10-QPeriod: Q1 FY2006

EVERSOURCE ENERGY Quarterly Report for Q1 Ended Mar 31, 2006

Filed May 8, 2006For Securities:ES

Summary

Eversource Energy (ES), operating as Northeast Utilities (NU), reported a net loss of $10.1 million, or $0.07 per share, for the first quarter of 2006. This is a significant improvement from the $117.7 million loss, or $0.91 per share, reported in the same period of 2005. The improvement was driven by stronger performance in the regulated Utility Group businesses, which generated a net income of $54.6 million, offsetting losses from the NU Enterprises segment. The company is in the process of exiting its competitive businesses, with significant charges recorded in relation to this strategy, particularly in the retail marketing segment. The Utility Group experienced milder weather impacts on gas sales but saw increased transmission earnings due to higher investments. The company reaffirmed its 2006 earnings guidance for the Utility Group and parent company, projecting between $1.09 and $1.22 per share.

Key Highlights

  • 1Net Loss Improvement: The company significantly reduced its net loss to $10.1 million ($0.07/share) in Q1 2006 from $117.7 million ($0.91/share) in Q1 2005.
  • 2Utility Group Strength: The regulated Utility Group businesses reported a net income of $54.6 million, contributing positively to the overall results and offsetting losses from NU Enterprises.
  • 3Exit from Competitive Businesses: NU is actively exiting its competitive businesses, recording significant charges in Q1 2006, particularly a $39.1 million after-tax charge related to the retail marketing business being held for sale.
  • 4Transmission Investment Growth: Earnings from transmission businesses increased due to higher investments in infrastructure, particularly within The Connecticut Light & Power Company (CL&P).
  • 5Mild Weather Impact on Gas Sales: Yankee Gas experienced a decline in firm natural gas sales due to milder weather, impacting its earnings.
  • 6Reaffirmation of Utility Group Guidance: NU maintained its 2006 earnings guidance for the Utility Group and parent company, projected between $1.09 and $1.22 per share.
  • 7Environmental Legislation Focus: PSNH is addressing potential mercury emission reduction legislation with an estimated compliance cost of $250 million.

Frequently Asked Questions

The primary driver for the improved financial results was the strong performance of the regulated Utility Group businesses, which generated a net income of $54.6 million. This offset the losses incurred by the NU Enterprises segment, which is undergoing a strategic exit from its competitive businesses.

Eversource Energy (Northeast Utilities) has decided to exit all of its competitive businesses. This includes wholesale marketing, retail marketing, competitive generation, and energy services. The company is in the process of selling or divesting these operations, which has led to significant charges recorded in the financial statements.

Yes, there are several. In New Hampshire, PSNH is preparing for potential mercury emission reduction legislation, estimating compliance costs of $250 million. In Connecticut, CL&P is benefiting from a transmission tracking mechanism that allows for recovery of transmission expenditures, and a proposed Forward Capacity Market is expected to impact costs across the Utility Group. Additionally, the company is monitoring developments related to tax treatments of investment tax credits and excess deferred income taxes.

Mild weather conditions negatively impacted Yankee Gas's firm natural gas sales, leading to lower earnings for that segment. For the Utility Group's electric operations, milder weather contributed to a 3.5% decrease in retail electric sales compared to the prior year.