(D) Dominion Dominion Resources Beats Expectations & Reaffirms

January 30th, 2010

Dominion Resources Inc. (D) fourth quarter 2009 EPS was 63 cents, within company’s guidance range of 55 to 65 cents and above the Zacks Consensus Estimate of 60 cents. However, the quarterly EPS declined versus last year’s EPS of 73 cents. The earnings drag during the quarter is attributed to higher outage costs, unfavorable weather in the regulated electric service territory and higher depreciation and amortization expenses.

Dominion reported full-year operating earnings of $3.27 per share, which was within the company’s guidance of $3.20-$3.30 and above the Zacks Consensus Estimate of $3.24 and full year 2008 earnings of $3.16. The outperformance was driven by higher contributions from the regulated electric utility and gas transmission businesses, higher merchant generation margins and lower income taxes, partially offset by lower gas and oil production in the company’s E&P operations.

Segment wise, operating earnings in the fourth quarter at Dominion Virginia Power and Dominion Generation declined, while earnings at Dominion Energy improved over the corresponding period last year. In 2009, earnings at Dominion Virginia Power remained flat, while earnings improved in the Generation and Energy segments.

Net operating revenues for the quarter and the year decreased 22% and 7% to $3.3 billion and $15.1 billion, respectively.

During 2009, the company increased its total generating capacity in the Generation segment by 1.5%, through a combination of new generation and uprates of existing generating facilities. Dominion also progressed on its two large generating facilities — Virginia City Hybrid Energy Center and Bear Garden — which are expected to supply 1,175 megawatts in Virginia when operational in 2012.

In the Energy segment, the company doubled the size of its LNG importation facility with the startup of its Cove Point Expansion project. Additionally, the company achieved full commercial operation at its USA Storage Project, the Appalachian Gateway, to ensure market access by firming up transportation rights and drilled more than 300 wells in the Appalachian E&P operations without any dry holes.

In its Dominion Virginia Power segment, the company is focused on increasing reliability by making significant investments. Investments in 2009 included completion of over 400 miles of circuit reconditioning across Virginia and North Carolina. On the transmission front, the company made considerable progress on the 500 kV Meadow Brook to Loudoun and Carson to Suffolk electric transmission line projects, which would be commenced by mid-year 2011.

Given the earnings outperformance and limited sensitivity to commodity price changes, Dominion has reaffirmed its 2010 EPS guidance in the range of $3.20 to $3.40. Furthermore, the company reiterated its target to achieve a 55% dividend payout ratio by 2010. The board also set a 2010 dividend rate of $1.83 per share of common stock, up from $1.75 per share in 2009, a 4.6% increase.

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(D) Dominion Dominion Resources Beats Expectations & Reaffirms

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