THE VIRGINIAN-PILOT
Copyright (c) 1995, Landmark Communications, Inc.
DATE: Saturday, April 22, 1995 TAG: 9504220281
SECTION: BUSINESS PAGE: D1 EDITION: FINAL
SOURCE: BY DAVE MAYFIELD, STAFF WRITER
DATELINE: NORFOLK LENGTH: Medium: 92 lines
Brushing off a year-long public battle between his company and its Virginia Power subsidiary as ``regrettable'' but insignificant, Dominion Resources Inc. Chairman Thomas E. Capps said Friday he is confident of higher company profits in the years ahead.
But Capps told shareholders of the Richmond-based Dominion Resources that the company will need to more aggressively diversify beyond Virginia Power in order to realize that promise.
Increasing competition in the slow-growing electric-utility business in the United States is forcing Dominion to explore far-flung new venues for potential profits, Capps told about 1,200 people at Norfolk's Waterside Marriott Hotel.
This was the first meeting of Dominion shareholders since a boardroom and executive-suite brawl erupted last year over the running of Virginia Power, the state's largest power producer. The utility subsidiary accused Capps and other Dominion Resources executives and board members of meddling in its affairs.
The dispute led to a State Corporation Commission investigation and an unresolved battle in the General Assembly over the commission's authority to preserve Virginia Power's independence.
Capps and Virginia Power President James T. Rhodes agreed in February to resign next year as part of a wide-ranging settlement. The corporation commission hasn't indicated whether it will accept the terms of the deal.
Capps acknowledged that the dispute has been stressful on him and others in Dominion and its subsidiaries. But he downplayed its long-term effect.
``It is behind us,'' he said in his opening statement. ``It did not affect Dominion Resources' stock price, our earnings or our operating performance.''
He refused to answer shareholder questions on the matter - except to reject their contention that Dominion's stock price was hurt by the dispute. Capps said the company's stock price fell last year by about the same percentage as the average for companies in the Dow Jones Utility Index.
But Jerome Meyers, a Hampton shareholder, didn't buy Capps' explanation. Given the company's strong competitive position, he said the company's stock ought to be outperforming utility averages.
``Respectfully,'' he told Capps, ``I believe you're wrong that the things last summer did not affect the stock price.''
Most of Friday's meeting was devoted to Capps' and Rhodes' summaries of their companies' strategies and prospects.
Virginia Power is still Dominion Resources' dominant operation, generating more than 85 percent of Dominion's net profit. However, Capps pointed out that the company's non-utility investments have been fueling its profit growth recently.
Non-utility profits doubled over the past four years to $73 million in 1994, while Virginia Power's profits declined slightly over the same period.
Slowing electricity demand and unusually mild weather have exacerbated Virginia Power's recent profit drop. In the first quarter of 1995, Virginia Power's electricity sales fell 3.6 percent from the previous year as a mild winter cut heating use.
That was the main reason for a 23 percent drop in Dominion's first-quarter net income: to a total of $108.5 million, or 63 cents a share. In the same period last year, the company earned the equivalent of 84 cents a share. Total revenues declined 3 percent, to $1.13 billion in the most recent quarter.
Virginia Power has been aggressively cutting costs - eliminating 1,400 jobs last year alone - to firm up its bottom line. Last month, it announced a restructuring that will lead to further streamlining.
``You can raise earnings for a while through cost-cutting,'' Capps said, acknowledging the moves, ``but after a while you've got to grow revenues.''
Virginia Power President Rhodes said the utility does have a revenue-expansion plan. It will bid aggressively to sell wholesale power to other utilities and electric cooperatives around the country.
Meanwhile, Capps walked shareholders through a hodgepodge of non-utility investments that Dominion has made.
They range from long-distance telephone service in St. Petersburg, Russia; natural-gas exploration in Australia, and hydroelectric power plants in South America, as well as commercial lending, land development and mutual-fund administration.
Dominion has a controlling interest in Norfolk-based Goodman Segar Hogan Hoffler, a prominent commercial real-estate company. It also owns and operates high-price housing developments in Williamsburg, Alexandria and Charlotte, N.C.
Capps said he believes he is Dominion's largest individual shareholder. He controls about 60,000 shares.
A majority of his financial assets are tied up in Dominion stock, Capps said. ``I am very bullish on the future of this company.'' ILLUSTRATION: Color photo
Capps
KEYWORDS: DOMINION RESOURCES INC. VIRGINIA POWER by CNB