Dominion Power 2005 Annual Report Download - page 41

Dominion 2005 39
Corporate
Presented below are the Corporate segment’s after-tax results:
2005 2004 2003
(millions, except EPS amounts)
Specific items attributable to operating segments $ (505) $(224) $ (220)
DCI operations (22) (82) (96)
Telecommunications operations(1) 5(13) (750)
Other corporate operations (179) (208) (342)
Total net expense (701) (527) (1,408)
Earnings per share impact $(2.04) $(1.59) $ (4.41)
(1) $5 million, $(15) million and $(642) million are classified as discontinued operations in 2005,
2004 and 2003, respectively.
Specific Items Attributable to Operating Segments — 2005
We reported expenses of $505 million in the Corporate segment
attributable to our operating segments. The expenses in 2005 pri-
marily related to the impact of the following:
•A $556 million loss ($357 million after-tax), related to the dis-
continuance of hedge accounting for certain gas and oil hedges
resulting from an interruption of gas and oil production in the
Gulf of Mexico caused by Hurricanes Katrina and Rita, and sub-
sequent changes in the fair value of those hedges, attributable
to Dominion E&P;
•A $77 million ($47 million after-tax) charge resulting from the
termination of a long-term power purchase agreement, attribut-
able to Dominion Generation; and
•A $51 million charge related to credit exposure associated with
the bankruptcy of Calpine Corporation, attributable to Dominion
Generation. We have not recognized any deferred tax benefits
related to the charge, since realization of tax benefits is not
anticipated at this time based on our expected future tax profile.
Specific Items Attributable to Operating Segments
— 2004
We reported net expenses of $224 million in the Corporate seg-
ment attributable to our operating segments. The net expenses in
2004 primarily related to the impact of the following:
•$96 million of losses ($61 million after-tax) related to the dis-
continuance of hedge accounting for certain oil hedges, result-
ing from an interruption of oil production in the Gulf of Mexico
caused by Hurricane Ivan, and subsequent changes in the fair
value of those hedges during the third quarter, attributable to
Dominion E&P; and
•$71 million of charges ($43 million after-tax) resulting from the
termination of certain long-term power purchase contracts,
attributable to Dominion Generation.
Specific Items Attributable to Operating Segments
— 2003
We reported net expenses of $220 million in the Corporate seg-
ment attributable to our operating segments. The net expenses in
2003 primarily related to the impact of the following:
•$21 million net after-tax benefit representing the cumulative
effect of adopting new accounting principles, as described in
Note 3 to our Consolidated Financial Statements, including:
•SFAS No. 143, Accounting for Asset Retirement Obligations:
a $180 million after-tax benefit attributable to: Dominion
Generation ($188 million after-tax benefit); Dominion E&P
($7 million after-tax charge); and Dominion Delivery ($1 mil-
lion after-tax charge);
•Emerging Issues Task Force (EITF) Issue No. 02-3, Issues
Involved in Accounting for Derivative Contracts Held for Trad-
ing Purposes and Contracts Involved in Energy Trading and
Risk Management Activities: a $67 million after-tax charge
attributable to Dominion Energy;
•Statement 133 Implementation Issue No. C20, Interpreta-
tion of the Meaning of ‘Not Clearly and Closely Related’ in
Paragraph 10(b) regarding Contracts with a Price Adjustment
Feature: a $75 million after-tax charge attributable to
Dominion Generation; and
•FIN 46R: a $17 million after-tax charge attributable to
Dominion Generation;
•$197 million of operations and maintenance expense ($122
million after-tax), representing incremental restoration expenses
associated with Hurricane Isabel, attributable primarily to
Dominion Delivery;
•A $105 million charge ($65 million after-tax) for the termination
of power purchase agreements attributable to Dominion Gener-
ation;
•A $64 million charge ($39 million after-tax) for the restructuring
and termination of certain electric sales agreements attributable
to Dominion Generation; and
•$26 million of severance costs ($15 million after-tax) for work-
force reductions during the first quarter of 2003, attributable to:
•Dominion Generation ($8 million after-tax);
•Dominion Energy ($2 million after-tax);
•Dominion Delivery ($4 million after-tax); and
•Dominion E&P ($1 million after-tax).
DCI Operations
DCI’s net loss for 2005 decreased $60 million, primarily due to a
reduction in after-tax charges associated with the impairment and
divestiture of DCI investments.
DCI recognized a net loss of $82 million in 2004; a decrease of
$14 million as compared to 2003. The decrease primarily resulted
from a $20 million reduction in after-tax charges associated with
asset impairments.
Telecommunications Operations
We sold our telecommunications business in May 2004 to Elantic
Telecom, Inc., which subsequently filed for bankruptcy. Due to the
resolution of certain contingencies, we recognized an after-tax ben-
efit of $5 million in 2005 related to the discontinued telecommuni-
cations business.
The loss from our discontinued telecommunications business
decreased $737 million to $13 million in 2004, primarily due to the
impact of certain charges recognized during 2003, which included:
•$566 million associated with the impairment of network assets
and related inventories. We have not recognized any deferred tax
benefits related to the impairment charges, since realization of
tax benefits will be dependent on our expected future tax profile;
•A $48 million increase in deferred tax expense as a result of an
increase in the valuation allowance on deferred tax assets;
•Our purchase of the remaining equity interest in DFV held by
another party for $62 million in December 2003, $60 million of
which was recorded as goodwill and impaired;
•$57 million ($35 million after-tax) for the costs associated with
our acquisition of DFV senior notes; and
•$41 million of after-tax operating losses.
•A $184 million charge ($112 million after-tax) related to the
sale of our interest in a long-term power tolling contract
attributable to Dominion Generation;