10-QPeriod: Q3 FY2009

EVERSOURCE ENERGY Quarterly Report for Q3 Ended Sep 30, 2009

Filed November 6, 2009For Securities:ES

Summary

Eversource Energy (ES), operating as Northeast Utilities (NU) and its subsidiaries, reported a mixed financial performance for the third quarter and first nine months of 2009 compared to the same periods in 2008. The company saw a decrease in third-quarter net income attributable to controlling interests to $64.8 million ($0.37/share) from $72.7 million ($0.47/share) in Q3 2008, primarily due to higher income tax expenses and increased uncollectible receivable balances. However, for the first nine months, net income grew to $245.3 million ($1.43/share) from $188.9 million ($1.21/share) in the prior year, despite a higher effective tax rate, largely due to the absence of a significant litigation settlement charge in 2008. The company's regulated utility segments (distribution and transmission) performed robustly, with transmission earnings showing significant year-over-year improvement due to higher investments. The company reaffirmed its full-year 2009 earnings guidance and provided projections for 2010, anticipating continued growth driven by substantial capital investments in infrastructure, particularly in transmission projects.

Key Highlights

  • 1Total net income attributable to controlling interests for the nine months ended September 30, 2009, was $245.3 million, an increase from $188.9 million in the same period of 2008.
  • 2Third-quarter net income attributable to controlling interests decreased to $64.8 million from $72.7 million in the prior year, primarily due to higher income tax expenses and uncollectible receivables.
  • 3Earnings from the regulated transmission segments showed strong year-over-year growth, reflecting significant investment in infrastructure projects.
  • 4The company reaffirmed its full-year 2009 earnings per share guidance of $1.80 to $1.90.
  • 5Capital expenditures for regulated companies are projected at approximately $960 million for 2009, with significant investments planned for transmission and distribution infrastructure through 2014.
  • 6Liquidity remains strong with $249 million in cash and cash equivalents as of September 30, 2009, and significant borrowing availability on credit facilities.
  • 7The company continues to make progress on smart grid initiatives and renewable energy projects, demonstrating a commitment to future growth and sustainability.

Frequently Asked Questions

The increase in net income for the first nine months of 2009 was primarily driven by the absence of a significant litigation settlement charge recorded in the first quarter of 2008, coupled with improved earnings from the regulated utility segments, particularly in transmission, due to higher investments in infrastructure. These positive factors were partially offset by higher income tax expenses and increased uncollectible receivable balances in 2009.

Eversource Energy (Northeast Utilities) plans substantial capital investments, projecting approximately $960 million for regulated companies in 2009, with further investments totaling about $6.36 billion planned from 2010 through 2014. These investments are expected to drive rate base growth and support a projected compound average annual EPS growth rate of 6-9% from 2010 to 2014.

Liquidity remained strong, with cash and cash equivalents increasing significantly to $249 million by the end of the third quarter of 2009, up from $89.8 million at the end of 2008. This improvement was largely due to common share issuances and debt financing. The company also maintained substantial borrowing availability under its credit facilities and has no significant long-term debt maturities until April 2012, indicating robust financial flexibility.

The regulated segments are primarily influenced by infrastructure investments, regulatory rate decisions, and energy demand. Transmission segment earnings benefited from higher investments, while distribution earnings were impacted by retail sales volumes, weather normalization effects, operational costs (including uncollectibles), and regulatory filings. The company is actively managing costs and pursuing rate adjustments to recover investments and maintain earnings stability.