Dominion Resources, Inc. (D)

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Dominion Resources, Inc. (D)

Q1 2013 Earnings Call

April 25, 2013 10:00 am ET

Executives

Thomas F. Farrell II – Chairman, President and Chief Executive Officer

Mark F. McGettrick – Executive Vice President and Chief Financial Officer

Paul D. Koonce – Executive Vice President, Dominion Resources, Inc. Chief Executive Officer-Energy Infrastructure Group and Chief Executive Officer-Dominion Virginia Power

Gary L. Sypolt – Executive Vice President and Chief Executive Officer, Dominion Energy

David A. Christian – Executive Vice President, Dominion Resources, Inc. Chief Executive Officer-Dominion Generation Group

Analysts

Dan Eggers – Credit Suisse

Steve Fleishman – Wolfe Trahan.

Jonathan Arnold – Deutsche Bank

Paul Fremont – Jefferies & Company

Paul Patterson – Glenrock Associates

Michael Lapides – Goldman Sachs & Co.

Stephen Byrd – Morgan Stanley

Julien Dumoulin-Smith – UBS

Presentation

Operator

Good morning and welcome to Dominion’s First Quarter Earnings Conference Call. On the call today, we have Tom Farrell, CEO; Mark McGettrick, CFO; and other members of senior management. At this time each of your lines is in a listen-only mode. At the conclusion of today’s presentation, we will open the floor for questions. At that time, instructions will be given as for the procedure to follow, if you would like to ask a question.

I would now like to turn the call over to Tom Harlin, Vice President of Investor Relations and Financial Analysis for the Safe Harbor statement.

Thomas E. Harlin

Good morning and welcome to Dominion’s first quarter 2013 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 first quarter 2013 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.

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 first quarter 2013 operating earnings and our operating earnings guidance for the second quarter and full year 2013, as well as our 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 and Pages 8 and 9 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 first quarter of 2013 and our guidance for the second quarter. Tom will review our operating and regulatory activities for the quarter and review the progress we’ve made on our growth plan.

I will now turn the call over to Mark McGettrick.

Mark F. McGettrick

Good morning. Dominion's operating earnings of $0.83 per share for the first quarter were within but below the midpoint of our guidance range of $0.80 to $0.95 per share. Earnings for the quarter were impacted by higher than normal storm and service restoration activity in Virginia, the delay of our Natrium processing plant coming on line, lower margins at Millstone due to transmission congestion at February and lower electric sales in plan. GAAP earnings were $0.86 per share for the quarter, the principle difference between first quarter GAAP and operating earnings with a net gain from our investment in our nuclear decommissioning trust.

A reconciliation of operating earnings to reported earnings can be found on Schedule 2 of the earnings release kit. Before moving to operating segment results, let me spend a minute on sales and actions we are taking to protect against, any sales growth that may fall below our estimate of 2%.

In the first quarter weather normalized sales grew by about 1%, thus far we have seen strong growth in commercial activity this year, our residential sales have lagged. It is far too early in the year to draw any definitive conclusion on changes to our estimates, but you should know that we expect to reduce our 2013 operating expenses by about $100 million from originally plan levels to offset the higher storm and margin events in the first quarter and protect against any potential short-fall in our sales expectations.

As we have previously stated a 1% change in sales equates to about $0.04 to $0.05 per share in earnings. We believe this early action reinforces our plans to grow operating earnings by our annual target of 5% to 6%. Finally, as we explained at our March 4 Analyst Meeting, you should expect most of our growth to occur in the third and the fourth quarters as outlined on slide 4.

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