Dominion Power 2000 Annual Report Download - page 33

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On March 3, 2000, Dominion announced a new business struc-
ture that integrates CNG’s businesses, streamlines operations, and
positions Dominion for long-term growth in the competitive market-
place. Under the structure, Dominion operates three principal
business segments — Dominion Energy, Dominion Delivery and
Dominion Exploration & Production. In addition, Dominion reviews
the financial services business of DCI and Corporate Operations
as segments. Items for which the operating segments are not held
accountable, as well as inter-segment eliminations, are included in
Corporate Operations. See Note 27 to the Consolidated Financial
Statements. While Dominion manages its daily operations as
described above, assets remain wholly owned by its legal sub-
sidiaries. For more information on business segments, see Note 27
to the Consolidated Financial Statements.
Results of Operations
Overview
Dominion achieved net income of $436 million in 2000, or $1.85 per
diluted share, compared with net income of $297 million in 1999, or
$1.48 per share. Since its acquisition, CNG’s various businesses
have had a significant impact on Dominion’s current year opera-
tions. Consequently, the primary reason for the increase in operat-
ing results when comparing 2000 to 1999 is the contributions of
CNG’s operations. CNG’s various businesses contributed $157 mil-
lion, or $0.67 per share, to Dominion’s net income in 2000. Net
income for the comparative periods was impacted by an extraordi-
nary item for the write-off of certain generation-related assets and
liabilities in 1999 and the following factors in 2000:
•a change in the method of accounting for pensions (see Note 3
to the Consolidated Financial Statements);
•the increased earnings contributions by Dominion Energy,
Dominion Delivery and Dominion Exploration & Production;
•the gain on the sale of Dominion’s interest in Corby Power Station
(see Note 5 to the Consolidated Financial Statements);
•the charges for restructuring and other acquisition-related
costs and the charges resulting from the impairment and
revaluation of DCI’s assets (see Note 6 to the Consolidated
Financial Statements);
•the amortization of the goodwill associated with the purchase
of CNG (see Note 5 to the Consolidated Financial Statements);
•an increase in interest charges primarily due to debt incurred to
finance the acquisition of CNG and the interest expense of DCI;
•a decrease in income tax expense primarily due to restructuring
and other acquisition-related charges and the impairment and
revaluation of DCI’s assets.
Net income decreased $251 million in 1999 as compared to 1998
and was impacted by the following:
•the write-off of generation-related assets and liabilities in 1999,
resulting in an after-tax charge to earnings of $255 million (see
Note 7 to the Consolidated Financial Statements);
•the loss recorded by Dominion Energy in 1999 related to its
interests in Latin American power generation;
•the sale of East Midlands which resulted in a gain in 1998 and
the absence of East Midlands’ contribution to earnings in 1999;
•the increased contribution from Dominion Energy’s energy mar-
keting business during 1999;
•the impairment of regulatory assets and one-time base
rate refund resulting from the settlement of 1998 Virginia
jurisdictional rate proceedings;
•lower interest charges primarily due to the retirement of debt
upon the sale of East Midlands, the capitalization of interest on
utility generation construction beginning in 1999 and the inter-
est portion of the 1998 Virginia jurisdictional rate refund. These
factors were offset, in part, by interest charges from debt issued
to fund the acquisition of Kincaid Power Station and Dominion
Energy Canada, Ltd. in 1998 and increased funding for loan origi-
nations at Dominion’s financial services businesses; and
•a decrease in income tax expense due to taxes on the gain on
the East Midlands sale recorded in 1998.
A comparison of net income and earnings per share contribu-
tions by segment follows:
Year ended December 31, 2000 1999 1998
(millions, except per Net Net Net
share amounts) Income EPS Income EPS Income EPS
Dominion Delivery $ 339 $ 1.44 $ 175 $ 0.91 $168 $ 0.86
Dominion Energy 478 2.03 271 1.42 262 1.35
Dominion E&P 270 1.14 44 0.23 34 0.17
DCI 11 0.05 78 0.41 59 0.30
East Midlands 26 0.14
1,098 4.66 568 2.97 549 2.82
Corporate Operations (662) (2.81) (271) (1.42) (1) (0.01)
Consolidated $ 436 $ 1.85 $ 297 $ 1.48(1) $548 $ 2.81
Average shares — diluted 235.9 191.4 194.9
(1) Diluted earnings per share calculation includes the effect of the total return equity swap. For
more information, see Note 19 to the Consolidated Financial Statements.
Regulated Sales Revenue
Regulated sales — electric consist primarily of sales to retail cus-
tomers in Dominion’s electric service territory at rates authorized by
the Virginia and North Carolina regulatory commissions and sales
to cooperatives and municipalities at wholesale rates authorized
by FERC. Also, included in this revenue are amounts received from
others for use of Dominion’s transmission system to transport elec-
tric energy under tariffs authorized by FERC.
Regulated sales — electric for fiscal years 2000, 1999 and 1998
were allocated to the electric utility operations of the Dominion
Energy and Dominion Delivery businesses as follows:
(millions) Year ended December 31, 2000 1999 1998
Revenue:
Dominion Energy $3,341 $3,122 $3,069
Dominion Delivery 1,151 1,109 1,063
Corporate Operations (4) (153)
Total revenue $4,492 $4,227 $3,979