Dominion Power 2001 Annual Report Download - page 58

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
56
Acquisitions
Louis Dreyfus Natural Gas Corp. (Louis Dreyfus)
On November 1, 2001, Dominion acquired all of the outstand-
ing shares of common stock of Louis Dreyfus, a natural gas and
oil exploration and production company headquartered in
Oklahoma City, Oklahoma. The results of Louis Dreyfus have
been included in the consolidated financial statements since that
date. Dominion’s proven gas and oil reserves increased approxi-
mately 60 percent as a result of the acquisition of Louis Dreyfus.
Dominion recognized goodwill in the acquisition to reflect
the value attributable to: the complementary nature of the Louis
Dreyfus assets in relation to Dominion’s growth strategy for its
integrated energy businesses; Louis Dreyfus’ experienced explo-
ration and production technical personnel; and potential opera-
tional efficiencies from the consolidation of Louis Dreyfus’
operations with Dominion’s existing exploration and production
operations. By providing Dominion with a presence in addi-
tional large natural gas basins and increasing its holdings in cer-
tain basins in which it already operates, management believes
that the acquisition results in a more balanced portfolio of pro-
ducing properties, a more stable production profile and a larger
platform for future growth. Dominion has not yet completed the
assignment of goodwill associated with the Louis Dreyfus acqui-
sition to its operating segments. In addition, the goodwill is not
deductible for income tax purposes.
The aggregate purchase price was $1.8 billion, which con-
sisted of approximately 14 million shares of Dominion common
stock valued at $881 million and $902 million in cash. The
value of the common stock issued was determined based on the
average market price of common shares over the two-day period
before and after the terms of the acquisition were agreed to and
announced. In addition, Dominion issued approximately
675,000 stock options to employees of Louis Dreyfus in
exchange for outstanding Louis Dreyfus options with a fair value
on the date of grant of approximately $13 million.
Note 5 The following table summarizes the estimated fair values
of the assets acquired and liabilities assumed at the date of
acquisition.
(millions) At November 1, 2001
Current assets $89 Current liabilities $ 167
Property, plant and
equipment 2,387 Long-term debt 1,426*
Deferred charges and Deferred credits and
other assets 43 other liabilities 551
Goodwill 519 Total liabilities assumed 2,144
Total Assets $3,038 Net assets acquired $ 894
*Long-term debt includes approximately $1.1 billion of debt issued by CNG and preferred
securities issued through an affiliated trust to finance the cash portion of the acquisition
and refinance certain Louis Dreyfus debt.
Dominion is in the process of evaluating and measuring
certain liabilities assumed in the acquisition; thus, the allocation
of the purchase price is subject to refinement. Potential adjust-
ments are not expected to be material. In accordance with SFAS
No. 142, no goodwill amortization was recorded during 2001.
See Note 4.
Millstone Power Station
On March 31, 2001, Dominion acquired Millstone Power Sta-
tion (Millstone), a nuclear power station located in Waterford,
Connecticut and accounted for the acquisition under the pur-
chase method of accounting. The results of Millstone have been
included in the consolidated financial statements since that date.
The acquisition includes a 100% ownership interest in Unit 1
and Unit 2 and a 93.47% ownership interest in Unit 3 for a total
of 1,954 megawatts of generating capacity. Unit 1 is being
decommissioned and is no longer in service. Dominion acquired
the decommissioning trusts for the three units that were fully
funded to the regulatory minimum at closing. See Note 16.
The aggregate purchase price was $1.3 billion in cash; repre-
senting approximately $1.2 billion for plant assets and $105 mil-
lion for nuclear fuel. Dominion recorded $302 million of
goodwill representing the excess of the purchase price over
amounts allocated to Millstone’s assets acquired and liabilities
assumed. Through December 31, 2001, Dominion amortized
$6 million of goodwill based on the straight-line method and 40
years. See Note 4.