10-QPeriod: Q2 FY2004

EVERSOURCE ENERGY Quarterly Report for Q2 Ended Jun 30, 2004

Filed August 6, 2004For Securities:ES

Summary

Eversource Energy (ES), operating as Northeast Utilities, reported a decrease in earnings for the second quarter of 2004 compared to the same period in 2003, with net income falling to $22.9 million from $26.9 million. However, for the first six months of 2004, net income saw a slight increase to $90.3 million from $87.1 million in the prior year. This performance was impacted by a $2.4 million write-down on an investment in a fuel cell technology developer, which reduced earnings per share by $0.02. The company experienced growth in regulated retail electric sales, up 4.6% on a weather-adjusted basis for the first half of the year. Eversource Energy maintained its full-year earnings projection between $1.20 and $1.40 per share, indicating confidence in future performance despite the short-term earnings dip. Several regulatory developments occurred during the quarter, including a settlement agreement for transmission rate cases that allows for formula-based rates with an 11.0% return on equity. Favorable decisions were also received on locational marginal pricing costs and CL&P's distribution rate case. Yankee Gas filed for a rate increase, while PSNH and WMECO also had rate-related filings. The company's liquidity remains adequate, with $180.2 million in cash and equivalents at the end of the quarter, and a common dividend increase of 8.3% was announced, signaling a commitment to shareholder returns. Capital expenditures were lower than initially projected due to delays in transmission projects.

Key Highlights

  • 1Net income for Q2 2004 was $22.9 million ($0.18/share), down from $26.9 million ($0.21/share) in Q2 2003.
  • 2For the first six months of 2004, net income was $90.3 million ($0.71/share), up from $87.1 million ($0.69/share) in the first six months of 2003.
  • 3An investment write-down of $2.4 million ($0.02/share impact) in a fuel cell developer affected quarterly and year-to-date results.
  • 4Regulated retail electric sales increased by 4.6% on a weather-adjusted basis for the first half of 2004.
  • 5The company maintained its 2004 earnings per share projection of $1.20 to $1.40.
  • 6Cash and cash equivalents, including unrestricted cash from counterparties, increased to $180.2 million at June 30, 2004.
  • 7The quarterly dividend was increased by 8.3% to $0.1625 per share, payable on September 30, 2004.

Frequently Asked Questions

The net income for the first six months of 2004 increased to $90.3 million from $87.1 million in the same period of 2003. This increase was primarily driven by higher revenues from NU Enterprises' merchant energy business segment due to higher electric and gas prices and volumes, and an increase in Utility Group revenues due to higher retail electric sales volume and prices. These positive impacts were partially offset by an investment write-down and higher pension and administrative expenses.

Key regulatory developments include a settlement agreement for transmission rate cases allowing formula-based rates with an 11.0% return on equity, approval of a settlement for Standard Market Design (SMD) locational marginal pricing (LMP) costs, a favorable decision from the Connecticut Department of Public Utility Control (DPUC) on CL&P's distribution rate case, and rate case filings by Yankee Gas. Public Service Company of New Hampshire (PSNH) filed for rate increases, and Western Massachusetts Electric Company (WMECO) received approval for financing its spent nuclear fuel liability.

The company's liquidity position has strengthened, with total cash, including cash and cash equivalents and unrestricted cash from counterparties, increasing to $180.2 million at June 30, 2004, from $83.7 million at December 31, 2003. Net cash flows provided by operating activities also saw a significant increase in the first six months of 2004 compared to the same period in 2003, primarily due to changes in working capital items like accounts payable and accrued taxes.

Capital expenditures for 2004 are now projected to total $674.2 million, which is lower than the initial budget of $738 million. This reduction is primarily due to delays in certain transmission projects resulting from appeals and other regulatory and legal delays.