Eversource 2006 Annual Report Download - page 27

NU 2006 ANNUAL REPORT 25
NU projects a total of approximately $4.9 billion of Utility Group capital
expenditures from 2007 through 2011. A summary of these estimated
capital expenditures for the Utility Group transmission and distribution/
generation businesses by company for 2007 through 2011, excluding
approximately $18 million per year at the corporate service companies,
is as follows (millions of dollars):
Year
2007 2008 2009 2010 2011 Totals
CL&P:
Transmission $ 590 $ 517 $343 $231 $333 $2,014
Distribution 270 261 266 270 279 1,346
860 778 609 501 612 3,360
PSNH:
Transmission 83 85 37 35 6 246
Distribution and
generation 128 134 111 128 148 649
211 219 148 163 154 895
WMECO:
Transmission 16 54 45 43 42 200
Distribution 34 33 31 31 31 160
50 87 76 74 73 360
Yankee Gas
distribution 62 42 41 41 41 227
Totals –
transmission 689 656 425 309 381 2,460
Totals –
distribution and
generation 494 470 449 470 499 2,382
Totals $1,183 $1,126 $874 $779 $880 $4,842
Actual levels of capital expenditures could vary from the estimated
amounts for the companies and periods above.
NU Enterprises: NU Enterprises capital expenditures were $20.6 million
in 2006, compared with $21.3 million in 2005 and $19.3 million in 2004.
Aportion of the 2006 capital expenditures related to work performed
for the selective catalytic reduction system installed at Mt. Tom. This
project was completed in June of 2006 at a cost of $14 million, of
which approximately $4.1 million was spent in 2006. On November 1,
2006, Mt. Tom was sold.
NU Enterprises Divestitures
At December 31, 2006, with the completion of the sale of its competitive
generation business on November 1, 2006, NU has exited substantially
all of the competitive businesses. As a result of exiting these businesses,
NU’sannual revenues related to NU Enterprises have decreased by
approximately $1 billion from 2005 levels. NU is using the net proceeds
from the sale of these businesses to invest in its regulated businesses
and reduceshort-term debt. An overview of this process is as follows:
WholesaleMarketing Business: In 2005, NU exited its New England
wholesale electric sales commitments by buying out some contracts
and assigning others to a third party. The total pre-tax cost of exiting
those commitments in 2005 was approximately $242 million. Select
Energy continues to serve its remaining PJM and New York Municipal
Power Association (NYMPA) wholesale sales contract obligations,
which havebeen marked-to-market since 2005.
In 2006, Select Energy sold 8.4 million megawatt-hours (MWH) to
regulated utilities in the PJM pool, and at December 31, 2006 its estimated
remaining obligations through May 31, 2008 totaled 3.6 million MWH.
Those obligations are largely hedged (or sourced) through their remaining
term, and management does not expect future price movements to
cause them to have a material impact on net income in 2007 if loads
are served as currently expected. Select Energy has a long-term contract
with NYMPA. Under that contract, Select Energy expects to sell an
estimated 3.9 million MWH to NYMPA members through 2013 unless it
is successful in exiting its remaining obligations. While most of Select
Energy’s obligations over the next 5 years are hedged, obligations in
the later years are partially unhedged, and Select Energy’s financial
results can vary based on mark-to-market movements in the unhedged
portions of the NYMPA contract. In addition to the contracts noted
above, Select Energy’s only other long-term wholesale obligation is a
contract to purchase forward reserve in New England through 2012.
That contract is expected to be profitable for Select Energy, which will
recognize earnings on this contract as the products are delivered.
Based on the current value of this contract, when combined with the
net wholesale derivative contract portfolio that has been marked-to-
market at December 31, 2006 with a value of negative $126.5 million,
management believes, under present conditions, that the total cash
cost to exit the remaining wholesale marketing business is significantly
less than $100 million.
As of December 31, 2006, Select Energy’s remaining wholesale sales
obligations areestimated tobe 7.5 million MWH, down from approxi-
mately22 million MWH in March of 2005 when NU Enterprises
announced it was exiting the wholesale marketing business.
Retail Marketing Business: On June 1, 2006, Select Energy sold its retail
marketing business to Hess, including all of its retail sales obligations
and supply contracts. Under the terms of the agreement, Select Energy
paid Hess approximately $11.5 million at closing, $12.9 million in
December of 2006 and will pay $14.8 million by the end of 2007, which
is included in other current liabilities on the accompanying consolidated
balance sheet.
At December 31, 2006, Select Energy has net accounts receivable in
the process of being collected of approximately $5 million for services
provided to customers prior to the June 1, 2006 sale of the retail
marketing business.
Select Energy is in the process of obtaining the final remaining consents
from its retail customers to assign contracts to Hess. Those contracts
that have not been assigned are subject to administrative arrangements
with Hess that mirror Select Energy’s obligations.
Competitive Generation Business: On November 1, 2006, NU completed
the sale of its 100 percent ownership in NGC stock and Mt. Tom for
$1.34 billion, which included ECP’s assumption of $320 million of NGC
debt. As a result, NU recorded an after-tax gain of approximately $314
million in the fourth quarter of 2006.
Energy Services Businesses: SECI-NH and Woods Network were sold
in November of 2005. In January of 2006, the Massachusetts service
location of SECI-CT was sold. In April of 2006, NU Enterprises sold
Woods Electrical – Services. In May of 2006, SESI was sold.
In connection with the saleof the retail marketing business, the
competitive generation business and certain of the energy services
businesses, NU provided various guarantees and indemnifications to