			0.1			40.1
Total operating expenses		981.4		10.4			(21.3	)		970.5
OPERATING INCOME		131.5		13.0			(0.9	)		143.6
OTHER INCOME (EXPENSE) - NET
Equity in earnings of consolidated companies		-		59.8			(59.8	)		-
Other income (expense) – net		2.8		24.6			(23.2	)		4.2
Total other income (expense) - net		2.8		84.4			(83.0	)		4.2
Interest expense		35.8		28.2			(24.1	)		39.9
INCOME BEFORE INCOME TAXES		98.5		69.2			(59.8	)		107.9
Income taxes		38.7		2.4			-			41.1
NET INCOME	$	59.8	$	66.8		$	(59.8	)	$	66.8

Condensed Consolidating Statement of Income for the six months ended June 30, 2007 (in millions):


	Subsidiary		Parent			Eliminations &
	Guarantors		Company			Reclassifications			Consolidated
OPERATING REVENUES
Gas utility	$	776.0	$	-		$	-		$	776.0
Electric utility		218.0		-			-			218.0
Other		-		20.2			(19.3	)		0.9
Total operating revenues		994.0		20.2			(19.3	)		994.9
OPERATING EXPENSES
Cost of gas		539.1		-			-			539.1
Cost of fuel & purchased power		79.0		-			-			79.0
Other operating		149.8		-			(17.0	)		132.8
Depreciation & amortization		67.4		11.6			-			79.0
Taxes other than income taxes		37.7		0.6			-			38.3
Total operating expenses		873.0		12.2			(17.0	)		868.2
OPERATING INCOME		121.0		8.0			(2.3	)		126.7
OTHER INCOME (EXPENSE) - NET
Equity in earnings of consolidated companies		-		55.5			(55.5	)		-
Other income (expense) – net		2.8		21.4			(19.3	)		4.9
Total other income (expense) - net		2.8		76.9			(74.8	)		4.9
Interest expense		32.9		26.7			(21.6	)		38.0
INCOME BEFORE INCOME TAXES		90.9		58.2			(55.5	)		93.6
Income taxes		35.4		(0.7	)		-			34.7
NET INCOME	$	55.5	$	58.9		$	(55.5	)	$	58.9

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Condensed Consolidating Statement of Cash Flows for the six months ended June 30, 2008 (in millions):


			Subsidiary	Parent	Eliminations &
			Guarantors	Company	Reclassifications	Consolidated

NET CASH FLOWS FROM OPERATING ACTIVITIES			$ 251.5	$ 66.0	$ -	$ 317.5

CASH FLOWS FROM FINANCING ACTIVITIES
	Proceeds from:
		Capital contribution from Vectren	-	124.9	-	124.9
		Long-term debt, net of issuance costs	171.1	111.1	(111.1)	171.1
	Requirements for:
		Dividends to parent	(41.6)	(41.6)	41.6	(41.6)
		Retirement of long-term debt, including premiums paid	(103.3)	(0.3)	0.3	(103.3)
	Net change in short-term borrowings, including to other
		Vectren companies	(159.7)	(314.5)	134.5	(339.7)
		Net cash flows from financing activities	(133.5)	(120.4)	65.3	(188.6)

CASH FLOWS FROM INVESTING ACTIVITIES
	Proceeds from
		Consolidated subsidiary distributions	-	41.6	(41.6)	-
		Other investing activities	0.3	0.1	-	0.4
	Requirements for:
		Capital expenditures, excluding AFUDC equity	(118.6)	(13.4)	-	(132.0)
		Other investing activities	(0.8)	-	-	(0.8)
	Net change in notes receivable to other Vectren companies		-	23.7	(23.7)	-
		Net cash flows from investing activities	(119.1)	52.0	(65.3)	(132.4)
Net change in cash & cash equivalents			(1.1)	(2.4)	-	(3.5)
Cash & cash equivalents at beginning of period			6.5	5.2	-	11.7
Cash & cash equivalents at end of period			$ 5.4	$ 2.8	$ -	$ 8.2

Condensed Consolidating Statement of Cash Flows for the six months ended June 30, 2007 (in millions):


			Subsidiary	Parent	Eliminations &
			Guarantors	Company	Reclassifications	Consolidated

NET CASH FLOWS FROM OPERATING ACTIVITIES			$ 170.5	$ 35.5	$ -	$ 206.0

CASH FLOWS FROM FINANCING ACTIVITIES
	Requirements for:
		Dividends to parent	(38.3)	(38.3)	38.3	(38.3)
	Net change in short-term borrowings		(13.1)	(32.7)	(9.3)	(55.1)
		Net cash flows from financing activities	(51.4)	(71.0)	29.0	(93.4)