10-QPeriod: Q1 FY2008

EVERSOURCE ENERGY Quarterly Report for Q1 Ended Mar 31, 2008

Filed May 9, 2008For Securities:ES

Summary

Eversource Energy (ES), formerly Northeast Utilities, reported net income of $58.4 million, or $0.38 per share, for the first quarter of 2008, a decrease from $75.1 million, or $0.49 per share, in the same period of 2007. Excluding a significant $29.8 million after-tax charge related to the settlement of litigation with Consolidated Edison, Inc., adjusted net income was $88.2 million, or $0.57 per share. The company's regulated segments, primarily electric and gas distribution and transmission, remain the core contributors to earnings, while the NU Enterprises segment experienced a decline in profitability. The company is advancing several key transmission projects, particularly in southwest Connecticut, and has received favorable regulatory updates regarding returns on equity (ROE) for transmission assets. Despite increased capital expenditures driven by these projects, the company maintains its 2008 earnings guidance, indicating confidence in its operational and regulatory strategies. Liquidity remains adequate, supported by credit facilities and proceeds from asset sales, though the company acknowledges potential impacts from current credit market conditions on future debt issuances.

Key Highlights

  • 1Net income for Q1 2008 was $58.4 million ($0.38/share), down from $75.1 million ($0.49/share) in Q1 2007, excluding a $29.8 million after-tax charge from a Con Edison litigation settlement.
  • 2Regulated utilities (CL&P, PSNH, WMECO, Yankee Gas) are the primary earnings drivers, with strong performance in transmission segments due to ongoing infrastructure investments and favorable FERC ROE decisions.
  • 3Significant investments are being made in transmission infrastructure, particularly in southwest Connecticut, with major projects on schedule or ahead of schedule.
  • 4The company reaffirmed its 2008 earnings guidance range of $1.45-$1.70 per share (GAAP) or $1.65-$1.90 per share (adjusted).
  • 5Liquidity is supported by credit facilities and accounts receivable sales, though the company noted potential impacts of credit market volatility on future debt issuances.
  • 6Sales volumes for electricity and natural gas showed slight declines, influenced by economic conditions and energy conservation efforts.

Frequently Asked Questions

The primary driver for the decrease in net income was a significant $29.8 million after-tax charge related to the settlement of litigation with Consolidated Edison, Inc. (Con Edison). Excluding this charge, adjusted net income showed improvement compared to the prior year.

The company is making substantial progress on its major transmission projects, especially in southwest Connecticut, with some projects ahead of schedule. Regulatory developments are generally favorable, including recent FERC decisions that increase the allowed return on equity (ROE) for transmission projects, providing a positive outlook for earnings from these investments.

Eversource Energy (Northeast Utilities) maintains its 2008 earnings per share guidance of $1.45-$1.70 on a GAAP basis, or $1.65-$1.90 on an adjusted basis excluding the Con Edison settlement charge. Key factors influencing this outlook include the performance of its regulated utility segments, continued investment in transmission infrastructure, and effective management of operational costs and regulatory frameworks.

The company's liquidity position is considered adequate, supported by credit facilities and proceeds from asset sales like accounts receivable. However, management acknowledges that ongoing volatility in the credit markets could potentially impact the cost and availability of future debt issuances.