10-QPeriod: Q2 FY2002

EVERSOURCE ENERGY Quarterly Report for Q2 Ended Jun 30, 2002

Filed August 9, 2002For Securities:ES

Summary

Eversource Energy (formerly Northeast Utilities) reported a decrease in net income for the second quarter and first six months of 2002 compared to the prior year. The decline was primarily driven by weaker performance in its competitive energy subsidiaries, which experienced losses in the second quarter of 2002, contrasting with profits in the same period of 2001. This was attributed to natural gas trading losses and reduced hydroelectric production due to low river flows. Additionally, regulated electric and natural gas sales were lower due to mild weather and decreased industrial sales, particularly in New Hampshire. Despite the overall decline, the company highlighted increased revenues in the first six months of 2002 due to higher sales at its competitive energy subsidiaries, though these revenues are subject to restatement under new accounting guidance (EITF Issue No. 02-3) for energy trading contracts, which will require net reporting. The company is maintaining its previously updated earnings guidance, expecting to achieve the lower end of its range, supported by expectations of more seasonal weather, improved competitive energy subsidiary performance, and regulatory support. Liquidity remains strong, with cash expected to improve further following the anticipated close of the Seabrook nuclear unit sale.

Key Highlights

  • 1Net income decreased to $28.9 million ($0.22 EPS) in Q2 2002 from $46.7 million ($0.35 EPS) in Q2 2001, and to $47.5 million ($0.37 EPS) in the first six months of 2002 from $158.9 million ($1.14 EPS) in the same period of 2001.
  • 2Competitive energy subsidiaries reported a loss of $9.3 million in Q2 2002, compared to earnings of $13.6 million in Q2 2001, impacting overall profitability.
  • 3Operating revenues for the first six months of 2002 increased to $3.6 billion from $3.4 billion in 2001, mainly driven by competitive energy subsidiaries, although this figure will be reduced due to new accounting guidance for energy trading.
  • 4Regulated electric and natural gas sales declined due to milder weather and reduced industrial demand, with Public Service Company of New Hampshire (PSNH) experiencing significant drops in industrial electric sales.
  • 5The company is maintaining its earnings guidance for the full year, expecting to achieve the lower end of its range, contingent on favorable weather, improved competitive energy performance, and regulatory outcomes.
  • 6Liquidity is strong, with cash and cash equivalents totaling $94 million at June 30, 2002. The planned sale of the Seabrook nuclear unit is expected to further enhance the company's cash position.

Frequently Asked Questions

The primary reason for the decrease in net income is the weaker performance of the company's competitive energy subsidiaries, which incurred losses in the second quarter of 2002. Additionally, lower regulated electric and natural gas sales due to mild weather and decreased industrial demand also contributed to the decline.

EITF Issue No. 02-3 requires energy trading companies to report revenues and expenses associated with energy trading contracts on a net basis rather than a gross basis. This change is retroactive and will reduce reported revenues, although it will not impact net income. For the first six months of 2002, the company estimates its competitive energy revenues will be reduced to $800 million from the previously reported $1.9 billion.

The company is maintaining its previously updated earnings guidance, aiming to achieve the lower end of its projected range. This outlook relies on a return to more seasonal weather patterns, improved performance from its competitive energy subsidiaries, and continued regulatory support. Expected gains from the proposed sale of its interest in the Seabrook nuclear unit are also anticipated to contribute positively.

The company maintained a strong liquidity position as of June 30, 2002, with $94 million in cash and cash equivalents. The anticipated sale of its share in the Seabrook nuclear unit is expected to further improve its cash position in the fourth quarter of 2002. Proceeds will be used for debt repayment, equity returns, and tax payments.