Dominion, Exelon Agree To Terminate Power Purchase Agreement
* Transaction is immediately accretive to Dominion’s earnings
* Dominion raises 2008 operating earnings outlook
RICHMOND, Va. – Dominion (NYSE: D) has reached an agreement with Exelon (NYSE: EXC) to terminate a power purchase agreement between the two companies for power sold from Dominion’s 515-megawatt State Line Power Station in Hammond, Ind.
The cost to terminate the power purchase agreement, purchase coal inventories on hand and in transit as of the closing date, and other assets is approximately $233 million. The power purchase agreement was scheduled to end in December 2012. Certain conditions must be met for the termination agreement to become final, such as receiving Federal Energy Regulatory Commission approval and consents of third-parties. Upon closing, the output of State Line will be sold into the PJM Interconnection LLC regional grid. The transaction is expected to close before year-end 2007.
Thomas F. Farrell II, Dominion chairman, president and chief executive officer, said:
“There is enormous value trapped in our Midwest generation fleet by below-market contracts scheduled to expire beginning in 2012. This transaction will unlock some of that value ahead of schedule. Although State Line’s capacity is less than 20 percent of the total Midwest fleet, the contract termination is expected to add more than $30 million of after-tax earnings annually. That is a good indication of the total value yet to be realized from this part of Dominion’s merchant generation portfolio.”
Farrell continued: “As a result of this transaction, we are raising our current 2008 operating earnings per share outlook of $6.00 or more per share to $6.10 to $6.25 per share and are affirming our expected average annual operating earnings per share growth of at least 6 percent thereafter.”
In providing its operating earnings outlook, the company notes that there could be differences between expected 2008 Generally Accepted Accounting Principles and operating earnings for matters such as, but not limited to, changes in accounting principles. At this time Dominion management is not able to estimate the impact, if any, of these items on GAAP. Accordingly, Dominion is not able to provide a corresponding GAAP equivalent for its operating earnings outlook.
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