Dominion Power 2003 Annual Report Download - page 68

66.Dominion 2003
Notes to Consolidated Financial Statements, Continued
From 1997 through 2002, Dominion established five capital
trusts that sold trust preferred securities to third party investors.
Dominion received the proceeds from the sale of the trust pre-
ferred securities in exchange for various junior subordinated
notes issued by Dominion to be held by the trusts. Upon adoption
of FIN 46R, Dominion’s Consolidated Balance Sheet at December
31, 2003 reports the junior subordinated notes held by the trusts
as long-term debt, rather than the trust preferred securities.
Dominion is required to adopt FIN 46R for its interests in VIEs
that are not considered special purpose entities no later than
March 31, 2004. Dominion is still evaluating the impact that
adopting FIN 46R for these interests may have on its future results
of operations or financial condition.
FIN 45
In November 2002, FASB issued Interpretation No. 45, Guaran-
tor’s Accounting and Disclosure Requirements for Guarantees,
Including Indirect Guarantees of Indebtedness of Others — An
Interpretation of FASB Statements No. 5, 57 and 107 (FIN 45).
Under FIN 45, issuers of certain types of guarantees must recog-
nize a liability based on the fair value of the guarantee issued,
even when the likelihood of making payments is remote. In
addition, FIN 45 requires increased disclosures for specific types
of guarantees.
FIN 45’s initial recognition requirements apply only to guaran-
tees issued or modified after December 31, 2002. Dominion does
not anticipate any material impact on its future results of opera-
tions or financial condition as a result of recording newly issued
or modified guarantees at fair value.
2002 and 2001
SFAS No. 142
Dominion adopted SFAS No. 142 on January 1, 2002. The
discontinuance of goodwill amortization under SFAS No. 142
resulted in an increase in net income of $95 million in 2002.
SFAS No. 133
Dominion adopted SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities, on January 1, 2001 and
recorded an after-tax charge to accumulated other comprehen-
sive income of $183 million, net of taxes of $106 million.
Pro Forma Information Reflecting Adoption of
New Standards
Disclosure requirements associated with the adoption of FIN 46R,
SFAS Nos. 143 and 142, require a presentation of pro forma net
income and earnings per share for 2002 and 2001 as if Domin-
ion had applied the provisions of those standards as of January
1, 2001. Other standards adopted during 2003 do not require
pro forma information and are excluded from the amounts pre-
sented below.
Basic Diluted
Amount EPS EPS
(in millions, except per share amounts)
2002
Reported net income $1,362 $4.85 $4.82
Adjusted net income 1,363 4.85 4.82
2001
Reported net income 544 2.17 2.15
Adjusted net income 658 2.63 2.60
SFAS No. 143 also requires a pro forma presentation of
asset retirement obligations as if Dominion had applied the provi-
sions of SFAS No. 143 as of January 1, 2001. Those amounts are
as follows:
2001 2002
(millions)
Pro forma asset retirement obligations
at January 1, $ 810 $1,447
Pro forma asset retirement obligations
at December 31, $1,447 $1,543
4. Acquisitions
Cove Point LNG Limited Partnership
In September 2002, Dominion acquired 100% ownership of
Cove Point LNG Limited Partnership (Cove Point), a cost-based
rate-regulated entity, from a subsidiary of The Williams Compa-
nies for $225 million in cash. Dominion recorded $75 million of
goodwill representing the excess of the purchase price over the
regulatory basis of Cove Point’s assets acquired and liabilities
assumed. Cove Point’s assets include a liquefied natural gas
import facility located near Baltimore, Maryland, a liquefied nat-
ural gas storage facility and an approximately 85-mile natural
gas pipeline. Cove Point became fully operational in 2003. Cove
Point is included in the Dominion Energy operating segment and
the goodwill arising from the acquisition was allocated to that
segment for purposes of impairment testing under SFAS No. 142.
Mirant State Line Ventures, Inc.
In June 2002, Dominion acquired 100% ownership of Mirant
State Line Ventures, Inc. (State Line) from a subsidiary of Mirant
Corporation for $185 million in cash. State Line’s assets include
a 515-megawatt coal-fired generation facility located near
Hammond, Indiana. Its operations are included in the Dominion
Generation operating segment.
Louis Dreyfus Natural Gas Corp.
In November 2001, Dominion acquired all of the outstanding
shares of common stock of Louis Dreyfus Natural Gas Corp.
(Louis Dreyfus), a natural gas and oil exploration and production
company headquartered in Oklahoma City, Oklahoma. The