Dominion Power 2005 Annual Report Download - page 20

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18 Dominion 2005
Proved Gas
adeserves
Trillion Cubic Feet Equivalent (Tcfe)
8
4
0
nclu e ear en re erve o ne
b t e o inion E loration
ro uction bu ine e ent an
oinion Tran i ion nc
artoft e o inion Ener
bu ine e ent
mid-Atlantic and Midwest. We’ll use proceeds of the sale for
general corporate purposes, including debt reduction.
In 2006, we are scheduled to receive about $330
million in proceeds from the conversion of equity-linked
debt securities. Future moves to raise capital will be made
in full accordance with our commitment to operate not only
to the satisfaction of our shareholders but our valued
community of bondholders as well.
At year-end, our company’s adjusted debt as a percent-
age of capital stood at about 58 percent, compared to
54 percent at the end of 2004. We missed our target of 51
percent in 2005, largely because of the temporary negative
effects of hurricanes and rising commodity prices. A chart
showing our debt ratios under GAAP appears on page 25.
As a result of falling short of our targeted credit metrics,
Standard & Poor’s downgraded our bond rating from BBB+
to BBB. Moody’s maintained its Baa1 rating but in early
January placed our rating on review for a downgrade. In
2005, we added coverage from Fitch, which rates your
company’s debt at BBB+. Although we are disappointed
with the downgrades, we are confident we have the assets
and the financial plan to achieve credit metrics consistent
with the high triple-B rating over the next few years.
Patience grounded in a long-term perspective has
rewarded Dominion shareholders in the past. We believe
our bondholders maintain a long-term view and
are comfortable, not only with where we are today but also
with our ability to improve these metrics as we continue
to execute our plan.
Renewed Earnings Growth Expectations
Yes, 2005 turned out to be a difficult earnings year. But
we have weathered such years before. In January 2006, we
set operating earnings targets of $5.05 to $5.25.
As we’ve noted in earlier letters, differences can occur
between our operating earnings forecasts and actual GAAP
earnings. Some factors we can see on the horizon but can’t
yet quantify. In 2006, for example, potential changes
in accounting principles could come into play. Factors we
can’t foresee can also create differences, and usually do,
as in all businesses.
Among the things that we know will work against us in
the short-term in 2006 are the remaining impacts of the
hurricanes on our Gulf operations. Pension and retiree med-
ical benefits will cost more to provide. And underrecovery
of fuel costs at Dominion Virginia Power in 2006 also will
play a negative role.
Fortunately, our projected earnings will benefit from
important positive drivers in 2006. Even more importantly,
the same positive drivers are expected to fuel our earnings
Patience grounded in a long-term
perspective has rewarded Dominion
shareholders in the past.