Dominion Power 2007 Annual Report Download - page 14

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Cleaner Air in
Vi rginia
Projected
emissions reduction
Percent
’98 ’00 ’02 ’04 ’06 ’10 ’15
ercur
Cleaner Air in
NewEngland
’98 ’00 ’02 ’04 ’06 ’10 ’15
100
0
0
0
20
0
20
2
N
ercur
12 Dominion 2007 Annual Report
Acting as Profitable,
Responsible
Capital Stewards
We include a popular phrase on
Wall Street—“capital stewardship”—
among our challenges. The metrics
defining good stewardship show how
well we size up investment opportuni-
ty and whether we bring it home
to investors at efficient profit levels.
Among many investors the first and
foremost metric is earnings per share.
Earnings per share under Generally
Accepted Accounting Principles
(GAAP) in 2007 rose 98 percent
over 2006 earnings thanks in large
part to a one-time, after-tax gain
of $2.1 billion generated by the sale
of substantially all of our E&P
properties. As a result, we reported
GAAP earnings of $3.88 per share in
2007, compared with GAAP earnings
of $1.96 per share in 2006, recast for
the 2-for-1 stock split.
Dominion recorded operating
earnings of $2.56 per share in 2007,
up from 2006 operating earnings of
$2.53 per share, excluding the benefit
from the E&P sales under GAAP,
among other items.*
Management uses operating
earnings as the primary performance
measurement because we believe it
provides a more meaningful represen-
tation of the company’s fundamental
earnings power. However, last year’s
corporate refocusing, E&P sales and
significant share repurchases make a
year-to-year comparison of operating
earnings not particularly meaningful.
In 2008 we have set an operating
earnings target of $3.05 per share to
$3.15 per share, and have provided
an initial operating earnings outlook
of $3.25 per share to $3.40 per share
in 2009. At this time we are not able
to project differences between GAAP
earnings and operating earnings for
2008 or 2009. As I mentioned earli-
er, we expect average annual growth
in operating earnings of 6 percent or
more beginning in 2008.
MAINTAINING ASTRONG BALANCE
SHEET THROUGH INVESTMENT
PERIOD
With a major expansion program
under way, Dominion will need to
maintain its solid credit ratings to
ensure that financing costs for proj-
ects are affordable. Cash generated by
our businesses will cover the expected
dividend payments and maintenance
capital. Financing the planned
new infrastructure investments will
require us to raise a combination
of equity and debt.
We plan to issue between
$200 million and $250 million of
equity in 2008, and about $800 mil-
lion of equity in each of the follow-
ing two years. All of the equity to
* Based on non-GAAP financial measures. See page
26 for GAAP reconciliations.
WITH AMAJOR EXPANSION
PROGRAM UNDER WAY,
DOMINION WILL NEED TO
MAINTAIN ITSSOLID CREDIT
RATINGS TO ENSURE THAT
FINANCING COSTSFOR
PROJECTSARE AFFORDABLE.
Projected
emissions reduction
Percent
Dominion began
ownership of Dominion
New England (DNE)
January 1, 2005