Dominion's fourth quarter earnings slip

Dominion (NYSE: D) today announced unaudited reported earnings determined in accordance with Generally Accepted Accounting Principles (GAAP) for the 12 months ended Dec. 31, 2009, of $1.46 billion ($2.46 per share), compared with reported earnings of $1.83 billion ($3.16 per share) for the same period in 2008.
Operating earnings for the 12 months ended Dec. 31, 2009, amounted to $1.94 billion ($3.27 per share), compared to operating earnings of $1.84 billion ($3.16 per share) for the same period in 2008. Operating earnings are defined as reported (GAAP) earnings adjusted for certain items. 

Dominion uses operating earnings as the primary performance measurement of its earnings guidance and results for public communications with analysts and investors. Dominion also uses operating earnings internally for budgeting, for reporting to the board of directors, for the company's incentive compensation plans and for its targeted dividend payouts and other purposes. Dominion management believes operating earnings provide a more meaningful representation of the company's fundamental earnings power. 

Thomas F. Farrell II, chairman, president and chief executive officer, said: "Our core businesses delivered solid operating earnings results in 2009 despite challenging economic conditions in many of the markets we serve. Driven by the performance of our gas transmission operations, as well as lower financing costs and lower income taxes, our 2009 operating earnings landed in the upper half of our guidance range. 

"Throughout the year we continued our emphasis on meeting the growing energy infrastructure needs of our customers. In our Generation segment, we increased our total generating capacity by 1.5 percent, or 417 megawatts, through a combination of new generation and uprates of existing generating facilities. Also, we made significant construction progress on two large generating facilities, Virginia City Hybrid Energy Center and Bear Garden, which will supply Virginia with 1,175 megawatts once both are in operation by 2012. 

"At the Energy segment, our Cove Point Expansion project was placed into service, nearly doubling the size of our LNG importation facility. Additionally, the USA Storage Project went into full commercial operation. We also announced the Appalachian Gateway Project, which would ensure market access for the participating Appalachian producers by firming up their transportation rights. In our Appalachian E&P operations, we drilled more than 300 new wells without any dry holes. 

"In the Dominion Virginia Power segment, we made significant investments in reliability, including completing over 400 miles of circuit reconditioning across Virginia and North Carolina. On the transmission front, we made considerable progress on the 500 kV Meadow Brook to Loudoun and Carson to Suffolk electric transmission line projects, which are on track to be in-service by mid-year 2011. 

"We are affirming our 2010 operating earnings guidance of $3.20 to $3.40 per share and we will be in a better position to provide details for 2010 after we receive a final order in the Virginia base rate case proceeding.
"Finally, the board of directors affirmed the dividend policy to achieve a 55 percent payout ratio by 2010. The board also set a 2010 dividend rate of $1.83 per share of common stock, up from $1.75 per share in 2009, a 4.6 percent increase." 

Full-year 2009 operating earnings compared to 2008 

The increase in full-year 2009 operating earnings per share as compared to full-year 2008 operating earnings per share is primarily attributable to higher contributions from the regulated electric utility and gas transmission businesses, higher merchant generation margins and lower income taxes. Partially offsetting these positives were lower gas and oil production in the company's E&P operations, as a result of the expiration of overriding royalty interests associated with former volumetric production payment agreements, and higher depreciation and amortization expenses. 

Fourth-quarter 2009 operating earnings compared to 2008 

The decrease in fourth-quarter 2009 operating earnings per share as compared to fourth-quarter 2008 operating earnings per share is primarily attributable to higher outage costs, unfavorable weather in the regulated electric service territory and higher depreciation and amortization expenses. Partially offsetting these negatives were higher contributions from the regulated electric utility and gas transmission businesses, higher contributions from unregulated retail energy marketing operations and lower income taxes. 

First-quarter 2010 operating earnings guidance 

Dominion expects first-quarter 2010 operating earnings in the range of 90 cents per share to $1.00 per share as compared to first-quarter 2009 operating earnings of 98 cents per share. Positive factors for the first quarter of 2010 compared to the prior year include higher rate adjustment clause revenues and the impact of a full quarter's benefit from the Cove Point expansion. Factors offsetting these positives include lower merchant generation margins, the recent unplanned outage at Millstone Unit 3 and a return to normal weather. Reported earnings for the first quarter of 2009 were 42 cents per share.



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