Dominion Completes Sale of $700 Million of Notes
Representing Replacement Financing For Tendered Dominion Fiber Ventures Notes
Interest savings of about $42 million pre-tax
over next two years will more than offset cost of Dominion Fiber Ventures
tender offer
Pre-tax cost of removing trigger provisions
in Dominion Fiber Ventures notes is approximately $17 million
RICHMOND, Va. - Dominion (NYSE: D) announced today it has
completed the sale of $700 million of senior unsecured notes, consisting of
$300 million of 2.80 percent 2-year notes and $400 million of 4.125 percent
5-year notes. The notes represent replacement financings for Dominion Fiber
Ventures (DFV) notes tendered to the company as part of a consent solicitation
and tender offer ("the DFV offer") launched on January 23, 2003, with
an expected effective date of February 21, 2003.
The newly issued notes have a weighted all-in cost of about
3.72 percent and replace $665 million worth of DFV notes bearing a coupon rate
of 7.05 percent, having an all-in cost of 7.55 percent and maturing March 2005.
The net proceeds will also be used to cover the cash transaction costs of the
DFV offer. The estimated pre-tax interest savings over the next two years will
approximate $42 million, more than offsetting the cost of the DFV tender offer
from an earnings and cash flow standpoint.
A separate part of the DFV offer was a consent solicitation
to remove trigger provisions contained in the DFV notes. The effective date
of the removal of the trigger provisions is expected to be February 21, 2003.
The estimated cost of removing the trigger provisions is about $17 million pre-tax.
This cost is consistent with management's original estimates and investor expectations
related to the cost of removing the trigger provisions.
Thomas N. Chewning, chief financial officer of Dominion, said:
"We are very pleased that during a time of great capital markets turmoil
in our sector we were able to issue these replacement financings at such attractive
interest rates."
The 2-year and 5-year notes were priced to yield 2.85 percent
and 4.15 percent, respectively. These yields represent spreads of 118 basis
points and 120 basis points, respectively, over the yield on U.S. Treasury notes
of comparable maturity.
Chewning said: "These spreads were the best we can recall
ever realizing on Dominion parent level debt. This will save millions of dollars
compared to the interest we would have paid on the DFV notes had they remained
outstanding. We are also pleased that the estimated pre-tax cost of removing
the trigger provisions of the DFV notes will be around $17 million, which is
in-line with our original estimates and is consistent with our previous communications
with investors regarding the expected cost of removing the trigger provisions."
Dominion
is one of the nation's largest producers of energy, with a diversified and integrated
energy portfolio consisting of 24,000 megawatts of generation, 6.1 trillion
cubic feet equivalent of natural gas reserves, 7,700 miles of natural gas transmission
pipeline and more than 960 billion cubic feet of storage capacity. Dominion
also serves 3.9 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.
This release contains forward-looking statements including
our expectations for 2003 earnings and for future annual growth rates 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, changes to rating agency requirements, changing
financial accounting standards, trading counterparty credit risks, risks related
to energy trading and marketing, 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.
