Dominion Power 2015 Annual Report Download - page 19

DOMINION RESOURCES 2015 SUMMARY ANNUAL REPORT
17
THOMAS F. FARRELL II
CHAIRMAN, PRESIDENT AND CEO
OTHER HIGHLIGHTS
I would like to highlight a few other things
we have done to position your company
better for the future.
As part of our long-term financial
strategy we began monetizing our
contracted merchant solar portfolio, selling
a 33 percent ownership stake in 24 projects
for about $300 million to SunEdison, Inc. We
plan to monetize the remaining ownership
after the Investment Tax Credit holding
period ends and when economically
advantageous to the company.
In 2015, our board of directors also
approved a plan allowing your company
to purchase up to $50 million in Dominion
Midstream units. Last year, Dominion
Midstream began to pay out cash distri-
butions to Dominion. Those payments are
expected to increase annually. For more
information about Dominion Midstream,
please see the top of page 13.
2016 EARNINGS EXPECTATIONS
As your company considers “new normal”
commodity and power markets prices —
both of which fell to unprecedented lows
in 2015 — and a return to normal weather,
we expect that our growth plan providing
new and upgraded energy infrastructure
in the states we serve will bring earnings
growth to our company.
In 2016, we anticipate operating
earnings in the range of $3.60 per share
to $4.00 per share of common stock,3
with strong annual earnings and dividend
growth throughout the remainder of
the decade.4
RECORD OF COMPLIANCE
Your investment in Dominion is also
enhanced because you know that your
company not only will comply with federal
and state standards but also exceed them.
In 2003, Dominion voluntarily reached
an agreement with the U.S. Environmental
Protection Agency (EPA) to install
environmental control equipment such
as scrubbers and baghouses to reduce
sulfur dioxide, nitrogen oxides and
mercury emissions at its coal-fired power
stations. The results have been astound-
ing — each type of emission has been
reduced by more than 80 percent.
In 2015, Dominion’s coal-fired power
stations complied with the requirements of
the EPA’s Mercury and Air Toxics Standards
(MATS). And in 2014, North Anna Unit 2
became the nation’s first operating reactor
to achieve full compliance with the Nuclear
Regulatory Commission’s Fukushima
Mitigating Strategies Order — which
called on all operating reactors to create
strategies allowing them to keep the public
safe in case of a loss of power. As of today,
all six of Dominion’s nuclear units are
in compliance.
Now comes the EPA’s proposed Clean
Power Plan, or as some call it, the Carbon
Rule. It is the most comprehensive and
far-reaching environmental regulation
ever issued by the federal government.
Despite what anyone says, it is designed
to change how we power America — and,
if implemented, it will.
Despite legal challenges brought
by others, we are working with the
Commonwealth of Virginia and other
stakeholders to develop a State
Implementation Plan to meet the goals
of the Clean Power Plan — reducing
carbon emissions — while protecting
reliability and promoting rate stability.
Those are very real challenges.
CHALLENGES FOR VIRGINIA
For Virginia, there are six potential
compliance options. Whichever option
state officials decide to take, the genera-
tion makeup in Virginia will look markedly
different in the next decade and beyond.
In 2015, 32 percent of Virginia Power’s
net electric production came from coal,
and 28 percent from gas. In the future, we
expect to use more natural gas and less coal.
Closures of coal-fired stations would
cost money. So too would replacing them
with lower-emitting or non-emitting
sources and with additional transmission
capacity.
We have already spent billions of
dollars to reduce carbon emissions,
and achieving compliance with these
proposed regulations would cost billions
more. That would, unfortunately, be
reflected in higher customer bills.
But we are on the right path.
The capital expenditures plan I outlined
in this letter would help us comply.
The proposed Greensville facility is
expected to meet the proposed
standards of Rule 111(b), which would set
an achievable carbon emissions intensity
rate by new fossil generation type (coal,
gas combined cycle), and be among the
nation’s most efficient and cost-effective
gas-fired power plants. Our solar plans
for Virginia also would give Dominion a
zero-carbon-emitting boost.
And we are committed to constructing
natural gas pipelines such as the Atlantic
Coast Pipeline so that other gas and
electric utilities and power generators can
build gas combined-cycle fleets capable
of 111( b ) compliance.
However the final rules shake out,
Dominion will comply — while working to
protect reliability and promote rates
as stable as possible. Our outstanding
people will get us there.
THANK YOU FOR YOUR INVESTMENT
Economic headwinds in 2015 were strong,
resulting in lower-than-anticipated earnings
per share and market returns.
The things we could not control held
us back. We thrived, however, on the
things we could.
Our capital allocation plan, our quality
of service, our employees, our commit-
ment to communities and our record of
compliance were recognized by our peers,
our investors and other industry leaders.
We will continue to wisely allocate capital
and invest in our people, communities and
customers to realize competitive returns
and provide reliable service.
Thank you for your continued ownership
of Dominion.
Sincerely,
3 See page 22 for GAAP Reconciliation of 2016 Operating
Earnings Guidance.
4 All dividend declarations are subject to Board of
Directors approvals.