Dominion Power 2002 Annual Report Download - page 65

5Acquisitions
Cove Point LNG Limited Partnership
In September 2002, Dominion acquired 100 percent ownership
of Cove Point LNG Limited Partnership (Cove Point), a cost-
based rate-regulated entity, from a subsidiary of The Williams
Companies for $225 million in cash. Dominion recorded
$75 million of goodwill representing the excess of the purchase
price over the regulatory basis of Cove Point’s assets acquired
and liabilities assumed. Cove Point’s assets include a liquefied
natural gas import facility located near Baltimore, Maryland
that is under reconstruction, a liquefied natural gas storage
facility and an approximately 85-mile natural gas pipeline.
Dominion expects Cove Point to become fully operational in
2003. Dominion incurred $33 million of additional develop-
ment costs during 2002 and expects to incur $84 million of
costs in 2003. Cove Point is included in the Dominion Energy
operating segment and all of the goodwill arising from the
acquisition has been allocated to that segment for purposes
of impairment testing under SFAS No. 142.
Mirant State Line Ventures,Inc.
In June 2002, Dominion acquired 100 percent ownership of
Mirant State Line Ventures, Inc. (State Line) from a subsidiary
of Mirant Corporation for $185 million in cash. State Line’s
assets include a 515-megawatt coal-fired generation facility
located near Hammond, Indiana. Its operations are included
in the Dominion Energy operating segment.
Louis Dreyfus Natural Gas Corp.
In November 2001, Dominion acquired all of the outstanding
shares of common stock of Louis Dreyfus Natural Gas Corp.
(Louis Dreyfus), a natural gas and oil exploration and produc-
tion company headquartered in Oklahoma City, Oklahoma.
The aggregate purchase price was $1.8 billion, which consisted
of approximately 14 million shares of Dominion common stock
valued at $881 million, $902 million in cash and employee
stock options with a fair value on the date of grant of approxi-
mately $13 million. Dominion initially recorded $519 million
of goodwill, representing the excess of purchase price over
amounts allocated to Louis Dreyfus’ assets acquired and liabili-
ties assumed. The purchase price allocation was completed
during the first quarter of 2002 upon receipt of information
from outside specialists, increasing liabilities and goodwill each
by $24 million.
The operations of Louis Dreyfus are included in the
Dominion Exploration & Production operating segment. All
of the goodwill arising from the acquisition has been allocated
to that segment for purposes of impairment testing under
SFAS No. 142. In accordance with SFAS No. 142, no goodwill
amortization was recorded related to the acquisition.
Millstone Power Station
In March 2001, Dominion acquired Millstone Power Station
(Millstone), a nuclear power station located in Waterford,
Connecticut. The aggregate purchase price was $1.3 billion in
cash, consisting of approximately $1.2 billion for plant assets
and $105 million 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 liabili-
ties assumed. The operations of Millstone are included in the
Dominion Energy operating segment and all of the goodwill
arising from the acquisition has been allocated to that segment
for purposes of impairment testing under SFAS No. 142.
CNG
In January 2000, Dominion acquired all of the outstanding
shares of CNG and accounted for the acquisition under the
purchase method of accounting. The aggregate purchase price
was $6.4 billion, consisting of approximately 87 million shares
of Dominion common stock valued at $3.5 billion and approxi-
mately $2.9 billion in cash. Dominion recorded $3.5 billion of
goodwill, representing the excess of the purchase price over the
fair value of CNG’s operations not subject to cost-based rate
regulation and the historical carrying value of CNG’s opera-
tions subject to cost-of-service rate regulation. The operations
of CNG are reported in Dominion’s Energy, Delivery and
Exploration & Production operating segments and the goodwill
arising from the CNG acquisition has been allocated among
those segments for purposes of impairment testing under
SFAS No. 142.
6Divestitures
As of December 31, 2002, Dominion had substantially com-
pleted its strategy to exit the core operating businesses of DCI as
required by the SEC under the 1935 Act. Currently, Dominion
is required to divest of all remaining DCI holdings by January
2006. See Note 9 for charges recognized in connection with the
DCI exit strategies in 2001 and 2000. In 2001, Dominion sold
Saxon Capital, Inc. and recognized an after-tax loss of $25 mil-
lion. Under the terms of the sale, Dominion received $116 mil-
lion in cash, a $25 million note and a non-controlling equity
interest that was subsequently sold for $25 million. In addition,
Dominion retained approximately $300 million in retained
interests related to prior mortgage loan securitizations.
Dominion held $185 million and $269 million of retained
interests from mortgage loan securitizations at December 31,
2002 and 2001, respectively.
In 2000, Dominion sold $600 million of commercial loans
and transferred $223 million of outstanding commercial loan
commitments. As of December 31, 2002, Dominion held com-
mercial and other loans receivable of $87 million, net of
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Dominion ’02 Annual Report