RICHMOND, Va., Oct. 17, 2001 – Dominion today announced unaudited consolidated earnings for the third quarter ended September 30, 2001 of $344 million ($1.37 per share), compared to operating earnings of $270 million ($1.13 per share) for the same period in 2000.
Operating earnings for the third quarter of 2000 exclude a one-time after-tax gain of $12 million (5 cents per share) on the sale of Corby Power Station to PowerGen plc and restructuring and merger-related after-tax costs of $22 million (9 cents per share).
Third-quarter 2001 highlights include:
* Thirty-nine thousand net new delivery customers added;
* Proven gas and oil reserves increased to 3 trillion cubic feet equivalent (tcfe);
* Announced acquisition of Louis Dreyfus Natural Gas, an accretive transaction that will boost gas and oil reserves by 60 percent, to more than 4.6 tcfe;
* Fifty million megawatt-hours and 346 billion cubic feet of natural gas traded and sold, a 42 percent and 19 percent increase, respectively, versus prior year.
Thos. E. Capps, chairman, president and chief executive officer, said:
“The third quarter was outstanding, despite a difficult business environment. Dominion generated record cash flow from operations and earnings of $1.1 billion and $344 million, respectively. Dominion’s performance demonstrates the strength of its well-balanced portfolio of energy businesses.”
The company reaffirmed its earnings targets of $4.15 or better in 2001 and $4.85 to $4.90 in 2002, excluding the addition of Louis Dreyfus Natural Gas. Dominion’s acquisition of Louis Dreyfus is expected to close by year-end and add about 5 cents per share to 2002 earnings.
Capps said: “We expect to meet these 2001 and 2002 earnings goals and then achieve long-term earnings per share growth of 10 percent beyond 2002. We believe Dominion is capable of delivering this kind of earnings growth because of the fundamental strength of its core businesses, combined with an intense and relentless focus on cost efficiency, driven by a company-wide implementation of Six Sigma.”
Dominion is the first gas and electric energy company to implement Six Sigma enterprise-wide. Six Sigma is the acclaimed business process improvement methodology that deploys efficiency experts known as “Black Belts” through all units of a company’s operations and support. It was extensively and successfully used by retired General Electric Chairman Jack Welch beginning in 1995. Tom Capps laid the groundwork for implementing Six Sigma at Dominion more than a year ago when he hired retired Admiral Jay Johnson, former Chief of Naval Operations, as senior vice president- business excellence and put him in charge of Six Sigma deployment.
Capps said: “Today, we have nearly completed training and deploying a team of 125 full-time Black Belts. We’ve identified efficiency improvements that can and will yield improved processes and lower operating expenses beginning in 2002. We continue to develop a more entrepreneurial culture at Dominion, and Six Sigma is playing a critical role. Thanks to the process improvement methodology, we’re finding even more ways to think 227 and act 227 as entrepreneurs in all that we do. What excites us most is how much untapped potential there is for efficiency improvement.”
Earnings Breakdown by Operating Segment
Dominion Energy, the company’s electric generation and gas pipeline business segment, contributed $288 million ($1.15 per share) to third-quarter 2001 operating earnings, up from $208 million (87 cents per share) in the third quarter of 2000. The increase in Dominion Energy’s third-quarter 2001 earnings is primarily attributable to the addition of the Millstone power station, higher earnings at the Dominion Energy Clearinghouse, warmer weather in the company’s electric service area, a reduction in depreciation expenses resulting from the application for relicensing of the company’s nuclear units in Virginia, and lower purchased power expenses.
Dominion Delivery, the company’s electric and gas distribution and customer service segment, contributed $68 million (27 cents per share) to third-quarter operating earnings, compared to $90 million (37 cents per share) in the third quarter of 2000. The change in quarter-over-quarter earnings is primarily attributable to higher taxes and other expenses, partially offset by customer growth and warmer weather in the company’s electric service area.
Dominion Exploration & Production, the company’s gas and oil exploration and production unit, earned $78 million (31 cents per share) in the third quarter of 2001, up from $66 million (28 cents per share) in the prior-year period. The increase is primarily attributable to higher realized gas and oil prices, partially offset by higher operating expenses and lower production.
Dominion Capital reported a loss of $7 million (3 cents per share) in the third quarter of 2001, compared to income of $3 million (1 cent per share) in the prior-year period. Operating results from the remaining financial services assets were lower in the third quarter of 2001 due to the lack of securitization gains following the sale of Saxon Mortgage and to lower fee and interest income, partially offset by lower interest expense, lower loan loss reserves and lower taxes. Operating results from Dominion Capital’s real estate and other non-core operations were also lower in the third quarter of 2001 primarily due to lower water flow at the Vidalia hydro facility.
Legal Entity Results
While Dominion has restructured its daily operations as described above, assets remain wholly owned by its legal subsidiaries, including Virginia Power, Consolidated Natural Gas and Dominion Energy, pending full implementation of electric and gas deregulation in the company’s service areas.
Third-quarter 2001 operating earnings for Virginia Power, the company’s electric utility, were $1.04 per share, compared to $1.07 per share in the third quarter of 2000.
Third-quarter 2001 operating earnings for Consolidated Natural Gas, the company’s natural gas utility, were 30 cents per share, up from 27 cents per share in the third quarter of 2000.
Dominion Energy, the company’s independent power and natural gas subsidiary, earned 41 cents per share, up from 11 cents per share last year.
Dominion is one of the nation’s largest producers of energy, with a production capability of 2.8 trillion British Thermal Units (BTUs) of energy per day.
Its 22,000-megawatt generation portfolio is expected to grow to more than 28,000 megawatts by 2005. In addition to its existing 3 trillion cubic feet equivalent of natural gas reserves and more than 300 billion cubic feet equivalent of annual production, Dominion also owns and operates 7,600 miles of natural gas transmission pipeline with a delivery capability of 6.3 billion cubic feet per day.
The company also operates the nation’s largest underground natural gas storage system with more than 950 billion cubic feet of storage capacity. Dominion serves nearly 4 million retail natural gas and electric customers in five states, and 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.