Dominion Power 2006 Annual Report Download - page 46

to certain regulatoryapprovals, including registration with the
SECand, in the case of VirginiaElectric and Power Company
(Virginia Power), approval by the Virginia State Corporation
Commission (Virginia Commission).
In December 2005, the SECadoptedrulesthat modify the
registration, communications and offering processes under the
SecuritiesAct of 1933. The rulesstreamline the shelf registration
process to provide registrants with more timelyaccess to capital.
Under the new rules, Dominion and Virginia Power meet the
definition of a well-known seasoned issuer. This allows the
companies to use an automatic shelf registration statementto
register any offering of securities, other than thosefor business
combination transactions.
Significant financing activities in 2006 included:
$2.3 billion forthe repayment of long-term debt;
$970 million of common dividend payments;
$540 million forthe repurchase of common stock; and
$300 million for the repayment of affiliated notes payable;
partially offset by
$2.5 billion from the issuance of long-term debt;
$713 million from the net issuance of short-term debt;and
$479 million from the issuance of common stock.
CREDIT FACILITIES ANDSHORT-TERM DEBT
We use short-term debt, primarily commercial paper, to fund
working capital requirements, as abridge to long-term debt
financing and as bridge financing foracquisitions, if applicable.
The levelof our borrowings mayvary significantly duringthe
course of the year, depending upon the timingand amount of
cash requirements not satisfied by cash from operations. In addi-
tion,we utilize cash and letters of credit to fund collateral
requirements under our commodities hedging program.Collateral
requirements are impacted by commodity prices, hedging levels
and our credit qualityandthecredit qualityof our counterparties.
Short-term financing is supportedbya$3.0 billion five-yearjoint
credit facilitywith Virginia Power and CNG dated February
2006, that can also be usedtosupport up to $1.5 billion of letters
of credit. Short-term financing at CNG is alsosupported by an
amended and restated $1.7 billion five-yearrevolving credit
facility and a$1.05 billion 364-day credit facility, both dated
February 2006. At December 31, 2006, we had committed lines
of credit totaling$5.75 billion. These lines of credit support
commercial paper borrowings, bank loans and letter of credit
issuances. Our financial policy precludes issuing commercial
paper in excess of our supporting lines of credit. At December 31,
2006, we had the following commercial paper, bank loans and
letters of credit outstanding and capacity available under credit
facilities:
Facility
Limit
Outstanding
Commercial
Paper
Outstanding
Bank Loans
Outstanding
Letters of
Credit
Facility
Capacity
Available
(millions)
Five-year
revolving joint
credit facility(1) $3,000 $1,759 $—$236 $1,005
Five-year CNG
credit facility(2) 1,700 —500484716
364-day CNG
credit facility(3) 1,050 ———1,050
Totals $5,750 $1,759 $500 $720 $2,771
(1) The $3.0 billion five-year credit facilitywasentered into in February 2006 and
terminates in February 2011. This credit facility can also be used to support
up to $1.5 billion of letters of credit.
(2) The $1.7 billion five-year credit facilityisprimarily used to support the issu-
ance of letters of credit and commercial paper by CNG to fund collateral
requirements under its gas and oil hedging program.The facility was entered
into in February 2006 and terminates in August 2010. In October 2006, we
borrowed $500 million from this facility to repay CNG’s $500 million 2001
Series B5.375% Senior Notes, which matured on November 1, 2006. We
expect torepay the outstanding loan with proceeds received from pending
asset sales.
(3) The $1.05 billion 364-day credit facility was used to support the issuance of
letters of credit and commercial paper by CNG to fund collateral requirements
under its gas and oil hedging program.The facility was entered into in Febru-
ary 2006 and terminated in February 2007.
We have also entered into several bilateral credit facilities in
addition to the facilitiesabove in order to provide collateral
required on derivative contracts used in our risk management
strategies forgas and oil productionoperations. AtDecember 31,
2006, we had the following letter of credit facilities:
Company
Facility
Limit
Outstanding
Letters of
Credit
Facility
Capacity
Remaining
Facility
Inception Date
Facility
Maturity Date
(millions)
CNG$100 $25$75June 2004 June 2007
CNG100 100 —August 2004 August 2009
CNG(1) 200 —200December 2005 December 2010
Totals $400 $125 $275
(1) This facility can also be used to support commercial paper borrowings.
In connection with our commodity hedging activities, we are
required to provide collateral to counterparties under some cir-
cumstances. Under certain collateral arrangements, we maysatisfy
these requirements by electing to either deposit cash, post letters
of credit or, in some cases, utilize other forms of security. From
time to time, we vary the form of collateral provided to counter-
partiesafter weighing the costs and benefits of various factors
associated with the different formsof collateral. These factors
include short-term borrowing and short-term investment rates,
the spread over these short-term rates at which we can issue
commercial paper, balance sheet impacts, the costs and fees of
alternative collateral postings with these and other counterparties
and overall liquidity management objectives.
DOMINION2006 Annual Report 45