Dominion Power 2007 Annual Report Download - page 91

N OTE 17. V ARIABLE I NTEREST E NTITIES
FASB Interpretation No. 46 (revised December 2003), Con-
solidation of Variable Interest Entities (FIN 46R) addresses the
consolidation of VIEs. An entity is considered a VIE under FIN
46R if it does not have sufficient equity to finance its activities
without assistance from variable interest holders or if its equity
investors lack any of the following characteristics of a controlling
financial interest:
‰control through voting rights,
‰the obligation to absorb expected losses, or
‰the right to receive expected residual returns.
FIN 46R requires the primary beneficiary of a VIE to con-
solidate the VIE and to disclose certain information about its
significant variable interests in the VIE. The primary beneficiary
of a VIE is the entity that receives the majority of a VIE’s
expected losses, expected residual returns, or both.
We have long-term power and capacity contracts with 4 poten-
tial VIEs, which contain certain variable pricing mechanisms to
the counterparty in the form of partial fuel reimbursement. We
have concluded we are not the primary beneficiary of any of these
potential VIEs. The contracts expire at various dates ranging from
2015 to 2021. We are not subject to any risk of loss from these
potential VIEs other than our remaining purchase commitments
which totaled $2.1 billion as of December 31, 2007. We paid
$211 million, $214 million and $222 million for electric capacity
and $160 million, $130 million and $159 million for electric
energy to these entities for the years ended December 31, 2007,
2006 and 2005, respectively.
Our Consolidated Balance Sheet as of December 31, 2006,
reflected $337 million of net property, plant and equipment and
$370 million of debt, related to the consolidation, in accordance
with FIN 46R, of a variable interest lessor entity through which
we had financed and leased a power generation plant for our
utility operations. The debt was non-recourse to us and was
secured by the entity’s property, plant and equipment. The lease
under which we operated the power generation facility terminated
in August 2007 and we took legal title to the facility through the
repayment of the lessor’s related debt.
As discussed in Note 28, DCI holds an investment in the
subordinated notes of a third-party CDO. In June 2006, the
CDO entity’s equity investor withdrew its capital, which required
a redetermination of whether the CDO entity is a VIE under FIN
46R. We concluded that the CDO entity is a VIE and that DCI
is the primary beneficiary of the CDO entity, which we have
consolidated in accordance with FIN 46R.
N OTE 18. S HORT -T ERM D EBT AND C REDIT
A GREEMENTS
As a result of the merger of CNG with Dominion in June 2007,
all of CNG’s former credit facilities have been assumed by
Dominion. We use short-term debt, primarily commercial paper,
to fund working capital requirements, as a bridge to long-term
debt financing and as bridge financing for acquisitions, if appli-
cable. The levels of borrowing may vary significantly during the
course of the year, depending upon the timing and 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,
our credit quality and the credit quality of our counterparties. At
December 31, 2007, we had committed lines of credit totaling
$4.9 billion. These lines of credit support commercial paper bor-
rowings and letter of credit issuances. At December 31, 2007 and
2006, we had the following commercial paper, bank loans, and
letters of credit outstanding, as well as capacity available under
our credit facilities:
Facility
Limit
Outstanding
Commercial
Paper
Outstanding
Bank
Borrowings
Outstanding
Letters of
Credit
Facility
Capacity
Available
(millions)
2007
Five-year joint
revolving credit
facility(1) $3,000 $ 757 $ — $229 $2,014
Five-year Dominion
credit facility(2) 1,700 — 1,000 1 699
Five-year Dominion
bilateral facility(3) 200 — — — 200
Totals $4,900 $ 757 $1,000 $230 $2,913
2006
Five-year joint
revolving credit
facility(1) $3,000 $1,759 $ — $236 $1,005
Five-year Dominion
credit facility(2) 1,700 — 500 484 716
Five-year Dominion
bilateral facility(3) 200 — — — 200
364-day credit
facility(4) 1,050 — — — 1,050
Totals $5,950 $1,759 $ 500 $720 $2,971
(1) The $3.0 billion five-year credit facility was entered into February 2006
and terminates in February 2011. This credit facility can be used to
support bank borrowings and the issuance of commercial paper, as well
as to support up to $1.5 billion of letters of credit. The weighted-average
interest rates of the outstanding commercial paper supported by this
facility were 5.66% and 5.41% at December 31, 2007 and 2006,
respectively.
(2) The $1.7 billion five-year credit facility was entered into in August
2005 and terminates in August 2010. This facility can be used to sup-
port bank borrowings, the issuance of letters of credit and commercial
paper. The weighted-average interest rates of the outstanding bank bor-
rowing supported by this facility were 5.69% and 5.76% at December
31, 2007 and 2006, respectively.
(3) The $200 million five-year facility was entered into in December 2005
and terminates in December 2010. This credit facility can be used to
support commercial paper and letter of credit issuances.
(4) The $1.05 billion 364-day credit facility was used to support the issu-
ance of letters of credit and commercial paper by our former CNG con-
solidated subsidiary to fund collateral requirements under its gas and oil
hedging program. The facility was entered into in February 2006 and
terminated in February 2007.
In addition to the facilities above, we also entered into a $100
million bilateral credit facility in August 2004 that terminates in
August 2009. At December 31, 2007, there were no letters of
credit outstanding under this facility. At December 31, 2006,
outstanding letters of credit under this facility totaled $100 mil-
lion. At December 31, 2006, we also had a $100 million three-
year credit facility entered into in June 2004 that terminated in
June 2007. At December 31, 2006, outstanding letters of credit
under this facility totaled $25 million.
Dominion 2007 Annual Report 89