Dominion Power 2004 Annual Report Download - page 47

D 2004/Page 45
Credit ratings for the Dominion Companies as of February 1,
2005 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 1, 2005, Moody’s maintains a negative outlook for its rat-
ings of CNG and Standard & Poor’s maintains a negative outlook for its rat-
ings of Dominion Resources, Inc., Virginia Power and CNG.
Generally, a downgrade in an individual company’s credit rating 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 works closely with both Standard & Poor’s and
Moody’s with the objective of maintaining its current credit ratings. 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 acceleration of principal and interest
payments; restrictions on distributions related to its capital stock, including
dividends, redemptions, repurchases, liquidation payments or guarantee
payments; and in some cases, the termination of credit commitments
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 provisions 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 mort-
gage 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, 2004, there were
no events of default under the Dominion Companies’ covenants.
Future Cash Payments for Contractual Obligations and Planned
Capital Expenditures
Dominion is party to numerous contracts and arrangements obligating
Dominion to make cash payments in future years. These contracts include
financing arrangements such as debt agreements and leases, as well as
contracts for the purchase of goods and services and financial derivatives.
Presented below is a table summarizing cash payments that may result
from contracts to which Dominion is a party as of December 31, 2004. For
purchase obligations and other liabilities, amounts are based upon contract
terms, including fixed and minimum quantities to be purchased at fixed or
market-based prices. Actual cash payments will be based upon actual
quantities purchased and prices paid and will likely differ from amounts
presented below. The table excludes all amounts classified as current lia-
bilities on the Consolidated Balance Sheets, other than current maturities
of long-term debt and interest payable. The majority of current liabilities
will be paid in cash in 2005.
Less More
Than 1 1-3 3-5 than 5
year years years years Total
(millions)
Long-term debt(1) $1,368 $3,948 $1,807 $ 9,810 $16,933
Interest payments(2) 974 1,682 1,346 7,339 11,341
Leases 133 225 184 365 907
Purchase Obligations(3):
Purchased electric capacity
for utility operations 509 968 858 3,103 5,438
Fuel used for utility
operations 691 673 245 51 1,660
Fuel used for nonregulated
operations 48 76 70
— 194
Production handling 56 105 61 27 249
Pipeline transportation
and storage 82 118 85 95 380
Energy commodity purchases
for resale(4) 527 131 3
— 661
Other 352 254 35 5 646
Other long-term liabilities(5):
Financial derivatives-
commodities(4) 1,084 858 1
— 1,943
Other contractual obligations 25 32 14 32 103
Total cash payments $5,849 $9,070 $4,709 $20,827 $40,455
(1) Based on stated maturity dates rather than the earlier redemption dates that could be
elected by instrument holders.
(2) Does not reflect Dominion’s ability to defer distributions related to its junior subordinated
notes payable to affiliated trusts.
(3) Amounts exclude open purchase orders for services that are provided on demand, the timing
of which cannot be determined.
(4) 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.
(5) Excludes regulatory liabilities, AROs and employee benefit plan obligations that are not
contractually fixed as to timing and amount. See Notes 14, 15 and 21 to the Consolidated
Financial Statements. Deferred income taxes are also excluded since cash payments are
based primarily on taxable income for each discrete fiscal year.
Dominion’s planned capital expenditures during 2005 are expected to
total approximately $3.6 billion, which includes the cost of acquiring USGen
and certain non-utility generating facilities. For 2006, planned capital
expenditures are expected to be approximately $3.0 billion. These expendi-
tures include construction and expansion of generation facilities, environ-
mental upgrades, construction improvements and expansion of gas and