Dominion Power 2007 Annual Report Download - page 81

term overriding royalty interests formerly associated with these
agreements.
Additionally, we recognized expenses for employee severance,
retention and other costs of $91 million ($56 million after-tax) in
2007, related to the sale of our U.S. non-Appalachian E&P busi-
ness, which are reflected in other operations and maintenance
expense in our Consolidated Statement of Income. We also
recognized expenses for employee severance, retention, legal,
investment banking and other costs of $30 million ($18 million
after-tax) in 2007 related to the sale of our Canadian E&P oper-
ations, which are reflected in discontinued operations in our
Consolidated Statement of Income.
We recognized a gain of approximately $3.6 billion ($2.1 bil-
lion after-tax) from the disposition of our U.S. non-Appalachian
E&P operations. This gain is net of expenses related to the dis-
position plan for transaction costs, including audit, legal, invest-
ment banking and other costs of $48 million ($30 million after-
tax), but excludes severance and retention costs and costs asso-
ciated with the discontinuance of hedge accounting and recog-
nition of forward gas contracts. We paid federal income taxes
related to the gain on the sale in the fourth quarter of 2007. We
expect to pay the related state income taxes by the end of the
second quarter of 2008.
The total impact on net income from the sale of our Cana-
dian and U.S. non-Appalachian E&P operations was a benefit of
$1.5 billion for 2007. This benefit is net of expenses for trans-
action costs, severance and retention costs, costs associated with
the discontinuance of hedge accounting and recognition of for-
ward gas contracts, and costs associated with our debt tender offer
completed in July 2007 using a portion of the proceeds received
from the sale, as discussed in Note 19.
Disposition of Partially Completed Generation Facility
In September 2007, we completed the sale of the Dresden Energy
merchant generation facility (Dresden) to AEP Generating
Company (AEP) for $85 million. During 2007, we recorded a
$387 million ($252 million after-tax) impairment charge in other
operations and maintenance expense to reduce Dresden’s carrying
amount to its estimated fair value based on AEP’s purchase price.
Sale of Certain DCI Operations
In May 2007, we committed to a plan to dispose of certain DCI
operations including substantially all of the assets of Gichner LLC
(Gichner), all of the issued and outstanding shares of the capital
stock of Gichner, Inc. (an affiliate of Gichner), as well as all of the
membership interests in Dallastown Realty (Dallastown).
The consideration to be received indicated that the goodwill
associated with these operations was impaired and we recorded a
goodwill impairment charge of $8 million in other operations
and maintenance expense in our Consolidated Statement of
Income. In August 2007, we completed the sale of Gichner and
Dallastown for approximately $30 million. The sale resulted in
an after-tax loss of $4 million, which included $10 million of
goodwill.
The following table presents selected information regarding
the results of operations of Gichner and Dallastown, which are
reported as discontinued operations in our Consolidated State-
ments of Income:
Year Ended December 31, 2007 2006 2005
(millions)
Operating revenue $29 $41 $28
Income (loss) before income taxes (7) 21
Sale of Merchant Generation Facilities
In 2007, we sold three of our natural gas-fired merchant gen-
eration peaking facilities (Peaker facilities) for net cash proceeds of
$254 million. The sale resulted in a $24 million after-tax loss
($0.03 per share). The Peaker facilities are:
‰Armstrong, a 625 Mw station in Shelocta, Pennsylvania;
‰Troy, a 600 Mw station in Luckey, Ohio; and
‰Pleasants, a 313 Mw station in St. Mary’s, West Virginia.
During 2006, we recorded a $253 million ($164 million
after-tax) impairment charge in other operations and maintenance
expense to reduce the Peaker facilities’ carrying amount to their
estimated fair value less cost to sell. The carrying amounts of the
major classes of assets and liabilities classified as held for sale in
our Consolidated Balance Sheet at December 31, 2006 were
comprised of property, plant and equipment, net ($245 million),
inventory ($13 million) and accounts payable ($3 million).
The following table presents selected information regarding
the results of operations of the Peaker facilities, which are
reported as discontinued operations in our Consolidated State-
ments of Income:
Year Ended December 31, 2007 2006 2005
(millions)
Operating revenue $5 $42 $71
Loss before income taxes (31) (283) (19)
The Peaker facilities’ operating revenues were related to sales
to other Dominion affiliates. In addition, the Peaker facilities
purchased $1 million, $14 million and $38 million of electric fuel
from affiliates in 2007, 2006 and 2005, respectively.
Planned Sale of Regulated Gas Distribution Subsidiaries
On March 1, 2006, we entered into an agreement with Equitable
Resources, Inc. (Equitable), to sell two of our wholly-owned regu-
lated gas distribution subsidiaries, Peoples and Hope. Peoples and
Hope serve approximately 500,000 customer accounts in
Pennsylvania and West Virginia. This sale was subject to
regulatory approvals in the states in which the companies operate,
as well as antitrust clearance under the Hart-Scott-Rodino Act. In
January 2008, Dominion and Equitable announced the termi-
nation of the agreement for the sale of Peoples and Hope, primar-
ily due to the continued delay in achieving final regulatory
approval. We are seeking other offers for the purchase of these
utilities.
Dominion 2007 Annual Report 79