Vectren CorporationVVC

Morningstar Rating

Stock Research and Analysis

by Mark Barnett

Despite weak demand in its service territory, Vectren has significantly improved its regulatory rate structures in recent years. The challenge the company faces is generating investment opportunities to attract investors in the face of struggling economies Read more

Bulls Say

Vectren's rate structure provides a more consistent stream of cash flows than some of the utilities we cover, as much of its service territory is protected by revenue-stabilization programs.

Opportunities for investments in rate base provide this company with an avenue for modest earnings growth.

Vectren has increased its dividend for 50 consecutive years and could raise payments by 3% annually through 2013.

Vectren's predominantly coal-fired generation helps keep electricity prices low, scoring points with its regulators who are exposed to the whims of the consuming public. Read more

Bears Say

Vectren's service territory consists of Indiana and a piece of Ohio, two states that have seen declines in industry and meager population growth.

Vectren's generating fleet is more than 75% coal-fired. Major capital expenditures for environmental compliance could create significant regulatory lag.

Vectren's unregulated operations are more extensive than many pure-play regulated utilities', which increases its exposure to competition and raises the potential volatility of returns.

In times of rising interest rates, utilities become relatively less attractive investments.

Vectren's unregulated operations are more extensive than many pure-play regulated utilities', which increases its exposure to competition and raises the potential volatility of its returns. Read more

Strategy

The company is focused on maintaining positive regulatory relationships and improving utility earnings. With various revenue stabilization clauses in place for the majority of its customers, Vectren Read more

Management

Vectren earns a C Stewardship Grade. Management has enhanced shareholder value by getting regulators to agree to some form of revenue normalization in each of the company's service territories. These clauses help Vectren recover its costs in a timely Read more

Profile

Vectren is an energy holding company with an electric distribution utility and three natural gas utilities in Indiana and Ohio that represented almost 85% of earnings in Read more

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