EVANSVILLE, Ind. (AFX) - Utility owner Vectren Corp. said Tuesday it will opt out of a partnership that makes synthetic fuel, as federal tax credits for its production appear likely to be phased out.
Vectren has a $2.9 million investment in Pace Carbon Synfuels LP, a partnership that operates four projects to produce and sell coal-based synthetic fuel. The Internal Revenue Code allows for tax credits for synthetic fuel production, but the credits are slated to be phased out if oil prices remain high.
A 'significant' phase out of credits this year looks likely, Vectren said.
Vectren is obligated to fund the Pace Carbon partnership for working capital as tax credits are earned; the obligation could total between $5 million and $7 million, depending on the phase out of credits, Vectren said.
The company said it could resume participation in the partnership if oil prices fall significantly, or if the federal government changes the phase-out requirements.
Vectren shares closed up 7 cents at $27.21 on the New York Stock Exchange.
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