10-Q/APeriod: Q3 FY2004

EVERSOURCE ENERGY Quarterly Report (Amendment) for Q3 Ended Sep 30, 2004

Filed March 15, 2005For Securities:ES

Summary

This filing is an Amendment No. 1 to Northeast Utilities' (NU) Form 10-Q for the quarter ended September 30, 2004. The primary purpose of this amendment is to correct the accounting treatment for certain natural gas derivative contracts within NU's merchant energy segment. NU previously applied accrual accounting to these contracts, but determined that fair value accounting should have been used. This restatement resulted in a negative impact of $47 million on third-quarter 2004 net income and $45.9 million for the nine-month period ended September 30, 2004. The restatement affected operating revenues, fuel, purchased and net interchange power expenses, and income tax provisions. For the nine months ended September 30, 2004, NU reported net income of $83.5 million, or $0.65 per share, a decrease from $126.3 million, or $0.99 per share, in the same period of 2003. This decrease was largely attributable to the aforementioned accounting restatement. The company's Utility Group saw increased earnings due to rate adjustments and tax reserve changes, while NU Enterprises experienced a significant earnings decline, heavily impacted by the derivative contract accounting changes and lower wholesale margins. Capital expenditures for 2004 are projected to be lower than initially planned due to delays in major transmission project approvals.

Key Highlights

  • 1Northeast Utilities (NU) is restating its financial statements for the period ended September 30, 2004, due to an incorrect application of accounting for certain natural gas derivative contracts.
  • 2The company incorrectly applied accrual accounting and hedge accounting for natural gas contracts, determining fair value accounting should have been used.
  • 3This restatement resulted in a negative $47 million impact on third-quarter 2004 net income and a $45.9 million negative impact for the nine months ended September 30, 2004.
  • 4For the nine months ended September 30, 2004, NU reported net income of $83.5 million, down from $126.3 million in the prior year period, largely due to the restatement.
  • 5Capital expenditures are projected to be lower than initially planned for 2004, totaling $638.4 million, down from a previous projection of $738 million, due to delays in major transmission project approvals.
  • 6The Utility Group's earnings increased due to rate increases and tax adjustments, while NU Enterprises' earnings significantly decreased, impacted by the accounting changes and market conditions.

Frequently Asked Questions

This filing is an amendment to correct an accounting error where Northeast Utilities (NU) incorrectly applied accrual and hedge accounting for certain natural gas derivative contracts. Fair value accounting should have been applied, and this correction required restating previously issued financial statements for the period ended September 30, 2004.

The restatement resulted in a negative impact of $47 million on NU's net income for the third quarter of 2004 and a $45.9 million negative impact for the nine months ended September 30, 2004. This primarily affected operating revenues and fuel, purchased and net interchange power expenses.

For the nine months ended September 30, 2004, NU reported net income of $83.5 million, or $0.65 per share, which is a decrease from $126.3 million, or $0.99 per share, in the same period of 2003. This decrease was largely attributable to the accounting restatement, although the Utility Group showed improved earnings due to rate adjustments, while NU Enterprises experienced a significant decline.

NU's capital expenditures for 2004 are now projected to be $638.4 million, lower than the initially budgeted $738 million. This reduction is primarily due to delays in approvals for major transmission projects, impacting the company's investment plans.