10-QPeriod: Q1 FY2009

DOMINION ENERGY, INC Quarterly Report for Q1 Ended Mar 31, 2009

Filed April 30, 2009For Securities:D

Summary

Dominion Energy, Inc. (D) reported a net income of $248 million for the first quarter of 2009, a significant decrease from $680 million in the same period of 2008. This decline was primarily driven by a substantial impairment charge related to its E&P (Exploration & Production) properties due to falling gas and oil prices, and the absence of a significant deferred tax liability reversal that benefited the prior year's results. The company also experienced higher net losses on its nuclear decommissioning trust investments. Despite the drop in net income, operating revenue saw a healthy increase of 10% to $4.8 billion, bolstered by higher revenues from electric utility operations, merchant generation, and retail energy marketing. The company continues to advance key strategic initiatives, including seeking regulatory approval for significant rate increases for its regulated electric utility operations in Virginia and progressing with the planned sale of its regulated gas distribution subsidiaries, Peoples and Hope. Investors should monitor the outcomes of these regulatory proceedings and the successful completion of the divestiture.

Financial Highlights

18 data points
Beta

Revenue

$4.59B

Net Income

$248.00M

5.4% Net Margin

Free Cash Flow

$685.00M

Financial Statements
Beta
Revenue$4.59B
Operating Expenses$3.92B
Operating Income$664.00M
Net Income$248.00M

Key Highlights

  • 1Net income decreased significantly to $248 million from $680 million in the prior year quarter, largely due to a $455 million E&P impairment charge.
  • 2Operating revenue increased by 10% to $4.78 billion, driven by higher electric utility and merchant generation revenues.
  • 3The company is seeking significant rate increases in Virginia, proposing an annual increase of approximately $289 million in base rates.
  • 4Dominion is actively pursuing the sale of its regulated gas distribution subsidiaries, Peoples and Hope, with expected closure in 2009.
  • 5The company experienced a substantial increase in 'Other operations and maintenance expense' due to the E&P impairment charge and higher nuclear decommissioning trust losses.
  • 6Earnings Per Share (EPS) diluted dropped to $0.42 from $1.18 in the prior year period.
  • 7Dominion has $3.3 billion in unused capacity under its credit facilities as of March 31, 2009, indicating solid liquidity.

Frequently Asked Questions

The primary reason for the significant decrease in net income from $680 million in Q1 2008 to $248 million in Q1 2009 is a $455 million impairment charge related to the carrying value of Dominion's E&P (Exploration & Production) properties. This charge was necessitated by declining natural gas and oil prices. Additionally, the prior year benefited from a reversal of deferred tax liabilities associated with the planned sale of Peoples and Hope, which did not recur in the current period.

Dominion Energy appears to maintain a healthy liquidity position, reporting $3.3 billion in unused capacity under its credit facilities as of March 31, 2009. While the company repaid some short-term debt in the quarter, it also issued common stock, indicating a balanced approach to managing its capital structure. The company's credit ratings have remained stable, with a positive outlook revision for Virginia Power by Moody's, suggesting continued access to capital markets.

Dominion has an agreement with Babcock & Brown Infrastructure Fund North America (BBIFNA) to sell Peoples and Hope for approximately $910 million, subject to adjustments. The transaction is expected to close in 2009, pending regulatory approvals in Pennsylvania and West Virginia. The assets and liabilities related to these subsidiaries are already classified as 'held for sale' on the balance sheet. The sale is a key strategic move to focus on core energy businesses.

Dominion is actively engaged with the Virginia Commission to recover costs and earn an appropriate return. This includes proposing a base rate increase of approximately $289 million annually, a petition to recover transmission charges and demand response program costs totaling about $78 million annually, and seeking approval for demand side management programs. These proposed increases would lead to higher monthly bills for typical residential customers, but Dominion argues they are necessary for infrastructure investment and service quality. The company is also seeking approval for rate adjustment clauses for new generation facilities like the Virginia City Hybrid Energy Center and Bear Garden facility.