SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
/X/ QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended June 30, 1997
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______________ to _______________
Commission file number 1-8489
DOMINION RESOURCES, INC.
(Exact name of registrant as specified in its charter)
Virginia 54-1229715
(State or other jurisdiction (I.R.S. Employer
incorporation or organization) Identification No.)
901 East Byrd Street, Richmond, Virginia 23219
(Address of principal executive offices) (Zip Code)
Registrant's telephone number (804) 775-5700
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No _____
At July 31, 1997, 185,785,807 shares of common stock, without par value, of
the registrant were outstanding.
DOMINION RESOURCES, INC.
INDEX
Page
Number
PART I. Financial Information
Item 1. Consolidated Financial Statements
Consolidated Statements of Income - Three 3
and Six Months Ended June 30, 1997 and 1996
Consolidated Balance Sheets - June 30, 1997 4-5
and December 31, 1996
Consolidated Statements of Cash Flows 6-7
Six Months Ended June 30, 1997 and 1996
Notes to Consolidated Financial Statements 8-16
Item 2. Management's Discussion and Analysis 17-29
PART II. Other Information
Item 1. Legal Proceedings 30
Item 4. Submission of Matters to a Vote of Security Holders 30
Item 5. Other Information 30-37
Item 6. Exhibits and Reports on Form 8-K 37
DOMINION RESOURCES, INC.
PART I. FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
Three Months Ended Six Months Ended
June 30, June 30,
1997 1996 1997 1996
Millions, except per share amounts
Operating revenues and income:
Virginia Power $ 1,028.0 $1,029.1 $2,155.8 $2,193.9
East Midlands 407.4 962.7
Nonutility 199.3 91.9 371.3 166.4
1,634.7 1,121.0 3,489.8 2,360.3
Operating expenses:
Fuel, net 264.3 225.6 545.6 488.7
Purchased power capacity, net 159.5 165.9 344.0 360.1
Supply and distribution-East Midlands 337.4 784.0
Other operation 258.6 186.1 490.4 355.7
Maintenance 61.6 60.3 115.8 119.9
Accelerated cost recovery 2.8 2.8
Restructuring 6.3 19.3 6.3 24.7
Depreciation and amortization 195.7 153.0 390.0 301.1
Other taxes 66.4 67.6 139.8 141.6
1,352.6 877.8 2,818.7 1,791.8
Operating income 282.1 243.2 671.1 568.5
Other income 6.1 3.6 13.0 6.4
Income before fixed charges and
income taxes 288.2 246.8 684.1 574.9
Fixed charges:
Interest charges, net 160.4 95.7 295.9 190.9
Preferred dividends and distributions
of Virginia Power, net 10.8 10.6 21.3 21.4
171.2 106.3 317.2 212.3
Income before provision for
income taxes 117.0 140.5 366.9 362.6
Provision for income taxes 37.9 46.3 117.9 118.2
Net income $ 79.1 $ 94.2 $ 249.0 $ 244.4
Average common stock 184.7 177.4 183.8 177.0
Earnings per common share $ 0.43 $ 0.53 $ 1.35 $ 1.38
Dividends paid per common share $ 0.645 $ 0.645$ 1.29 $ 1.29
__________________
The accompanying notes are an integral part of the Consolidated Financial
Statements.
DOMINION RESOURCES, INC.
CONSOLIDATED BALANCE SHEETS
ASSETS
(UNAUDITED)
June 30, December 31,
1997 1996*
(Millions)
Current assets:
Cash and cash equivalents $ 215.8 $ 110.8
Trading securities 4.4 16.4
Customer accounts receivable, net 521.9 354.8
Other accounts receivable 245.5 174.9
Accrued unbilled revenues 169.7 162.8
Accrued taxes 22.0
Materials and supplies:
Plant and general 166.5 148.7
Fossil fuel 66.6 76.8
Mortgage loans in warehouse 125.9 65.8
Other 162.0 209.5
1,700.3 1,320.5
Investments 2,559.1 1,893.4
Property, plant and equipment: 18,990.2 16,815.8
Less accumulated depreciation
and amortization 6,706.2 6,306.4
12,284.0 10,509.4
Deferred charges and other assets:
Regulatory assets 787.6 773.9
Goodwill 1,870.8 179.1
Other 221.8 229.3
2,880.2 1,182.3
Total assets $19,423.6 $14,905.6
__________________
The accompanying notes are an integral part of the Consolidated Financial
Statements.
* The Balance Sheet at December 31, 1996 has been taken from the
audited Consolidated Financial Statements at that date.
DOMINION RESOURCES, INC.
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND SHAREHOLDERS' EQUITY
(UNAUDITED)
June 30, December 31,
1997 1996*
(Millions)
Current liabilities:
Securities due within one year $ 569.4 $ 750.7
Short-term debt 584.4 378.2
Accounts payable, trade 579.5 410.6
Accrued interest 137.5 107.3
Accrued taxes 19.9
Accrued payroll 61.1 73.1
Customer deposits 46.1 50.0
Severance costs accrued 34.7 50.2
Other 292.4 155.4
2,325.0 1,975.5
Long-term debt:
Virginia Power 3,570.0 3,579.4
Nonrecourse - nonutility 2,764.9 505.7
East Midlands 1,448.2
Other 300.0 642.5
8,083.1 4,727.6
Deferred credits and other liabilities:
Deferred income taxes 2,000.0 1,743.3
Investment tax credits 246.8 255.3
Other 913.2 455.5
3,160.0 2,454.1
Total liabilities 13,568.1 9,157.2
Virginia Power obligated mandatorily
redeemable preferred securities
of subsidiary trust ** 135.0 135.0
Preferred stock:
Virginia Power stock subject to
mandatory redemption 180.0 180.0
Virginia Power stock not subject to
mandatory redemption 509.0 509.0
Common shareholders' equity:
Common stock - no par 3,563.5 3,471.4
Retained earnings 1,467.3 1,437.9
Accumulated translation adjustments (15.0)
Allowance on available-for-sale
securities (0.5) (1.1)
Other 16.2 16.2
5,031.5 4,924.4
Total liabilities & shareholders'
equity $19,423.6 $14,905.6
The accompanying notes are an integral part of the Consolidated
Financial Statements.
* The Balance Sheet at December 31, 1996 has been taken from the audited
Consolidated Financial Statements at that date.
** As described in Note (G) to NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, the
8.05% Junior Subordinated Notes totaling $139.2 million principal amount
constitute 100% of the Trust's assets.
DOMINION RESOURCES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Six Months Ended
June 30,
1997 1996
(Millions)
Cash flows from (used in) operating activities:
Net income $ 249.0 $ 244.4
Adjustments to reconcile net income to
net cash from operating activities:
Depreciation, depletion and amortization 426.8 344.9
Unremitted earnings of subsidiary (24.7)
Currency translation adjustment (14.9)
Minority interests 44.7
Purchase and originations of mortgage loans (1,055.3) (166.5)
Proceeds from sales and principle collections
of mortgage loans 995.2 1.0
Deferred income taxes 22.1 31.6
Investment tax credits, net (8.5) (8.6)
Deferred fuel expenses (0.7) (23.6)
Deferred capacity expenses (38.4) 6.0
Changes in assets and liabilities:
Accounts receivable 49.9 12.7
Accrued unbilled revenues (6.5) (7.2)
Materials and supplies (3.3) 16.1
Accounts payable, trade (87.6) (11.7)
Accrued interest and taxes (17.4) (4.4)
Other changes (64.0) (97.3)
Net cash flows from operating activities 466.4 337.4
Cash flows from (used in) financing activities:
Issuance of common stock 90.4 79.0
Issuance of long-term debt:
Virginia Power 210.0 24.5
East Midlands 1,904.2
Nonrecourse-nonutility 2,491.2 264.2
Issuance of short-term debt 126.8 117.3
Repayment of long-term debt and preferred stock (2,594.6) (267.1)
Common dividend payments (237.4) (228.2)
Other 36.9 (5.5)
Net cash flows from (used in) financing activities 2,027.5 (15.8)
DOMINION RESOURCES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(CONTINUED)
Six Months Ended
June 30,
1997 1996
(Millions)
Cash flows from (used in) investing activities:
Utility capital expenditures-(excluding AFC) $ (211.8) $(233.2)
Nonutility capital expenditures (182.4) (86.0)
Purchase of East Midlands (1,885.8)
Acquisition of business, net of cash (96.1)
Investments in marketable securities 15.4 19.1
Other (28.2) (28.4)
Net cash flows used in investing activities (2,388.9) (328.5)
Increase (decrease) in cash and cash equivalents 105.0 (6.9)
Cash and cash equivalents at beginning of period 110.8 66.7
Cash and cash equivalents at end of period $ 215.8 $ 59.8
Supplementary cash flows information:
Cash paid during the period for:
Interest (net of interest capitalized) $ 252.0 $205.1
Income taxes 76.3 100.8
Non-cash transactions from investing and
financing activities:
Equity contribution for Wolverine acquisition $ 22.2
Issuance of loan notes-East Midlands acquisition 19.4
Exchange of available for sale securities 21.8 $ 4.3
The accompanying notes are an integral part of the Consolidated Financial
Statements.
DOMINION RESOURCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(A) DOMINION RESOURCES AND INTERIM REPORTING POLICIES
GENERAL
Dominion Resources is a holding company headquartered in Richmond, Virginia.
Its primary business is Virginia Electric and Power Company (Virginia Power),
which is a regulated public utility engaged in the generation, transmission,
distribution and sale of electric energy within a 30,000 square mile area in
Virginia and northeastern North Carolina. It sells electricity to retail
customers (including government agencies) and to wholesale customers such as
rural electric cooperatives and municipalities. The Virginia service area
comprises about 65 percent of Virginia's total land area, but accounts for 80
percent of its population.
Acquired early in 1997 East Midlands Electricity plc (East Midlands) a
subsidiary of Dominion Resources, is principally a power and supply
distribution company serving 2.3 million homes and businesses in the East
Midlands region of the United Kingdom.
Dominion Resources uses the exchange rate at June 30, 1997 ($1.6655 per pound
sterling) to evaluate amounts originally denominated in pounds sterling.
Dominion Resources also operates business subsidiaries active in independent
power production, the acquisition and sale of natural gas reserves, financial
services, and real estate. Some of the independent power and natural gas
projects are located in foreign countries. Net assets of approximately $445
million are involved in independent power production operations in Central and
South America.
In the opinion of Dominion Resources' management, the accompanying unaudited
Consolidated Financial Statements contain all adjustments, consisting only of
normal recurring accruals, necessary to present fairly the financial position
as of June 30, 1997, the results of operations for the three-month periods
ended June 30, 1997 and 1996, and cash flows for the six-month periods ended
June 30, 1997 and 1996.
These Consolidated Financial Statements should be read in conjunction with the
Consolidated Financial Statements and notes thereto included in the Dominion
Resources Annual Report on Form 10-K for the year ended December 31, 1996.
The consolidated financial statements include the accounts of Dominion
Resources and its subsidiaries, with all significant intercompany transactions
and accounts being eliminated on consolidation.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
The results of operations for the interim periods are not necessarily
indicative of the results to be expected for the full year. Information for
quarterly periods is affected by seasonal variations in sales, rate changes,
timing of fuel expense recovery and other factors.
DOMINION RESOURCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
DERIVATIVES
Dominion Resources utilizes derivative instruments to manage exposure to
fluctuations in interest rates, foreign exchange rates and natural gas,
purchasing and electricity prices.
Derivatives that are used by Dominion Resources in the management of interest
rate and foreign currency exposures, through the use of interest rate and
currency swaps, are accounted for on a settlement basis. In addition, East
Midlands, employs fixed price forward contracts (contracts for differences),
which are utilized to protect against price volatility in its supply business.
Contracts for differences are contracts, which are entered into between
generators and suppliers to fix the price of a contracted quantity of
electricity over a specified period. East Midlands accounts for these
instruments on a settlement basis. Under this method, each net payment/receipt
due or owed under the derivative is recorded in earnings during the period to
which the payment/receipt relates. Income and expense are recorded in the
same category as that arising from the related asset or liability. For
example, amounts to be paid or received under interest rate swap agreements
are recognized in interest expense in the periods in which they accrue and the
amounts paid or received under contracts for differences are recognized as an
adjustment to Supply & Distribution expense. Cash flows from interest rate
swaps, currency swaps and fixed price forward contracts are reported in Net
Cash Flows from Operating Activities.
Under the deferral method, gains and losses related to effective hedges of
existing assets and liabilities are recorded on the balance sheet and
recognized in earnings in conjunction with earnings of the designated asset or
liability. Instruments are deemed to be effective hedges when the historical
value fluctuations correlate strongly with those of the item being hedged and
the instruments are designated as hedges. Income and expense related to
instruments that do not meet the hedge criteria, hedges that have been
terminated, and transactions in which the hedged item has been sold or
matured, are recognized in current earnings. Dominion Resources uses the
deferral method to account for derivative instruments which are designated as
effective hedges.
Dominion Energy uses commodity natural gas options and collars as hedges
against natural gas price exposure. Gains and losses resulting from natural
gas price derivative instruments activities are included in Operating revenues
and income - Nonutility. Cash flows from commodity natural gas options and
collars are reported in Cash Flows from Operating Activities.
Dominion Resources' UK subsidiary (DR Investments) utilizes the deferral
method to account for derivatives which minimize exposure to currency
fluctuations. These derivatives are designed to minimize cross-currency
exposure on the issuance by DR Investments of U.S. dollar denominated Senior
Notes. In addition, the deferral method has been employed to account for
derivatives such as forward rate agreements which stabilized the interest rate
on the anticipated issuance of the Senior Notes and Eurobonds. The forward
rate agreement and the cross-currency swaps associated with the Senior Notes
are treated in aggregate as an adjustment to Long-term debt East Midlands
and is amortized to Interest expense over the life of the bonds. Cash flows
from the forward rate agreements and the cross-currency swaps are reported as
Net Cash Flows from Financing Activities. The amortization of these
agreements and swaps are included in Net Cash Flows from Operating Activities.
DOMINION RESOURCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
The fair value method, which is used for those derivative transactions which
do not qualify for settlement or deferral accounting, requires that
derivatives are carried on the balance sheet at fair value with changes in
that value recognized in earnings or stockholder's equity.
Virginia Power's wholesale power group is engaged in off-system purchases and
sales of energy and capacity. A substantial portion of its trading activities
are through fixed-priced forward contracts which require physical delivery of
the underlying commodity. In addition, Virginia Power's trading activities
include the purchase and sale of over-the-counter options that require
physical delivery of the underlying commodity. Virginia Power purchases and
sells NYMEX natural gas futures contracts, as well as options on such
contracts in order to manage price risk associated with natural gas
requirements. Options and futures contracts are marked to market with the
resulting gains and losses reported in earnings unless the options qualify,
and are designated, as a hedge for accounting purposes. For options which
require physical delivery of the underlying commodity, market value reflects
management's best estimates considering over-the-counter quotations, time
value and volatility factors of the underlying commitments. Futures contracts
and options on futures contracts are marked to market based on closing
exchange prices. No options or futures contracts were designated as hedges
during the six months ended June 30, 1997.
Purchased options and options sold are reported in Deferred Charges and Other
Assets Other and in Deferred Credits and Other Liabilities Other
respectively, until exercise or expiration. Gains and losses are reported in
Other Income unless the options or futures contracts have been designated as
hedges. For designated hedges, unrealized gains and losses are deferred
during the hedge period as Deferred Credits and Other Liabilities Other and
Deferred Debits and Other Assets Other, respectively, and are ultimately
reflected in the measurement of the hedged transaction. Electric options
exercised are reflected in the recording of related purchases or sales of
electricity as Operating Expenses or Operating Revenues, respectively. Upon
expiration, electric options written are recognized in Operating Revenues and
options purchased are reported in Operating Expenses. Cash flows from options
and futures contracts are reported in Net Cash Flow from Operating Activities.
Options, futures and forward contracts are used by Dominion Resources'
financial services indirect subsidiary (Saxon Mortgage) for the purpose of
reducing exposure to the effects of changes in interest rates on mortgage
loans which the company has funded or has committed to fund. Gains and losses
incurred on options, futures and forward contracts used to hedge the interest
rate exposure are deferred as an adjustment to the value of the mortgages and
recorded in Mortgage Loans in Warehouse. The gains and losses are recognized
at the time of securitization and are recorded to Operating Revenues and
Income Nonutility. The related cash flows are recorded in Net Cash Flow
from Operating Activities. In addition, Saxon Mortgage utilizes the deferral
method to account for interest rate caps. The caps are used to hedge the
value of mortgage investments retained from the securitization of mortgage
loans. The cost of the caps are included with the mortgage investments
reported in Investments and are amortized as an adjustment to Operating
Revenues and Income - Nonutility. Cash flows from interest rate caps are
included Net Cash Flow from Investing Activities. The amortization of the
caps is included in Net Cash Flow from Operating Activities.
DOMINION RESOURCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
(B) COMMON STOCK
At June 30, 1997 there were 300,000,000 shares of common stock authorized of
which 185,604,273 were issued and outstanding. Common shares issued during
the referenced periods were as follows:
Three Months Ended Six Months Ended
June 30, June 30,
1997 1996 1997 1996
Automatic Dividend
Reinvestment and
Stock Purchase Plan 727,704 1,418,180
Employee Savings Plan 245,598 122,656 469,295 123,265
Dominion Direct Investment 1,063,129 1,974,548
Wolverine Pooling 1,879,974
Stock Repurchase and Retirement 0 (136,800)
Other 49,885 (15) 59,710 75,140
Total Shares 1,358,612 850,345 4,383,527 1,479,785
(C) LONG-TERM INCENTIVE PLAN
For the six-month period ended June 30, 1997, 2,250 common shares were issued
associated with exercised stock options from previous awards. As of June 30,
1997, options from 8,351 shares were exercisable from previous awards.
(D) PREFERRED STOCK - VIRGINIA POWER
As of June 30, 1997, there were 1,800,000 and 5,090,140 issued and outstanding
shares of preferred stock subject to mandatory redemption and preferred stock
not subject to mandatory redemption, respectively. There are a total of
10,000,000 authorized shares of Virginia Power's preferred stock.
DOMINION RESOURCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
(E) PROVISION FOR FEDERAL INCOME TAXES
Total Federal income tax expense differs from the amount computed by applying
the statutory Federal income tax rate to pre-tax income for the following
reasons:
Three Months Ended Six Months Ended
June 30, June 30,
1997 1996 1997 1996
(Millions)
Computation of Provision
for Federal Income Tax:
Income before income taxes $117.0 $140.5 $366.9 $362.6
Foreign income tax (0.3) (0.4) (28.9) (0.7)
Other income tax 2.3 (1.6) 0.1 (3.1)
Income before Federal tax $119.0 $138.5 $338.1 $358.8
Tax at statutory federal
income tax rate of 35% applied
to pre-tax income $41.7 $ 48.5 $118.4 $125.6
Changes in federal income
taxes resulting from:
Preferred dividends
of Virginia Power 3.1 3.1 6.2 6.2
Nonconventional fuel credit (6.7) (6.6) (12.7) (13.2)
Ratable amortization of
investment tax credits (4.3) (4.3) (8.5) (8.5)
Foreign tax 3.7 (20.7)
Other, net 2.4 3.6 6.4 4.3
Total Provision for Federal
Income Tax Expense $ 39.9 $ 44.3 $ 89.1 $114.4
Effective Tax Rate 33.5% 32.0% 26.4% 31.9%
(F) INTEREST RATE AND FOREIGN CURRENCY RISK
On May 9, 1997, DR Investments, a UK indirect subsidiary of Dominion Resources,
issued $819 million of senior notes. The obligations are denominated in US
dollars and the net proceeds were used to repay a portion of the short-term
debt incurred in connection with the acquisition of East Midlands. In order to
hedge the currency exposures associated with a US dollar financing, DR
Investments entered into certain interest rate and currency swaps that are
intended to minimize any cross-currency exposures and maintain the fixed nature
of the interest payment obligations.
On June 6, 1997, DR Investments, issued $166.6 million of Euro-Sterling 10 year
bonds. The net proceeds were used to repay a portion of the short-term debt
incurred in the acquisition of East Midlands. In anticipation of the issuance
of these bonds, DR Investments also entered into a forward rate agreement for
the purpose of fixing the interest rate for the Euro-Sterling Bonds.
DOMINION RESOURCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
(G) VIRGINIA POWER OBLIGATED MANDATORILY REDEEMABLE PREFERRED SECURITIES OF
SUBSIDIARY TRUST
In 1995, Virginia Power established Virginia Power Capital Trust I (VP Capital
Trust). VP Capital Trust sold 5,400,000 shares of Preferred Securities for
$135.0 million, representing preferred beneficial interests and 97% beneficial
ownership in the assets held by VP Capital Trust.
Virginia Power issued $139.2 million of its 1995 Series A, 8.05% Junior
Subordinated Notes (the Notes) in exchange for the $135.0 million realized from
the sale of the Preferred Securities and $4.2 million of common securities of
VP Capital Trust. The common securities represent the remaining 3% beneficial
ownership interest in the assets held by VP Capital Trust. The Notes
constitute 100% of VP Capital Trust's assets.
(H) CONTINGENCIES
VIRGINIA POWER
Nuclear Insurance
The Price-Anderson Act limits the public liability of an owner of a nuclear
power plant to $8.9 billion for a single nuclear incident. Virginia Power is a
member of certain insurance programs that provide coverage for property damage
to members' nuclear generating plants, replacement power and liability in the
event of a nuclear incident. Virginia Power may be subject to retrospective
premiums in the event of major incidents at nuclear units owned by covered
utilities (including Virginia Power). For additional information, see Note Q
to CONSOLIDATED FINANCIAL STATEMENTS included in Dominion Resources' Annual
Report on Form 10-K for the year ended December 31, 1996.
Virginia Jurisdictional Rates
On March 6, 1997, in the proceeding in which Virginia Power filed its
alternative rate plan and in the separate 1995 Annual Informational Filing
proceeding, the Virginia State Corporation Commission (Virginia Commission)
entered an order on March 6, 1997 providing that Virginia Power's rates shall
become interim rates subject to refund as of March 1, 1997.
Site Remediation
The Environmental Protection Agency (EPA) has identified Virginia Power and
several other entities as Potentially Responsible Parties (PRPs) at two
Superfund sites located in Kentucky and Pennsylvania. The estimated future
remediation costs for the sites are in the range of $61.5 million to $72.5
million. Virginia Power's proportionate share of the cost is expected to be in
the range of $1.7 million to $2.5 million, based upon allocation formulas and
the volume of waste shipped to the sites. As of June 30, 1997, Virginia Power
had accrued a reserve of $1.7 million to meet its obligations at these two
sites. Based on a financial assessment of the PRPs involved at these sites,
Virginia Power has determined that it is probable that the PRPs will fully pay
the costs apportioned to them.
DOMINION RESOURCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
Virginia Power and Dominion Resources, Inc., along with Consolidated Natural
Gas, have remedial action responsibilities remaining at two coal tar sites.
Based on site studies and investigations performed at these sites, Virginia
Power accrued a $2 million reserve to meet its estimated liability. As of June
30, 1997, Virginia Power had incurred remedial action costs for the two sites
totaling $2 million. Virginia Power does not anticipate that it will be liable
for additional remedial action costs that are significant in amount.
In addition to the remedial action costs associated with the coal tar sites,
two civil actions have been instituted against the City of Norfolk and Virginia
Power. Several property owners allege that their property has been
contaminated by toxic pollutants originating from one of the coal tar sites now
owned by the City of Norfolk and formerly owned by Virginia Power. The
plaintiffs are seeking compensatory damages of $12 million and punitive damages
of $6 million. It is too early in the cases for the Virginia Power to predict
their outcome. Virginia Power has filed answers denying liability. A trial date
of August 18, 1997 has been set for one of the two actions seeking fifteen
million dollars.
Virginia Power generally seeks to recover its costs associated with
environmental remediation from third party insurers. At June 30, 1997, any
pending or possible claims were not recognized as an asset or offset against
recorded obligations of Virginia Power.
NONUTILITY SUBSIDIARIES
Dominion Energy
Dominion Cogen, Inc., a wholly owned subsidiary of Dominion Energy, has an
investment interest in a corporation that owns two cogeneration plants in
Texas. Under terms of various equity support agreements entered into in
connection with this investment, Dominion Resources must provide contingent
equity support to Dominion Energy. While management believes that the
possibility of such support is remote, Dominion Resources could be required to
ensure that Dominion Energy has sufficient funds to meet its equity support
obligations which management does not believe will exceed $50.0 million.
Dominion Energy has general partnership interests in certain of its energy
ventures. Accordingly, Dominion Energy may be called upon to fund future
operations of these investments to the extent operating cash flow is
insufficient.
In addition, Dominion Energy may be required to make payments under certain
agreements on behalf of its energy ventures. As of June 30, 1997, no payments
have been required.
Dominion Capital
As of June 30, 1997, Saxon Mortgage, Inc. a wholly-owned subsidiary of Dominion
Capital has entered into commitments of approximately $233 million to fund
mortgage loans. The commitments for mortgages have original terms of not more
than 60 days.
DOMINION RESOURCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
(I) LINES OF CREDIT
At June 30, 1997, Dominion Resources and its subsidiaries have lines of credit
and revolving credit agreements that provide for maximum borrowings of $2,649
million. At June 30, 1997, $1,553.0 million had been borrowed under such
agreements. In addition, these credit agreements supported $372.4 million of
Dominion Resources' commercial paper and $524.1 million of nonrecourse
commercial paper issued by Dominion Resources' subsidiaries which was
outstanding at June 30, 1997. A total of $300 million of the commercial paper
is classified as long-term debt since it is supported by revolving credit
agreements that have expiration dates extending beyond one year.
(J) CHANGE IN ACCOUNTING STANDARD
In February 1997, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 129 "Disclosure of
Information about Capital Structure." This statement establishes standards
for disclosing information about an entity's capital structure. SFAS NO. 129
continues and consolidates previous disclosure requirements regarding an
entity's capital structure. This statement is effective for periods ending
after December 15, 1997.
In June 1997, FASB issued SFAS No. 130, " Reporting Comprehensive Income" and
SFAS No. 131, "Disclosures about Segments of an Enterprise and Related
Information." SFAS No. 130 establishes standards for reporting and disclosure
of comprehensive income and its components in financial statement format.
Comprehensive income is defined as the change in equity of a business
enterprise during a period from transactions and other events and
circumstances from nonowner sources. Items considered comprehensive income
include foreign currency items, minimum pension liability adjustments and
unrealized gains and losses on certain investments in debt and equity
securities. SFAS No. 130 is effective for financial statements for fiscal
years beginning after December 15, 1997.
SFAS No. 131 establishes standards for the reporting information about
operating segments by public entities in annual financial statements and
requires that those entities report selected information about operating
segments in interim financial reports issued for shareholders. This
statement supersedes SFAS No. 14, Financial Reporting for Segments of a
Business Enterprise and amends SFAS No. 94, " Consolidation of
All-Majority-Owned Subsidiaries." SFAS No. 131 requires that public entities
report financial and descriptive information about its reportable business
segments. This statement is effective for financial statements for periods
beginning after December 15, 1997.
(K) SUBSEQUENT EVENTS
East Midlands
On July 2, 1997, the United Kingdom Labour Party in its first budget as the
new Government included proposals for a windfall profit tax on the excess
profits of the privatized utilities. The Labour Party's majority in the UK
parliament makes it probable that proposals will become law. East Midlands'
portion of this tax is estimated at 96 million pounds sterling or approxi-
mately $160 million. The tax will be payable in two equal installments on or
before December 1,
DOMINION RESOURCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
1997 and December 1, 1998. It is expected that a liability amounting to
approximately $160 million will be recorded in the third quarter of 1997.
Dominion Energy
On August 1, 1997, Dominion Energy sold to Chilgener S.A. 49 percent of its
interest in Inversiones Dominion Peru S.A., a Peruvian company which holds a
60 percent interest in EGENOR S.A., a 405 megawatt electric generation
business in Peru.
DOMINION RESOURCES, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FORWARD-LOOKING INFORMATION
This report contains "forward-looking statements" as defined by the Private
Securities Litigation Reform Act of 1995, including (without limitation)
discussions as to expectations, beliefs, plans, objectives and future
financial performance, or assumptions underlying or concerning matters
discussed in this document. These discussions, and any other discussions
contained in this report that are not historical facts, are forward-looking
and, accordingly, involve estimates, projections, goals, forecasts,
assumptions and uncertainties that could cause actual results or outcomes to
differ materially from those expressed in the forward-looking statements. In
addition to certain contingency matters (and their respective cautionary
statements) discussed elsewhere in this report, the following important
factors should be considered with respect to any forward-looking statements
made herein:
Current governmental policies and regulatory actions both domestic and
international (including those of FERC, the EPA, the NRC, the Virginia
Commission and UK regulatory authorities), industry and rate structure,
general industry trends, operation of nuclear power facilities, acquisition
and disposal of assets and facilities, operation and storage facilities,
recovery of the cost of purchased power, nuclear decommissioning costs,
economic and geographic factors including political and economic risks
(particularly those associated with international development and operations,
including currency fluctuation), changes in and compliance with environmental
laws and policies, weather conditions and catastrophic weather related damage,
competition, including competition for retail and wholesale customers, pricing
and transportation of commodities, market demand for energy, inflation,
capital market conditions, unanticipated development project delays or changes
in project cost, unanticipated changes in operating expenses and capital
expenditures, competition for new energy development opportunities and legal
and administrative proceedings. All such factors are difficult to predict,
contain uncertainties that may materially affect actual results, and may be
beyond the control of Dominion Resources. New factors emerge from time to
time and it is not possible for management to predict all of such factors, nor
can it assess the impact of each such factor on the businesses of Dominion
Resources.
Any forward-looking statement speaks only as of the date on which such
statement is made, and Dominion Resources undertakes no obligation to update
any forward-looking statement or statements to reflect events or circumstances
after the date on which such statement is made.
DOMINION RESOURCES, INC.
ITEM 2. MANAGEMENTS'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
DOMINION RESOURCES - CONSOLIDATED
RESULTS OF OPERATIONS
Earnings Per Share Three Months Ended Six Months Ended
June 30, June 30,
1997 1996 1997 1996
Virginia Power $0.34 $.50 $.90 $1.31
East Midlands (.05) .22
Nonutility .14 .03 .24 .07
Total Shares $0.43 $0.53 $1.36 $1.38
The results of operations for the interim periods are not necessarily
indicative of the results to be expected for the full year. Information for
quarterly periods is affected by seasonal variations in sales, rate changes,
timing of fuel expense recovery and other factors.
Consolidated earnings decreased 10 cents per share for the second quarter of
1997 when compared to the second quarter of 1996. The decline was primarily
due to the decrease in earnings from Virginia Power as result of unseasonably
mild weather experienced in the second quarter. The decrease also included an
anticipated loss for the second quarter at East Midlands which was acquired
earlier this year. East Midlands is a winter-peaking company whose earnings
are generated primarily in the first and fourth quarters.
Earnings from Dominion Resources' nonutility subsidiaries offset part of the
second quarter decline with an increase in earnings from 4 cents per share to
14 cents per share for the second quarter of 1996 and 1997, respectively.
Dominion Energy's earnings increased primarily as a result of income from the
acquisition of power generation assets in Peru in August 1996 and higher gas
prices and greater production volumes due to the acquisition of natural gas
properties in the Gulf Coast area in March 1996 and in Michigan in January
1997. Increased earnings at Dominion Capital was primarily due to the
securitization of residential mortgages and additional income contributed by
its First Source Financial subsidiary as a result of the purchase of the
remaining 50 percent interest in early 1997.
Operating Revenues And Expenses
Operating revenues increased by $513 million or 46% in the second quarter 1997
as compared to the second quarter of 1996 and $1,130 million or 48% for the
six months ended June 30, 1997 as compared to the six months ended June 30,
1996. Both increases reflect the addition of revenues from East Midlands
which was acquired in early 1997 as well as increased operating revenues from
Dominion Resources nonutility subsidiaries. Operating expenses increased in
the second quarter of 1997 by $470 million or 53% as compared to the second
quarter of 1996 and $1,023 million or 57% for the six months ended June 30,
1997 as compared to the six months ended June 30, 1996. Both increases reflect
the addition of expenses from East Midlands.
DOMINION RESOURCES, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(CONTINUED)
Interest Expense
Interest expense increased $65 million or 66% in the second quarter 1997 as
compared to the second quarter of 1996 and $105 million or 55% for the six
months ended June 30, 1997 as compared to the six months ended June 30, 1996.
Both increases are attributed to the issuance of short and long-term debt for
the acquisition of East Midlands.
LIQUIDITY
Cash Flows From Operations
Cash flows from operating activities for the six months ended June 1997
increased by $129 million as compared to the six months ended June 30, 1996
primarily due to normal operations plus the securitization of residential
mortgage loans in Dominion Resources' financial service business.
Cash Flows From Financing Activities
For the six months ended June 30, 1997, net cash flows from financing
activities were $2,025 million due to the issuance of long-term debt to
finance the mandatory maturities of First and Refunding Mortgage Bonds at
Virginia Power, as well as the acquisitions of East Midlands and the remaining
interest in a subsidiary by Dominion Capital. During the six months ended
June 30, 1997, approximately $800 million of short-term debt was issued and
retired for the acquisition of East Midlands.
On April 18, 1997, the Board of Directors of Dominion Resources declared a
quarterly common stock dividend of $0.645 per share, payable June 20, 1997 to
holders of record at the close of business May 30, 1997.
Dominion Resources issued 1,308,727 net shares of common stock through its
Dominion Direct Investment and Employee Savings Plan (see Note (B) to
CONSOLIDATED FINANCIAL STATEMENTS) during the three-month period ended June
30, 1997.
The proceeds from the issuance of common stock are invested on a short-term
basis by Dominion Resources and ultimately utilized to provide equity capital
to its subsidiaries generally within the same calendar year as the issuance of
the common stock.
Cash Flows Used In Investing Activities
Cash flows used in investing activities for the second quarter of 1997 were
$2,387 million resulting primarily from the acquisition of East Midlands,
utility plant capital expenditures, and Dominion Capital's acquisition of the
remaining interest of a subsidiary.
FUTURE ISSUES
Year 2000 Compliance
Dominion Resources has begun to address possible remedial efforts in
connection with computer software and devices containing embedded
DOMINION RESOURCES, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(CONTINUED)
microprocessors necessitated by the upcoming millennium change. At this time,
Dominion Resources believes, with respect to its computerized systems and
devices containing embedded microprocessors, that the Year 2000 compliance
issue is being addressed properly to prevent any adverse operational or
financial impacts. Management has not yet determined an estimate or range of
estimates of the costs to be incurred.
The Year 2000 issue may impact other entities with which Dominion Resources
transacts business. Dominion Resources cannot estimate or predict the
potential adverse consequences, if any, that could result from such entities'
failure to address this issue.
VIRGINIA POWER
LIQUIDITY AND CAPITAL RESOURCES
Cash Flows From Operations
Internal generation of cash during the first six months of 1997 provided 110%
of funds required for Virginia Power's capital requirements compared to 155%
during the first six months of 1996.
With the completion of the Clover Power Station in 1996, Virginia Power is in
a period in which internal cash generation should exceed construction
expenditures.
As detailed in the Consolidated Statements of Cash Flows, cash flow from
operating activities for the six-month period ended June 30, 1997 decreased
$102.9 million as compared to the six-month period ended June 30, 1996. The
decrease was primarily attributable to a decline in retail sales caused by the
unusually mild weather in the first six months of 1997 as compared to the
colder winter and warmer spring weather in the first six months of 1996.
Cash Flows Used in Financing Activities
Cash from (used in) financing activities was as follows:
Six Months Ended June 30,
1997 1996
(Millions)
Mortgage bonds $ 200.0
Pollution control securities 10.0
Issuance of short-term debt, net 127.9 $ 125.1
Issuance of tax exempt securities 4.5
Repayment of long-term debt (299.3) (220.9)
Dividends (206.7) (209.5)
Preferred securities distribution (5.4) (5.4)
Other (1.1) 1.7
Total $(174.6) $(284.5)
Financing activities for the first six months of 1997 resulted in a net cash
outflow of $174.6 million.
DOMINION RESOURCES, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(CONTINUED)
In February 1997, the Company issued $200 million of First and Refunding
Mortgage Bonds of 1997, Series A, 6.75%, due February 1, 2007. The proceeds
from the sale of these bonds and cash provided by operating activities were
used to fund first quarter 1997 mandatory maturities of First and Refunding
Mortgage Bonds in the amount of $299.3 million.
In April 1997, the Industrial Development Authority of the Town of Louisa,
Virginia issued $10 million of Solid Waste and Sewage Disposal Revenue Bonds
that were secured by a pledge of payments to be made by Virginia Power. The
proceeds from the sale of these bonds were used to finance certain solid waste
and sewage disposal equipment previously installed at Virginia Power's North
Anna Power Station located in Louisa County, Virginia.
The Virginia Power's commercial paper program is supported by credit
facilities totaling $500 million. Borrowings under the commercial paper
program were $440.2 million at June 30, 1997, which is an increase of $127.8
million from the balance at December 31, 1996. Proceeds from the sale of
commercial paper are primarily used to finance working capital for operations.
On July 2, 1997, Virginia Power issued $60 million of its Medium Term Notes,
Series F, at an annual interest rate of 6.35%, maturing on July 2, 1999. The
proceeds from the sale of the notes were used to reduce commercial paper
borrowings.
Cash Flows Used in Investing Activities
Cash used in investing activities was as follows:
Six Months Ended June 30,
1997 1996
(Millions)
Utility plant expenditures $(164.8) $(157.6)
Nuclear fuel (47.0) (57.6)
Nuclear decommissioning contributions (18.1) (18.1)
Purchase of assets (20.0) (14.6)
Other (1.1) (7.2)
Total $(251.0) $(255.1)
Investing activities for the first six months of 1997 resulted in a net cash
outflow of $251.0 million primarily due to $164.8 million of construction
expenditures, $47.0 million of nuclear fuel expenditures and $20.0 million for
the purchase of a gas-fired combined cycle generator. Of the construction
expenditures, Virginia Power spent approximately $121 million on transmission
and distribution projects, $22 million on production projects, $21 million on
general support facilities, and $1 million on clean air projects.
RESULTS OF OPERATIONS
Balance available for Common Stock decreased by $24.5 million and $66.7
million for the three months and six months, respectively, ended June 30,
1997, as compared to the same periods in 1996, primarily as a result of the
DOMINION RESOURCES, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(CONTINUED)
unusually mild weather experienced in 1997 versus the more extreme weather
experienced in the first six months of 1996.
Operating Revenues
Operating revenues changed primarily due to the following:
Three Months Ended Six Months Ended
June 30, June 30,
1997 vs. 1996 1997 vs. 1996
(Millions)
Weather $(31.1) $(111.9)
Customer growth 9.2 21.9
Change in base revenues (16.2) (17.6)
Fuel cost recovery 12.2 23.2
Other, net (7.1) (14.9)
Total retail (33.0) (99.3)
Sales for resale 25.0 49.5
Other operating revenues 6.9 11.7
Total revenues $ (1.1) $ (38.1)
Customer kilowatt-hour sales changed as follows:
Three Months Ended Six Months Ended
June 30, June 30,
1997 vs. 1996 1997 vs. 1996
Residential (6.9)% (9.8)%
Commercial (2.8) (3.9)
Industrial 6.1 3.5
Public authorities (7.2) (7.1)
Total retail sales (3.1) (5.3)
Resale 67.5 56.4
Total sales 7.1 3.8
Heating and cooling degree days during the second quarter were as follows:
1997 1996 Normal
Heating degree days 468 374 303
Percentage change compared to prior year 25.1% 33.1%
Cooling degree days 303 468 451
Percentage change compared to prior year (35.3)% 9.3%
Heating and cooling degree days during the first six months were as follows:
1997 1996 Normal
Heating degree days 2,324 2,708 2,375
Percentage change compared to prior year (14.2)% 22.9%
Cooling degree days 309 468 459
Percentage change compared to prior year (34.0)% (24.9)%
DOMINION RESOURCES, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(CONTINUED)
Retail operating revenues and retail kilowatt-hour sales for the three- and
six-month periods ended June 30, 1997, decreased as compared to the same
periods in 1996. The decreases are primarily attributable to the mild weather
experienced in the first two quarters of 1997 combined with the colder and
warmer weather experienced in the first two quarters of 1996. To illustrate,
the first quarter of 1996 was the third coldest quarter in 28 years whereas
the first quarter of 1997 was the fifth warmest. In addition, the second
quarter of 1997 was the third mildest quarter in twenty-eight years.
The increase in sales for resale for the three- and six-month periods ended
June 30, 1997, as compared to the same periods in 1996, is due primarily to
Virginia Power's heightened power marketing efforts.
Fuel, net
Fuel, net increased for the three-month and six-month periods ended June 30,
1997, as compared to the same periods in 1996, primarily due to an increase in
the volume and price of power purchased for resale Virginia Power's wholesale
power group in connection with Virginia Power's power marketing efforts.
Restructuring
Virginia Power recorded $6.3 million of restructuring charges in the three and
six months ended June 30, 1997, as compared to $19.3 million and $24.7
million, respectively, recorded in the three- and six-month periods ended June
30, 1996. The restructuring costs are associated with the implementation of
Vision 2000, Virginia Power's strategic plan to prepare for the increasingly
competitive electric industry in the United States.
Accelerated Cost Recovery
In the second quarter of 1997, Virginia Power established a $2.8 million
reserve for potential costs related to the transition to competition for
electric operations in Virginia. The reserve is consistent with Virginia
Power's alternative regulatory plan pending before the Virginia State
Corporation Commission.
Operation - Other and Maintenance
Other operating and maintenance expenses increased for the three- and six-month
periods ended June 30, 1997, as compared to the same periods in 1996,
primarily due to the timing of maintenance and refueling outages at Virginia
Power's power stations. The increase in the expenses for the six months ended
June 30, 1997, as compared to the six months ended June 30, 1996, was also
attributable to transmission expenses related to Virginia Power's increased
off-system sales, expenses related to the growth of Virginia Power's Energy
Services Business, increased computer lease expenses, fees paid to the Nuclear
Regulatory Commission and lump sum merit payments to Virginia Power's
employees. These increases were partially offset by a decrease in salaries
and wages pursuant to Vision 2000 involuntary separations.
DOMINION RESOURCES, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(CONTINUED)
Income Taxes
Income taxes decreased for the three- and six-month periods ended June 30,
1997, as compared to the same periods in 1996, primarily as a result of
decreased income subject to tax.
Contingencies
For information on contingencies, see Note (H) to CONSOLIDATED FINANCIAL
STATEMENTS.
Future Issues
Competition
Presently, Virginia Power expects to continue to operate under regulation and
to recover its cost of providing traditional electric service. However, the
form of cost-based rate regulation under which Virginia Power operates is
likely to evolve as a result of various legislative or regulatory initiatives,
including Virginia Power's alternative regulatory plan filed with the Virginia
Commission on March 24, 1997 (see Note (H) to CONSOLIDATED FINANCIAL
STATEMENTS). At this time, Virginia Power management can predict neither the
ultimate outcome of regulatory reform in the electric utility industry nor the
impact such changes would have on Virginia Power.
For additional information, see Future Issues-Competition under MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION included
in Dominion Resources' Annual Report on Form 10-K for the year ended December
31, 1996.
Sale of Subsidiary
On August 6, 1997, Virginia Power sold its wholly-owned subsidiary, A&C Enercom,
Inc. (A&C). Eaarlier this year, the TriTech division of A&C was integrated into
Evantage, the retail side of Virginia Power's energy services business unit.
Management believes that TriTech's experience in helping commercial and
industrial customers improve performance and increase competitiveness, combined
with its geographic presence around the country, strengthens Evantage's position
as an energy services provider. The sale of A&C will not have a material impact
on Virginia Power's financial statements.
DOMINION ENERGY
RESULTS OF OPERATIONS
Net income increased by $14.1 million during the first six months of 1997 as
compared to the same period in 1996 primarily due to income from power genera-
tion assets in Peru acquired in August 1996; higher gas prices; and greater
production volumes due to the acquisition of natural gas properties in the Gulf
Coast area in March 1996 and in Michigan in January 1997.
DOMINION RESOURCES, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(CONTINUED)
LIQUIDITY AND CAPITAL RESOURCES
Cash Flows From Operations
Cash flows from operations for the six months ended June 30, 1997 increased by
$62.8 million as compared to the six months ended June 30, 1996 primarily due
to income from power generation assets in Peru acquired in August 1996; higher
gas prices; and greater production volumes due to the acquisition of natural
gas properties in the Gulf Coast area in March 1996 and in Michigan in January
1997.
Cash Flows Used In Financing Activities
Cash from (used in) financing activities was as follows:
Six Months Ended
June 30,
1997 1996
(Millions)
Issuance (repayment) of long-term debt $(19.9) $10.5
Investment from parent 40.0
Dividend payment (24.6) (21.2)
Other 7.8 (0.7)
Total $(36.7) $28.6
During the first six months of June 30, 1997, cash flows used in financing
activities were $36.7 million primarily for the repayment of long-term debt
and payment of dividends to parent.
Cash Flows Used In Investing Activities
Cash used in investing activities was as follows:
Six Months Ended
June 30,
1997 1996
(Millions)
Investment in natural gas assets $(20.9) (68.0)
Investment in power generation assets (40.5)
Other (3.4) (3.4)
Total $(64.8) $(71.4)
DOMINION RESOURCES, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(CONTINUED)
During the first six months of June 30, 1997, cash flows used in investing
activities were $64.8 million primarily for the natural gas and oil drilling
activity and investments in power generation assets.
CAPITAL EXPENDITURES
During the first six months of 1997, Dominion Energy expended $61.4 million in
capital requirements. Total capital requirements for 1997 are estimated to be
$339 million.
DOMINION CAPITAL
RESULTS OF OPERATIONS
Net income increased by $12 million during the second quarter and the first
six months of 1997 as compared to the same periods in 1996 primarily due to
residential mortgage securitizations performed by Saxon Asset Securities
Company and the acquisition of the remaining fifty percent interest in First
Source Financial LP. in early 1997.
LIQUIDITY AND CAPITAL RESOURCES
Cash Flows From Operations
Cash flows used in operations for the six months ended June 30, 1997 decreased
by $157.4 million as compared to the six months ended June 30, 1996 primarily
due to a decrease in the net cash outflow of mortgage loan activity for Saxon
Mortgage.
Cash Flows Used In Financing Activities
Cash from (used in) financing activities was as follows:
Six Months Ended
June 30,
1997 1996
(Millions)
Issuance of long-term debt $ 2,412.4 $191.1
Repayment of long-term debt (2,275.4) (46.2)
Investment from parent 99.0 44.4
Dividend payment (21.4) (14.9)
Issuance (repayment) of intercompany debt (17.5) 56.4
Other (7.0) (0.2)
Total $ 190.1 $230.6
During the first six months of June 30, 1997, cash flows from financing
activities were $190.1 million primarily due to the acquisition of the
remaining fifty percent interest in First Source Financial LLP.
DOMINION RESOURCES, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(CONTINUED)
Cash Flows Used In Investing Activities
Cash from (used in) investing activities was as follows:
Six Months Ended
June 30,
1997 1996
(Millions)
Marketable securities $ 5.9 $ 7.3
Acquisition of remaining interest in
subsidiary (96.1)
Other (27.6) (19.7)
Total $(117.8) $ (2.4)
During the first six months of June 30, 1997, cash flows used in investing
activities increased primarily due to the acquisition of the remaining fifty
percent interest in First Source Financial LLP.
.
CAPITAL EXPENDITURES
During the first six months of 1997, Dominion Capital expended $229.4 million
in capital requirements. Total capital requirements for 1997 are estimated to
be $486 million.
EAST MIDLANDS
RESULTS OF OPERATIONS
A separate discussion of East Midlands is not presented because it was not
part of Dominion Resources' consolidated entity during the first six months of
1996.
LIQUIDITY AND CAPITAL RESOURCES
Financing the Acquisition
In the first quarter of 1997, Dominion Resources acquired 100% indirect
ownership of East Midlands by means of a cash tender offer commenced on
November 22, 1996. Dominion Resources, through two UK financing subsidiaries,
obtained the funds necessary for the tender offer in part from borrowings of
approximately $1,055 million under a short-term credit agreement and
borrowings of 700 million pounds sterling ($1,154 million) under a revolving
credit agreement, both guaranteed by Dominion Resources. The direct holding
company of East Midlands issued approximately $20 million in unsecured loan
notes, with the remainder of the funds contributed indirectly by Dominion
Resources.
DOMINION RESOURCES, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(CONTINUED)
On May 9, 1997, DR Investments, one of the UK financing subsidiaries, issued
$819 million of five- and ten- year senior notes, the net proceeds of which
were used to pay down debt borrowed under the short-term credit agreement.
On June 6, 1997, DR Investments issued $156.6 million ten year Euro-Sterling
Bonds, the net proceeds of which were used to pay down debt borrowed under the
short-term credit agreement.
On June 24, 1997, DR Investments signed a $333.1 million 5 year term loan
facility with a group of banks and at the same time DR Investments and East
Midlands Electricity signed a $333.1 million 5 year revolving credit facility to
provide working capital. On June 25, 1997, DR Investments drew down $83.3
million under the term loan facility which was used to repay the balance of the
short-term credit agreement.
A further drawing of $250 million under the term loan facility was made by DR
Investments on July 10, 1997 and was used to fund the return of share capital of
$250 million to the parent of DR Investments, DR Nottingham. DR Nottingham used
$245 million of this payment to repay part of its revolving credit agreement put
in place to fund the acquisition of East Midlands Electricity.
Cash Flows From Operations
Cash flows from operations for the six months ended June 30, 1997 were $2.5
million and were primarily due to normal operations. A comparison is not made
to the six months ended June 30, 1996 because East Midlands was not part of
Dominion Resources' consolidated entity during the first six months of 1996.
Cash Flows From Financing Activities
Cash Flows from financing activities was as follows:
Six Months Ended
June 30, 1997
(Millions)
Issuance of long-term debt $1,904.2
Investment from parent 51.4
Dividend payment (2.2)
Other (51.7)
Total $2,005.2
During the first six months of 1997, cash from financing activities was
primarily due to the issuance of the following debt:$819 million of senior
notes, $165 million of Eurobonds, and $830 million under a revolving credit
agreement. The proceeds were used to pay down the debt borrowed under the
short-term credit agreement, fund the expected return of share capital to the
parent of DR Investments and finance the initial funding for the acquisition
of East Midlands.
DOMINION RESOURCES, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(CONTINUED)
Cash Flows Used In Investing Activities
Cash from (used in) investing activities was as follows:
Six Months Ended
June 30, 1997
(Millions)
Purchase of shares in EME $(1,885.8)
Purchase of fixed assets (106.1)
Other 27.0
Total $(1,964.9)
During the first six months of June 30, 1997, cash flows used in investing
activities was utilized primarily to acquire the outstanding shares of stock
in East Midlands.
CAPITAL EXPENDITURES
During the first six months of 1997, East Midlands expended $106.1 million in
capital requirements. Total capital requirements for 1997 are estimated to be
$210.6 million.
FUTURE ISSUES
Supply Regulation
The market for supply customers in the United Kingdom with a peak demand above
1MW has been open to competition among suppliers of electricity since
privatization in 1990, while, for customers with a peak demand above 100KW
(the Non-Franchise Supply Customers), the market became competitive in April
1994. The final stage of the process is scheduled to begin on April 1, 1998,
when the exclusive right of Public Electricity Supply License (PES License)
holders to supply Franchise Supply Customers is scheduled to end. The current
proposal is for full competition to be phased in for both business and
domestic customers in three stages in each PES area. The date of the first
stage will vary across different PES regions.
In a consultation papers dated May and July 1997, The Director General of
Electricity Supply indicated that he would be seeking to maintain some form of
continuing supply price control to operate from April 1998, the precise nature
and form of regulation is under discussion.
DOMINION RESOURCES, INC.
PART II. - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On July 10, 1997, the Virginia Commission entered an Order terminating the
proceedings to investigate the holding company structure and the relationship
between Dominion Resources and Virginia Power. The Order noted that all
actions required by prior order of the Commission had been taken and that
relative harmony had continued over the past year. The Order directed
Virginia Power to continue to file an independent certified annual audit of
affiliate transactions each year.
VIRGINIA POWER
In reference to the motion for judgment filed by Doswell Limited Partnership
against Virginia Power, on April 2, 1997, in the Circuit Court of the City of
Richmond, a hearing on the Demurrer filed by Virginia Power, which seeks
dismissal of the lawsuit, has been scheduled for August 26, 1997.
In reference to the complaint filed by Doswell Limited Partnership against
Virginia Power on April 2, 1997 in the United States District Court for the
Eastern District of Virginia, no hearing date has been set on Virginia Power's
Motion to Dismiss filed on April 25, 1997.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Dominion Resources Annual Shareholders Meeting was held on April 18, 1997
and the results were reported in the company's first quarter ended March 31,
1997 Form 10-Q, dated May 14, 1997.
ITEM 5. OTHER INFORMATION
THE COMPANY
EAST MIDLANDS
Dominion Resources purchased East Midlands Electricity plc (East Midlands) in
the first quarter of 1997. East Midlands' principal businesses are the
distribution of electricity and the supply of electricity to approximately 2.3
million customers in the East Midlands region of the United Kingdom. East
Midlands' primary business is its distribution business which is a regulated
monopoly and its electricity supply business. Together these businesses
produced substantially all of East Midlands' consolidated operating income.
Franchise Area
East Midlands' Franchise Area (or service area) has a resident population of
over five million and covers approximately 9,920 square miles extending from
Coventry to the Lincolnshire coast and from Milton Keynes to Chesterfield of
which the southernmost part is less than 60 miles from London.
The bulk of the Franchise Area consists of the East Midlands region, which is
centrally located in the UK and has a diverse industrial base and a multi-
skilled workforce. The region benefits from extensive road and rail
transportation infrastructure and features a number of major industries,
including agriculture and food, automobile manufacturing (including Toyota's
European manufacturing base), iron and steel, minerals, chemicals and coal
mining.
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Distribution Business
East Midlands owns, manages and operates the electricity distribution network
within its Franchise Area. The primary activity of the distribution business
is the receipt of electricity from the national grid transmission system and
its distribution to end users connected to East Midlands' power lines.
Because East Midlands is the exclusive holder of a Public Electricity Supply
(PES) license for its Franchise Area, virtually all electricity supplied
(whether by East Midland's supply business or by other suppliers) to consumers
in East Midland's Franchise Area is transported through East Midlands'
distribution network. As a holder of a PES license, East Midlands is subject
to a price cap regulatory framework that provides economic incentives to
increase the number of units of electricity distributed and to operate in a
more cost-efficient manner.
In addition to the network division, East Midlands' distribution business also
includes construction and metering divisions. The construction division
provides construction, standby and maintenance services to the network as well
as performing similar services for certain third-parties. East Midlands'
metering division focuses on the ownership and management of metering and
related assets as well as data collection and transmission service. While
portions of construction and metering are gradually opening to competition,
the network division, which generates over 80% of the distribution business'
profits, is expected to remain a regulated monopoly subject to price
regulation.
Customers
East Midlands' distribution system has approximately 2.3 million customers.
This customer group consists predominantly of residential and small commercial
consumers, which provides East Midlands a stable customer base. East Midlands
also distributes electricity to industrial concerns in its Franchise Area.
The principal activities of East Midlands' largest distribution customers
include agriculture, automobile manufacturing, iron and steel, minerals,
chemicals and coal mining.
Distribution Facilities
Electricity is transported across the national grid transmission system (the
high voltage transmission system in England that carries the generated
electricity in bulk from power stations to regional and local distribution
systems) at 400kv or 275kv to 14 grid supply points within East Midlands'
distribution network, where East Midlands transforms the voltage to 132kv for
entry into East Midlands' distribution system. Electricity is also
transported to one national grid supply point located in a neighboring REC's
franchise area, which is connected to East Midlands' distribution system by
overhead lines and underground cables. Substantially all electricity which
enters East Midlands' system is received at these 15 grid supply points.
At March 31, 1996, East Midlands' electricity distribution network (excluding
service connections to consumers) included 15,034 circuit miles of overhead
lines and 26,142 circuit miles of underground cables.
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East Midlands' distribution facilities also include approximately:
Number
Transformers:
132kv/lower voltages . . . . . . . . . . . . . . . . . . . .185
33kv/11kv or 6/6kv . . . . . . . . . . . . . . . . . . . . .679
11kv or 6.6 kv/lower voltages (including
22,085 pole mounted transformers). . . . . . . . . . . 37,774
Substations:
132kv/33kv . . . . . . . . . . . . . . . . . . . . . . . . . 85
33kv/11kv or 6.6kv . . . . . . . . . . . . . . . . . . . . .368
11kv or 6.6kv/415v or 240v . . . . . . . . . . . . . . . 15,689
Substantially all substations are owned and the balance are leased which will
not expire for 10 years.
Competition
East Midlands' network distribution division is a regulated monopoly within
its Franchise Area, and therefore does not face direct competition. East
Midlands' network distribution division contributes over 80% of the
distribution businesses' profits. Such business faces indirect competition
from alternative energy sources such as gas. Furthermore, to the extent a
customer may invest in its own on-site electricity generating plants, such
customer would no longer require distribution and related services from East
Midlands. Currently the metering division is essentially a regulated business
but will become subject to full competition by 2000. The majority of the work
of the construction division relates to the maintenance, support and
development of East Midlands' own distribution network. This division's work
is open to competition from a number of firms.
Supply Business
East Midlands' supply business consists of selling electricity to end users,
purchasing such electricity primarily from the Pool and arranging for its
distribution to those end users. The Pool is the wholesale trading market
that was established at the time of privatization (1990) for bulk trading of
electricity in England between generators and suppliers. Basically all
electricity generated in England must be sold and purchased through the Pool.
The Pool does not buy or sell electricity. East Midlands' supply business
predominately supplies Franchise Supply Customers who have a peak demand of
less than 100kW, and Non-Franchise Supply Customers who have a peak demand of
100kW or more. In addition, East Midlands supplies gas to approximately 4,000
customers.
Franchise Supply Market
East Midlands holds a PES License under which it currently has the exclusive
right to supply electricity to approximately 2.3 million Franchise Supply
Customers within its Franchise Area. At the time that the industry was
privatized,"Franchise Supply Customers" included all customers whose supply
peak demand was less than 1MW. The 1MW threshold was reduced to 100 kW on
April 1, 1994. The exclusive right to supply Franchise Supply Customers is
currently scheduled to end over a 6-month phase-in period beginning April 1,
1998. On completion of the phase-in period, there will be no Franchise Supply
Customers and all supply customers will have the ability to choose their
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electricity supplier. Supply prices of electricity from Franchise Supply
Customers are based on the Supply Price Control Formula, pursuant to which
East Midlands' costs of purchasing and delivering electricity and costs of
hedging the purchase price are charged to end-users.
Non-Franchise Supply Market
Non-Franchise Supply Customers are currently defined as customers whose peak
demand equals or exceeds 100kW. In addition to competing for Non-Franchise
Supply Customers in its Franchise Area, East Midlands holds a second tier
license to compete with the Regional Electric Companies and other suppliers to
provide electricity to Non-Franchise Supply Customers outside its Franchise
Area.
The market to supply Non-Franchise Supply Customers is fully competitive,
with the principal competitors being other Regional Electric Companies and
major generators. Non-Franchise Supply Customers are typically supplied
through individual 12-month contracts with competitively bid or negotiated
prices.
Power Purchasing and Risk Management
Regulations governing the Franchise Supply Market permit the pass-through to
customers of prudent costs, which include the cost of arrangements such as
contracts for differences (CFDs) to hedge against Pool price volatility. CFDs
are contracts predominantly entered into between generators and suppliers to
fix the price of a contracted quantity of electricity over a specific period.
Differences between the actual prices set by the Pool and the agreed prices
give rise to difference payments between the parties to the particular CFD.
At the present time, East Midlands' forecast franchise supply market demand
for fiscal 1998 is substantially hedged through various types of agreements,
including CFDs.
The most common contracts for supply to Non-Franchise Supply customers are for
a twelve-month term and contain fixed rates. East Midlands is exposed to two
principal risks associated with such contracts: (a) purchasing price risk
(East Midlands' cost of purchased electricity relative to the price East
Midlands receives from the supply customer) and (b) load shape risk (the risk
associated with a shift in the customer's usage pattern, including absolute
amounts demanded and timing of amounts demanded). East Midlands employs risk
management methods to maximize its return consistent with an acceptable level
of risk. East Midlands seeks to hedge purchasing price risk through a variety
of risk management tools, including management of its supply contract
portfolio, CFDs, option arrangements and other means which mitigate risk of
future Pool price volatility. Load shape risk is mitigated by paying detailed
attention to forecasting demand.
Competition
East Midlands' non-franchise supply business competes with electricity
generators and a number of other suppliers of electricity, primarily the other
PES license holders. When East Midlands' exclusive right to supply Franchise
Supply Customers in its Franchise Area is phased out, East Midlands will
likewise face competition from such generators and other suppliers. East
Midlands' supply business also competes with a number of other gas suppliers.
Furthermore, to the extent a larger customer may, invest in its own on-site
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electricity generating plants, such customer would no longer require
electricity supplied by East Midlands.
UK Environmental Regulation
East Midland' businesses are subject to numerous regulatory requirements with
respect to the protection of the environment. The Electricity Act
(legislation governing the electricity industry in Great Britain) obligates
the UK Secretary of State for Trade and Industry (the Secretary of State) to
take into account the effect of electricity generation, transmission and
supply activities upon the environment in approving applications for the
construction of generating facilities and the location of overhead power
lines. The Electricity Act requires East Midlands to adhere to such
guidelines when it formulates proposals for development. East Midlands is
required to mitigate any effect its proposals may have on the environment and
may be required to carry out an environmental assessment when it intends to
construct overhead lines. East Midlands also has produced an Environmental
Policy Statement which sets out the manner in which it intends to comply with
its obligations under the Electricity Act.
Britain's Environmental Protection Act 1990 addresses waste management issues
and imposes certain obligations and duties on companies which handle and
dispose of waste. Some of East Midlands' distribution activities produce
waste, but Dominion Resources believes East Midlands is in compliance with
applicable standards.
Possible adverse health effects of electro-magnetic fields (EMFs) from various
sources, including transmission and distribution lines, have been the subject
of a number of studies and increasing public discussion. The scientific
research currently is inconclusive as to whether EMFs can cause adverse health
effects. Claims are currently being brought against other companies within
the electricity business alleging damages caused by EMFs. East Midlands
believes that it has taken and continues to take sufficient measures to comply
with the applicable laws and governmental regulations for the protection of
the environment.
Employees
East Midlands currently has 4,418 employees. Of East Midlands' employees, 85%
are trade union members. Approximately 95% of East Midlands' employees are
subject to collective bargaining agreements. The 5% of employees who are not
party to a collective bargaining agreement are party to personal/individual
contracts.
There are various collective agreements covering the distribution, and the
supply businesses and the different groups of staff within each of these
businesses. These provisions may be amended by agreement between the
particular business' management representatives and the appropriate trade
union and are terminable with not less than 12 months notice by either party.
Most staff of East Midlands' contracting business have terms and conditions
based on one of two national collective bargaining agreements which have
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minimum standards. In the past 10 years there have been no work stoppages
which have resulted in a loss of man days. Dominion Resources believes East
Midlands relations with its employees and representatives are generally good.
DOMINION ENERGY
In reference to the purchase of the Kincaid Power Station from Commonwealth
Edison Company (ComEd) by Kincaid Generation, L.L.C. (LLC), a subsidiary of
Dominion Energy, in March 1997, the Illinois Commerce Commission (ICC) issued
an order approving the transaction. ComEd and certain intervenors requested
rehearing before the ICC, and certain intervenors requested the ICC to stay
the effort of its approval order, all requests were denied by the ICC. ComEd
and certain intervenors have filed appeals to the Appellate Court of Illinois
for the Fourth District.
VIRGINIA POWER
During April, Dr. James T. Rhodes, President and Chief Executive Officer of
Virginia Power since 1989, announced his retirement effective August 1, 1997.
On May 23, 1997, the Board of Directors elected Mr. Norman B.M. Askew as the
new President and Chief Executive Officer, effective August 1, 1997. Mr.
Askew was previously the Chief Executive of East Midlands , the United Kingdom
regional electricity company acquired by Dominion Resources during the first
quarter of 1997. Pursuant to Virginia Power's policy on employee Directors,
Dr. Rhodes resigned from and Mr. Askew was appointed to the Board of Directors
effective August 1, 1997.
On August 6, 1997, Virginia Power sold its wholly-owned subsidiary, A&C
Enercom, Inc. (A&C) to Intellisource, Inc. of Fairfield, CT. Earlier this
year, the TriTech division of A&C was integrated into Evantage, the retail
side of Virginia Power's energy services business unit. For additional
information see Sale of Subsidiary under MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
Regulation
Virginia
In the proceeding before the Virginia Commission for authority to implement a
program for monitoring of compliance by nonutility generators with the
"Qualifying Facility" (QF) requirements of the Public Utility Regulatory
Policies Act of 1978, on June 13, 1997, the Commission granted the authority
requested.
In reference to its application before the Virginia Commission for authority
to provide interexchange non-switched dedicated telecommunication services
throughout Virginia, on August 8, 1997, the Commission issued an order
granting the certificate to provide such telecommunications services and
approving the proposed affiliate agreements between Virginia Power and its
wholly-owned subsidiary, VPS Communications, Inc.
In reference to the consolidated alternative regulatory plan and 1995 Annual
Information Filing proceeding before the Virginia Commission, a public hearing
has been rescheduled to February 17, 1998. On June 2, 1997, Virginia Power
issued a NUG Mitigation Report and the Staff issued its report on the
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developments in the wholesale power market. The Staff has requested an
extension of time to file its report on increased monitoring of electric
service quality from July 1, 1997 to March 1, 1998.
Nuclear
In reference to Virginia Power's joint petition with thirty-five other utility
petitioners against the U.S. Department of Energy (DOE) in the U.S. Court of
Appeals for the District of Columbia and a parallel lawsuit filed by numerous
states and state agencies, DOE filed a response to mandamus petitions on June
6, 1997, and the utilities and state petitioners filed replies on June 16,
1997. Oral argument has been scheduled for September 25, 1997.
Rates
FERC
In reference to Virginia Power's Open Access Transmission service tariff, on
June 11, 1997, FERC issued a Letter Order approving Virginia Power's tariff.
On July 14, 1997, Virginia Power filed amendment to its open Access
Transmission tariff and Standards of Conduct to conform with the requirements
of FERC Orders 888-A and 889-A.
On July 1, 1997, Virginia Power filed an amendment to its Power Sales Tariff
to Eligible Customers dated June 28, 1994. The amendments provide for sales
of electric capacity and energy at market-based rates and for the resale of
transmission rights. As part of the filing, Virginia Power attached an
analysis of the company's generation market power for installed and
uncommitted capacity that illustrates Virginia Power is within the parameters
previously found by the Commission to establish a lack of generation
dominance.
Virginia
In the proceeding before the Virginia Commission involving an increase in
Virginia Power's recovery of fuel expenses, on June 11, 1997, the Commission
approved the requested increase in the fuel factor from 1.299 cents to 1.322
cents per kilowatt-hour
North Carolina
On June 19, 1997, the North Carolina Commission issued an Order requiring the
company to offer long-term (5,10 and 15 year) levelized capacity payments to
hydroelectric and certain landfill and waste facilities contracting for up to
5 MW; a 5-year levelized rate option to other QFs contracting for up to 100
KW; and optional long-term levelized energy payments for QFs rated at 100 KW
or less capacity.
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Sources of Energy Used and Fuel Costs
Purchases And Sales Of Power
In reference to the principles of agreement reached between Virginia Power and
Old Dominion Electric Cooperative (ODEC) in November 1996 providing for
Virginia Power's continued supply of ODEC's supplemental capacity needs
through 2005, on July 29, 1997, the parties executed a revised agreement in
keeping with those principles of agreement.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
10(i)*- Employment Agreement date June 20, 1997 between
Dominion Resources, Inc. and Thos. E. Capps
(filed herewith).
10(ii)* - Dominion Resources, Inc. Retirement Benefit
Restoration Plan as adopted effective January
1, 1991 and amended and restated September 1,
1996 (filed herewith).
10(iii)*- Dominion Resources, Inc. Retirement Benefit Funding
Plan effective June 29, 1990 and amended and restated
September 1, 1996 filed herewith).
10(iv)*- Dominion Resources, Inc. Executive Supplemental
Retirement Plan effective January 1, 1981 as amended
and restated September 1, 1996 (filed herewith).
11 - Statement re: computation of per share earnings
(included in this Form 10-Q on page 3).
27 - Financial Data Schedule (filed herewith).
*Indicates management contract or compensatory plan or arrangement.
(b) Reports on Form 8-K
None.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
DOMINION RESOURCES, INC.
Registrant
BY JAMES L. TRUEHEART
James L. Trueheart
Vice President and Controller
(Principal Accounting Officer)
August 12, 1997