Virginia utility aims to build plant

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Dominion Virginia Power last week applied with state regulators to build a new power station that would generate 580 megawatts of electricity to help meet the state's growing energy demands.

The Richmond-based utility, a unit of Dominion Resources Inc., said the natural-gas-powered plant, which would be built 60 miles west of Richmond, could generate enough electricity for 145,000 homes. The $619 million project comes after Dominion, the country's third-largest energy company, purchased a similar project near Front Royal, Va., that would generate 600 megawatts of electricity.

The deals were made on the heels of Virginia's decision to end electricity deregulation in the state, once again giving utilities the right to build power plants.

Dominion's assets include 26,500 megawatts of generation capacity; 6,000 miles of electric transmission lines; 14,000 miles of natural-gas transmission, gathering and storage pipeline; and 1.1 trillion cubic feet equivalent of natural gas and oil reserves. The company owns utilities in Virginia, North Carolina, West Virginia, Ohio and Pennsylvania.

Last year, the company shed much of its oil and natural-gas assets, a move that raised $14 billion, which the company used to buy back shares and pay down debt.

"That takes a lot of the commodity risk out of the equation," said Brian Youngberg, a utility analyst with St. Louis-based investment firm Edward Jones.

Despite its divestitures, Dominion still retains a "very strong gas pipeline" because of its Appalachian exploration and production facilities and Maryland-based Cove Point LNG, the northernmost liquefied natural-gas facility on the East Coast, Mr. Youngberg noted.

Dominion closed up 64 cents at $40.21 yesterday on the New York Stock Exchange, one week after last Monday's six-month low of $39.05. The average diversified utility is down 16 percent year over year, according to Greg Gordon of Citigroup.

"The whole sector has just been beaten up with the overall market turmoil this year," Mr. Youngberg said. He has a "buy" rating on Dominion.

"Many companies have gone back to being more of a traditional utility. That's kind of what Dominion has done here, but they've kept some good assets that I think will allow them to grow a little bit faster than most of their peers," he said.