Dominion Power 2003 Annual Report Download - page 45

43.Dominion 2003
include the reduction of planned capital spending and related
borrowings, as discussed below, and the issuance of $2.0 billion
of common stock during 2002 and $990 million during 2003.
As discussed in Risk Factors and Cautionary Statements That
May Affect Future Results, in order to maintain its current ratings,
Dominion may find it necessary to modify its business plans
and such changes may adversely affect its growth and earnings
per share.
Debt Covenants
As part of borrowing funds and issuing debt (both short-term and
long-term) or preferred securities, the Dominion Companies must
enter into enabling agreements. These agreements contain
covenants that, in the event of default, could result in the accelera-
tion of principal and interest payments; restrictions on distribu-
tions related to its capital stock, including dividends,
redemptions, repurchases, liquidation payments or guarantee
payments; and in some cases, the termination of credit commit-
ments unless a waiver of such requirements is agreed to by the
lenders/security holders. These provisions are customary, with
each agreement specifying which covenants apply. These provi-
sions are not necessarily unique to the Dominion Companies.
Some of the typical covenants include:
• The timely payment of principal and interest;
• Information requirements, including submitting financial
reports filed with the SEC to lenders;
• Performance obligations, audits/inspections, continuation of
the basic nature of business, restrictions on certain matters
related to merger or consolidation, restrictions on disposition of
substantial assets;
• Compliance with collateral minimums or requirements related
to mortgage bonds; and
• Limitations on liens.
Dominion monitors the covenants on a regular basis in order
to ensure that events of default will not occur. As of December 31,
2003, there were no events of default under the Dominion Com-
panies’ covenants.
Cash Used In Investing Activities
During 2003, 2002 and 2001, investing activities resulted in net
cash outflows of $3.4 billion, $4.0 billion, and $4.2 billion,
respectively. Significant investing activities for 2003 included:
• $2.1 billion for the construction and expansion of generation
facilities, including environmental upgrades, purchases of nuclear
fuel, and construction and improvements of gas and electric
transmission and distribution assets;
• $1.3 billion for the purchase and development of gas and oil
producing properties, drilling and equipment costs and undevel-
oped lease acquisitions;
• $777 million for the purchase of securities and $912 million
for the sale of securities, primarily related to investments held in
nuclear decommissioning trusts;
• $633 million for purchase of DFV senior notes;
• $385 million in advances related to a generation project
under construction in Pennsylvania. The asset, when completed,
will be leased to Dominion;
• $305 million of proceeds from sales of gas and oil prop-
erties and
• release of $500 million from escrow for the repayment
of debt.
Future Cash Payments For Contractual Obligations
and Planned Capital Expenditures
Dominion is party to numerous contracts and arrangements oblig-
ating Dominion to make cash payments in future years. These
contracts include financing arrangements such as debt agree-
ments and leases, as well as contracts for the purchase of goods
and services and financial derivatives. Presented below is a table
summarizing expected cash payments that may result from con-
tracts to which Dominion is a party as of December 31, 2003.
For purchase obligations and other liabilities, amounts are largely
estimated based upon contract terms, including fixed, minimum
or expected quantities to be purchased at fixed or market-based
prices. Actual cash payments will be based upon actual quanti-
ties purchased and prices paid and will likely differ from amounts
presented below.
Less More
Than 1 1-3 3-5 than 5
year years years years Total
(millions)
Long-term debt(1) $1,239 $3,724 $2,626 $9,485 $17,074
Interest charges 981 1,778 1,383 7,965 12,107
Leases 70 95 60 57 282
Purchase obligations:
Purchased electric
capacity for utility
operations 589 1,155 1,063 4,176 6,983
Fuel used for utility
operations
— other(2) 986 638 309 424 2,357
Production handling 44 117 89 43 293
Pipeline capacity 86 141 89 235 551
Energy commodity
purchases for
resale(3) 547 102 24
— 673
Other fuel —
nonregulated 30 119 102 — 251
Other 283 276 265 274 1,098
Other long-term liabilities:
Financial derivatives(3) 725 645 40 193 1,603
Asset retirement
obligations(4) 49 56 84 11,502 11,691
Other contractual
obligations 55 35 4 32 126
Total cash payments $5,684 $8,881 $6,138 $34,386 $55,089
(1) Based on stated maturity dates rather than the earlier redemption dates that
could be elected by instrument holders.
(2)Fuel used in utility operations is recoverable through rate recovery
mechanisms.
(3)Represents the summation of settlement amounts, by contracts, due from
Dominion if all physical or financial transactions among Dominion and its
counterparties were liquidated and terminated.
(4)Represents expected cash payments adjusted for inflation for estimated costs to
perform asset retirement activities.