Dominion Power 2001 Annual Report Download - page 44

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
2004. Virginia Power had $900 million principal amount
remaining under an effective shelf registration, which was
reduced in January 2002 by the aforementioned issuance of
$650 million of senior notes. At December 31, 2001, CNG did
not have any amounts remaining under effective shelf registra-
tions. However, CNG expects to file a shelf registration with the
SEC in March 2002 for an additional $1.5 billion principal
amount in debt and trust preferred securities.
Investing Activities
In 2001, investing activities resulted in a net cash outflow of
$4.2 billion, reflecting the following primary investing activities:
•capital expenditures of $1.2 billion that included construc-
tion and expansion of generation facilities, environmental
upgrades, purchase of nuclear fuel, and construction and
improvements of gas and electric transmission and distribu-
tion assets;
•capital expenditures of $944 million that included the
purchase of gas and oil producing properties, drilling and
equipment costs and undeveloped lease acquisitions;
•proceeds from securitizations and collections of loans
receivable by DCI of $283 million;
•acquisition of Millstone for approximately $1.3 billion;
•cash consideration for acquisition of Louis Dreyfus for
approximately $902 million; and
•proceeds from the sale of Saxon Capital of $141 million.
For discussion of Dominion’s acquisition of Millstone
and Louis Dreyfus, see Note 5 to the Consolidated Financial
Statements.
Capital Expenditures
Dominion’s planned capital expenditures during 2002, 2003
and 2004 are expected to total approximately $2.5 billion, $3.2
billion and $3.3 billion, respectively. These expenditures include
construction and expansion of generation facilities, environmen-
tal upgrades, construction improvements of gas and electric
transmission and distribution assets, purchases of nuclear fuel
and expenditures to develop natural gas and oil properties.
Dominion expects to fund its capital expenditures with cash
from operations; a combination of sales of securities and short-
term borrowings.
Contractual Cash Obligations and Commitments
Other than planned capital expenditures, Dominion has con-
tractual cash obligations and commitments associated with the
following: repayment of long-term debt and mandatorily
redeemable preferred securities of subsidiary trusts (see Notes 20
and 22 to the Consolidated Financial Statements); purchased
power contracts, fuel purchase contracts, natural gas pipeline
and storage capacity contracts and leases (see Note 27 to the
Consolidated Financial Statements). Dominion expects to fund
these obligations and commitments with cash flow from opera-
tions and a combination of sales of securities and short-term
borrowings. Contractual cash obligations and commitments at
December 31, 2001 follow: 2002—$2.7 billion; 2003—$3.2 bil-
lion; 2004—$2.4 billion; 2005—$1.9 billion; 2006—$2.3 bil-
lion; and years after 2006—$13.8 billion. The amount for 2002
includes $1.35 billion associated with the redemption of previ-
ously issued securities that are scheduled to mature. These
amounts do not include working capital commitments, includ-
ing the repayment of short-term debt (see Note 19 to the Con-
solidated Financial Statements) and settlement of derivative and
energy trading contracts (see Note 15 to the Consolidated
Financial Statements), or amounts for interest or distributions
payable on securities issued by Dominion (see Notes 20 and 22
to the Consolidated Financial Statements). In addition, at
December 31, 2001, Dominion had issued $3.3 billion of guar-
antees to various third parties in relation to payment of obliga-
tions by certain of its subsidiaries and officers. At December 31,
2001, subsidiary debt subject to such guarantees totaled $1.1 bil-
lion and officers’ borrowings under the executive stock loan pro-
gram guaranteed by Dominion totaled $84 million.
As of December 31, 2001, Dominion, through certain
subsidiaries, has entered into agreements with special purpose
entities (Lessors) in order to finance and lease several new power
generation projects, as well as its corporate headquarters and
aircraft. The Lessors have an aggregate financing commitment
from equity and debt participants (Investors) of $2.2 billion, of
which $817 million has been used for total project costs to date.
Dominion, in its role as construction agent for the Lessors, is
responsible for completing construction by a specified date. In
the event a project is terminated before completion, Dominion
has the option to either purchase the project for 100 percent of
project costs or terminate the project and make a payment to
the Lessor of approximately but no more than 89.9 percent of
project costs. Upon completion of each individual project,
Dominion has use of the project assets subject to an operating
lease. Dominion’s lease payments to the Lessors are sufficient to
provide a return to the Investors. At the end of each individual
project’s lease term, Dominion may renew the lease at negotiated
amounts based on project costs and current market conditions,
subject to Investors’ approval; purchase the project at its original
construction cost; or sell the project, on behalf of the Lessor,
to an independent third party. If the project is sold and the
proceeds from the sale are insufficient to repay the Investors,
Dominion may be required to make a payment to the Lessor,
ranging from 81 percent to 85 percent of the project cost
depending on the individual project and applicable agreement.
Dominion has guaranteed a portion of the obligations of its
subsidiaries to the Lessors during the construction and
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