Dominion Resources Inc. (D) has sold $450 million unsecured notes yielding 1.95% interest per year and maturing on August 15, 2016. The notes were offered at $99.976 (per $100.00 principal).
During the second quarter earnings call, Dominion revealed plans of issuing $1.2 billion to $1.5 billion in debt through the rest of the year. The current issuance is thus a part of the company’s professed financial strategy.
On August 2, 2011, the company issued $500 million in 30-year notes. Earlier, in March 2011, the company issued $900 million senior unsecured notes in two parts. One of the series consists of $500 million 4.45% notes due March 2021 while the other comprises $400 million 1.8% notes due in March 2014.
The company intends to utilize the current proceeds of the new issue for general corporate purposes, including the reduction of the company's short-term debt.
Dominion's long-term debt as of June 30, 2011, was $16.5 billion versus $15.34 billion as of June 30, 2010. Interest expenses in the second quarter 2011 increased 12.8% year over year mainly due to higher debt levels from the year-earlier quarter. With the new debts issued, interest expenses of the company will rise further in the coming quarters.
The debt-to-capital ratio at the end of the second quarter 2011 was 62.1%, up from 59.5% at the end of 2010. However, with the issuance of the two series of notes aggregating to $950 million, the debt-to-capital ratio will worsen to 63.2%.
The second quarter earnings per share of the company were in line with our expectation. During the earnings call, Dominion reaffirmed its 2011 earnings guidance of $3.00 to $3.30 per share and expects operating earnings between 90 cents and $1.00 per share for the third quarter of 2011. Dominion expects to deliver an earnings growth of 5% to 6% starting next year.
The Zacks Consensus Estimates for third-quarter 2011, fiscal year 2011 and fiscal year 2012 are 97 cents per share, $3.15 per share and $3.27 per share, respectively.
Dominion Resources currently retains a Zacks #3 Rank (short-term Hold rating). The company competes with American Electric Power Co. (AEP) and Nisource Inc. (NI).
Based in Richmond, Virginia, Dominion Resources, together with its subsidiaries, engages in producing and transporting energy in the United States.
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