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NORTHEAST UTILITIES ANNUAL REPORT 2005
3
For the long-term, our strategy will serve two key
purposes: meet the reliability needs of our customers
and deliver value to our shareholders.
For our customers and communities, our significant
investment in “poles, wires and pipes” will deliver vitally
needed energy infrastructure improvement. Our plan is
supported by both national and regional energy policy and
directly benefits the region’s economic health and vitality.
For shareholders, we expect this strategy to deliver
attractive earnings per share growth, a growing dividend
and a balance sheet strong enough to finance our capital
programs. Beginning in 2007, we estimate compound
annual earnings per share growth of between 8 and
10 percent. This attractive value proposition has been
recognized by the market, with a positive reaction to
our equity offering late in 2005.
Transmission: Our growth engine
Across the country, customers’ steadily changing and
growing electricity use drives the essential need for a
reliable transmission system. The 2005 national energy
bill acknowledged the need and sought to improve the
nation’s energy infrastructure.
Here in New England, the requirement for an improved
and enhanced electric transmission system is especially
urgent, and NU is a leader in building the right solution,
at the right time. We have begun construction on vitally
needed upgrades to the current inadequate transmission
grid — the bulk power system connecting generators to
lower voltage distribution lines that deliver electricity to
customers. Our build-out program represents approximately
55 percent of the total New England transmission
upgrade and is one of the largest, most far-reaching
programs of its type in the United States.
NU’s investment in this high-voltage system is expected
to total up to $2.3 billion over the next five years, with
the major projects already approved and cost recovery
mechanisms in place. The first of these projects is on
schedule and on budget — a 21-mile line to connect our
largest load center, southwest Connecticut, to the region’s
345-kV backbone. The project is nearly 70 percent complete,
more than five miles of the line are already energized, and
we expect the line to be operational by the end of 2006.
This and other planned projects in southwest Connecticut
will improve reliability and reduce congestion and
constraints on the transmission system.
Positive regulatory decisions provide financial support
for our plans. Congress directed the Federal Energy
Regulatory Commission (FERC) to develop incentives
for constructing new transmission facilities. At the state
level, Massachusetts and Connecticut laws allow a
prompt true-up of FERC-approved retail transmission
charges in distribution company rates.
In 2005, our Transmission business earned $42.5 million,
an increase of 44 percent over 2004. Transmission’s
asset base is expected to grow from $650 million to
$2.3 billion in 2010. We strongly believe that directing
our investment in this manner will produce strong
results for both our customers and shareholders.