10-QPeriod: Q1 FY2003

EVERSOURCE ENERGY Quarterly Report for Q1 Ended Mar 31, 2003

Filed May 9, 2003For Securities:ES

Summary

Eversource Energy (ES), operating as Northeast Utilities and Subsidiaries, reported a significant increase in net income for the first quarter of 2003, reaching $60.2 million ($0.47 per share), a substantial rise from $18.6 million ($0.14 per share) in the prior year's quarter. This improvement was largely driven by stronger performance in its NU Enterprises segment and the absence of write-downs that affected the prior year's results, particularly related to investments in NEON Communications and Acumentrics. Total revenues also saw a healthy increase, climbing to $1.7 billion from $1.3 billion year-over-year, attributed to higher electric and natural gas sales across its utility operations and improved results from NU Enterprises. The company maintained a strong liquidity position with $99 million in cash and cash equivalents at the end of the quarter. Management reaffirmed its full-year 2003 earnings guidance of $1.10 to $1.30 per share, though it anticipates lower earnings in subsequent quarters due to seasonal factors and the absence of certain prior-year income sources.

Key Highlights

  • 1Net income increased significantly to $60.2 million ($0.47/share) in Q1 2003 from $18.6 million ($0.14/share) in Q1 2002, benefiting from the absence of prior-year write-downs.
  • 2Total revenues grew by 31% to $1.7 billion in Q1 2003, driven by higher sales volumes in the Utility Group and improved performance in NU Enterprises.
  • 3The Utility Group experienced strong sales growth, with electric sales up 8.9% and natural gas sales up 18.3% year-over-year, largely due to colder weather.
  • 4NU Enterprises showed a substantial turnaround, reporting a profit of $5.2 million compared to a loss of $20.1 million in the prior year's quarter, due to better management of wholesale marketing portfolios and absence of trading losses.
  • 5Cash and cash equivalents increased by $44.3 million to $99 million at March 31, 2003, indicating a robust liquidity position.
  • 6The company reaffirmed its full-year 2003 earnings per share guidance range of $1.10 to $1.30.
  • 7Implementation of the New England Standard Market Design (SMD) starting March 1, 2003, introduced Locational Marginal Pricing (LMP) which is expected to increase congestion costs, particularly in Connecticut, with CL&P pursuing recovery and legal remedies.

Frequently Asked Questions

The primary driver for the significant increase in net income was the absence of significant after-tax write-downs totaling $10 million ($0.08 per share) that impacted the first quarter of 2002, related to investments in NEON Communications, Inc. and Acumentrics Corporation. Additionally, improved performance from NU Enterprises contributed positively.

The SMD, which began on March 1, 2003, introduced Locational Marginal Pricing (LMP). For CL&P, this is expected to increase transmission congestion and line loss costs, particularly in Connecticut, due to high loads and transmission constraints. CL&P incurred $15.5 million in incremental LMP costs in March 2003, which it is seeking to recover from customers and is pursuing legal remedies against its standard offer suppliers to assign liability. The regulatory impact and recovery are ongoing matters.

Management reaffirmed its full-year earnings per share guidance of $1.10 to $1.30. However, it anticipates that earnings in the second, third, and fourth quarters of 2003 will likely be lower than the strong results achieved in the first quarter, due to more seasonal weather patterns, lower pension income, and the absence of certain income components that were present in the prior year.

The company reported strong liquidity with $99 million in cash and cash equivalents at the end of the first quarter of 2003. The Utility Group had $35 million borrowed against its $300 million revolving credit agreement. NU Enterprises also had borrowings against its $350 million revolving credit agreement. The company expects to issue $100 million to $150 million of unsecured, five-year fixed-rate senior notes in the second quarter of 2003 to refinance short-term debt.