Dominion, Exelon Agree To Terminate Power Purchase
Agreement
Transaction is immediately accretive
to Dominion’s earnings
Dominion
raises 2008 operating earnings outlook
RICHMOND, Va. – Dominion (NYSE: D) has reached an agreement
with Exelon (NYSE: EXC) to terminate a power purchase agreement between the
two companies for power sold from Dominion’s 515-megawatt State Line
Power Station in Hammond, Ind.
The cost to terminate the power purchase agreement,
purchase coal inventories on hand and in transit as of the closing date,
and other assets is approximately $233 million. The power purchase agreement
was scheduled to end in December 2012. Certain conditions must be met for the termination
agreement to become final, such as receiving Federal Energy Regulatory Commission
approval and consents of third-parties. Upon closing, the output of State
Line will be sold into the PJM Interconnection LLC regional grid. The
transaction is expected to close before year-end 2007.
Thomas F. Farrell II,
Dominion chairman, president and chief executive officer, said:
"There
is enormous value trapped in our Midwest generation fleet by below-market contracts
scheduled to expire beginning in 2012. This transaction
will unlock some of that value ahead of schedule. Although State Line’s
capacity is less than 20 percent of the total Midwest fleet, the contract termination
is expected to add more than $30 million of after-tax earnings annually. That
is a good indication of the total value yet to be realized from this part of
Dominion’s merchant generation portfolio."
Farrell continued: "As
a result of this transaction, we are raising our current 2008 operating earnings
per share outlook of $6.00 or more per share to $6.10 to $6.25 per share and
are affirming our expected average annual operating earnings per share growth
of at least 6 percent thereafter."
In providing its operating earnings
outlook, the company notes that there could be differences between expected
2008 Generally Accepted Accounting Principles and operating earnings for matters
such as, but not limited to, changes in accounting principles. At this time
Dominion management is not able to estimate the impact, if any, of these items
on GAAP. Accordingly, Dominion is not able to provide a corresponding GAAP
equivalent for its operating earnings outlook.
Dominion is one of the nation's
largest producers and transporters of energy, with a portfolio of more than
26,500 megawatts of generation, 7,800 miles of natural gas transmission pipeline
and 1 trillion cubic feet equivalent (Tcfe) of proved natural gas and oil reserves.
Dominion also owns and operates the nation's largest underground natural gas
storage system with about 960 billion cubic feet of storage capacity and serves
retail energy customers in 11 states. For more information about Dominion,
visit the company's Web site at http://www.dom.com.
This
news release contains certain forward-looking statements including our forecasted
2008 operating earnings and projected future long-term operating earnings growth
rates that are subject to various risks and uncertainties. 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 fluctuations in energy-related
commodity prices, the timing of the closing dates of acquisitions or divestitures
(including our divestiture of The Peoples Natural Gas Company and Hope Gas,
Inc.), the amount of net proceeds received from the divestitures, estimates
of future market conditions, estimates of proved and unproved reserves, the
company’s ability to meet its natural
gas and oil production forecasts, the behavior of other market participants,
and the effects of hurricanes on our operations and realized prices. Other
factors include, but are not limited to, weather conditions, governmental regulations,
economic conditions in the company's service area, risks of operating businesses
in regulated industries that are subject to changing regulatory structures,
changes to regulated gas and electric rates collected by Dominion, risks associated
with the realignment of our operating assets (including the potential dilutive
effect on earnings in the near term and costs associated with the sale of most
of our exploration and production business), 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.
