NU, headquartered in Hartford, Connecticut, is a public utility holding company subject to regulation by the Federal Energy Regulatory Commission (FERC) under the Public Utility Holding Company Act of 2005. We are engaged primarily in the energy delivery business through the following wholly-owned utility subsidiaries:
●The Connecticut Light and Power Company (CL&P), a regulated electric utility which serves residential, commercial and industrial customers in parts of Connecticut;
●Public Service Company of New Hampshire (PSNH), a regulated electric utility which serves residential, commercial and industrial customers in parts of New Hampshire and continues to own generation assets used to serve customers;
●Western Massachusetts Electric Company (WMECO), a regulated electric utility which serves residential, commercial and industrial customers in parts of western Massachusetts; and
●Yankee Gas Services Company (Yankee Gas), a regulated gas utility which serves residential, commercial and industrial customers in parts of Connecticut.
NU also owns certain unregulated businesses through its wholly-owned subsidiary, NU Enterprises, Inc. (NU Enterprises). We have exited most of these businesses. As of December 31, 2009, NU Enterprises’ remaining business consisted of (i) Select Energy Inc.’s few remaining energy wholesale marketing contracts, and (ii) NU Enterprises’ remaining electrical contracting business.
Although NU, CL&P, PSNH and WMECO each report their financial results separately, we also include information in this report on a segment, or line-of-business basis. The regulated companies include three business segments: the electric distribution segment (which includes PSNH’s regulated generation activities), the natural gas distribution segment, and the electric transmission segment. The regulated companies’ segment of our business represented approximately 98 percent of our total earnings of $330 million for 2009, with electric distribution (including PSNH’s generation activities) representing approximately 41.9 percent, electric transmission representing approximately 49.8 percent, and natural gas distribution representing approximately 6.4 percent. The remaining two percent of our 2009 earnings come from our competitive businesses, which are being wound down.
Management's Discussion and Analysis of Financial Condition and Results of Operations: Results, Strategy and Outlook:
·We earned $330 million, or $1.91 per share, in 2009, compared with $260.8 million, or $1.67 per share, in 2008. Excluding the after-tax charge of $29.8 million, or $0.19 per share, for the settlement of litigation, we earned $290.6 million, or $1.86 per share, in 2008. The increase in 2009 results was due primarily to a $34.4 million increase in earnings from our regulated distribution and transmission segments. The EPS for 2009 reflected the issuance of approximately 19 million common shares on March 20, 2009.
·Our regulated companies, which consist of The Connecticut Light and Power Company (CL&P), Public Service Company of New Hampshire (PSNH), Western Massachusetts Electric Company (WMECO), and Yankee Gas Services Company (Yankee Gas), earned $323.5 million, or $1.87 per share, in 2009, compared with $289.1 million, or $1.85 per share, in 2008.
·Earnings at the distribution segments of our regulated companies (which also include Yankee Gas and the generation business of PSNH) totaled $159.2 million in 2009, compared with $150.8 million in 2008. Earnings at the transmission segments of our regulated companies totaled $164.3 million in 2009, compared with $138.3 million in 2008. The increase in distribution segment results was due primarily to lower operating costs as a result of cost management efforts, lower storm costs, distribution rate increases at CL&P and PSNH, higher generation-related earnings and the absence of a $3.5 million after-tax charge recorded in 2008 that related to the refund of the 2004 procurement incentive fee. The higher transmission segment results were due to an increased investment in transmission infrastructure after the completion of major projects in 2008.
·Our competitive businesses, which are held by NU Enterprises, Inc. (NU Enterprises), earned $15.8 million, or $0.09 per share, in 2009, compared with $13.1 million, or $0.08 per share, in 2008. The after-tax mark-to-market gain on wholesale marketing contracts increased by $2.7 million from $1.1 million in 2008 to $3.8 million in 2009. The 2008 mark-to-market included a net after-tax charge of $3.2 million due to the implementation of fair value measurement accounting guidance.
·NU parent and other companies recorded net expenses of $9.3 million, or $0.05 per share, in 2009, compared with net expenses of $41.4 million, or $0.26 per share, in 2008. Results for 2008 included the after-tax charge of $29.8 million, or $0.19 per share, associated with the settlement of litigation.
·We project consolidated 2010 earnings of between $1.80 per share and $2.00 per share, including distribution segment earnings of between $0.95 per share and $1.05 per share, transmission segment earnings of between $0.90 per share and $0.95 per share, competitive business earnings of between zero and $0.05 per share, and net expenses at NU parent and other companies of approximately $0.05 per share. PSNH filed a distribution rate case in June 2009 and CL&P filed a distribution rate case in January 2010. There are uncertainties over the outcomes of these distribution rate cases, both of which are expected to conclude in mid-2010. WMECO intends to file a distribution rate case in mid-2010 with an expected decision by the end of 2010 and a distribution rate case filing for Yankee Gas is also under consideration, neither of which are included in the 2010 projections.
·We paid common dividends of $162.4 million in 2009, compared with $129.1 million in 2008. The increase is the result of 6.3 percent and 11.8 percent increases that took effect in the third quarter of 2008 and the first quarter of 2009, respectively, and a higher number of shares outstanding in the second, third and fourth quarters of 2009.
·We project that we will achieve a compound average annual EPS growth rate for the five-year period from 2010 to 2014 of between 6 percent and 9 percent, using 2009 EPS of $1.91 as the base level.
·Regulated company capital expenditures are expected to total approximately $6.4 billion from 2010 through 2014, which would enable our total rate base to grow at a compound average annual growth rate of 9.5 percent from approximately $7 billion at the end of 2009 to $11.1 billion at the end of 2014. This projection assumes the projects we have included in our five-year plan are built according to our schedule and on budget. Significant projects included in the plan are the CL&P and WMECO New England East-West Solutions (NEEWS) project, the PSNH Clean Air Project, the Hydro-Québec (HQ) tie line project, and the Yankee Gas Waterbury to Wallingford Pipeline Project.
As of December 31, 2009, we employed a total of 6,078 employees, excluding temporary employees, of which 1,870 were employed by CL&P, 1,250 by PSNH, 348 by WMECO, 425 by Yankee Gas and 2,185 were employed by Northeast Utilities Service Company (NUSCO). Approximately 2,231 employees of CL&P, PSNH, WMECO, NUSCO and Yankee Gas are members of the International Brotherhood of Electrical Workers and The United Steelworkers and are covered by 11 union agreements.
Our website address is www.nu.com. We make available through our website a link to the SEC's EDGAR website (http://www.sec.gov/edgar/searchedgar/companysearch.html), at which site NU's, CL&P's, WMECO's and PSNH's Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and any amendments to those reports may be reviewed. Printed copies of these reports may be obtained free of charge by writing to our Investor Relations Department at Northeast Utilities, 56 Prospect Street, Hartford, CT 06103.