10-QPeriod: Q3 FY2006

EVERSOURCE ENERGY Quarterly Report for Q3 Ended Sep 30, 2006

Filed November 8, 2006For Securities:ES

Summary

Eversource Energy (ES), formerly Northeast Utilities (NU), reported a net income of $111.5 million ($0.72 per share) for the third quarter of 2006, a significant improvement from a net loss of $94.5 million ($0.73 per share) in the same period of 2005. This turnaround was driven by strong performance in the regulated utility segments, particularly CL&P's distribution business, which benefited from a $74 million tax benefit related to an IRS private letter ruling. The company continued its strategic exit from competitive businesses, completing the sale of its competitive generation assets in November 2006, which is expected to generate significant proceeds to fund capital expenditures and reduce debt. NU is projecting continued earnings growth in its utility segment for 2007, with a focus on capital investments to improve transmission system reliability and capacity.

Key Highlights

  • 1Eversource Energy (ES) reported a net income of $111.5 million ($0.72/share) for Q3 2006, a substantial improvement from a net loss of $94.5 million ($0.73/share) in Q3 2005.
  • 2The Q3 2006 results were boosted by a $74 million tax benefit from an IRS private letter ruling impacting CL&P's distribution business.
  • 3The company completed the sale of its competitive generation assets (NGC and Mt. Tom) in November 2006 for $1.34 billion, expecting an after-tax gain of $300 million.
  • 4Utility Group's distribution and generation businesses (CL&P, PSNH, WMECO, Yankee Gas) saw a significant earnings increase to $87.7 million in Q3 2006 from $26.9 million in Q3 2005.
  • 5Transmission business revenues increased to $18.2 million in Q3 2006 from $11.8 million in Q3 2005, driven by higher investment and FERC-approved rates.
  • 6NU Enterprises' segment reported a net income of $3.2 million in Q3 2006, a turnaround from a loss of $129.6 million in Q3 2005, largely due to the sale of the retail marketing business.
  • 7Capital expenditures for the nine months ended September 30, 2006, totaled $600.3 million, primarily for transmission system upgrades, and the company projects $4.9 billion in Utility Group capital expenditures from 2007-2011.

Frequently Asked Questions

The primary driver for the improved performance was a $74 million tax benefit recognized by CL&P's distribution business due to a private letter ruling from the IRS concerning deferred tax balances. Additionally, stronger earnings from the regulated utility segments and a significant turnaround in NU Enterprises' results contributed to the net income.

Yes, by November 1, 2006, Eversource Energy completed the sale of its competitive generation assets (NGC and Mt. Tom) to ECP. This sale, along with previous divestitures of the retail marketing and energy services businesses, marks substantial progress in exiting its competitive operations. The company expects to record a significant after-tax gain from the competitive generation asset sale in the fourth quarter of 2006.

Eversource Energy projects approximately $4.9 billion in Utility Group capital expenditures from 2007 through 2011. A significant portion of this investment, totaling over $2 billion, is allocated to transmission system upgrades and reliability improvements, particularly in southwest Connecticut. The company also plans to invest in its distribution and generation businesses.

The Utility Group, encompassing regulated electric and gas distribution and transmission, showed robust performance with total net income of $105.9 million. The transmission business contributed $18.2 million, while the distribution and generation businesses collectively earned $87.7 million. NU Enterprises reported a net income of $3.2 million, a significant recovery from the prior year's loss, and parent and affiliates contributed $2.4 million.