Dominion Power 2002 Annual Report Download - page 57

fund benefit payments. To the extent that the values of invest-
ments held in these trusts decline, the effect will be reflected in
Dominion’s recognition of the periodic cost of such employee
benefit plans and the determination of the amount of cash to be
contributed to the employee benefit plans. The net realized and
unrealized losses on pension trust investments was $241 million
for 2002 and $91 million for 2001.
Risk Management Policies
Dominion has operating procedures in place that are adminis-
tered by experienced management to help ensure that proper
internal controls are maintained. In addition, Dominion has
established an independent function at the corporate level to
monitor compliance with the risk management policies of all
subsidiaries. Dominion maintains credit policies that include
the evaluation of a prospective counterparty’s financial
condition, collateral requirements where deemed necessary, and
the use of standardized agreements which facilitate the netting
of cash flows associated with a single counterparty. In addition,
Dominion also monitors the financial condition of existing
counterparties on an ongoing basis. Based on credit policies and
the December 31, 2002 provision for credit losses, management
believes that it is unlikely that a material adverse effect on its
financial position, results of operations or cash flows would
occur as a result of counterparty nonperformance. See Note 15
to the Consolidated Financial Statements for discussion of the
effects of Enron’s bankruptcy on Dominion’s Consolidated
Financial Statements.
Foreign Exchange Risk
Dominion’s Canadian natural gas and oil exploration and pro-
duction activities are relatively self-contained within Canada. As
a result, Dominion’s exposure to foreign currency exchange risk
for these activities is limited primarily to the effects of transla-
tion adjustments that arise from including that operation in its
Consolidated Financial Statements. Dominion’s management
monitors this exposure and believes it is not material. In addi-
tion, Dominion manages its foreign exchange risk exposure
associated with anticipated future purchases of uranium enrich-
ment services denominated in foreign currencies by utilizing
currency forward contracts. As of result of holding these con-
tracts as hedges, Dominion’s exposure to foreign currency risk is
minimal. A hypothetical 10 percent unfavorable change in rele-
vant foreign exchange rates would have resulted in a decrease of
approximately $22 million and $5 million in the fair value of
currency forward contracts held by Dominion at December 31,
2002 and 2001, respectively.
Investment Price Risk
Dominion is subject to investment price risk due to marketable
securities held as investments in decommissioning trust funds.
In accordance with current accounting standards, these mar-
ketable securities are reported on the Consolidated Balance
Sheets at fair value. As described in Note 16 to the Consolidated
Financial Statements, Dominion recognized net realized and
unrealized losses on decommissioning trust investments of $150
million for 2002 and $14 million for 2001.
Dominion also sponsors employee pension and other
postretirement benefit plans that hold investments in trusts to
55
Dominion ’02 Annual Report
Selected Consolidated Financial Data
2002 2001 2000 1999 1998
(millions, except per share amounts)
Operating revenue $10,218 $10,558 $ 9,246 $ 5,520 $ 6,081
Income before extraordinary item and cumulative effect of a change
in accounting principle 1,362 544 415 552 548
Extraordinary item (net of income taxes of $197) ——— (255) —
Cumulative effect of a change in accounting principle
(net of income taxes of $11) —— 21 ——
Net income 1,362 544 436 297 548
Earnings per common share—basic 4.85 2.17 1.85 1.55 2.81
Earnings per common share—diluted 4.82 2.15 1.85 1.48 2.81
Total assets 37,909 34,369 29,297 17,782 17,549
Long-term debt, subsidiary preferred stock subject to mandatory
redemption and preferred securities of subsidiary trusts 13,457 13,251 10,486 7,321 6,817
Dividends paid per share 2.58 2.58 2.58 2.58 2.58