Dominion Power 2002 Annual Report Download - page 80

Notes to Consolidated Financial Statements, Continued
(3) Substantially all of Virginia Power’s property is subject to the lien of the
mortgage, securing its mortgage bonds. In 2002,Virginia Power redeemed
its $200 million, 6.75% mortgage bonds due February 1, 2007.Virginia
Power completed the redemption with part of the proceeds from the
issuance of $650 million, 5.375% senior notes due February 1, 2007.The
redemption included a direct exchange of senior notes for $117 million of
mortgage bonds.Virginia Power used the remaining proceeds of senior notes
to redeem the remaining $83 million of mortgage bonds and for general
corporate purposes including the repayment of other debt.
(4) Certain pollution control equipment at Virginia Power’s generating facilities
has been pledged to support these financings.
(5) In 2002,Virginia Power converted $292 million of its variable rate tax
exempt financings to fixed rates, ranging from 4.95% to 5.875%. Other
terms of the bonds remain the same.
(6) Includes an aggregate principal amount of CAD$335 million of securities
denominated in Canadian dollars and presented in US dollars, based on
exchange rates as of year-end.
(7) In 2002, Dominion redeemed $200 million of 7.40% remarketable senior
notes and $250 million of variable rate remarketable senior notes, both due
September 16, 2012. In a direct exchange, Dominion completed the
redemption by issuing $520 million, 5.70% senior notes due September 17,
2012.The principal amount of the senior notes was determined by an
exchange ratio that was based on the fair value of the remarketable senior
notes.The $63 million difference between the principal amounts of senior
notes issued and remarketable senior notes redeemed was recorded as a
debt discount.
(8) Represents weighted-average coupon rates for debt outstanding as of
December 31, 2002.
The scheduled principal payments of long-term debt at
December 31, 2002 were as follows (in millions):
2003 2004 2005 2006 2007 Thereafter Total
$2,125 $1,290 $969 $1,675 $1,091 $7,055 $14,205
In December 2002, Dominion issued $600 million of
senior notes, of which $500 million of proceeds was deposited
into an escrow account solely for the purpose of being used to
repay approximately one half of the aggregate principal amount
of Dominion’s 2001 Series A 6.0 percent senior notes maturing
in January 2003.
Dominion’s short-term credit facilities and long-term debt
agreements contain customary covenants and default provi-
sions. As of December 2002, there were no events of default
under these covenants.
Equity—Linked Securities
In 2002 and 2000, Dominion issued equity-linked debt securi-
ties, consisting of stock purchase contracts and senior notes.
The stock purchase contracts obligate the holders to purchase
shares of Dominion common stock from Dominion by a settle-
ment date, two years prior to the senior notes’ maturity date.
The purchase price is $50 and the number of shares to be pur-
chased will be determined under a formula based upon the
average closing price of Dominion common stock near the set-
tlement date. The senior notes, or treasury securities in some
instances, are pledged as collateral to secure the purchase of
common stock under the related stock purchase contracts. The
holders may satisfy their obligations under the stock purchase
contracts by allowing the senior notes to be remarketed with
the proceeds being paid to Dominion as consideration for
the purchase of stock. Alternatively, holders may choose to
continue holding the senior notes and use other resources
as consideration for the purchase of stock under the stock
purchase contracts.
Dominion makes quarterly interest payments on the senior
notes and quarterly payments on the stock purchase contracts at
the rates described below. Dominion has recorded the present
value of the stock purchase contract payments as a liability, off-
set by a charge to common stock in shareholders’ equity. Interest
payments on the senior notes are recorded as interest expense
and stock purchase contract payments are charged against the
liability. Accretion of the stock purchase contract liability is
recorded as interest expense. In calculating diluted earnings
per share, Dominion applies the treasury stock method to the
equity-linked debt securities. These securities did not have a
significant effect on diluted earnings per share for 2002.
Under the terms of the stock purchase contracts,
Dominion will issue between 6.7 million and 8.1 million shares
of its common stock in November 2004 and between 4.1 mil-
lion and 5.5 million shares of its common stock in May 2006.
A total of 13.6 million shares of Dominion common stock
has been reserved for issuance in connection with the stock
purchase contracts.
Selected information about Dominion’s equity-linked debt
securities is presented below:
78 Dominion ’02 Annual Report
Senior Stock
Total Notes Purchase
Long- Annual Contract Total Maturity
Date of Units Total Net term Interest Annual Equity Stock Purchase of Senior
Issuance Issued Proceeds Debt Rate Rate Charge Settlement Date Notes
(millions, except percentages)
2000 8.3 $400.1 $412.5 8.05% 1.45% $20.7 11/04 11/06
2002 6.6 $320.1 $330.0 5.75% 3.00% $36.3 5/06 5/08