Fitch Rates Dominion Resources $600MM 8.875% Notes 'BBB+; Outlook Stable

NEW YORK--(BUSINESS WIRE)--Fitch assigns a rating of 'BBB+' to the $600 million of 8.875% senior notes issued by Dominion Resources, Inc. (Dominion; Fitch Issuer Default Rating (IDR) of 'BBB+'). The new notes are unsecured and rank equally with existing and future unsecured debt of Dominion. The maturity date is Jan. 15, 2019. Proceeds from the notes will be used for general corporate purposes including the repayment of short-term debt, including commercial paper (CP). Dominion had an aggregate of approximately $678 million in outstanding CP on Nov. 21, 2008. A portion of the proceeds may also be used to repay some or all of Dominion's 2.125% convertible senior notes due 2023, of which the $202 million aggregate principal amount is outstanding and which holders have the right to put back to the company in December 2008.

Dominion's ratings are supported by solid cash flows, a majority of which is from regulated operations, strong operating performance, good access to the CP and term debt markets, supportive 2007 Virginia energy legislation that lowered business risk, and tightening energy and capacity markets in the northeastern U.S., which bodes well for future realized power pricing in the merchant generation segment over the medium to long term. Dominion had available liquidity of approximately $2.7 billion as of Sept. 30, 2008. Fitch anticipates that the ratio of funds from operations (FFO)-to-debt will exceed 20% at year-end 2008.

Fitch's rating concerns include the execution risks associated with Dominion's significant capital spending plan, upward pressures on operating costs and lags in fuel recovery. Dominion Virginia Power is investing in coal, gas and potentially new nuclear capacity additions as well as transmission and other system investments. While load growth has slowed in Virginia, the economy is holding up relatively well and the company is short of generation capacity.

Fitch's Stable Outlook incorporates Dominion's plan to reduce debt with the $675 million after-tax proceeds expected in 2009 from the sale of two gas distribution companies, Peoples and Hope. It also includes Fitch's expectation that management will defer or cut growth in capital expenditures and issue debt, hybrid, or common equity as needed to supplement internal cash flow and maintain leverage and coverage ratios at levels consistent with Fitch's guidelines for the 'BBB+' rating during this period of heavy capital spending and challenging capital market conditions. For further information, please refer to Fitch's credit analysis of Dominion Resources dated May 20, 2008 available on the Fitch Ratings web site at www.fitchresearch.com.

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