Dominion Resources (D)
Q3 2012 Earnings Call
October 25, 2012 10:00 am ET
Mark F. McGettrick - Chief Financial Officer and Executive Vice President
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Paul D. Koonce - Executive Vice President and Chief Executive Officer of Dominion Virginia Power
Dan Eggers - Crédit Suisse AG, Research Division
Paul B. Fremont - Jefferies & Company, Inc., Research Division
Paul Patterson - Glenrock Associates LLC
Greg Gordon - ISI Group Inc., Research Division
Steven I. Fleishman - BofA Merrill Lynch, Research Division
Julien Dumoulin-Smith - UBS Investment Bank, Research Division
Stephen Byrd - Morgan Stanley, Research Division
Angie Storozynski - Macquarie Research
Michael J. Lapides - Goldman Sachs Group Inc., Research Division
Good morning, and welcome to Dominion's Third Quarter Earnings Conference Call. On the call today, we have Tom Farrell, CEO; Mark McGettrick, CFO; and other members of senior management. [Operator Instructions] I would now like to turn the call over to Tom Hamlin, Vice President of Investor Relations and Financial Analysis for our Safe Harbor statement.
Good morning, and welcome to Dominion's Third Quarter 2012 Earnings Conference Call. During this call, we will refer to certain schedules included in this morning's earnings release and pages from our earnings release kit. Schedules in the earnings release kit are intended to answer the more detailed questions pertaining to operating statistics and accounting. Investor relations will be available after the call for any clarification on these schedules. If you have not done so, I encourage you to visit our website, register for e-mail alerts and view our third quarter 2012 earnings documents. Our website address is www.dom.com/investors.
In addition to the earnings release kit, we have included a slide presentation on our website that will guide this morning's discussion.
And now for the usual cautionary language. The earnings release and other matters that will be discussed on the call today may contain forward-looking statements and estimates that are subject to various risks and uncertainties.
Please refer to our SEC filings, including our most recent annual report on Form 10-K and our quarterly report on Form 10-Q for a discussion of factors that may cause results to differ from management's projections, forecasts, estimates and expectations.
Also on this call, we will discuss some measures of our company's performance that differ from those recognized by GAAP. Those measures include our third quarter 2012 operating earnings and our operating earnings guidance for the fourth quarter and full year 2012 and 2013, as well as operating earnings before interest and tax, commonly referred to as EBIT. Reconciliation of such measures to the most directly comparable GAAP financial measures we are able to calculate and report, are contained on Schedules 2 and 3 in Pages 32 to 39 in our earnings release kit.
Joining us on the call this morning are our CEO, Tom Farrell; our CFO, Mark McGettrick; and other members of our management team. Mark will discuss our earnings results for the third quarter, as well as our guidance for the fourth quarter of 2012. Tom will update our operating and regulatory activities, as well as review the progress we have made on our growth plan.
I will now turn the call over to Mark McGettrick.
Mark F. McGettrick
Good morning. Dominion's 2012 third quarter operating earnings were $0.92 per share, toward the bottom of our guidance range of $0.90 to $1 per share. Mild weather in our Virginia service territory during the quarter reduced earnings by $0.01 per share when compared to normal. While temperatures, as measured by degree days, were above normal, other factors impacting weather-related demand, principally low humidity, offset the higher temperatures. Although the degree days were above normal in July, they were close to normal in August and below normal in September.
Additionally, the highest temperatures during the quarter occurred in the aftermath of the derecho storm in early July, where over 1.2 million of our customers lost power. Full restoration took nearly a week, which prevented us from benefiting from the extreme weather.
Through the first 9 months of 2012, mild weather conditions have reduced earnings by a total of $0.17 per share compared to normal. Lower interest expenses and a lower effective tax rate had a positive impact on the results for the quarter. Negative factors in the quarter relative to the midpoint of our guidance range where a storm-related outage at our Hastings processing plant and an unplanned outage at Millstone, due to water temperature limitations that required us to remove Unit 2 from service for almost 2 weeks.
Earnings for GAAP purposes were $0.36 per share for the third quarter. Earlier this week, we announced our decision to close the Kewaunee nuclear plant and the associated write-down of the investment in that plant. This was the principal factor for the lower GAAP earnings for the quarter.
Other differences between GAAP and operating earnings for the quarter were the results related to the Brayton Point, Kincaid and Elwood Power Stations that we are in the process of selling. Consistent with our treatment of previous transactions, results for these assets were excluded from operating earnings as of this quarter. A reconciliation of 2012 operating earnings to reported earnings can be found on Schedule 2 of the earnings release kit.
Now moving to results by operating segment. At Dominion Virginia Power, EBIT for the third quarter was $242 million, which was just below the midpoint of its guidance range. Lower-than-expected results at Dominion Retail, due to mark-to-market changes, were partially offset by lower-than-expected storm costs and lower operating expenses.