Dominion Power 2002 Annual Report Download - page 45

1992A Series, and September 1992B Series for $250 million.
Preferred stock is discussed in Note 23 to the Consolidated
Financial Statements.
Common Stock
During 2002, Dominion issued 44 million shares of common
stock and received proceeds of $2.0 billion. Approximately 38
million shares and proceeds of $1.7 billion resulted from two
public offerings. Net proceeds were used for general corporate
purposes, principally repayment of debt. The remainder of the
shares issued and proceeds received during 2002 occurred
through Dominion Direct®(a dividend reinvestment and open
enrollment direct stock purchase plan), employee savings plans
and the exercise of employee stock options. During 2002,
Dominion also reacquired approximately one million shares of
its common stock for $66 million primarily with proceeds
received from the exercise of employee stock options.
Amounts Available under Shelf Registrations
At March 6, 2003, Dominion Resources, Inc., Virginia Power,
and CNG had approximately $1.1 billion, $1.3 billion, and $1.5
billion, respectively, of available capacity under currently effec-
tive shelf registrations. Securities that may be issued under
these shelf registrations, depending upon the registrant,
include senior notes (including medium-term notes),
subordinated notes, first and refunding mortgage bonds, trust
preferred securities, preferred stock and common stock.
Credit Ratings
Credit ratings are intended to provide banks and capital market
participants with a framework for comparing the credit quality
of securities and are not a recommendation to buy, sell or hold
securities. Management believes that the current credit ratings
of the Dominion Companies provide sufficient access to the
capital markets. However, disruptions in the bank and capital
markets not specifically related to Dominion may affect the
Dominion Companies’ ability to access these funding sources
or cause an increase in the return required by investors.
Both quantitative (financial strength) and qualitative (busi-
ness or operating characteristics) factors are considered by the
credit rating agencies in establishing an individual company’s
credit rating. Credit ratings are subject to revision or withdrawal
at any time by the assigning rating organization, and each rating
should be evaluated independently. The credit ratings for the
Dominion Companies are most affected by each company’s
financial profile, mix of regulated and non-regulated businesses
and respective cash flows, changes in methodologies used by the
rating agencies and “event risk,” if applicable, such as major
acquisitions.
Credit ratings for the Dominion Companies as of March 1,
2003 follow:
Standard & Poor’s Moody’s
Dominion Resources, Inc.
Senior unsecured debt securities BBB+ Baa1
Preferred securities of subsidiary trusts BBB– Baa2
Commercial paper A-2 P-2
Virginia Power
Mortgage bonds A– A2
Senior unsecured (including tax-exempt)
debt securities BBB+ A3
Preferred securities of subsidiary trust BBB Baa1
Preferred stock BBB Baa2
Commercial paper A-2 P-1
CNG
Senior unsecured debt securities BBB+ A3
Preferred securities of subsidiary trust BBB– Baa1
Commercial paper A-2 P-2
These credit ratings reflect Standard & Poor’s downgrade of
its credit ratings for Virginia Power’s debt, preferred securities of
subsidiary trusts, preferred stock and commercial paper in
October 2002. Based on its conclusions about regulatory insula-
tion in Virginia being no better than other states, Standard &
Poor’s concluded that Virginia Power’s ratings should be no
more than one-notch above the ratings of its parent, Dominion
Resources, Inc. Standard & Poor’s noted that Virginia Power’s
downgrade is not reflective of any diminished credit protection
measures, as Virginia Power’s credit protection measures on a
stand-alone basis remain strong. As of March 1, 2003, Moody’s
maintains a negative outlook for its ratings of Dominion
Resources, Inc. and CNG.
Generally, a downgrade in an individual company’s credit
rating would not restrict its ability to raise short-term and long-
term financing so long as its credit rating remains “investment
grade,” but it would increase the cost of borrowing. Dominion
has been working closely with both Standard & Poor’s and
Moody’s with the objective of maintaining its current credit rat-
ings. Recent steps to improve the agencies’ view of Dominion’s
financial position include the reduction of planned capital
spending and related borrowings, as discussed below, and the
issuance of $2.0 billion of common stock during 2002. As
discussed in Risk Factors and Cautionary Statements That May
Affect Future Results, in order to maintain its current ratings,
Dominion may find it necessary to take further steps or change
its business plans, and such changes may adversely affect its
growth and earnings per share.
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Dominion ’02 Annual Report