Corporate Analysis of Dominion Resources, Inc.

NYSE (D)

Analysts:

Ronnie Ingram

Victoria D. Johnson

Jerome Pratt

February 22, 2011

Table of Contents

1. Introduction

2. Abstract

3. History

4. Financial Analyst

a. Trends, Anomalies & Off Balance Sheet Obligations:

i. Balance Sheet

ii. Income and Expense Statement

iii. Statement of Cash Flows: Investing, Financing, Operating Activities

iv. Statement of Retained Earnings

5. Financial Ratio Analysis

a. Liquidity, Asset Management, Debt Management, Profitability, Market Value Ratios

6. Bond Analysis

a. Issues, IR’s, Ratings, average weighted rd.

7. Equity Analysis

a. Common Stock

i. IPOs, Trends, Splits, Repurchases

ii. Treasury, Beta, Equity Issuances

iii. Fundamental & Technical Analysis Techniques

iv. News articles from WSJ & industry analysis

v. Calculations for rs. (including CAPM & DCF)

8. Preferred Equities

9. Analyst Reports & Wall Street’s Expectations

10. Dividend Policy, Historical and Current

11. WACC Calculations

12. Intrinsic Valuation Model versus Enterprise Value

13. Capital Expenditure Projects

14. M&A Activity

15. Recommendation/Conclusion

16. Appendix

Introduction:

The following paper analyzes the financials of Dominion Resources (NYSE symbol D). One of

Dominion’s biggest competitors, American Electric Power Company (NYSE - AEP) was

compared to establish clear ratios on how Dominion compared to a major competitors

performance. The objective of the analysis was to decide if Dominion Resources is capable of

remaining competitive in the power service industry. To conduct this research, a financial

analysis was used to review the desired level of corporate liquidity required to meet current and

future goals of Dominion Resources in a timely and cost effective manner. An overview of

Dominion Resources will be used to assess working capital strategies and tools used to manage

current assets and liabilities most effectively. Both companies were reviewed regarding the

optimization of capital structure, their management towards costs of long-term capital and capital

resource investments. The results of these functions will help analysts make a decision on the

likelihood Dominion Resources can remain profitable, stay above competition, and maximize

shareholders’ equity

Dominion Resources, Inc. (DRI) is a holding company with assets of over $35 billion whose

largest subsidiary, Dominion Virginia Power, provides electricity to about two million retail

customers in Virginia and North Carolina. Dominion also distributes natural gas to 1.7 million

customers in Ohio, Pennsylvania, and West Virginia. Diversification efforts have led Dominion

to establish subsidiaries to pursue interests in real estate, investment, and other non-utility areas.

In anticipation of deregulation, Dominion separated its generation operations from its

transmission and distribution operations. Transmission and distribution remained under federal

and state regulation, keeping the name Virginia Power, while a new subsidiary, Dominion

Energy, was formed to manage Dominion's power generating plants as well as other non-

regulated energy activities. Dominion's 2000 merger with Consolidated Natural Gas transformed

it into one of the largest integrated natural gas and electric companies in the United States.

History

Incorporated in Virginia on Feb. 18, 1983. On July 1, 1986, Co. formed Virginia Natural Gas, Inc., Dominion Reserves, an oil and natural gas unit of Dominion Energy, Inc.. In Apr. 1988, Co. acquired Suffolk Gas Corp. In June 1988, Co.'s subsidiary, Dominion Energy Inc., acquired 50% of Enron Cogeneration Co. from Enron Corp for $106.4 million. On Feb. 15, 1990, Co. sold its subsidiary, Virginia Natural Gas, Inc. for $150 million. On Sept. 1, 1995, Dominion Capital, Inc. and Venture Capital Holdings, Inc. announced that they will form Trilon Dominion Partners, L.L.C. to own and manage a $102 million portfolio of venture capital investments. Venture Capital Holdings, Inc. will serve as general partner and manager of the portfolio. The assets under management will primarily consist of an investment in approximately 18 venture capital enterprises at various stages of development, as well as an interest in Houston Venture Partners, a

Texas-based venture capital fund. On May 13, 1996, Dominion Capital, through a wholly owned subsidiary, acquired the stock of Saxon Mortgage, Inc. In Aug. 1996, Dominion Energy, through wholly owned subsidiary, acquired a 60% ownership and management interest in Empresa de Generacion Electrica NorPeru S.A. In 1997, Co. purchased East Midlands, the principal operating subsidiary of Dominion UK Holding, Inc. In 1997, Dominion Capital acquired the remaining 50% of First Source Financial. In Feb. 1998, Dominion Energy completed its purchase of Kincaid Power Station from Commonwealth Edison Co. of Chicago. The purchase price was $186 million and the transaction has been recorded using the purchase method of accounting. In April 1998, DEI purchased Dominion Energy Canada, Ltd. DEI paid $119 million and assumed debt of $26 million. In Apr. 1998, Dominion Energy purchased Archer Resources, Ltd. for $119 million plus the assumption of debt amounting to $26 million. The transaction has been recorded using the purchase method of accounting. In July 1998, Co. sold East Midlands Electricity plc to PowerGen plc. Under terms of the sale, PowerGen acquired 100% of Co. for $3.2 billion. In 1999, DEI acquired all of the issued and outstanding shares of Remington Energy Ltd. (Remington) for $33 million and assumed $260 million of Remington's debt and liabilities. In 2000, Co. completed the sale of its interest in Corby Power Limited for $78,000,000. On Jan. 28, 2000, Consolidated Natural Gas Co. merged with and into Co. On Oct. 6, 2000, Co. completed the sale of VNG to AGL Resources Inc. for $533,000,000. In Dec. 2000, Co. formed Dominion Fiber Ventures, LLC (DFV). In Mar. 2001, Co. contributed through DT Services, Inc. (DTSI) all of the outstanding shares of its telecommunications subsidiary, Dominion Telecom, Inc. (DTI), formerly VPS Communications, with an equity value of $110 million, in exchange for 100% of Class B managing membership interests in DFV. A third-party investor trust (Investor Trust) contributed $60 million for 100% of the Class A membership interests in DFV. DFV is the sole owner of DTI. DTI will continue to own and operate the existing telecommunications business of Co. As a result of the contribution to the joint venture, DTI is no longer consolidated, and Co's investment in the joint venture is accounted for using the equity method. On Mar. 31, 2001, Co. acquired Millstone Nuclear Power Station (Millstone), for a purchase price of $1.3 billion. In July 2001, Dominion Capital, Inc. (DCI) sold Saxon Capital, Inc. (Saxon) for approx. $109 million in cash, a $25 million note and an approx. 9% interest in the purchaser, Saxon Capital Acquisition Corp., which completed a concurrent private placement of approx. $277 million.

On Nov. 1, 2001, Co. acquired Louis Dreyfus Natural Gas Corp. shares of outstanding common stock for $1.8 billion, consisting of approx. 14 million shares of Co.'s common stock valued at $876 billion and approximately $888 billion in cash. In June 2002, Co. acquired 100 percent ownership of Mirant State Line Ventures, Inc. (State Line) from Mirant Corporation for approx. $185 million in cash. In Sept. 2002, Co. acquired 100 percent ownership of Cove Point LNG Limited Partnership (Cove Point) from The Williams Companies (Williams) for approx. $217 million in cash. On May 24, 2004, Co. sold its telecommunication operations to Elantic Telecom, Inc. In Jan. 2005, Co. acquired three fossil-fuel fired generation facilities from USGen New England, Inc. for $642,000,000, in cash. In July 2005, Co. acquired a 556 megawatt (Mw) Kewaunee nuclear power station (Kewaunee), located in northeastern Wisconsin, from Wisconsin Public Service Corporation for approx. $192,000,000, in cash. On Dec. 31, 2005, Co.'s Virginia Electric and Power Company subsidiary completed a transfer of its indirect wholly-owned subsidiary, Virginia Power Energy Marketing, Inc., to Co. through a series of dividend distributions, in exchange for a capital contribution of $633,000,000. In Feb. 2006, Co. acquired Pablo Energy LLC for approx. $92,000,000, in cash. During 2007, Co. completed the sale of its non-Appalachian natural gas and oil Exploration & Production (E&P) operations and received approximately $13,300,000,000 for its U.S. non-Appalachian E&P operations and approximately $624,000,000 million for its Canadian E&P operations. On June 26, 2007, Co. completed the sale of its Canadian E&P operations to Paramount Energy Trust and Baytex Energy Trust for approximately $624,000,000. On July 2, 2007, Co. completed the merger of its wholly owned subsidiary, Consolidated Natural Gas Company. On July 31, 2007, Co. completed the sale of its E&P operations in Alabama, Michigan and Permian to Hight Mount Exploration & Production LLC for approx. $4,000,000,000 and also its sale of E&P operations in the Gulf Coast, Rockies, South Louisiana and San Juan basin of New Mexico to XTO Energy Inc. for $2,500,000,000. In Aug. 2007, Co. completed the sale of Gichner, LLC (Gichner), all of the issued and outstanding shares of the capital stock of Gichner, Inc. for approximately $30,000,000. In March 2008, Co. reached an agreement to sell the remaining interest in the subordinated notes of a third-party collateralized debt obligation (CDO) entity held as an investment by DCI and in April 2008 received proceeds of $54 million, including accrued interest. On Sept. 30, 2008, Co. announced that it closed its agreement to assign drilling rights to 114,259 acres in the Marcellus Shale prospect to Antero Resources for about $347 million ($205 million after tax), or about $3,037 per acre. Co. will receive a 7.5 percent royalty interest on future natural gas production from the assigned acreage. After-tax proceeds will be used initially to reduce outstanding short-term debt. Longer term, the proceeds are expected to partially offset previously announced equity issuances in 2009. Co. has drilling rights on 600,000 to 800,000 acres in the Marcellus Shale formation, including the acreage assigned to Antero. Co. is continuing its effort to market additional Marcellus Shale acreage.

Antero is one of the anchor tenants of the proposed Dominion Keystone pipeline, which is designed to transport Marcellus Shale production to market. Co. continues to negotiate binding precedent agreements with potential customers following an open season. Barclays Capital Inc. acted as financial adviser to Co. on the transaction. In Dec. 2008, Co.'s Virginia Electric and Power Company completed the merger with Dominion Nuclear North Anna. On Apr. 30, 2010, Co. sold its subsidiaries, Dominion Exploration & Production, Inc., Dominion Reserves, Inc. and Dominion Transmission, Inc. to CONSOL Energy Inc. for $3,475,000,000 in cash.

http://www.mergentonline.com.ezproxy.averett.edu/documents.php?pagetype=predefinedreport

&compnumber=99014

Historical performance

Dominion outperformed the S&P and Dow between May 2010 to early November.

YAHOO FINANCE

Trend Analysis of Balance Sheet and income statement(data from 2007-2009 income Statement

and balance Sheet)

Dominion Resources :

Trend Analysis for Year's ended

Comparative Balance Sheet Latest Latest Latest

Assets 2009 2008 2007 Less 1 Yr less 2Yrs

Cash 48 66 283 17% 23% 100%

Accounts Receivable (less Bad Debts estimate) 2180 2354 2130 102% 111% 100%

Merchandise Inventory 1185 1166 1045 113% 112% 100%

Prepaid Expenses 405 163 387 105% 42% 100%

Total Current Assets 3818 3749 3845 99% 98% 100%

Furniture and Equipment (less depreciation) 5623 5206 5189 108% 100% 100%

Total Assets 9441 8955 9034 105% 99% 100%

Liabilities and Capital

Accounts payable 1401 1499 1734 81% 86% 100%

Notes payable 1409 2436 1734 81% 140% 100%

Accrued Expenses 676 754 934 72% 81% 100%

Total Current Liability 3486 4689 4402 79% 107% 100%

Capital / Owner's Equity 11442 9850 9663 118% 102% 100%

Total Liabilities and Capital/Owner's Equity 14928 14539 14065 106% 103% 100%

Dominion Resources :

Trend Analysis for Year's ended

Comparative Income Statements Latest Latest Latest

2009 2008 2007 Less 1 Yr less 2Yrs

Sales (Net) 14798 16290 14816 100% 110% 100%

Cost of Goods Sold 2611 3809 3214 81% 119% 100%

Gross Margin 12187 12481 11602 105% 108% 100%

Expenses (less other income) 10313 9750 7092 145% 137% 100%

Net Income for the year 1874 2731 4510 42% 61% 100%

Sales (Net) 100% 100% 100% Cost of Goods Sold 18% 23% 22% Gross Margin 82% 77% 78% Expenses (less other

income) 70% 60% 48% Net Income for the year 13% 17% 30%

Trend analysis results of Balance Sheet revealed cash trending downward slightly , but

Assets and equity trending upward, overall income statement show positive trends and that the

company is an good condition.

Trend analysis results of Income Statement revealed sales did well over the period with

no significant drop-off., cost of goods sold is trending downward which could be sign of

increased efficiency or waste reduction. Expense trending upward something that needs to be

watched, but net income trending upward. Overall very positive income statement .

Trend Analysis of Cash Flows

Analysis results

Cash from financing activities has trended as low and steady with little increase this is a

good indicator that company is not relying heavily on debt.

Cash from investing is trending upward which is a good sign that modest returns are

being realized.

Cash from Operating Activities is trending upward and is a positive indicator of expected

good performance.

3786 2676

-230 -3695 -3490

10192

-2000

0

2000

4000

6000

8000

10000

12000

2009 2008 2007

Cash from FinancingActivities

Cash from InvestingActivities

Cash from OperatingActivities

Trend Analysis of Free Cash Flows

Cash Flow analysis Results

After taking a significant decrease in 2007,Free Cash Flow for Dominion Resources, the

trend is currently strong and upward.

Trend Analysis of Operating Cash Flows

Operating Cash Flow analysis Results

After taking a significant decrease in 2007,Operating Cash Flow for Dominion

Resources, the trend is currently strong and upward.

-$47

-$4,218

-$895

-$51

-$5,000

-$4,000

-$3,000

-$2,000

-$1,000

$0

2006 2007 2008 2009

FCF

FCF

$4,005

-246

$2659

$3,786

-1000

0

1000

2000

3000

4000

5000

2006 2007 2008 2009

OPERATING CASH FLOW

OPERATING CASHFLOW

Trend Analysis of Statement of Retained Earnings

Statement of Retained earnings Trend Analysis

Dominion Resources :

Trend Analysis for Year's ended

Comparative Balance Sheet 2009 2008 2007 Latest

Less 1 Year

less 2 Years

Retained earnings $4686 $4170 $3510 134% 119% 100%

Retained earnings Trend Analysis results

Retained earnings are trending upward which is a positive indicator, steady increases

from 2006- 2006 with a 34% positive changes from 2007. These retained earnings

increases

indicate increased net income and is a good trend towards increased company value. boost

company value .

0

500

1000

1500

2000

2500

3000

3500

4000

4500

5000

2006 2007 2008 2009

1960

3510

4170

4686

DOMINION R/E

Anomalies of Dominion’s financial statements. There were no apparent anomalies noted

on the Financial Statements reviewed during research.

There were no off balance sheet obligations listed in the financial reports. Many off-the-

balance-sheet factors can play a role in the success or failure of a company.

Financial ratios for Dominion Resources and American Electric Power were compared.

The 2010 third quarter balance sheet of both firms represent similarities among current and total

assets, total liabilities and common shareholder’s equity. Total current assets in September 2010

for Dominion were reported at $5,995,000 and American Electric Power at $5,421,000. This

includes items such as cash and cash equivalents, customer receivables, inventories and more.

Total assets, which are items such as loans receivables, investments, property, plant equipment,

intangible assets and accumulated depreciation, which were reported at 42,229,000 for Dominion

and 49,892,000 for American Electric Power. Total liabilities such as securities, short-term debt

and accounts payable, accounted for $29,877,000 (Dominion) and $35,176,000 (American

Electric Power). Total common shareholders’ equity for Dominion fell at $12,095,000 and

$13,656,000 for American Electric Power.

Ratios for Dominion were compared to American Electric Power and where industry data

was found, those results were compared as well. Overall Dominion’s performance in all

management areas did well vs. their major competitor American Electric Power. When

Dominion Resources was when compared to the electric industry their overall number were

well above industry figures which supported their overall management effectiveness for the

corporation. Financial ratios were designed to evaluate financial statements . (Brigham,

Ehrhardt, 2008, p 123 ) This analysis will help during the evaluation to uncover any

deficiencies within the corporation that may affect the overall decision to buy, hold, or sell stock.

The table below is a quick snapshot of probability ratios that examines liquidity, debt

management, asset management, and per share values vs. Dominion Resources major competitor

American Electric Power..

Dominion Resources Inc (NYS: D)

American Electric Power Company, Inc. (NYS: AEP)

Profitability Ratios vs. .Competitor

09/30/2010 Dominion

09/30/2010 American Electric DIFF

ROA % (Net) 5.43 4.42 1.01

ROE % (Net) 18.43 16.31 2.12

ROI % (Operating) 15.79 12.59 3.2

EBITDA Margin % 37.95 37.6 0.35

Calculated Tax Rate % 39.24 31.77 7.47

0

Liquidity Ratios 09/30/2010 09/30/2010 0

Quick Ratio 0.46 0.49 -0.03

Current Ratio 1.22 0.88 0.34

Net Current Assets % TA 2.53 (1.46) 3.99

0

Debt Management 09/30/2010 09/30/2010 0

LT Debt to Equity 1.3 1.17 0.13

Total Debt to Equity 1.31 1.37 -0.06

Interest Coverage 4.89 4.13 0.76

0

Asset Management 09/30/2010 09/30/2010 0

Total Asset Turnover 0.37 0.32 0.05

Receivables Turnover 8.47 8.8 -0.33

Inventory Turnover 8.35 6.39 1.96

Accounts Payable Turnover 11.93 18.46 -6.53

Accrued Expenses Turnover 12.91 20.42 -7.51

Property Plant & Equip Turnover 0.61 0.46 0.15

Cash & Equivalents Turnover 36.57 15.44 21.13

0

Per Share 09/30/2010 09/30/2010 0

Cash Flow per Share 3.24 9.27 -6.03

Book Value per Share 21.26 28.57 -7.31

ROA Analyst

Evaluating Dominion with American Electric Power, we note that Dominion has a higher

return on assets than American Electric, which means they are most likely turning over their

assets at a higher rate.

ROE Analyst

Dominion has higher ROE. This shows they are a much better managed company and the

overall performance through management of marketing activities, asset management and debt is

much better than American Electric but greatly exceeds the industry.

3.70%

2.90%

0.00%

0.50%

1.00%

1.50%

2.00%

2.50%

3.00%

3.50%

4.00%

D AEP

ROA

ROA

15.30%

11.40%

9.70%

0.00%

2.00%

4.00%

6.00%

8.00%

10.00%

12.00%

14.00%

16.00%

18.00%

D AEP Industry

ROE

ROE

ROI Analyst

Dominion has a higher ROI which means Dominion is allocating its capital better than

American Electric. There is a close range among both companies on earnings before deductions.

Dominion has a higher tax rate than American Electric(industry data was not available).

Quick Ratio Analyst

Dominion has a slightly less quick ratio which means that it is slightly less liquid than

American Electric in the short term; although, they have a slightly higher ability to pay short

term obligations.

15.79

12.59

0

5

10

15

20

Dominion American Electric

ROI % (Operating)

ROI % (Operating)

0.46

0.49

0.445

0.45

0.455

0.46

0.465

0.47

0.475

0.48

0.485

0.49

0.495

Dominion American Electric

Quick Ratio

Quick Ratio

Current Ratio Analyst

Dominion has significantly greater net current assets than AE. This shows that Dominion

positively uses its assets to generate capital on day to day activities. This works to their

advantage in the event they need to take out a loan; most financial institutions would be willing

to loan them the money.

Debt/equity Ratio Analyst

Dominion’s debt to common equity ratio indicates that Dominion is slightly more

leveraged than American Electric in the power industry.

1.22

0.88

0

0.5

1

1.5

Dominion American Electric

Current Ratio

Current Ratio

1.05

1.1

1.15

1.2

1.25

1.3

1.35

D AEP

1.32

1.17

DEBT/COMMON EQUITY RATIO

DEBT/COMMON EQUITYRATIO

Total Asset Turnover Analysis

Dominion has higher percentage than AE which means they are utilizing more of their assets to

generate revenue.

Receivables Turnover Analysis

Dominion has a lower ratio than AE which could mean that Dominion has looser credit policies

that should be reviewed.

0.37

0.32

0.29

0.3

0.31

0.32

0.33

0.34

0.35

0.36

0.37

0.38

Dominion American Electric

Total Asset Turnover

Total Asset Turnover

8.47

8.8

8

8.5

9

Dominion American Electric

Receivables Turnover

Receivables Turnover

Inventory Turnover Analysis

Inventory turnover is higher with Dominion which indicates AEP has a better operating

efficiency..

Accrued Expenses turnover

Analysis shows Dominion is not accruing enough cash for expenses compared to AE.

8.35

6.39

0

5

10

Dominion American Electric

Inventory Turnover

Inventory Turnover

12.91

20.42

0

5

10

15

20

25

Dominion American Electric

Accrued Expenses Turnover

Accrued ExpensesTurnover

Property Plant &Equipment Turnover Analysis

Dominion is more efficient than AE at generating revenue from fixed assets and more efficient at

managing capital investments.

Cash Flow Turnover Analysis

Dominion’s cash flow turnover may be too high compared to AE; further analysis comparing it

to similar industries should be done to fully assess if this is good or bad. Dominion has a much

lower cash flow per share than AE. A low ratio indicates that the cash flow is high relative to the

stock’s price.

0.61

0.46

0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

Dominion American Electric

Property Plant &Equipment Turnover

Property Plant&Equipment Turnover

36.57

15.44

0

10

20

30

40

Dominion American Electric

Cash and Equivalent Turnover

Cash and EquivalentTurnover

Cash Flow per share Analysis

Dominion has a much lower cash flow per share than AE. companies.

Book Value per share Analysis

A lower book value could mean Dominion’s stock is underpriced.

3.24

9.27

0

1

2

3

4

5

6

7

8

9

10

Dominion American Electric

Cash Flow per Share

Cash Flow per Share

21.26

28.57

0

5

10

15

20

25

30

Dominion American Electric

Book Value per Share

Book Value per Share

Long Term debt ratio Analysis

Dominion has a slightly higher long term debt to equity ratio than AE which means AE has a

smaller financial risk than Dominion.

Dominion has a lower total debt ratio which means it has a stronger equity position than AE overall.

1.3

1.17

1.1

1.15

1.2

1.25

1.3

1.35

Dominion American Electric

LT Debt to Equity

LT Debt to Equity

1.31

1.37

1.28

1.3

1.32

1.34

1.36

1.38

Dominion American Electric

Total Debt to Equity

Total Debt to Equity

Interest Coverage Analyst

Dominion has a higher ratio meaning they are more capable than AE in the ability to pay the interest charges on its debt.

EBITDA Analysis

Dominion has a lower EBITDA than AEP but much higher than the industry this shows that

Dominion is able to satisfy all financial obligations including leases and principal payments.

(EBITDA is short for earnings before interest, taxes, depreciation, and amortization.)

4.89

4.13

3.6

3.8

4

4.2

4.4

4.6

4.8

5

Dominion American Electric

Interest Coverage

Interest Coverage

0

1

2

3

4

5

D AEP Industry

4.15 4.72

1.7821

EBITDA (ttm): in Billions

EBITDA (ttm): in Billions

Profitability

Profitability Ratios: Net Profit Margin, Return on Assets (ROA), Return on Equity

Dominion .has a significantly higher net profit margin than AEP and the industry

Dominion has, better ROE % which shows better overall performance through management of marketing activities, asset management and debt than AE and the industry.

Dominion has a higher ROI which means Dominion is allocating its capital better than AE.

0.00%

20.00%

D AEP Industry

12.70% 9.00% 7.50%

NET PROFIT MARGIN

NET PROFIT MARGIN

0.00%50.00%

100.00%

Dominion AmericanElectric

Industry

18.43% 16.31% 5.50%

ROE %

ROE %

0.00%

50.00%

100.00%

Dominion AmericanElectric

Industry

15.79% 12.59% 14.10%

ROI %

ROI %

Market Value Ratios

Dominion has lower price to earnings than AEP and the industry

Dominion has higher Price per share than AEP and the industry

Bond Analysis

Issues

10.55 13.42

14.7

0

5

10

15

20

D AEP Industry

P/E (ttm): price to earnings

P/E (ttm):

0

0.5

1

1.5

2

D AEP Industry

1.71

1.21 1.52

P/S (ttm): price per share

P/S (ttm):

IR’s

Ratings

Morningstar acknowledged Dominion Resources with a BBB+ rating while Market Watch upgraded them to an A-

.http://quicktake.morningstar.com/stocknet/bonds.aspx?symbol=d

http://www.marketwatch.com/story/sp-raises-dominion-resources-credit-rating-to-a

Weighted average of long term debt .

BOND FACE VALUE Coupon Rate YIELD

FUTURE VALUE weight

1 $6,222,000,000 5.95% $370,209,000 $6,592,209,000 0.374

2 $300,000,000 2.01% $6,030,000 $306,030,000 0.018

3 $202,000,000 2.13% $4,292,500 $206,292,500 0.012

4 $268,000,000 7.85% $21,038,000 $289,038,000 0.016

5 $1,485,000,000 7.50% $111,375,000 $1,596,375,000 0.089

6 $1,380,000,000 6.23% $85,974,000 $1,465,974,000 0.083

7 $5,838,000,000 5.84% $340,939,200 $6,178,939,200 0.351

8 $119,000,000 1.76% $2,094,400 $121,094,400 0.007

9 $504,000,000 6.31% $31,802,400 $535,802,400 0.030

10 $183,000,000 7.33% $13,413,900 $196,413,900 0.011

11 $124,000,000 5.30% $6,572,000 $130,572,000 0.007

$16,625,000,000 5.29% $993,740,400 $17,618,740,400 1.000

DUE IN LESS THAN 1 YEAR $1,144,000,000 .

105.98%

TOTAL LONG TERM DEBT $15,481,000,000

Equity Analysis

Common stock

IPO

Trend’s

http://phx.corporate-

ir.net/External.File?item=UGFyZW50SUQ9NTExNTJ8Q2hpbGRJRD0tMXxUeXBlPTM=&t=1

Ratings

Equity Analysis: (This will include a detailed technical analysis).

Common Stock:

IPOs

Stock Pricing Trends:

Dominion Resources

AEP

http://www.nasdaq.com/asp/quotes_reports.asp?symbol=D&selected=D

Dominion outperformed the S&P and Dow between May 2010 to early November.

http://finance.yahoo.com/q/bc?t=1y&s=D&l=on&z=m&q=l&c=&c=%5EGSPC&c=%5EDJI

Splits

Appendix F: Historical Common Stock Splits and Dividends (Dominion

Investor Relations <Victoria paraphrase>.Updated December 31, 2010

Page 1 of 3

Common Stock Splits November 19, 2007 – 2 for 1 split of Dominion Resources, Inc. (NYSE: D)

On this date, 1 held share of Dominion common stock was exchanged for 2 new shares of Dominion.

January 23, 1992 – 3 for 2 split of Dominion Resources, Inc. (NYSE: D)

On this date, 2 held shares of Dominion common stock were exchanged for 3 new shares of Dominion.

May 19, 1983 – 2 for 3 reverse split of Virginia Electric and Power Company (NYSE: VEL) into

Dominion Resources, Inc. (NYSE: D)

On this date, the holding company Dominion Resources, Inc. was created. Virginia Electric and Power

Company (VEPCO) was merged into Dominion as a wholly owned subsidiary at which time 3 shares

of VEPCO common stock were surrendered for 2 shares of Dominion common stock.

May 11, 1968 – 4 for 3 split of Virginia Electric and Power Company (NYSE: VEL)

On this date, 3 held shares of VEPCO common stock were exchanged for 4 new shares of VEPCO

common stock.

April 29, 1963 – 3 for 2 split of Virginia Electric and Power Company (NYSE: VEL)

On this date, 2 held shares of VEPCO common stock were exchanged for 3 new shares of VEPCO

common stock.

May 3, 1957 – 2 for 1 split of Virginia Electric and Power Company (NYSE: VEL)

On this date, 1 held share of VEPCO common stock was exchanged for 2 shares of new VEPCO

common stock.

Repurchases

Shelf-Registration

The only record found on Dominion was for the shelf-registration found below recorded in June 2005.

http://dom.mediaroom.com/index.php?s=43&item=364

Dominion Files Shelf Registration June 22, 2005

RICHMOND, Va. - Dominion (NYSE: D) announced today that it has filed a universal shelf

registration statement with the U.S. Securities & Exchange Commission. The filing will allow

Dominion to issue up to $3 billion in securities consisting of senior debt, junior subordinated

debentures, trust preferred, common stock, preferred stock, stock purchase contracts and stock

purchase units. Dominion has also deregistered approximately $215 million of securities

registered under two prior registration statements. The amount registered in this filing is

sufficient to cover the replacement of debt securities maturing over the next two years. Dominion

has no plans to issue new common stock other than that which has been previously disclosed or

pursuant to employee benefit plans. Dominion last filed a universal shelf registration statement in

July of 2003.The registration statement described above has been filed with the U. S. Securities

& Exchange Commission but has not yet become effective. This news release does not constitute

an offer of any securities for sale. Dominion is one of the nation's largest energy companies and

is headquartered in Richmond, Virginia.

Treasury

In 2009, credit markets improved for large businesses.

This reduced our financing costs compared

to earlier expectations and had a positive impact

on 2009 earnings. We expect continued benefits to

be reflected in 2010 earnings. Moreover, we took

advantage of historically low treasury rates by entering

into pre-issuance interest rate hedges at attractive

levels for anticipated debt issuances in 2009

and 2010. The transactions have yielded positive

results.

Beta

As of February 24, 2011 Dominion’s beta was 0.56 compared to AEP’s 0.55 beta.

http://finance.yahoo.com/q/ks?s=AEP+Key+Statistics

Equity Issuances

Two to three methods to calculate rs. (Should include CAPM & DCF).

Please add CAPM and WACC from PowerPoint

Preferred Equities.

Analyst Reports & Wall Street’s Expectations (can be included in appendix)

Stock Price Forecast http://money.cnn.com/quote/forecast/forecast.html?symb=D

The 15 analysts offering 12-month price forecasts for Dominion Resources Inc have a median target of 45.00, with a high estimate of 50.00 and a low estimate of 38.00. The median estimate represents a +0.40% increase from the last price of 44.82.

Analyst Recommendations

The current consensus among 17 polled investment analysts is to Hold stock in Dominion Resources Inc. This rating has held steady since February, when it was unchanged from a Hold rating. months for detail

Growth annually 2.85%

Earnings Estimates

Broker Summary Number of Analysts 21 Number of Buy Recommendations 3 Number of Hold Recommendations 7 Number of Sell Recommendations 0

Ratios and Statistics EPS Long-Term Growth 3.05 Forward P/E PEG

Average Target Price $44.5

Dividend Policy, Historical and Current.

Dividend Information

Dividends on Dominion common stock are paid as declared by the Board of Directors.

Dividends are typically paid on the 20th day of March, June, September and December.

Dividends can be paid by check or electronic deposit, or may be reinvested.

Proposed 2011 Record and Payment Dates

Ex-Dividend Date Record Date Payment Date Amount Per Share

March 2, 2011 March 4, 2011 March 20, 2011 .4925

May 25, 2011 May 27, 2011 June 20, 2011 TBD

Aug. 24, 2011 Aug. 26, 2011 Sept. 20, 2011 TBD

Nov. 30, 2011 Dec. 2, 2011 Dec. 20, 2011 TBD

2010 Record and Payment Dates

Ex-Dividend Date Record Date Payment Date Amount Per Share

Feb. 24, 2010 Feb. 26, 2010 March 20, 2010 .4575

May 26, 2010 May 28, 2010 June 20, 2010 .4575

Aug. 25, 2010 Aug. 27, 2010 Sept. 20, 2010 .4575

Nov. 24, 2010 Nov. 29, 2010 Dec. 20, 2010 .4575

http://www.dom.com/investors/stock-information/dividend-information.jsp

http://investors.dom.com/phoenix.zhtml?c=110481&p=irol-dividends

WACC Calculation to include CAPM & DCF calculations and explanations of the logic behind the WACC

components and weight calculations. (Discounted cash flow model)

http://phx.corporate-

ir.net/External.File?item=UGFyZW50SUQ9NTExNTJ8Q2hpbGRJRD0tMXxUeXBlPTM=&t=1

*ADD WACC FROM PPT AND CAPM

Intrinsic Valuation Model Calculation versus Enterprise Value (Market Capitalization plus the Value of

Debt).

Intrinsic Valuation Model vs. Enterprise Value

Intrinsic Valuation Model

Intrinsic value calculation initial earning

first stage growth rate

WACC

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

terminal value

earning flows

pv of flows

sum=

long term debt

shares outstanding

share price

Enterprise Value

Formula

Enterprise Value = Market Capitalization + Total Debt + Minority Interest + Preferred Shares -

Cash

Using latest quarterly information Enterprise value= 26,190,000,000.(market cap)+1790000000+28.000000+257000-4446000)= $44,056,257,000.00

Enterprise value is the theoretical price an acquirer might pay for another firm, and is useful in comparing

firms with different capital structures since the value of a firm is unaffected by its choice of capital

structure.

Capital Expenditure Projects (were they spending $$$, what are they purchasing?)

Much of Dominion’s purchasing costs are derived from ___________

ACQUISITIONS AND DISPOSITIONS

Following are significant acquisitions and divestitures by Dominion and Virginia Power during

the last five years.

ACQUISITION OF KEWAUNEE NUCLEAR POWER STATION

In July 2005, Dominion completed the acquisition of Kewaunee, a 556 MW facility in

northeastern Wisconsin for approximately $192 million in cash. The operations of Kewaunee are

included in the Dominion Generation operating segment.

ACQUISITION OF USGEN NEW ENGLAND, INC. POWER STATIONS

In January 2005, Dominion completed the acquisition of three fossil-fuel fired generation

facilities for $642 million in cash. The facilities include Brayton Point, a 1,551 MW facility in

Somerset, Massachusetts; Salem Harbor, a 754 MW facility in Salem, Massachusetts; and

Manchester Street, a 432 MW facility in Providence, Rhode Island. The operations of these

facilities are included in the Dominion Generation operating segment.

-4100

-4000

-3900

-3800

-3700

-3600

-3500

-3400

-3300

2006 2007 2008 2009

CAPITOL EXPENDITURES

CAPITOLEXPENDITURES

ASSIGNMENT OF MARCELLUS ACREAGE

In 2008, Dominion completed a transaction with Antero to assign drilling rights to approximately

117,000 acres in the Marcellus Shale formation located in West Virginia and Pennsylvania.

Dominion received proceeds of approximately $347 million. Under the agreement, Dominion

receives a 7.5% overriding royalty interest on future natural gas production from the assigned

acreage. Dominion retained the drilling rights in traditional formations both above and below the

Marcellus Shale interval and continues its conventional drilling program on the acreage.

SALE OF E&P PROPERTIES

In 2007, Dominion completed the sale of its non-Appalachian natural gas and oil E&P operations

and assets for approximately $13.9 billion. See Note 4 to the Consolidated Financial Statement

for additional information.

In 2006, Dominion received approximately $393 million of proceeds from sales of certain gas

and oil properties, primarily resulting from the sale of certain properties located in Texas and

New Mexico.

The historical results of these operations are included in the Corporate and Other segment.

SALE OF MERCHANT FACILITIES

In March 2007, Dominion sold three Peaker facilities for net cash proceeds of $254 million. The

Peaker facilities included the 625 MW Armstrong facility in Shelocta, Pennsylvania; the 600

MW Troy facility in Luckey, Ohio; and the 313 MW Pleasants facility in St. Mary’s, West

Virginia. Following the decision to sell these assets in December 2006, the results of these

operations were reclassified to discontinued operations and are presented in the Corporate and

Other segment.

SALE OF DRESDEN

In September 2007, Dominion completed the sale of Dresden to AEP Generating Company for

$85 million.

SALE OF CERTAIN DCI OPERATIONS

In August 2007, Dominion completed the sale of Gichner, LLC, all of the issued and outstanding

shares of the capital stock of Gichner, Inc. (an affiliate of Gichner, LLC) and Dallastown for

approximately $30 million.

In March 2008, Dominion reached an agreement to sell its remaining interest in the subordinated

notes of a third-party CDO entity held as an investment by DCI and in April 2008 received

proceeds of $54 million, including accrued interest. As discussed in Note 25 to the Consolidated

Financial Statements, Dominion deconsolidated the CDO entity as of March 31, 2008.

TRANSFER OF VIRGINIA POWER ENERGY MARKETING, INC. TO DOMINION

On December 31, 2005, Virginia Power completed a transfer of its indirect wholly-owned

subsidiary, VPEM, to Dominion through a series of dividend distributions, in exchange for a

capital contribution of $633 million. VPEM provides fuel, gas supply management and price risk

management services to other Dominion affiliates and engages in energy trading and marketing

activities. As a result of the transfer, VPEM’s results of operations were reclassified to

discontinued operations in Virginia Power’s Consolidated Statements of Income and presented in

its Corporate and Other segment.

SALE OF PEOPLES

In March 2006, Dominion entered into an agreement with Equitable to sell two of its wholly-

owned regulated gas distribution subsidiaries, Peoples and Hope. Peoples serves approximately

358,000 customer accounts in Pennsylvania and Hope serves approximately 114,000 customer

accounts in West Virginia. This sale was subject to regulatory approvals in the states in which

the companies operate, as well as antitrust clearance under the HSR Act. In January 2008,

Dominion and Equitable announced the termination of that agreement, primarily due to the

continued delays in achieving final regulatory approvals. Dominion continued to seek other

offers for the purchase of these utilities.

In July 2008, Dominion entered into an agreement with an indirect subsidiary of BBIFNA to sell

Peoples and Hope. In May 2009, following a change in ownership of the general partner of

BBIFNA and other related transactions, BBIFNA was renamed “SteelRiver Infrastructure Fund

North America LP”. The sale of Peoples and Hope to the SteelRiver Buyer, an indirect

subsidiary of the SteelRiver Fund, was expected to close in 2009, subject to state regulatory

approvals in Pennsylvania and West Virginia. In November 2009, the Pennsylvania Commission

approved the settlement entered into among Dominion, Peoples, the SteelRiver Buyer and two of

the active intervenors in the Peoples sale proceeding, thereby approving the sale of Peoples to the

SteelRiver Buyer. In December 2009, the West Virginia Commission denied the application for

the sale of Hope. Dominion decided to retain Hope, but continue with the sale of Peoples. The

sales price for Peoples was approximately $780 million, subject to changes in working capital,

capital expenditures and affiliated borrowings. In February 2010, Dominion completed the sale

of Peoples and netted after-tax proceeds of approximately $542 million. A more detailed

description of the sale can be found in Note 4 to the Consolidated Financial Statements

http://seekingalpha.com/symbol/d/description

Dominion Resources Inc. says if it doesn't build a third nuclear reactor at its North Anna Power Station, it will need to

build another power generation source in its place.

CEO Thomas F. Farrell II spoke Tuesday at the Bank of America Merrill Lynch Power ; Gas Leaders Conference in

New York about the potential reactor at the central Virginia plant.

Farrell said the company is looking for a partner to build the third nuclear reactor, but isn't going to build it itself right

now. Dominion announced in May that it selected Mitsubishi Heavy Industry's Advanced Pressurized Water Reactor

technology for the potential unit

If it decides to go forward with the reactor, the Richmond-based energy company must first get approval from the

Nuclear Regulatory Commission and the Virginia State Corporation Commission.

Farrell said that if the company doesn't build the reactor, Dominion would have to find another source for the 1,300

megawatts of electricity the reactor would have produced.

He also said Dominion plans to spend about $10 billion in growth capital expenditures for generation, transmission

and distribution between 2011 and 2015. That doesn't include about $3.6 billion for projects like the third nuclear

reactor, its replacement, or certain gas transmission growth projects under development.

http://nuclearstreet.com/nuclear_power_industry_news/b/nuclear_power_news/archive/2010/09/30/bloomber

g_3a00_-dominion-discusses-future-north-anna-nuclear-plant-_1320_-unit-3-093004.aspx

M&A Activity (May include a discussion about Goodwill) (Are they purchasing other corporations?)

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 in growth projects across all of our regulated lines of business. Achieving our 5%

to 6% earnings growth targets does not depend on our ability to make 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 would be accretive to earnings per share and shareholder value.

http://seekingalpha.com/article/249434-dominion-resources-ceo-discusses-q4-2010-results-earnings-call-

transcript

Strategic Position: Industry / Annual Reports letters from the Chairman/CEO. (include in Appendix)

SEE APPENDIX D FOR CEO LETTER

Recommendation: Buy, Sell, and Hold from the POV of a potential investor & the current shareholder.

(would you trade or invest?)

APPENDIX A –Dominion Resources CEO Letter

APPENDIX B -BALANCE SHEETS 2006-2009

APPENDIX C- INCOME STATEMENTS 2006-2009

APPENDIX D 2010 LAST QUARTERLY REPORT

Fiscal Year

Fiscal Year Ends: Dec 31

Most Recent Quarter (mrq): Dec 31, 2010

Profitability

Profit Margin (ttm): 18.48%

Operating Margin (ttm): 24.78%

Management Effectiveness

Return on Assets (ttm): 5.51%

Return on Equity (ttm): 25.67%

Income Statement

Revenue (ttm): 15.20B

Revenue Per Share (ttm): 25.75

Qtrly Revenue Growth (yoy): 15.10%

Gross Profit (ttm): 4.26B

EBITDA (ttm): 5.02B

Net Income Avl to Common (ttm): 2.96B

Diluted EPS (ttm): 4.76

Qtrly Earnings Growth (yoy): N/A

Balance Sheet

Total Cash (mrq): 62.00M

Total Cash Per Share (mrq): 0.11

Total Debt (mrq): 17.90B

Total Debt/Equity (mrq): 148.74

Current Ratio (mrq): 1.00

Book Value Per Share (mrq): 20.67

Cash Flow Statement

Operating Cash Flow (ttm): 1.82B

Levered Free Cash Flow (ttm): 21.12M

http://finance.yahoo.com/q/ks?s=D+Key+Statistics