Dominion Power 2006 Annual Report Download - page 47

MANAGEMENT’S DISCUSSION ANDANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, CONTINUED
LONG-TERM DEBT
During 2006, we issuedthefollowing long-term debt:
Type Principal Rate Maturity Issuing Company
(millions)
Enhanced junior
subordinated notes $5006.30% 2066 Dominion
Senior notes 400 variable 2008 Dominion
Enhanced junior
subordinated notes 300 7.50% 2066 Dominion
Senior notes 250 5.60%2016 Dominion
Senior notes 550 6.00% 2036 Virginia Power
Senior notes 450 5.40%2016 Virginia Power
Total long-term debt
issued $2,450
In February 2006, we successfully remarketed $330 million of
5.75% 2002 Series Asenior notes related to our equity-linked
debt securities. The senior notes, which will mature in 2008, now
carry an annual interest rate of 5.687%.
In February 2006, Dominion Energy BraytonPoint, LLC
borrowed $47 million in connection with theMassachusetts
Development Finance Agency’s issuance of its Solid Waste Dis-
posal Revenue Bonds (Dominion Energy BraytonPointIssue)
Series 2006, which mature in 2036 and bear a coupon rate of
5.0%. The bonds were issued pursuant to atrust agreement
whereby funds are withdrawn from the trust as improvements are
made at our Brayton PointStation located in Somerset,
Massachusetts. We havewithdrawn $33 millionfrom the trust as
of December 31, 2006.
In June2006, DCI began consolidating a collateralized debt
obligation (CDO) entity in accordance with FASB Interpretation
No. 46 (revised December 2003), Consolidation of Variable Inter-
est Entities (FIN 46R). At December 31, 2006, this CDO entity
had $385 million of notes payable that mature in January 2017
and are nonrecourse to us.
During 2006, we repaid $2.3 billion of long-term debt
securities.
ISSUANCE OF COMMON STOCK
During 2006, we issued6.6million shares of common stock and
received proceedsof $479 million. Of this amount, 4.5 million
shares and proceedsof $330 million resulted from the settlement
of stock purchasecontracts associated with our 2002 issuance of
equity-linked debt securities. The remainder of the shares issued
and proceeds received were through Dominion Direct® (a divi-
dend reinvestment and open enrollment direct stock purchase
plan), employee savings plans and the exercise of employee stock
options.FromMay 2006 until November 2006, we issued new
common shares in consideration of proceeds received through
these programs. In November 2006, we began purchasingour
common stock on the open market with theproceeds received
through these programs, rather than havingadditional new
common shares issued.
REPURCHASES OF COMMON STOCK
In February 2005, we were authorized by our BoardofDirectors
to repurchase up to the lesser of 25 million shares or $2.0 billion
of our outstanding common stock.
Pursuant tothis authority, in November 2006, we repurchased
500 thousandsharesof our common stock forapproximately $40
million. Additionally, in December 2006, we entered into apre-
paid accelerated share repurchase agreement (ASR) with afinan-
cial institution as the counterparty. Under the ASR, we will
ultimately receive between 5.6 million and6.5million shares in
exchange forthe prepaymentof $500 million. At the time of
execution of the ASR, the counterparty delivered to us 5million
shares. The final number of shares delivered to the Company will
be determined by avolume weighted-average price of our com-
monstock over the period commencing on December 12, 2006,
and terminating on or before May 16, 2007. The actual termi-
nation date is at the option of the counterparty. The average price
to be used to determine the final shares delivered to the Company
is subject toamaximum and minimum price. Assuming normal
termination, we will receive aminimum of 560 thousandaddi-
tional shares. In noevent will termination, normalor otherwise,
result in the Company delivering shares or additional cash to the
counterparty.
At December 31, 2006 the remaining purchase authorization
is thelesser of 15.7 million shares or $1.2 billion of our out-
standing common stock.
Credit Ratings
Creditratings are intended to provide banks and capital market
participants with aframework for comparing the credit qualityof
securities and are not arecommendation to buy, sell or hold secu-
rities. We believe that the current credit ratings of Dominion,
VirginiaPower and CNG (the Dominion Companies) provide
sufficient access to the capital markets.However, disruptionsin
the banking and capital markets not specifically related to us may
affect the Dominion Companies’ ability to access these funding
sources or cause an increase in the return required by investors.
Both quantitative (financial strength) and qualitative (business
or operating characteristics) factors are considered by the credit
rating agencies in establishing an individual company’s credit
rating. Creditratings should be evaluated independently andare
subject torevision or withdrawal at any time by the assigning
rating organization. The credit ratings for the Dominion
Companies are most affected by each company’s financial profile,
mix of regulated and nonregulated businesses and respective cash
flows, changes in methodologies used by the rating agencies and
“event risk,”if applicable, such as major acquisitions or dis-
positions.
46 DOMINION2006 Annual Report