Dominion Power 2007 Annual Report Download - page 7

Dominion 2007 Annual Report 5
have always admired Thomas
Jefferson, a fellow Virginian. While
many people rightly honor Jefferson
as the author of the Declaration of
Independence, his foresight and skills
in the acquisition of the Louisiana
Purchase also continue to impress
me. At a critical juncture in our
nation’s history, he seized a great
opportunity and transformed the
nation through decisive action.
Dominion now stands at a critical
juncture in its own long and remark-
able history, facing challenges that
seem, at times, contradictory. Meet
rising demand for energy while
maintaining reliability and affordable
prices. Utilize something environ-
mentally agreeable but not intrusive.
Be a conservationist, but not at the
expense of economic growth. Provide
shareholders with a competitive
return during a period of economic
uncertainty. Fulfill all regulatory
requirements. Never fail the interests
of your employees and communities.
Translating challenges into oppor-
tunities—fulfilling a vision—requires
decisive action.
REFOCUSING THE COMPANY
Last year we told you we would
reposition the company by refocusing
on our regulated energy sales, trans-
portation and delivery businesses and
on electric generation. By selling
substantially all of our natural gas
and oil exploration and production
(E&P) assets, we would reduce
Dominion’s exposure to swings in gas
and oil prices and most likely
improve the total return to our
shareholders.
We carried through. E&P asset
sales raised nearly $14 billion. We
used after-tax proceeds to reduce
outstanding debt by $3.3 billion and
repurchase more than $5.8 billion
of stock, or more than 18 percent
of the total shares outstanding as of
December 31, 2006.
The repositioned company has a
lower risk profile yet retains prospects
for strong earnings growth. We
expect operating earnings per share
to increase by 6 percent or more
annually for the foreseeable future.
REALIZING CONCRETE RESULTS:
A DIVIDEND INCREASE;
OPPORTUNITY FOR MORE
Shareholders realized some of the
fruits of Dominion’s refocusing after
the Board of Directors approved an
11 percent increase in the common
stock dividend in November 2007.
Such a significant increase would not
have been prudent under Dominion’s
former business structure. The board
coupled your dividend increase with
a 2-for-1 stock split.
At the same time it adopted a
policy that should create the oppor-
tunity for similar dividend increases
in 2009 and 2010. In light of the
company’s lower risk profile and solid
earnings potential, the board set a
goal of raising the dividend payout
ratio to 55 percent of operating
earnings by 2010, putting us in line
with our utility peers. The policy is
not a guarantee, but its successful
implementation would mean a nearly
37 percent increase in your dividend
over three years.
By the end of 2007 investors had
realized higher share prices and
improving total shareholder returns.
Combined with the dividend, your
shares produced a total return of
17.0 percent in 2007. That compares
with a 5.5 percent total return for
Dear Shareholders
THE REPOSITIONED
COMPANY HAS A LOWER RISK
PROFILE YET RETAINS
PROSPECTS FOR STRONG
EARNINGS GROWTH.
Targeted
Dividend Increase
Recent increase puts
targeted 2010 payout ratio of
55% in reach.
Dollars per Share
’08* ’09* ’10*
’04 ’05 ’06 ’07
1.30 1.34 1.38 1.46 1.58
* All dividend declarations
subject to Board of Directors
approval.
All per share figures
reflect the November 2007
2-for-1 stock split.
~55%
Payout Ratio*