Despite absorbing the two-headed blow from mild weather and the economic recession, Richmond, VA-based Dominion Resources posted 4Q2008 unaudited net income of $348 million, or 60 cents per share, up 16% from net income of $299 million, or 52 cents per share, for the same period in 2007.
The company attributed the increase in fourth quarter earnings 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.
Full-year results told a little different story when compared to the previous year's results due to the sale of the majority of the company's non-Appalachian exploration and production operations in 2007. Dominion's unaudited full-year 2008 net income was $1.83 billion, or $3.16 per share, down 28% from 2007 net income of $2.54 billion, or $3.88 per share. for the same period in 2007. The sale of the E&P operations benefited 2007 earnings by approximately $1.5 billion, or $2.27 per share.
"While we realize that 2008 is old news, a number of our 2008 accomplishments provide an important foundation for 2009 and later years, despite the current economic downturn," CEO Thomas F. Farrell II said during an analyst call Thursday. "2008 was the first full year we operated as a restructured company with newly aligned business segments. We met or exceeded guidance in each quarter. Despite the milder-than-normal weather in 2008 and the challenges that the economy presented in the last quarter of the year, our business units preformed extremely well."
Dominion, which uses operating earnings as a primary performance measurement, posted 4Q2008 operating earnings of $422 million, or 72 cents per share, compared to operating earnings of $299 million, or 52 cents per share for 4Q2007. Operating earnings for full-year 2008 amounted to $1.83 billion, or $3.16 per share, compared to operating earnings of $1.68 billion, or $2.56 per share, for 2007. Dominion defines operating earnings as generally accepted accounting principles earnings adjusted for certain items.
"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," Farrell added.
Looking to 2009 and 2010, Farrell said he expects operating earnings to grow each year. "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," he said. "Assuming a return to normal economic conditions, we expect to again grow operating earnings per share 6% or more annually beginning in 2011."
For 1Q2009, the company said it is providing operating earnings guidance of 85-90 cents per share.
"For full-year 2009, revenue growth is expected through all of our regulated gas and electric business lines," CFO Thomas Chewning said during the conference call. "This growth is expected to be augmented with the return to normal weather and lower service restoration expenses in our electric utility business. We also expect earnings growth in our merchant generation activities."
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