10-QPeriod: Q2 FY2009

DOMINION ENERGY, INC Quarterly Report for Q2 Ended Jun 30, 2009

Filed July 31, 2009For Securities:D

Summary

Dominion Energy, Inc. reported mixed financial results for the period ending June 30, 2009. While the second quarter saw a significant increase in net income attributable to Dominion by 52% to $454 million, driven by favorable merchant generation margins and a reduction in nuclear decommissioning ARO, the year-to-date performance showed a 28% decrease in net income to $702 million. This decline was primarily due to a substantial impairment charge related to E&P properties and the absence of prior-year tax benefits. The company is navigating a complex regulatory environment, particularly in Virginia, with ongoing base rate reviews and applications for new rate adjustment clauses. Significant capital expenditures continue for utility generation expansion, including new gas-fired and hybrid energy centers. Dominion also continues to manage its portfolio through planned divestitures, such as the sale of its Pennsylvania and West Virginia gas distribution operations, which is progressing through regulatory approvals.

Financial Highlights

44 data points
Beta

Revenue

$3.41B

Net Income

$454.00M

13.3% Net Margin

EPS (Diluted)

$0.76

Total Assets

$41.50B

Cash & Equivalents

$64.00M

Free Cash Flow

-$571.00M

Financial Statements
Beta
Revenue$3.41B
Operating Expenses$2.52B
Operating Income$889.00M
Net Income$454.00M
EPS (Basic)$0.76
EPS (Diluted)$0.76
Shares Outstanding (Basic)593.70M
Shares Outstanding (Diluted)594.00M

Key Highlights

  • 1Second quarter net income attributable to Dominion increased 52% to $454 million, driven by improved merchant generation and a reduction in nuclear decommissioning ARO.
  • 2Year-to-date net income attributable to Dominion decreased 28% to $702 million, impacted by a $455 million impairment charge on E&P properties and the absence of prior-year tax benefits.
  • 3Operating revenue increased slightly by 2% for the second quarter to $3.45 billion, with growth in regulated electric utility and retail energy marketing, partially offset by declines in gas sales and producer services.
  • 4The company is actively engaged in regulatory proceedings in Virginia concerning base rate reviews, fuel expense recovery, and the implementation of new rate adjustment clauses for transmission costs and demand-side management programs.
  • 5Capital expenditures remain significant, with ongoing investments in utility generation expansion projects, including the Virginia City Hybrid Energy Center and the Bear Garden facility.
  • 6Dominion continues with the planned sale of its Pennsylvania and West Virginia gas distribution operations, awaiting regulatory approvals.
  • 7The company maintains substantial unused capacity under its credit facilities, providing financial flexibility.

Frequently Asked Questions

The year-to-date decline in net income was primarily influenced by a $455 million impairment charge related to the carrying value of E&P properties due to falling natural gas and oil prices. Additionally, the company did not benefit from significant tax reversals and regulatory asset re-establishments that positively impacted the prior year's results, specifically related to the planned sale of its Pennsylvania and West Virginia gas distribution operations.

Dominion is actively involved in regulatory processes in Virginia. This includes a base rate review seeking an annual increase in rates, applications for new rate adjustment clauses to recover transmission and demand-side management costs, and a fuel factor application requesting a decrease in fuel expense recovery. The outcomes of these regulatory actions are crucial for future revenue and profitability.

The company has an agreement to sell its Peoples and Hope gas distribution operations. While the transaction is expected to close in 2009, it remains subject to regulatory approvals from the Pennsylvania and West Virginia commissions. Regulatory proceedings are ongoing, with some temporarily suspended and then resumed following ownership structure changes in the buyer's group.

Commodity price volatility has a significant impact. The decline in natural gas and oil prices led to a substantial impairment charge in the E&P segment. In merchant generation, while lower realized prices at some fossil facilities were a headwind, higher overall volumes and demand for natural gas generation provided a favorable offset, contributing to improved margins in that segment during the second quarter.