Dominion Estimates Hurricane Isabel
Cost at $128 Million After-Tax
RICHMOND, Va. – Dominion (NYSE: D) today identified $128
million as its estimated after-tax cost stemming from the company’s storm
restoration efforts following Hurricane Isabel. This estimate includes $91 million
incurred through the end of the third quarter. It includes an additional $37
million expected to be incurred in the fourth quarter, including post-restoration
clean-up costs.
Of the $91 million incurred in the third-quarter, Dominion
estimates about $80 million after tax, or about 25 cents per share, was expense
and the remainder, $11 million net of current and future tax benefits ($18 million
before tax benefits) was capital. Of the $37 million expected to be incurred
in the fourth quarter, Dominion estimates about $33 million after tax, or about
10 cents per share, will be expense and the remainder, $4 million net of current
and future tax benefits ($7 million before tax benefits) will be capital.
Dominion will recognize the expensed portions of the storm
restoration effort as a special charge excluded from its operating earnings.
Management believes the unique and extraordinary effects of Hurricane Isabel
require the exclusion of storm costs from operating earnings to provide investors
with accurate year-to-year earnings comparisons.
Therefore, Dominion re-affirms its operating earnings estimates
of $4.60 to $4.80 per share for the full year 2003.
Management is not yet able to estimate a corresponding equivalent
to 2003 earnings based on Generally Accepted Accounting Principles (GAAP). In
addition to differences between GAAP earnings and operating earnings reported
previously, management is aware of other potential differences that have not
yet been quantified, including those that may result from newly issued accounting
standards.
In addition to the restoration, repair and clean-up costs,
Dominion estimates that lost margin due to customer outages totaled about $12
million after-tax.
Eighty percent of Dominion’s electric customers, or
about 1.8 million homes and businesses, lost power as a result of the storm.
Service was restored in 2 weeks with the largest workforce ever assembled by
the company.
Dominion will not seek an increase in its Virginia or North
Carolina base rates to recover the expensed costs. Dominion’s base electric
rates in Virginia are capped until July 1, 2007, and until Jan. 1, 2006, in
North Carolina, where the company serves northeastern areas including the Outer
Banks.
Dominion assembled more than 12,000 people, including crews
from utilities in 21 states and Canada, to restore service. The bulk of hurricane
restoration expenses were for the mutual aid crews that came from other energy
companies to assist and additional contractors for line repair, as well as tree
and brush clearing.
Dominion used a year's supply of poles, cross arms and transformers
in just 10 days and about four years' worth of some other materials, such as
secondary wire and insulators.
During the restoration process, Dominion replaced:
10,700 power poles
14,600 pole cross arms
13,000 spans of wire
7,900 transformers
Dominion is one of the nation's largest producers of energy,
with an energy portfolio of more than 24,000 megawatts of generation, 6.3 trillion
cubic feet equivalent of proved natural gas reserves and 7,900 miles of natural
gas transmission pipeline. Dominion also operates the nation's largest underground
natural gas storage system with more than 960 billion cubic feet of storage
capacity and serves 5 million retail energy customers in nine states. For more
information about Dominion, visit the company's web site at www.dom.com.
This release contains forward-looking statements including
our expectations for 2003 earnings 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 and ratings, changing financial accounting standards, trading
counter-party credit risks, risks related to energy trading and marketing, costs
associated with successfully executing the company’s exit from the telecommunications
business, estimation of the total cost of Hurricane Isabel, including the portion
of such cost that will be capitalized and the portion that will be expensed,
and other uncertainties. Other risk factors are detailed from time to time in
the company's Securities & Exchange Commission filings.
