01—Abstract
Summary
Summary of the 10-K/A filed March 31, 1994. Cited figures are marked; the original filing is the authoritative source.
This filing is Amendment No. 1 (Form 10-K/A) to the combined 1993 annual report of Northeast Utilities (NU) and its subsidiaries: The Connecticut Light and Power Company (CL&P), Public Service Company of New Hampshire (PSNH), Western Massachusetts Electric Company (WMECO), and North Atlantic Energy Corporation (NAEC).
Per its own cover statement, the sole purpose of the amendment is to make format adjustments to Exhibits 13.1 through 13.5; it states that no substantive changes to the material in the original 10-K filed March 25, 1994 are included. The substantive content is therefore the 1993 financial information contained in those exhibits. For NU, 1993 earnings per common share were $2.02a, unchanged from 1992, but this figure includes a one-time $0.42 per share cumulative-effect gain from a change in Connecticut property tax accounting.
Excluding that gain, EPS before the accounting change was $1.60b, down from $2.02, reflecting the PSNH acquisition's one-time 1992 benefit, a $0.14 per share employee-reduction charge, and a $0.12 per share disallowance in CL&P's rate case. Operating revenues rose to $3.63 billion (from $3.22 billion), largely due to a full year of PSNH consolidation. Management expects retail sales growth of 1 to 2 percent in 1994, and flagged competitive and wholesale pricing pressure in the Northeast.
Key regulatory items include CL&P's multiyear rate plan (ROE cut to roughly 11.5 to 11.7 percent), a Connecticut GUAC disallowance of $7.9 millionc, and pending Millstone prudence reviews with about $66 million and $26 million in exposure. Balance sheet and financing points include total assets of $10.67 billion, long-term debt of about $4.0 billion net of current portions, $1.5 billion of debt and preferred maturities scheduled for 1994 through 1998, and a dividend payout of 87 percent of 1993 earnings. The company intends to lower that payout ratio through improved earnings.
02—Key points
Key Highlights
- NU 1993 EPS of $2.02 was flat versus 1992, but excluding a one-time $0.42 per share property-tax accounting gain, underlying EPS was $1.60, down from $2.02 in 1992.
- Operating revenues increased to $3.63 billion from $3.22 billion, driven mainly by a full year of PSNH and NAEC consolidation (PSNH acquired June 5, 1992).
- Dividends of $1.76 per share were 87 percent of 1993 earnings, and management aims to lower the payout ratio through higher earnings from 1994 onward.
- CL&P's Connecticut rate decision approved a three-year plan with a 6.1 percent cumulative increase but cut the allowed ROE to 11.5 to 11.7 percent, and the DPUC disallowed $7.9 million related to the GUAC.
- Total assets reached $10.67 billion at year-end 1993, up from $9.72 billion, with a $1.18 billion SFAS 109 regulatory asset and $769 million PSNH regulatory asset.
- Nuclear performance improved, with the composite capacity factor at 80.8 percent versus 63.7 percent in 1992, a system record, though the NRC assessed a $237,500 civil penalty for Millstone 2 violations.
- Workforce was reduced about 7 percent through an employee-reduction program costing roughly $38 million, and the company expects 1994 retail sales growth of 1 to 2 percent with competitive pressures in wholesale markets.
03—Questions
Frequently Asked Questions
Does this amendment change the financial results reported in the original 10-K?
No. The filing states that its sole purpose is to make format adjustments to Exhibits 13.1 through 13.5 of the combined annual report filed March 25, 1994, and that no substantive changes to the material in the original 10-K are included.
Why did NU's reported 1993 EPS stay at $2.02 when earnings were weaker?
The $2.02 figure includes a one-time $0.42 per share cumulative effect from changing Connecticut municipal property tax accounting. Before that gain, EPS was $1.60, down from $2.02 in 1992, due to one-time items including a 1992 PSNH acquisition benefit, a 1993 employee-reduction charge, and rate-case disallowances.
What are the main regulatory risks to CL&P's earnings?
Key risks include the DPUC's ROE reduction to about 11.5 to 11.7 percent under the multiyear rate plan, uncertainty over the future operation of the GUAC after a $7.9 million disallowance, pending appeals of the rate decision, and Millstone outage prudence reviews with about $66 million and $26 million of exposure. Management believes disallowances from the prudence reviews will not be material.
How much debt and preferred stock must the system refinance or retire over the next several years?
The system companies are obligated to meet about $1.5 billion of long-term debt and preferred stock maturities and sinking-fund requirements for 1994 through 1998, including $295.3 million in 1994. Management expects to refinance high-cost securities when market conditions permit, and it projects additional financing only in years with large maturities.
What is the outlook for competition and sales growth?
Management expects retail sales growth of 1 to 2 percent in 1994, following flat 1993 sales, and notes that wholesale power prices have fallen well below 1988 and 1989 levels with further downward pressure expected. The company says it has not yet been materially affected by competition but is pursuing customer retention and reengineering initiatives with aggressive three-year cost-reduction targets.
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