Dominion Power 2003 Annual Report Download - page 44

42.Dominion 2003
Management’s Discussion and Analysis of Financial Condition and Results of Operations, Continued
Long-Term Debt
During 2003, Dominion Resources, Inc. and its subsidiaries
issued the following long-term debt:
Issuing
Type Principal Rate Maturity Company
(millions)
Senior notes $2,120 2.125% to 2005 to Dominion
6.30% 2033 Resources, Inc.
Senior notes 500 Variable 2013 Dominion
Resources, Inc.
Senior notes 200 5.00% 2014 CNG
Senior notes 1,055 4.10% to 2010 to Virginia Power
5.25% 2038
Total long-term
debt issued 3,875
Less: direct
exchange(1) (500)
Total long-term debt
issued, excluding
direct exchanges $3,375
(1) During the third quarter of 2003, Dominion redeemed its $500 million
variable rate senior notes due 2013. In a direct exchange, Dominion
completed the redemption by issuing $510 million of 5.25% senior notes
due 2033.
In addition to the senior notes described above, Dominion
borrowed $18 million to complete a power generation project at
Virginia Power’s Possum Point power station.
In January 2004, Dominion Resources, Inc. issued $100 mil-
lion of variable rate senior notes due 2006 and $200 million of
5.2% senior notes due 2016. Net proceeds were used for general
corporate purposes, principally the repayment of debt.
During 2003, Dominion Resources, Inc. and its subsidiaries
repaid $2.9 billion of long-term debt securities. Dominion used
the entirety of its $500 million escrow deposit, established in
December 2002, to repay matured debt in January 2003.
Amounts Available under Shelf Registrations
At March 1, 2004, Dominion Resources, Inc., Virginia Power, and
CNG had approximately $2.4 billion, $670 million, and $1.3 bil-
lion, respectively, of available capacity under currently effective
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 secu-
rities. Management believes that the current credit ratings of the
Dominion Companies provide sufficient access to the capital mar-
kets. However, disruptions in the banking and capital markets not
specifically related to Dominion may affect the Dominion Compa-
nies’ ability to access these funding sources or cause an increase
in the return required by investors.
Both quantitative (financial strength) and qualitative (business
or operating characteristics) factors are considered by the credit
rating agencies in establishing an individual company’s credit rat-
ing. Credit ratings should be evaluated independently and are
subject to revision or withdrawal at any time by the assigning rat-
ing organization. The credit ratings for the Dominion Companies
are most affected by each company’s financial profile, mix of reg-
ulated and nonregulated 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 February 2,
2004 follow:
Standard
& Poor’s Moody’s
Dominion Resources, Inc.
Senior unsecured debt securities BBB+ Baa1
Preferred securities of affiliated 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 affiliated trust BBB Baa1
Preferred stock BBB Baa2
Commercial paper A-2 P-1
CNG
Senior unsecured debt securities BBB+ A3
Preferred securities of affiliated trust BBB– Baa1
Commercial paper A-2 P-2
As of February 2, 2004, Moody’s maintains a negative out-
look for its ratings of CNG and Standard & Poor’s maintains a
negative outlook for its ratings of Dominion Resources, Inc. and
CNG.
Generally, a downgrade in an individual company’s credit rat-
ing 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 ratings. Recent steps
to improve the agencies’ view of Dominion’s financial position