10-KPeriod: FY2008

EVERSOURCE ENERGY Annual Report, Year Ended Dec 31, 2008

Filed February 27, 2009For Securities:ES

Summary

Eversource Energy (formerly Northeast Utilities - NU) reported net income of $260.8 million ($1.67 per share) for 2008, an increase from $246.5 million ($1.59 per share) in 2007. This growth was primarily driven by the regulated utility segments, particularly the transmission segment, which benefited from increased investments in infrastructure. The company's strategy focuses on its regulated businesses, with most unregulated businesses having been exited. However, 2008 results were impacted by a $29.8 million after-tax charge related to a litigation settlement with Con Edison, which is not recoverable from ratepayers. The company continues to invest significantly in its transmission and distribution infrastructure, with projected capital expenditures of approximately $7 billion for the regulated companies from 2009 through 2013. Key projects include the New England East-West Solutions (NEEWS) series and the transmission initiative with Hydro-Québec. Despite the ongoing economic downturn and volatility in capital markets, Eversource Energy believes it has sufficient liquidity and access to funding sources to meet its obligations. The company also reaffirmed its commitment to returning value to shareholders through dividends, with a policy to target a dividend payout ratio of approximately 50% of earnings.

Key Highlights

  • 1Eversource Energy (NU) reported a net income of $260.8 million in 2008, up from $246.5 million in 2007, driven by regulated utility operations, especially transmission segment growth.
  • 2The company incurred a $29.8 million after-tax charge in 2008 due to a litigation settlement with Con Edison, which is not recoverable from customers.
  • 3Significant capital investments are planned for infrastructure upgrades, with approximately $7 billion projected for regulated companies from 2009-2013, including major transmission projects like NEEWS and the Hydro-Québec initiative.
  • 4Eversource Energy maintained sufficient liquidity and access to funding amidst financial market volatility, evidenced by successful debt issuances and stable credit ratings.
  • 5The company increased its common dividend, targeting a payout ratio of 50% of earnings, underscoring a commitment to shareholder returns.
  • 6Despite an economic slowdown, regulated distribution revenues were impacted by regulatory tracking mechanisms and consolidation eliminations, while transmission revenues saw growth due to increased investment.
  • 7Significant storm costs from a December 2008 ice storm affected operations, particularly PSNH, with deferred or capitalized costs expected to be recovered in future rates.

Frequently Asked Questions

Eversource Energy's (NU) financial performance in 2008 was primarily driven by its regulated utility segments, with the transmission segment showing significant growth due to increased infrastructure investments. Higher revenues from rate increases in Connecticut and favorable FERC decisions on transmission projects also contributed positively. However, a $29.8 million after-tax charge from a litigation settlement with Con Edison negatively impacted net income.

Eversource Energy plans substantial capital investments in its regulated infrastructure through 2013. Despite economic uncertainty and capital market volatility, the company believes it has sufficient liquidity and access to funding through its existing credit facilities and planned debt and equity issuances to support its capital program. The company carefully evaluates each investment for customer and shareholder benefits.

A major ice storm in December 2008 caused significant damage, particularly to PSNH's distribution system. While restoration costs were substantial, most were charged to storm cost reserves or capitalized and deferred, with the company expecting recovery through future rates or insurance. The storm did not have a material impact on the company's 2008 net income.

Eversource Energy (NU) is balancing shareholder returns with customer costs through a combination of strategies. The company is investing in infrastructure to improve reliability and efficiency, which are expected to provide long-term customer benefits. Shareholder returns are supported by a stated policy to target a dividend payout ratio of 50% of earnings and by focusing on regulated operations where cost recovery from customers is generally permitted through approved rate structures.