-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, AIx0vnaza5ZCTGZz/8Ic3SqHuQh4+4HvDOOIStlz7MZmxySHq9fpeTWjanOOd/bs QXJBs3JZu20BG3RaznsJPA== 0000950109-99-001873.txt : 19990518 0000950109-99-001873.hdr.sgml : 19990518 ACCESSION NUMBER: 0000950109-99-001873 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 19990331 FILED AS OF DATE: 19990517 FILER: COMPANY DATA: COMPANY CONFORMED NAME: DOMINION RESOURCES INC /VA/ CENTRAL INDEX KEY: 0000715957 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC SERVICES [4911] IRS NUMBER: 541229715 STATE OF INCORPORATION: VA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-08489 FILM NUMBER: 99625418 BUSINESS ADDRESS: STREET 1: 901 E BYRD ST, WEST TOWER STREET 2: P O BOX 26532 CITY: RICHMOND STATE: VA ZIP: 23219 BUSINESS PHONE: 8047755700 MAIL ADDRESS: STREET 1: P O BOX 26532 STREET 2: 901 EAST BYRD STREET CITY: RICHMOND STATE: VA ZIP: 23261 10-Q 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) /X/ QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 1999 OR / / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _____ to ______ Commission file number 1-8489 DOMINION RESOURCES, INC. ------------------------ (Exact name of registrant as specified in its charter) Virginia 54-1229715 - ---------------------------- ------------ (State or other jurisdiction (I.R.S. employer incorporation or organization) identification no.) 120 Tredegar Street Richmond, Virginia 23219 - ------------------- ------------ (Address of principal executive offices) (Zip Code) (804) 819-2000 ----------------------------- Registrant's telephone number Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- --- At April 30, 1999, the latest practicable date for determination, 191,960,866 shares of common stock, without par value, of the registrant were outstanding. 1 DOMINION RESOURCES, INC. ------------------------ INDEX ----- Page Number ------ PART I. Financial Information Item 1. Consolidated Financial Statements Consolidated Statements of Income - Three 3 Months Ended March 31, 1999 and 1998 Consolidated Balance Sheets - March 31, 1999 4-5 and December 31, 1998 Consolidated Statements of Cash Flows 6-7 Three Months Ended March 31, 1999 and 1998 Consolidated Statements of Changes in 7 Other Comprehensive Income - Three Months Ended March 31, 1999 and 1998 Notes to Consolidated Financial Statements 8-18 Item 2. Management's Discussion and Analysis of Financial 19-31 Condition and Results of Operations Item 3. Quantitative and Qualitative Disclosures About 32-33 Market Risk PART II. Other Information Item 4. Submission of Matters to a Vote of Security Holders 34 Item 5. Other Information 35 Item 6. Exhibits and Reports on Form 8-K 36 2 DOMINION RESOURCES, INC. ------------------------ PART I. FINANCIAL INFORMATION ----------------------------- ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS ------------------------------------------ CONSOLIDATED STATEMENTS OF INCOME --------------------------------- (UNAUDITED)
Three Months Ended March 31, 1999 1998 ---- ---- (Millions, except per share amounts) Operating revenues and income: Virginia Power $ 1,088.4 $1,050.8 East Midlands 550.8 Nonutility 204.6 171.9 -------- ------- 1,293.0 1,773.5 -------- ------- Operating expenses: Fuel, net 218.1 226.1 Purchased power capacity, net 209.9 180.8 Supply and distribution-East Midlands 361.4 Other operation and maintenance 293.3 333.6 Depreciation, depletion and amortization 178.4 216.9 Other 80.0 74.1 -------- ------- 979.7 1,392.9 ------ ------- Operating income 313.3 380.6 -------- ------- Other income 33.8 14.9 --------- ---- 347.1 395.5 -------- -------- Fixed charges: Interest charges, net 119.7 161.4 Preferred dividends and distributions of subsidiary trusts 16.4 16.6 ------- -------- 136.1 178.0 ------- ------- 211.0 217.5 ----- ----- Provision for income taxes 66.4 66.5 Minority interests 6.1 11.5 ------ -------- Income before extraordinary item, net of tax 138.5 139.5 Extraordinary item, net of tax 254.8 0.0 ----- --- Net income $ (116.3) $ 139.5 ======= ====== Average shares of common stock 193.4 193.2 Earnings per common share: Income before extraordinary item $ 0.72 $ 0.72 Net income $ (0.60) $ 0.72 Dividends paid per common share $ 0.645 $ 0.645
- ----------------- The accompanying notes are an integral part of the Consolidated Financial Statements. 3 DOMINION RESOURCES, INC. ------------------------ CONSOLIDATED BALANCE SHEETS --------------------------- ASSETS ------ (UNAUDITED)
March 31, December 31, 1999 1998* --------------------------------------------- (Millions) Current assets: Cash and cash equivalents $ 473.2 $ 425.6 Customer accounts receivable, net 663.0 777.8 Other accounts receivable 287.4 256.5 Materials and supplies: Plant and general 144.8 142.0 Fossil fuel 97.0 95.0 Mortgage loans in warehouse 230.5 140.3 Commodity contract assets 162.8 179.8 Other 331.7 268.3 -------- --------- 2,390.4 2,285.3 -------- --------- Investments: Investments in affiliates 447.2 382.1 Available-for-sale securities 500.8 500.0 Nuclear decommissioning trust funds 743.1 705.1 Loans receivable, net 1,765.6 1,686.5 Investments in real estate 89.9 93.9 Other 304.1 263.0 ------ -------- 3,850.7 3,630.6 -------- -------- Property, plant and equipment: 18,283.9 18,106.0 Less accumulated depreciation, depletion and amortization 7,601.0 7,469.4 -------- --------- 10,682.9 10,636.6 -------- --------- Deferred charges and other assets: Regulatory assets 209.9 620.0 Goodwill 148.4 150.0 Other 206.1 194.5 -------- --------- 564.4 964.5 ------ --------- Total assets $17,488.4 $17,517.0 ========= =========
- ------------------ The accompanying notes are an integral part of the Consolidated Financial Statements. * The Balance Sheet at December 31, 1998 has been derived from the audited Consolidated Financial Statements at that date. 4 DOMINION RESOURCES, INC. ------------------------ CONSOLIDATED BALANCE SHEETS --------------------------- LIABILITIES AND SHAREHOLDERS' EQUITY ------------------------------------ (UNAUDITED)
March 31, December 31, 1999 1998* -------------------------------------------- (Millions) Current liabilities: Securities due within one year $ 493.0 $ 442.9 Short-term debt 658.5 300.8 Accounts payable, trade 625.2 698.5 Accrued interest 112.3 109.1 Accrued payroll 53.5 79.0 Accrued taxes 254.2 175.3 Commodity contract liabilities 232.6 265.8 Other 225.8 266.8 -------- -------- 2,655.1 2,338.2 -------- -------- Long-term debt: Virginia Power 3,448.0 3,464.7 Nonrecourse - nonutility 2,696.2 2,727.9 Dominion UK 54.0 55.6 Other 257.9 3.1 -------- -------- 6,456.1 6,251.3 -------- -------- Deferred credits and other liabilities: Deferred income taxes 1,656.5 1,792.5 Investment tax credits 159.2 221.4 Other 219.7 212.8 -------- -------- 2,035.4 2,226.7 -------- -------- Total liabilities 11,146.6 10,816.2 -------- -------- Minority interest 300.3 310.9 -------- -------- Commitments and contingencies Obligated mandatory redeemable preferred securities ** 385.0 385.0 -------- -------- Virginia Power preferred stock: Subject to mandatory redemption 180.0 180.0 -------- -------- Not subject to mandatory redemption 509.0 509.0 -------- -------- Common shareholders' equity: Common stock - no par 3,831.1 3,933.4 Retained earnings 1,143.4 1,386.4 Accumulated other comprehensive income (23.2) (20.1) Other 16.2 16.2 -------- -------- 4,967.5 5,315.9 -------- -------- Total liabilities & shareholders' equity $17,488.4 $17,517.0 ========= =========
- ------------------- The accompanying notes are an integral part of the Consolidated Financial Statements. * The Balance Sheet at December 31, 1998 has been derived from the audited Consolidated Financial Statements at that date. ** As described in Note (F) to NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, the 7.83% and 8.05% Junior Subordinated Notes totaling $257.7 and $139.2 million principal amounts constitute 100% of the Trusts' assets. 5 DOMINION RESOURCES, INC. ------------------------ CONSOLIDATED STATEMENTS OF CASH FLOWS ------------------------------------- (UNAUDITED)
Three Months Ended March 31, 1999 1998 ------------------------- (Millions) Cash flows from (used in) operating activities: Net income $ (116.3) $ 139.5 Adjustments to reconcile net income to net cash: Depreciation, depletion and amortization 200.4 234.8 Purchase and originations of mortgage loans (630.4) (491.4) Proceeds from sales and principal collections of mortgage loans 540.3 450.7 Extraordinary item, net of income taxes 254.8 Changes in assets and liabilities: Accounts receivable 94.6 61.4 Accounts payable, trade (63.2) (64.2) Accrued interest and taxes 3.0 36.8 Other changes (80.5) (1.7) -------- ------ Net cash flows from operating activities 202.7 365.9 -------- ------ Cash flows from (used in) financing activities: Issuance of common stock 307.7 Repurchase of common stock (107.2) Issuance of long-term debt 1,123.0 980.4 Issuance of short-term debt 387.0 105.6 Repayment of long-term debt (892.3) (978.4) Repayment of short-term debt (146.3) Common dividend payments (124.6) (125.6) Other (15.9) (27.8) -------- ------ Net cash flows from financing activities 370.0 115.6 -------- ------ Cash flows from (used in) investing activities: Utility capital expenditures-(excluding AFC) (155.1) (151.4) Acquisition of natural gas and independent power properties (52.3) (13.7) Loan originations (537.0) (561.1) Repayment of loan originations 464.3 378.3 Acquisition of businesses (133.2) (189.1) Sale of business 24.1 99.5 Purchase of securities (50.3) (1.2) Proceeds from sale of securities 46.5 14.0 Other (132.1) (81.8) -------- ------ Net cash flows used in investing activities (525.1) (506.5) -------- ------ Increase (decrease) in cash and cash equivalents 47.6 (25.0) Cash and cash equivalents at beginning of period 425.6 321.7 -------- ------ Cash and cash equivalents at end of period $ 473.2 $ 296.7 ======== ========
6 DOMINION RESOURCES, INC. ------------------------ CONSOLIDATED STATEMENTS OF CASH FLOWS ------------------------------------- (UNAUDITED) (CONTINUED)
Three Months Ended March 31, 1999 1998 -------------------------- (Millions) Supplementary cash flows information: Cash paid during the period for: Interest (net of interest capitalized) $ 123.9 $150.3 Income taxes 6.5 8.3 - ------------
The accompanying notes are an integral part of the Consolidated Financial Statements. DOMINION RESOURCES, INC. ------------------------ CONSOLIDATED STATEMENT OF CHANGES IN OTHER COMPREHENSIVE INCOME --------------------------------------------------------------- (UNAUDITED)
Three Months Ended March 31, 1999 1998 ------------------------- (Millions) Other Comprehensive Income: Unrealized gains (losses) on on investment securities: Pre-tax $ 0.6 $4.5 Tax (expense) benefit (0.2) (1.6) ----- ----- Net of tax 0.4 2.9 Foreign currency translation adjustment (3.5) 4.8 ---- ----- Increase (decrease) in other comprehensive income (3.1) 7.7 Other comprehensive income at beginning of period (20.1) (3.4) ------ ---- Other comprehensive income at end of period $(23.2) $ 4.3 ====== ===== - ----------------------
The accompanying notes are an integral part of the Consolidated Financial Statements. 7 DOMINION RESOURCES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ------------------------------------------ (A) DOMINION RESOURCES AND INTERIM REPORTING POLICIES ------------------------------------------------- NATURE OF OPERATIONS Dominion Resources is a holding company headquartered in Richmond, Virginia. Its primary business is Virginia Electric and Power Company (Virginia Power), which is a regulated public utility. Virginia Power is engaged in the generation, transmission, distribution and sale of electric energy within a 30,000 square mile area in Virginia and northeastern North Carolina. It sells electricity to retail customers (including government agencies) and to wholesale customers such as rural electric cooperatives, power marketers and municipalities. The Virginia service area comprises about 65 percent of Virginia's total land area, but accounts for 80 percent of its population. Virginia Power's wholesale power group engages in off-system wholesale purchases and sales of electricity and purchases and sales of natural gas beyond the geographic limits of Virginia Power's service territory. Dominion Resources' subsidiary Dominion Energy is engaged in independent power production and the acquisition and sale of natural gas and oil reserves. Some of the independent power and natural gas and oil businesses are located in foreign countries. In Latin America, Dominion Energy is engaged in power generation. In Canada, Dominion Energy is engaged in natural gas exploration, production and storage. Dominion Energy's net investment in foreign operations is approximately $370 million. Dominion Capital is Dominion Resources' financial services subsidiary. Dominion Capital's primary business is financial services which includes commercial lending, merchant banking and residential mortgage lending. Dominion Resources' United Kingdom subsidiary, Dominion U.K. Holding, Inc., owns an 80% interest in Corby Power Station, a 350 megawatt natural gas fired facility located in Northamptonshire, about 90 miles north of London. Dominion Resources translates foreign currency financial statements by adjusting balance sheet accounts using the exchange rate at the balance sheet date and income statement accounts using the average exchange rate for the reporting period. Effective December 31, 1998, Dominion Resources adopted SFAS No. 131, "Disclosure About Segments of an Enterprise and Related Information." Dominion Resources' has defined Dominion Resources' segments based on product, geographic location and regulatory environment. Dominion Resources' principal business segment is Virginia Power. The other reportable segments for the first three months of 1999 are Dominion Energy and Dominion Capital. A description of these segments' products and services are provided above. In 1998 and 1997, the other reportable segments included Dominion U.K. which was sold by Dominion Resources on July 27, 1998. A Corporate category includes the corporate costs of Dominion Resources' holding company plus intercompany eliminations. 8 DOMINION RESOURCES, INC. ------------------------ NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ------------------------------------------ (CONTINUED) GENERAL In the opinion of Dominion Resources' management, the accompanying unaudited Consolidated Financial Statements contain all adjustments, consisting only of normal recurring accruals, with the exception of the extraordinary item as referred to in Note (B) below, necessary to present fairly the financial position as of March 31, 1999, the results of operations for the three-month periods ended March 31, 1999 and 1998, and cash flows for the three-month periods ended March 31, 1999 and 1998. These Consolidated Financial Statements should be read in conjunction with the Consolidated Financial Statements and notes included in the Dominion Resources Annual Report on Form 10-K for the year ended December 31, 1998. The Consolidated Financial Statements include the accounts of Dominion Resources and its subsidiaries, with all significant intercompany transactions and accounts being eliminated on consolidation. Dominion Resources uses the equity method when accounting for its 80% investment in Corby Power Ltd. (Corby) as the company believes that Corby's governing agreements give substantive participating rights to the minority shareholder. Corby owns and operates a 350-megawatt gas-fired power station in England. Corby had total revenues of $36.5 million and total expenses (including interest and taxes) of $29.3 million for the three months ending March 31, 1999. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The results of operations for the interim periods are not necessarily indicative of the results expected for the full year. Information for quarterly periods is affected by seasonal variations in sales, rate changes, timing of fuel expense recovery and other factors. Certain amounts in the 1998 financial statements have been reclassified to conform to the 1999 presentation. As discussed in the Dominion Resources' Form 8-K, filed March 29, 1999, Virginia Power discontinued the application of Statement of Financial Accounting Standards No. 71 (SFAS No. 71), Accounting for the Effects of Certain Types of Regulation, to its generation operations. The effect thereof was an after-tax charge of $254.8 million. See Note (B) below. 9 DOMINION RESOURCES, INC. ------------------------ NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ------------------------------------------ (CONTINUED) (B) EXTRAORDINARY ITEM - DISCONTINUANCE OF SFAS NO. 71 In 1998, Virginia Power negotiated a settlement with the Virginia State Corporation Commission (Virginia Commission) that resolved then outstanding rate proceedings. As part of the settlement, Virginia Power agreed to a a one-time rate refund paid to customers in 1998 and a two-phased rate reduction and base rate freeze through February 2002. On March 25, 1999, the Governor of Virginia signed into law legislation establishing a detailed plan to restructure the electric utility industry in Virginia. The major elements of the bill included: . Phase-in of retail customer choice beginning in 2002 with full retail customer choice by 2004; the schedule is to be determined by the Virginia Commission, which has the authority to accelerate or delay implementation under certain conditions; however, the phase-in of retail customer choice may not be delayed beyond January 1, 2005; . No mandatory divestiture of generating assets; . Deregulation of generation in 2002; . Capped base rates from January 1, 2001 to July 1, 2007; . Recovery of net stranded costs through capped rates or a wires charge paid by those customers opting, while capped rates are in effect, to purchase energy from a competitive supplier; . Cost-based recovery of fuel expenses until July 2007; . Consumer protection safeguards; . Establishment of default service beginning January 1, 2004; and . Creation of a Legislative Transition Task Force to oversee the implementation of the statute. Under this legislation, Virginia Power's base rates will remain unchanged until July 2007 and recovery of generation-related costs will continue to be provided through the capped rates. In addition, under companion legislation enacted by Virginia in 1999, providers of electric service will be subject to corporate income taxes in lieu of gross receipts taxes effective in 2001. As discussed in Dominion Resources' annual report filed on Form 10-K for the year ended December 31, 1998, the financial statements reflect regulatory assets and liabilities under cost-based rate regulation in accordance with SFAS No. 71. Rate-regulated companies are required to write off regulatory assets against current earnings whenever changes in facts and circumstances result in those assets no longer satisfying criteria for recognition as defined by SFAS No. 71. The legislation's deregulation of generation is an event that requires 10 DOMINION RESOURCES, INC. ------------------------ NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ------------------------------------------ (CONTINUED) discontinuation of SFAS No. 71 for Virginia Power's generation operations in the first quarter of 1999. Virginia Power's transmission and distribution operations continue to meet the criteria for recognition of regulatory assets and liabilities as defined by SFAS No. 71. In addition, fuel continues to be subject to deferral accounting. In order to measure the amount of regulatory assets to be written off, Virginia Power evaluated to what extent recovery of regulatory assets would be provided through the capped rates during the transition period. Emerging Issues Task Force (EITF) Issue No. 97-4, "Deregulation of the Pricing of Electricity Issues Related to the Application of FASB Statements No. 71, Accounting for the Effects of Certain Types of Regulation, and No. 101, Regulated Enterprises - Accounting for the Discontinuance of Application of FASB Statement No. 71" (EITF Issue 97-4), provides guidance about writing off regulatory assets when SFAS No. 71 is discontinued for only a portion of a utility's operations. The provisions of the Virginia legislation provide an opportunity to recover generation-related costs, including certain regulatory assets, through capped rates prior to July 2007. Under EITF Issue 97-4 such generation-related regulatory assets will continue to be recognized until they are recovered through capped rates. Generation-related assets and liabilities that will not be recovered through the capped rates were written off in the first quarter of 1999, resulting in an after-tax charge to earnings of $254.8 million. Virginia Power's regulatory assets as of March 31, 1999, and December 31, 1998, are as follows: March 31, December 31, 1999 1998 -------- -------- Income taxes recoverable through future rates $ 57.0 $ 438.8 Cost of decommissioning DOE uranium enrichment facilities 61.6 61.8 Deferred losses on reacquired debt, net 18.8 31.2 Nuclear design basis documentation cost 7.6 20.9 North Anna Unit 3 project termination costs 9.8 Deferred fuel 34.7 27.7 Other 30.2 29.8 -------- -------- Total $ 209.9 $ 620.0 ======== ======== In addition to the write-off of generation-related net regulatory assets discussed above, the $254.8 million ($1.32 per share) charge included approximately $18 million, after-tax, of other generation-related assets. Pursuant to EITF Issue 97-4,a corresponding regulatory asset of $23 million, representing the amount expected to be recovered during the transition period related to these assets, was established. The extraordinary item also included the write-off of approximately $38 million, after-tax, of deferred investment tax credits. Also, as discussed in Virginia Power's 1998 Form 10-K, the events or changes in circumstances that cause discontinuance of SFAS No. 71, and write-off of regulatory assets, also require a review of utility plant assets and long-term power purchase contracts for possible impairment. This review is based on estimates of possible future market prices, load growth, competition and many 11 DOMINION RESOURCES, INC. ------------------------ NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ------------------------------------------ (CONTINUED) other assumptions. Virginia Power evaluated its generation assets in accordance with the provisions of SFAS No. 121 "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of". These evaluations included the effects of nuclear decommissioning and other currently identified environmental expenditures. Based on these analyses which are highly dependent on the underlying assumptions, no plant write-downs are appropriate at this time. Virginia Power reviewed its long-term power purchase commitments for potential loss in accordance with SFAS No. 5, Accounting for Contingencies, and Accounting Research Bulletin No. 43, Chapter 4, Inventory Pricing. Based on projections of possible future market prices for wholesale electricity, the results of the analyses of Virginia Power's long-term power purchase contracts indicated no loss recognition is appropriate at this time. Other projections of possible future market prices indicated a possible loss of $500 million. In the absence of capped rates as provided by the legislation, the potential exposure related to Virginia Power's power purchase contracts would be approximately $3.2 billion. Significant estimates were required in recording the effect of the deregulation legislation, including the resulting impact on the fair value determination of generating facilities and estimated purchases under long-term power purchase contracts. Such projections were based on estimated generation and estimated future market prices for generation and are subject to future reevaluation. Virginia Power remains subject to numerous risks including, among others, exposure to long-term power purchase commitment losses, environmental contingencies, changes in tax laws, decommissioning costs, inflation, increased capital costs, and recovery of certain other items. Management believes the stable rates that are provided until July 2007 by the legislation present a reasonable opportunity to recover a substantial portion of the Company's potentially stranded costs as more fully described in Virginia Power's 1998 Form 10-K, in Future Issues - Competition--Exposure to Potentially Stranded Costs, Item 7, MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL ACCOUNTING CONDITION AND RESULTS OF OPERATIONS. (C) PROVISION FOR INCOME TAXES -------------------------- Income before provision for income taxes, classified by source of income, before minority interest was as follows: Three Months Ended March 31, 1999 1998 ---- ---- (Millions) U.S. $202.3 $175.6 Non U.S. 8.7 41.9 --- ---- Total $211.0 $217.5 ===== ===== 12 DOMINION RESOURCES, INC. ------------------------ NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ------------------------------------------ (CONTINUED) The statutory U.S. federal income tax rate reconciles to the effective income tax rates as follows: Three Months Ended March 31, 1999 1998 ---- ---- Percents -------- U.S. statutory rate 35.0 35.0 Utility plant differences 1.5 1.9 Amortization of investment tax credits (2.0) (2.0) Preferred dividends of Virginia Power 1.4 1.4 Nonconventional fuel credit (4.0) (2.8) Benefits and taxes related to foreign operations (2.0) (5.2) State taxes, net of federal benefit 2.2 1.0 Other, net (0.6) 1.3 ---- ---- Effective tax rate 31.5 30.6 ==== ==== The effective income tax rate includes state and foreign income taxes. (D) COMMON STOCK ------------ At March 31, 1999, there were 300,000,000 shares of common stock authorized of which 192,004,353 were issued and outstanding. Common shares issued and purchased during the referenced periods were as follows: Three Months Ended March 31, 1999 1998 ---- ---- Employee Savings Plans 201,188 Dominion Direct Investment 770,943 Public Offering 6,775,000 Stock Repurchase (2,568,400) Other 114,647 (61,429) --------- --------- Total Shares (2,453,753) 7,685,702 ========= ========= On July 20, 1998, the Dominion Resources Board of Directors authorized the repurchase of up to $650 million (approximately 8 percent) of Dominion Resources common stock outstanding. Dominion Resources has repurchased $205.7 million to date and continues to monitor market conditions for opportunities to repurchase additional shares. Also, effective August 1, 1998, purchases of shares required by Dominion Direct Investment and the Employee Savings Plans are being acquired on the open market instead of issuing new shares. (E) PREFERRED STOCK - VIRGINIA POWER -------------------------------- As of March 31, 1999, there were 1,800,000 and 5,090,140 issued and outstanding shares of preferred stock subject to mandatory redemption and preferred stock 13 DOMINION RESOURCES, INC. ------------------------ NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ------------------------------------------ (CONTINUED) not subject to mandatory redemption, respectively. There is a total of 10,000,000 authorized shares of Virginia Power's preferred stock. (F) OBLIGATED MANDATORILY REDEEMABLE PREFERRED SECURITIES ----------------------------------------------------- In December 1997, Dominion Resources established Dominion Resources Capital Trust I (DR Capital Trust). DR Capital Trust sold 250,000 shares of capital securities for $250 million, representing preferred beneficial interests and 97 percent beneficial ownership in the assets held by DR Capital Trust. Dominion Resources issued $257.7 million of 7.83% Junior Subordinated Debentures (Debentures) in exchange for the $250 million realized from the sale of the Capital Securities and $7.7 million of common securities of DR Capital Trust. The common securities represent the remaining 3 percent beneficial ownership interest in the assets held by DR Capital Trust. The Debentures constitute 100 percent of DR Capital Trust's assets. In 1995, Virginia Power established Virginia Power Capital Trust I (VP Capital Trust). VP Capital Trust sold 5,400,000 shares of preferred securities for $135 million, representing preferred beneficial interests and 97% beneficial ownership in the assets held by VP Capital Trust. Virginia Power issued $139.2 million of its 1995 Series A, 8.05% Junior Subordinated Notes (the Notes) in exchange for the $135 million realized from the sale of the Preferred Securities and $4.2 million of common securities of VP Capital Trust. The common securities represent the remaining 3% beneficial ownership interest in the assets held by VP Capital Trust. The Notes constitute 100% of VP Capital Trust's assets. (G) RECENTLY ADOPTED ACCOUNTING STANDARDS ------------------------------------- In 1998, the Emerging Issues Task Force reached consensus on Issue No. 98-10, Accounting for Contracts Involved in Energy Trading and Risk Management Activities (EITF Issue 98-10). EITF Issue 98-10 requires energy trading contracts to be recorded at fair value on the balance sheet with the changes in fair value included in earnings and was effective January 1, 1999. Virginia Power manages a portfolio of energy contracts which have been recorded at fair value on the balance sheet with the changes in fair value included in earnings as required by EITF 98-10. Therefore, the effect of the initial application of EITF Issue 98-10 at January 1, 1999, was not material to Dominion Resources' financial statements. (H) CONTINGENCIES ------------- VIRGINIA POWER Nuclear Insurance The Price-Anderson Act limits the public liability of an owner of a nuclear power plant to $9.7 billion for a single nuclear incident. Virginia Power is a member of certain insurance programs that provide coverage for property damage to members' nuclear generating plants, replacement power and liability in the event 14 DOMINION RESOURCES, INC. ------------------------ NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ------------------------------------------ (CONTINUED) of a nuclear incident. Virginia Power may be subject to retrospective premiums in the event of major incidents at nuclear units owned by covered utilities (including Virginia Power). Effective March 31, 1999, Virginia Power implemented surety bonds to replace the parent guarantee related to nuclear decommissioning. For additional information, see Note (T) to THE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS included in Dominion Resources' Annual Report on Form 10-K for the year ended December 31, 1998. Site Remediation The Environmental Protection Agency (EPA) has identified Virginia Power and several other entities as Potentially Responsible Parties (PRPs) at two Superfund sites located in Kentucky and Pennsylvania. The estimated future remediation costs for the sites are in the range of $61.8 million to $69.5 million. Virginia Power's proportionate share of the cost is expected to be in the range of $1.6 million to $2.2 million, based upon allocation formulas and the volume of waste shipped to the sites. Virginia Power has accrued a reserve of $1.7 million to meet its obligations at these two sites. Based on a financial assessment of the PRPs involved at these sites, Virginia Power has determined that it is probable that the PRPs will fully pay the costs apportioned to them. Virginia Power generally seeks to recover its costs associated with environmental remediation from third party insurers. At March 31, 1999, any pending or possible claims were not recognized as an asset or offset against recorded obligations of Virginia Power. DOMINION RESOURCES AND ITS NONUTILITY SUBSIDIARIES Dominion Resources Effective July 27, 1998, Dominion Resources guaranteed for 90 days DR Group Holdings' revolving credit agreement. DR Group Holdings is the indirect holder of Dominion Resources' 80% ownership interest in the Corby Power Station. The revolving credit agreement is with Bayerische Landesbank Girozentrale and National Westminister Bank Plc. As of March 31, 1999, the total commitment and outstanding balance of the agreement was 33.5 million pounds sterling ($54 million). On October 30, 1998, DR Group Holdings entered into a revolving credit agreement with Bayerische Landesbank Girozentrale. The total commitment and outstanding balance of the agreement is 33.5 million pounds sterling ($56.1 million at October 30, 1998). The term of the agreement is five years. This agreement replaces the short-term and five-year credit agreements described above with Bayerische Landesbank Girozentrale and National Westminister Bank which totaled 33.5 million pounds sterling. Dominion Resources is guarantor to DR Group Holdings for this revolving credit agreement. 15 DOMINION RESOURCES, INC. ------------------------ NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ------------------------------------------ (CONTINUED) Dominion Energy Subsidiaries of Dominion Energy have general partnership interests in certain of its energy ventures. These subsidiaries may be required to fund future operations of these investments, if operating cash flow is insufficient. Under an agreement related to the acquisition and financing of the Kincaid Power Station, Dominion Energy's wholly-owned subsidiary, Dominion Energy Construction Company (DECCO), must make certain improvements to the facility. Dominion Energy has provided a guarantee of DECCO's financial obligation under this agreement. Also, until the improvements are completed, Dominion Energy must fund up to approximately $130 million, less cash generated, in additional equity that may be required by Kincaid Generation LLC (KGL), the owner of the Kincaid Power Station. Dominion Resources has guaranteed Dominion Energy's obligation to make such equity infusions to KGL. Dominion Capital As of March 31, 1999, Dominion Capital had commitments to fund loans of approximately $587 million. For additional information regarding Contingencies, see Note (T) to THE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS included in Dominion Resources' Annual Report on Form 10-K for the year ended December 31, 1998. (I) LINES OF CREDIT --------------- Dominion Resources and its subsidiaries have lines of credit, revolving credit agreements and bank commitments that provide for maximum borrowings of $5,349.8 million. At March 31, 1999, $2,049.7 million had been borrowed under such agreements. In addition, these credit agreements supported $257.9 million of Dominion Resources' commercial paper and $641.6 million of non-recourse commercial paper issued by Dominion Resources' subsidiaries which was outstanding at March 31, 1999. At March 31, 1999, $321.1 million of Dominion Resources commercial paper is classified as long-term debt since it is supported by revolving credit agreements that have expiration dates extending beyond one year. (J) LONG-TERM INCENTIVES -------------------- During the first quarter of 1999, participants in the Dominion Resources, Inc. Incentive Compensation Plan were awarded by the Board of Directors of Dominion Resources 5,000 shares of common stock at $44.50 per share and 13,916 shares of restricted stock at $44.50 per share and 10,842 shares at $42.25 per share. For the three-month period ended March 31, 1999, 263 shares were issued associated with exercised stock options from previous awards. As of March 31, 1999, options on 1,863 were exercisable from previous awards under the Dominion Resources Long-term Incentive Plan. 16 DOMINION RESOURCES, INC. ------------------------ NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ------------------------------------------ (CONTINUED) (K) ACQUISITIONS ------------ San Juan Partners L.L.C. In January 1999, Dominion Energy acquired San Juan Partners, L.L.C., a natural gas investment company, for an initial price of $90.1 million in cash. On March 26, 1999, Dominion Energy completed the acquisition when San Juan Partners, L.L.C. purchased all of the assets of the Burlington Resources Coal Seam Gas Royalty Trust Estate (Trust), consisting principally of the Trust's interest in certain coal bed methane gas producing properties located in the San Juan Basin of New Mexico. The net all-cash purchase price of the Trust was $25 million. (L) BUSINESS SEGMENTS ----------------- Business segment financial information follows for the three months period ended March 31, 1999 and 1998. Corporate includes intersegment eliminations.
Virginia Dominion Dominion Dominion Corporate Consolidated Power Capital Energy UK Operations Total ----- ------- ------ -- ---------- ----- (millions, except total assets) 1999 Revenues $1,088.4 $107.6 $97.0 $1,293.0 Net Income $(149.1) $13.4 $20.8 $(1.4) $(116.3) Total Assets (billions) $11.5 $3.3 $2.4 $0.3 $17.5 1998 Revenues $1,050.8 $86.8 $85.1 $550.8 $1,773.5 Net Income $89.7 $13.4 $20.7 $22.4 $(6.7) $139.5 Total Assets at 12/31/98 (billions) $12.0 $3.1 $2.2 $0.2 $17.5
(M) SUBSEQUENT EVENTS ----------------- Remington Energy Ltd. In April 1999, Dominion Energy completed its purchase of all of the issued and outstanding shares of Remington Energy Ltd., (Remington) a publicly traded natural gas exploration and production company headquartered in Calgary, Alberta, Canada. Dominion Energy received tenders for approximately 93 percent of the outstanding Remington common shares on March 29, 1999 and acquired the remaining shares through statutory procedures. The total purchase price was $33 million. In addition, Dominion Energy assumed $260 million of Remington's 17 DOMINION RESOURCES, INC. ------------------------ NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ------------------------------------------ (CONTINUED) debt and liabilities. Revised Merger Offer - Consolidated Natural Gas Company On May 11, 1999, the Board of Directors of Consolidated Natural Gas Company (CNG) accepted an amended merger offer made by Dominion Resources on May 10, 1999. Under the terms of the amended agreement, CNG shareholders will receive consideration valued at $66.60 per share for each outstanding share of CNG common stock . The merger consideration will be paid partly in Dominion Resources common stock and partly in cash. The portion of the merger consideration to be paid in stock is structured not exceed approximately 60% of the total consideration. The amended agreement also provides for a merger transaction which will occur immediately before the CNG merger and in which approximately 15 to 20 percent of the Dominion Resources shares outstanding will be acquired by Dominion Resources for $43.00 per share in cash. The remaining shares will be replaced with new Dominion Resources shares on a one for one basis. The funds needed for the cash components of the transaction will be raised initially through debt which is expected to be replaced over time through other borrowings, the issuance of equity securities other than common stock and the divestiture of non-core assets. Under the amended agreement, the transaction will be accounted for using the purchase method rather than pooling of interest accounting which was expected to apply under the original merger agreement.. The transaction remains subject to approval by the shareholders of both companies, receipt of opinions of counsel as to the tax-free nature of the stock to be received by shareholders and approvals of various regulatory agencies at state and federal levels. 18 DOMINION RESOURCES, INC. ------------------------ ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS -------------------------------------------- OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS ------------------------------------------------ This Management's Discussion and Analysis of Financial Condition and Results of Operations contains "forward-looking statements" as defined by the Private Securities Litigation Reform Act of 1995, including (without limitation) discussions as to expectations, beliefs, plans, objectives and future financial performance, or assumptions underlying or concerning matters discussed in this document. These discussions, and any other discussions, including certain contingency matters (and their respective cautionary statements) discussed elsewhere in this report, that are not historical facts, are forward-looking and, accordingly, involve estimates, projections, goals, forecasts, assumptions and uncertainties that could cause actual results or outcomes to differ materially from those expressed in the forward-looking statements. The business and financial condition of Dominion Resources are influenced by a number of factors including political and economic risks, market demand for energy, inflation, capital market conditions, governmental policies, legislative and regulatory actions (including those of the Federal Energy Regulatory Commission (FERC), the Environmental Protection Agency, the Department of Energy, the Nuclear Regulatory Commission, the Virginia Commission and the North Carolina Utilities Commission), industry and rate structure and legal and administrative proceedings. Some other important factors that could cause actual results or outcomes to differ materially from those discussed in the forward-looking statements include changes in and compliance with environmental laws and policies, weather conditions and catastrophic weather-related damage, present or prospective wholesale and retail competition, competition for new energy development opportunities, pricing and transportation of commodities, operation of nuclear power facilities, acquisition and disposition of assets and facilities, recovery of the cost of purchased power, nuclear decommissioning costs, the ability of Dominion Resources, its suppliers, and its customers to successfully address Year 2000 compliance issues, exposure to changes in the fair value of commodity contracts, counter-party credit risk and unanticipated changes in operating expenses and capital expenditures. All such factors are difficult to predict, contain uncertainties that may materially affect actual results, and may be beyond the control of Dominion Resources. New factors emerge from time to time and it is not possible for management to predict all such factors, nor can it assess the impact of each such factor on Dominion Resources. Any forward-looking statement speaks only as of the date on which such statement is made, and Dominion Resources undertakes no obligation to update any forward-looking statement or statements to reflect events or circumstances after the date on which such statement is made. 19 DOMINION RESOURCES, INC. ------------------------ ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS -------------------------------------------- OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS ------------------------------------------------ (CONTINUED) DOMINION RESOURCES - CONSOLIDATED - --------------------------------- RESULTS OF OPERATIONS Earnings Per Share Three Months Ended March 31, 1999 1998 ---- ---- Virginia Power $(0.77) $0.46 Dominion UK 0.10 Nonutility 0.17 0.16 ----- ----- Consolidated $(0.60) $0.72 ====== ===== The results of operations for the interim periods are not necessarily indicative of the results expected for the full year. Information for quarterly periods is affected by seasonal variations in sales, rate changes, timing of fuel expense recovery and other factors. Consolidated earnings decreased $1.32 per share for the first quarter of 1999 when compared to the same time period in 1998. The decrease was due to the write-off of generation related assets and liabilities at Virginia Power. The amount of the write-off was $254.8 million, net of tax. The amount was recorded on the financial statements as an extraordinary item. For more information on the write-off, see Note (B) to THE NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS. Operating Revenues and Operating Expenses Operating revenues and operating expenses decreased by $480.5 million and $413.2 million, respectively during the first quarter of 1999 as compared to the same period in 1998 primarily due to the sale of East Midlands. For more information on the sale of East Midlands, see Note (C) Gain on Sale of DR Investments in the Notes to the Consolidated Financial Statements included in Dominion Resources' Annual Report on Form 10-K for the year ended December 31, 1998. Extraordinary Item, Net of Income Tax Virginia Power recorded a charge to earnings to reflect the write-off of assets and liabilities related to its generation activities which will not be recovered through capped rates. For more information on the extraordinary item, see Note (B) to THE NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS. Contingencies For information on contingencies, see Note (H) to THE NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS. 20 DOMINION RESOURCES, INC. ------------------------ ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS -------------------------------------------- OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS ------------------------------------------------ (CONTINUED) LIQUIDITY AND CAPITAL RESOURCES Cash Flows From Operating Activities Cash flows from operating activities for the three months ended March 31, 1999 decreased by $163.2 million as compared to the same period in 1998. The decrease was primarily due to normal operations and an increase in fuel expenses for which recovery was not received in the first quarter of 1999. Cash Flows From Financing Activities Cash flows from financing activities during the three-month period ending March 31, 1999 were $370 million and were due to the issuance of commercial paper: . to satisfy the funding needs for loan and mortgage originations at Dominion Capital; and . to fund the acquisition of San Juan Partners, L.L.C. at Dominion Energy. On February 19, 1999, the Board of Directors of Dominion Resources declared a quarterly common stock dividend of $0.645 per share, payable March 20, 1999 to holders of record at the close of business March 2, 1999. In addition, Dominion Resources repurchased 2,568,400 shares of common stock ($107.2 million) during the first quarter of 1999. On July 20, 1998, the Dominion Resources Board of Directors approved the repurchase of up to $650 million of Dominion Resources common stock. On March 31, 1999, Dominion Resources increased its bank lines of credit to $600 million by replacing the April 1, 1998, $200 million short-term credit agreement with a new $300 million 364-day facility. Dominion Resources uses these credit agreements to support its commercial paper borrowings. The proceeds from these borrowings are used to finance Dominion Resources' nonutility subsidiaries working capital for operations. Cash Flows Used In Investing Activities Net cash flows used in investing activities during the three-month period ending March 31, 1999 were $525.1 million. The primary reasons for the cash outflows were: . increase in loan originations at Dominion Capital's financial services subsidiaries; . utility plant (including nuclear fuel) expenditures at Virginia Power; . Dominion Energy's acquisition of San Juan Partners, L.L.C.; and . the funding to expand and upgrade certain independent power plants of Dominion Energy. 21 DOMINION RESOURCES, INC. ------------------------ ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS -------------------------------------------- OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS ------------------------------------------------ (CONTINUED) FUTURE ISSUES Power Generation Development On April 14, 1999, Dominion Resources and a subsidiary of Consolidated Natural Gas Company (CNG) signed an exclusive agreement to develop natural gas-fired power generation facilities along CNG's natural gas pipeline system. This agreement is not conditional upon the proposed merger between Dominion Resources and CNG. For additional information on the proposed merger, see Note (X) to NOTES TO THE CONSOLIDATED FINANCIAL STATMENTS in Dominion Resources' Annual Report on Form 10-K for the year ended December 31, 1998. Under terms of the agreement the companies have identified 45 potential development sites along CNG's natural gas pipeline network in Ohio, Pennsylvania, New York, West Virginia and Virginia. Dominion Resources and CNG affiliates will develop, own or lease, operate and maintain the facilities on a 50-50 ownership basis. Year 2000 Compliance Dominion Resources remains on schedule to complete all necessary work to prepare the company for the year 2000. The following tables summaries our status and projected timetable: Percent of Critical Systems Year 2000 Ready ------------------------------------------- Actual Planned ------ ------------------------ 3/31/99 7/31/99 10/31/99 ------- ------- -------- Virginia Power 96% 99% 99%* Dominion Resources 10% 100% 100% Dominion Energy 62% 84% 100% Dominion Capital 95% 100% 100% - ------------ * 100% planned to be ready by 12/31/99 We expect year 2000 costs to be within the range of $35 million and $45 million dollars of which $17.6 million has been expended as of March 31, 1999. Of this amount, $30 million to $40 million is for Virginia Power. Dominion Resources will have all contingency plans identified and tested prior to year-end 1999. In addition to our remediation programs directed at our critical information systems, embedded systems and external relationships, our year 2000 readiness efforts include evaluation of reasonably likely worst case scenarios and the development of contingency plans to address how we would respond to problems, should they occur. Our contingency planning efforts to support continuity of operations into and beyond the year 2000 are essentially complete. Minor 22 DOMINION RESOURCES, INC. ------------------------ ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS -------------------------------------------- OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS ------------------------------------------------ (CONTINUED) updates and final reviews of our contingency plans will be completed during the second quarter of 1999. Year 2000 contingency plans will be refined and validated throughout the remainder of 1999. As part of our contingency planning process, we have considered and evaluated, and continue to evaluate, reasonably likely worst case scenarios and their impact on critical business processes. Based on our evaluations, such potential scenarios could include the following: . Minor variations in voltage or frequency with no significant effect on electric service; . Temporary loss of a portion of generation capacity, including possibly non-utility generators; however, such loss is not expected to be sufficient to adversely affect electric service; . Temporary loss of some telecommunications functionality and other services with no impact expected on electric service; and . Temporary loss of a small portion of commercial and industrial customer loads due to customer year 2000 issues with no expected adverse impact on stability of electric service. When considering these scenarios or others specifically related to our major subsidiary, Virginia Power, we first take into account that Virginia Power, and the entire electric power industry, already have extensive contingency plans in place for many events such as extreme heat, storms, equipment failures, sudden loss of customer load or sudden loss of a generation unit. Year 2000 contingency plans address the scenarios recommended in the North American Electric Reliability Council Year 2000 Contingency Planning Guide, as well as additional company specific scenarios. For example, one contingency plan prescribes that in the event voice communications fail, satellite phones will be used to provide operational information to our operations center and to other utilities. Our contingency planning efforts also include developing precautionary measures. Precautionary measures are intended to place us in a position to mitigate the impact of year 2000 related problems, in the unlikely event problems occur. Examples of precautionary measures include planned additional staffing in key operational positions to facilitate quick responses to unusual situations, and having extra supplies and/or fuel on hand to minimize the impact if we experience interrupted access to key supplies. In addition, Virginia Power, is actively participating in industry contingency planning efforts at the regional and national level. Virginia Power expects to submit its finalized contingency plans to the North American Electric Reliability Council in June 1999. Virginia Power successfully participated in the first nationwide drill by electric utilities on April 9, 1999, coordinated by the North American Electric Reliability Council. The exercise simulated the partial failure of some primary voice and data communications to demonstrate the ability of electric utilities to communicate operating information using backup systems. No actual communications systems or generating units were shut down during the exercise. Service to Virginia Power's customers was not affected. Virginia Power will participate in the second nationwide drill on September 8-9, 1999. 23 DOMINION RESOURCES, INC. ------------------------ ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS -------------------------------------------- OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS ------------------------------------------------ (CONTINUED) Dominion Resources cannot estimate or predict the potential adverse consequences, if any, that could result from a third party's failure to effectively address the year 2000 issue, but believes that any impact would be short-term in nature and would not have a material adverse impact on results of operations. Based on Dominion Resources' and industry analyses to date, we do not believe the most reasonably likely worst case scenarios identified above, if they were to occur, would have a material adverse affect on Dominion Resources' businesses or results of operations. For additional information, see Year 2000 Compliance, MANAGEMENT'S DISCUSSION AND ANALYSIS OF OPERATIONS in Dominion Resources' Annual Report on Form 10-K for the year ended December 31, 1998. Recently Issued Accounting Standard Statement of Financial Accounting Standards No. 133, Accounting for Derivative Instruments and Hedging Activities, (SFAS No. 133) is effective for the Company beginning in 2000. SFAS No. 133 requires that derivative instruments (including certain derivative instruments embedded in other contracts) be recorded in the balance sheet as either an asset or liability measured at fair value. The statement requires that changes in a derivative's fair value be recognized currently in earnings unless specific hedge accounting criteria are met. The FASB-sponsored Derivatives Implementation Group that is addressing implementation issues related to SFAS No. 133 has tentatively concluded that certain long-term power purchase contracts may be considered derivatives under SFAS No. 133. The Company has not yet quantified the impacts of adopting SFAS No. 133 and has not yet determined the timing of, or method of, adoption. VIRGINIA POWER - -------------- RESULTS OF OPERATIONS Revenue Revenue for the three months ended March 31, 1999 varied from the same period in the prior year primarily due to the following: Change (Millions) Revenue - Electric Service Customer growth $ 16.7 Weather 27.8 Base rate variance (28.1) Fuel rate variance (9.5) Other retail, net .5 ------ Total retail 7.4 Other electric service 18.7 ------ Total electric service 26.1 ------ Revenue - Other 11.5 ------ Total revenue $ 37.6 ====== 24 DOMINION RESOURCES, INC. ------------------------ ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS -------------------------------------------- OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS ------------------------------------------------ (CONTINUED) Electric service revenue consists of sales to retail customers in our service territory at rates authorized by the Virginia and North Carolina Commissions and sales to cooperatives and municipalities at wholesale rates authorized by FERC. The primary factors affecting this revenue in the first three months of 1999 were customer growth, weather and changes in rates. Customer growth - There were 41,565 new customer connections in the twelve months ended March 31, 1999. These additional customers increased Virginia Power's revenue by $16.7 million in the first quarter of 1999 compared to the same period in 1998. Weather - The cooler weather in the first quarter of 1999, as compared to 1998, caused customers to use more electricity for heating, which increased retail revenue by $27.8 million from the previous year. Heating degree days were as follows: 1999 1998 Normal ---- ---- ------ Heating degree days 1,933 1,739 2,105 Percentage change compared to prior year 11.2% (6.3)% Base rates -- In 1998, as part of the settlement to resolve outstanding rate proceedings, Virginia Power agreed to a two-phased rate reduction, $100 million effective March 1, 1998 and an additional $50 million effective March 1, 1999, with a base rate freeze through February 2002. The 1999 deregulation legislation extended this base rate freeze until July 1, 2007. Fuel rates - The decrease in fuel rate revenue is attributable to lower fuel rates in effect during the first quarter of 1999, as compared to the same period in 1998. Other Revenues Other revenue includes sales of electricity beyond our service territory, natural gas, nuclear consulting services, energy management services and other revenue. The growth in power marketing and natural gas revenue for the three-month period ended March 31, 1999, as compared to the same period in 1998, is primarily due to favorable changes in commodity prices and higher margins in 1999. Fuel, net Fuel, net decreased as compared to the first quarter of 1998 due to increased deferral of fuel expenses as a result of higher fuel costs from changes in Virginia Power's generation mix and lower fuel rates in 1999. Purchased Power Capacity, net Purchased power capacity, net increased as compared to the first quarter of 1998, primarily due to increased expenses associated with the restructuring of 25 DOMINION RESOURCES, INC. ------------------------ ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS -------------------------------------------- OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS ------------------------------------------------ (CONTINUED) certain contracts and the discontinuance of deferral accounting for such expenses. This accounting change resulted from the 1998 rate settlement with the Virginia Commission. Operations and Maintenance Operations and maintenance increased for the three-month period ended March 31, 1999, as compared to the same period in 1998, as a result of increased costs for significant storm damage in early January. Extraordinary item--Discontinuance of SFAS No. 71 On March 25, 1999, the Governor of Virginia signed into law legislation establishing a detailed plan to restructure the electric utility industry in Virginia. See Note (B) Extraordinary Item - Discontinuance of SFAS No. 71, to THE NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS. Under this legislation, Virginia Power's base rates remain unchanged until July 2007. The legislation's deregulation of generation is an event that requires discontinuation of SFAS No. 71 for our generation operations although recovery of generation-related costs continues to be provided through the capped rates and the wires charge assessed to those customers opting for alternate suppliers. Our transmission and distribution operations continue to meet the criteria for recognition of regulatory assets and liabilities as defined by SFAS No. 71. In addition, cost-based recovery of fuel expenses continues until July 2007. Under EITF Issue 97-4 generation-related assets and liabilities that will not be recovered through the capped rates were written off in March 1999, resulting in an after-tax charge to earnings of $254.8 million. Contingencies For information on contingencies, see Note (H) to tHE NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS. LIQUIDITY AND CAPITAL RESOURCES Cash Flows From Operations Operating activities resulted in $105.3 million decreased cash flow for the three-month period ended March 31, 1999 as compared to the same period in 1998. This decrease was primarily attributable to the timing of certain payments related to normal operations and an increase in fuel expenses for which recovery was not received in the first quarter. Internal generation of cash exceeded Virginia Power's capital requirements during the first quarters of 1999 and 1998. 26 DOMINION RESOURCES, INC. ------------------------ ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS -------------------------------------------- OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS ------------------------------------------------ (CONTINUED) Cash Flows Used in Financing Activities Cash used in financing activities was as follows: Three Months Ended March 31, 1999 1998 ---- ---- (Millions) Issuance (repayment) of short-term debt $10.4 $(146.3) Repayment of long-term debt and preferred stock (40.0) Payment of dividends (107.2) (108.5) Other (2.8) (0.3) ------- ------- Total $(139.6) $(255.1) ======= ======= On April 13, 1999, Virginia Power filed a $400 million medium- term note shelf registration statement with the Securities and Exchange Commission (SEC). The registration statement became effective on April 30, 1999. The remaining principal amount of debt that can be issued from the currently effective medium-term note shelf is only $20 million. Virginia Power has $625 million of debt capacity under two other shelf registration statements. An additional capital resource of $100 million in preferred stock also is registered with the SEC. Virginia Power has a commercial paper program that is supported by two credit facilities totaling $500 million. Proceeds from the sale of commercial paper are primarily used to provide working capital. Net borrowings under the program were $232.1 million at March 31, 1999. Cash Flows Used in Investing Activities Cash used in investing activities was as follows: Three Months Ended March 31, 1999 1998 ---- ---- (Millions) Plant expenditures (excluding AFC-other funds) $(137.1) $ (83.7) Nuclear fuel (excluding AFC-other funds) (18.0) (20.8) Nuclear decommissioning contributions (7.8) (21.6) Other (0.2) 3.1 ------- ------- Total $(163.1) $(123.0) ======= ======= Investing activities for the first three months of 1999 resulted in a net cash outflow of $163.1 million primarily due to $137.1 million of construction expenditures, $18.0 million of nuclear fuel expenditures and $7.8 million of contributions to nuclear decommissioning trusts. Of the construction expenditures, Virginia Power spent approximately $70.6 million on transmission and distribution projects, $56.4 million on production projects and $9.7 million on general support facilities. 27 DOMINION RESOURCES, INC. ------------------------ ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS -------------------------------------------- OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS ------------------------------------------------ (CONTINUED) FUTURE ISSUES Competition On March 25, 1999, the Governor of Virginia signed into law legislation establishing a detailed plan to restructure the electric utility industry in Virginia which will provide for customer choice beginning in 2002. Under this legislation, Virginia Power's base rates will remain unchanged until July 2007 and recovery of generation-related costs will continue to be provided through the capped rates and the wires charge assessed to those customers opting for alternate suppliers. In the absence of the capped rates, Virginia Power would be exposed, on a pre-tax basis, to approximately $3.2 billion of potential losses related to long-term power purchase commitments and an additional $0.5 billion of potential losses in generation-related regulatory assets. The legislation's deregulation of generation is an event that requires discontinuation of SFAS No. 71 for our generation operations. Our transmission and distribution operations continue to meet the criteria for recognition of regulatory assets and liabilities as defined by SFAS No. 71. In addition, cost-based recovery of fuel expenses continues until July 2007. Virginia Power is subject to a base rate freeze at reduced revenue levels until July 2007. In addition, Virginia Power remains subject to numerous risks including, among others, exposure to long-term power purchase commitment losses, environmental contingencies, changes in tax laws, decommissioning costs, inflation, increased capital costs, and recovery of certain other items. Virginia Power believes the stable rates that are provided until July 2007 by the legislation present a reasonable opportunity to recover a substantial portion of Virginia Power's potentially stranded costs as more fully described in Virginia Power's 1998 Form 10-K, see Competition--Exposure to Potentially Stranded Costs, Item 7, MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. For additional information, see Extraordinary Item--Discontinuance of SFAS No. 71, Note (B) to THE NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS. DOMINION ENERGY - --------------- RESULTS OF OPERATIONS Net income during the first quarter ending March 31, 1999 was comparable to the first quarter ending March 31, 1998.The 1999 financial results reflect higher earnings from oil and gas operations, offset by a lower contribution from its foreign power businesses. 28 DOMINION RESOURCES, INC. ------------------------ ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS -------------------------------------------- OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS ------------------------------------------------ (CONTINUED) LIQUIDITY AND CAPITAL RESOURCES Cash Flows From Operating Activities Cash flows from operations for the three months ended March 31, 1999 decreased by $8.6 million as compared to the same period in 1998 reflecting the consistency of net income between the two periods and the effect of immaterial fluctuations due to normal operating activities. Cash Flows From Financing Activities Cash from (used in) financing activities was as follows: Three Months Ended March 31, 1999 1998 ---- ---- (Millions) Issuance of debt $ 146.8 $ 162.5 Investment from parent 85.0 Dividend payment (13.0) (12.3) Other 00.0 (0.3) ------- ------- Total $ 218.8 $ 149.9 ======= ======= During the first three months of 1999, cash flows from financing activities were $218.8 million primarily due to intercompany borrowings to fund the acquisition of San Juan Partners, L.L.C. and an equity contribution from Dominion Energy's parent. Cash Flows Used In Investing Activities Cash from (used in) investing activities was as follows:
Three Months Ended March 31, 1999 1998 ---- ---- (Millions) Investment in natural gas assets $ (12.6) $ 1.0 Investment in power generation assets (39.7) (14.7) Purchase of fixed assets (18.9) (32.4) Acquisition of business (133.2) (189.1) Sale of business 24.1 99.5 Other (51.5) (48.5) ------- ------- Total $(231.8) $(184.2) ======= =======
During the first three months of 1999 cash flows used in investing activities were $231.8 million primarily due to the acquisition of San Juan Partners, L.L.C. in addition to continued expansion and development of power generation assets. 29 DOMINION RESOURCES, INC. ------------------------ ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS -------------------------------------------- OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS ------------------------------------------------ (CONTINUED) Future Issues Sale of Power In April 1999, Elwood Energy LLC, (Elwood Energy) a joint venture between subsidiaries of Dominion Energy and subsidiaries of Peoples Energy Corporation signed agreements with Commonwealth Edison Company (ComEd) and Engage Energy US, L.P. (Engage) to sell all generating capacity from its natural gas-fired facility. Under the agreements, ComEd and Engage will each purchase one-half of the power produced by Elwood Energy. DOMINION CAPITAL - ---------------- RESULTS OF OPERATIONS Dominion Capital's net income in the first quarter ending March 31, 1999 was comparable to the same period in 1998. The financial results reflect higher earnings due to the improved performance from its four core financial services operating units, which was offset by losses from non-core operations. LIQUIDITY AND CAPITAL RESOURCES Cash Flows Used In Operating Activities Dominion Capital's cash flows used in operations for the three months ended March 31, 1999 increased by $35.7 million as compared to the same period for 1998 primarily due to an increase in cash outflows from net mortgage originations and sales. Cash Flows From Financing Activities Cash from financing activities was as follows:
Three Months Ended March 31, 1999 1998 ---- ---- (Millions) Issuance of long-term debt $ 847.1 $ 812.8 Repayment of long-term debt (843.6) (722.6) Issuance of commercial paper 367.0 67.7 Investment from parent 25.0 24.1 Dividend payment (17.3) (14.2) Issuance (repayment) of intercompany debt (189.8) 32.0 ------- ------- Total $ 188.4 $ 199.8 ======= =======
During the first three months of 1999, Dominion Capital's cash flows from financing activities were $188.4 million primarily due to funding needs for loan and mortgage originations during the period. 30 DOMINION RESOURCES, INC. ------------------------ ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS -------------------------------------------- OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS ------------------------------------------------ (CONTINUED) Cash Flows Used In Investing Activities Cash used in investing activities was as follows: Three Months Ended March 31, 1999 1998 ---- ---- (Millions) Loan originations $ (537.1) $ (561.1) Repayments of loan originations 464.3 378.3 Purchase of securities (50.3) (1.2) Proceeds from sale of securities 46.5 13.6 Other (53.4) 12.4 -------- -------- Total $ (130.0) $ (158.0) ======== ======== During the first three months of 1999, Dominion Capital's cash flows used in investing activities were $130 million primarily due to net loan originations and residual interest retained. 31 DOMINION RESOURCES, INC. ------------------------ ITEM 3. QUANTITATIVE AND QUALITATIVE ------------------------------------ DISCLOSURES ABOUT MARKET RISK ----------------------------- MARKET RATE SENSITIVE INSTRUMENTS AND RISK MANAGEMENT Dominion Resources is exposed to market risk because it utilizes financial instruments, derivative financial instruments and derivative commodity instruments. The market risks inherent in these instruments are represented by the potential loss due to adverse changes in commodity prices, equity security prices, interest rates and foreign currency exchange rates as described below. Interest rate risk generally is related to Dominion Resources' and its subsidiaries' outstanding debt as well as their commercial, consumer, and mortgage lending activities. Currency risk exists principally through Dominion Energy's investments in Canada and some debt denominated in European currencies associated with Dominion Energy's investment in South America. Dominion Resources is exposed to equity price risk through various portfolios of equity securities. Commodity price risk is experienced in Dominion Resources' subsidiaries Dominion Energy and Virginia Power. They are exposed to effects of market shifts in the sales prices they receive and pay for natural gas and electricity. Dominion Resources uses derivative commodity instruments to hedge exposures of underlying electric, gas production, and gas procurement operations and is also involved in trading activities, which also use these instruments. Dominion Resources is also exposed to price risk associated with the nonfinancial assets and liabilities of power production operations, including underlying fuel requirements and natural gas operations. Dominion Resources uses the Sensitivity Analysis methodology to disclose the quantitative information for the interest rate, commodity price and foreign exchange risks. Sensitivity analysis provides a presentation of the potential loss of future earnings, fair values, or cash flows from market risk sensitive instruments over a selected time period due to one or more hypothetical changes in interest rates, foreign currency exchange rates, commodity prices, or other similar price changes. The Tabular Presentation methodology is used to disclose equity price market risk. The tabular presentation of summarized information requires disclosure of key terms and information for market risk sensitive instruments. Interest Rate Risk Non-Trading Activities Dominion Resources manages its interest rate risk exposure by maintaining a mix of fixed and variable rate debt. In addition, Dominion Resources enters into interest rate sensitive derivatives. Examples of these derivatives are swaps, forwards and futures contracts. Dominion Resources, as part of its routine risk management policy, reviews the level of market risk it faces. 32 DOMINION RESOURCES, INC. ------------------------ ITEM 3. QUANTITATIVE AND QUALITATIVE ------------------------------------ DISCLOSURES ABOUT MARKET RISK ----------------------------- (CONTINUED) ----------- Electric and Gas Commodity Price Risk Trading Activities As part of its strategy to market energy from its generation capacity and to manage related risks, Virginia Power manages a portfolio of derivative commodity contracts held for trading purposes. These contracts are sensitive to changes in the prices of natural gas and electricity. Virginia Power employs established policies and procedures to manage the risks associated with these price fluctuations and uses various commodity instruments, such as futures, swaps and options, to reduce risk by creating offsetting market positions. In addition, Virginia Power seeks to use its generation capacity, when not needed to serve customers in our service territory, to satisfy commitments to sell energy. Based on the sensitivity analysis methodology discussed previously in this section, Virginia Power has determined a hypothetical loss by calculating a hypothetical fair value for each contract assuming a 10 percent unfavorable change in the market prices of the related commodity and comparing it to the fair value of the contracts based on market prices at March 31, 1999 and December 31, 1998. This hypothetical 10 percent change in commodity prices would have resulted in a hypothetical loss of approximately $7.2 million and $13.5 million in the fair value of our commodity contracts as of March 31, 1999 and December 31, 1998, respectively. The sensitivity analysis does not include the price risks associated with utility operations and utility fuel requirements, since these costs are generally provided for through our capped rates, nor does it include risks that are either nonfinancial or nonquantifiable. In addition, provisions are made in the financial statements to address credit risk. The risk associated with Dominion Resources' use of these instruments has not materially changed from that discussed in Market Rate Sensitive Instruments and Risk Management under MANAGEMENT'S DISCUSSION AND ANALYSIS OF CASH FLOWS AND FINANCIAL CONDITION included in Dominion Resources' Annual Report on Form 10-K for the year ended December 31, 1998. 33 DOMINION RESOURCES, INC. ------------------------ PART II. - OTHER INFORMATION ---------------------------- ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS Dominion Resources Annual Shareholders Meeting was held on April 16, 1999 and the following issues were voted on by shareholders. ELECTION OF DIRECTORS The following Directors were elected to the Board of Directors for terms expiring in the year 2000: Votes ----- Director For Withheld - -------- --- -------- John W. Harris 168,820,145 3,122,656 Kenneth A. Randall 168,639,451 3,303,350 Judith B. Warrick 168,789,054 3,153,747 David A. Wollard 168,756,521 3,186,280 As a result of the Amendments to the Articles of Incorporation as described below, the following incumbent Directors' terms will also expire in the year 2000. Director - -------- John B. Adams Benjamin J. Lambert Richard L. Leatherwood Frank S. Royal John B. Bernhardt Thos. E. Capps S. Dallas Simmons Robert H. Spilman AMENDMENTS TO DOMINION RESOURCES ARTICLES OF INCORPORATION Shareholders approved the amendments to Dominion Resources Articles of Incorporation to eliminate the classification of the Board of Directors and to increase the number of Directors to a maximum number of 17 members as follows: Votes Broker For Against Abstained Non-Votes --- ------- --------- --------- 141,652,286 8,453,778 2,280,682 19,556,056 INCENTIVE COMPENSATION PLAN Shareholders approved the amendments to Dominion Resources Employee Incentive Compensation Plan as follows: Votes For Against Abstained --- ------- --------- 149,592,479 19,094,648 3,255,675 34 DOMINION RESOURCES, INC. ------------------------ PART II. - OTHER INFORMATION ---------------------------- (CONTINUED) ITEM 5. OTHER INFORMATION - -------------------------- THE COMPANY The Merger With respect to the previously reported merger agreement between Dominion Resources and Consolidated Natural Gas Company (CNG), on May 11, 1999, the CNG Board of Directors accepted Dominion Resources' amended merger offer which guarantees a fixed value of $66.60 for each share of CNG. The merger consideration will be paid partly in Dominion Resources common stock and partly in cash. In addition, the amended merger agreement also includes a first step merger in which approximately 15 to 20 percent of the outstanding Dominion Resources shares will be reacquired by Dominion Resources for $43.00 per share in cash. For additional information, see Note (M) in NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS. Restructuring Dominion Resources announced in April 1999, a reorganization of its energy businesses, effective May 1, along functional lines with the following areas of focus: . power generation/off-systems transactions; . bulk power delivery and distribution; and . oil and gas development, exploration and operation. By 2002, when deregulation of generation is anticipated in Virginia, Dominion Resources plans to conduct all of its power generation/off-systems businesses through a new subsidiary (Dominion Generation, Inc.). No generating assets are expected to be transferred from the Virginia Power corporate entity nor is it anticipated that these assets will be operated by any entity other than Virginia Power until deregulation. During this transition period, both Virginia Power and Dominion Energy may use the name Dominion Generation to refer to their generation activities. VIRGINIA POWER Competition For a discussion on Virginia legislation requiring competition beginning in 2002 see Note (B) to THE NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS and VIRGINIA POWER-Future Issues-Competition under MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. Future Sources of Power Virginia Power has requested approval from the Virginia Commission to construct four gas-fired turbine generators in Virginia. At a January 1999 hearing the Virginia Commission determined that the Rules Governing the Use of Bidding Programs to Purchase Electricity from Other Power Suppliers apply to this proposed transaction. The Virginia Commission ordered Virginia Power to issue a Request for Proposals (RFP) and also ordered the Virginia Commission Staff to review the solicitation process and set an expedited schedule requiring bidders to submit responses no later than March 26, 1999. After a review of the bids, the Virginia Commission Staff issued a report to the Virginia Commission with its recommendations and the Virginia Commission 35 DOMINION RESOURCES, INC. ------------------------ PART II. - OTHER INFORMATION ---------------------------- (CONTINUED) issued another Order allowing bidders under the RFP to file a response to that report. Virginia Power is currently awaiting action by the Virginia Commission. Virginia Power has obtained the applicable zoning permits for the construction of the generators and have applied for other required environmental permits. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K - ----------------------------------------- (a) Exhibits: 3(i)- Articles of Incorporation as in effect April 16, 1999 (filed herewith). 3(ii)- Bylaws as in effect April 16, 1999 (filed herewith). 10(i)- Dominion Resources, Inc. Incentive Compensation Plan as restated effective April 16, 1999 (Exhibit 99, Form S-8 Registration Statement, File No. 333-78173, incorporated by reference). 10(ii)- Employment agreement dated April 16, 1999 between Dominion Resources and Thos. E. Capps (filed herewith). 10(iii)- Alliance Agreement, dated April 14, 1999, between Dominion Resources, Inc. and CNG Power Company (filed herewith). 11- Statement re: computation of per share earnings (included in this Form 10-Q on page 3) 27- Financial Data Schedule (filed herewith). (b) Reports on Form 8-K Dominion Resources filed a report on Form 8-K, dated March 29, 1999, relating to Virginia Power's effect of the final legislation the Governor of Virginia signed into law establishing the restructuring of the electric utility industry in Virginia. 36 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. DOMINION RESOURCES, INC. Registrant BY JAMES L. TRUEHEART ------------------------ James L. Trueheart Senior Vice President and Controller (Principal Accounting Officer) May 14,1999 37 EX-3.I 2 ARTICLES OF INCORPORATION EXHIBIT 3(i) DOMINION RESOURCES, INC. ARTICLES OF INCORPORATION As Amended Effective April 16, 1999 ARTICLE I. NAME - -------------------------------------------------------------------------------- The name of the Corporation is Dominion Resources, Inc. ARTICLE II. PURPOSE - -------------------------------------------------------------------------------- The purpose for which the Corporation is organized is to transact any and all lawful business, not required to be specifically stated in the Articles of Incorporation, for which corporations may be incorporated under the Virginia Stock Corporation Act. ARTICLE III. STOCK - -------------------------------------------------------------------------------- DIVISION A -- COMMON STOCK The Corporation shall have authority to issue 300,000,000 shares of Common Stock without par value. Dividends may be paid upon the Common Stock out of any assets of the Corporation available for dividends remaining after full dividends on the outstanding Preferred Stock at the dividend rate or rates therefor, together with the full additional amount required by any participation right, with respect to all past dividend periods and the current dividend period shall have been paid or declared and set apart for payment and all mandatory sinking fund payments that shall have become due in respect of any series of the Preferred Stock shall have been made. In the event of any liquidation, dissolution or winding up of the Corporation the Board of Directors may, after satisfaction of the rights of the holders of all shares of preferred Stock, or the deposit in trust of money adequate for such satisfaction, distribute in kind to the holders of the Common Stock all then remaining assets of the Corporation or may sell, transfer or otherwise dispose of all or any of such remaining assets of the Corporation and receive payment therefor wholly or partly in cash and/or in stock and/or in obligations and may sell all or any part of the consideration received therefor and distribute all or the balance thereof in kind to the holders of the Common Stock. The holders of the Common Stock shall, to the exclusion of the holders of the Preferred Stock, have the sole and full power to vote for the election of 1 directors and for all other purposes without limitation except only as otherwise recited or provided in the provisions of these Articles of Incorporation applicable to the Preferred Stock. Subject to the provisions of these Articles of Incorporation applicable to the Preferred Stock, the Corporation may from time to time purchase or otherwise acquire for a consideration or redeem (if permitted by the terms thereof) share of Common Stock or shares of any other class of stock hereafter created ranking junior to the Preferred Stock in respect of dividends or assets and any shares so purchased or acquired may be held or disposed of by the Corporation from time to time for its corporate purposes or may be retired as provided by law. DIVISION B --- PREFERRED STOCK The Corporation shall have authority to issue 20,000,000 shares of Preferred Stock. The Board of Directors is hereby empowered to cause any class of the Preferred Stock of the Corporation to be issued in series with such of the variations permitted by clauses (a)-(k) below, as shall be determined by the Board of Directors. The shares of Preferred Stock of different classes or series may vary as to: (a) the designation of such class or series, the number of shares to constitute such class or series and the stated value thereof; (b) whether the shares of such class or series shall have voting rights, in addition to any voting rights provided by law, and, if so, the terms of such voting rights, which (i) may be general or limited, and (ii) may permit more that one vote per share; (c) the rate or rates (which may be fixed or variable) at which dividends, if any, are payable on such class or series, whether any such dividends shall be cumulative, and, if so, from what dates, the conditions and dates upon which such dividends shall be payable, the preference or relation which such dividends shall bear to the dividends payable on any shares of stock of any other class or any other series of such class; (d) whether the shares of such class or series shall be subject to redemption by the Corporation, and, if so, the times, prices and other conditions of such redemption; 2 (e) the amount or amounts payable upon shares of such class or series upon, and the rights of the holders of such class or series in, the voluntary or involuntary liquidation, dissolution or winding up, or upon any distribution of the assets, of the Corporation; (f) whether the shares of such class or series shall be subject to the operation of a retirement or sinking fund and, if so, the extent to and manner in which any such retirement or sinking fund shall be applied to the purchase or redemption of the shares of such series for retirement or other corporate purposes and the terms and provisions relative to the operation thereof; (g) whether the shares of such series shall be convertible into, or exchangeable for, shares of stock of any class or any other series of such class or any other securities (including common stock) and, if so, the price or prices or the rate or rates of conversion or exchange and the method, if any, of adjusting the same, and any other terms and conditions of conversion or exchange; (h) the limitations and restrictions, if any, to be effective while any shares of such class or series are outstanding upon the payment of dividends or the making of other distributions on, and upon the purchase, redemption or other acquisition by the Corporation of, the Common Stock or shares of stock of any other class or any other series of such class; (i) the conditions or restrictions, if any, upon the creation of indebtedness of the Corporation or upon the issue of any additional stock, including additional shares of such class or series or of any other series of such class or of any other class; (j) the ranking (be it pari passu, junior or senior) of each class or series as to the payment of dividends, the distribution of assets and all other matters; and (k) any other powers, preferences and relative, participating, optional and other special rights, and any qualifications, limitations and restrictions thereof, insofar they are not inconsistent with the provisions of these Articles of Incorporation, to the full extent permitted in accordance with the laws of the Commonwealth of Virginia. In the event of any liquidation, dissolution or winding up of the Corporation, after there shall have been paid to or set aside for the holders 3 of the Preferred Stock the full preferential amounts to which they are respectively entitled under the provisions of these Articles of Incorporation applicable to the Preferred Stock, the holders of the Preferred Stock shall have no claim to any of the remaining assets of the Corporation. The powers, preferences and relative, participating, optional and other special rights of each class or series of Preferred Stock, and the qualifications, limitations or restrictions thereof, if any, may differ from those of any and all other classes and series at any time outstanding. All shares of Preferred Stock of each series shall be equal in all respects. DIVISION C -- GENERAL PROVISIONS The number of authorized shares of capital stock of the Corporation, or the amount of capital represented thereby, may be increased or decreased in the manner and subject to the conditions and limitations prescribed by the laws of the Commonwealth of Virginia, as they now and may hereafter exist, and subject to the provisions hereinafter contained. Any and all shares of Preferred Stock and Common Stock of the Corporation, at the time authorized but not issued and outstanding may be issued and disposed of by the Board of Directors of the Corporation in any lawful manner, consistently, in the case of shares of Preferred Stock, with the requirements set forth in the provisions of these Articles of Incorporation applicable to the Preferred Stock, at any time and from time to time, for such considerations as may be fixed by the Board of Directors of the Corporation. The Board of Directors shall have authority from time to time to set apart out of any assets of the Corporation otherwise available for dividends a reserve or reserves as working capital or for any other proper purpose or purposes, and to reduce, abolish or add to any such reserve or reserves from time to time as said board may deem to be in the interests of the Corporation; and said board shall likewise have power to determine in its discretion what part of the assets of the Corporation available for dividends in excess of such reserve or reserves shall be declared as dividends and paid to the stockholders of the Corporation. No stockholder shall have any pre-emptive right to acquire unissued shares of the Corporation or to acquire any securities convertible into or exchangeable for such shares or to acquire any options, warrants or rights to purchase such shares. 4 Each holder of record of outstanding shares of stock entitled to vote at any meeting of stockholders shall, as to all matters in respect of which such stock has voting power, be entitled to one vote for each share of such stock held by him, as shown by the stock books of the Corporation, and may cast such vote in person or by proxy. Except as herein expressly provided, or mandatorily provided by the laws of the Commonwealth of Virginia, a quorum at any meeting shall consist of a majority of the shares outstanding, and a plurality vote of such quorum shall govern. The Board of Directors of the Corporation may, by resolution, determine that only a part of the consideration which it is to receive for any shares of stock which it shall issue shall be capital and that the balance of such consideration (not greater, however, that the excess of such consideration over the par value, if any, of such shares) shall be capital surplus of the Corporation. ARTICLE IV. OFFICES - -------------------------------------------------------------------------------- The principal office of the Corporation in the Commonwealth of Virginia is to be located in the City of Richmond. ARTICLE V. DIRECTORS AND OFFICERS - -------------------------------------------------------------------------------- The business and affairs of the Corporation shall be managed by or under the direction of a Board of Directors consisting of not less than ten nor more than seventeen Directors, the exact number of Directors to be determined from time to time by resolution adopted by the affirmative vote of a majority of the Directors then in office or at least two-thirds of the shares entitled to vote at a meeting of Stockholders. Each Director shall hold office until the next annual meeting and until his or her successor shall be elected and shall qualify, subject, however, to prior death, resignation, retirement, disqualification or removal from office. No decrease in the number of directors shall shorten the term of any incumbent Director. Notwithstanding, the foregoing, whenever the holders of any one or more classes or series of Preferred Stock issued by the Corporation shall have the right, voting separately by class or series, to elect Directors at an annual or special meeting of stockholders, the election, term of office, 5 filling of vacancies and other features of such Directorships shall be governed by the terms of these Articles of Incorporation applicable thereto, and such Directors so elected shall not be divided into classes pursuant to this Article V unless expressly provided by such terms. If the office of any Director shall become vacant, the Directors at the time in office, whether or not a quorum, may, by majority vote of the Directors then in office, choose a successor who shall hold office until the next annual meeting of stockholders. Vacancies resulting from the increase in the number of Directors shall be filled in the same manner. Directors of the Corporation may be removed by stockholders of the Corporation only for cause and with the affirmative vote of at least two-thirds of the outstanding shares entitled to vote. Advance notice of stockholder nominations for the election of Directors shall be given in the manner provided in the Bylaws of the Corporation. Notwithstanding any other provision of the Articles of Incorporation or the Bylaws, the affirmative vote of at least two-thirds of the outstanding shares entitled to vote shall be required to amend, alter, change or repeal, or to adopt any provision inconsistent with the purpose and intent of, this Article V or Articles IV and IX of the Bylaws. ARTICLE VI. LIMIT ON LIABILITY AND INDEMNIFICATION - -------------------------------------------------------------------------------- 1. To the full extent that the Virginia Stock Corporation Act, as it exists on the date hereof or may hereafter be amended, permits the limitation or elimination of the liability of directors or officers, a Director or officer of the Corporation shall not be liable to the Corporation or its stockholders for monetary damages. 2. To the full extent permitted and in the manner prescribed by the Virginia Stock Corporation Act and any other applicable law, the Corporation shall indemnify a Director or officer of the Corporation who is or was a party to any proceeding by reason of the fact that he is or was such a Director or officer or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise. The Board of Directors is hereby empowered, by 6 majority vote of a quorum or disinterested Directors, to contract in advance to indemnify any Director or officer. 3. The Board of Directors is hereby empowered, by majority vote of a quorum of disinterested Directors, to cause the Corporation to indemnify or contract in advance to indemnify any person not specified in Section 2 of this Article who was or is a party to any proceeding, by reason of the fact that he is or was an employee or agent of the Corporation, or is or was serving at the request of the Corporation as director, officer, employee or agent of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise, to the same extent as if such person were specified as one to whom indemnification is granted in Section 2. 4. The Corporation my purchase and maintain insurance to indemnify it against the whole or any portion of the liability assumed by it in accordance with this Article an may also procure insurance, in such amounts as the Board of Directors may determine, on behalf of any person who is or was a Director, officer, employee or agent of the Corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise, against any liability asserted against or incurred by any such person in any such capacity or arising from his status as such, whether or not the Corporation would have power to indemnify him against such liability under the provisions of this Article. 5. In the event there has been a change in the composition of a majority of the Board of Directors after the date of the alleged act or omission with respect to which indemnification is claimed, any determination as to indemnification and advancement of expenses with respect to any claim for indemnification made pursuant to Section 2 of this Article VI shall be made by special legal counsel agreed upon by the Board of Directors and the proposed indemnitee. If the Board of Directors and the proposed indemnitee are unable to agree upon such special legal counsel, the Board of Directors and the proposed indemnitee each shall select a nominee, and the nominees shall select such special legal counsel. 6. The provisions of this Article VI shall be applicable to all actions, claims, suits or proceedings commenced after the adoption hereof, whether arising from any action taken or failure to act before or after such adoption. no amendment, modification or repeal of this Article 7 shall diminish the rights provided hereby or diminish the right to indemnification with respect to any claim, issue or matter in any then pending or subsequent proceeding that is based in any material respect on any alleged action or failure to act prior to such amendment, modification or repeal. 7. Reference herein to Directors, officers, employees or agents shall include former Directors, officers, employees and agents and their respective heirs, executors and administrators. 8 EX-3.II 3 BYLAWS EXHIBIT 3(ii) DOMINION RESOURCES, INC. BYLAWS As Amended Effective April 16, 1999 TABLE OF CONTENTS
ARTICLE PAGE I. Name.......................................................................... 1 II. Shareholders' Meetings........................................................ 1 III. Annual Meeting................................................................ 1 IV. Special Meetings.............................................................. 1 V. Notice of Shareholders' Meetings and Voting Lists.................................................................. 2 VI. Waiver of Notice.............................................................. 3 VII. Quorum........................................................................ 3 VIII. Proxy and Voting.............................................................. 4 IX. Board of Directors............................................................ 4 X. Powers of Directors........................................................... 5 XI. Executive and Other Committees................................................ 5 XII. Meetings of Directors and Quorum.............................................. 7 XIII. Action Without a Meeting...................................................... 8 XIV. Officers...................................................................... 8 XV. Eligibility of Officers....................................................... 8 XVI. Duties and Authority of Chairman of the Board of Directors, President and Others.................................................................... 9 XVII. Vice Presidents............................................................... 9 XVIII. Corporate Secretary........................................................... 10 XIX. Treasurer..................................................................... 10 XX. Controller.................................................................... 11 XXI. Resignations and Removals..................................................... 11 XXII. Vacancies..................................................................... 11 XXIII. Certificates for Shares....................................................... 12 XXIV. Transfer of Shares............................................................ 13 XXV. Record Date................................................................... 13 XXVI. Voting of Shares Held......................................................... 13 XXVII. Bonds, Debentures and Notes Issued Under an Indenture 14 XXVIII. Amendments.................................................................... 14 XXIX. Emergency Bylaws.............................................................. 15 XXX. Shareholder Proposals......................................................... 17 XXXI. Control Share Acquisitions.................................................... 17
ARTICLE I. NAME. - -------------------------------------------------------------------------------- The name of the Corporation is Dominion Resources, Inc. ARTICLE II. SHAREHOLDERS' MEETINGS. - -------------------------------------------------------------------------------- All meetings of the Shareholders shall be held at such place, within or without of the Commonwealth, as provided in the notice of the meeting given pursuant to Article V. If the Chairman of the Board of Directors determines that the holding of any meeting at the place named in the notice might be hazardous, he may cause it to be held at some other place deemed by him suitable and convenient, upon arranging notice to Shareholders who attend at the first place and reasonable opportunity for them to proceed to the new place. ARTICLE III. ANNUAL MEETING. - -------------------------------------------------------------------------------- The Annual Meeting of the Shareholders shall be held on the third Friday in April in each year if not a legal holiday, and if a legal holiday then on the next succeeding Friday not a legal holiday. In the event that such Annual Meeting is omitted by oversight or otherwise on the date herein provided for, the Board of Directors shall cause a meeting in lieu thereof to be held as soon thereafter as conveniently may be, and any business transacted or elections held at such meeting shall be as valid as if transacted or held at the Annual Meeting. Such subsequent meeting shall be called in the same manner as provided for Special Shareholders' Meetings. ARTICLE IV. SPECIAL MEETINGS. - -------------------------------------------------------------------------------- Special Meetings of the Shareholders shall be held whenever called by the Chairman of the Board of Directors, the President, or a majority of the Directors. Special Meetings of the Shareholders may also be held following the accrual or termination of voting rights of the Preferred Stock, whenever requested to be called in the manner provided in the Articles of Incorporation. ARTICLE V. NOTICE OF SHAREHOLDERS' MEETINGS AND VOTING LISTS. - -------------------------------------------------------------------------------- Written notice stating the place, day and hour of each Shareholders' Meeting and the purpose or purposes for which the meeting is called shall be given not less than 10 nor more than 60 days before the date of the meeting, or such longer period as is specified below, by, or at the direction of, the Board of Directors or its Chairman, the President or any Vice President or the Corporate Secretary or any Assistant Corporate Secretary, by mail, to each Shareholder of record entitled to vote at the meeting, at his or her registered address and the person giving such notice shall make affidavit in relation thereto. Such notice shall be deemed to be given when deposited in the United States mails addressed to the Shareholder at his address as it appears on the stock transfer books, with postage thereon prepaid. Notice of a Shareholders' Meeting to act on an amendment of the Articles of Incorporation, on a plan of merger or share exchange, on a proposed dissolution of the Corporation, or on a proposed sale, lease or exchange, or other disposition, of all, or substantially all, of the property of the Corporation otherwise than in the usual and regular course of business, shall be given not less than 25 nor more than 60 days before the date of the meeting. Any notice of a Shareholders' Meeting to act on an amendment of the Articles of Incorporation or a plan of merger or share exchange or a proposed sale, lease or exchange, or other disposition of all, or substantially all, of the property of the Corporation otherwise than in the usual and regular course of business shall be accompanied by a copy of the proposed amendment or plan of merger or exchange or agreement effecting the disposition of assets. Any meeting at which all Shareholders having voting power in respect of the business to be transacted thereat are present, either in person or by proxy, or of which those not present waive notice in writing, whether before or after the meeting, shall be a legal meeting for the transaction of business notwithstanding that notice has not been given as herein before provided. The officer or agent having charge of the share transfer books of the Corporation shall make, at least 10 days before each meeting of Shareholders, a complete list of the Shareholders entitled to vote at such meeting or any adjournment thereof, with the address of and number of shares held by each. The list shall be arranged by voting group and within each voting group by class or series of shares. Such list, for a period of 10 days prior to such meeting, shall be kept on file at the principal place of business of the Corporation. Any person who shall have been a Shareholder of record for at least 6 months immediately preceding his demand or who shall be the holder of record of at least 5% of all the outstanding shares of the Corporation, upon demand stating with reasonable particularity the purpose thereof, shall have the right to inspect such list, in person, for any proper purpose if such list is directly connected with such purpose, during usual business hours within the period of 10 days prior to the meeting. Such list shall also be produced at the time and place of the meeting and shall be subject to the inspection of any Shareholder during the whole time of the meeting for the purposes thereof. ARTICLE VI. WAIVER OF NOTICE. - -------------------------------------------------------------------------------- Notice of any Shareholders' Meeting may be waived by any Shareholder, whether before or after the date of the meeting. Such waiver of notice shall be in writing, signed by the Shareholder and delivered to the Corporate Secretary. Any Shareholder who attends a meeting shall be deemed to have waived objection to lack of notice or defective notice of the meeting, unless the Shareholder at the beginning of the meeting objects to holding the meeting or transacting business at the meeting and shall be deemed to have waived objection to consideration of a particular matter at the meeting that is not within the purpose or purposes described in the meeting notice, unless the Shareholder objects to considering the matter when it is presented. ARTICLE VII. QUORUM. - -------------------------------------------------------------------------------- At any meeting of the Shareholders, a majority in number of votes of all the shares issued and outstanding having voting power in respect of the business to be transacted there at, represented by such Shareholders of record in person or by proxy, shall constitute a quorum, but a lesser interest may adjourn any meeting from time to time and the meeting may be held as adjourned without further notice. When a quorum is present at any meeting, a majority vote represented thereat shall decide any question brought before such meeting, unless the question is one upon which by express provision of law or of the Articles of Incorporation or of these Bylaws a larger or different vote is required, in which case such express provision shall govern and control the decision of such question. The provisions of this Article are, however, subject to the provisions of the Articles of Incorporation. ARTICLE VIII. PROXY AND VOTING. - -------------------------------------------------------------------------------- Shareholders of record entitled to vote may vote at any meeting held, in person or by proxy executed in writing or by proxy authorized by any means permitted by the Virginia Stock Corporation Act or other applicable law, in each case by the Shareholder or by his or her duly authorized officer, director, employee or agent, which proxy shall be filed with or received by the Corporate Secretary of the meeting before being voted. A proxy shall designate only one person as proxy, except that proxies executed pursuant to a general solicitation of proxies may designate one or more persons as proxies. Proxies shall entitle the holders thereof to vote at any adjournment of the meeting, but shall not be valid after the final adjournment thereof. No proxy shall be valid after 11 months from its date unless the appointment form expressly provides for a longer period of validity. Shareholders entitled to vote may also be represented by an agent personally present, duly designated by power of attorney, with or without power of substitution, and such power of attorney shall be produced at the meeting on request. Each holder of record of shares of any class shall, as to all matters in respect of which shares of any class have voting power, be entitled to one vote for each share of stock of such class standing in his name on the books. ARTICLE IX. BOARD OF DIRECTORS. - -------------------------------------------------------------------------------- A Board of Directors shall be chosen by ballot at the Annual Meeting of the Shareholders or at any meeting held in lieu thereof as herein before provided. Subject to the rights of holders of any class or series of stock having a preference over the Common Stock as to dividends or upon liquidation, nominations for the election of Directors shall be made by the Board of Directors or a committee appointed by the Board of Directors or by any Shareholder entitled to vote in the election of Directors generally. However, any Shareholder entitled to vote in the election of Directors generally may nominate one or more persons for election as Directors at a meeting only if written notice of such Shareholder's intent to make such nomination or nominations has been given, either by personal delivery or by United States mail, postage prepaid, to the Corporate Secretary of the Corporation not later than 60 days in advance of such meeting (except that, if public disclosure of the meeting is made less than 70 days prior to the meeting, the notice need only be received within 10 days following such public disclosure). Each such notice shall set forth: (a) the name and address of the Shareholder who intends to make the nomination and of the person or persons to be nominated; (b) a representation that the Shareholder is a holder of record of stock of the Corporation entitled to vote at such meeting and intends to appear in person or by proxy at the meeting to nominate the person or persons specified in the notice; (c) a description of all arrangements or understandings between the Shareholder and each nominee and any other person or persons (naming such person or persons) pursuant to which the nomination or nominations are to be made by the Shareholder; (d) such other information regarding each nominee proposed by such Shareholder as would be required to be included in a proxy statement filed pursuant to the proxy rules of the Securities and Exchange Commission, had the nominee been nominated, or intended to be nominated, by the Board of Directors; and (e) the consent of each nominee to serve as a Director of the Corporation if so elected. The Chairman of the meeting may refuse to acknowledge the nomination of any person not made in compliance with the foregoing procedure. ARTICLE X. POWERS OF DIRECTORS. - -------------------------------------------------------------------------------- All corporate powers shall be exercised by or under the authority of, and the business and affairs of the Corporation shall be managed under the direction of, the Board of Directors, subject to any limitation set forth in the Articles of Incorporation and so far as this delegation of authority is not inconsistent with the laws of the Commonwealth of Virginia, with the Articles of Incorporation or with these Bylaws. ARTICLE XI. EXECUTIVE AND OTHER COMMITTEES. - -------------------------------------------------------------------------------- The Board of Directors, by resolution passed by a majority of the whole Board, may designate two or more of its number to constitute an Executive Committee. If a quorum is present, the Committee may act upon the affirmative vote of a majority of the Committee members present. When the Board of Directors is not in session, the Executive Committee shall have and may exercise all of the authority of the Board of Directors except that the Executive Committee shall not (i) approve or recommend to Shareholders action that Virginia law requires to be approved by Shareholders; (ii) fill vacancies on the Board of Directors or any of its Committees or elect officers; (iii) Amend Articles of Incorporation other than as permitted by statute; (iv) adopt, amend or repeal these Bylaws; (v) approve a plan of merger not requiring Shareholder approval; (vi) authorize or approve a distribution, except according to a general formula or method prescribed by the Board of Directors; or (vii) authorize or approve the issuance or sale or contract for sale of shares, or determine the designation and relative rights, preferences, and limitations of a class or series of shares, except that the Board of Directors may authorize the Executive Committee to do so within limits specifically prescribed by the Board of Directors. If the Executive Committee is created for any designated purpose, its authority shall be limited to such purpose. The Executive Committee shall report its action to the Board of Directors. Regular and special meetings of the Executive Committee may be called and held subject to the same requirements with respect to time, place and notice as are specified in these Bylaws for regular and special meetings of the Board of Directors. Members of the Executive Committee shall receive such compensation for attendance at meetings as may be fixed by the Board of Directors. The Board of Directors likewise may appoint from their number, from the directors of affiliated corporations or from officers of the Corporation other Committees from time to time, the number composing such Committees and the power conferred upon the same to be subject to the foregoing exceptions for an Executive Committee but otherwise as determined by vote of the Board of Directors provided that any Committee empowered to exercise the authority of the Board of Directors shall be composed only of members of the Board of Directors. The Board of Directors may designate one or more Directors to represent the Corporation at meetings of committees of affiliated corporations. Members of such committees, and Directors so designated, shall receive such compensation for attendance at meetings as may be fixed by the Board of Directors. ARTICLE XII. MEETINGS OF DIRECTORS AND QUORUM. - -------------------------------------------------------------------------------- Regular Meetings of the Board of Directors may be held at such places within or without the Commonwealth of Virginia and at such times as the Board by vote may determine from time to time, and if so determined no notice thereof need be given. Special Meetings of the Board of Directors may be held at any time or place either within or without the Commonwealth of Virginia, whenever called by the Chairman of the Board of Directors, the President, any Vice President, the Corporate Secretary, or three or more Directors, notice thereof being given to each Director by the Corporate Secretary or an Assistant Corporate Secretary, the Directors or the officer calling the meeting, or at any time without formal notice provided all the Directors are present or those not present waive notice thereof. Notice of Special Meetings, stating the time and place thereof, shall be given by mailing the same to each Director at his residence or business address at least two days before the meeting, or by delivering the same to him personally or telephoning or telegraphing the same to him at his residence or business address at least one day before the meeting, unless, in case of exigency, the Chairman of the Board of Directors or the President shall prescribe a shorter notice to be given personally or by telephoning or telegraphing each Director at his residence or business address. A written waiver of notice signed by the Director entitled to such notice, whether before or after the date of the meeting, shall be equivalent to the giving of such notice. A Director who attends or participates in a meeting shall be deemed to have waived timely and proper notice of the meeting unless the Director, at the beginning of the meeting or promptly upon his arrival, objects to holding the meeting or transacting business at the meeting and does not thereafter vote for or assent to action taken at the meeting. A majority of the number of Directors fixed at the time in accordance with the Bylaws shall constitute a quorum for the transaction of business, but a lesser number may adjourn any meeting from time to time, and the meeting may be held without further notice. The foregoing provision is, however, subject to the Articles of Incorporation. When a quorum is present at any meeting, a majority of the members present thereat shall decide any question brought before such meeting, except as otherwise provided by law, by the Articles of Incorporation, or by these Bylaws. ARTICLE XIII. ACTION WITHOUT A MEETING. - -------------------------------------------------------------------------------- Any action required to be taken at a meeting of the Directors, or any action which may be taken at a meeting of the Directors or of a Committee, may be taken without a meeting if a consent in writing (which may be in any number of counterparts), setting forth the action so to be taken, shall be signed by all of the Directors, or all of the members of the Committee, as the case may be, either before or after such action is taken. Such consent shall have the same force and effect as a unanimous vote. ARTICLE XIV. OFFICERS. - -------------------------------------------------------------------------------- The officers of the Corporation shall be a President, one or more Vice Presidents, a Corporate Secretary, a Treasurer and a Controller. The Chairman of the Board of Directors shall also be an officer unless he is not also a full-time employee of the Corporation. The officers and the Chairman of the Board of Directors shall be elected or appointed by the Board of Directors after each election of Directors by the Shareholders, and a meeting of the Board of Directors may be held without notice for the purpose of electing officers following the Annual Meeting of the Shareholders. The Board of Directors, in its discretion, may appoint one or more Assistant Corporate Secretaries, one or more Assistant Treasurers, one or more Assistant Controllers, and such other officers or agents as it may deem advisable, and prescribe their duties. ARTICLE XV. ELIGIBILITY OF OFFICERS. - -------------------------------------------------------------------------------- The Chairman of the Board of Directors and the President shall be Directors. Any person may hold more than one office provided, however, that neither the Corporate Secretary, the Treasurer nor the Controller shall at the same time hold the office of Chairman of the Board of Directors or President. ARTICLE XVI. DUTIES AND AUTHORITY OF CHAIRMAN OF THE BOARD OF DIRECTORS, PRESIDENT AND OTHERS. - -------------------------------------------------------------------------------- The Chairman of the Board of Directors shall preside at the meetings of the Board of Directors. He may call meetings of the Board of Directors and of any Committee thereof whenever he deems it necessary. He shall call to order, and act as chairman of, all meetings of the Shareholders and prescribe rules of procedure therefor. He shall perform the duties commonly incident to his office and such other duties as the Board of Directors shall designate from time to time. The Board of Directors may designate the Chief Executive Officer of the Corporation. In the absence of the Chairman of the Board of Directors, the President shall perform his duties. The President shall perform the duties commonly incident to his office and such other duties as the Board of Directors shall designate from time to time. The Chief Executive Officer, the President and each Vice President shall have authority to sign certificates for shares of stock, bonds, deeds and contracts and to delegate such authority in such manner as may be approved by the Chief Executive Officer or the President. ARTICLE XVII. VICE PRESIDENTS. - -------------------------------------------------------------------------------- Each Vice President shall perform such duties and have such other powers as the Board of Directors shall designate from time to time. In the event of the absence or disability of the President, the duties and powers of the President shall be performed and exercised by the Vice President designated to so act by the line of succession provided by the Board of Directors, or if not so provided by the Board of Directors, in accordance with the following order of priority: (a) The Executive Vice Presidents in order of their seniority of first election to such office, or if two or more shall have been first elected to such office on the same day, in order of their seniority in age; (b) The Senior Vice Presidents in order of their seniority of first election to such office, or if two or more shall have been first elected to such office on the same day, in order of their seniority in age; (c) All other Vice Presidents at the principal office of the Corporation in the order of their seniority of first election to such office or if two or more shall have been first elected to such office on the same day, the order of their seniority in age; and (d) Any other persons that are designated on a list that shall have been approved by the Board of Directors, such persons to be taken in such order of priority and subject to such conditions as may be provided in the resolution approving the list. ARTICLE XVIII. CORPORATE SECRETARY. - -------------------------------------------------------------------------------- The Corporate Secretary shall keep accurate minutes of all meetings of the Shareholders, the Board of Directors and the Executive Committee, respectively, shall perform the duties commonly incident to his office, and shall perform such other duties and have such other powers as the Board of Directors shall designate from time to time. The Corporate Secretary shall have power together with the Chief Executive Officer, the President or a Vice President, to sign certificates for shares of stock. In his absence an Assistant Corporate Secretary shall perform his duties. ARTICLE XIX. TREASURER. - -------------------------------------------------------------------------------- The Treasurer, subject to the order of the Board of Directors, shall have the care and custody of the money, funds and securities of the Corporation and shall have and exercise under the supervision of the Board of Directors, all the powers and duties commonly incident to his office. He shall deposit all funds of the Corporation in such bank or banks, trust company or trust companies or with such firm or firms doing a banking business, as the Directors shall designate. He may endorse for deposit or collection all checks, notes, et cetera, payable to the Corporation or to its order, may accept drafts on behalf of the Corporation, and, together with the Chief Executive Officer, the President or a Vice President, may sign certificates for shares of stock. All checks, drafts, notes and other obligations for the payment of money except bonds, debentures and notes issued under an indenture shall be signed either manually or, if and to the extent authorized by the Board of Directors, through facsimile, by the Treasurer or an Assistant Treasurer or such other officer or agent as the Board of Directors shall authorize. Checks for the total amount of any payroll may be drawn in accordance with the foregoing provisions and deposited in a special fund. Checks upon this fund may be drawn by such person as the Treasurer shall designate. ARTICLE XX. CONTROLLER. - -------------------------------------------------------------------------------- The Controller shall keep accurate books of account of the Corporation's transactions and shall perform such other duties and have such other powers as the Board of Directors shall designate from time to time. ARTICLE XXI. RESIGNATION AND REMOVALS. - -------------------------------------------------------------------------------- Any Director or officer may resign at any time by giving written notice to the Board of Directors, to the Chairman of the Board of Directors, to the President or to the Corporate Secretary, and any member of any Committee may resign by giving written notice either as aforesaid or to the Committee of which he is a member or the chairman thereof. Any officer may resign at any time by delivering notice to the Corporation. Any such resignation shall take effect at the time specified therein or, if the time be not specified, upon receipt thereof; and, unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective. The Shareholders, at any meeting called for the purpose, by vote of a majority of the stock having voting power issued and outstanding, may remove any Director from office with cause and elect his successor. The Board of Directors, by vote of a majority of the entire Board, may remove any officer, agent or member of any Committees with or without cause from office. ARTICLE XXII. VACANCIES. - -------------------------------------------------------------------------------- If the office of any officer or agent, one or more, becomes vacant by reason of death, disability, resignation, removal, disqualification or otherwise, the Directors at the time in office, if a quorum, may, by a majority vote at a meeting at which a quorum is present, choose a successor or successors who shall hold office for the unexpired term or until his successor is duly elected and qualified or his position is eliminated. ARTICLE XXIII. CERTIFICATES FOR SHARES. - -------------------------------------------------------------------------------- Every Shareholder shall be entitled to a certificate or certificates for shares of record owned by him in such form as may be prescribed by the Board of Directors, duly numbered and setting forth the number and kind of shares to which such Shareholder is entitled. Such certificates shall be signed by the President or a Vice President and by the Treasurer or an Assistant Treasurer or the Corporate Secretary or an Assistant Corporate Secretary. The Board of Directors may also appoint one or more Transfer Agents and/or Registrars for its stock of any class or classes and may require stock certificates to be countersigned and/or registered by one or more of such Transfer Agents and/or Registrars. If certificates for shares are signed, either manually or by facsimile, engraved or printed, by a Transfer Agent or by a Registrar, the signatures thereon of the President or a Vice President and the Treasurer or an Assistant Treasurer or the Corporate Secretary or an Assistant Corporate Secretary may be facsimiles, engraved or printed. Any provisions of these Bylaws with reference to the signing of stock certificates shall include, in cases above permitted, such facsimiles. In case any officer or officers who shall have signed, or whose facsimile signature or signatures shall have been used on, any such certificate or certificates shall cease to be such officer or officers of the Corporation, whether because of death, resignation or otherwise, before such certificate or certificates shall have been delivered by the Corporation, such certificate or certificates may nevertheless be issued and delivered as though the person or persons who signed such certificate or certificates or whose facsimile signature or signatures shall have been used thereon had not ceased to be such officer or officers of the Corporation. Notwithstanding the foregoing, the Board of Directors may authorize the issue of some or all of the shares of any or all of its classes or series without certificates. Within a reasonable time after the issue or transfer of shares without certificates, the Corporation shall send the Shareholder a written statement of the information required on certificates by the Virginia Stock Corporation Act or other applicable law. ARTICLE XXIV. TRANSFER OF SHARES. - -------------------------------------------------------------------------------- Shares may be transferred by delivery of the certificate accompanied either by an assignment in writing on the back of the certificate or by a written power of attorney to sell, assign and transfer the same on the books of the Corporation, signed by the person appearing by the certificate to be the owner of the shares represented thereby, and shall be transferable on the books of the Corporation upon surrender thereof so assigned or endorsed. The person registered on the books of the Corporation as the owner of any shares shall be entitled exclusively as the owner of such shares, to receive dividends and to vote in respect thereof. It shall be the duty of every Shareholder to notify the Corporation of his address. ARTICLE XXV. RECORD DATE. - -------------------------------------------------------------------------------- For the purpose of determining the Shareholders entitled to notice of or to vote at any meeting of Shareholders, or any adjournment thereof, or entitled to receive payment of any dividend, or in order to make a determination of Shareholders for any other proper purpose, the Board of Directors may fix in advance a date as the record date for any such determination of Shareholders, provided that such date shall not in any case be more than 70 days prior to the date on which the particular action, requiring such determination of Shareholders, is to be taken. If no record date shall be fixed for the determination of Shareholders entitled to notice of or to vote at a meeting of Shareholders, or for the determination of the Shareholders entitled to receive payment of a dividend, the date on which notice of the meeting is mailed or the date on which the resolution of the Board of Directors declaring such dividend is adopted, as the case may be, shall be the record date for such determination of Shareholders in such cases. A determination of Shareholders entitled to notice of or to vote at a Shareholders' meeting is effective for any adjournment of the meeting unless the Board of Directors fixes a new record date, which it shall do if the meeting is adjourned to a date more than 120 days after the date fixed for the original meeting. ARTICLE XXVI. VOTING OF SHARES HELD. - -------------------------------------------------------------------------------- Unless the Board of Directors shall otherwise provide, the Chairman of the Board of Directors, the Chief Executive Officer, the President, any Vice President, or the Corporate Secretary may from time to time appoint one or more attorneys-in-fact or agents of the Corporation, in the name and on behalf of the Corporation, to cast the votes that the Corporation may be entitled to cast as a shareholder or otherwise in any other corporation, any of whose stock or securities of which may be held by the Corporation, at meetings of the holders of any such other corporations, or to consent in writing to any action by any such other corporation, and may instruct the person or persons so appointed as to the manner of casting such votes or giving such consent, and may execute or cause to be executed on behalf of the Corporation such written proxies, consents, waivers or other instruments as he may deem necessary or proper in the premises; or either the Chairman of the Board of Directors, the Chief Executive Officer, the President or the Corporate Secretary may himself attend any meeting of the shareholders of any such other corporation and thereat vote or exercise any or all other powers of the Corporation as the shareholder of such other corporation. ARTICLE XXVII. BONDS, DEBENTURES AND NOTES ISSUED UNDER AN INDENTURE. - -------------------------------------------------------------------------------- All bonds, debentures and notes issued under an indenture shall be signed by the Chief Executive Officer, the President or any Vice President or such other officer or agent as the Board of Directors shall authorize and by the Corporate Secretary or any Assistant Corporate Secretary or by the Treasurer or any Assistant Treasurer or such other officer or agent as the Board of Directors shall authorize. The signature of any authorized officer of the Corporation on bonds, debentures and notes authenticated by a corporate trustee may be made manually or by facsimile. ARTICLE XXVIII. AMENDMENTS. - -------------------------------------------------------------------------------- Both the Board of Directors and the Shareholders shall have the power to alter, amend or repeal the Bylaws of the Corporation or to adopt new Bylaws, but Bylaws enacted by the Shareholders, if expressly so provided, may not be altered, amended or repealed by the Directors. Notwithstanding the foregoing, Articles IV and IX of these Bylaws may not be amended, altered, changed or repealed without the affirmative vote of at least two-thirds of the outstanding shares of the Corporation entitled to vote. ARTICLE XXIX. EMERGENCY BYLAWS. - -------------------------------------------------------------------------------- The Emergency Bylaws provided in this Article XXIX shall be operative during any emergency notwithstanding any different provision in the preceding Articles of the Bylaws or in the Articles of Incorporation of the Corporation or in the Virginia Stock Corporation Act. An emergency exists if a quorum of the Corporation's Board of Directors cannot readily be assembled because of some catastrophic event. To the extent not inconsistent with these Emergency Bylaws, the Bylaws provided in the preceding Articles shall remain in effect during such emergency and upon the termination of such emergency the Emergency Bylaws shall cease to be operative unless and until another such emergency shall occur. During any such emergency: (a) Any meeting of the Board of Directors may be called by any officer of the Corporation or by any Director. Notice shall be given by the person calling the meeting. The notice shall specify the time and place of the meeting. Notice may be given only to such of the Directors as it may be feasible to reach at the time and by such means as may be feasible at the time, including publication or radio. If given by mail, messenger or telephone, the notice shall be addressed to the Director's address or such other place as the person giving the notice shall deem most suitable. Notice shall be similarly given, to the extent feasible, to the other persons referred to in (b) below. Notice shall be given at least two days before the meeting if feasible in the judgment of the person giving the notice, but otherwise shall be given any time before the meeting as the person giving the notice shall deem necessary. (b) At any meeting of the Board of Directors, a quorum shall consist of a majority of the number of Directors fixed at the time by Article IX of the Bylaws. If the Directors present at any particular meeting shall be fewer than the number required for such quorum, other persons present, as determined by the following provisions and in the following order of priority, up to the number necessary to make up such quorum, shall be deemed Directors for such particular meeting: (i) The Executive Vice Presidents in the order of their seniority of first election to such office, or if two or more shall have been first elected to such office on the same day, in the order of their seniority in age; (ii) The Senior Vice Presidents in the order of their seniority of first election to such office, or if two or more shall have been first elected to such office on the same day, in the order of their seniority in age; (iii) All other Vice Presidents at the principal office of the Corporation in the order of their seniority of first election to such office, or if two or more shall have been first elected to such office on the same day, in the order of their seniority in age; and (iv) Any other persons that are designated on a list that shall have been approved by the Board of Directors before the emergency, such persons to be taken in such order of priority and subject to such conditions as may be provided in the resolution approving the list. (c) The Board of Directors, during as well as before any such emergency, may provide, and from time to time modify, lines of succession in the event that during such an emergency any or all officers or agents of the Corporation for any reason shall be rendered incapable of discharging their duties. (d) The Board of Directors, before and during any such emergency, may, effective in the emergency, change the principal office or designate several alternative principal offices or regional offices, or authorize the officers so to do. No officer, Director or employee shall be liable for any action taken in good faith in accordance with these Emergency Bylaws. These Emergency Bylaws shall be subject to repeal or change by further action of the Board of Directors or by action of the Shareholders, except that no such repeal or change shall modify the provisions of the next preceding paragraph with regard to action or inaction prior to the time of such repeal or change. Any such amendment of these Emergency Bylaws may make any further or different provision that may be practical and necessary for the circumstances of the emergency. ARTICLE XXX. SHAREHOLDER PROPOSALS. - -------------------------------------------------------------------------------- To be properly brought before a meeting of Shareholders, business must be (i) specified in the notice of meeting (or any supplement thereto) given by or at the direction of the Board of Directors, (ii) otherwise properly brought before the meeting by or at the direction of the Board of Directors or (iii) otherwise properly brought before the meeting by a Shareholder. In addition to any other applicable requirements, for business to be properly brought before an Annual Meeting by a Shareholder, the Shareholder must have given timely notice thereof in writing to the Corporate Secretary of the Corporation. To be timely, a Shareholder's notice must be given, either by personal delivery or by United States registered or certified mail, postage prepaid, to the Corporate Secretary of the Corporation not later than 90 days prior to the date of the anniversary of the immediately preceding Annual Meeting. A Shareholder's notice to the Corporate Secretary shall set forth as to each matter the Shareholder proposes to bring before the Annual Meeting (i) a brief description of the business desired to be brought before the Annual Meeting, including the complete text of any resolutions to be presented at the Annual Meeting, with respect to such business, and the reasons for conducting such business at the meeting, (ii) the name and address of record of the Shareholder proposing such business, (iii) the class and number of shares of the Corporation that are beneficially owned by the Shareholder and (iv) any material interest of the Shareholder in such business. In the event that a Shareholder attempts to bring business before an Annual Meeting without complying with the foregoing procedure, the Chairman of the meeting may declare to the meeting that the business was not properly brought before the meeting and, if he shall so declare, such business shall not be transacted. ARTICLE XXXI. CONTROL SHARE ACQUISITIONS. - -------------------------------------------------------------------------------- In the event that any acquiring person (an "Acquiring Person") as defined in Section 13.1-728.1 of the Virginia Stock Corporation Act (the "Act"), either (i) fails to comply with the provisions of Section 13.1-728.4 of the Act or (ii) fails to obtain the approval of the Shareholders of the Corporation at any meeting held pursuant to Section 13.1-728.5, then the Corporation shall have authority, upon approval by resolution of the Board of Directors to call for redemption, at anytime within 60 days after the last acquisition of any such shares by such Acquiring Person or the date of such meeting, as the case may be, and thereafter to redeem on such date within such 60-day period as may be specified in such resolution (the "Redemption Date") all shares of Common Stock of the Corporation theretofore acquired by the Acquiring Person in a control share acquisition (as defined in Section 13.1-728.1 of the Act) and then owned beneficially by such Acquiring Person, as such number of shares may be either (i) shown on any control share acquisition statement or any statement or report filed by the Acquiring Person with the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended, or (ii) otherwise determined by the Board of Directors. The redemption price shall be paid in cash on the Redemption Date against delivery at the principal office of the Corporation of certificates evidencing the shares so redeemed. All determinations by the Board of Directors as to (i) the status of any person as an Acquiring Person under the Act, (ii) the number of shares of the Corporation owned by such Acquiring Person, (iii) the timeliness of compliance by any Acquiring Person within Section 13.1-728.4 of the Act, or (iv) the interpretation of the Act or this Article if made in good faith, shall be conclusive and binding on all persons. EX-10.II 4 EMPLOYMENT AGREEMENT EXHIBIT 10(ii) EMPLOYMENT AGREEMENT -------------------- This EMPLOYMENT AGREEMENT (the "Agreement") is made as of April 16, 1999, between DOMINION RESOURCES, INC. (the "Company") and THOS. E. CAPPS (the "Executive"). RECITALS: -------- The Board of Directors of the Company (the "Board of Directors") recognizes that outstanding management of the Company is essential to advancing the best interests of the Company, its shareholders and its subsidiaries. The Board of Directors has and continues to believe that it is particularly important to have stable, excellent management. The Board of Directors has and continues to believe that this objective may be achieved by giving key management employees assurances of financial security for a period of time, so that they will not be distracted by personal risks and will continue to devote their full time and best efforts to the performance of their duties. To accomplish this purpose, the Company and the Executive entered into an agreement as of June 20, 1997, which replaced a prior agreement (the "1997 Employment Agreement"). The Board of Directors wishes to foster an atmosphere of cooperation among the key management employees of the Company and its subsidiaries, and provide an incentive for such -1- employees to continue to contribute to the future growth and success of the Company and its subsidiaries. To accomplish this objective, the Organization and Compensation Committee of the Board of Directors (the "Committee") has recommended, and the Board of Directors has approved, entering into a new employment agreement with the Executive, which shall replace the Executive's 1997 Employment Agreement. The Company acknowledges that the Executive's contributions to the past and future growth and success of the Company have been and will continue to be substantial. The Company and the Executive are entering into this Agreement to induce the Executive to remain an employee of the Company and to continue to devote his full energy to the Company's affairs. The Executive has agreed to continue to be employed by the Company under the terms and conditions hereinafter set forth. NOW, THEREFORE, in consideration of the foregoing and the mutual undertakings contained in this Agreement, the parties agree as follows: 1. Employment. The Company will employ the Executive, and the Executive ---------- will continue in the employment of the Company, as Chief Executive Officer and President of the Company for the period beginning on the date of this Agreement and ending on the date of the Company's annual meeting of shareholders in 2005 (the "Term of this Agreement"), according to the terms of this Agreement. 2. Duties. The Company and the Executive agree that, during the Term of ------ this Agreement, the Executive will be Chief Executive Officer of the Company and will report directly to the Board of Directors. During the Term of this Agreement, the Executive will -2- continue to exercise such authority and perform such executive duties as are commensurate with his position as Chief Executive Officer. The Executive (i) will devote his knowledge, skill and best efforts on a full-time basis to performing his duties and obligations to the Company (with the exception of absences on account of illness or vacation in accordance with the Company's policies and civic and charitable commitments not involving a conflict with the Company's business), and (ii) will comply with the directions and orders of the Board of Directors of the Company with respect to the performance of his duties. The Executive shall also be President of the Company and will perform such executive duties as are commensurate with his position as President. 3. Effect on Other Agreements. This Agreement sets forth the entire -------------------------- understanding of the parties with respect to the terms of the Executive's employment with the Company and its subsidiaries. This Agreement supersedes and replaces the Executive's 1997 Employment Agreement, which will terminate as of the date on which this Agreement is executed. This Agreement supersedes and replaces all agreements that were superseded and replaced by the 1997 Employment Agreement, including the Executive's Employment Continuity Agreement, the letter dated April 21, 1994 to the Executive from James F. Betts, the employment agreement between the Executive and the Company dated August 12, 1994, the employment agreement between the Executive and the Company dated April 12, 1995 as amended as of September 15, 1995 and any other employment agreements between the Executive and the Company or a subsidiary (collectively, the "Prior Agreements"). The term "employment agreement" as used in -3- the preceding sentence does not include any retirement, incentive or benefit plan or program in which the Executive participates or the credited service agreement described in Section 5(c). The Executive and the Company agree that the Executive's Prior Agreements are null and void. 4. Compensation and Benefits. ------------------------- (a) During the Term of this Agreement, while the Executive is employed by the Company, the Company will pay to the Executive the following salary and incentive awards for services rendered to the Company: (i) The Company will pay to the Executive an annual salary in an amount not less than the base salary in effect for the Executive as of the date on which this Agreement is executed. The Board of Directors will evaluate the Executive's performance at least annually and will consider annual increases in the Executive's salary based on the Executive's performance. (ii) The Executive will be entitled to receive incentive awards based on the Executive's job performance, if and to the extent that the Board of Directors determines that the Executive's performance merits payment of an award. The Board of Directors will make its determination consistent with the methodology used by the Board of Directors for compensating its senior management employees. (b) During the Term of this Agreement, while the Executive is employed by the Company, the Executive will be eligible to participate in a similar manner as other senior -4- executives of the Company in retirement plans, cash and stock incentive plans, fringe benefit plans and other employee benefit plans and programs provided by the Company for its senior management employees from time to time. 5. Completion Benefits. ------------------- (a) The Executive will be entitled to receive the following additional benefits upon his termination of employment with the Company: (i) The Executive's retirement benefits under the Company's Retirement Plan and Benefit Restoration Plan will be computed using compensation based on the Executive's highest rate of annual salary in effect at any time during his employment. The supplemental benefit to be provided under this subsection (i) will be provided as a supplemental benefit under this Agreement and will not be provided directly from the Retirement Plan. (ii) The Executive's "Final Compensation" under the Company's Executive Supplemental Retirement Plan (the "SRP") will be determined by computing the "Incentive Compensation Amount" as if the Executive's short-term incentive compensation target award was the unreduced percentage (which will be at least 45%) of his salary midpoint as approved by the Committee for the year (for example, for 1993 and 1994, the unreduced percentage was 45% of his salary midpoint, as compared to the reduced target that was used for 1993 and 1994 in order to make long-term compensation a larger part of the Executive's incentive -5- compensation for those years). (iii) The benefit under the SRP will continue to be computed as an equal periodic payment for 120 months, according to the SRP document. However, this periodic payment will be payable for the Executive's life (or for 120 payments, if longer). (iv) All restricted stock held by the Executive as of the date of termination of his employment will become fully vested (that is, transferable and nonforfeitable) as of the date of termination of his employment. (v) The Company will pay to the Executive a single lump sum payment equal to nine hundred fifty thousand dollars ($950,000) on the day following the date of termination of his employment. (b) In addition to the foregoing, the Executive will receive, upon his termination of employment with the Company before the annual meeting of shareholders in 2005, a single lump sum cash payment equal to the present value of the annual base salary and annual cash incentive awards (computed as described below) that the Executive is projected to receive for employment in the "Calculation Year" to the extent otherwise not paid for services rendered. For purposes of this Agreement, the Calculation Year is the period from the annual meeting of shareholders in 2004 until the annual meeting of shareholders in 2005. The lump sum will be computed as follows: (i) For purposes of this calculation, the annual base salary that the -6- Executive is projected to receive for employment for the Calculation Year will be calculated at the highest annual base salary rate in effect for the Executive during the three-year period ending with the last complete calendar year before his termination of employment. For purposes of this calculation, the annual cash incentive awards that the Executive is projected to receive for employment in the Calculation Year will be calculated at a rate equal to the highest annual cash incentive award paid to the Executive during the three- year period ending with the last complete calendar year before his termination of employment. Salary and bonus that the Executive elected to defer will be taken into account for purposes of this Agreement without regard to the deferral. (ii) If the Executive has not yet received an annual cash incentive award for the year in which his employment terminates, the lump sum payment will be increased to include a pro-rated award for the portion of the year preceding the Executive's termination of employment. If the Executive has not yet received payment of his annual cash incentive award for the year preceding his termination of employment, the lump sum payment will be increased to include an award for the year preceding the Executive's termination of employment. The incentive award for the year or portion of the year preceding the Executive's termination of employment will be determined according to clause (i) above, unless the Board of Directors made a good faith final determination of the amount of the applicable -7- incentive award pursuant to Section 4(a)(ii) before the Executive's termination of employment. If the Board of Directors made such a determination, the applicable incentive award will be computed according to the Board of Directors' determination. (iii) Present value will be computed by the Company as of the date of the Executive's termination of employment, based on a discount rate equal to the applicable Federal short-term rate, as determined under Section 1274(d) of the Internal Revenue Code of 1986, as amended (the "Code"), compounded monthly, in effect on the date on which the present value is determined. (iv) The lump sum payment will be paid within 30 days after the Executive's termination of employment. (c) As set forth in the existing credited service agreement between the Executive and the Company, the Executive will be credited with a total of 30 years of service for purposes of the Company's retirement plans. 6. Termination of Employment. ------------------------- (a) During the Term of this Agreement, the Company may terminate the Executive's employment only for Cause. During the Term of this Agreement, the Executive may voluntarily terminate employment under the circumstances described in clauses (i)-(v) of this subsection (a). After July 31, 1998, the Executive may voluntarily terminate employment under the circumstance described in clause (vi) of this subsection (a). If the Executive's employment is -8- terminated for Cause, or if the Executive voluntarily terminates employment pursuant to this Section 6(a), the Executive will be entitled to receive the benefits described in subsection (b). Subject to the provisions of this subsection (a), the Executive may voluntarily terminate employment after (i) the Executive's base salary is reduced, (ii) the Executive is not in good faith considered for incentive awards as described in Section 4(a)(ii), (iii) the Company fails to provide benefits as required by Section 4(b), (iv) the Executive's place of employment is relocated to a location further than 30 miles from Richmond, Virginia, (v) the Executive's working conditions or management responsibilities are substantially diminished (other than on account of the Executive's disability, as defined in Section 7 below), or (vi) the Executive voluntarily terminates employment on or after August 1, 1998 upon 90 days prior written notice to the Company and the Committee consents in writing to such termination. In order for clause (i), (ii), (iii), (iv) or (v) of this subsection (a) to be effective: (1) the Executive must give written notice to the Company indicating that the Executive intends to terminate employment under this subsection (a), (2) the Executive's voluntary termination under this subsection must occur within 60 days after an event described in clause (i), (ii), (iii), (iv) or (v) of the preceding sentence, or within 60 days after the last in a series of such events, and (3) the Company must have failed to remedy the event described in clause (i), (ii), (iii), (iv) or (v), as the case may be, within 30 days after receiving the Executive's written notice. If the Company remedies the event described in clause (i), (ii), (iii), (iv) or (v), as the case may be, within 30 days after receiving the Executive's written notice, the Executive may not terminate employment under this subsection (a) on account -9- of the event specified in the Executive's notice. (b) In accordance with the provisions of Section 6(a), the Executive will be entitled to receive the following benefits determined as of the date of his termination of employment: (i) The Executive will receive the benefits described in Section 5(a)(i), (ii), (iii), (iv) and (v) above as of the date of his termination of employment. In addition, the Executive will receive the single lump sum cash payment described in Section 5(b) of this Agreement if such payment is not otherwise payable under the terms of Section 5(b). (ii) The Executive will be credited with a total of 30 years of service and will be considered to have attained age 60 (if he has not already done so) for purposes of the Company's retirement plans. (iii) The Executive will be credited with age and service credit through the end of the Term of this Agreement for purposes of computing benefits under the Company's medical and other welfare benefit plans, and the Company will continue the Executive's coverage under the Company's welfare benefit plans as if the Executive remained employed through the end of the Term of this Agreement. Notwithstanding the foregoing, if the Company determines that giving such age and service credit or continued coverage could adversely affect the tax qualification or tax treatment of a benefit plan, or otherwise have adverse -10- legal ramifications, the Company may pay the Executive a lump sum cash amount that reasonably approximates the after-tax value to the Executive of such age and service credit and continued coverage through the end of the Term of this Agreement, in lieu of giving such credit and continued coverage. (c) The amounts under this Agreement will be paid in lieu of severance benefits under any severance plan or program maintained by the Company. The amounts payable under this Agreement will not be reduced by any amounts earned by the Executive from a subsequent employer or otherwise. If the Executive voluntarily terminates employment prior to the end of the Term of this Agreement for a reason not described in subsection (a) above or Section 7 below, this Agreement will immediately terminate and the Executive shall be entitled to the payment of the benefits under Sections 5(a), 5(b) and 5(c). 7. Disability or Death. If the Executive becomes disabled (as defined ------------------- below) during the Term of this Agreement while he is employed by the Company, the Executive shall be entitled to receive the benefits described in Sections 5(a)(i), 5(a)(ii), 5(a)(iii), 5(a)(iv), 5(a)(v), 5(b), and 6(b)(ii) of this Agreement as of the date on which he is determined by the Company to be disabled. If the Executive dies during the Term of this Agreement while he is employed by the Company, the benefits described in Sections 5(a)(i), 5(a)(ii), 5(a)(iii), 5(a)(iv), 5(a)(v), 5(b), and 6(b)(ii) will be provided to the Executive's beneficiary designated under the terms of the applicable benefit plan. The foregoing benefits will be provided in addition to any death, disability and other benefits provided under Company benefit plans in which the Executive -11- participates. Except to the extent provided in this Section 7, the provisions of Sections 1, 2, 4, 5 and 6 of this Agreement will terminate upon the Executive's death or disability. The term "disability" means a condition, resulting from bodily injury or disease, that renders, and for a six consecutive month period has rendered, the Executive unable to perform any and every duty pertaining to his employment with the Company. A return to work of less than 14 consecutive days will not be considered an interruption in the Executive's six consecutive months of disability. Disability will be determined by the Company on the basis of medical evidence satisfactory to the Company. 8. Cause. For purposes of this Agreement, the term "Cause" means (i) ----- material misappropriation with respect to the business or assets of the Company, (ii) persistent refusal or willful failure of the Executive materially to perform his duties and responsibilities to the Company, which continues after the Executive receives notice of such refusal or failure, (iii) conviction of a felony involving moral turpitude, or (iv) the use of drugs or alcohol that interferes materially with the Executive's performance of his duties. The foregoing acts or events will constitute "Cause" for purposes of this Agreement only to the extent that they were committed on or after September 15, 1995 (i.e., the date on which the 1995 Employment Agreement was amended). 9. Parachute Tax. If the Company determines that any amounts payable ------------- under this Agreement would be subject to the excise tax imposed under Code Section 4999 on "excess parachute payments", the Company will compute the after- tax amount that would be payable to -12- the Executive if the total amounts that are payable to the Executive by the Company, an affiliate, or a plan of the Company or an affiliate and are considered "parachute payments" for purposes of Code Section 280G ("Parachute Payments") were limited to the maximum amount that may be paid to the Executive under Code Sections 280G and 4999 without imposition of the excise tax (this after-tax amount is referred to as the "Capped Amount"). The Company will also compute the after-tax amount that would be payable to the Executive if the total Parachute Payments were payable without regard to the Code Sections 280G and 4999 limit (this after-tax amount is referred to as the "Uncapped Amount"). Notwithstanding anything in this Agreement to the contrary, if the Capped Amount is greater than or equal to 97% of the Uncapped Amount, then the total benefits and other amounts that are considered Parachute Payments and are payable to the Executive under this Agreement will be reduced to the largest amount that will result in no portion of any such payment being subject to the excise tax imposed by Code Section 4999. Tax counsel selected by mutual consent of the Company and the Executive will determine the amount of any such reduction in good faith. The determination will be made before the payments are due and payable to the Executive, to the extent possible. The Executive will determine which payments will be reduced, subject to approval by the Company (which approval may not be unreasonably withheld). The Executive will have no right to receive Parachute Payments under this Agreement in excess of the reduced amount. The calculations under this Section will be made in a manner consistent with the requirements of Code Sections 280G and 4999, as in effect at the time the calculations are made. -13- 10. Indemnification. The Company will pay all reasonable fees and --------------- expenses, if any, (including, without limitation, legal fees and expenses) that are incurred by the Executive to enforce this Agreement and that result from a breach of this Agreement by the Company. 11. Form of Payment. All amounts payable under this Agreement (other than --------------- restricted stock, which will be paid according to the terms of the Company's Long-Term Incentive Plan and Incentive Compensation Plan) will be paid in cash, subject to required income and payroll tax withholdings. 12. Administration. The Committee will be responsible for the -------------- administration and interpretation of this Agreement on behalf of the Company. If for any reason a benefit under this Agreement is not paid when due, the Executive may file a written claim with the Committee. If the claim is denied or no response is received within 90 days after the filing (in which case the claim is deemed to be denied), the Executive may appeal the denial to the Board of Directors within 60 days of the denial. The Executive may request that the Board of Directors review the denial, the Executive may review pertinent documents, and the Executive may submit issues and comments in writing. A decision on appeal will be made within 60 days after the appeal is made, unless special circumstances require that the Board of Directors extend the period for another 60 days. If the Company defaults in an obligation under this Agreement, the Executive makes a written claim pursuant to the claims procedure described above, and the Company fails to remedy the default within the claims procedure period, then all amounts payable to the Executive under this Agreement will become due and owing. -14- 13. Assignment. The rights and obligations of the Company under this ---------- Agreement will inure to the benefit of and will be binding upon the successors and assigns of the Company. If the Company is consolidated or merged with or into another corporation, or if another entity purchases all or substantially all of the Company's assets, the surviving or acquiring corporation will succeed to the Company's rights and obligations under this Agreement. The Executive's rights under this Agreement may not be assigned or transferred in whole or in part, except that the personal representative of the Executive's estate (or other beneficiary designated under the terms of the applicable benefit plan) will receive any amounts payable under this Agreement after the death of the Executive. 14. Rights Under the Agreement. The right to receive benefits under the -------------------------- Agreement will not give the Executive any proprietary interest in the Company or any of its assets. Benefits under the Agreement will be payable from the general assets of the Company, and there will be no required funding of amounts that may become payable under the Agreement. The Executive will for all purposes be a general creditor of the Company. The interest of the Executive under the Agreement cannot be assigned, anticipated, sold, encumbered or pledged and will not be subject to the claims of the Executive's creditors. 15. Notice. For purposes of this Agreement, notices and all other ------ communications must be in writing and are effective when delivered or mailed by United States registered mail, return receipt requested, postage prepaid, addressed to the Executive or his personal representative at his last known address. All notices to the Company must be directed to the -15- attention of the Chairman of the Committee. Such other addresses may be used as either party may have furnished to the other in writing. Notices of change of address are effective only upon receipt. 16. Miscellaneous. This instrument contains the entire agreement of the ------------- parties. To the extent not governed by federal law, this Agreement will be construed in accordance with the laws of the Commonwealth of Virginia, without reference to its conflict of laws rules. No provisions of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing and the writing is signed by the Executive and the Company. A waiver of any breach of or compliance with any provision or condition of this Agreement is not a waiver of similar or dissimilar provisions or conditions. The invalidity or unenforceability of any provision of this Agreement will not affect the validity or enforceability of any other provision of this Agreement, which will remain in full force and effect. This Agreement may be executed in one or more counterparts, all of which will be considered one and the same agreement. -16- WITNESS the following signatures. DOMINION RESOURCES, INC. By: /s/ K. A. RANDALL --------------------------- Kenneth A. Randall, Chairman, Organization and Compensation Committee Dated: April 19, 1999 /s/ THOS. E. CAPPS --------------------------- Thos. E. Capps Dated: April 19, 1999 -17- EX-10.III 5 ALLIANCE AGREEMENT EXHIBIT 10(iii) ALLIANCE AGREEMENT THIS ALLIANCE AGREEMENT (the "Agreement") is made as of April 14, 1999, between CNG POWER COMPANY, a Delaware corporation ("CNG"), and DOMINION RESOURCES, INC., a Virginia corporation ("DRI"). INTRODUCTION A. DRI, though its subsidiaries, is engaged in the business of developing, owning and operating energy facilities, including gas-fired electric generation facilities. DRI desires to expand its ownership of energy facilities principally in the area from New England to the states comprising the Mid- America Interconnected Network. B. CNG is engaged in the business of developing and owning independent power projects. C. In order to further DRI's desire to expand its ownership of energy facilities in the area which includes major portions of the pipeline system of CNG's Affiliates, and to further CNG's desire to expand the market for gas along the pipeline system of CNG's Affiliates through the development of gas-fired electric generation facilities, DRI and CNG have entered into this Agreement. ARTICLE I DEFINITIONS For purposes of this Agreement, the following terms shall have the meanings set forth below: "Acceptance Notice" shall have the meaning set forth in Section 7.3 "Affiliate" shall mean as to any Person, any other Person that directly or indirectly controls, is controlled by, or is under common control with such first Person. A Person shall be deemed to control another Person if such Person (i) possesses, directly or indirectly, the power to direct or cause the direction of the management or policies of such other Person, whether through the ownership of voting securities, by contract or otherwise, or (ii) owns or controls 10 percent or more of the equity securities of such other Person. "Agreement" shall have the meaning set forth in the first paragraph hereof. "Alliance Information" shall mean all data, evaluations, projections and other information provided by one Party to the other pursuant to this Agreement and all information developed by or on behalf of the Parties pursuant to their activities under this Agreement (including, without limitation Development Site locations). "CNG" shall have the meaning set forth in the first paragraph hereof. "CNG Manager" shall have the meaning set forth in Section 2.4(b). "Confidential Information" shall have the meaning set forth in Section 5.1(a). "Development Area" means the area within a three-mile radius of a Development Site. "Development Entity" shall have the meaning set forth in Section 3.4(a). "Development Sites" means, for any date, all of the Existing Sites and any Development Sites which have been identified by the Management Committee pursuant to Section 3.1 on or before such date, less any Development Sites which the Management Committee has eliminated from the list of Development Sites prior to such date pursuant to Section 3.1. "Dominion Manager" shall have the meaning set forth in Section 2.4(b). "DRI" shall have the meaning set forth in the first paragraph hereof. "Existing Sites" shall have the meaning set forth in Section 3.1. "Facilities" shall mean gas-fired electric generation facilities. "Management Committee" shall have the meaning set forth in Section 2.4(a). "Manager" shall have the meaning set forth in Section 2.4(b). "No Purchase Termination" shall have the meaning set forth in Section 7.3. "Notes" shall have the meaning set forth in Section 5.1(b). "Party" shall mean each of CNG and DRI. "Person" shall mean any individual, corporation, partnership, joint venture, association, joint-stock company, limited liability company, trust, unincorporated organization, government or any agency or political subdivision thereof or any other legal entity. "Purchase Termination" shall have the meaning set forth in Section 7.3. "Receipt Date" shall have the meaning set forth in Section 7.2. "Receiving Party" shall have the meaning set forth in Section 7.2. 2 "Representative" shall mean, with respect to a Party, the officers, directors, employees, agents, representatives and advisors of such Party and its Affiliates. "Resolution Period" shall have the meaning set forth in Section 7.1(b). "Response" shall have the meaning set forth in Section 7.4. "Sites" shall have the meaning set forth in Section 2.2. "Tendered Interest" shall have the meaning set forth in Section 7.4(a). "Terminating Party" shall have the meaning set forth in Section 7.2. "Termination Date" shall have the meaning set forth in Section 7.2. "Termination Notice" shall have the meaning set forth in Section 7.2. "Termination Price" shall have the meaning set forth in Section 7.2. "Transfer Agreement" shall have the meaning set forth in Section 7.2. "Transfer of Control" shall mean: (i) with respect to DRI, the transfer of ownership or control of a majority of the voting equity interests in DRI, whether in one transaction or a series of transactions, to a Person and any Affiliates of such Person or (ii) with respect to CNG, the transfer of ownership or control of a majority of the voting equity interests in either CNG or Consolidated Natural Gas Company, whether in one transaction or a series of transactions, to a Person and any Affiliates of such Person. ARTICLE II THE ALLIANCE SECTION 2.1 BASIC AGREEMENT. On the terms and subject to the conditions set forth in this Agreement, the Parties hereby agree to form an alliance to undertake the activities contemplated herein. SECTION 2.2 PURPOSE OF THE ALLIANCE. The purpose of the alliance will be to identify and evaluate potential sites ("Sites") for the development of Facilities to be located generally along the pipeline system of CNG's Affiliates in Ohio, Pennsylvania, New York, West Virginia and Virginia, and, through one or more Affiliates of the Parties, to seek to develop, own, operate and maintain such Facilities and to market power and other energy products generated thereby. SECTION 2.3 RIGHTS OF PARTIES IN ALLIANCE INFORMATION AND RIGHTS. All Alliance Information and all permits and development rights in or with respect to any Development Site owned or controlled by either Party or its Affiliates shall be available 3 for use by both Parties in connection with the identification, evaluation and development of Development Sites. SECTION 2.4 MANAGEMENT COMMITTEE. (a) The management of the Parties' activities pursuant to this Agreement will be conducted through a management committee (the "Management Committee") which will be empowered to set policy for, and to make all decisions in respect of, any activities conducted by the Parties hereunder. The acts of the Management Committee shall bind the Parties. (b) The Management Committee shall consist of four individuals (each, a "Manager"). DRI shall be entitled to appoint two Managers to the Management Committee (each a "Dominion Manager"). CNG shall be entitled to appoint two Managers to the Management Committee (each a "CNG Manager"). In addition, each Party shall appoint one or more alternates for each Manager appointed by it. Each alternate shall have all of the powers of the regular Manager in the regular Manager's absence, declination or inability to serve from time to time. Notwithstanding the foregoing, each Dominion Manager and alternative Dominion Manager shall be an employee of Dominion or an Affiliate thereof when appointed by Dominion and at all times thereafter while serving in such position, and each CNG Manager and alternate CNG Manager shall be an employee of CNG or an Affiliate thereof when appointed by CNG and at all times thereafter while serving in such position. (c) The Management Committee shall meet at least monthly during the first year after the date hereof and thereafter, at least quarterly, which meetings may be held by telephonic conference. Special meetings of the Management Committee may be called from time to time by any Manager. A quorum shall consist of at least one DRI Manager and one CNG Manager. In lieu of a meeting, action of the Management Committee may be taken by the unanimous written consent of the Managers. (d) The unanimous approval of the Managers present at a meeting at which a quorum is present shall be required for the Management Committee to act or to refrain from acting. (e) The Management Committee may adopt such rules as the Managers consider necessary to govern its operations, provided such rules are not inconsistent with this Agreement. (d) The Management Committee may designate such officers and other agents, and may grant such Persons such rights and powers, as the Management Committee may deem appropriate. 4 ARTICLE III THE SITES SECTION 3.1 SITE IDENTIFICATION. The Parties have identified those Sites listed on Exhibit A attached hereto as potential development sites for --------- Facilities (the "Existing Sites"). During the term of this Agreement, the Parties shall seek to identify additional potential Sites for the development of Facilities. The Management Committee shall establish procedures for identifying additional potential Sites, including the information needed to assist in such identification, and each Party shall provide to the other Party such information which it then has available to it (either directly or through its Affiliates) to aid in such identification. At such time as the Management Committee identifies a potential Site, it shall designate such Site in a writing signed by at least one Manager appointed by each Party, whereupon such Site shall become a "Development Site". If the Management Committee determines that a Development Site cannot feasibly be developed for a Facility and the Management Committee specifies that such Site be deleted from the list of Development Sites, then such Site shall no longer be deemed a Development Site. SECTION 3.2 SITE EVALUATION. (a) The Management Committee shall establish procedures for evaluating Development Sites and shall seek to prioritize those Development Sites which appear to have the greatest potential for successful development. Each Party shall provide to the other Party such information as shall be necessary or appropriate to assist in the evaluation of Development Sites, to the extent such information is then available to such Party (either directly or through its Affiliates). (b) Except as otherwise decided by the Management Committee, the Parties will consider the following general criteria for evaluating potential Development Sites: (i) a nominal 14 percent internal rate of return after tax; (ii) an emphasis on projects which are generally accretive in their first year of operations to DRI and CNG; (iii) an equity structure that provides for 50 percent ownership interest by each of DRI and CNG; (iv) an expectation that projects will be developed with equity funds until the most beneficial long-term financing structure is in place; (v) an expectation that projects will be project- or portfolio-financed, as appropriate, to maximize value; (vi) an expectation that projects will be leveraged to the maximum extent practicable; (vii) an expectation that tax efficient structures favorable to each Party will be used to the extent possible; and (viii) such additional or alternative criteria as the Management Committee deems appropriate with respect to the Development Site in question. SECTION 3.3 EMPLOYEES AND CONTRACTORS. Upon the request of the Management Committee, each Party shall make available to the other Party such employees of that Party or its Affiliates as shall be necessary and available to assist in the performance or furtherance of the objectives of this Agreement. To the extent that qualified employees of the Parties or their Affiliates are not available for such purposes, 5 the Management Committee may hire or authorize the hiring of third party contractors for the performance of any such activities. SECTION 3.4 SITE DEVELOPMENT. (a) If the Management Committee determines that a Development Site is suitable for development of a Facility, then the Parties shall form a separate limited liability company or other entity (a "Development Entity") to pursue such development. The Parties anticipate that each such Development Entity shall be formed pursuant to an operating agreement (or other appropriate formation documents) to be mutually agreed upon between the Parties as and when needed. CNG or its Affiliates and DRI or its Affiliates shall each own 50 percent of the equity interests in any such development or Development Entity. In addition, each of CNG and DRI acknowledges and agrees that it will cause the appropriate level of mutually agreeable equity support to be provided to the Affiliate of such Party that owns the interest in the Development Entity. (b) During the term of this Agreement, (i) except for development that is conducted by the Parties pursuant to this Agreement, neither Party shall develop (either directly or through its Affiliates) any Facility within a Development Area, or acquire any interest in any Facility in a Development Area, or, if a Development Site is owned or leased by a Party or its Affiliates, sell or lease (either directly or through its Affiliates) to another Person such Development Site and (ii) the Parties, acting pursuant to this Agreement, shall have the exclusive right to develop any Facility within the Development Areas. The terms of this Section 3.4(b) shall survive any termination of this Agreement. ARTICLE IV EXPENSES Except as set forth in the following sentence, each Party shall bear all expenses incurred by it in connection with this Agreement and the investigation and evaluation of Development Sites pursuant to this Agreement. All third party costs incurred by either Party on behalf of the alliance contemplated hereby or in connection with this Agreement which have been approved by the Management Committee shall be borne equally by the Parties. ARTICLE V CONFIDENTIALITY SECTION 5.1 CONFIDENTIALITY. (a) "Confidential Information" means any and all plans, information, processes, procedures, trade secrets, compositions, improvements, devices, programs, know-how, inventions, discoveries, concepts and designs, information regarding business operations, plans and strategies, products or services, data, marketing and distribution plans, site locations, methods and techniques and all other information and other materials whether written or oral (whatever the form or storage medium) provided by a 6 Party to the other Party or its Representatives and any analyses, compilations, studies or other documents prepared by either Party or its Affiliates or their respective Representatives which contain or otherwise reflect such information. "Confidential Information" does not include information which: (i) is or was already in a Party's possession prior to contacts with the other Party; (ii) is or becomes generally available to the public other than as a result of a disclosure by a Party or its Representatives (other than the Party whose information is at issue); or (iii) becomes available to a Party or its Representatives on a non-confidential basis from a source other than the other Party or its Representatives; provided that such source is not known to be bound by a confidentiality agreement or other obligation of secrecy with respect to such information. (b) To maintain the confidentiality of the Confidential Information, each Party, for itself and its Representatives with access to Confidential Information, agrees, during the period from the date hereof until the second anniversary of the termination of this Agreement: (i) not to use any Confidential Information supplied by the other Party, or any copies, extracts, notes, analyses, summaries, or other material prepared by them or their Representatives based upon the Confidential Information supplied by the other Party (collectively, "Notes") except for the purpose of identifying, evaluating or developing a Development Site as contemplated by this Agreement; (ii) not to disclose any Confidential Information supplied by the other Party or its Representatives or Notes other than to their Representatives with a need to know the information contained therein for the purpose of assisting its identification, evaluation or development of a Development Site; provided, that -------- such Representatives shall have agreed to be bound by the terms of this Agreement and each Party shall be responsible for a breach of this agreement by its Representatives; and (iii) not to disclose the terms of this Agreement, that Confidential Information has been made available, that it or its Representatives have inspected any Confidential Information, or that it has identified a Development Site or is evaluating or planning to develop such Development Site or has had, is having or proposes to have any discussions with respect thereto; provided that (i) such disclosure may be made if required, in the written - -------- opinion of counsel to a Party, by applicable law or rule of a stock exchange on which a Party's shares are listed if in the event of any such required disclosure the Party shall, prior to such disclosure being made, notify the other Party and in good faith seek to agree upon the form and content thereof, and (ii) nothing contained herein shall prohibit a Party from using Confidential Information solely provided or developed by it or its Representatives in any manner or for any purpose such Party desires. ARTICLE VI ASSIGNMENT No Party may assign, sell, give, exchange, pledge, encumber or otherwise transfer (including, without limitation, transfers upon dissolution, reorganization or merger), whether voluntary or involuntary, any interest in this Agreement, without the consent of the other Party, which consent may be withheld in the sole and absolute discretion of such other Party. 7 ARTICLE VII DISPUTE RESOLUTION SECTION 7.1 DEADLOCK. (a) If the Parties disagree with respect to the identification, evaluation or development of a Development Site or with respect to any other matter that is material to the operation, financial success, capital requirements or liability of the alliance activities, and if such disagreement is not otherwise resolved within a period of thirty (30) days, then either Party may declare a "material deadlock," which declaration shall be given in writing to the other Party. (b) Upon declaration of a material deadlock in accordance with Section 7.1(a), DRI and CNG shall each cause one or more of their respective senior executive officers to negotiate in good faith with the designated senior executive officers of the other in an effort to resolve the dispute within the next sixty (60) days (the "Resolution Period"). SECTION 7.2 TERMINATION NOTICE. If the Parties are unable to resolve the dispute within the Resolution Period in accordance with the provisions of Section 7.1(b), either Party (the "Terminating Party") may initiate the termination procedures of this Agreement by delivering a written notice (the "Termination Notice") to the other Party (the "Receiving Party") within thirty (30) days after the end of the Resolution Period requesting the termination of this Agreement. The Termination Notice shall specify the applicable "Termination Price" (as defined below) and a date on which the termination shall occur (the "Termination Date"), which date shall be not less than 60 nor more than 180 days after the date on which the Termination Notice is received by the Receiving Party (the "Receipt Date"). If the Receipt Date does not occur within thirty (30) days following the end of the Resolution Period, then this Agreement shall continue in full force and effect. Notwithstanding anything to the contrary contained herein, if prior to the second anniversary of the date of this Agreement (i) a Transfer of Control occurs with respect to a Party (or in the case of CNG, with respect to either CNG or Consolidated Natural Gas Company) or (ii) a written agreement (a "Transfer Agreement") is entered into pursuant to which a Transfer of Control would occur with respect to a Party (or in the case of CNG, with respect to either CNG or Consolidated Natural Gas Company) upon the consummation of such agreement, then, in either such case, such Party shall be deemed to have given a Termination Notice and the Receipt Date shall be deemed to have occurred as of the earlier of the date on which such Transfer of Control occurs or the date on which the Receiving Party receives notice or has knowledge that a Transfer Agreement has been executed; provided, however, the provisions of this paragraph shall not be applicable to, and no Termination Notice shall be deemed given upon the occurrence of, a Transfer of Control arising from a merger of Consolidated Natural Gas Company and DRI or their Affiliates. 8 SECTION 7.3 TERMINATION PRIOR TO SECOND ANNIVERSARY. If the Receipt Date occurs or is deemed to occur before the second anniversary of the date of this Agreement, then the Termination Price shall be an amount equal to all unreimbursed expenses incurred by the Terminating Party in connection with this Agreement, from the date hereof to the date on which the Receipt Date occurs. The Terminating Party shall deliver to the Receiving Party, together with the Termination Notice, such documentation as shall be reasonably necessary to substantiate the calculation of such Termination Price; provided, however, that ----------------- if the Termination Notice is deemed given in accordance with the last sentence of Section 7.2 hereof, then the Receiving Party shall make its best estimate of the Termination Price, which shall be subject to verification by the Terminating Party. The Receiving Party shall have the right to terminate this Agreement by written notice delivered to the Terminating Party (the "Acceptance Notice") within sixty (60) days after the Receipt Date. If the Receiving Party does not give the Acceptance Notice within such sixty (60) day period or if the Receiving Party specifies in such Acceptance Notice that it elects not to purchase the Terminating Party's interest in this Agreement (a "No Purchase Termination"), then this Agreement shall terminate on the Termination Date, at which time all Alliance Information and all development rights provided by a Party shall first be distributed to such Party, the alliance shall then be dissolved and all assets and liabilities of the Parties incurred in connection with this Agreement and approved by the Management Committee shall be distributed equally to the Parties; provided, however, if the Terminating Party is deemed to have given a Termination Notice pursuant to the last sentence of Section 7.2, and the Receiving Party fails to give an Acceptance Notice within sixty (60) days after the Receipt Date or specifies in a timely Acceptance Notice that it elects not to terminate this Agreement as a result of any such Transfer of Control or Transfer Agreement, then this Agreement shall continue in full force and effect as if such deemed Termination Notice was never given. If the Receiving Party gives the Acceptance Notice within sixty (60) days after the Receipt Date and specifies therein that it elects to purchase the Terminating Party's interest in this Agreement (a "Purchase Termination"), then this Agreement shall terminate on the Termination Date, at which time the Receiving Party shall pay the Termination Price to the Terminating Party in cash or by wire transfer and the Terminating Party shall execute and deliver to the Receiving Party such instruments of conveyance, assignment and transfer as shall be necessary to transfer to the Receiving Party all of the Termination Party's right, title and interest in and to this Agreement, all permits, contracts and development rights associated with the Development Sites, and such other documents of conveyance as the Receiving Party shall reasonably request to fully consummate the transactions contemplated in this Section. In the event of a Purchase Termination under this Section 7.3, then from the Termination Date to the fifth anniversary of this Agreement, the Receiving Party, by itself or with partners, shall have the exclusive right (which right shall survive any termination of this Agreement) to develop all of the Development Sites and any Facility within any of the Development Areas and neither the Terminating Party nor its Affiliates nor their respective successors or assigns shall have the right during such period, by themselves or with others, to develop any Facility within any Development Area, to acquire an interest in any 9 Development Site or in any Facility within a Development Area, or, if the Terminating Party or its Affiliates already owns an interest in a Development Site, to sell, lease or otherwise transfer such interest to another Person for the development of such Site. The Terminating Party shall execute, and shall cause its Affiliates to execute, from time to time such additional documents as shall be requested by the Receiving Party to further confirm such exclusive development rights. SECTION 7.4 TERMINATION AFTER SECOND ANNIVERSARY. (a) If the Termination Notice is given after the second anniversary of this Agreement, then the Termination Notice shall include (i) an offer on the part of the Terminating Party to terminate this Agreement and to sell the Terminating Party's entire interest (the "Tendered Interest") in this Agreement and the Development Sites and (ii) the price and terms on which the Terminating Party will sell the Tendered Interest; provided, however, in no event shall such terms provide for a closing within less than 120 nor more than 180 days after the Receipt Date or terms and conditions which differ materially from those typical for the purchase of a 50 percent ownership interest in an ongoing partnership. Within sixty (60) days after the Receipt Date, the Receiving Party shall give a written notice (the "Response") to the Terminating Party stating whether the Receiving Party elects to purchase the Tendered Interest on the terms and conditions set forth in the Termination Notice. (b) If the Receiving Party does not elect within such sixty (60) days after the Receipt Date to purchase the Tendered Interest on the terms set forth in the Termination Notice, then the Receiving Party shall be required to sell, and the Terminating Party shall be required to purchase, all of the Receiving Party's interest in this Agreement and the Development Sites on the same terms and conditions as were set forth in the Termination Notice with respect to the Terminating Party's Tendered Interest. (c) The election made in the Response shall be binding on all Parties. If there is no Response given within the time specified above, the Receiving Party shall be deemed to have agreed to sell to the Terminating Party as provided in Section 7.4(b) all of the Receiving Party's interests in this Agreement and the Development Sites. 7.5 CLOSING AND DEFAULT. The purchase and sale of a Party's interests pursuant to Section 7.3 and Section 7.4 shall be closed at the principal office of the Party purchasing such interests on the date specified in the Termination Notice (provided, however, if no closing date is specified in the Termination Notice, then the closing shall occur 180 days after the Receipt Date). The seller of such Party's interests shall convey such interests at the closing free and clear of all liens, security interests and encumbrances. 7.6 EFFECT ON ONGOING PROJECTS. No termination of this Agreement pursuant to this Article 7 shall effect a termination or sale of any development projects or site development plans as to which the Parties have formed a Development Entity pursuant to Section 3.4(a) hereof. Except as set forth in the charter documents of such Development 10 Entity, such Development Entity and the Parties rights, obligations and ownership therein and thereunder shall continue to the same extent and manner as set forth in such charter documents. ARTICLE VIII REPRESENTATIONS AND WARRANTIES SECTION 8.1 REPRESENTATIONS AND WARRANTIES OF CNG. CNG hereby makes the following representations and warranties to DRI: (a) CNG is a Delaware corporation duly organized, validly existing and in good standing under the laws of the State of Delaware, is qualified to do business in those states where the nature of its business requires it to be so qualified and has the legal power and authority to own its properties, to carry on its business as now being conducted, to enter into this Agreement, to carry out the transactions contemplated hereby and to perform and carry out all covenants and obligations on its part to be performed under and pursuant to this Agreement. (b) The execution, delivery and performance by CNG of this Agreement have been duly authorized by all necessary corporate action, and do not and will not require any consent or approval of CNG's board of directors or shareholders other than that which has been obtained. (c) The execution and delivery of this Agreement, the consummation of the transactions contemplated hereby and the fulfillment of and compliance with the provisions of this Agreement, do not and will not conflict with or constitute a breach of or a default under, any of the terms, conditions or provisions of any legal requirements, or any organizational documents, agreement, deed of trust, mortgage, loan agreement, other evidence of indebtedness or any other agreement or instrument to which CNG is a party or by which it or any of its property is bound, or result in a breach of or a default under any of the foregoing, and CNG has obtained all permits, licenses, approvals and consents of governmental authorities required for the execution and delivery of this Agreement. (d) This Agreement constitutes the legal, valid and binding obligation of CNG enforceable in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization or similar laws relating to or affecting the enforcement of creditors' rights generally or by general equitable principles, regardless of whether such enforceability is considered in a proceeding in equity or at law. (e) There is no pending, or to the knowledge of CNG, threatened action or proceeding affecting CNG before any governmental authority which purports to affect the legality, validity or enforceability of this Agreement. 11 SECTION 8.2 REPRESENTATIONS AND WARRANTIES OF DRI. DRI hereby makes the following representations and warranties to CNG: (a) DRI is a Virginia corporation duly organized, validly existing and in good standing under the laws of the Commonwealth of Virginia, is qualified to do business in those states where the nature of its business requires it to be so qualified and has the legal power and authority to own its properties, to carry on its business as now being conducted, to enter into this Agreement, to carry out the transactions contemplated hereby and to perform and carry out all covenants and obligations on its part to be performed under and pursuant to this Agreement. (b) The execution, delivery and performance by DRI of this Agreement have been duly authorized by all necessary corporate action, and do not and will not require any consent or approval of DRI's board of directors or shareholders other than that which has been obtained. (c) The execution and delivery of this Agreement, the consummation of the transactions contemplated hereby and the fulfillment of and compliance with the provisions of this Agreement, do not and will not conflict with or constitute a breach of or a default under, any of the terms, conditions or provisions of any legal requirements, or any organizational documents, agreement, deed of trust, mortgage, loan agreement, other evidence of indebtedness or any other agreement or instrument to which DRI is a party or by which it or any of its property is bound, or result in a breach of or a default under any of the foregoing, and DRI has obtained all permits, licenses, approvals and consents of governmental authorities required for the execution and delivery of this Agreement. (d) This Agreement constitutes the legal, valid and binding obligation of DRI enforceable in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization or similar laws relating to or affecting the enforcement of creditors' rights generally or by general equitable principles, regardless of whether such enforceability is considered in a proceeding in equity or at law. (e) There is no pending, or to the knowledge of DRI, threatened action or proceeding affecting DRI before any governmental authority which purports to affect the legality, validity or enforceability of this Agreement. ARTICLE IX MISCELLANEOUS SECTION 9.1 TERM. The term of this Agreement shall commence on the date of this Agreement and shall terminate on the fifth anniversary of such date. 12 SECTION 9.2 NOTICES. Notices and communications given pursuant to this Agreement (including Termination Notices, Acceptance Notices and Responses) shall be in writing and shall be delivered by hand, telefax, commercial courier or registered or certified mail (return receipt requested and postage prepaid), to the following addresses (or at such other address for a party as shall be specified by like notice): If to DRI: James F. Stutts Vice President and General Counsel Dominion Resources, Inc. 120 Tredegar Street Richmond, Virginia 23219 Fax: (804) 819-2233 with a copy to: Michael J. Schewel McGuire, Woods, Battle & Boothe, LLP 901 East Cary Street Richmond, Virginia 23219 Fax: (804) 775-1061 If to CNG: Stephen E. Williams Senior Vice President and General Counsel Consolidated Natural Gas Company CNG Tower 625 Liberty Avenue Pittsburgh, Pennsylvania 15222 Fax: (412) 690-7633 with a copy to: Gary Jeffries Senior Counsel Consolidated Natural Gas Company CNG Tower 625 Liberty Avenue Pittsburgh, Pennsylvania 15222 Fax (412) 316-7230 All such notices shall be deemed to be effective when received or, if acceptance of delivery is refused, upon tender of delivery. Notices given by telecopy shall be followed by a copy of the notice given by overnight courier service. 13 SECTION 9.3 AMENDMENT. This Agreement may be amended only in a writing evidenced by the consent of all of the Parties. SECTION 9.4 INVALIDITY. If any provision of this Agreement shall be held invalid, the same shall not affect in any respect whatsoever the validity of the remainder of this Agreement. SECTION 9.5 BINDING EFFECT. This Agreement shall be binding upon, and shall inure to the benefit of, the Parties hereto and their respective successors and assigns. SECTION 9.6 PRESS RELEASES. Neither DRI nor CNG shall make any press release or public statement about the Agreement or the transactions contemplated hereby until each party has approved the timing and content of such press release. SECTION 9.7 RELATIONSHIP OF PARTIES. It is understood and agreed that the relationship of the Parties is limited to that specifically contained herein. Neither DRI nor CNG nor any of their respective Affiliates, employees or agents shall be construed to be the agent, employee or representative of the other, except as provided in Section 2.4 hereof, and neither Party has the authority to bind the other or to incur any obligation on its behalf. As between the Parties, nothing in this Agreement shall be deemed to constitute any such Party a partner or joint venturer of any other Party or to create a fiduciary relationship between such Parties. SECTION 9.8 COUNTERPARTS. This Agreement may be executed in counterparts, each of which shall be deemed an original and all of which, when taken together, shall constitute one and the same instrument. SECTION 9.9 FURTHER ASSURANCES. The Parties agree that they will cooperate with each other and will execute and deliver, or cause to be delivered, all such other instruments, and will take such other actions, as any Party hereto may reasonably request from time to time in order to effectuate the provisions and purposes hereof. SECTION 9.10 COMPLETE AGREEMENT. This Agreement constitutes the complete and exclusive statement of the agreement among the Parties with respect to the alliance and the parties rights and obligations regarding the Development Sites. It supersedes all prior agreements. SECTION 9.11 DEFAULT; EXPENSES OF LITIGATION. If a Party defaults in the performance of its obligations hereunder (including a default by such Party (either directly or through its Affiliates) of the exclusivity provisions hereof), then the non-defaulting Party shall be entitled to all remedies available at law or equity (including specific performance and injunctive relief). If either Party commences litigation to enforce the terms of this Agreement, then the prevailing Party in such litigation shall be entitled to recover from the other Party all legal fees and expenses incurred by the prevailing Party in connection therewith. 14 SECTION 9.12 GOVERNING LAW, JURISDICTION. This Agreement shall be governed by the laws of the State of New York, without giving effect to its choice of laws rules. Furthermore, each Party agrees to subject itself to the jurisdiction of the courts of the State of New York and has designated an agent for service of process. SECTION 9.13 GUARANTY OF CONSOLIDATED NATURAL GAS COMPANY. Within 5 business days of the date hereof, CNG shall cause Consolidated Natural Gas Company to deliver to DRI a guaranty supporting performance of all of CNG's obligations under this Agreement. Such guaranty shall be acceptable in form and substance to DRI in its reasonable discretion. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] 15 WITNESS the following signatures. CNG POWER COMPANY By: /s/ Thomas E. Dodd -------------------------------------- Name: Thomas E. Dodd Title: Vice President and General Manager DOMINION RESOURCES, INC. By: /s/ Thomas N. Chewning -------------------------------------- Name: Thomas N. Chewning Title: Executive Vice President 16 EXHIBIT A
- -------------------------------------------------------------------------------------------------------------- STATE, SITE NAME OF SITE UTILITY CONNECTION COMMENTS NUMBER LATITUDE & LONGITUDE ------------------------------------ Transmission Interface Point - -------------------------------------------------------------------------------------------------------------- OH-1 Warren County CG&E, CSP(AEP), Non-attainment area, put back on DP&L [Joint list at request of market team ------------------------------------ ownership line] 345 Kv line between Fostor and Greene Substations - -------------------------------------------------------------------------------------------------------------- OH-2 Clinton County CG&E, CSP(AEP), Possible access to Cinergy via 39d31m long, 83d53m lat DP&L [Joint joint ownership line (56 percent ownership line] loaded line) 345 Kv line between Clinton and Greene Substations - -------------------------------------------------------------------------------------------------------------- OH-2a Washington Compressor Dayton P&L or AEP Electric transmission is an issue, Station/ Fayette County CNG owns 60 acres - -------------------------------------------------------------------------------------------------------------- OH-3 Pickaway County, west CG&E, CSP(AEP), OH Commission likes, possible 39d42m39.1s long, DP&L [Joint access to Cinergy ------------------------------------ 83d10m38.4s lat ownership line] 345Kv tie line between Stuart and Beatty substations - -------------------------------------------------------------------------------------------------------------- OH-4 Pickaway County, east CG&E, CSP(AEP), OH Commission likes, possible line 39d45m38s long 82d59m20s DP&L [Joint to Cinergy ------------------------------------ lat ownership line] 345KV line between Marquis and Bixby substations - -------------------------------------------------------------------------------------------------------------- OH-4a Groveport Compressor Dayton P&L or AEP CNG owns 20 acres, on 138KV line, Station/Fairfield County in flood plain - -------------------------------------------------------------------------------------------------------------- OH-5 Fairfield County, west Dayton P&L or AEP Inside AEP, access to joint ownership line - -------------------------------------------------------------------------------------------------------------- OH-6 Fairfield County, east Dayton P&L or AEP Inside AEP, access to joint ownership line - -------------------------------------------------------------------------------------------------------------- OH-7 Newark Compressor AEP CNG owns 89 acres, access to joint Station/Licking County ownership line, arch. site on property - -------------------------------------------------------------------------------------------------------------- OH-8 Muskingum County AEP In AEP - -------------------------------------------------------------------------------------------------------------- OH-9 Coshocton County AEP In AEP, non-attainment for SO2 - -------------------------------------------------------------------------------------------------------------- OH-9a Gilmore Compressor AEP 138KV transmission Station/Tuscarawas - -------------------------------------------------------------------------------------------------------------- OH-10 Carroll Compressor AEP CNG owns 101 acres, inside AEP, Station, Carroll County 765Kv line - -------------------------------------------------------------------------------------------------------------- OH-11 Carroll County, east First Energy Possible non-attainment for SO2 and PM10 ------------------------------------ 345Kv line between Sammis and South Canton substations - --------------------------------------------------------------------------------------------------------------
17
- -------------------------------------------------------------------------------------------------------------- STATE, SITE NAME OF SITE UTILITY CONNECTION COMMENTS NUMBER LATITUDE & LONGITUDE ------------------------------------ Transmission Interface Point - -------------------------------------------------------------------------------------------------------------- OH-12 Jefferson County Ohio Edison Non-attainment for SO2 & PM10 - -------------------------------------------------------------------------------------------------------------- OH-13 Columbiana County, First Energy Ohio Commission likes ------------------------------------ west 345Kv line between Sammis and Highland substations - -------------------------------------------------------------------------------------------------------------- OH-14 Columbiana County, central Duquesne/First Ohio Commission likes Energy or First ------------------------------------ Energy 345Kv tie line between Beaver Valley and Hanna substations or 345 KV line between Mansfield and Champerlain substations - -------------------------------------------------------------------------------------------------------------- OH-15 Columbiana County, east First Energy Ohio Commission likes 40d47m long, ------------------------------------ 80d32m30s lat 345Kv line between Mansfield and Highland substations - -------------------------------------------------------------------------------------------------------------- OH-16 Orrville Site, Wayne AEP 138KV transmission, gas issues County - -------------------------------------------------------------------------------------------------------------- OH-17 WCI Steel Site, Trumball Possible cogen, DE will County investigate - -------------------------------------------------------------------------------------------------------------- OH-18 Wood County Toledo Edision/First CNG owns 500 acres, access Energy through LDC - --------------------------------------------------------------------------------------------------------------
18
- ------------------------------------------------------------------------------------------------------------ STATE, SITE NUMBER NAME OF SITE UTILITY CONNECTION COMMENTS LATITUDE & LONGITUDE -------------------------------------- Transmission Interface Point - ------------------------------------------------------------------------------------------------------------ PA-1 Greene County Allegheny -------------------------------------- 39d47m14s long, 80d24m46s 500KV line between Kammer and Ft. lat Martin substations or the 500Kv line between the Harrison or Wylie Ridge substations - ------------------------------------------------------------------------------------------------------------ PA-2 South Bend Facility/ Allegheny/PJM or PJM On border w/ PJM, near Keystone Indiana County Station, CNG owns 100 acres -------------------------------------- 40d40m long, 79d21m lat 500Kv tie line between the Keystone and Yukon substations or the 500Kv line between the Keystone and Conemaugh substations - ------------------------------------------------------------------------------------------------------------ PA-3 Jefferson County Penn Electric - ------------------------------------------------------------------------------------------------------------ PA-4 Clearfield County Penn Electric Environmental Issues - ------------------------------------------------------------------------------------------------------------ PA-5 Elk County Allegheny - ------------------------------------------------------------------------------------------------------------ PA-6 McKean County Allegheny - ------------------------------------------------------------------------------------------------------------ PA-7 Potter County Allegheny - ------------------------------------------------------------------------------------------------------------ PA-8 Tioga County Penn Electric Transmission may be an issue - ------------------------------------------------------------------------------------------------------------ PA-9 Beaver Compressor Dusquense Non-attainment 03, CO, SO2, PM-10; Station//Beaver County CNG owns 300 acres - ------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------ Note: All PA. Will be non attainment for ozone, market in PJM west is not attractive - ------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------
19
- ------------------------------------------------------------------------------------------------------ STATE, SITE NAME OF SITE UTILITY CONNECTION COMMENTS NUMBER LATITUDE & LONGITUDE --------------------------------- Transmission Interface Point - ------------------------------------------------------------------------------------------------------ WV-1 Pleasants County Allegheny or Possible interface site between Allegheny to AEP AEP and Allegheny, 500Kv line --------------------------------- interface 500 Kv line between the Belmont and Harrison substations or the 500 Kv tie line at the Belmont substation - ------------------------------------------------------------------------------------------------------ WV-2 Marshall/Wetzel County AEP - ------------------------------------------------------------------------------------------------------ WV-3 Marshall County AEP - ------------------------------------------------------------------------------------------------------ WV-4 Doddridge/Tyler County Allegheny 500Kv transmission, gas constraints --------------------------------- 500Kv line between the Belmont and Harrison substations - ------------------------------------------------------------------------------------------------------ WV-5 Doddridge County Allegheny 500Kv transmission, gas constraints --------------------------------- 500Kv line between the Belmont and Harrison substations - ------------------------------------------------------------------------------------------------------ WV-6 Harrison County Allegheny - ------------------------------------------------------------------------------------------------------ WV-7 Marion County Allegheny Gas constraints - ------------------------------------------------------------------------------------------------------ WV-8 Taylor/Preston County Allegheny Gas Constraints plus close to Class 1 area - ------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------
20
- ------------------------------------------------------------------------------------------------------ STATE, SITE NAME OF SITE UTILITY CONNECTION COMMENTS NUMBER LATITUDE & LONGITUDE --------------------------------- Transmission Interface Point - ------------------------------------------------------------------------------------------------------ NY-1 Montgomery County Niagara Mohawk West of constraint --------------------------------- 42d54m long 345Kv line between Scotland and 74d18m lat Edic substations or 345 Kv (built to 765) line between Scotland and Marcy substations - ------------------------------------------------------------------------------------------------------ NY-2 Schenectady County Niagara Mohawk West of constraint --------------------------------- 42d50m long 230 Kv line between Porter and 74d3m lat Rotterdam substations - ------------------------------------------------------------------------------------------------------ NY-3 Albany County Niagara Mohawk West of constraint --------------------------------- 42d45m long 345Kv line between Scotland and 74d07m30s lat Edic substations or 345 Kv (built to 765) line between Scotland and Marcy substations - ------------------------------------------------------------------------------------------------------ NY-4 Rensselear County, Niagara Mohawk or NY north 42d41m long State Electric & Gas --------------------------------- 73d42m30s lat 345Kv line between Alps and Reynolds substations - ------------------------------------------------------------------------------------------------------ NY-5 Rensselear County, Niagara Mohawk or NY south 42d41m long State Electric & Gas --------------------------------- 73d42m30s lat 345 Kv line between Alps and Scotland substations - ------------------------------------------------------------------------------------------------------ NY-6 Rochester Rochester Gas & Elec. DE will investigate Or Niagara Mohawk --------------------------------- Later - ------------------------------------------------------------------------------------------------------ NY-7 Utica West of transmission constraint - ------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------
21 EX-27 6 FINANCIAL DATA SCHEDULE
UT 3-MOS DEC-31-1999 MAR-31-1999 PER-BOOK 9,008 5,526 2,390 564 0 17,488 3,831 16 1,120 4,968 180 509 6,456 659 0 0 493 0 15 0 4,208 17,488 1,293 66 980 980 313 34 347 120 (116) 16 (116) 125 0 203 (0.60) (0.60)
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