Eversource 2008 Annual Report Download - page 20

• Our cash capital expenditures totaled $1.3 billion in 2008, compared with $1.1 billion
in 2007. We were successful in meeting our extensive 2008 capital plan. In 2009, we
expect cash capital expenditures to be approximately $880 million, primarily because
of lower transmission capital expenditures at CL&P.
• We issued $760 million of long-term debt in 2008 at rates of between 5.65 percent
and 6.9 percent, and $250 million in February 2009 at a rate of 5.5 percent. We expect
further external financings totaling $400 million to $450 million in mid-2009 (or earlier
depending on market opportunities), including approximately $150 million of long-term
debt by PSNH, subject to regulatory approval, and between $250 million and $300
million of additional equity by NU parent. Refer to “Liquidity” in this Management’s
Discussion and Analysis for further discussion.
• On June 30, 2008, due to the availability and lower relative cost of other liquidity
sources, CL&P chose to terminate the arrangement under which CL&P could sell to a
financial institution up to $100 million of accounts receivable and unbilled revenues.
• After rate reduction bond (RRB) payments included in financing activities, we had cash
flows provided by operations in 2008 of $418.5 million, which represented an increase
of $429.8 million from 2007. This increase was primarily due to the absence in 2008
of approximately $400 million in tax payments in 2007 related to the 2006 sale of the
competitive generation business, partially oset by the litigation settlement payment
to Con Edison of $49.5 million in 2008. Refer to “Liquidity - Consolidated” in this
Management’s Discussion and Analysis for further discussion.
• In 2009, we project operating cash flows of approximately $500 million, after
repayment of RRBs. This projection does not include any contributions to our
pension plan, as they are not required to be paid in 2009. The primary reasons for the
projected increase from 2008 are that our major southwest Connecticut transmission
projects will be fully reflected in rates in 2009 due to their completion in the second
half of 2008 and that the 2008 Con Edison settlement payment is absent in 2009,
partially oset by the payment in 2009 of major storm costs incurred in December
2008 that likely will not be fully recovered from customers in 2009. Excluding
potential contributions to our pension plan, we currently project our internally-
generated cash flows to grow to approximately $1 billion by 2013.
• As of February 25, 2009, we had approximately $466 million of externally invested
cash. At this time, we also had approximately $51 million of borrowing availability on
our revolving credit lines, excluding the remaining unfunded commitment of Lehman
Brothers Commercial Bank (LBCB) (refer to “Liquidity - Impact of Financial Market
Conditions” for further discussion).
Overview
Consolidated: We earned $260.8 million, or $1.67 per share, in 2008, compared with
$246.5 million, or $1.59 per share, in 2007 and $470.6 million, or $3.05 per share, in 2006.
Results for 2008 included an after-tax charge of $29.8 million, or $0.19 per share, resulting
from the settlement of litigation with Con Edison. Excluding that charge, our earnings
in 2008 were $290.6 million, or $1.86 per share. Results for 2006 included an after-
tax gain of $314 million, or $2.03 per share, associated with the sale of our competitive
generation business, and a reduction in income tax expense at CL&P of $74 million, or
$0.48 per share, pursuant to a PLR received from the IRS. Results in 2007 and 2006
included discretionary pre-tax donations to the NU Foundation (Foundation) of $3 million
and $25 million, respectively. There was no such contribution in 2008. A summary of
our earnings, which also reconciles the non-GAAP measures of consolidated non-GAAP
earnings and EPS, as well as EPS by segment, to the most directly comparable GAAP
measures of consolidated net income and fully diluted EPS, for 2008, 2007 and 2006 is
as follows:
For the Years Ended December 31,
2008 2007 2006
(Millions of Dollars, except per share amounts)
Amount Per Share Amount Per Share Amount Per Share
Net Income (GAAP) $ 260.8 $ 1.67 $ 246.5 $ 1.59 $ 470.6 $ 3.05
Regulated companies $ 289.1 $ 1.85 $ 228.7 $ 1.47 $ 183.3 $ 1.19
Competitive businesses 13.1 0.08 11.7 0.08 (102.7 ) (0.66 )
NU parent and
other companies (11.6 ) (0.07 ) 6.1 0.04 2.0 0.01
Non-GAAP earnings 290.6 1.86 246.5 1.59 82.6 0.54
Con Edison litigation
charge (29.8 ) (0.19 ) - - - -
Gain on sale of
competitive business - - - - 314.0 2.03
Reduction in income tax
expense (PLR) - - - - 74.0 0.48
Net Income (GAAP) $ 260.8 $ 1.67 $ 246.5 $ 1.59 $ 470.6 $ 3.05
Regulated Companies: Our regulated companies segment their earnings between their
electric transmission segments and their electric and gas distribution segments, with
PSNH generation included in the electric distribution segment. A summary of regulated
company earnings by segment for 2008, 2007 and 2006 is as follows:
For the Years Ended December 31,
(Millions of Dollars) 2008 2007 2006
CL&P Transmission* $ 115.6 $ 66.7 $ 46.9
PSNH Transmission 16.7 10.7 8.3
WMECO Transmission 6.0 5.1 4.6
Total Transmission* $ 138.3 $ 82.5 $ 59.8
CL&P Distribution* $ 70.0 $ 61.4 $ 147.6
PSNH Distribution 41.4 43.7 27.0
WMECO Distribution 12.3 18.5 11.0
Yankee Gas 27.1 22.6 11.9
Total Distribution* $ 150.8 $ 146.2 $ 197.5
Net Income - Regulated
Companies* $ 289.1 $ 228.7 $ 257.3
*After preferred dividends of CL&P in all years.
The higher 2008 and 2007 transmission segment earnings reflect a higher level of
investment in this segment as we continued to build out our transmission infrastructure
to meet the region’s reliability needs. CL&P’s transmission segment earnings increased
primarily due to the investment by CL&P of approximately $1.6 billion since the beginning
of 2005 in the southwest Connecticut transmission projects that were completed in 2008.
At December 31, 2008, our transmission segment rate base was approximately $2.4 billion,
compared with approximately $1.5 billion at December 31, 2007.
CL&P’s 2008 distribution segment earnings were $8.6 million higher than 2007 primarily
due to higher distribution revenues resulting from a distribution rate increase eective
February 1, 2008, a settlement of federal tax matters, a lower eective income tax rate,
and higher other revenues resulting from financial incentives under Connecticut’s “Act
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