Earnings Preview: Dominion Resources' 1Q profit may fall
NEW YORK—Dominion Resources Inc., a utility focused on the mid-Atlantic, Midwest and Northeast regions, reports first-quarter earnings Thursday. The following is a summary of key developments and analyst opinion related to the period.
OVERVIEW: Dominion owns significant reserves of natural gas, which has helped insulate it from that commodity's rising price.
The Richmond, Va.-based utility also is increasing its wind power investments. In January, Dominion acquired a 50 percent interest in an Indiana wind farm from BP Alternative Energy Inc. The facility is Dominion's second wind-to-electricity venture, and more such deals are expected.
In March, Dominion said it bought a project that envisions a combined-cycle natural gas-fired plant that will eventually generate 600 megawatts.
Near the end of the first quarter, Virginia regulators approved a 585-megawatt coal plant, which the utility hopes to have in operation by 2012.
BY THE NUMBERS: Analysts polled by Thomson Financial, on average, expect earnings per share of 89 cents, on revenue of $4.08 billion. The company forecasts earnings per share in a range from 89 cents to 94 cents.
ANALYST TAKE: Wachovia Capital Markets analyst Samuel Brothwell, who has a "Buy"-equivalent rating on the shares and a price target of $48 to $50, said in a recent note that Dominion's Virginia utility has already completed many environmental upgrades and will get more generous treatment from state regulators for its investments in renewable energy. Also, any caps on carbon dioxide emissions could financially benefit the utility, due to its nuclear power generation investments.
WHAT'S AHEAD: Brothwell expressed concern about a May 22 meeting of the Virginia Air Pollution Control Board, which recently took over the air-permitting authority for the newly approved 585-megawatt coal plant.
"In our view, this is an unfavorable development which could delay the plant and jeopardize the ... $1.8 billion plant cost."
Meanwhile, the company's Virginia utility should benefit from incentives to increase its use of renewable resources, which were included in the re-regulation bill passed in the state last year, Brothwell said.
STOCK PERFORMANCE: Shares fell 14 percent during the quarter to close on March 31 at $40.84. They closed Monday at $43.42.
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