Eversource 2004 Annual Report Download - page 21

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Yankee Gas:
• On September 3, 2004, the DPUC approved the application of Yankee
Gas Services Company (Yankee Gas) to construct a liquefied natural
gas (LNG) storage facility in Waterbury, Connecticut capable of
storing 1.2 billion cubic feet of natural gas with an estimated cost
of $108 million.
• The DPUC approved the Yankee Gas rate case settlement agreement
on December 8, 2004. The approval resulted in a $14 million
increase in rates beginning January 1, 2005.
PSNH:
• In October 2004, Public Service Company of New Hampshire (PSNH)
received the approvals necessary to begin construction related to
the conversion of one of three 50-megawatt units at the coal-fired
Schiller Station to burn wood.
• On September 2, 2004, the New Hampshire Public Utilities
Commission (NHPUC) approved the negotiated settlement of the
PSNH rate case that was filed in 2003. The settlement agreement
resulted in an annualized delivery rate increase of $3.5 million
beginning October 1, 2004 and approval of another rate increase
of $10 million on June 1, 2005.
• On September 24, 2004, PSNH filed a petition with the NHPUC
requesting a change in the transition energy service rate for residential
and small commercial customers and the default energy service rate
(TS/DS) for large commercial and industrial customers for the period
February 1, 2005 through January 31, 2006. PSNH files for updated
TS/DS rates periodically to ensure timely recovery of its costs. The
NHPUC issued its order approving PSNH’s proposed TS/DS rate of
$0.0649 per kWh on January 28, 2005.
WMECO:
• On December 29, 2004, the Massachusetts Department of
Telecommunications and Energy (DTE) approved a settlement
agreement to increase Western Massachusetts Electric Company’s
(WMECO) electricity distribution rates by $6 million annually effective
January 1, 2005 and by an additional $3 million annually beginning
January 1, 2006. The settlement also reduced WMECO’s transition
charge by approximately $13 million annually.
Liquidity:
• During 2004, the Utility Group issued a total of $505 million of
fixed-rate bonds and notes with maturities ranging from 10 years
to 30 years. The debt was issued primarily to fund capital expenditure
programs, repay higher cost debt and fund prior spent nuclear
fuel obligations.
• NU’s capital expenditures, totaled $643.8 million in 2004, compared
with $563.6 million in 2003 and $510.5 million in 2002. The increase
resulted from increased spending on new electric transmission projects.
NU projects capital expenditures of approximately $740 million in 2005.
• NU’s net cash flows from operations totaled $517.1 million in 2004,
compared with $593.4 million in 2003 and $615.8 million in 2002.
Overview
Consolidated: NU reported 2004 earnings of $116.6 million, or $0.91 per
share, compared with earnings of $116.4 million, or $0.91 per share,
in 2003 and $152.1 million or $1.18 per share in 2002. All earnings
per share amounts are reported on a fully diluted basis.
Earnings in 2004 of $116.6 million, or $0.91 per share, include an
after-tax loss of $48.3 million, or $0.38 per share, associated with
mark-to-market accounting for certain natural gas positions
established to mitigate the risk of electricity purchased in anticipation
of winning certain levels of wholesale electric load in New England.
Also included in 2004 earnings are after-tax investment write-downs
of approximately $8.8 million ($13.8 million on a pre-tax basis), or
$0.07 per share, primarily related to NU’s investments in a fuel cell
development company and a telecommunications company. NU’s 2004
earnings were essentially unchanged from 2003. Utility Group earnings
increased by $23.1 million due to increased rates and other positive
regulatory developments. That increase was offset by increased losses
at NU Enterprises and higher parent and other costs. Increased NU
Enterprises losses were due primarily to a 2004 negative mark-to-
market loss on certain natural gas contracts. Higher parent and other
costs were due to higher investment write-downs in 2004.
NU’s 2003 earnings of $116.4 million or $0.91 per share include a
charge of $36.9 million, or $0.29 per share, associated with a loss
recorded for the settlement of a wholesale power contract dispute
between CL&P and its three 2003 standard offer power suppliers,
including an NU subsidiary, Select Energy. Also included in 2003
earnings was a negative $4.7 million after-tax cumulative effect of an
accounting change as a result of the adoption of FIN 46. 2003 earnings
decreased by $35.7 million compared to 2002. Earnings at the Utility
Group decreased significantly in 2003 due to lower pension income
and the absence of earnings related to the Seabrook nuclear unit
(Seabrook). These decreases were partially offset by lower Utility Group
controllable operation and maintenance costs. NU’s 2003 results
benefited from lower corporate-wide interest costs and improved
performance at NU Enterprises from improved margins on Select
Energy’s energy supply contracts, higher volumes, improved operation
of NU Enterprises’ generating facilities, and the absence of natural
gas trading losses that occurred in the first half of 2002.
A summary of NU’s earnings/(losses) by major business line for 2004,
2003 and 2002 is as follows:
For the Years Ended December 31,
(Millions of Dollars) 2004 2003 2002
Utility Group $155.6 $132.5 $198.3
NU Enterprises (15.1) (3.4) (53.2)
Parent and Other (23.9) (12.7) 7.0
Net Income $116.6 $116.4 $152.1
NU’s revenues during 2004 increased to $6.7 billion from $6.1 billion in
2003 and from $5.2 billion in 2002. The increase in 2004 revenues was
due to increased revenues from NU Enterprises totaling $0.4 billion
primarily as a result of higher merchant energy retail sales volumes
and higher prices. The remainder of the increase in 2004 revenues
related to higher Utility Group transmission and distribution revenues
as a result of higher rates and higher FMCC revenues.