Moody's downgrades Dominion Resources

Moody's Investors Service said it downgraded Dominion Resources Inc.'s senior unsecured debt rating to Baa2 from Baa1 and the senior unsecured debt ratings of its primary subsidiaries, including Virginia Electric and Power Co. to Baa1 from A3 and Consolidated Natural Gas Co. to Baa1 from A3.

In addition, Moody's downgraded the short-term commercial paper rating for Virginia Electric to Prime-2 from Prime-1 and affirmed the Prime-2 short-term ratings for commercial paper for Dominion and Consolidated Natural Gas. This concludes the review for possible downgrade that began on Jan. 9. The outlook is stable.

The agency said the downgrade reflects weaker-than-expected consolidated financial performance, with a decline in funds from operations, and higher-than-expected leverage at year-end 2005. The Baa2 rating for Dominion's senior unsecured debt also incorporates a higher level of business risk in comparison to most peer companies with electric and gas utility operations and the expectation that the company would maintain stronger financial performance to balance the higher risk profile that results from its substantial oil and gas E&P operations and its merchant generation and commodity risk management activities.

Dominion's ratings and outlook are supported by the relatively stable earnings and cash flow generated by the company's rate-regulated business activities, the agency said.

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