Dominion Power 2004 Annual Report Download - page 45

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CNG entered into three letter of credit agreements totaling $700 million
that terminate in April 2005 and are not expected to be renewed. These
five agreements support letter of credit issuances, providing collateral
required on derivative financial contracts used by CNG in its risk manage-
ment strategies for gas and oil production. At December 31, 2004, outstand-
ing letters of credit under these agreements totaled $900 million.
Dominion’s financial policy precludes issuing commercial paper in
excess of its supporting lines of credit. At December 31, 2004, the total
amount of commercial paper outstanding was $573 million and the total
amount of letter of credit issuances was $738 million, leaving approxi-
mately $2.4 billion 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 condi-
tions 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, 2004, the calculated 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% 55%
Virginia Power 60% 50%
CNG 60% 51%
(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 spe-
cific company’s material subsidiaries fail to make payment on various debt
obligations in excess of $25 million, the lenders could require that respec-
tive company to accelerate its repayment of any outstanding borrowings
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 Vir-
ginia 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 repur-
chase of its outstanding commercial paper.
Long-Term Debt
During 2004, Dominion Resources, Inc. and its subsidiaries issued the fol-
lowing long-term debt:
Issuing
Type Principal Rate Maturity Company
(millions)
Senior notes $200 5.20% 2016 Dominion
Resources, Inc.
Senior notes 100 Variable 2006 Dominion
Resources, Inc.
Senior notes 400 5.00% 2014 CNG
Senior notes 177 4.92% 2009 Dominion
Canada Finance
Corporation
Total long-term debt issued $877
During 2004, Dominion Resources, Inc. and its subsidiaries repaid
$1.3 billion of long-term debt securities.
In 2004, Dominion exchanged $219 million of outstanding contingent con-
vertible senior notes for new notes with a conversion feature that requires
that the principal amount of each note be repaid in cash upon conversion.
In 2004, in connection with the acquisition of certain generating facili-
ties, Virginia Power assumed $109 million of private placement bonds and
$104 million of pollution control bonds. Virginia Power exchanged $106 mil-
lion of its 2004 Series A 7.25% senior notes due 2017 for $106 million of the
private placement bonds. The senior notes have the same financial terms
as the private placement bonds, but are registered securities.
Common Stock
During 2004, Dominion issued 14 million shares of common stock and
received proceeds of $839 million. Of this amount, 7 million shares and
proceeds of $413 million resulted from the settlement of stock purchase
contracts associated with Dominion’s 2000 issuance of equity-linked debt
securities. The remainder of the shares issued and proceeds received were
through Dominion Direct®(a dividend reinvestment and open enrollment
direct stock purchase plan), employee savings plans and the exercise of
employee stock options. In 2005, Dominion Direct®and the Dominion
employee savings plans will purchase Dominion common stock on the open
market with the proceeds received through these programs, rather than
having additional new common shares issued.
In July 1998, Dominion was authorized by its Board of Directors to
repurchase up to the lesser of 16.5 million shares, or $650 million of its out-
standing common stock. As of December 31, 2004, Dominion had repur-
chased approximately 12 million shares for $537 million, with its last
repurchase occurring in 2002. In February 2005, in order to recognize the
significant increase in the size of the company and the market value of its
common stock since the time of the previous authorization, Dominion’s
Board of Directors superseded this authority, with new authority, to repur-
chase up to the lesser of 25 million shares or $2.0 billion of Dominion’s
outstanding common stock.
Forward Equity Transaction
In September 2004, Dominion entered into a forward equity sale agree-
ment (forward agreement) with Merrill Lynch International (MLI), as for-
ward purchaser, relating to 10 million shares of Dominion’s common stock.
The forward agreement provides for the sale of two tranches of Dominion
common stock, each with stated maturity dates and settlement prices. In