<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement
[_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[_] Definitive Proxy Statement
[X] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S) 240.14a-11(c) or (S) 240.14a-12
Dominion Resources, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
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(5) Total fee paid:
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
April 30, 1999
-------------------------------------------------------------------------
Notes:
Reg. (S) 240.14a-101.
SEC 1913 (3-99)
<PAGE>
[Dominion Resources Logo] [CNG Logo]
"A Marriage Made In Heaven"
Investor/Analyst Meetings
April - May 1999
<PAGE>
[Dominion Resources Logo] [CNG Logo]
Note to potential users
of the following information
- --------------------------------------------------------------------------------
This material contains forward-looking statements within the meaning of Section
21E of the Securities Exchange Act of 1934. The Forward-looking statements are
subject to various risks and uncertainties. Discussion of 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 estimates of future
market conditions and the behavior of other market participants. Other factors
include, but are not limited to, weather conditions, economic conditions in the
company's service territory, fluctuations in energy-related commodity prices,
conversion activity, other marketing efforts and other uncertainties. Other
risk factors are detailed from time to time in the two companies' SEC reports.
The information provided herein is for purposes of providing analysts general
guidance and a framework for modeling the combined entity created by the
Dominion Resources - CNG merger. Certain third party assumptions and estimates,
such as Zack's earnings estimates, are provided for your convenience and are
deemed to be within an acceptable range of reasonableness, but are not endorsed
by Dominion Resources or Consolidated Natural Gas.
You should take this information as general guidance only and apply your own
judgement in assessing the reasonableness of modeling inputs and assumptions.
In addition, refer to the forward-looking statement contained at the front of
this presentation and to the joint S-4 registration statement filed on April 5,
1999.
Notes:
2
<PAGE>
[Dominion Resources Logo] [CNG Logo]
Purpose of Today's Meeting
- --------------------------------------------------------------------------------
We're going to discuss the:
. WHAT
. HOW and
. WHEN
of creating the nation's premier fully integrated electric and gas company
Notes:
3
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[Dominion Resources Logo] [CNG Logo]
WHAT are we doing?
- --------------------------------------------------------------------------------
. Creating one of the nation's largest fully integrated energy companies
positioned to be a winner in the competitive new world
. Maximizing shareholder value by growing earnings and cash flow
------------------------------
. Providing customers expanded options for low-cost energy
. Creating opportunities for our employees to grow and be part of an industry
leader
Notes:
4
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[Dominion Resources Logo] [CNG Logo]
Focused Strategy: MAIN to Maine
Forty Percent of US Energy Consumption
[Map of United States highlighting Northeastern quadrant]
Notes:
5
<PAGE>
[Dominion Resources Logo] [CNG Logo]
DRI and CNG Combined Footprint*
Platform for Success
Combined footprint map showing where listed assets are located:
. 3.9 million customers
. 20,000 MW power generation portfolio
. 5,000 miles of electric transmission lines
. 7,600 miles of gas transmission lines
. more than 300 Bcfe production
. more than 3.0 Tcfe reserves
*Excludes Canadian and Rocky Mountain reserves
Notes:
6
<PAGE>
[Dominion Resources Logo] [CNG Logo]
Combined Company Footprint
Retail Access by State
. Gas Customers in Core States
- CNG customers: 1.9M
- Others: 8.4M
-----
- Total market potential: 10.3M
. Electric Customers in Core States
- Virginia Power customers: 2.0M
- Others: 15.5M
-----
- Total market potential: 17.5M
Map of northeastern United States and legend which contains icons for;
Combined Service Territory
Gas/Electric Overlap Territory
Independent Power
Gas Pipelines
Storage Field
Status of Retail Access:
Electric Only
Gas Only
Gas and Electric
Notes:
7
<PAGE>
[Dominion Resources Logo] [CNG Logo]
Combined - E&P Opportunities
. Estimated proved reserves approximately 3 Tcfe
. Annual production more than 300 Bcfe
. Balanced reserves
. 10th largest independent E&P Company
Map of United States and part of Canada highlighting reserves location
Notes:
8
<PAGE>
[Dominion Resources Logo] [CNG Logo]
Combined Storage and Arbitrage Opportunities
- --------------------------------------------------------------------------------
CNG DRI/CNG Combined
Flowchart showing CNG producing, storing Flowchart showing DRI/CNG producing,
Gas or Selling Gas storing Gas,Selling Gas or Using Gas
to Generate Electricity
<-"Gas"-> <-"BTUs"->
. Power Development Potential 3,000 -
4,000 MW next 3-5 years.
. Long-term Potential 8,000 MW
Legend which contains icons for:
Notes: Gas production
Gas storage
Gas sales
Using gas to generate electricity
9
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[Dominion Resources Logo] [CNG Logo]
HOW we are going to. . .
. Grow earnings 8-10% Grow
. Fund capital expenditures -> and Shareholder
. Maintain the dividend Value
. Link employee compensation to Shareholder value
Notes:
10
<PAGE>
[Dominion Resources Logo] [CNG Logo]
Expected Earnings Growth
- --------------------------------------------------------------------------------
Bar graph showing earnings growth from 1999-2004 as indicated in
the following chart*
1999 : 919
2000 : 1,027
2001 : 1,144
2002 : 1,234
2003 : 1,305
2004 : 1,407
*Net income ($ Millions)
("9% Growth Rate")
Notes:
11
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[Dominion Resources Logo] [CNG Logo]
Expected EPS and Payout Ratio
- --------------------------------------------------------------------------------
Graph showing EPS, Dividend and Payout Ratio from 1999-2004 as
indicated in the following chart
EPS Dividend Payout Ratio
--- -------- ------------
1999 : $ 3.00 $ 2.58 86%
2000 : $ 3.02 $ 2.58 85%
2001 : $ 3.37 $ 2.58 77%
2002 : $ 3.63 $ 2.58 71%
2003 : $ 3.84 $ 2.58 67%
2004 : $ 4.14 $ 2.58 62%
Notes:
12
<PAGE>
[Dominion Resources Logo] [CNG Logo]
Expected Cash Flow
- --------------------------------------------------------------------------------
Bar graph showing Operating Cash Flow and Cash Flow After Dividends and
Regulated Capex from 1999-2004 as indicated in the
following chart
Cash flow after dividends*
Operating cash flow* and regulated Capex
-------------------- -------------------
1999 : 2,035 325
2000 : 2,180 311
2001 : 2,326 452
2002 : 2,501 762
2003 : 2,620 948
2004 : 2,745 1,073
*Cash flow ($ Millions)
Notes:
13
<PAGE>
[Dominion Resources Logo] [CNG Logo]
Expected Cash Flow
- --------------------------------------------------------------------------------
Bar graph comparing Operating Cash Flow and Net New Financing from 1999-2004 as
indicated in the following chart
Portion*
of Growth
Capex
requiring
net new
Dividend* Regulated Capex* Growth Capex* financing
--------- ---------------- ------------- ---------
1999 : 688 1,022 1,243 (918)
2000 : 878 991 1,341 (1,030)
2001 : 878 997 1,127 (675)
2002 : 878 862 988 (226)
2003 : 878 794 1,059 (111)
2004 : 878 794 1,073 0
*Cash flow ($ Millions)
Notes:
14
<PAGE>
[Dominion Resources Logo] [CNG Logo]
Expected Equity to Total Capitalization
- --------------------------------------------------------------------------------
Bar graph showing Equity to Total Capitalization (%) from 1999-2004 as
indicated in the following chart
1999 : 43.9%
2000 : 42.1%
2001 : 41.5%
2002 : 42.0%
2003 : 43.0%
2004 : 44.3%
Notes:
15
<PAGE>
[Dominion Resources Logo] [CNG Logo]
Earnings growth drivers - Regulated Businesses
- --------------------------------------------------------------------------------
. Virginia Power deregulation story
. Customer growth
. Cost control/merger synergies
. Regulated capital expenditures control
1999* 2004*
- ----- -----
$680 $850
*Net income ($ Millions)
Notes:
16
<PAGE>
[Dominion Resources Logo] [CNG Logo]
Earnings growth drivers - E&P
- --------------------------------------------------------------------------------
. Finding and developing costs
. Lifting costs
. Production growth
. Merger synergies
1999* 2004*
- ----- -----
$125 $250
*Net income ($ Millions)
Notes:
17
<PAGE>
[Dominion Resources Logo] [CNG Logo]
Earnings growth drivers - Electric Generation
- --------------------------------------------------------------------------------
. New site development / leveraging CNG infrastructure
. Gas / electric arbitrage
. Exploiting opportunities in high cost markets
1999* 2004*
- ----- -----
$20 $40
* Net income ($ Millions)
Notes:
18
<PAGE>
[Dominion Resources Logo] [CNG Logo]
Earnings growth drivers - Retail and Wholesale Marketing
- --------------------------------------------------------------------------------
. Incumbent customer base in deregulating markets
. Existing low cost source of power
. Leveraging low cost new generation sources
. Existing trading skills at Virginia Power
1999* 2004*
- ---- ----
$20 $150
*Net income ($ Millions)
Notes:
19
<PAGE>
[Dominion Resources Logo] [CNG Logo]
Sources of Expected Net Income Growth
- --------------------------------------------------------------------------------
Bar graph showing sources of expected net income growth through 2004, as
indicated in the following chart
2004* CAGR off Earnings
---- -----------------
1999 Earnings Base 919.1
Regulated Business 169.4 4%
E & P 125.9
Generation, DCI & Other 62.1 7% including regulated
business, E & P,
generation, DCI and other
Wholesale\Retail marketing 130.4 9% (total)
*Net income ($ Millions)
Notes:
20
<PAGE>
[Dominion Resources Logo] [CNG Logo]
Expected Net Income by Segment
- --------------------------------------------------------------------------------
1999 2004
---- ----
$915 $1,410
Pie Charts showing income breakdown as indicated in the following charts
<TABLE>
<CAPTION>
Description $ Description $
- ----------- --- ------------ --
<S> <C> <C> <C>
Regulated $680 Regulated $470
E&P $125 Deregulated Va. Power $380
Generation & Marketing $ 40 E&P $250
Other $ 70 Generation & Marketing $190
Other $120
</TABLE>
Notes:
21
<PAGE>
[Dominion Resources Logo] [CNG Logo]
Projected Capex By Business
1999-2004 Total
- --------------------------------------------------------------------------------
Pie Chart showing projected Capex (1999-2004 Total) as indicated in the
following table
<TABLE>
<CAPTION>
Description % $
--- -----
<S> <C> <C>
Regulated 45 4.4 b
E&P 35 3.5 b
DCI/Corp/Other 10 1.2 b
Generation 10 0.8 b
Retail & Wholesale Mktg. less than 1 0.1 b
</TABLE>
Total Projected Capex, 1999 - 2004: $10 Billion
Notes:
22
<PAGE>
[Dominion Resources Logo] [CNG Logo]
Improved Expected Earnings Profile
=P/E Multiple Expansion
- --------------------------------------------------------------------------------
Bar chart comparing "Stand Alone" EPS growth (5-6% Growth) vs. "Combined"
earnings growth (8-10% Growth) from 1999-2004 as indicated in the following
table
Stand-Alone Combined
----------- --------
1999 : $ 2.99 -
2000 : $ 3.32 $ 3.15
2001 : $ 3.43 $ 3.45
2002 : $ 3.54 $ 3.65
2003 : $ 3.66 $ 3.90
2004 : $ 3.77 $ 4.30
Stand Alone - Based on analyst projections per First Call and Zacks
Combined - Stand alone adjusted for assumed merger synergies
Notes:
23
<PAGE>
[Dominion Resources Logo] [CNG Logo]
Market P/E Ratio and Projected EPS Growth Rate Major Electric & Gas Companies
- --------------------------------------------------------------------------------
Regression analysis graph comparing P/E Ratio to EPS Growth Rate
(Zack's Estimate)
P/E For 9% Growth P/E For 5% Growth Imputed multiple expansion
Company = 16.4 Company = 13.2 -> for post-merger
Dominion = 3
Notes:
24
<PAGE>
[Dominion Resources Logo] [CNG Logo]
"Show Me the Money"
How we expect to create more shareholder
value together than we can alone
Current Dominion Resources Shareholder Perspective
D-Stand Alone D-Combined with CNG
------------- -------------------
[Bar charts comparing stand alone "Target" price to combined "Target" price as
reflected in the following chart]
Recent Price "Target"(1) Recent Price "Target"(2)
------------ ----------- ------------ -----------
$38.00 $70.00 (84% total $38.00 $90.50 (138% total
shareholder return; shareholder return;
CAGR =11%) CAGR = 15%)
(1) Includes reinvested dividends and projected stock price based on Zack's EPS
estimate (2004) times P/E multiple of 13.2
(2) Includes reinvested dividends and projected stock price based on Zack's EPS
estimate (2004) + merger synergies times P/E multiple of 16.4
Notes:
25
<PAGE>
[Dominion Resources Logo] [CNG Logo]
"Show Me the Money"
How we expect to create more shareholder
value together than we can alone
Current CNG Shareholder Perspective
CNG-Stand Alone CNG-Combined with D
--------------- -------------------
[Bar charts comparing stand alone "Target" price to combined "Target" price as
reflected in the following chart]
Recent Price "Target"(1) Recent Price "Target"(2)
------------ ----------- ------------ -----------
$53.00 $109.00 (106% total $53.00 $134.00 (153% total
shareholder return; shareholder return;
CAGR = 13%) CAGR = 17%)
(1) Includes reinvested dividends and projected stock price based on Zack's EPS
estimate (2004) times P/E multiple of 16.4
(2) Includes reinvested dividends and projected stock price based on Zack's EPS
estimate (2004) + merger synergies times P/E multiple of 16.4
Notes:
26
<PAGE>
[Dominion Resources Logo] [CNG Logo]
WHEN are we going to do it?
- --------------------------------------------------------------------------------
. We are working together NOW to identify opportunities
. We will implement many revenue enhancement opportunities prior to deal
closing through joint ventures
- Example: D-CNG power generation joint venture
. We plan to obtain all approvals and close deal by end of 1999
- See Appendix for approval time lines
Notes:
27
<PAGE>
[Dominion Resources Logo] [CNG Logo]
"A Marriage Made In Heaven"
Notes:
28
<PAGE>
[Dominion Resources Logo] [CNG Logo]
APPENDIX
. Synergy details
. Modeling assumptions
. Transition process
. Approval timelines
. April 14, 1999 press release on the D-CNG power generation joint venture
. April 5, 1999 blast fax on the merger S-4 filing
Notes:
29
<PAGE>
[Dominion Resources Logo] [CNG Logo]
Note to potential users
of the following information
This material contains forward-looking statements within the meaning of Section
21E of the Securities Exchange Act of 1934. The Forward-looking statements are
subject to various risks and uncertainties. Discussion of 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 estimates of future
market conditions and the behavior of other market participants. Other factors
include, but are not limited to, weather conditions, economic conditions in the
company's service territory, fluctuations in energy-related commodity prices,
conversion activity, other marketing efforts and other uncertainties. Other
risk factors are detailed from time to time in the two companies' SEC reports.
The information provided herein is for purposes of providing analysts general
guidance and a framework for modeling the combined entity created by the
Dominion Resources - CNG merger. Certain third party assumptions and estimates,
such as Zack's earnings estimates, are provided for your convenience and are
deemed to be within an acceptable range of reasonableness, but are not endorsed
by Dominion Resources or Consolidated Natural Gas.
You should take this information as general guidance only and apply your own
judgement in assessing the reasonableness of modeling inputs and assumptions.
In addition, refer to the forward-looking statement contained at the front of
this presentation and to the joint S-4 registration statement filed on April 5,
1999.
Notes:
30
<PAGE>
[Dominion Resources Logo] [CNG Logo]
Combined Financial Strengths
CNG DRI Combined
--------------------------------
. Revenue $ 2.7 B $ 6.1 B $ 8.8 B
. Equity Market Capitalization $ 5.4 B $ 8.2 B $ 14.5 B*
. 1998 Earnings $287.7 M $ 535.6 M $ 823.3 M
. Dividend per Share $ 1.94 $ 2.58 $ 2.58
. Total Debt Ratio 38% 51% 48%
. Total Assets $ 6.4 B $ 17.5 B $ 23.9 B
. Employees 6,400 11,000 17,400
. Customers (Millions) 1.9 2.0 3.9
* Includes acquisition premium
Notes:
31
<PAGE>
[Dominion Resources Logo] [CNG Logo]
"Show me the money"
How we expect to create more Shareholder
Value together than we can alone
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
D CNG Combined
Stand Combined Stand (CNG)
Alone (D Perspective) Alone Perspective
----- --------------- ----- ------------
<S> <C> <C> <C> <C>
Earnings per share (2004) $3.79 $ 4.15 $ 5.66 $4.15
P/E Multiple x13.2 x16.4 x16.4 x16.4
----- ------ ------ -----
Share Price Target $50.0 $ 68.0 $ 93.0 $68x1.52(1)=$103.5
Cumulative Dividends(2)(1999-2004) $20.0 $ 22.5 $ 16.0 $ 30.5
----- ------ ------ ------
Share Price + Dividends $70.0 $ 90.5 $109.0 $134.0
Recent Stock Price 38 38 53 53
Total Shareholder Return 84% vs. 138% 106% vs. 153%
Compound Annual Growth 11% 15% 13% 17%
</TABLE>
(1) Exchange Ratio
(2) Includes reinvestment of dividends in stock
Notes:
32
<PAGE>
FINANCIAL ASSUMPTIONS
DRI/CNG COMBINED
Proforma Cash Flow
<TABLE>
<CAPTION>
1999 2000 2001 2002 2003 2004 CAGR
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Net Income (First Call/Zacks plus synergies) 915 1,020 1,145 1,235 1,305 1,410 9.0%
Depreciation 1,080 1,130 1,165 1,265 1,315 1,355
------- ------- ------- ------- ------- -------
OPERATING CASH FLOW $ 1,995 $ 2,150 $ 2,310 $ 2,500 $ 2,620 $ 2,765 6.7%
Cap Ex-Regulated Businesses (1) $ 1,025 $ 995 $ 1,000 $ 865 $ 795 $ 795
Cap Ex-Growth Businesses 1,245 1,340 1,125 985 1,065 1,090
Cash Flow Before Dividends ($275) ($185) $ 185 $ 650 $ 760 $ 880
& Financing
DIVIDENDS $ 690 $ 880 $ 880 $ 880 $ 880 $ 880
Cash Flow Before Financing ($ 965) ($ 1,065) ($ 695) ($ 230) ($ 120) $ 0
DIVIDEND PAYOUT RATIO 75% 86% 77% 71% 67% 62%
Capital Structure (as of 12/31)
Debt $ 9,105 $10,170 $10,865 $11,095 $11,215 $11,215
Preferred $ 1,075 $ 1,075 $ 1,075 $ 1,075 $ 1,075 $ 1,075
Common Equity (2) $ 7,965 $ 8,105 $ 8,370 $ 8,725 $ 9,150 $ 9,680
Total Capitalization $18,145 $19,350 $20,310 $20,895 $21,440 $21,970
Ratios:
Debt 50.2% 52.6% 53.5% 53.1% 52.3% 51.0%
Preferred 5.9% 5.6% 5.3% 5.1% 5.0% 4.9%
EQUITY 43.9% 41.9% 41.2% 41.8% 42.7% 44.1%
</TABLE>
Notes:
1-Capital to maintain regulated businesses
2-No new equity
<PAGE>
FINANCIAL ASSUMPTIONS
Street Estimates Prior To Merger Announcement
- ---------------------------------------------
<TABLE>
<CAPTION>
1999 2000 2001 2002 2003 2004
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
EPS:
DRI $ 2.99 $ 3.32 $ 3.43 $ 3.55 $ 3.66 $ 3.79
CNG $ 3.53 $ 3.99 $ 4.33 $ 4.95 $ 5.22 $ 5.66
</TABLE>
Based on First Call consensus for 1999 and 2000 prior to merger announcement,
and Zack's 5-year growth estimate for 2001 and beyond, also prior to
announcement.
<TABLE>
<CAPTION>
Net Income 1999 2000 2001 2002 2003 2004
- ---------- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
DRI:
EPS $ 2.99 $ 3.32 $ 3.43 $ 3.55 $ 3.66 $ 3.79
Shares Outstanding 194.5 194.5 194.5 194.5 194.5 194.5
Net Income $ 580 $ 645 $ 665 $ 690 $ 715 $ 735
CNG:
EPS $ 3.53 $ 3.99 $ 4.33 $ 4.95 $ 5.22 $ 5.66
Shares Outstanding 95.6 95.6 95.6 95.6 95.6 95.6
Net Income $ 335 $ 380 $ 415 $ 475 $ 500 $ 540
</TABLE>
<PAGE>
FINANCIAL ASSUMPTIONS
<TABLE>
<CAPTION>
Net Income By Business Segment
- ------------------------------
DRI: 1999 2000 2001 2002 2003 2004
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Virginia Power $ 415 $ 450 $ 460 $ 475 $ 490 $ 505
Wholesale Marketing $ 20 $ 25 $ 25 $ 25 $ 25 $ 25
Dominion Energy:
E&P $ 40 $ 55 $ 65 $ 70 $ 70 $ 75
Power Generation $ 20 $ 15 $ 15 $ 15 $ 20 $ 20
Dominion Capital $ 75 $ 90 $ 90 $ 95 $ 100 $ 105
Corporate/Other $ 10 $ 10 $ 10 $ 10 $ 10 $ 5
------ ------ ------ ------ ------ ------
Total DRI Net Income $ 580 $ 645 $ 665 $ 690 $ 715 $ 735
CNG:
Gas Distribution $ 145 $ 150 $ 155 $ 160 $ 165 $ 180
Gas Transmission $ 120 $ 120 $ 125 $ 130 $ 135 $ 140
E&P $ 80 $ 95 $ 105 $ 135 $ 140 $ 155
Retail Marketing $ 0 $ 5 $ 5 $ 10 $ 15 $ 25
Corporate/Other ($ 10) $ 10 $ 25 $ 40 $ 45 $ 40
----- ------ ------ ------ ------ ------
Total CNG Net Income $ 335 $ 380 $ 415 $ 475 $ 500 $ 540
Combined Total, Before Synergies
Regulated $ 680 $ 720 $ 740 $ 765 $ 790 $ 825
E&P $ 120 $ 150 $ 170 $ 205 $ 210 $ 230
Power Generation $ 20 $ 15 $ 15 $ 15 $ 20 $ 20
Retail & Wholesale Marketing $ 20 $ 30 $ 30 $ 35 $ 40 $ 50
Capital/Corporate/Other $ 75 $ 110 $ 125 $ 145 $ 155 $ 150
----- ------ ------ ------ ------ ------
Total Combined Net Income, Before Synergies $ 915 $1,025 $1,080 $1,165 $1,215 $1,275
</TABLE>
<PAGE>
FINANCIAL ASSUMPTIONS
<TABLE>
<CAPTION>
Depreciation by Business Segment
- --------------------------------
DRI: 1999 2000 2001 2002 2003 2004
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Virginia Power $ 570 $ 595 $ 610 $ 635 $ 665 $ 680
Wholesale Marketing $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
Dominion Energy:
E&P $ 75 $ 75 $ 75 $ 85 $ 95 $ 105
Power Generation $ 35 $ 45 $ 40 $ 45 $ 50 $ 60
Dominion Capital $ 25 $ 25 $ 25 $ 25 $ 25 $ 30
Corporate/Other $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
------- ------ ------ ------ ------ ------
Total DRI Depreciation $ 705 $ 740 $ 750 $ 790 $ 835 $ 875
CNG:
Gas Distribution $ 75 $ 80 $ 85 $ 85 $ 90 $ 90
Gas Transmission $ 60 $ 65 $ 65 $ 70 $ 70 $ 70
E&P $ 220 $ 235 $ 245 $ 300 $ 295 $ 300
Retail Marketing $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
Corporate/Other $ 10 $ 15 $ 15 $ 20 $ 25 $ 15
------- ------ ------ ------ ------ ------
Total CNG Depreciation $ 365 $ 395 $ 410 $ 475 $ 480 $ 475
Capex by Business Segment
- -------------------------
DRI: 1999 2000 2001 2002 2003 2004
---- ---- ---- ---- ---- ----
Virginia Power $ 840 $ 795 $ 800 $ 665 $ 585 $ 585
Wholesale Marketing $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
Dominion Energy:
E&P $ 215 $ 205 $ 225 $ 145 $ 165 $ 165
Power Generation $ 125 $ 150 $ 115 $ 120 $ 135 $ 135
Dominion Capital $ 395 $ 375 $ 105 $ 60 $ 110 $ 105
Corporate/Other $ 5 $ 0 $ 0 $ 0 $ 0 $ 0
------ ------ ------ ----- ------ ------
Total DRI Capex $1,580 $1,525 $1,245 $ 990 $ 995 $ 990
CNG:
Gas Distribution $ 130 $ 120 $ 120 $ 120 $ 120 $ 120
Gas Transmission $ 55 $ 80 $ 80 $ 80 $ 90 $ 90
E&P $ 370 $ 475 $ 490 $ 525 $ 545 $ 575
Retail Marketing $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
Corporate/Other $ 135 $ 85 $ 85 $ 85 $ 90 $ 90
------ ------ ------ ----- ------ ------
Total CNG Capex $ 690 $ 760 $ 775 $ 810 $ 845 $ 875
</TABLE>
<PAGE>
FINANCIAL ASSUMPTIONS
COST REDUCTIONS AND REVENUE ENHANCEMENTS
- ----------------------------------------
<TABLE>
<CAPTION>
2000 2001 2002 2003 2004
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Pre-Tax Synergies:
Regulated Cost Reductions $ 15 $ 35 $ 40 $ 40 $ 45
(Net of Rate Reductions)
E&P Enhancements $ 10 $ 25 $ 25 $ 25 $ 30
New Electric Generation $ 0 $ 10 $ 15 $ 35 $ 35
Wholesale Gas & Electricity $ 15 $ 30 $ 30 $ 30 $ 30
Retail Gas & Electricity $ 15 $ 25 $ 40 $ 60 $120
---- ---- ---- ---- ----
Total Pre-Tax Synergies $ 55 $125 $150 $190 $260
Cost of Financing Synergies and
Additional Dividends ($ 10) ($ 25) ($ 40) ($ 50) ($ 55)
Transaction Costs ($ 50) $ 0 $ 0 $ 0 $ 0
---- ---- ---- ---- ----
Net Pre-Tax Merger Impacts ($ 5) $100 $110 $140 $205
Less: Tax(@ 35%) $ 0 ($ 35) ($ 40) ($ 50) ($ 70)
---- ---- ---- ---- ----
Net Income Impact ($ 5) $ 65 $ 70 $ 90 $135
</TABLE>
COMBINED FINANCIALS
- -------------------
<TABLE>
<CAPTION>
2000 2001 2002 2003 2004
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net Income $1,020 $1,145 $1,235 $1,305 $1,410
Shares Outstanding 340 340 340 340 340
EPS $ 3.00 $ 3.37 $ 3.63 $ 3.84 $ 4.15
Dividend Rate $ 2.58 $ 2.58 $ 2.58 $ 2.58 $ 2.58
Dividend Payout Ratio 86% 77% 71% 67% 62%
</TABLE>
Reported EPS figures above include extraordinary one-time merger transaction
costs of $50 million pre-tax in 2000 or $0.10 per share and exclude SFAS71
income of $21 million after-tax or $0.06 per share in 2000, and $0.07 per share
in 2001 through 2007. Therefore, operating earnings are expected to be $3.16,
$3.44, $3.70, $3.91 and $4.22 in years 2000 through 2004 respectively.
<PAGE>
FINANCIAL ASSUMPTIONS
COMBINED FINANCIAL DETAILS
<TABLE>
<CAPTION>
Net Income 1999 2000 2001 2002 2003 2004
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Regulated Businesses $ 680 $ 730 $ 765 $ 790 $ 815 $ 850
E&P $ 125 $ 155 $ 180 $ 220 $ 225 $ 250
Electric Generation $ 20 $ 15 $ 20 $ 25 $ 40 $ 40
Retail & Wholesale Marketing $ 20 $ 50 $ 65 $ 80 $ 100 $ 150
DCI, Corporate, Other $ 70 $ 70 $ 115 $ 120 $ 125 $ 120
------ ------ ------ ------ ------ ------
Total Net Income $ 915 $1,020 $1,145 $1,235 $1,305 $1,410
Capex
Regulated Businesses $1,025 $ 995 $1,000 $ 865 $ 795 $ 795
E&P $ 585 $ 680 $ 715 $ 670 $ 710 $ 740
Electric Generation $ 125 $ 180 $ 200 $ 150 $ 135 $ 135
Retail & Wholesale Marketing $ 0 $ 20 $ 20 $ 20 $ 20 $ 20
DCI, Corporate, Other $ 535 $ 460 $ 190 $ 145 $ 200 $ 195
------ ------ ------ ------ ------ ------
Total Capex $2,270 $2,335 $2,125 $1,850 $1,860 $1,885
</TABLE>
<PAGE>
WHEN
. Putting companies together / creating synergies
. Regulatory and shareholder approvals
Notes:
39
<PAGE>
[Dominion Resources Logo] [CNG Logo]
Transition Functions
. Steering Committee
- Manage process
- Corporate strategy - Board
- Articulate strategy
- Communications
- Restructuring Board
. Transition Teams
- Consolidate - not reengineer
- Analyze and make recommendations on specifically defined areas -
- Synergy Teams
- Revenue Enhancement Teams
- Consultants
Notes:
40
<PAGE>
[Dominion Resources Logo] [CNG Logo]
Chart of Steering Committee Transition Team, as detailed on the following
four pages
Notes:
41
<PAGE>
[Dominion Resources Logo] [CNG Logo]
Synergy
<TABLE>
<CAPTION>
Customer Service Information Human Corporate/Support
Team Systems and Resources Services
---- --------- --------
Technology
----------
<S> <C> <C> <C>
Call Centers Systems Support Procurement
Meter Reading Systems Development Legal services
Billing Systems Integration External Affairs
Credit & Collection Data Center Accounting
Remittance Processing Telecommunications Finance
Treasury
IT
Corporate Secretary
Regulatory
</TABLE>
Notes:
42
<PAGE>
[Dominion Resources Logo] [CNG Logo]
Revenue Enhancement
Chart showing the following revenue enhancement areas:
Electricity and Gas Retail Program
----------------------------------
New Electric Retail Wholesale E & P International
Generation Gas & Electric Trading
Trading Onshore
Large Customers Offshore
Notes:
43
<PAGE>
[Dominion Resources Logo] [CNG Logo]
Delivery System Transportation System
--------------- ---------------------
Best Practice Best Practice
Notes:
44
<PAGE>
[Dominion Resources Logo] [CNG Logo]
Deal Closing
<TABLE>
<CAPTION>
Regulatory Strategy Communications Legal Accounting Treasury
- ------------------- -------------- ----- ---------- --------
<S> <C> <C> <C> <C>
Filings Internal Proxy, Etc.
Negotiations External
Government IR
Affairs
</TABLE>
Notes:
45
<PAGE>
[Dominion Resources Logo] [CNG Logo]
Shareholder and Regulatory Approvals
Projected Timeline
4/99 Mail Proxy
6/99 Shareholder Approval
Notes:
46
<PAGE>
[Dominion Resources Logo] [CNG Logo]
Shareholder and Regulatory Approvals
Projected Timeline
4/99 1935 Act Filing
6/99 Commission Review
12/31/99 Approval
Notes:
47
<PAGE>
[Dominion Resources Logo] [CNG Logo]
Shareholder and Regulatory Approvals
Projected Timeline
4/99 FERC Filing
6/99 Commission Review
10/99 Approval
Notes:
48
<PAGE>
[Dominion Resources Logo] [CNG Logo]
Shareholder and Regulatory Approvals
Projected Timeline
4/99 HSR Filing
6/99 Commission Review
10/99 Approval
Notes:
49
<PAGE>
[Dominion Resources Logo] [CNG Logo]
Shareholder and Regulatory Approvals
Projected Timeline
4/99 Other Federal Filings
NRC
FCC
10/99 Approvals
Notes:
50
<PAGE>
[Dominion Resources Logo] [CNG Logo]
Shareholder and Regulatory Approvals
Projected Timeline
4/99 State Filings
NC
PA
OH (Informational)
VA
WVA
10/99 Approvals
Notes:
51
<PAGE>
[LETTERHEAD OF DOMINION RESOURCES APPEARS HERE]
FOR IMMEDIATE RELEASE
DOMINION RESOURCES, CNG ENTER AGREEMENT
---------------------------------------
TO DEVELOP POWER GENERATION ALONG CNG PIPELINE SYSTEM
-----------------------------------------------------
RICHMOND, Va. and PITTSBURGH, April 14, 1999 - Dominion Resources Inc. (NYSE: D)
and a subsidiary of Consolidated Natural Gas Company (NYSE: CNG) today announced
that they have signed an agreement to develop natural gas-fired power generation
facilities along CNG's natural gas pipeline system.
Under terms of an exclusive interim alliance agreement signed today, Dominion
Resources and CNG Power Company will identify and evaluate potential sites for
development of facilities along CNG's natural gas pipeline network in Ohio,
Pennsylvania, New York, West Virginia and Virginia. Dominion Resources and CNG
affiliates will develop, own, operate and maintain the facilities on a 50-50
ownership basis.
At present, the companies have identified 45 potential development sites, a
number the alliance expects to broaden. Negotiations are under way with major
turbine manufacturers for pricing and delivery of 10 turbines over a period of
the next two to three years. Letters of intent and memoranda of understanding
with the selected manufacturers are expected to be signed this month.
Power generated by the facilities will be marketed by The Wholesale Power Group
of Dominion Resources. The group nearly tripled its wholesale megawatt-hour
sales in 1998 compared to 1997, increasing volume from about 20 million
megawatt-hours to more than 60 million megawatt-hours. The Wholesale Power
Group is increasingly active in natural gas wholesale trading and is now
marketing a portion of CNG production.
(MORE)
<PAGE>
In a joint statement, Thos. E. Capps, Dominion Resources chairman, president and
chief executive officer, and George A. Davidson Jr., CNG chairman and chief
executive officer, said:
"This alliance agreement continues the momentum created by the announcement of
the planned merger of our two companies. It is a first step in combining
Dominion Resources' and CNG's complementary asset bases and skills sets in
electric power and natural gas to enhance value across the energy production
chain. Successful execution of this alliance agreement will further position us
to efficiently serve the growing energy needs across a region that accounts for
40 percent of the nation's energy demand.
In February, Dominion Resources, based in Richmond, Va., and CNG, based in
Pittsburgh, signed a $25 billion merger agreement to create the nations' fourth
largest electric and natural gas company. The merger is expected to be completed
later this year or early next year.
# # #
CONTACTS:
Dominion Resources
- ------------------
Media: Mark Lazenby (804) 819-2042
Hunter Applewhite (804) 819-2043
Analysts: Tom Wohlfarth (804) 819-2150
Suzette Mata (804) 819-2154
CNG
- ---
Media: Chet Wade (412) 690-1361
Dan Donovan (412) 690-1370
Analysts: Jim Garrett (412) 690-1485
Dan Zajdel (412) 690-1241
<PAGE>
[LETTERHEAD OF DOMINION RESOURCES APPEARS HERE]
April 5, 1999
To the Financial Community:
DRI-CNG MERGER:
--------------
JOINT S-4 REGISTRATION STATEMENT FILING
---------------------------------------
This morning, Dominion Resources and Consolidated Natural Gas filed a joint Form
S-4 Registration Statement with the Securities and Exchange Commission regarding
the proposed merger. The companies plan to host a conference call within the
next week to review details of the filing with the financial community. A
separate announcement on the conference call will be forthcoming by blast fax.
The following information is provided as advance information and to help answer
key questions concerning the registration statement.
1. What does the S-4 filing say with regard to dividend policy?
The current annual dividend for Dominion Resources is $2.58 per share. Dominion
Resources' targeted payout ratio of dividends to earnings is 70-75%. At present,
the payout ratio is higher. Dominion Resources' business plan projects that the
targeted ratio will be achieved within two years post-closing through earnings
growth. Therefore, Dominion Resources dividend will be maintained at its current
level.
2. Why is DRI registering as a holding company?
After further analysis of 1998 results and consultation with counsel and the SEC
staff, it has become apparent to management that retaining the Section 3(a)(1)
exemption would be difficult. Furthermore, registration should permit the
company to expand its growth to more geographic areas.
3. Can the combined DRI-CNG system meet the criteria for registration? In
particular, does the 1935 Act permit a combination electric and gas company like
DRI/CNG?
Yes, the companies have been advised by counsel that registration should be
permitted.
The companies believe that the combination of DRI's and CNG's electric and gas
operations is consistent with the requirements of the 1935 Act as interpreted by
<PAGE>
the Securities and Exchange Commission in recent decisions involving the
combination of electric and gas operations under newly formed registered holding
companies.
4. Will registering as a holding company impact the timing of the SEC approval
and the ability to obtain the necessary state approvals for the merger?
No. DRI and CNG are seeking to obtain all necessary approvals for the merger and
to close the merger by the end of the year. DRI and CNG do not expect that
registration of DRI as a holding company will result in delay in obtaining such
approvals. Please note that CNG is already a registered holding company
operating in the states of Virginia, West Virginia, Pennsylvania and Ohio.
Thus, the state commissions in these states are already familiar with the nature
of regulation under the 1935 Act.
5. Will DRI, as a registered holding company, be permitted to retain its
diversified operations, in particular its financial services businesses?
The companies have strong grounds for retaining all of their existing
diversified businesses, many of which are permitted activities for registered
holding companies. They will request SEC approval to do that, or in the
alternative, request that the SEC retain jurisdiction over that question for
review at a later time. The SEC may, however, as a condition to its approval of
the merger, require divestiture of certain non-utility businesses of DRI which
are unrelated to utility operations. In the past, when divestiture has been
ordered, the SEC has allowed a reasonable time within which to effect
divestiture.
6. Will registration of DRI limit DRI's ability to expand its international
operations?
No. Registered holding companies are expressly permitted by Section 33 of the
1935 Act to acquire and hold investments in international utility operations.
The SEC does regulate some aspects of the way a registered holding company
finances those acquisitions and operations.
7. How will registration of DRI affect current outstanding CNG debt or the way
DRI raises capital?
The transition teams are in the process of analyzing financing options for the
combined companies under both alternative merger structures, as part of the
ongoing transition effort. However, no decision has yet been made with respect
to this issue.
2
<PAGE>
8. How will registration affect DRI's operations and growth prospects on an
ongoing basis?
DRI and CNG believe their combination is in the best interest of shareholders
and customers. Registration as a holding company is necessary to complete the
transaction and to permit the combined company to aggressively grow and operate
in more than one state. Thus, registration offers flexibility to expand
operations rather than to artificially limit operations to only one state.
THIS BLAST-FAX CONTAINS FORWARD-LOOKING STATEMENTS WHICH ARE SUBJECT TO VARIOUS
RISKS AND UNCERTAINTIES. DISCUSSION OF FACTORS THAT COULD CAUSE ACTUAL RESULTS
TO DIFFER MATERIALLY FROM MANAGEMENT'S PROJECTIONS, FORECASTS, ESTIMATES AND
EXPECTATIONS IS CONTAINED IN THE COMPANY'S SEC FILINGS, INCLUDING THE SUBJECT
FORM S-4 REGISTRATION STATEMENT.
CONTACTS: THOMAS P. WOHLFARTH 804-819-2150
SUZETTE M. S. MATA 804-819-2154
JOSEPH G. O'HARE 804-819-2156
3
<PAGE>
[Dominion Resources Logo]
The Columbia Gas
Proposal
<PAGE>
[Dominion Resources Logo]
The Columbia Gas Proposal
- --------------------------------------------------------------------------------
. Savings numbers and regulatory retention inflated
- 2/3 cost savings retained (at 50%, dilutive beyond 5 years)
. Double digit dilution for 3 years based on. . .
- $260 million interest on $3.7 billion in debt,
- $64 million in dividends on $800 million in preferred,
- $135 million goodwill and breakup fee amortization
. Dividend cut ($.80 v. $1.94) v. dividend increase to $3.92
. Cash component is taxable
. Up to 20 months to close the deal v. 8-12 months
. Anti-trust problems for CG - CNG
. Leveraged balance sheet will constrain growth
<PAGE>
[Dominion Resources Logo]
Relative Value of Proposals
at Year-End 1999
[Bar chart showing relative value of D-CNG v. CG-CNG]
D - CNG CG - CNG
------- --------
$78.67 $62.58
------- -------
$16.35 [2] $3.34 [5]
+$62.32 [1] +$63.64 [4]
+($4.40) [3]
[1] 1.52 x $41.00
[2] PV of dividends over five years
[3] Tax impact
[4] $70.00 CG offer discounted 1 year at 10%
[5] PV of dividends over five years
<PAGE>
[Dominion Resources Logo]
The Columbia Gas
Proposal
<PAGE>
[Dominion Resources Logo]
The Columbia Gas Proposal
- --------------------------------------------------------------------------------
. Savings numbers and regulatory retention inflated
- 2/3 cost savings retained (at 50%, dilutive beyond 5 years)
. Double digit dilution for 3 years based on. . .
- $260 million interest on $3.7 billion in debt,
- $64 million in dividends on $800 million in preferred,
- $135 million goodwill and breakup fee amortization
. Dividend cut ($.80 v. $1.94) v. dividend increase to $3.92
. Cash component is taxable
. Up to 20 months to close the deal v. 8-12 months
. Anti-trust problems for CG - CNG
. Leveraged balance sheet will constrain growth
<PAGE>
[Dominion Resources Logo]
Columbia Gas/CNG - Earned Return on Equity
- --------------------------------------------------------------------------------
Bar chart comparing ROE as indicated in the following table
Earned 14.2%
Authorized 12.2%
Proformed Earned w/50% Regulatory Retention 17.3%
Proformed Earned w/67% Regulatory Retention 18.4%
<PAGE>
[Dominion Resources Logo]
The Columbia Gas
Proposal
<PAGE>
[Dominion Resources Logo]
The Columbia Gas Proposal
- --------------------------------------------------------------------------------
. Savings numbers and regulatory retention probably inflated
- 2/3 cost savings retained (at 50%, dilutive beyond 5 years)
. Double digit dilution for 3 years assuming. . .
- $260 million interest on $3.7 billion in debt,
- $64 million in dividends on $800 million in preferred,
- $135 million goodwill and breakup fee amortization
. Dividend cut ($.80 from $1.94) v. dividend increase to $3.92
. Cash component is taxable
. Up to 20 months to close the deal v. 8-12 months
. Potential anti-trust problems for CG - CNG
. Leveraged balance sheet could constrain growth
<PAGE>
[Dominion Resources Logo]
Consolidated Natural Gas
Relative Value of Proposals at Year-End 1999
Bar chart showing relative value of proposals at Year-End 1999
D / CNG Transaction [1] CG / CNG Transaction [2]
----------------------- ------------------------
Total Value per share as of 12/31/99: Total Value per share as of 12/31/99:
$61.18 $66.60 $58.10 $62.50
------ ------ ------- ------
$61.18 [3] $66.60 [4] $62.50 [5] $62.50
+($4.40) [6]
Taxable Investor Tax Exempt
Investor
[1] D / CNG transaction assumed to close as of 12/31/99.
[2] CG / CNG transaction assumed to close as of 12/31/00.
[3] 1.52 exchange ratio x D 4/22/99 closing price of $40.25.
[4] 1.52 exchange ratio x D 2/18/99 pre-announcement closing price of $43.82.
[5] $70.00 CG proposal discounted 1 year at 12%. There is no assurance that
the transaction would be worth $70.00 at closing due to the stock component with
a collar.
[6] Reflects tax impact associated with CG proposal.
<PAGE>
[Dominion Resources Logo]
Consolidated Natural Gas
Relative Value of Proposals at Year-End 1999
(Including value of dividend - 1st year)
Bar chart showing relative value of proposals at Year-End 1999 including 1st
year dividend
D / CNG Transaction [1] CG / CNG Transaction [2]
----------------------- ------------------------
Total Value per share as of 12/31/99: Total Value pershare as of 12/31/99:
$65.10 $70.52 $60.04 $64.44
------- ------- ------- -------
$3.92 [7] $3.92 [7] $1.94 [8] $1.94 [8]
+$61.18 [3] +$66.60 [4] +$62.50 [5] +$62.50
+($4.40) [6]
Taxable Investor Tax Exempt
Investor
[1] D / CNG transaction assumed to close as of 12/31/99.
[2] CG / CNG transaction assumed to close as of 12/31/00.
[3] 1.52 exchange ratio x D 4/22/99 closing price of $40.25.
[4] 1.52 exchange ratio x D 2/18/99 pre-announcement closing price of $43.82.
[5] $70.00 CG proposal discounted 1 year at 12%. There is no assurance that
the transaction would be worth $70.00 at closing due to the stock component with
a collar.
[6] Reflects tax impact associated with CG proposal.
[7] D dividend of $2.58 x 1.52 exchange ratio.
[8] Current CNG dividend.
<PAGE>
[Dominion Resources Logo]
Consolidated Natural Gas
Relative Value of Proposals at Year-End 1999
(Including value of dividend -5 years)
Bar chart showing relative value of proposals at Year-End 1999 including value
of dividend - 5 years
D / CNG Transaction [1] CG / CNG Transaction [2]
----------------------- ------------------------
Total Value per share as of 12/31/99: Total Value per share as of 12/31/99:
$77.04 $82.46 $62.47 $66.87
------- ------- ------- -------
$15.86 [7] $15.86 [7] $4.37 [8] $4.37 [8]
+$61.18 [3] +$66.60 [4] +$62.50 [5] +$62.50
+($4.40) [6]
Taxable Investor Tax Exempt
Investor
[1] D / CNG transaction assumed to close as of 12/31/99.
[2] CG / CNG transaction assumed to close as of 12/31/00.
[3] 1.52 exchange ratio x D 4/22/99 closing price of $40.25.
[4] 1.52 exchange ratio x D 2/18/99 pre-announcement closing price of $43.82.
[5] $70.00 CG proposal discounted 1 year at 12%. There is no assurance that
the transaction would be worth $70.00 at closing due to the stock component with
a collar.
[6] Reflects tax impact associated with CG proposal.
[7] PV of D dividend of $2.58 x 1.52 exchange ratio for 5 years.
[8] PV of CNG / CG dividend for 5 years.
<PAGE>
[Dominion Resources Logo]
Virginia Restructuring
Legislation
<PAGE>
Key Elements
of Virginia Legislation
- --------------------------------------------------------------------------------
. Generation deregulated in 2002
. No forced divestiture of assets
. Rate cap through June 2007
. No ROE / earnings cap
- efficiencies / growth to bottom line
. "Stranded cost" recovery through capped rates or wires charge
<PAGE>
Historic
Cost of Regulation
- --------------------------------------------------------------------------------
Graph showing Regulated earnings (unadjusted for inflation*) from 1989 through
1998, as indicated in the following table
1989: 375.2
1990: 392.2
1991: 435.9
1992: 423.8
1993: 466.9
1994: 404.9
1995: 388.7
1996: 421.8
1997: 433.4
1998: 395.1
* $ Millions
<PAGE>
Historic Cost:
Allowed Return Less Than Others
- --------------------------------------------------------------------------------
Bar graph showing allowed returns v. actual return as indicated in the chart
below
Company Allowed Actual
- ------- ------- ------
CP&L 12.8% 13.7%
Duke Energy 12.4% 15.7%
Florida Progress 12.0% 15.5%
FPL Group 12.0% 13.3%
TECO Energy 12.8% 14.4%
Dominion Resources 11.4% 10.1%
