Dominion Power 2013 Annual Report Download - page 11

In further seeking to maximize the value
of our gas assets, we announced plans to
form a master limited partnership (MLP).
A commonly used financing vehicle in the
natural gas industry, the MLP would include
certain gas assets and allow the company
to maintain operating control while raising
capital by selling a portion of the limited
partnership interests to public investors.
We will have more to say about the process
and which businesses we will contribute
in 2014.
AGREEMENTS BENEFIT SHAREHOLDERS
Additional shareholder value will also
be derived from leasing approximately
100,000 acres of Marcellus Shale development
rights underneath several of our natural gas
storagefieldsinWestVirginiatotwogas
producers — CONSOL Energy and Triana
Energy LLC. Geological studies have proved
the storage fields’ structural stability to
withstand drilling far below them.
These farmout agreements are expected
to result in payments to Dominion of about
$200 million over the next nine years,
with an additional overriding royalty interest
in any gas produced there.
FINANCIAL OUTLOOK FOR 2014
The groundwork laid over the past few years
has fostered Dominion’s enviable position
among American gas and electric utilities.
We achieved operating earnings growth of
5–6 percent in 2013.* Our total shareholder
return ranked Dominion second of 20 utilities in
our peer group. And we returned 69 percent of
our operating earnings in dividends to you.**
We expect this growth to continue based
on our plan to invest nearly $14 billion between
2014 and 2018 in energy infrastructure projects
that make up our portfolio of diverse and
growing business lines.
Our guidance for 2014 contemplates
operating earnings in the range of $3.35 per
share to $3.65 per share.*** And, contingent
on quarterly declaration by the board,
your company plans to raise the dividend
rate from $2.25 per share in 2013 to $2.40 per
share in 2014—a 6.7 percent increase that is
expected to fall within our targeted dividend
payout ratio of 65 percent to 70 percent of
operating earnings per share.
NEW INFRASTRUCTURE COMES ONLINE
While reducing commodity risk through asset
sales in 2013, we also invested about $2.5 billion
in growth capital for energy infrastructure
projects that we expect to begin serving our
customers over the next decade. These outlays
will also bolster our eorts to provide higher
earnings per share in future years.
Every day, Dominion strives to meet our
customers’ demands. In Virginia, North Carolina,
West Virginia and Ohio, that means reliable
utility service in all weather conditions, at all
times. For our Dominion Transmission (DTI)
customers — whether gas producers,
shippers or end-user utilities — we must
provide a steady flow of gas from point
A to point B, and have sucient capacity
to handle their needs.
So we are investing in new electric
wires, substations, power stations, pipelines
and related natural gas developments and
upgrading existing energy infrastructure to
help ensure service reliability and customer
satisfaction today and decades henceforth.
Fundamentally, any expenditures we
consider must satisfy a market need and
benefit our customers, shareholders and
company alike. For instance, the New Market
Project, expected to come online in 2016
and cost about $160 million, will provide
Marcellus gas supply to customers of two
local distribution companies in New York state
while producing solid returns for Dominion.
We will continue to develop long-term
growth plans that serve the interests of each
of our stakeholders, while creating jobs in
our communities.
POWER STATIONS AND POWER LINES
In order to reliably serve our Dominion Virginia
Power customers, we must continue building
new power stations and power lines, while
upgrading existing facilities. Over the next five
years, we anticipate spending more than
$8 billion for electric utility growth projects.
The regulatory environment in Virginia is
important in light of this massive buildout.
The regulations provide balanced benefits
for our company, our ratepayers and the
Commonwealth of Virginia.
I am not sure you can point to another
regulatory framework in the country allowing
for fair returns on investment for the billions
13 DOMINION RESOURCES, INC.
* Based on non-GAAP Financial
Measures. See page 22 for GAAP
Reconciliations.
** See page 22 for GAAP Reconciliation
of Operating Dividend Payout Ratio
(non-GAAP) to Reported Payout Ratio
(GAAP).
*** See page 22 for GAAP Reconciliation
of 2014 Operating Earnings Guidance.
“
WE WILL CONTINUE TO
DEVELOP LONG-TERM
GROWTH PLANS THAT SERVE
THE INTERESTS OF EACH OF
OUR STAKEHOLDERS, WHILE
CREATING JOBS IN OUR
COMMUNITIES.
”