Form 8-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

FORM 8-K

CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934

Date of report (Date of earliest event reported)  December 31, 2005

Virginia Electric and Power Company
(Exact Name of Registrant as Specified in Its Charter)


Virginia
(State or other jurisdiction
of incorporation)
1-2255
(Commission
File Number)
54-0418825
(IRS Employer
Identification No.)


701 East Cary Street
Richmond, Virginia
(Address of Principal Executive Offices)
 
23219
(Zip Code)

Registrant’s Telephone Number, Including Area Code (804) 819-2000



(Former Name or Former Address, if Changed Since Last Report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 
 
 

Item 2.01 Completion of Acquisition or Disposition of Assets

On December 31, 2005, Virginia Electric and Power Company (Virginia Power) completed a transfer of its indirect wholly-owned subsidiary, Virginia Power Energy Marketing, Inc. (VPEM) to Dominion Resources, Inc. (Dominion), Virginia Power’s parent company. Prior to the transfer, VPEM was a wholly-owned subsidiary of Virginia Power Services, LLC (VPS). The transaction was consummated through a series of dividend distributions of all of VPEM’s common stock from VPS to Virginia Power, VPS’s parent company, and subsequently from Virginia Power to Dominion. This resulted in a transfer of Virginia Power’s negative investment in VPEM to Dominion in exchange for a capital contribution.

VPEM engages in price risk management activities on behalf of Dominion affiliates through the use of derivative contracts. Following the transfer, VPEM’s results of operations will no longer be included in Virginia Power’s consolidated financial statements and Virginia Power’s consolidated financial statements for periods prior to the transfer will reflect VPEM as a discontinued operation.

Item 9.01.  Financial Statements and Exhibits.

(b) Pro Forma Financial Information
On December 31, 2005, Virginia Power completed the transfer of its indirect wholly-owned subsidiary, VPEM, to Dominion, Virginia Power’s parent company. The following unaudited pro forma condensed consolidated balance sheet of Virginia Power reflects the disposition of VPEM as if it had occurred on September 30, 2005. The accompanying unaudited pro forma condensed consolidated statements of income for the nine months ended September 30, 2005 and for the year ended December 31, 2004, reflect the disposition of VPEM as if it had occurred on January 1, 2005 and 2004, respectively.

The pro forma adjustments have been based on the operations of VPEM during the periods presented, the impact of the disposition of VPEM on December 31, 2005 and other transactions resulting from the disposition. The pro forma adjustments have been made to illustrate the anticipated financial impact of the disposition upon Virginia Power and are based upon available information and assumptions that Virginia Power believes to be reasonable at the date of this filing. Consequently, the pro forma financial information presented is not necessarily indicative of the consolidated results of operations that would have been reported had the transaction actually occurred on the dates presented.

 
 
 

VIRGINIA ELECTRIC AND POWER COMPANY
CONDENSED PRO FORMA CONSOLIDATED BALANCE SHEET
As of September 30, 2005
(Unaudited)

 
 
As Reported
Less: VPEM
Disposition
Pro Forma
 Adjustments
Pro Forma
 Results
 
(millions)
ASSETS
        
         
Current Assets
        
Derivative assets
$  3,355 
$ 3,350 
$ --     
$          5 
Other
   2,453 
  1,095 
 15 (1)
   1,373 
       Total current assets
   5,808 
  4,445 
 15    
   1,378 
         
Investments
   1,166 
     (15)
(15)(1)
   1,166 
         
Property, Plant and Equipment
        
Property, plant and equipment
20,174 
-- 
  --     
  20,174 
Accumulated depreciation and amortization
  (8,015)
       -- 
  --     
  (8,015)
       Total property, plant and equipment, net
  12,159 
       -- 
  --     
  12,159 
         
Deferred Charges and Other Assets
   1,410 
    727 
  --     
      683 
         
       Total assets
$20,543 
$ 5,157 
$ --     
$15,386 
         
LIABILITIES AND SHAREHOLDER’S EQUITY
        
         
Current Liabilities
        
Derivative liabilities
$  3,701 
$ 3,700 
$ --     
$          1 
Other
   3,037 
  1,080 
  --     
   1,957 
       Total current liabilities
   6,738 
  4,780 
  --     
   1,958 
         
Long-Term Debt
        
Long-term debt
3,773 
-- 
  --     
3,773 
Affiliated long-term debt
      632 
       -- 
  --     
      632 
       Total long-term debt
   4,405 
       -- 
  --     
   4,405 
         
Deferred Credits and Other Liabilities
        
Deferred income taxes and investment tax credits
2,050 
(223)
  --     
2,273 
Derivative liabilities
1,287 
  1,283 
  --     
4 
Other
   1,321 
       -- 
  --     
   1,321 
       Total deferred credits and other liabilities
   4,658 
  1,060 
  --     
   3,598 
         
       Total liabilities
 15,801 
  5,840 
  --     
   9,961 
         
Preferred Stock Not Subject to Mandatory Redemption
     257 
       -- 
  --     
      257 
         
Common Shareholder’s Equity
        
Common stock - no par, 300,000 shares authorized;
   198,047 shares outstanding
 
3,388 
 
-- 
 
  --     
 
3,388 
Other shareholder’s equity
   1,097 
    (683)
  --     
   1,780 
       Total common shareholder's equity
   4,485 
    (683)
  --     
   5,168 
         
       Total liabilities and shareholder's equity
$20,543 
$5,157 
$ --     
$15,386 

(1) Adjustment reflects the repayment of VPEM’s intercompany borrowings as of September 30, 2005 resulting from the transfer to Dominion.

 
 
 

VIRGINIA ELECTRIC AND POWER COMPANY
CONDENSED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
Nine Months Ended September 30, 2005
(Unaudited)

 
 
As Reported
Less: VPEM
Disposition
Pro Forma
Results
 
(millions)
       
Operating Revenue
$4,995 
$579 
$4,416
       
Operating Expenses
      
Electric fuel and energy purchases, net
1,943 
-- 
1,943
Purchased electric capacity
355 
-- 
355
Other purchased energy commodities
658 
631 
27
Other operations and maintenance - external
1,274 
755 
519
Other operations and maintenance - affiliated
225 
11 
214
Depreciation and amortization
396 
-- 
396
Other taxes
     132 
         1 
    131
         Total operating expenses
  4,983 
  1,398 
 3,585
       
Income (loss) from operations
       12 
   (819)
    831
       
Other income
55 
3 
52
       
Interest and related charges
     231 
       11 
    220
       
Income (loss) before income taxes
(164)
(827)
663
Income tax expense (benefit)
      (60)
   (307)
    247
Net Income (Loss)
(104)
(520)
416
Preferred dividends
        12 
        -- 
     12
Balance available for common stock
$  (116)
$ (520)
$ 404

 
 
 

VIRGINIA ELECTRIC AND POWER COMPANY
CONDENSED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
Year Ended December 31, 2004
(Unaudited)

 
 
As Reported
Less: VPEM
Disposition
Pro Forma
Results
 
(millions)
       
Operating Revenue
$5,741
$ 371 
$5,370
       
Operating Expenses
      
Electric fuel and energy purchases, net
1,750
-- 
1,750
Purchased electric capacity
550
-- 
550
Other purchased energy commodities
628
590 
38
Other operations and maintenance - external
1,000
24 
976
Other operations and maintenance - affiliated
276
13 
263
Depreciation and amortization
496
-- 
496
Other taxes
     169
       1 
     168
         Total operating expenses
  4,869
    628 
  4,241
       
Income (loss) from operations
     872
  (257)
  1,129
       
Other income
52
3 
49
       
Interest and related charges
     254
       5 
     249
       
Income (loss) before income taxes
670
(259)
929
Income tax expense (benefit)
      239
  (100)
     339
Net Income (Loss)
431
(159)
590
Preferred dividends
        16
       -- 
       16
Balance available for common stock
$    415
$(159)
$ 574



 
 
 


SIGNATURE


Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.


VIRGINIA ELECTRIC AND POWER COMPANY
Registrant
 
/s/ Patricia A. Wilkerson
Patricia A. Wilkerson
Vice President and Corporate Secretary
 

Date: January 6, 2006