10-Q/APeriod: Q2 FY2004

EVERSOURCE ENERGY Quarterly Report (Amendment) for Q2 Ended Jun 30, 2004

Filed March 15, 2005For Securities:ES

Summary

Eversource Energy (formerly Northeast Utilities) reported a decrease in net income for the second quarter of 2004 compared to the prior year, primarily driven by an investment write-down and the impact of accounting for certain natural gas contracts. However, for the six-month period ended June 30, 2004, net income saw a slight increase compared to the same period in 2003. The company experienced growth in regulated retail electric sales and is undertaking a strategic review of its business lines. Regulatory matters remain a significant focus, with various rate case filings and settlements impacting the company's utilities in Connecticut, New Hampshire, and Massachusetts. Liquidity remains adequate, though capital expenditures were revised downwards due to project delays. The company's merchant energy segment, NU Enterprises, showed mixed results with improved year-to-date performance offset by a weaker second quarter, influenced by commodity price fluctuations and contract structures.

Key Highlights

  • 1Net income decreased by $2.9 million in Q2 2004 compared to Q2 2003, while increasing by $4.3 million for the first six months of 2004.
  • 2An investment write-down of $2.4 million (after-tax) impacted Q2 and H1 2004 earnings, reducing EPS by $0.02.
  • 3Regulated retail electric sales increased by 4.6% on a weather-adjusted basis for the first half of 2004.
  • 4Capital expenditures for H1 2004 were $311.6 million, revised downwards from original projections due to project delays.
  • 5The company is conducting a comprehensive review of its business lines and corporate functions.
  • 6The company reported adequate liquidity with $48.7 million in cash and cash equivalents as of June 30, 2004.
  • 7A restatement occurred due to incorrect accounting for certain natural gas contracts, impacting balance sheet items but not net income for prior periods.

Frequently Asked Questions

The company restated its financial statements due to incorrectly applying accrual accounting for certain natural gas contracts. Fair value (mark-to-market) accounting should have been applied. This impacted balance sheet accounts like cash and cash equivalents, derivative assets/liabilities, and accounts payable, but had no impact on net income.

Regulatory matters are a significant factor. The company has been involved in various rate case filings and settlements across its utilities in Connecticut, New Hampshire, and Massachusetts. These include transmission rate cases, standard market design cost disputes, and adjustments to Competitive Transition Assessment (CTA) and System Benefits Charge (SBC) rates. While some settlements provided for rate increases or cost recovery, others resulted in refunds to customers or regulatory liabilities.

NU Enterprises' merchant energy segment showed mixed results. While year-to-date earnings improved due to better margins and higher retail volumes, the second quarter performance was weaker than anticipated due to contract structures and commodity price fluctuations. The company's ability to secure wholesale load contracts remains critical for future profitability.

Capital expenditures for the first six months of 2004 were $311.6 million, revised downwards to $674.2 million for the full year due to delays in transmission projects. The company maintains adequate liquidity, with $48.7 million in cash and cash equivalents as of June 30, 2004. Its credit facilities are expected to be renewed. The company also announced an 8.3% increase in its quarterly dividend.