Dominion Power 2003 Annual Report Download - page 43

41.Dominion 2003
During 2003, 2002 and 2001, net cash flows from financing
activities were $853 million, $1.3 billion and $1.9 billion, respec-
tively. During 2003, the Dominion Companies issued long-term
debt (net of exchanged debt) and common stock totaling approxi-
mately $4.4 billion. The proceeds were used primarily to repay
other debt and to finance capital expenditures.
Credit Facilities and Short-Term Debt
The Dominion Companies use short-term debt, primarily commer-
cial paper, to fund working capital requirements and as bridge
financing for acquisitions, if applicable. The levels of borrowing
may vary significantly during the course of the year, depending
upon the timing and amount of cash requirements not satisfied
by cash from operations. At December 31, 2003, the Dominion
Companies had committed lines of credit totaling $3.0 billion.
Although there were no loans outstanding, these lines of credit
support commercial paper borrowings and letter of credit
issuances. At December 31, 2003, the Dominion Companies
had the following short-term debt outstanding and capacity
available under credit facilities:
Outstanding Outstanding Facility
Facility Commercial Letters of Capacity
Limit Paper Credit Available
(millions)
364-day joint
revolving credit
facility $1,250
Three-year joint
revolving credit
facility 750
Total joint credit
facilities(1) 2,000 $1,440 $ 85 $475
364-day CNG
credit facility(2) 1,000 — 820 180
Totals $3,000 $1,440 $905 $655
(1) The joint credit facilities support borrowings by the Dominion Companies. The
364-day revolving credit facility was executed in May 2003 and terminates in
May 2004. The three-year revolving credit facility was executed in May 2002
and terminates in May 2005.
(2)The credit facility is used to support the issuance of letters of credit and
commercial paper by CNG to fund collateral requirements under its gas and
oil hedging program. The facility was executed in August 2003 and
terminates in August 2004.
Dominion’s financial policy precludes issuing commercial
paper in excess of its supporting lines of credit. At December 31,
2003, the total amount of commercial paper outstanding was
$1,440 million and the total amount of letter of credit issuances
was $905 million, leaving approximately $655 million available
for issuance. The Dominion Companies are required to pay
minimal annual commitment fees to maintain the credit facilities.
In addition, these credit agreements contain various terms and
conditions that could affect the Dominion Companies’ ability
to borrow under these facilities. They include maximum debt to
total capital ratios, material adverse change clauses and cross-
default provisions.
All of the credit facilities include a defined maximum total
debt to total capital ratio. As of December 31, 2003, the calcu-
lated ratio for the Dominion Companies, pursuant to the terms of
the agreements, was as follows:
Maximum Actual
Company Ratio Ratio(1)
Dominion Resources, Inc. 65% 56%
Virginia Power 60% 52%
CNG 60% 52%
(1) Indebtedness as defined by the bank agreements excludes certain junior
subordinated notes payable to affiliated trusts and mandatorily convertible
securities that are reflected on the Consolidated Balance Sheets.
These provisions apply separately to Dominion Resources,
Inc., Virginia Power and CNG. If any one of the Dominion
Companies or any of that specific company’s material sub-
sidiaries fail to make payment on various debt obligations in
excess of $25 million, the lenders could require that respective
company to accelerate its repayment of any outstanding borrow-
ings under the credit facility and the lenders could terminate
their commitment to lend funds to that company. Accordingly,
any defaults on indebtedness by CNG or any of its material
subsidiaries would not affect the lenders’ commitment to Virginia
Power. Similarly, any defaults on indebtedness by Virginia
Power or any of its material subsidiaries would not affect the
lenders’ commitment to CNG. However, any default by either
CNG or Virginia Power would also affect in like manner the
lenders’ commitment to Dominion Resources, Inc. under the joint
credit agreements.
Although the joint credit agreements contain material adverse
change clauses, the participating lenders, under those specific
provisions, cannot refuse to advance funds to any of the
Dominion Companies for the repurchase of its outstanding com-
mercial paper.
Common Stock
During 2003, Dominion issued 17 million shares of common
stock and received proceeds of $990 million. Of this amount,
11 million shares and proceeds of $683 million resulted from a
public offering. The remainder of the shares issued and proceeds
received were through Dominion Direct®(a dividend reinvest-
ment and open enrollment direct stock purchase plan), employee
savings plans and the exercise of employee stock options.