January 29, 2009

RICHMOND, Va. – Dominion (NYSE: D) today announced unaudited net income determined in accordance with Generally Accepted Accounting Principles (GAAP) for the 12 months ended Dec. 31, 2008 of $1.83 billion ($3.16 per share) compared to net income of $2.54 billion ($3.88 per share) for the same period in 2007. The sale of the majority of the company’s non-Appalachian E&P operations benefited 2007 GAAP earnings by approximately $1.5 billion ($2.27 per share).

Operating earnings for the 12 months ended Dec. 31, 2008 amounted to $1.83 billion ($3.16 per share) compared to operating earnings of $1.68 billion ($2.56 per share) for the same period in 2007.  Operating earnings are defined as GAAP earnings adjusted for certain items.

Dominion uses operating earnings as the primary performance measurement of its earnings outlook and results for public communications with analysts and investors.  Dominion also uses operating earnings internally for budgeting, for reporting to the board of directors, for the company’s incentive compensation plans and for its targeted dividend payouts.  Dominion management believes operating earnings provide a more meaningful representation of the company’s fundamental earnings power.

Business segment results and detailed descriptions of items included in 2008 and 2007 GAAP earnings but excluded from operating earnings can be found on Schedules 1, 2 and 3 of this release.

Thomas F. Farrell II, chairman, president and chief executive officer, said:

“2008’s operating results reflect the strength of the business model we implemented in 2007 as well as the diligent efforts of our business units to operate efficiently in challenging markets and milder-than-normal electric utility weather.

“We are providing our 2009 operating earnings guidance of $3.20 to $3.30 per share and a 2010 operating earnings outlook of $3.33 to $3.50 per share. Assuming a return to normal economic conditions, we expect to again grow operating earnings per share 6 percent or more annually beginning in 2011.

“I am confident in the fundamental strengths of our business as is our board of directors, who recently declared a nearly 11 percent dividend increase for 2009 to a rate of $1.75 per share and reconfirmed the company’s dividend policy to achieve a 55% payout ratio by 2010.”
 

Fourth-quarter earnings

Dominion also announced today unaudited net income determined in accordance with GAAP for the three months ended Dec. 31, 2008, of $348 million (60 cents per share) compared to net income of $299 million (52 cents per share) for the same period in 2007.

Operating earnings for the three months ended Dec. 31, 2008, were $422 million (72 cents per share) compared to operating earnings of $299 million (52 cents per share) for the three months ended Dec. 31, 2007.

Business segment results and detailed descriptions of items included in 2008 and 2007 GAAP earnings but excluded from operating earnings can be found on Schedules 1, 2 and 3 of this release.

Fourth-quarter 2008 operating earnings compared to 2007

The increase in fourth-quarter 2008 operating earnings is primarily attributable to lower outage costs at the company’s generating units; a lower effective tax rate; lower operating and maintenance expenses at the regulated electric utility; and higher contributions from the company’s merchant generation business. These positives were partially offset by the exclusion of Peoples Natural Gas and Hope Gas, Inc. from operating earnings beginning in 2008.

Full-year 2008 operating earnings compared to 2007

The increase in full-year 2008 operating earnings per share as compared to 2007 is primarily attributable to lower unrecovered Virginia fuel expenses; higher contributions from the merchant generation business; higher volumes and realized prices from the company’s remaining E&P operations; a lower effective tax rate; and accretion due to share repurchases.  These positives were partially offset by the absence of earnings resulting from the divestiture of the majority of the company’s U.S. E&P operations; the exclusion of Peoples Natural Gas and Hope Gas, Inc. from operating earnings beginning in 2008; and milder-than-normal electric utility weather.

Complete details of fourth-quarter and full-year 2008 operating earnings compared to 2007 can be found on Schedule 4 of this release.   

First-quarter 2009 operating earnings guidance

In addition to providing full-year 2009 guidance, the company is providing operating earnings guidance of 85 cents to 90 cents per share for the first quarter of 2009.

This morning, at approximately 7:30 a.m. EST, the company will publish detailed guidance for each of its operating segments.  Complete details of the company’s 2009 guidance can be found on Dominion’s Web page under Financial Modeling, Forecasts and Outlook at http://www.dom.com/investors/.

In providing its 2009 operating earnings guidance and its 2010 operating earnings outlook, the company notes that there could be differences between expected 2009 and 2010 GAAP earnings and operating earnings for matters such as, but not limited to, divestitures or changes in accounting principles. At this time, Dominion management is not able to estimate the impact, if any, of these items on GAAP earnings. Accordingly, Dominion is not able to provide a corresponding GAAP equivalent for its 2009 operating earnings guidance and 2010 operating earnings outlook.

Conference call today

Dominion will host its fourth-quarter earnings conference call at 10 a.m. EST on Thursday, Jan. 29.  Dominion management, including the heads of each business unit, will discuss 2008 financial results, 2009 operating earnings guidance, future growth rates and other matters of interest to the financial community.

Domestic callers should dial (866) 710-0179. The passcode for the conference call is “Dominion.”  International callers should dial (334) 323-9871.  Participants should dial in 10-15 minutes prior to the scheduled start time.  Members of the media also are invited to listen.

A live webcast of the conference call will be available on the company’s investor information page at http://www.dom.com/investors/.

A replay of the conference call will be available beginning about 1 p.m. EST Jan. 29 and lasting until 11 p.m. EST Feb. 5.  Domestic callers may access the recording by dialing (877) 919-4059.  International callers should dial (334) 323-7226.  The PIN for the replay is 24164401.  Additionally, a replay of the webcast will be available on the company’s investor information page by the end of the day Jan. 29.

Dominion is one of the nation's largest producers and transporters of energy, with a portfolio of approximately 27,000 megawatts of generation, 1.2 trillion cubic feet equivalent of proved natural gas and oil reserves, 14,000 miles of natural gas transmission, gathering and storage pipeline and 6,000 miles of electric transmission lines.  Dominion operates the nation’s largest natural gas storage facility with 975 billion cubic feet of storage capacity and serves retail energy customers in 12 states. For more information about Dominion, visit the company's site at http://www.dom.com/.

This release contains certain forward-looking statements, including our forecasted operating earnings for 2009 and 2010 as well as our projected future operating earnings growth rates which are subject to various risks and uncertainties.  Factors that could cause actual results to differ materially from management's projections, forecasts, estimates and expectations may include factors that are beyond the company's ability to control or estimate precisely, such as fluctuations in energy-related commodity prices, the timing of the closing dates of acquisitions or divestitures, estimates of future market conditions, access to and costs of capital, fluctuations in the value of our pension assets, estimates of proved and unproved reserves, the company’s ability to meet its natural gas and oil production forecasts, the timing and receipt of regulatory approvals necessary for planned projects, acquisitions and divestitures, and the ability to complete planned construction or expansion projects as scheduled.  Other factors include, but are not limited to, weather conditions, including the effects of hurricanes on operations, the behavior of other market participants, state and federal legislative and regulatory developments and changes to environmental and other laws and regulations, including those related to climate change, greenhouse gases and other emissions to which we are subject, economic conditions in the company's service area, risks of operating businesses in regulated industries that are subject to changing regulatory structures, changes to regulated gas and electric rates collected by Dominion, changes to rating agency requirements and ratings, changing financial accounting standards, trading counter-party credit risks, risks related to energy trading and marketing, adverse outcomes in litigation matters, and other uncertainties.  Other risk factors are detailed from time to time in Dominion’s most recent quarterly report on Form 10-Q or annual report on Form 10-K filed with the Securities & Exchange Commission.

###

• Financial schedules that accompany the news release (PDF document, requires the free Adobe Acrobat Reader)