01—Abstract
Summary
Summary of the 10-K filed February 25, 2011. Cited figures are marked; the original filing is the authoritative source.
Eversource Energy (formerly Northeast Utilities) reported solid financial performance for the year ended December 31, 2010.
The company's earnings saw a significant improvement compared to the previous year, driven by favorable rate case decisions for its Connecticut Light and Power (CL&P) and Public Service Company of New Hampshire (PSNH) subsidiaries, warmer weather boosting retail electric sales, and one-time benefits from tax settlements. These positive factors were partially offset by increased pension and storm-related expenses, as well as costs associated with the proposed merger with NSTAR. A key development for investors is the pending merger with NSTAR, announced in October 2010 and structured as a merger of equals.
This combination is expected to create a larger, more integrated energy delivery company serving nearly 3.5 million customers across Connecticut, Massachusetts, and New Hampshire. Management anticipates closing the merger in the second half of 2011, subject to shareholder and regulatory approvals. The merger is expected to enhance EPS growth and is a significant strategic focus for the company.
02—Key points
Key Highlights
- Eversource Energy (NU) reported net income attributable to controlling interests of $387.9 million, or $2.19 per diluted share, for 2010, an increase from $330.0 million, or $1.91 per diluted share, in 2009.
- The company announced a proposed merger of equals with NSTAR in October 2010, which is expected to close in the second half of 2011, subject to regulatory and shareholder approvals.
- Regulated operations contributed $384.0 million to net income, with the distribution segment earning $206.2 million and the transmission segment earning $177.8 million.
- Capital expenditures for 2011 are projected at approximately $1.2 billion, with a five-year projection (2011-2015) of approximately $6.6 billion, primarily for maintaining, upgrading, and expanding existing systems.
- The company's consolidated debt-to-total capitalization ratio remained strong at 55% for both 2010 and 2009, well within debt covenant limits.
- Eversource Energy projects a compound average annual EPS growth rate of 6-9% through 2015, with the higher end of the range anticipated if the NSTAR merger is completed.
- The company declared a quarterly dividend of $0.275 per share, payable in March 2011, reflecting an annualized dividend of $1.10 per share, with a potential increase to $1.30 per share annualized post-merger.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2010filed February 25, 2011Financial Statements
FY2010 against FY2009
| Line item | FY2010FY2009 | Change |
|---|---|---|
| Revenue | $4.90B$5.44B | −10.0% |
| Operating Expenses | $4.10B$4.69B | −12.6% |
| Operating Income | $799.89M$751.38M | +6.5% |
| Interest Expense | $237.29M$273.64M | −13.3% |
| Net Income | $387.95M$330.03M | +17.5% |
| EPS (Basic) | $2.20$1.91 | +15.2% |
| EPS (Diluted) | $2.19$1.91 | +14.7% |
| Shares Outstanding (Basic) | 176.64M172.57M | +2.4% |
| Shares Outstanding (Diluted) | 176.89M172.72M | +2.4% |
05—Questions
Frequently Asked Questions
What was the company's financial performance in 2010?
In 2010, Eversource Energy (NU) reported a net income attributable to controlling interests of $387.9 million, or $2.19 per diluted share, an improvement from $330.0 million, or $1.91 per diluted share, in 2009. This growth was driven by rate case decisions, warmer weather impacting electric sales, and one-time tax benefits, partially offset by merger-related expenses and higher pension costs.
What are the key strategic initiatives discussed in the report?
The most significant strategic initiative is the proposed merger with NSTAR, announced in October 2010. If completed, this merger would combine two major New England utilities, creating a larger entity serving approximately 3.5 million customers. The company is also undertaking substantial capital expenditures, projecting approximately $1.2 billion for 2011 and $6.6 billion over the next five years, focused on maintaining, upgrading, and expanding its electric and natural gas infrastructure, including significant investments in transmission projects like NEEWS and Northern Pass.
How is the company managing its capital and debt?
Eversource Energy maintains a strong financial position, with its consolidated debt-to-total capitalization ratio at 55% in both 2010 and 2009, remaining within its debt covenants. The company has access to significant revolving credit facilities totaling $900 million ($400 million for operating subsidiaries and $500 million for the parent company) and actively manages its long-term debt issuance to fund its capital expenditure program.
What is the outlook for earnings and dividends?
Excluding merger-related costs, the company projects 2011 earnings per share to be between $2.25 and $2.40. Looking ahead, Eversource Energy projects a compound average annual EPS growth rate of 6-9% through 2015, with the potential for higher growth if the NSTAR merger is completed. The company also anticipates increasing its quarterly dividend post-merger to approximately $0.325 per share, or $1.30 annualized, from its current $0.275 per share quarterly dividend ($1.10 annualized).
06—Continue