Dominion Power 2011 Annual Report Download - page 11

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Imagine the effort of our electric transmission
employees, who — even with the huge power
restoration effort from Hurricane Irene — went
164 straight days without a recordable incident in
2011. That safety performance sets the bar high.
Employees at Sweeney Station in West Virginia,
a part of our gas transmission business, were up
to the task. They have completed more than five
decades without a lost time incident.
Financial Year in Review
While Mother Nature wreaked havoc in Virginia
this past year, the global financial system was
rocked by problems in Europe. The precarious
financial conditions of some European Common
Market countries resulted in unprecedented
market volatility. Low consumer confidence
scores for most of the year reflected slow
economic recovery in the U.S.
Our owners, however, continue to benefit
from the fact that Virginia is the home base of our
electric utility, which represents about half of our
earnings. In 2011, Virginia’s economy remained
largely recession-resistant principally because
of the presence of the U.S. military, the federal
government, government contractors and several
energy-intensive data centers.
Last year I wrote you that Dominion might
experience its first year-over-year operating
earnings per share decline since 2005. We
anticipated this possibility because of (1) several
major merchant power stations being taken offline
for maintenance, refueling and environmental
equipment tie-ins and (2) historically low commodity
prices. Indeed, this is what happened. What we
did not expect were the revenue losses from
natural disasters and relatively mild weather that
caused customers to use less air conditioning in
the summer and heat in the winter.
In 2011, Dominion earned $3.05 per share in
operating earnings, down from $3.34 per share in
2010, meeting the guidance range we anticipated
in January 2011 of $3.00 per share to $3.30
per share.* Earnings under Generally Accepted
Accounting Principles (GAAP) in 2011 were $2.45
per share, down from $4.76 per share in 2010.**
Higher Shareholder Return
Despite this drop in operating earnings per share,
Dominion’s total shareholder return — the
combination of a share of common stock’s price
appreciation or depreciation over a year and its
dividend payout — ended 2011 at 29.4 percent.
This bested the returns of the major indices — the
Dow Jones Industrial Average, at 8.3 percent,
and the S&P 500, at 2.1 percent. In addition,
we exceeded the returns of our peers in the
Dow Jones Utility Average, the S&P 500 Utilities
and the Philadelphia Utility Sector Index,
which yielded 19.6 percent, 19.9 percent
and 19.2 percent, respectively.
Last year, Dominion returned $1.97 per share
in dividends to shareholders, a 7.7 percent
increase from 2010. We paid out 64.6 percent of
operating earnings per share, within the 60–65
percent payout target range set by the board
in 2010.*** In addition, we repurchased about
13 million shares on the open market for
approximately $600 million to offset the expected
earnings per share impact from economic
recovery tax provisions relating to accelerated
asset depreciation.
Be Safe Today
In late 2010 and early
2011, the Services
company, which
includes more than
2,500 employees,
initiated the “Be Safe
Today” campaign.
Services company
executives sent a
campaign kickoff
letter to their
employees reminding
them to take safety
personally and act
to eliminate potential
hazards. Monthly
safety messages
were emailed. And
the employee
intranet site was
redesigned to feature
the “Be Safe Today”
campaign.
In 2011, Dominion
Resources Services
had just one OSHA
recordable incident.
In 2012, as always,
we will strive for zero.
* Based on Non-GAAP Financial Measures. See page 22 for
GAAP Reconciliations.
** The principal difference between 2010 GAAP earnings of $4.76 per
share and 2011 GAAP earnings of $2.45 per share was a one-time
net benefit of $2.34 per share in 2010 resulting from the sale of our
Appalachian gas exploration and production assets.
*** See page 22 for GAAP Reconciliation of Operating Dividend
Payout Ratio (non-GAAP) to Reported Payout Ratio (GAAP).