道明尼資源 (D) 2002 Q1 法說會逐字稿

Good day, everyone, and welcome to the Dominion Resources First Quarter Earnings conference call. Today's call is being recorded. For opening remarks and introductions, I would now like to turn the conference over to the Chief Financial Officer, Mr. Thomas N. Chewning. Please go ahead, sir.

Good morning. And thanks for joining us for our first quarter 2002 earnings conference call.

Before we begin, I need to remind you that the earnings release and other matters that may be discussed on the call today contain forward-looking statements and estimates that are subject to various risks and uncertainty.

Please refer to the SEC filings, including our most recent annual reports on form 10K and quarterly reports on form 10Q, for discussion of factors that may cause results to differ from management's projections, forecasts, estimates and expectations.

I'll take just a few moments to hit some high points of our preliminary

the first quarter earnings and give second quarter earnings guidance. Then Steve Rogers, our controller, will walk through the quarterly results in detail. We'll then open the call up to your questions.

Dominion first quarter performance was remarkably good. Dominion earned $322 million, or a dollar and 20 cents per diluted share. This compares to $298 million in operating earnings, or a dollar and 20 cents per share the first quarter of 2001. First quarter 2001 results exclude an after tax charge of $136 million, or 55 cents per share related to the buy out of power purchase contracts and non-utility generating plants previously serving the company under long term contracts.

Therefore, reported earnings for the first quarter 2001 were 65 cents per share. There were no special items or charges recorded during the first quarter 2002. Dominion's first quarter earning results were exceptional, considering the mild weather, which adversely impacted earnings 19 cents per share, and the impact of corporate hedges, which is a pure timing issue, and which reduced earnings an additional 13 cents per share.

The corporate hedges are derivative contracts being used by Dominion as economic hedges to attain desired prices for sales of volumes of natural gas expected to be produced this year.

Dominion did not designate these contracts as hedges for accounting purposes. So, they are subject to mark-to-market accounting recognition through the income segment. As a result, there will be poorly earned timing differences between the earnings impact of the hedges and the earnings impact of fiscal gas produced and sold.

Since we know the negative 13 cent impact from the corporate hedges in the first quarter is merely timing, and in combination with natural gas produced and delivered will reduce by year end, we can add it back to earnings to get a true picture of the first quarter results.

This adjusted figure is a dollar and 33 cents per share, which is in line with our original guidance for the first quarter of a dollar 30 to a dollar 40 cents per share.

The first quarter adjusted earnings of a dollar and 33 cents per share demonstrates that Dominion is on track to achieve its full year earnings for $4.90 to $4.95 per share, despite one of the mildest winters on record.

When we further consider and adjust for the effects of weather, the earnings picture becomes even more compelling. Dominion's original guidance for the first quarter of $1.30 to $1.40 per share assumes normal weather.

If we'd rather normalize the corporate hedge adjusted earnings of $1.33 per share, we get implied earnings of $1.52 per share. From that figure, it's clear Dominion has tremendous fundamental earnings power.

Including corporate hedges, Dominion has hedged about 90 percent of expected 2002 natural gas production. Without the use of corporate hedges, Dominion would generally be limited to about 60 to 70 percent hedge provision. While the use of corporate hedges has introduced some potentially early earnings volatility as a result of potential market to market swing, it has increased the visibility and stability of full year 2002 earnings.

We are adjusting our quarterly earnings guidance for the remaining three quarters of 2002. We expect 85 to 95 cents per share in the second quarter. And we expect $4.90 to $4.95 per share for the full year.

As always, details of our earnings guidance can be viewed on our Web site by all investors, from our largest institutional owners holding millions of shares to small individual investors holding a few shares in Dominion Direct, our dividend reinvestment program.

The Web site address is www.dom.com/investors. Beyond the financial numbers, there were a significant number of accomplishments during the quarter.

Dominion raised $938 million of equity capital through the issuance of 10.3 million shares of common stock and 6.6 million units of mandatory convertible securities.

We added 300 megawatts of generation during the quarter, bringing portfolio to more than 22,100 megawatts. The company reached an agreement to acquire State Line Power Station. The condition of State Line and additional green field generation in late stages of development, the main power generation portfolio is expected to grow to 24,000 megawatts by summer, a nine percent increase over the year end 2000

.

Dominion E&P added 256 billion cubic feet equivalent to crude gas and oil reserves. A quarterly replacement ratio of 240 percent, bringing total crude reserves to 5.1 trillion cubic feet equivalent.

So

was announced as

there for lease rights on 37 blocks in the central Gulf Of Mexico, potentially increasing the lease inventory of the exploration prospects by 20 percent and all shore lease acreage by 23 percent. Dominion Delivery added 16,151 net new gas and electric franchise customers during the quarter.

We reduced the debt to capitalization ratio from 59.2 percent at year end 2001 to 56.5 percent at the end of the first quarter 2002. Dominion is on target to meet our debt to cap ratio of 55 percent by the end of this year. Now, let me turn the call over to Steve Rogers to discuss first quarter earnings in detail.

Thanks, Tom. Dominion is composed of three core operating segments: Dominion Energy, Dominion Delivery and Dominion Exploration And Production.

Dominion also has a corporate reporting segment, which includes Dominion Capital and the Corporate Cap

.

Let's begin with the Dominion Energy segment. Dominion Energy manages the company's electric generation and gas pipeline business. This business segment operates the company's 22,100 megawatt generation portfolio, 7600-mile natural gas pipeline, and the 950 billion cubic foot storage system.

Dominion Energy also manages a small portion of the company's Appalachian Gas Production, which consists of about 152 billion cubic feet equivalent of crude reserves as of the end of the first quarter.

And finally, Dominion Energy manages our energy trading, hedging and

activities through the Dominion Energy clearing house.

Dominion Energy posted earnings of 52 cents per share in the first quarter of 2002, compared with 64 cents per share in the first quarter of 2001. Sales volume from customer growth in our Virginia and North Carolina electric franchise service areas provided an increase of two cents per share.

Warmer weather in the electric franchise service areas reduced earnings by 10 cents per share. There were 16 percent fewer 80 degree days during the first quarter of 2002 as compared to 2001.

At the Dominion Energy clearing house, higher trading volumes and gains from market origination deals in both the electric and gas markets contributed an additional 13 cents per share.

The timing impact of market to market losses, related to the corporate hedge on 2002 natural gas production decreased earnings by 13 cents per share.

And finally, other factors, including lower capacity expenses, other expense reductions and share dilution resulted in a forced

per share reduction to quarter over quarter earnings.

Moving on to Dominion Delivery. Dominion Delivery, the company's electric and gas distribution and customer service business, with about 3.9 million electric and gas distribution customers in five states, Ohio, Pennsylvania, West Virginia, Virginia and North Carolina.

Dominion Delivery also manages the company's electric transmission system. Dominion Delivery posted earnings of 55 cents per share in the first quarter of 2002, as compared to 63 cents per share in the first quarter of 2001.

Customer growth added one cent per share to earnings. Warmer weather in the electric franchise service areas reduced earnings by five cents per share, quarter over quarter.

There were 16 percent fewer 80 degree days during the first quarter of 2002, as compared to 2001. Warmer weather in the gas franchise service areas reduced earnings by four cents per share, quarter over quarter. There were 12 percent fewer 80 degree days during the first quarter of 2002, as compared to 2001.

Lower expenses, due to staffing reductions, facility consolidation and other cost cutting measures, improved earnings six cents per share, as compared to the first quarter of 2001. Another factor is including share dilution reduced earnings by six cents per share.

Dominion E&P. Dominion Exploration And Production is the company's gas and oil exploration and production business. It is one of the nation's largest independent E&P companies, with 5.1 trillion cubic feet equivalent of crude natural gas and oil reserves at the end of the first quarter 2002.

Dominion Exploration and Production's earnings increased 14 percent to 33 cents per share in the first quarter of 2002, compared to 29 cents per share in the first quarter of 2001. A 42 percent increase in gas and oil production improved earnings by 18 cents per share. Aided by the acquisition of

, a

natural gas production increased to nearly 108

for the quarter, up from about 76

in the first quarter of 2001.

Lower average realized gas and oil prices reduced earnings 13 cents per share. Average equivalent realized prices were $3.25 per

in the first quarter of 2002, compared to $3.86 per

in the first quarter of 2001. And other factors, including OEM expense and share dilution reduced earnings by one cent per share.

The Corporate Cap Center consists primarily of interest expense on corporate level debt and certain general and administrative corporate costs. In a change to our previous method of reporting segment results, Dominion Capital is now reflected in the corporate and other segments. Dominion Capital results include the performance of its remaining assets.

The corporate and other segment yielded an improvement of 16 cents per share to a net expense of 20 cents per share in the first quarter of 2002, compared to a net expense of 36 cents per share in the first quarter of 2001. The elimination of good will amortization expense resulted from the implementation of new accounting rules, improved earnings nine cents per share.

Dominion Capital improved two cents per share. Other factors, including

other income and shared dilutions improved earnings five cents per share. That increased the earnings reconciliation. We will now open the call to your questions.

Thank you. The question and answer session will be conducted electronically. If you would like to ask a question, please press star-one on your touch tone telephone. We will proceed in the order that you signal us and take as many questions as time permits. Once again, that is star-one to ask a question. I will pause for a moment to assemble our roster. And our first question comes from

of

.

Good morning, everyone. Just a question or two on the corporate hedges. Will similar practices be used in out years going forward? And, also, is there something in the current corporate hedges that could trigger an impact to earnings in 2003?

Michael, thanks for the question. We will, in the fourth quarter of this year, unless we see market reasons. Otherwise, once again, evaluated as we did this time, the third quarter of last year, whether or not we believe that the market

price is, is

going in the right direction or the wrong directions. So, we have an internal group that determines supply and demand, etc., for gas and comes up with our own conclusions of what we think gas and oil prices should be on that fundamental basis.

That's why we took the position that we did on this corporate hedge this year. This corporate hedge will wear off this year, and there's nothing in it that will affect 2003. We have not decided whether or not we will need to have a corporate hedge for 2003. One thing we are doing, though, is that we try and

possible to qualify, produce new reserves for our hedge growth, because the best answer for that is to be able to hedge and have no impact for the quarter.

Obviously, the, the marketplace, you and others understand that if something settles in a year,

and we are conscious of the fact we don't want to have a swing over year-end if at all possible. So, the answer is we haven't made a decision for 2003 as to whether or not we will have a corporate hedge.

Great. Second question for you would be, can you kind of discuss the use of stock options as it relates to management compensation. And can you shed some light on this decision to allow management to sell up to 20 percent of their options, when in the past I guess that wasn't permitted.

First, we have two different incentive programs. One is an annual bonus that's a profit sharing cash only payout if we achieve it. And that basically is based on the assumption that we are paid a slightly beneath the market and if we produce better than expected we surely would expected

create bonus pool that will in turn will enable us to have an annual cash compensation above our peers if we deserve it.

In the past, until 1999 we also had a rolling three year, a long term compensation that was either all cash or part stock and cash depending on what level of management you were in. We abandoned that program in 1999 when we knew we had the

acquisition in hand in May. And exchanged those long term cash and stock programs for a stock option program. No one really or literally has been exercising any of these options although they were exercisable invested almost from the very beginning.

In essence, the last three years we've given up liquidity and any opportunity to diversify as we used to have on the long term cash incentive programs. So, the company decided with some soul searching, that we would allow officers to exercise up to 20% of the options without a penalty and those penalties would have been forfeiture of other potential options and existing options.

And so we raised that because we feel it's appropriate in a small amount for individuals to be able to liquify and to, if they choose to, either spend the money on themselves or diversify portfolios of whatever. I hope that answers your question.

Just a follow up on that is that, is this plan different from the five year loan you have out?

Yes, the direct ownership of the

to have the eligible 1.2 million shares of options. It's 2.19 million direct shares and many of those 2.19 million shares were acquired through the stock loan program. That stock loan problem doesn't mature until 2005 and most cannot be prepaid. There will be no reduction in the direct ownership of Dominion stock which I might add, is valued at about 140 million dollars, that is owned currently by executives.

So, you none of us is going to reduce our direct holding. This is only the exercising of options, some of which are already created according to the treasury a method into our stock. And some of the individuals may indeed convert and hold.

One last question for you, if we go to natural gas and the recent run up in gas prices. Have you revised your outlook for gas prices, which I believe was in the 3.10 to $3.60

F range.

We, we have, we have not revised 3.10 as a realized place for the year end models. However we are attempting, as you might imagine, to hedge as much gas as we can. Not only for this year and next year in our hedge book but obviously our approach is that when you see values in the market that we can hedge into at levels that give us good returns and help ensure that we have a 10% growth rate

. It would not be bad for our current 3.10 average realized price for 2002, nor have we revised any of the 3.15 number that we were using to realize price for 2003.

Thank you very much. Our next question comes from

of Morgan Stanley.

Hi, good morning.

Morning Carrie.

Follow up on that real quick, it looks like you've moved your O-3 hedged gas position from about 50% to 75%? Is that correct?

We have moved our 2003 hedge position over 50% for gas and I believe over 70% for, for oil.

Over 50%, I'm corrected.

So, I'm sorry, okay so that position has remained roughly the same? But I guess, just looking at the drivers you gave for earnings on your fourth quarter conference call. Can we assume that the since you have such mild weather that the boosts you were expecting from that will be replaced with higher commodity prices?

Not necessarily we, as you know, lost about 50 million dollars in the first quarter. One of the answers potentially hoped not to use it is what I mentioned on my short term incentive plan. We have about five cents a quarter built into a model of 4.9, to 4.95 for short term bonus pool or creation. So, one of the answer is that we can make up rather a number that's unforeseen through a reduction of our full term bonus.

But we expect to have greater cost cutting. We're pretty good at making up things

and I think you can figure we already made up a portion of our lost revenue in the first quarter much more than we thought we could in a short period of time. Another possibilities would be higher oil and gas production. We've had good production, we're very excited about that opportunity.

And we're also still excited about

so we would expect if we had normal weather from now on that we can make up the short fall and remember that the corporate hedge will be zero. So we, from 133 we, we think we can get to 490, 495 without too much trouble, unless we have bad utility weather from here on out. So, hopefully the last few days will help us.

If we could clarify too on the hedging, we actually did hedge increase hedge and we were around 40% more. And we've moved it to over 50% so we have taken advantage of the price.

One more quick question, so I'm guessing with your comment about fourth quarter you won't look at even hedging more O3 production until that time frame?

Now we are Carrie we, we won't have a corporate hedge probably until that time.

Okay and then could you just give us a little bit more color on the reverse results with the trading and marketing business? Obviously you mentioned an increase in volumes you also mentioned structured origination. Could you just kind of go into a little bit more detail and also note if you think your stronger credit rating is having giving you a competitive advantage, versus competitors?

I'm gonna let Steve Rogers answer that one, the preamble will be, in terms of being a good credit it's just essential that you're a good credit now in order to get good trading partners. It's the little guys whose not having to support it with cash support with trading partners because they know you're strong enough. And that's very costly

don't have strong balance sheets. Steve Rogers will cover specifically the performance in the first quarter.

If we have, the clearing house had to have really good first quarter and is the earnings out of there are about 7% of our consolidated

. The reason that number's a little bit higher than we had at the end of last year, there were two things. The first one is, it was I guess you'd call it a slight to quality counter parties as a result of the whole ENRON situation.

So, we capitalized on some opportunities for market origination deals in the first quarter. As a result of that, that fat

we don't expect that that plight will continue throughout the year. But it was first quarter benefit. And also just looking at the percentage you know, you're comparing it to a lower number than you normally would because of the weather impact that we experienced in the first quarter.

If you had a normal weather in there you'd have a higher

that we were comparing it to. But the main business reason was the flight to the counter parties because of the ENRON situation. And we just capitalized on that in the first quarter.

Now, are you targeting for this year, roughly 65 million in that income from that business?

Yes we are.

Okay, would you say you had a plan an alignment plan?

I'm sorry it's about 90 million, I apologize.

Okay.

We would say we had a real good first quarter, sometimes that doesn't mean that you're gonna remain ahead for the rest of the year. But you know it all comes to

would like to finish ahead and we're gonna make sure that they do if we can help them.

Okay. But?

We'll now take a question from Kurt Lauder of

Good morning, I'd like to follow up with some of the questions relative to the clearing house and off to a good start with the first quarter is certainly the basis for them. If we could ask relative to the average life of the deals being done in the market origination area and also if you could talk about the fair value of the book that you have right now. And how much of it is based on actively quartered prices and models and things like that.

And also, a last quick question I hope relative to just the credit profile of the group so we can make some of the gauges of the merchant business compared to some of the others in the industry.

Okay talking first the first question was about I guess the average duration or length of these deals. About 80% of them are less than three years in length and the rest of them go out you know from years four and onward. As far as how we value those, basically through three years, those are based on some actual prices that we can find quotes we can find.

External sources and then beyond that, the other 20% we do use internal models to do that evaluation. And we're very careful when we put those together to make sure we're responsible in how we value those contracts. It, the credit quality of we have a credit department that closely monitors our credit exposure and our credit risk. Right now we're very comfortable with where we are from a credit perspective and we continue to look at it basically on a daily basis.

Kurt I'm not sure if you asked for that capitalization of the unit itself. We don't' treat our trading

differently than any other part of that company. We really have time to all parts of the company are total corporate cap. Which now, the first end of the first quarter will

44% equity and 56% debt.

All right, great thank you and if you could go further than that balance sheet comment into a value at risk calculation for the unit, have you done that as well?

We do that daily, hourly, constantly. We have a 10 million dollar advance at risk limit. I don't know what the average

was in the first quarter. We'll have to get that to you. About eight million is what we think. We'll try to be exact when we issue that final quarter numbers on the 10Q. But probably about eight million average.

Okay great, thank you for that comparable information.

Thanks sir.

Gabe Dobson of Georgia Bank has the next question.

Morning Tom.

A couple of questions higher other income in the corporate you know, Dominion Capital, other sort of segment seem to really move. I was wondering if you could just sort of give us an idea what that was? It was the five cent slashed item in the corporate

.

Thanks Dob, one second. Or the other income that the higher other income in share dilution is, share dilution is about 70% of that five cents. You have some currency translation that, that get built into there for some of the international investments that are still hanging on. And it's just various little dribs and drabs that come through.

But of the five cents for the share dilution and the currency translation and the rest of it is just a bunch of little miscellaneous things that they're hanging on in the company.

As you can imagine when you're an expense center like the holding company is, with, with the larger number shares that actually get split out.

Right, right. So it works in your favor in terms of reducing that percent charge.

Okay, fair enough. And then on the unrealized gains in the quarter, can you give us an idea what that was, sort of Q-1, over Q-1 a year ago. And then Q Q-1 versus the fourth quarter?

The change was 22 million the

market in the first quarter of '02 was 31 million and it was nine million in Q-1 of '01.

What was that number of the Q-1 of '01?

Q-1 '01, nine million Q-1 '02 31 million. Net change, 22 million.

Got you and do you have the number convenient just for the fourth quarter?

Do not have it.

Okay, we can follow up with that. Can you remind me the production figures, I think you covered this for the quarter. But what the full production numbers were for the first quarter?

Excuse me, the quarter in natural gas production was about 108

for the quarter. That and then when you add what we, when we give guidance on production we include the Appalachian piece which increases about 12 a year. So, about three a quarter, when you add that it was about 108, plus, got a 111. So, we're on target for the 450, approximately 450 we're expecting for the full year.

Okay, fair enough. And then one other comment just or actually before I get off the production. On the hedges do you have a, an average hedge price for the gas, the oil and then I guess just a range for the electric? What you have hedged for '02?

We don't give out the jaded, what we're hedging prices at. We do have prices but we include them hedge book actual accrual hedges and I marked a market hedges are a part of our 310 or NCFE average realized price. So, everything, included in that corporate hedge is in that number. So, everything including that corporate hedge is in that number. We did not break it down.

Okay. Fair enough, and then last it would be just on the origination at the clearing house could you just take the one step further, just sort of what activity you're seeing, sort of what if first quarter is sort of origination activity is at all an indication. I think you were saying a flight to quality. But outside of expected flight to quality you know sort of what the origination environment was like in the first quarter and looking out into the remainder of the year?

who we happen to have talked into drifted over to our table and Paul knows more about it than anybody else in the company, so Paul

?

Yes as far as origination activity, we had a very good first quarter. I think that was really a roll off of activity that got started in the fourth quarter of last year following the events around ENRON. We are seeing though, the you know, companies of municipals continue to engage in long term supply planning for both electricity and gas because we're situated in the market place with many of those counter parties, they look favorable upon us, I think for a couple reasons.

One, we own gas production so we're well suited to meet their natural gas needs. And we have a nice blended electric portfolio so we're well suited to provide load following needs. So, yeah we're seeing you know good activity in that regard. We expect it to continue. Certainly I think through staffing enhancements that we've made over the last year has helped that, that's part of it. And it certainly got a jump start with the ENRON failure.

Okay and just last question on this mark to market number the Delta 22, I assume the 31 for the first quarter includes the corporate hedges, so that's a total MTM unrealized?

Yes, that is excluding the corporate hedges.

That excludes the corporate hedges?

That's correct.

Okay great, thank you so much.

Moving on from to

.

Good morning, most of my questions have been answered except the generation I think you said 24,000 megawatts by summer. Are you speaking is Armstrong and Troy, are those the two plants you're mainly looking at?

Yeah, the present stability in and Armstrong and Troy and then the state line acquisition should close in June.

Is that still on track in the finishing of Armstrong and Troy as well?

Yes, uh huh.

Okay great and I know you already touched on it but it seemed like the first quarter production at the

segment was a little what was strong. But you're maintaining the full year 450 forecast. Is that, is that any different or was the first quarter actually in line with expectation?

The first quarter was slightly above what we expected. We always try to be a little conservative in terms of good things happen to you and some bad things happen to you. And

first quarter we don't jump to start revising estimates quickly. But I'd have to say that it's fairly encouraging, and we certainly hope it continues, just like we hope that the performance of the clearinghouse, which was way above expectations, continues. But we don't change our annual guidance. And afterall we do have to

up a heck of a lot of weather.

Great. Thank you.

Thank you.

We'll now take a question from

.

Hey guys, it's Zack Schreiber from

. Can you hear me?

Hey Zack.

Just was wondering if you could update us on the whole

cost cutting program, and what the full impact of that was on the quarter. I think you mentioned plus six cents a share on energy delivery. And, is that the right quarterly runway for that business? Was there any other impact, any other business lines? And just to refresh us on what the guidance was in that. I think you had ten million dollars of start up expenses on that, which you thought you were gonna offset with some payback in the first year. Are we ahead of that?

We're really right on track. We put in this year 50 million dollars for

cost cutting initiatives. We really paid for the

last year more or less internally

. And we are very excited about

and we are right on track with that.

Okay.

One, Zack, one thing I'd like to clarify in there, you had mentioned that we had said six cents per share in energy and delivery.

was a factor in those six cents, but the entire six cents in each unit was not completely attributable to Six Sigma.

What else was it attributable...

It did some, we had the

reductions last year, and capacity expense savings and things along those lines.

Okay. And again, that

million dollars, was that after tax or pre-tax?

After tax.

After tax, great. Great. If you

update us on interest expense, you guys have a lot of floating rate debt, a few billion dollars and got the benefit of falling interest rates, as I recall, as part of this whole re-capitalization you were taking out short term debt and kind of fixing it long term. Can you update us on, as to where you are on that, what kind of blended interest rate we should be applying to the corporate debt?

Zack, this is Scott

, we've got a budget of four percent for our variable rate debt. We've got about 20 percent of our total debt in variable rate. And, of course, we're gaining some ground right now with interest rates lower than the four percent. But we expect interest rates to climb over the year, so we're not adjusting budgets because of that.

We are

as much as we can, so, you know, every couple of months we'll put out some in a fixed rate form, either synthetically or by converting some of the CP2 longer term, medium term notes and so forth. Zack, I think that will probably change

on interest

and 2004 because most of the time when we were able to fix rates now, it doesn't beat the four percent variable.

It's just, keeps us from what we think will be higher interest rates in those future time periods. I think we predicted something over five and a half percent for next year for interest rates. So it's one of those things that's almost like another commodity that we try to hedge out when we can. And we either hedge it out by fixing it or by using

.

So

as far as 2003, you're assumption for the variable rate, that was five and a half percent, and you think...

5.7 and actually in terms of dollar expense, about ten million dollars more in after tax expense

interest next year. So obviously working on next year

we could play the three percent short term rate all year, and finish

with 2002. But you kind of have to make that trade off between

this year and looking out for years beyond now.

Okay. Great, thank you so much.

Thank you Zack.

We'll now take a question from Tim Dobbman of Salomon Smith Barney.

Good morning. Most of my questions have been answered as well, but as far as some of the plants coming out in the summer, have you been able to sell any of that output, or are you still not really expecting any contribution out of those, on those plants?

We are expecting a contribution

about ten million dollars

do not have a contract to deal with the merchant

.

Okay. And the gas hedges that you have on beyond the corporate hedge, are all the gas hedges, those are physical hedges?

We have both the, yes, they're all physical, yes.

Okay.

And that's

production and delivery

. Our present plant has been on

all week long, which was not what we expected at this point. So that's been a pleasant surprise.

Even taking advantage of the heat?

Yes, we have. I didn't mean to make a point about

.

No, that's fine. It worked out well. Okay, thank you.

Moving on to Peggy Jones of

.

Some of my questions have been answered, but I had one more, which is do you anticipate any changes in the rating agencies approach to what financial parameters they'll require going forward? And do you have any discussions scheduled with either agency about this?

No. We do not expect anything to change significantly. We meet with them fairly regularly

February was our last meeting with them. We

with them in terms of meeting the

that we told them we would meet. And they liked our financial ratios and

as well as the projections. And so I don't really believe that there's anything with those that will change in our regard, nor do I think they're gonna change dramatically the way they look at life. Did that answer your question Peggy?

Yes, it does. Thank you very much.

We have time for one more question.

Thank you. We'll take our final question from

of

.

Good morning. It was just a couple quick questions. What was your ENP production increase resulting from

? What did that contribute to the 108 million BCFe?

The one rate is 35. 35 is

.

That's approximate. It's somewhere in the 30 to 35.

Actually, to what extent did you kind of opportunistically realize some cost savings to help offset

as January and February didn't pan out?

don't know if we'd term it opportunistic. I will say this, there was a lot of really terrified people in January and February as we experienced such horrible weather. And we always react to reality, and reality was with, even though you should always save money, you always get more careful just like at home when your budget gets tight and you start watching the pennies more carefully.

And so, you know, we had a whole month left at the end of February to try to sharpen the pencil. And everybody worked real hard because it's just human nature.

weather, we probably wouldn't have watched expenses as much as we should. That's just human nature. But we had to pull together and, you know, we got a big company with a lot of

expense.

And so when we pull together like that we can really throttle back. And we're not throttling back on things that are really valuable and either impact the

customer service.

that are just watching the discretionary spending. It really doesn't add to performance. They also have a little bit of a economic offset in terms of the growth of their customer base even though the weather didn't help us.

specifically as to the local economies?

been very strong. As I said, we added customers on both the gas and electric sides.

in particularly, you're more or less

into recessions and some other parts of that service territory and that's our biggest electric market. We certainly have done well because we have both the military

and the government in Northern Virginia and the central part of the state's got a very balanced economy that seemed to hold on better than the rest of the nation during it's recession.

Thank you very much.

Thanks Paul. Thanks everybody for being on the call this morning

patient. Appreciate your being here, looking forward to talking with you again at the end of the second quarter.

That concludes the day's conference. Thank you for your participation.