Dominion Power 2000 Annual Report Download - page 49

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Millstone Nuclear Power Station
Dominion has reached an agreement to acquire the Millstone
Nuclear Power Station located in Waterford, Connecticut. Dominion
is acquiring the three-unit station from subsidiaries of Northeast
Utilities and other owners for a total purchase price of approxi-
mately $1.3 billion, including approximately $1.19 billion for plant
assets and $105 million for fuel. The acquisition will include 100%
ownership interest in Unit 1 and Unit 2, and a 93.47% ownership
interest in Unit 3, for a total of 1,954 Mw of generating capacity.
Unit 1 is being decommissioned and is no longer in service.
Dominion will assume the decommissioning trusts for the three
units and expects the trusts to be fully funded to the regulatory
minimum at the time of the closing.
Divestitures
In October 2000, Dominion completed the sale of VNG to AGL
Resources Inc. Cash proceeds from the sale were $533 million.
After Dominion acquired CNG in the first quarter of 2000, CNG
committed to a plan to sell CNG International as part of its desire to
focus on the United States oil and gas markets. In October 2000,
CNG International completed the sale of its Argentine assets to
Sempra Energy International for $145 million.
In September 2000, Dominion completed the sale of its 80 per-
cent interest in Corby Power Limited (Corby) to PowerGen plc. for
52.5 million pounds sterling ($78 million at December 31, 2000).
Corby is the owner of a 350-megawatt natural gas-fired facility
about 90 miles north of London, England. The sale of Corby resulted
in an after-tax gain of $13 million ($0.05 per share).
In 1999, Dominion reached an agreement to sell its interests in
approximately 1,200 megawatts of gross generation capacity
located in Latin America. Duke Energy International purchased the
interests for approximately $405 million. The Company completed
the sale of its interests in Belize and Peru in November 1999. In
2000, Dominion completed the sale of its interests in the generation
capacity located in Argentina and Bolivia.
Note 6 Restructuring and Acquisition-Related
Activities
General
As a result of the CNG acquisition and Dominion’s desire to focus
its businesses in the MAIN to Maine area of the United States,
Dominion is divesting certain businesses. The region begins at the
Mid-America Interconnected Network (MAIN) and extends north-
eastward through Maine. MAIN includes electric service territories
of the upper Midwest. In addition, Dominion and its subsidiaries
developed and began the implementation of a plan to restructure
the operations of the combined companies. The restructuring plan
included an involuntary severance program, a voluntary early retire-
ment program (ERP) and a transition plan to consolidate operations
after the CNG acquisition.
For the year ended December 31, 2000, Dominion recognized
$460 million of restructuring and other acquisition-related costs
as follows:
(millions)
Severance liability accrued $70
Commodity contract losses 55
Information technology related costs 35
Lease termination and restructuring 14
DCI exit strategies 172
ERP benefit costs 114
Curtailment gains (see Note 21) (26)
Other, net 26
Total restructuring costs $460
Severance paid $41
Ending severance liability $29
Positions eliminated at December 31, 2000 679
Estimated positions yet to be eliminated 89
ERP participants 860
Employee Severance Programs
Dominion established a comprehensive involuntary severance pack-
age for salaried employees impacted by workforce reductions.
Severance payments are based on the individual’s base salary and
years-of-service at the time of termination. In addition, severance
payments are being provided to employees at DCI (and certain sub-
sidiaries of DCI) who are terminated as part of Dominion’s imple-
mentation of its strategy to exit certain businesses of DCI.
Change in Risk Management Strategy
During the first quarter of 2000, Dominion implemented a new
hedging strategy for its combined operations. Under its new strat-
egy, Dominion created an enterprise risk management group with
responsibility for managing Dominion’s aggregate energy portfolio,
including the related commodity price risk, across its consolidated
operations. Previously, individual business segments managed their
respective energy portfolios and related price risk exposure on a
stand-alone basis. Dominion management believes this new struc-
ture should result in more effective risk management with the
objective of maximizing the value of Dominion’s diversified energy
portfolio and market opportunities.
As part of the implementation of the new strategy, management
evaluated CNG’s hedging strategy associated with its oil and gas
operations in relation to Dominion’s combined operations. As a
result of the evaluation, CNG designated its portfolio of derivative
contracts that existed at January 28, 2000 as held for purposes
other than hedging for accounting purposes. This action required a
change to mark-to-market accounting where derivative contracts
are carried at fair value in the balance sheet with any future unreal-
ized gains and losses included in the determination of net income.
In addition, CNG entered into offsetting contracts for those
contracts in the January 28, 2000 portfolio that would not be