Dominion Power 2005 Annual Report Download - page 80

Notes to Consolidated Financial Statements, Continued
Junior Subordinated Notes Payable to Affiliated Trusts
From 1997 through 2002, we established five subsidiary capital
trusts, each as a finance subsidiary of the respective parent com-
pany, which holds 100% of the voting interests. The capital trusts
sold trust preferred securities representing preferred beneficial
interests and 97% beneficial ownership in the assets held by the
capital trusts. In exchange for the funds realized from the sale of
the trust preferred securities and common securities that represent
the remaining 3% beneficial ownership interest in the assets held
by the capital trusts, we issued various junior subordinated notes.
The junior subordinated notes constitute 100% of each capital
trust’s assets. Each trust must redeem its trust preferred securities
when their respective junior subordinated notes are repaid at matu-
rity or if redeemed prior to maturity.
Under previous accounting guidance, we consolidated the trusts
in the preparation of our Consolidated Financial Statements. In
accordance with FIN 46R, we ceased to consolidate the trusts as of
December 31, 2003 and instead report as long-term debt on our
Consolidated Balance Sheet the junior subordinated notes issued
by us and held by the trusts.
The following table provides summary information about the
trust preferred securities and junior subordinated notes outstanding
as of December 31, 2005:
78 Dominion 2005
Selected information about our equity-linked debt securities is presented below:
Senior Stock
Total Notes Purchase Stock
Total Long- Annual Contract Total Purchase Maturity
Date of Units Net term Interest Annual Equity Settlement of Senior
Issuance Issued Proceeds Debt Rate Rate Charge Date Notes
(millions, except percentages)
2000 8.3 $400.1 $412.5 3.66%(1) — %(2) $20.7 11/04 11/06
2002 6.6 $320.1 $330.0 5.75% 3.00% $36.3 5/06 5/08
(1) Prior to their remarketing in November 2004, the senior notes carried an annual interest rate of 8.05%.
(2) The stock purchase contracts carried an annual interest rate of 1.45% prior to their settlement in November 2004.
Trust
Preferred Common
Date Securities Securities
Established Capital Trusts Units Rate Amount Amount
(thousands) (millions)
December 1997 Dominion Resources Capital Trust I(1) 250 7.83% $250 $ 8
January 2001 Dominion Resources Capital Trust II (2) 12,000 8.4% 300 9
January 2001 Dominion Resources Capital Trust III (3) 250 8.4% 250 8
October 2001 Dominion CNG Capital Trust I(4) 8,000 7.8% 200 6
August 2002 Virginia Power Capital Trust II(5) 16,000 7.375% 400 12
Junior subordinated notes/debentures held as assets by each capital trust were as follows:
(1) $258 million — Dominion Resources, Inc. 7.83% Debentures due 12/1/2027.
(2) $309 million — Dominion Resources, Inc. 8.4% Debentures due 1/30/2041.
(3) $258 million — Dominion Resources, Inc. 8.4% Debentures due 1/15/2031.
(4) $206 million — CNG 7.8% Debentures due 10/31/2041.
(5) $412 million — Virginia Power 7.375% Debentures due 7/30/2042.
Distribution payments on the trust preferred securities are con-
sidered to be fully and unconditionally guaranteed by the respective
parent company that issued the debt instruments held by each
trust, when all of the related agreements are taken into considera-
tion. Each guarantee agreement only provides for the guarantee of
distribution payments on the relevant trust preferred securities to
the extent that the trust has funds legally and immediately available
to make distributions. The trust’s ability to pay amounts when they
are due on the trust preferred securities is solely dependent upon
the payment of amounts by Dominion, Virginia Power or CNG when
they are due on the junior subordinated debt instruments. If the
payment on the junior subordinated notes is deferred, the company
that issued them may not make distributions related to its capital
stock, including dividends, redemptions, repurchases, liquidation
payments or guarantee payments. Also, during the deferral period,
the company that issued them may not make any payments on or
redeem or repurchase any debt securities that are equal in right of
payment with, or subordinated to, the junior subordinated notes.