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Dominion Resources (D) |
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WIKI ANALYSIS
Dominion Resources (D) is an electric and natural gas utility. Dominion Resources has approximately 26,500 megawatts (MW) of electrical generating capacity, enough to power around 20 million homes.[1] As the owner of the nation's largest underground natural gas storage system, Dominion also delivers natural gas to retail customers in eleven states.
Dominion Resources, with its easy access to cheap coal in Virginia, generates over 40%[2] of its energy from burning coal. Like other electric utilities Dominion is under increasing political pressure to adopt cleaner electricity generation methods while maintaining competitive prices. Dominion Resources is also investing in clean energy projects such as wind farms and the conversion of some of its coal plants to cleaner, gas powered plants. Nuclear power already constitutes over 21% of Dominion Resources' generation capacity.
Business Overview
Business & Financial Metrics[3]
In 2009, Dominion generated a net income of $1.29 billion on revenues of $15.13 billion. This represents a 29.8% decrease in net income and a 7.1% decrease in total revenues from 2008, when the company earned $1.83 billion on $16.29 billion in revenues.
Business Segments[4]
Dominion Resources has three primary business segments:
- Dominion Generation (55.4% of total revenue): Dominion's Generation sales electricity to other utilities. Its generation mix includes coal, nuclear, gas, oil, renewables and purchased power. The electric generating plants are located in Virginia, West Virginia and North Carolina.
- Dominion Virginia Power (DVP) (20.5% of total revenue): DVP includes the company's regulated electric transmission, distribution and customer service operations. The electric transmission and distribution operations serve customers in Virginia and northeastern North Carolina
- Dominion Energy (17.2% of total revenue): Dominion Energy includes the company's Ohio natural gas distribution and storage company, liquid natural gas operations and its Applachian natural gas exploration and production business.
Key Trends & Forces
The "Greening" of Utilities
Growing political awareness of the risks of global warming is resulting in increasing governmental pressure for utility companies to reduce emissions. In 2008, three major investment bank predicted that the U.S. government would cap CO2 emissions in the next three years. Dominion's reliance on coal for a major part of its electrical generation mix makes it vulnerable to "greener legislation." However, unlike peer Allegheny Energy (AYE), slightly under half of Dominion's electricity comes from nuclear and hydroelectric power better positioning the company to conform to new environmental standards. The company plans to spend $3.4 billion by 2015[5] on new clean air technologies to reduce particulate and toxic emissions. Dominion has filed for permits to expand one of its nuclear power plants and actively invests in new renewable energy projects to remain on-track for the renewable energy standards set forth by Virginia and North Carolina.
Nuclear Power & Electricity Generation
The key difference between nuclear and fossil plants is the cost structure. Nuclear plants require very large capital investments (to construct the plant) but little expenditure for fuel because it takes relatively little uranium to power a plant. On the other hand, fossil fuel plants require relatively little capital investment but have high fuel costs because they require large amounts of coal, oil or gas. In the past, low fossil fuel prices gave given fossil fuel plants a cost advantage over nuclear plants. The cost advantage, compounded by the stigmas of nuclear energy (the not in my backyard phenomenon) has prevented new nuclear construction for almost 30 years.[6] Record fossil fuel prices have begun to reverse this trend. Already, nuclear utilities such as Exelon, Entergy and Duke Energy Corporation (DUK) have begun filing for permits for construction of new nuclear plants. Dominion has filed for permits to expand one of its existing nuclear generation plants. Dominion operates four nuclear plants on the east cost of the United States.
Competition
Dominion's competitors include Allegheny Energy (AYE), Edison International (EIX), American Electric Power Company (AEP), Duke Energy Corporation (DUK), Entergy (ETR), Exelon Energy Corp (EXC), and Public Service Enterprise Group (PEG).
References
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