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January 27, 2005
Dominion Announces Fourth Quarter
and Full-Year Earnings
- Conference call scheduled for 10 a.m. EST today
RICHMOND, Va. - Dominion (NYSE: D) announced today preliminary
unaudited net income determined in accordance with Generally Accepted Accounting
Principles (GAAP) for the 12 months ended Dec. 31, 2004, of $1.249 billion ($3.78
per share) compared to net income of $318 million ($1.00 per share) for the
same period last year.
Operating earnings, which are defined as GAAP earnings adjusted
for certain items, were $1.523 billion ($4.61 per share) for the 12 months ended
Dec. 31, 2004, compared to operating earnings of $1.449 billion ($4.55 per share)
for the same period in 2003.
Dominion uses operating earnings as the primary performance
measurement of its earnings outlook and results for public communications with
analysts and investors. Dominion also uses operating earnings internally for
budgeting, reporting to the board of directors and for the company’s profit
sharing plan. Dominion management believes operating earnings provide a more
meaningful representation of the company’s fundamental earnings power.
Business segment results and detailed descriptions of items
included in 2004 and 2003 GAAP earnings but excluded from operating earnings
can be found in schedules 1, 2 and 3 of this release or on Dominion’s
Web site at www.dom.com/investors/.
Thos. E. Capps, chairman and chief executive officer, said:
“2004 went very much the way we expected when it began
with the exception of the under-recovery of Virginia fuel. We firmly believe
that the trade-off between a fixed fuel factor scheduled to be adjusted in mid-2007
and base rate certainty through 2010 will result in greater value to our shareholders.”
Fourth quarter earnings
Dominion also announced today preliminary unaudited net income
determined in accordance with GAAP for the three months ended Dec. 31, 2004,
of $224 million (67 cents per share) compared to a net loss of $174 million
(54 cents per share) for the same period last year.
Operating earnings were $408 million ($1.22 per share) for
the three months ended Dec. 31, 2004, compared to operating earnings of $274
million (84 cents per share) for the same period in 2003.
Business segment results and detailed descriptions of items
included in fourth quarter 2004 and 2003 GAAP earnings that are excluded from
operating earnings can be found in schedules 1, 2 and 3 of this release or on
Dominion’s Web site at www.dom.com/investors/.
2004 operating earnings compared to expectations
Dominion earned $1.22 per share in operating earnings during
the fourth quarter of 2004. This fell below fourth-quarter guidance of $1.29
to $1.36 per share announced Oct. 21. Key reasons were lower sales in our franchise
service areas due to warmer-than-normal weather; unrecoverable fuel expenses
at Dominion Virginia Power; lower-than-expected contributions from the Clearinghouse;
and a delay in the acquisition of the Kewaunee nuclear power plant. Additionally,
sales at Dominion Exploration and Production (E&P) were reduced by longer-than-forecast
production delays created by Hurricane Ivan and lower-than-expected business
interruption insurance proceeds due to the timing and processing of our resulting
claims. These offset the benefit of higher-than-anticipated prices received
from natural gas and oil production.
Dominion’s full-year 2004 operating earnings of $4.61
per share compares to expectations announced on Jan. 23, 2004 of $4.80 to $5.00
per share. The difference is primarily attributable to the effect of Virginia
fuel expenses and Clearinghouse results, partially offset by the benefit of
higher commodity prices and gains on oil options at Dominion E&P.
Complete details of fourth quarter and full-year 2004 results
versus guidance can be found on schedule 4 of this release or on Dominion’s
Web site at www.dom.com/investors/.
2004 operating earnings compared to 2003
Fourth-quarter 2004 operating earnings of $1.22 per share compares to 84 cents
per share in the fourth quarter of 2003. The increase is primarily attributable
to higher contributions from Clearinghouse activities and Millstone, lower purchased
power capacity expenses and higher revenue at E&P, partially offset by higher
expenses at E&P and the impact of Virginia fuel expenses.
Full year 2004 operating earnings of $4.61 per share compares
to $4.55 per share in 2003. The increase is primarily attributable to higher
contributions from Millstone and Dominion Retail, lower purchased power capacity
expenses and higher revenue at E&P, partially offset by lower contributions
from Clearinghouse activities, higher expenses at E&P and the impact of
Virginia fuel expense.
Complete details of fourth-quarter and full-year 2004 operating
earnings versus 2003 can be found on schedules 5 and 6 of this release or on
Dominion’s Web site at www.dom.com/investors/.
Change in Clearinghouse revenue and cost allocation
As mentioned during its Dec. 20 conference call, Dominion
has decided to exit proprietary trading and focus the Clearinghouse operations
on management and optimization of company assets. Accordingly, Clearinghouse
revenue and costs will be reported as part of the results of the business segments
operating the related assets. 2004 and 2003 segment results have been recast
to reflect coal and emissions trading in the Generation segment and are detailed
in the attached schedules as well as supplemental schedules found on Dominion’s
Web site. 2004 and 2003 consolidated results are unaffected by this change.
First quarter 2005 operating earnings guidance
Dominion expects to produce first-quarter 2005 operating earnings
in the range of $1.35 to $1.45 per share. This compares to $1.37 per share in
the first quarter 2004. The primary drivers compared to 2004 include: customer
growth, net purchased power capacity expense savings, and contributions from
E&P and the newly acquired Dominion New England assets, partially offset
by the impact of Virginia fuel expenses and a return to normal weather.
In providing 2005 operating earnings guidance, Dominion management
is aware of potential differences between operating earnings and GAAP-earnings.
Dominion estimates an after-tax charge of $40 million to $45 million related
to the pending acquisition of the Panda non-utility generation facility, expected
to close in the first quarter. Until the acquisition is completed, Dominion
management is not able to estimate the corresponding GAAP equivalent for 2005
operating earnings per share guidance.
Complete details of Dominion’s first quarter 2005 guidance
can be found on our Web site at www.dom.com/investors/.
Conference call for investors / media
Dominion will host a conference call today at 10 a.m. EST
to discuss 2004 results and other issues of interest to investors.
Domestic investors who wish to participate in the conference
call should dial 888-243-3836. International investors should
call 973-935-2096. Participants should dial in 10 to 15 minutes
prior to the scheduled start time. Members of the media also are invited to
listen.
A live Web cast of the conference call will be available on
the company’s investor information page at www.dom.com/investors/.
A replay of the conference call will be available from approximately
1 p.m. EST, Jan. 27 until 11 p.m. EST, Feb. 3. Domestic investors may access
the recording by dialing 877-519-4471. International callers
should dial 973-341-3080 to access the recording. The PIN
for the conference call replay is 5579284. Additionally, a
replay of the Web cast will be available on the company’s investor information
page by the end of the day Jan. 27.
Dominion is one of the nation's largest producers of energy,
with an energy portfolio of about 28,100 megawatts of generation, about 6 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 retail energy customers in eight 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 2005 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 the successful completion of pending acquisitions, 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, governmental regulations, economic conditions in the company's
service area, fluctuations in energy-related commodity prices, including changes
in the cost of fuel for our regulated electric business, risks related to operating
businesses in regulated industries that are becoming deregulated, the transfer
of control over electric transmission facilities to a regional transmission
organization, changes to rating agency requirements and ratings, changing financial
accounting standards, trading counter-party credit risks, risks related to energy
trading and marketing, and other uncertainties. Other risk factors are detailed
from time to time in Dominion’s most recent quarterly report on Form 10-Q
or annual report on Form 10-K filed with the Securities & Exchange Commission.
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