Dominion Power 2012 Annual Report Download - page 10

Dominion Resources 2012 Summary Annual Report12
for Dominion Virginia Power, Dominion
Transmission and Dominion East Ohio.
In Virginia, the $1.8 billion coal- and
biomass-fired Virginia City Hybrid Energy
Center — which we believe to be one of
the nation’s cleanest coal-burning power
stations— began producing electricity
for Dominion Virginia Power customers.
Located in Southwest Virginia, a region in
which most counties have unemployment
rates above 8 percent, the 600-mega-
watt facility has about 125 permanent
employees onsite, and employed nearly
2,400 during the peak of construction.
It is expected to contribute between
$6 million and $7 million per year to Wise
County’s tax base. In addition, a major
electric transmission project, Hayes to
Yorktown, was energized. We invested
$79 million in this electric transmission
infrastructure, serving a high-load,
constrained population center in the
Peninsula of Virginia.
In gas-rich Appalachia, four transmis-
sion, gathering and processing projects—
Appalachian Gateway, Gathering
Enhancement, Northeast Expansion and
Ellisburg to Craigs— entered service to
help producers deliver natural gas to
markets in the Northeast and mid-Atlantic.
All told, they represent nearly $1 billion
in investment and encompass an area that
includes West Virginia, Ohio, Pennsylvania
and New York. The projects include more
than 800,000 dekatherms per day of firm
transportation and pipeline capacity,
new compression at 14 stations and
additional processing— the removal of
heavy hydrocarbons and natural gas
liquids (NGL) from the gas stream and
separation of those products into propane,
butane, isobutane and natural gasoline—
at the Hastings Extraction Plant and two
other new plants in West Virginia.
Moreover, to stimulate growth in mid-
stream services to natural gas producers
operating in the Utica Shale in eastern
Ohio and western Pennsylvania, in late
December we formed a joint venture
with Dallas-based Caiman Energy II, LLC,
an energy company focused on midstream
gas assets, particularly in the Utica region.
The $1.5 billion joint venture— Blue
Racer Midstream, LLC— will use our
assets and midstream expertise along
with Caiman’s midstream expertise and
equity funding to focus on “wet” gas
gathering, processing, fractionation and
NGL transportation and marketing, and,
perhaps, dry gas and oil gathering in the
area. It should solidify and enhance our
position in the Utica Shale.
We also expect Blue Racer to support
our 5– 6 percent earnings per share
growth target and provide flexibility
to spend Dominion capital on other
gas-related growth projects.
Business Model Refinement:
Reducing Merchant Exposure
Your company took additional steps in
2012 to prepare to meet future 5– 6 percent
earnings per share growth. Recognizing
depressed merchant power markets and
declining spreads in the Midwest and among
merchant coal-fired stations nearly every-
where, Dominion decided to pursue the sale
of two coal-fired stations —Kincaid in Illinois
and Brayton Point in Massachusetts—and
our 50 percent ownership interest in
Elwood, a gas-fired facility also in Illinois.
These three plants have a generating
capacity of nearly 3,400 megawatts. This
action follows the announced retirements
and sale of two coal-fired facilities, Salem
Harbor in Massachusetts and State Line
in Indiana, principally because of environ-
mental reasons.
The proposed sales of these assets
advance our transition to a more regulated
earnings mix — 80– 90 percent regulated
in 2013 and beyond. And they are the best
path forward, allowing us to further reduce
risk, redeploy capital to regulated busi-
nesses and lessen equity needs for 2013.
You may recall that in 2011, Dominion
announced its intention to sell the Kewaunee
nuclear station in Wisconsin because
it no longer fit strategically with our mer-
chant portfolio. We were unable to find a
buyer for the facility and expect to begin