Dominion Announces Second-Quarter 2014 Earnings
Dominion (NYSE: D) announced unaudited reported earnings determined in accordance with Generally Accepted Accounting Principles (GAAP) for the three months ended June 30, 2014, of $159 million ($0.27 per share), compared with earnings of $202 million ($0.35 per share) for the same period in 2013.
Operating earnings for the three months ended June 30, 2014, amounted to $361 million ($0.62 per share), compared to operating earnings of $355 million ($0.62 per share) for the same period in 2013. Operating earnings are defined as reported (GAAP) earnings adjusted for certain items.
Dominion uses operating earnings as the primary performance measurement of its earnings guidance and results for public communications with analysts and investors. Dominion also uses operating earnings internally for budgeting, for reporting to the Board of Directors, for the company's incentive compensation plans and for its targeted dividend payouts and other purposes. Dominion management believes operating earnings provide a more meaningful representation of the company's fundamental earnings power.
The principal difference between GAAP earnings and operating earnings for the quarter was a charge associated with Virginia legislation permitting recovery of certain costs related to the development of a third nuclear unit at North Anna and offshore wind facilities through base rates.
Business segment results and detailed descriptions of items included in 2014 and 2013 reported earnings but excluded from operating earnings can be found on Schedules 1, 2 and 3 of this release.
Thomas F. Farrell II, chairman, president and chief executive officer, said:
"Our second-quarter results came in the upper half of our guidance range of $0.55 to $0.65 per share. Excluding the two cents per share impact of milder than normal weather, second quarter earnings would have been at the top of our range.
"During the quarter, we also continued to move forward with our infrastructure growth plan. We received the environmental assessment from FERC for our Cove Point Liquefaction project and we anticipate receiving FERC approval for the project in the next few weeks. We are also in negotiations with multiple parties on the Southeast Reliability Pipeline and hope to secure firm contracts in the near future.
"Construction of the Warren County Power Station and Brunswick County Power Station continues on time and on budget. During the quarter, we announced the acquisition of two solar projects in Tennessee and an agreement to acquire a seventh in California, bringing the total solar projects in service or in development to 232 megawatts."
SECOND-QUARTER 2014 OPERATING EARNINGS COMPARED TO 2013
Second-quarter 2014 operating earnings per share were equivalent to second-quarter 2013 operating earnings per share. The main positive driver for the quarter was a lower effective tax rate, partially offset by lower contributions from unregulated retail energy marketing operations.
Details of second-quarter 2014 operating earnings as compared to 2013 can be found on Schedule 4 of this release.
THIRD-QUARTER 2014 OPERATING EARNINGS GUIDANCE
Dominion expects third-quarter 2014 operating earnings in the range of 90 cents to $1.05 per share, compared to third-quarter 2013 operating earnings of $1.00 per share. Positive factors for the third-quarter of 2014 compared to the same period of the prior year include an expected return to normal weather in our electric service territory, higher weather-normalized kilowatt sales and higher revenues related to our electric transmission growth projects. Negative factors for the quarter include higher interest expense, the absence of a benefit from an asset contribution to Blue Racer last year and higher operating expenses. GAAP earnings for the third quarter of 2013 were 98 cents per share. A reconciliation between operating and GAAP earnings for the third quarter of 2013 can be found on Schedule 3 of this release.
In providing its third-quarter and full-year 2014 operating earnings guidance, the company notes that there could be differences between expected reported earnings and estimated operating earnings for matters such as, but not limited to, divestitures or changes in accounting principles. At this time, Dominion management is not able to estimate the aggregate impact of these items on reported earnings. However, Dominion anticipates recording additional pre-tax charges of approximately $44 million in each of the third and fourth quarters of 2014 associated with the North Anna and offshore wind legislation.
Dominion is one of the nation's largest producers and transporters of energy, with a portfolio of approximately 23,600 megawatts of generation, 10,900 miles of natural gas transmission, gathering and storage pipeline, and 6,400 miles of electric transmission lines. Dominion operates one of the nation's largest natural gas storage systems with 947 billion cubic feet of storage capacity and serves utility and retail energy customers in 10 states.
This release contains certain forward-looking statements, including forecasted operating earnings for third-quarter and full-year 2014 which are subject to various risks and uncertainties. Factors that could cause actual results to differ materially from management's projections, forecasts, estimates and expectations may include factors that are beyond the company's ability to control or estimate precisely, including fluctuations in energy-related commodity prices, estimates of future market conditions, additional competition in our industries, changes in the demand for Dominion's services, access to and costs of capital, fluctuations in the value of our pension assets and assets held in our decommissioning trusts, impacts of acquisitions, divestitures, transfers of assets to joint ventures or an MLP and retirements of assets based on asset portfolio reviews, the receipt of regulatory approvals for, and timing of, planned projects, acquisitions and divestitures, the timing and execution of our MLP strategy, and the ability to complete planned construction or expansion projects at all or within the terms and timeframes initially anticipated. Other factors include, but are not limited to, weather conditions and other events, including the effects of hurricanes, earthquakes, high winds, major storms and changes in water temperatures on operations, the risk associated with the operation of nuclear facilities, unplanned outages at facilities in which Dominion has an ownership interest, the impact of operational hazards and catastrophic events, state and federal legislative and regulatory developments, including changes in federal and state tax laws and changes to environmental and other laws and regulations, including those related to climate change, greenhouse gases and other emissions to which we are subject, political and economic conditions, industrial, commercial and residential growth or decline in Dominion's service area, risks of operating businesses in regulated industries that are subject to changing regulatory structures, changes to regulated gas and electric rates collected by Dominion, changes to rating agency requirements and ratings, changing financial accounting standards, fluctuations in interest rates, employee workforce factors, including collective bargaining, counter-party credit and performance risks, adverse outcomes in litigation matters or regulatory proceedings, the risk of hostile cyber intrusions and other uncertainties. Other risk factors are detailed from time to time in Dominion's quarterly reports on Form 10-Q or most recent annual report on Form 10-K filed with the Securities and Exchange Commission.
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