Dominion Resources, Inc. (D)

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Dominion Resources (D)

Q4 2010 Earnings Call

January 28, 2011 10:00 am ET

Executives

Mark McGettrick - Chief Financial Officer and Executive Vice President

Gary Sypolt - Chief Executive Officer of Dominion Energy

Thomas Hamlin -

Thomas Farrell - Executive Chairman, Chief Executive Officer, President, Chairman of Virginia Electric & Power Company, Chief Executive Officer of Dominion Energy and Chief Executive Officer of Virginia Electric

Analysts

Michael Lapides - Goldman Sachs Group Inc.

Dan Eggers - Crédit Suisse AG

Nathan Judge - Atlantic Equities

Paul Fremont - Jefferies & Company, Inc.

Paul Patterson - Glenrock Associates

Jonathan Arnold - Deutsche Bank AG

Michael Worms - BMO Capital Markets U.S.

Hugh Wynne - Bernstein Research

Presentation

Operator

Good morning, and welcome to Dominion's Fourth Quarter Earnings Conference Call. On the call today, we have Tom Farrell, CEO, and other members of senior management. [Operator Instructions] I would now like to turn the conference over to Tom Hamlin, Vice President of Investor Relations, for Safe Harbor statement.

Thomas Hamlin

Thank you. Good morning, and welcome to Dominion's 2010 Year-End 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. The 2011 guidance kit will be posted on our website later today. Schedules in the earnings release kit and earnings guidance 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 of these schedules. If you've not done so, I encourage you to visit our website, register for email alerts and view our fourth quarter and full year 2010 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 fourth quarter and full year operating earnings and our operating earnings guidance for the first quarter and full year 2011, 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 our contained 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. Tom will begin with the review of our operating and regulatory activities in 2010 and the outlook for 2011 and beyond. Mark will discuss the earnings results for the fourth quarter and full year 2010, as well as our outlook for the first quarter of the full year 2011 and earnings growth beyond 2011. We will also discuss our financing plans, and we will then take your questions. I will now turn the call over to our Chairman and Chief Executive Officer, Tom Farrell.

Thomas Farrell

Good morning, everyone, and thank you for joining us. While we typically do not discuss issues related to M&A, I want to make a couple of comments, given market rumors regarding Dominion's interest in merging with or acquiring other utilities. As anyone familiar with our company knows, Dominion has a very strong organic growth plan. We are investing over $2 billion a year on growth projects across all of our regulated lines of business. Achieving our 5% to 6% earnings growth target does not depend on our ability to make the acquisitions. If we were to consider an M&A transaction, it would have to be a unique opportunity that would not weaken our financial condition and will be accretive to earnings per share and shareholder value.

Now turning to 2010. 2010 was an extraordinary year for Dominion. We made significant progress on our strategic plan and demonstrated how our infrastructure growth plan will continue for at least the next five years. Our Board of Directors adopted a new dividend policy that raises our targeted payout ratio to be more in line with our more regulated peers. Last month, the Board authorized a 7.7% increase in the dividend to an annual rate of $1.97 per share. Also, our total shareholder return for the year was strong.

We began the year with a comprehensive settlement agreement for Virginia Power that maintains current base rates through at least 2013 and enables the company to earn a competitive rates of return that support our infrastructure growth program. This was the first base rate case for the company under Virginia's new regulatory structure. We have since joined other parties in submitting a proposal to the Commission, which calls for the terms of the settlement to be extended for an additional year through a deferral of the first biennial review until 2012. The so-called staggering of the biennial review process was provided for in the 2007 Reregulation Law. If approved by the Commission, the first biennial review will cover results for 2010 and 2011. And no change in base rates could occur before December 2014.

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