Eversource 2005 Annual Report Download - page 18

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• In 2005, the Utility Group companies issued $350 million of first
mortgage bonds and senior notes with maturities ranging from
10 years to 30 years, the proceeds from which were used to repay
short-term borrowings used to finance capital expenditures.
• In 2005, NU’s capital expenditures totaled $775.4 million compared
with $671.5 million in 2004. The increased level of capital expenditures
was caused primarily by a need to continue to improve the capacity
and reliability of NU’s regulated transmission system.
• Cash flows from operations decreased by $19.4 million to
$441.2 million in 2005 from $460.6 million in 2004.
Overview
Consolidated: NU lost $253.5 million, or $1.93 per share, in 2005,
compared with earnings of $116.6 million, or $0.91 per share, in 2004,
and $116.4 million, or $0.91 per share, in 2003. Earnings per share in
2004 and 2003 are reported on a fully diluted basis and the weighted
average common shares outstanding at December 31, 2005 include
the impact of the issuance of 23 million NU common shares on
December 12, 2005 which were outstanding for 20 days in 2005.
The 2005 loss reflects losses of $398.2 million, or $3.03 per share,
at NU Enterprises, the holding company for NU’s competitive
businesses, and earnings of $163.4 million, or $1.24 per share, at NU’s
regulated Utility Group companies. In 2005, NU also had $18.7 million,
or $0.14 per share, of parent company and other expense, compared
with $23.9 million, or $0.18 per share, in 2004 and $12.7 million, or
$0.10 per share, in 2003. NU’s 2005 losses also include after-tax
employee termination and benefit plan curtailment charges totaling
$15 million.
The losses at NU Enterprises reflect decisions announced in 2005 to
exit all of its competitive business lines. As a result of those decisions,
NU Enterprises recorded $306.2 million of after-tax restructuring and
impairment and mark-to-market charges, primarily on wholesale electric
marketing sales contracts. In 2005, NU Enterprises exited all of its
wholesale sales obligations in New England. NU Enterprises still has
below-market wholesale obligations in the New York power pool
through 2013 and Pennsylvania-New Jersey-Maryland (PJM) power
pool through 2008, all of which weremarked-to-market in 2005. Those
positions will continue to create volatility in NU’s quarterly earnings until
the contracts expire or are exited.
NU’s 2004 results included an after-tax loss of $48.3 million 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.
NU’s2004 results also included after-tax investment write-downs of
approximately $8.8 million, which is included in the $23.9 million.
Asummary of NU’s (losses)/earnings by major business line for 2005,
2004 and 2003 is as follows:
For the Years Ended December 31,
(Millions of Dollars) 2005 2004 2003
Utility Group $ 163.4 $155.6 $132.5
NU Enterprises (1) (398.2) (15.1) (3.4)
Parent and Other (18.7) (23.9) (12.7)
Net (Loss)/Income $(253.5) $116.6 $116.4
(1) The NU Enterprises losses include losses totaling $23.3 million for the year
ended December 31, 2005 and earnings totaling $3.6 million and $4.7 million
for the years ended December 31, 2004 and 2003, respectively,which are
classified as discontinued operations.
In 2005, NU announced decisions to exit all of its competitive businesses.
NU expects that exiting the NU Enterprises businesses will benefit
shareholders by producing a company with a simpler, lower risk business
model, and with more predictable financial results and cash flows. In
2005, those businesses accounted for approximately $2 billion of NU’s
revenues of $7.4 billion. At December 31, 2005, these businesses also
accounted for $2.4 billion of NU’s total assets. NU Enterprises is
comprised of two business segments: the merchant energy business
segment, which includes the wholesale marketing, retail marketing and
competitive generation businesses, and the energy services business
segment. In 2005, in addition to exiting all of its New England wholesale
sales obligations, NU Enterprises sold two of its six energy services
businesses for approximately $6.5 million and part of another energy
services business in January of 2006 for approximately $2 million. NU
Enterprises expects to complete the sale of all its remaining competitive
businesses in 2006. The net proceeds from these sales will be used to
reduce debt and make equity investments in the Utility Group companies.
For the Utility Group, NU segments its earnings between its transmission
and distribution businesses with regulated generation included in the
distribution business. The electric transmission business earned
$42.5 million, or $0.32 per share, in 2005, compared with earnings
of $29.5 million, or $0.23 per share, in 2004, and $28.2 million, or
$0.22 per share, in 2003. The higher level of earnings was due primarily
to a return on a higher level of transmission investment at CL&P. In
2005, the electric distribution and regulated generation companies
earned $103.6 million, or $0.79 per share, compared with earnings of
$112 million, or $0.87 per share, in 2004 and $97 million, or $0.76 per
share, in 2003. Distribution company results in 2005 were primarily
affected by rate increases implemented at CL&P, PSNH and WMECO
in 2005. Those increases were more than offset by higher operation,
interest and depreciation costs at CL&P and PSNH. Yankee Gas earned
$17.3 million, or $0.13 per share, in 2005, compared with earnings
of $14.1 million, or $0.11 per share, in 2004, and $7.3 million, or
$0.06 per share, in 2003. Improved 2005 Yankee Gas results were primarily
due to a $14 million base rate increase implemented on January 1, 2005.
NU’s consolidated revenues increased to $7.4 billion in 2005 from
$6.5 billion in 2004 and $5.9 billion in 2003. Utility Group revenues
totaled $5.5 billion in 2005, compared with $4.6 billion in 2004, and
$4.3 billion in 2003. Higher regulated revenues are primarily caused
by higher fuel and energy costs which arepassed through to customers.
NU Enterprises revenues totaled $2 billion before eliminations in 2005,
compared with $2.7 billion in 2004 and $2.5 billion in 2003. The lower
2005 NU Enterprises revenues reflect lower wholesale electric sales.
NU’s revenues during 2004 increased due to increased revenues from
NU Enterprises 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 revenues to recover
federally mandated congestion charges (FMCC).
Utility Group: The Utility Group is comprised of CL&P, PSNH, WMECO,
and Yankee Gas, and is comprised of their transmission, distribution
and generation businesses. The Utility Group earned $163.4 million
in 2005, or $1.24 per share, compared with $155.6 million, or
$1.21 per share, in 2004 and $132.5 million, or $1.04 per share, in
2003. A summary of Utility Group earnings by company and business
segment for 2005, 2004 and 2003 is as follows: