Vectren Corp. reported preliminary net income for 2002 more than double that of 2001 on increases in both gas and electric margins, but the company also said it was re-auditing its 2000-2002 results after some discrepancies were uncovered.

The Evansville, IN-based parent of Indiana Gas and Southern Indiana Gas and Electric (SIGECO) announced preliminary net income for 2002 of $114.6 million, or $1.70 per share, compared to preliminary net income of $51.2 million, or $0.77 per share, as restated, for the same period a year ago. The 2001 totals included nonrecurring merger, integration, and restructuring costs and other nonrecurring items totaling $26.4 million after tax.

The discrepancies came to light when Vectren requested that Deloitte & Touche LLP, its newly appointed independent auditors, re-audit the company’s 2001 financials as part of the company’s planned transfer of information technology systems, related assets and certain buildings from corporate to its regulated business group, Vectren Utility Holdings, Inc., which is the primary user of the systems. In the course of preparing for the 2001 re-audit, the company identified adjustments that, in aggregate, reduced previously reported 2001 earnings by $12.4 million after tax.

Vectren’s accounting group also identified items which, when netted, amount to about $300,000 after tax that relate to 2000 and prior periods.

The company has no reason to believe the 2002 and restated 2001 results will change; it is possible, however, that the reaudit of 2000 could result in adjustments. The audit is expected to be completed in time for the filing of its annual report with the Securities and Exchange Commission March 31, 2003.

“Vectren performed well in 2002 and our results for the year are consistent with our expectations and the guidance we had previously provided the financial community. That said, I am extremely disappointed and regret that these adjustments were necessary. We believe that three years of financial statements newly audited will provide a good foundation as we pursue a permanent financing strategy,” said Chairman Niel C. Ellerbrook.

Ellerbrook noted that both Moody’s Investors Service and Standard and Poor’s Ratings Services have said the adjustments are not expected to impact current ratings or outlook for the company.

Vectren confirmed 2003 earnings guidance in the range of $1.80 to $1.90 per share, excluding the potential impact of any permanent financing completed during 2003. Vectren’s board of directors also declared a quarterly common stock dividend of 27.5 cents per share, unchanged from the last quarter.

Regulated utility operations contributed net income of $94.4 million for 2002 as compared to $38.5 million for 2001 as restated. In addition to the completion of merger and restructuring activities and related costs, the increase of over $55 million is primarily due to improved utility margins and reduced operating expenses.

Gas utility margins for the year were $337 million, an increase of $27 million over the prior year. Heating weather was 7% colder than in 2001, but 3% warmer than normal. The 10% increase in residential and commercial sales was principally due to the weather and customer growth. Industrial contract throughput decreased approximately 2%, reflecting a continued slowdown in the economy.

Electric utility margins for the year were $230 million, an increase of 9% over the prior year. Cooling weather was 27% warmer than in 2001 and 23% warmer than normal. Retail sales increased 6% over 2001 principally due to weather. In addition, 2002 results were positively affected by a full year of the recovery through rates of a return on NOx compliance expenditures.

Nonregulated operations contributed net income of $18.9 million for the year 2002 as compared to $12.1 million for 2001, as restated. The Energy Marketing and Services group earned $14.8 million in 2002, an increase of $3.1 million due to improved margins.

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