Dominion Purchase of Northeast Power Stations Moves Forward

Nov 23, 2004
7:00am

November 23, 2004

RICHMOND, Va. – Dominion (NYSE: D), one of the nation’s largest producers of energy, was granted approval Tuesday by the U.S. Bankruptcy Court for the District of Maryland to purchase three Northeast power stations from USGen New England Inc.

The purchase price includes $536 million in cash and an estimated $120 million for an adjustment for fuel inventory and reimbursement for certain capital expenditures occurring before closing for a total consideration of $656 million.

Over the next seven years, Dominion expects capital expenditures will average $70 million to $95 million a year, with most of that budgeted for environmental controls. In 2005 and 2006 the expenditures are expected to total approximately $230 million.

In July 2003, USGen New England filed for bankruptcy court protection. As part of its bankruptcy reorganization, USGen decided to divest its generating assets through an auction. The court’s decision acknowledges Dominion’s bid as the highest and best offer for the assets. Based on the court’s sale order, Dominion is proceeding to closing, subject to regulatory approvals. Closing is planned for early 2005.

Under terms of the agreement, Dominion will purchase the 1,599-megawatt coal- and oil-fired Brayton Point Station and the 745-megawatt coal- and oil-fired Salem Harbor Station, both in Massachusetts. Dominion also will acquire the 495-megawatt combined-cycle natural gas-fired Manchester Street Station in Providence, R.I. The three stations have a total of about 515 employees.

Thos. E. Capps, chairman and chief executive officer of Dominion, said: "Dominion is extremely pleased with the court’s decision. The assets, with their mix of coal-, gas- and oil-fired capacity, strengthen a regional generation portfolio that already includes the output from our Millstone Power Station. This mix of fuels and generating technologies is important to meeting New England’s energy needs."

At closing, about 60 percent of the combined output from the three stations will be sold under contracts to various buyers, with the balance being sold into the NEPOOL wholesale market.

Dominion is not acquiring any of the facilities' debt in the transaction and plans to finance the acquisition with a combination of debt and equity that will be balance sheet neutral. As announced on Sept. 7, Dominion completed a forward sale of equity transaction, which provides security that the equity need created by the USGen New England acquisition is funded, and that proceeds are applied only when closing of the acquisition occurs. In summary, the forward sale of equity enables Dominion to match the need for proceeds with actual stock issuance. Dominion expects the transaction to be accretive immediately upon closing.

Mark E. McGettrick, president and chief executive officer of Dominion Generation, said: "Dominion has a proven record in operating fossil stations efficiently, economically, and in compliance with all environmental regulations. We welcome our new employees to the team and look forward to integrating their skills and knowledge. We are anxious to demonstrate that we will be a good corporate neighbor in the communities in which we will operate."

Certain aspects of the transaction must be approved by the Federal Energy Regulatory Commission. Registration with the Rhode Island Public Utilities Commission also will be required. Approval under the Hart-Scott-Rodino Act already has been obtained.

Dominion is one of the nation's largest producers of energy, with an energy portfolio of about 25,500 megawatts of generation, 6.4 trillion cubic feet equivalent of proved natural gas reserves and 7,900 miles of natural gas transmission pipeline. Dominion also operates the nation's largest underground natural gas storage system with more than 960 billion cubic feet of storage capacity and serves retail energy customers in nine states. For more information about Dominion, visit the company's Web site at www.dom.com.

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This release contains forward-looking statements, including our expectation that the acquisition of the USGen New England assets will be immediately accretive, that are subject to various risks and uncertainties. Factors that could cause actual results to differ materially from management's projections, forecasts, estimates and expectations include changes in the expected closing date, changes in the expected adjustment to the purchase price at closing, changes in capital market conditions affecting our financing of the acquisition, and changes in our projected future capital expenditures, including environmental expenditures. Other risks include those that affect Dominion generally, including those that are detailed from time to time in our most recent quarterly report on Form 10-Q filed with the Securities & Exchange Commission.


CONTACTS:    
Media: Dan Genest, 804-771-6115  
     
Analysts: Joe O'Hare, 804-819-2156
T.A. Hickman, 804-819-2129

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