Dominion Resources, Inc. (D)

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Dominion Resources (D)

Q4 2011 Earnings Call

January 27, 2012 10:00 am ET

Executives

Paul D. Koonce - Executive Vice President and Chief Executive Officer of Dominion Virginia Power

Thomas F. 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

David A. Christian - Executive Vice President and Chief Executive Officer of Dominion Generation

G. Scott Hetzer - Senior Vice President of Tax and Treasurer

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

Thomas Hamlin -

Analysts

Dan Eggers - Crédit Suisse AG, Research Division

Paul B. Fremont - Jefferies & Company, Inc., Research Division

Carrie Saint Louis

Jonathan P. Arnold - Deutsche Bank AG, Research Division

Paul Patterson - Glenrock Associates LLC

Nathan Judge - Atlantic Equities LLP

Paul T. Ridzon - KeyBanc Capital Markets Inc., Research Division

Steven I. Fleishman - BofA Merrill Lynch, Research Division

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 like to turn the conference over to Tom Hamlin, Vice President of Investor Relations for Safe Harbor statement.

Thomas Hamlin

Good morning, and welcome to Dominion's Fourth Quarter 2011 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 of these schedules. If you have not done so, I encourage you to visit our website, register for email alerts and view our fourth quarter 2011 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 from 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 2011 operating earnings and our operating earnings guidance for the first quarter and full year 2012, as well as our operating earnings before interest and tax, commonly referred to as EBIT. Reconciliations of such measures to the most directly comparable GAAP financial measures we were able to calculate and report are 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 a review of the progress we have made on our growth plan in 2011 and our outlook for 2012. Mark will discuss our earnings results for the fourth quarter, as well as our guidance for the first quarter and full year 2012. We will then take your questions.

I will now turn the call over to Tom Farrell.

Thomas F. Farrell

Good morning. For Dominion, 2011 was a year of significant accomplishment. Across our business units, our employees delivered improved service quality in nearly all areas of operations, and in most cases, with record-setting safety performance. We completed several major capital projects in our strategic growth plan and made significant progress in the construction of several others. We also worked to secure the contractual commitments and regulatory approvals necessary for the next round of projects that should sustain our growth plan for the foreseeable future.

We delivered operating earnings per share within our guidance range in the face of a sluggish, yet improving economy, weak commodity prices and mild weather, particularly in the fourth quarter. Shareholders were rewarded in 2011 with a total return of 29.4%, which exceeded the returns for most of our industry peers as well as the overall market.

Our strategic growth plan consists of investments in new infrastructure in all of our regulated lines of business. At Dominion Generation, it involved the construction of new generation to reduce the existing capacity deficit of Virginia Power to meet the expected growth in demand from our service territory and to replace the generating capacity that is being retired, in order to comply with new EPA regulations.

At Dominion Virginia Power, it involves the modernization of the 500 kV loop that has been the backbone of our electric transmission system, as well as upgrades in new service lines to support demand from new customers, including data centers, and to maintain reliability to portions of our service area affected by generation plant retirements.

At Dominion Energy, it involves the construction of the gathering, processing and transmission infrastructure that will be needed to facilitate the natural gas production from Marcellus and Utica Shale formations. It also includes the systematic replacement of much of the pipeline network at Dominion East Ohio. All told, this plan involves about $11.6 billion of new plant investment and identified projects over the next 5 years, providing the foundation for our 5% to 6% expected growth in earnings per share beginning this year, which we again affirm today.

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