10-QPeriod: Q2 FY2006

DOMINION ENERGY, INC Quarterly Report for Q2 Ended Jun 30, 2006

Filed August 3, 2006For Securities:D

Summary

Dominion Energy, Inc. (D) reported its financial results for the second quarter and the first six months of 2006. For the second quarter, net income significantly decreased to $161 million from $332 million in the prior year, primarily due to the absence of Hurricane Ivan insurance proceeds received in 2005 and an impairment charge related to a DCI investment. Year-to-date net income also saw a decrease, falling by 9% to $695 million from $761 million in the same period of 2005, impacted by similar factors, along with higher fuel expenses and charges related to the pending sale of gas distribution subsidiaries. The company is undergoing strategic changes, including the planned divestiture of certain gas distribution subsidiaries and a review of its merchant generation assets. Despite the decline in net income, the company's operational segments, particularly Dominion Delivery, Dominion Energy, and Dominion Generation, showed resilience or slight improvements. However, the Dominion E&P segment experienced a notable decline in net income due to business interruption insurance impacts and increased DD&A expenses.

Key Highlights

  • 1Net income for the second quarter of 2006 was $161 million, a significant decrease from $332 million in the second quarter of 2005, largely due to the absence of Hurricane Ivan insurance proceeds and an impairment charge.
  • 2Year-to-date net income for the first six months of 2006 was $695 million, down from $761 million in the same period of 2005, reflecting a 9% decrease.
  • 3The company is in the process of selling its regulated gas distribution subsidiaries, The Peoples Natural Gas Company and Hope Gas, Inc., with an expected closing by the first quarter of 2007.
  • 4Dominion E&P experienced a substantial decrease in net income due to business interruption insurance impacts and higher depreciation, depletion, and amortization (DD&A) expenses.
  • 5Operating revenue for the second quarter decreased slightly to $3.56 billion from $3.65 billion, while year-to-date operating revenue increased to $8.51 billion from $8.38 billion.
  • 6The company's financial flexibility remains supported by approximately $3.4 billion in unused capacity under its credit facilities as of June 30, 2006.
  • 7Dominion is evaluating the potential sale of four merchant generation facilities: State Line, Armstrong, Troy, and Pleasants.

Frequently Asked Questions

The significant decrease in net income for the second quarter of 2006 to $161 million from $332 million in the prior year was primarily attributed to the absence of business interruption insurance proceeds that were received in 2005 due to Hurricane Ivan, and an $85 million impairment charge related to a DCI investment.

Dominion has entered into an agreement to sell two of its wholly-owned regulated gas distribution subsidiaries, The Peoples Natural Gas Company and Hope Gas, Inc., for approximately $970 million. The transaction is expected to close by the first quarter of 2007, subject to regulatory approvals. As of June 30, 2006, these businesses were classified as assets and liabilities held for sale on the balance sheet.

The Dominion E&P segment's net income contribution decreased significantly in the second quarter, impacted by the absence of business interruption insurance claims related to the 2005 hurricanes and higher depreciation, depletion, and amortization (DD&A) expenses. While gas and oil production volumes increased year-to-date, realized prices before hedging were mixed, and the segment faced challenges due to increased operational costs and lack of adequate insurance coverage following the hurricanes.

As of June 30, 2006, Dominion had $83 million in cash and cash equivalents and approximately $3.4 billion of unused capacity under its credit facilities. This indicates a solid liquidity position to meet its working capital and capital expenditure needs.