Energy utility Dominion Resources Inc. (D) announced that it will sell $250 million in debentures. The debentures will mature on Sep 1, 2015, and will have an interest rate of 2.25%.
Dominion Resources offered the debentures at 99.854% of face value and will yield 2.281% when held till maturity. The company intends to use the net proceeds from the issue for general corporate purposes. Dominion will also utilize the proceed to fund its projected fourth-quarter capital requirement, and redeem a portion of the maturity amount of its $200 million in 6% debentures due on Oct 15, 2010 and its $300 million in 4.75% senior notes due on Dec 15, 2010.
Dominion’s total long-term debt at the end of second-quarter 2010 were $15.34 billion versus $15.48 billion at the end of 2009, reflecting a reduction of around $132 million in the first half of 2010.
The debt-to-capital ratio of Dominion at the end of the second-quarter 2010 was 57.2%, which was lower than the 2009 year-end level of 61.6%. The new debt issues will raise the current debt-equity ratio of the company by 40 basis points.
Interest and related expenses of Dominion at the end of second-quarter 2010 were $188 million versus $220 million at the end of the year-ago quarter. Since the proceeds from the new debt issues will be used to redeem high interest bearing debts, the overall interest expenses of the company are expected to come down in the coming periods, unless new debts are issued.
Dominion posted adjusted earnings of 72 cents per share in the second-quarter of 2010, compared to 68 cents in the year-ago period. Dominion expects adjusted earnings per share to be in the range of $3.25 to $3.40 for 2010.
The Zacks Consensus Estimates for third quarter fiscal 2010, fiscal year 2010 and fiscal year 2011 currently stand at $1.02 per share, $3.33 per share and $3.97 per share, respectively.
The company’s major peers include Allegheny Energy Inc. (AYE), American Electric Power Co. Inc. (AEP) and Nisource Inc. (NI). On a competitive landscape the net margins of Dominion fared better than its peers in the trailing twelve months. The company can further expand its margins with the lower interest bearing debt issues.
Dominion Resources currently retains a Zacks #3 Rank (short-term Hold rating). We also maintain a long-term Neutral rating on the stock.
Based in Richmond, Virginia, Dominion Resources, together with its subsidiaries, engages in producing and transporting energy in the United States.
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