By Ted Caddell
Dominion Resources blamed December’s “extremely mild weather” for a drop in its fourth-quarter earnings, reporting earnings of $416 million ($0.70/share) compared to last year’s $490 million ($0.84/share) for the same period, a decline of about 15%. The weather reduced earnings by about 8 cents/share, the company said.
“While we have discussed our sensitivity to weather in prior calls, never [has weather had] the kind of impact that we saw in December,” said CFO Mark F. McGettrick in a conference call with analysts.
Dominion projected earnings per share for the year of $3.50 to $3.85/share, but the company came in at $3.20/share on revenue of $1.9 billion. This was compared to earnings of $1.3 billion, or $2.24/share, for 2014.
The company noted that it is nearly done building the 1,358-MW natural gas combined cycle plant in Brunswick County, Va., and that it has obtained nearly all necessary approvals to build a 1,588-MW combined cycle plant in Greensville County, Va.
Most of the call was taken up, though, with news that it is buying the Utah-based natural gas distributor Questar for $4.4 billion in cash in a deal aimed at expanding its gas business into the West.
Dominion said it expects to complete the acquisition by the end of the year. The company also said it would be assuming Questar’s approximately $1.31 billion in long- and short-term debt.
Like Duke Energy, which announced in October it would purchase Piedmont Natural Gas, Dominion expects the value of natural gas to increase as more and more states switch to the fuel for electric generation in order to meet state and federal emissions mandates.
CEO Thomas Farrell II said the Questar acquisition “provides enhanced geographic diversity to Dominion’s natural gas operations.”
“While our Dominion transmission system is known as the Hub of the Mid-Atlantic, the Questar system is called the Hub of the Rockies, and a principal source of gas supply to the Western states. We believe the value of the system will increase over time,” Farrell said. “As Utah and the surrounding Western states seek to comply with the requirements of the EPA’s Clean Power Plan … compliance is highly likely to result in an increased reliance on low-emission, gas-fired generation.”
It is Dominion’s latest big natural gas play. The company is one of the majority owners of the Atlantic Coast Pipeline project, a $5 billion, 550-mile pipeline that would bring natural gas from the shale fields in Pennsylvania, West Virginia and Ohio to markets and terminals in Virginia and North Carolina. Farrell said construction is expected to start by the end of the year.
Dominion also has invested $3.8 billion to convert its LNG import terminal at Cove Point, Md., on the western shore of the Chesapeake Bay, into an export facility.