Dominion Announces 2001 Operating Earnings
of $4.17 Per Share
Company provides earnings outlook and
guidance for 2002 to 2004
Conference call scheduled
for 10:00 a.m. ET today
RICHMOND, Va. – Dominion (NYSE: D) announced today unaudited
consolidated operating earnings for the 12 months ended December 31, 2001 of
nearly $1.1 billion ($4.17 per share), compared with earnings of $787 million
($3.33 per share) in 2000.
Operating earnings for 2001 exclude special after-tax charges
of $97 million (38 cents per share) resulting from Dominion's estimated Enron
exposure; $136 million (54 cents per share) related to the buyout of power purchase
contracts and non-utility generating units previously serving the company under
long-term contracts; $25 million (10 cents per share) associated with the divestiture
of Saxon Capital Inc.; $68 million (27 cents per share) in restructuring charges
associated with a senior management restructuring initiative announced in November
and other restructuring costs; and $183 million (73 cents per share) from a
write-down of Dominion Capital assets.
Operating earnings for 2000 exclude special after-tax charges
of $198 million (84 cents per share) in restructuring and merger-related expenses;
$187 million (79 cents per share) associated with the write-down of Dominion
Capital assets; as well as after-tax gains of $13 million (6 cents per share)
from the sale of Corby Power Station and $21 million (9 cents per share) from
the cumulative effect of pension accounting changes.
Reported net income for the 12 months ended December 31,
2001 was $544 million ($2.15 per share), compared with $436 million ($1.85 per
share) in 2000.
Selected 2001 highlights include:
Added 2,617 megawatts of generation to existing portfolio,
a 14 percent increase;
Increased gas and oil reserves 77 percent to 4.93 trillion
cubic feet equivalent;
Added 48,725 new gas and electric franchise customers;
Reduced debt to total capitalization ratio from 61.6 percent
to 58.9 percent;
Restructured officer ranks, reducing the number of officers
by 25 percent;
Trained 125 Six Sigma black belts and implemented Six
Sigma company-wide.
Thos. E. Capps, chairman, president and chief executive officer,
said:
"2001 was both challenging and rewarding. We are pleased
to report solid results and reaffirm our expectations for continued stable growth
going forward during these difficult times. The ability to deliver solid financial
performance in today's environment demonstrates the durability of Dominion's
earnings power and the value of our integrated model."
Full-year earnings breakdown by operating segment
Dominion Energy, the company's electric generation and gas
pipeline business segment, earned $723 million ($2.86 per share) in 2001, up
from 2000 operating earnings of $489 million ($2.07 per share). Dominion Energy's
results reflect the addition of a full year of Consolidated Natural Gas Company's
(CNG) pipeline operations, customer growth in the company's electric service
area, lower capacity costs resulting from the termination of third-party generation
contracts, a reduction in depreciation expenses resulting from the application
for relicensing of the company's nuclear units in Virginia, and the acquisition
of Millstone power station, partially offset by mild weather in the company's
electric service area.
Dominion Delivery, the company's electric and gas distribution
and customer service segment, earned $366 million ($1.45 per share), compared
to 2000 operating earnings of $339 million ($1.43 per share). Dominion Delivery's
results reflect the addition of a full year of CNG's local distribution operations
and customer growth in the company's service areas, partially offset by mild
weather.
Dominion Exploration & Production (E&P), the company's
gas and oil exploration and production unit, earned $320 million ($1.27 per
share) in 2001, up from $255 million ($1.08 per share) in the prior-year period.
The increase is primarily attributable to the addition of a full year of CNG,
the acquisition of Louis Dreyfus Natural Gas Corp. (Louis Dreyfus), and higher
average realized gas prices, partially offset by higher operating expenses.
Dominion Capital, the financial services subsidiary, reported
a loss of $14 million (6 cents per share) in 2001, compared to income of $11
million (4 cents per share) in 2000. Pursuant to regulatory agreements reached
as part of its merger with CNG, Dominion has agreed to divest Dominion Capital.
Suspension and sale of various operations had an effect on earnings; principally
attributable to the lack of securitization gains following the sale of Saxon
Mortgage and lower fee and interest income, partially offset by lower interest
expense.
Fourth-quarter earnings breakdown by operating segment
Consolidated operating earnings for the fourth quarter ended
December 31, 2001 were $231 million (89 cents per share), compared to operating
earnings of $144 million (59 cents per share) in the fourth quarter of 2000.
Fourth-quarter 2001 earnings exclude special after-tax charges of $97 million
(37 cents per share) resulting from Dominion's estimated Enron exposure; $68
million (27 cents per share) in restructuring charges associated with a senior
management restructuring initiative and other restructuring costs; and, $183
million (70 cents per share) from a write-down of Dominion Capital assets. Fourth-quarter
2000 earnings exclude special after-tax charges of $38 million (15 cents per
share) in restructuring and merger-related expenses.
Dominion Energy contributed $127 million (49 cents per share)
to fourth-quarter 2001 operating earnings, up from $67 million (28 cents per
share) in the fourth quarter of 2000. The change in Dominion Energy's fourth-quarter
2001 earnings is primarily attributable to customer growth in the company's
electric service area, lower capacity costs resulting from the termination of
third-party generation contracts, a reduction in depreciation expenses resulting
from the application for relicensing of the company's nuclear units in Virginia,
and the acquisition of Millstone power station, partially offset by warmer-than-normal
weather in the company's electric service area.
Dominion Delivery earned $93 million (36 cents per share)
in its fourth quarter, up from $78 million (32 cents per share) for the same
period in 2000. Dominion Delivery's fourth-quarter earnings reflect lower bad
debt expense and lower operating costs, partially offset by warmer-than-normal
weather in the company's electric and gas service areas.
Dominion Exploration & Production contributed $86 million
(33 cents per share) to fourth-quarter 2001 operating earnings, up from $81
million (33 cents per share) in the fourth quarter of 2000. The change in Dominion
E&P's fourth-quarter earnings is primarily attributable to higher production
from Louis Dreyfus, partially offset by lower average realized prices.
Dominion Capital posted operating earnings of $2 million
(1 cent per share) for the quarter, compared to a loss of $1 million (1 cent
per share) in the fourth quarter of 2000.
Legal entity results
While Dominion has restructured its daily operations as described
above, assets remain wholly-owned by its legal subsidiaries, Virginia Electric
and Power Co. (Virginia Power), Consolidated Natural Gas Company, and Dominion
Energy Inc. (DEI), pending full implementation of electric and gas deregulation
legislation in the company's service areas.
Operating earnings for Virginia Power, the company's electric
utility, were $2.32 per share in 2001, compared to operating earnings of $2.41
per share in 2000. Operating earnings for CNG, the company's natural gas utility
and exploration and production concern, were $2.00 per share in 2001, compared
to 2000 operating earnings (since the Dominion/CNG merger closed January 28,
2000) of $1.45 per share. DEI, the company's independent power and natural gas
subsidiary, earned $1.24 per share in 2001, compared to 36 cents per share in
2000.
Fourth-quarter 2001 operating earnings for Virginia Power
were 17 cents per share, compared to 25 cents per share in the fourth quarter
of 2000. Fourth-quarter 2001 operating earnings for CNG were 68 cents per share,
compared to 42 cents per share in 2000. DEI earned 36 cents per share in the
fourth quarter of 2001, compared to 10 cents per share in the fourth quarter
of 2000.
Earnings outlook and general guidance
Dominion expects earnings of $4.90 to $4.95 per share in
2002 and then earnings per share growth at a compound annual rate of ten percent
after 2002, which, for any single year, could range from high single-digit,
year-over-year growth to low double-digit growth. Dominion has hedged about
two-thirds of its expected 2002 gas and oil production at prices well above
$3.00 per thousand cubic feet equivalent. Dominion has committed about 85 to
90 percent of its generation portfolio, consisting of about 70 to 75 percent
committed to serve its franchise customer base, and an additional 15 percent
sold to other customers.
Dominion expects gas and oil production of approximately
450 billion cubic feet equivalent in 2002, and expects production growth to
be in the 15 to 20 percent annual range over the following two years, as a result
of two recent, significant discoveries, Devil's Tower and Front Runner, as well
as other exploration and development projects.
Other drivers of earnings and cash flow growth in 2002 and
beyond include an additional 10 months of earnings contribution from Louis Dreyfus,
the acquisition of which closed in the fourth quarter of 2001, the discontinuance
of goodwill amortization, growth in the company's franchise gas and electric
service territories, growth in earnings contribution from the Dominion Energy
Clearinghouse, earnings contribution from new generation, lower interest rates,
significant recurring savings from cost-cutting and the company-wide implementation
of Six Sigma, which began in full-force this month with 125 fully-trained "Black
Belts." In 2002, the positive earnings drivers are expected to more than
offset the general decline in commodity prices. The resumption of more normal
weather patterns and the stabilization of commodity prices are important assumptions
for Dominion's outlook.
Capps said: "Most investors do not fully understand
the new Dominion. Beginning in 1998, Dominion began a transformation from a
regulated electric utility holding company with strict limitations on its ability
to produce attractive returns for its owners. Since then, Dominion has been
dramatically transformed into an integrated energy company with the majority
of its earnings effectively unregulated. Over the past three years, Dominion
has been reshaped into an entity with the single purpose of becoming the nation's
premier energy company poised to deliver superior long-term value to its customers,
owners and debt investors."
Conference call for investors / media
Dominion will host a conference call for investors at 10
a.m. ET, on Thursday, January 24. Dominion management will review fourth-quarter
and full-year 2001 earnings to be released that morning. Members of the media
are also invited to listen.
Domestic investors who wish to participate in the conference
call should dial 800-314-7867. International investors should call 719-219-0214.
The confirmation number required to join the call is 533654. Participants
should dial in five to 10 minutes prior to the scheduled start time.
A live web cast of the conference call will be available
on the company's investor information page at www.dom.com/investors.
A tape recording of the conference call will be available
from approximately
1 p.m. ET, January 24, through 11 p.m. ET, January 29. Domestic investors may
access the recording by dialing 888-203-1112. International callers should
dial 719-457-0820 to access the recording. The access code for the replay
is also 533654. A replay of the conference call also will be available
on the company's investor information page by the end of the day on January
24.
Dominion is one of the nation's largest producers of energy,
with a production capability of more than 3 trillion British thermal unit of
energy per day. Dominion has a diversified and integrated energy portfolio consisting
of 22,000-megawatts of generation, 4.9 trillion cubic feet equivalent of natural
gas reserves, 7,600 miles of natural gas transmission pipeline and the nation's
largest underground natural gas storage system with more than 950 billion cubic
feet of storage capacity. Dominion also serves 3.8 million franchise natural
gas and electric customers in five states. In addition, Dominion owns a managing
equity interest in Dominion Fiber Ventures LLC, owner of Dominion Telecom. For
more information about Dominion, visit the company's web site at www.dom.com.
This release contains forward-looking statements
that are subject to various risks and uncertainties. Discussion of factors that
could cause actual results to differ materially from management's projections,
forecasts, estimates and expectations may include factors that are beyond the
company's ability to control or estimate precisely, such as estimates of future
market conditions, estimates of proved and unproved reserves and the behavior
of other market participants. Other factors include, but are not limited to,
weather conditions, economic conditions in the company's service area, fluctuations
in energy-related commodity prices, trading counterparty credit risks, risks
associated with successfully executing the telecommunications business plan
and other uncertainties. Other risk factors are detailed from time to time in
the company's Securities & Exchange Commission filings.
