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Dominion says 2001 earnings, after charges, to exceed estimates

By the OGJ Online Staff

HOUSTON, Jan. 16, 2002 — Utility holding company Dominion Resources Inc. Wednesday said 2001 operating earnings, excluding special charges, are expected to meet or slightly exceed analyst expectations of $4.15/share.

The company also reaffirmed 2002 earnings guidance of $4.90-4.95/share. The Richmond, Va.-based company reported it will take an after-tax charges of a $348 million in the fourth quarter of 2001, that will include $97 million in exposure to Enron Corp., a $183 million write-down of Dominion Capital assets, and $68 million in restructuring charges.

The noncash Enron charge is related to credit exposure on past energy sales to Enron for which payment has not yet been received and the impaired value of forward natural gas contracts with Enron, Dominion reported.

The Dominion Capital charge is related to a write-down of the value of Dominion Capital 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, which prohibits registered companies from engaging in businesses 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 overlapping with the recession. Since completion of the CNG merger, Dominion reported making “significant progress” selling Dominion Capital and anticipates no further Dominion Capital asset write-downs or loan loss reserve adjustments under existing market conditions.

Post-Enron, Dominion said it has hedged more than 60% of its expected 2002 gas volumes and hedged about 40% of its expected 2003 gas volumes at prices “significantly” above current market prices. For this reason and others, Dominion reported it is positioned to exceed consensus analyst estimates of $4.89/share this year and to grow earnings an average annual rate of 10% going forward.

CEO Thos. E. Capps called Enron’s bankruptcy protection filing the industry equivalent of a “thousand year flood.” He said Enron’s collapse set in motion “a badly needed weeding-out process in the industry” and predicted the industry will be financially stronger overall as a result.