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Breaking News : posted Jan 16, 9:52 AM
Dominion '01 Earnings Exceed Estimates Despite $348M 4Q Charges 
Dominion said Wednesday its 2001 operating earnings, excluding special charges, are expected to "meet or slightly exceed" analyst expectations of $4.15 per share, and it reaffirmed its 2002 earnings guidance of $4.90-4.95 per share. The higher earnings come despite fourth quarter write-downs of about $348 million, created by $97 million related to Enron Corp. exposure, a write-down of Dominion Capital assets worth $183 million, and a restructuring initiative announced in November, which will cost $68 million. 
The Richmond, VA-based integrated energy company said the Enron charge is "related to credit exposure on past energy sales to Enron for which payment has not yet been received," totaling $6 million, and the "impaired value of forward natural gas contracts with Enron," worth $91 million. Dominion said the Enron charges are non-cash, and with the fourth quarter charge, the company "substantially eliminates any further Enron-related earnings exposure going forward." 
Dominion has hedged more than 60% of its expected 2002 gas volumes and has hedged about 40% of its expected 2003 gas volumes at prices "significantly" above current market prices. Because of the hedging program and cost-cutting initiatives, Dominion said it is "positioned to exceed the consensus analyst estimate of $4.89 per share in 2002 and to grow earnings thereafter at an average annual rate of 10%." 
"The Enron bankruptcy was the industry's equivalent of a 'thousand-year flood'," said CEO Thomas E. Capps. "The floodwaters are receding. As a result of some very costly but important lessons learned, the industry will be financially stronger overall. However, the Enron collapse has set in motion and accelerated a badly needed weeding-out process in the industry. The strong will get stronger and the weak will get weaker." 
Capps said a "handful" of "financially strong, asset-heavy and integrated industry leaders, including Dominion, are already benefiting from a 'flight to quality' as energy users seek out suppliers they know they can count on to be there when the energy is needed." 
Another write-down, for Dominion Capital, is related to the value of its assets and increased loan loss reserves. When Dominion completed its merger with CNG in January 2000, it became a registered company under the Public Utility Holding Company Act of 1935 (PUHCA), which prohibits registered companies from engaging in business not functionally related to the energy business. To comply with PUHCA, Dominion had to divest Dominion Capital, its financial services business, within a defined period, "which happened to overlap a recession." The company said it anticipates no other Dominion Capital asset write-downs or loan loss reserve adjustments. 
"We have conducted a rigorous review of all of our assets, with a particular focus on non-core assets," said Capps. "There were significant fourth quarter events that led to a decline in consumer and business confidence and triggered an impairment of Dominion Capital assets. The adjusted values should allow us to pursue liquidation without negatively impacting earnings or the balance sheet going forward." 
Dominion has scheduled an earnings call for 10 a.m. EST on Jan. 24. To participate, call (800) 314-7867 or view a live web cast at www.dom.com/investors. <http://www.dom.com/investors.>