Dominion Announces Second-Quarter 2006 Earnings

-Company affirms 2006 earnings guidance

-Conference call scheduled for 10 a.m. EDT today

Aug 3, 2006
7:00am

August 3, 2006

RICHMOND, Va. – Dominion (NYSE: D) announced today unaudited net income determined in accordance with Generally Accepted Accounting Principles (GAAP) for the three months ended June 30, 2006 of $161 million (46 cents per share) compared to net income of $332 million (97 cents per share) for the same period last year.

Operating earnings for the three months ended June 30, 2006 amounted to $295 million (84 cents per share) compared to operating earnings of $340 million (99 cents per share) for the three months ended June 30, 2005. 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, reporting to the board of directors and for the company’s annual incentive plan. 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 2006 and 2005 GAAP earnings but excluded from operating earnings can be found on Schedules 1, 2 and 3 of this release.

Tom Farrell, president and chief executive officer, said:

“The first six months of the year reflect operational strength across all of our businesses. Of note, our large coal units achieved the highest year-to-date capacity factor on record of 84.3 percent. Throughput in our wet gas system is up approximately 7 percent year to date. Virginia’s service territory continues to prosper, and our electric new connects grew 2.5 percent compared to the same period last year.

“Last year’s second quarter included business interruption insurance income that did not recur in the second quarter of this year. After normalizing for the receipt of insurance income, our quarterly operating earnings compared favorably to last year’s second quarter.

“In looking to the second half of the year, we have reached an agreement in principle on our outstanding business interruption insurance claims for Katrina and Rita. We anticipate recognizing the income in the third quarter. Additionally, we are revising our 2006 gas and oil production forecast upward, partially reflecting the early return of our production following the hurricanes.

“With our solid second-quarter performance, our expected receipt of business interruption insurance income in the third quarter and our revised production estimate, we are affirming our full-year operating earnings guidance of $5.05 to $5.25 per share.”

In affirming 2006 operating earnings guidance, the company notes that there could be differences between expected GAAP and operating earnings for matters such as, but not limited to, divestitures or changes in accounting principles. 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 operating earnings guidance.


Second-quarter 2006 operating earnings compared to 2005

Second-quarter 2006 operating earnings of 84 cents per share compares to 99 cents per share in the second quarter of 2005. The decrease is primarily attributable to the absence of business interruption insurance income and lower sales of excess emissions allowances, partially offset by higher contributions from the company’s merchant generation business.

Complete details of second-quarter 2006 operating earnings compared to 2005 can be found on Schedule 5 of this release.


Third-quarter 2006 operating earnings assumptions

In the third-quarter 2005, Dominion reported operating earnings of $1.08 per share. Third-quarter 2006 drivers that are expected to compare favorably to third-quarter 2005 include recovery of business interruption insurance income, higher contributions from the company’s merchant generation business and lower unrecovered Virginia fuel expenses. Partial offsets include an expected return to normal weather in the electric utility service area, lower sales of excess emissions allowances and a scheduled refueling outage at our Kewaunee power station.

Dominion’s third-quarter 2006 operating earnings assumptions compared to 2005 can be found on Schedule 6 of this release.


Conference call today

Dominion will host its second-quarter earnings conference call at 10 a.m. EDT on Thursday, Aug. 3, at which time Dominion management will discuss second quarter financial results, the status of the company’s business interruption insurance claims 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 to 15 minutes prior to the scheduled start time. Members of the media also are invited to listen.

A live Web cast 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. EDT Aug. 3 and lasting until 11 p.m. EDT Aug. 10. Domestic callers may access the recording by dialing (877) 919-4059. International callers should dial (334) 323-7226. The PIN for the replay is 91365780. Additionally, a replay of the Web cast will be available on the company’s investor information page by the end of the day Aug. 3.

Dominion is one of the nation's largest producers of energy, with a portfolio of about 28,000 megawatts of generation, about 6.3 trillion cubic feet equivalent of proved natural gas reserves and 7,800 miles of natural gas transmission pipeline. Dominion also operates one of the nation's largest underground natural gas storage systems with about 950 billion cubic feet of storage capacity and serves retail energy customers in ten states. For more information about Dominion, visit the company's Web site at http://www.dom.com/.

This release contains certain forward-looking statements including our earnings guidance for 2006 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 may include factors that are beyond the company's ability to control or estimate precisely, such as fluctuations in energy-related commodity prices, including changes in the cost of fuel for our regulated electric business, the timing of the closing dates of acquisitions or divestitures, realization of and timing of the receipt of expected business interruption insurance proceeds, additional risk exposure associated with the termination of business interruption, offshore property damage and other insurance related to our exploration and production operations and our inability to replace such insurance on commercially reasonable terms, estimates of future market conditions, estimates of proved and unproved reserves, the company’s ability to meet its natural gas and oil production forecasts, the behavior of other market participants, and the effects of hurricanes on our operations, gas and oil production and realized prices. Other factors include, but are not limited to, weather conditions, governmental regulations, 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, 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.

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CONTACTS:    
Media: Mark Lazenby, 804-819-2042  
     
Analysts: Joseph O'Hare, 804-819-2156
Laura Kottkamp, (804) 819-2254

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