10-QPeriod: Q1 FY2001

EVERSOURCE ENERGY Quarterly Report for Q1 Ended Mar 31, 2001

Filed May 11, 2001For Securities:ES

Summary

Eversource Energy (ES), operating as Northeast Utilities (NU) in this filing, reported a significant increase in first-quarter 2001 earnings to $0.78 per share, up from $0.55 per share in the prior year. This improvement was largely driven by the substantial sale of its Millstone nuclear units, which generated approximately $1.2 billion in cash proceeds and a significant gain. The company also benefited from the acquisition of Yankee Energy System, Inc. in the previous year. Despite positive earnings momentum from asset sales, the company is embroiled in a high-profile legal dispute with Consolidated Edison, Inc. (Con Edison) over the termination of their previously agreed-upon merger. Con Edison's refusal to close the merger is cited as a primary reason for a nearly 28.3% decline in NU's share price during the quarter. The company's liquidity was also bolstered by the issuance of significant amounts of rate reduction bonds, which were used to retire high-cost debt and purchased-power contracts.

Key Highlights

  • 1Net income for the first quarter of 2001 increased to $112.2 million ($0.78 per share) from $74.6 million ($0.55 per share) in the same period of 2000, primarily due to the sale of Millstone nuclear units.
  • 2The company generated approximately $1.2 billion in cash proceeds from the sale of its Millstone nuclear units, significantly strengthening liquidity.
  • 3A major legal battle is ongoing with Consolidated Edison, Inc. (Con Edison) regarding the termination of their merger agreement, with NU seeking damages exceeding $1 billion.
  • 4Liquidity was further enhanced by the issuance of approximately $1.44 billion in rate reduction bonds by CL&P, used to buy out or buydown expensive purchased-power contracts and reduce debt.
  • 5Eversource Energy (as Northeast Utilities) experienced a significant drop in its stock price, falling 28.3% in the quarter, largely attributed to Con Edison's refusal to complete the merger.
  • 6The company's competitive energy subsidiary, Select Energy, reported a loss of $4.2 million, impacted by extended outages at nuclear units it relies on for power, contrasting with a profit in the prior year.
  • 7Credit rating agencies upgraded NU system securities, reflecting the positive impact of the Millstone sale and rate reduction bond issuances, returning NU's unsecured debt to investment grade.

Frequently Asked Questions

The primary driver of the earnings increase was the sale of the Millstone nuclear units, which generated significant proceeds and a substantial gain. Additionally, the acquisition of Yankee Energy System, Inc. in March 2000 contributed to revenue growth compared to the prior year's first quarter.

Northeast Utilities (NU) is engaged in a legal dispute with Con Edison after Con Edison refused to close the merger. NU has sued Con Edison for damages exceeding $1 billion, alleging breach of the merger agreement. A jury trial is anticipated to commence on or after May 3, 2002. The outcome and its effect on NU are uncertain.

Liquidity was significantly improved by over $2.6 billion in cash proceeds from the Millstone sale and CL&P's securitization of rate reduction bonds. These funds were used to retire substantial amounts of debt, including first mortgage bonds and preferred stock, as well as to buy out or reduce expensive purchased-power contracts.

The sale of the Millstone units removes nuclear generation assets from NU's portfolio. While this generated immediate cash and reduced debt, it will negatively impact year-over-year comparisons in the second half of 2001, as the Millstone units performed well in the latter half of 2000. However, the sale also removes the operational risks and costs associated with nuclear power generation.