10-QPeriod: Q1 FY2007

EVERSOURCE ENERGY Quarterly Report for Q1 Ended Mar 31, 2007

Filed May 9, 2007For Securities:ES

Summary

Eversource Energy (ES), operating as Northeast Utilities (NU) and its subsidiaries, reported a net income of $75.1 million, or $0.49 per share, for the first quarter of 2007, a significant turnaround from a net loss of $10.1 million, or $0.07 per share, in the same period of 2006. This improvement was driven by stronger performance in the regulated utility segments, which benefited from higher sales volumes, rate increases, and favorable weather conditions. The company continues to make substantial investments in its transmission infrastructure, particularly in Connecticut, anticipating significant growth in this segment. NU is also progressing with its strategy to exit competitive energy businesses, with NU Enterprises reporting a profit in the quarter due to divestiture gains, a contrast to the losses incurred in the prior year. The company reaffirmed its full-year 2007 earnings guidance and projected long-term EPS growth, underscoring a positive outlook contingent on regulatory approvals and continued infrastructure investment. Liquidity remains strong, supported by proceeds from asset sales and debt issuance, although operating cash flows were impacted by significant tax payments related to past asset sales. Capital expenditures were elevated, primarily due to transmission projects. The company is actively managing market and interest rate risks, with strategies in place to mitigate potential adverse effects. Regulatory developments in Connecticut, New Hampshire, and Massachusetts are ongoing, with rate cases and cost recovery filings expected to influence future financial performance. Despite ongoing legal proceedings and environmental matters, management expressed confidence that their resolutions would not materially impact the company's financial position.

Key Highlights

  • 1Net income significantly improved to $75.1 million ($0.49/share) in Q1 2007, compared to a net loss of $10.1 million ($0.07/share) in Q1 2006, driven by stronger regulated utility performance.
  • 2Regulated companies' earnings increased by $9.5 million, with both transmission and distribution/generation segments showing improved results.
  • 3NU Enterprises, focused on exiting competitive businesses, swung to a profit of $4.8 million from a loss of $62.6 million in the prior year, primarily due to divestiture gains.
  • 4The company reaffirmed its full-year 2007 earnings guidance of $1.30 to $1.55 per share.
  • 5Capital expenditures increased to $227.7 million in Q1 2007, driven by significant transmission infrastructure investments, particularly at CL&P.
  • 6Liquidity remains strong, supported by asset sale proceeds and debt issuance, though operating cash flow was negatively impacted by $398.5 million in tax payments related to the sale of competitive generation assets.
  • 7The company's long-term outlook includes projected compounded annual EPS growth of 10-14% from 2007 through 2011, based on anticipated growth in regulated asset bases.

Frequently Asked Questions

The significant earnings improvement was primarily driven by stronger performance in the regulated utility segments. This included higher sales volumes across electric and gas distribution, the positive impact of rate increases that took effect in early 2007, and favorable weather conditions. Additionally, NU Enterprises' return to profitability, due to gains from the divestiture of competitive businesses, contributed significantly to the overall positive results.

Eversource Energy (Northeast Utilities) is making substantial investments in its transmission infrastructure, with capital expenditures for the transmission segment projected to total $0.7 billion in 2007. Major projects are underway, particularly at CL&P in southwest Connecticut, including the Middletown to Norwalk and Glenbrook Cables projects. The company is also involved in large-scale regional projects like the New England East-West Solution (NEEWS) and the Springfield 115 KV Upgrade, aimed at enhancing reliability and efficiency. These investments are expected to drive future growth in the transmission segment.

The company is actively exiting its competitive energy businesses, with NU Enterprises focused on winding down remaining wholesale contracts and pursuing divestiture opportunities. This strategy led to NU Enterprises reporting a profit in the first quarter of 2007, a significant turnaround from the losses incurred in the prior year, primarily due to gains from the sale of competitive generation assets and other divestitures. Management expects the remaining wholesale marketing business to be exited at a cost significantly less than $100 million.

Eversource Energy (Northeast Utilities) reaffirmed its consolidated 2007 earnings guidance of $1.30 to $1.55 per share. The company projects long-term compounded annual EPS growth of 10-14% from 2007 through 2011, driven by expected growth in its regulated transmission and distribution rate bases. This outlook is contingent on obtaining necessary regulatory approvals and successfully executing its capital expenditure plans.