Eversource 2008 Annual Report Download - page 25

Distribution Segment: A summary of distribution segment capital expenditures by
company in 2008, 2007 and 2006 is as follows:
For the Years Ended December 31,
(Millions of Dollars) 2008 2007 2006
CL&P $ 296.6 $ 283.3 $ 210.3
PSNH 98.2 88.3 77.5
WMECO 37.8 34.0 30.0
Totals - Electric distribution
(excluding generation) 432.6 405.6 317.8
Yankee Gas 44.0 63.7 89.9
Other 0.5 0.4 2.3
Total distribution 477.1 469.7 410.0
PSNH generation 74.0 35.3 32.1
Total distribution segment $ 551.1 $ 505.0 $ 442.1
PSNH’s Clean Air Project is expected to cost approximately $457 million, which will be
recovered through its generation rates under New Hampshire law. PSNH commenced
preliminary site work for this project in 2008. The project is scheduled to be completed
by the end of 2012. As of December 31, 2008, PSNH had capitalized approximately $27.5
million associated with this project, of which $24.8 million was capitalized in 2008. Refer
to “Regulatory Developments and Rate Matters - New Hampshire - Merrimack Clean Air
Project” for further discussion, including the status of the New Hampshire Supreme Court
proceedings and their eect on this project.
On February 15, 2008, Yankee Gas and NRG Energy, Inc. (NRG) entered into a settlement
agreement, which, among other things, allowed for the recovery by Yankee Gas of
approximately $17.5 million of capital costs and expenses related to an NRG subsidiary’s
generating plant construction project that was abandoned. The 2008 capital expenditures
at Yankee Gas were oset by this $17.5 million recovery, and the 2007 capital expenditures
included $12 million spent on its $108 million liquefied natural gas storage and production
facility in Waterbury, Connecticut, which was placed in service in July 2007.
Liquidity
Consolidated: We had $89.8 million of cash and cash equivalents on hand at December
31, 2008, compared with $15.1 million at December 31, 2007. As of February 25, 2009, we
had approximately $466 million of externally invested cash. Refer to “Impact of Financial
Market Conditions” below for further discussion.
We had positive consolidated operating cash flows in 2008 of $418.5 million, after RRB
payments included in financing activities, compared with negative operating cash flows
of $11.3 million in 2007 and positive operating cash flows of $233.7 million in 2006, both
after RRB payments. The increase in 2008 operating cash flows 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. After factoring these cash
flow impacts, the increase in operating cash flows in 2008 from 2007 was primarily due to
a favorable impact of approximately $118 million from tax-related matters in 2008, which
included an income tax net settlement of approximately $78 million in the fourth quarter
and a reduction in income tax payments of approximately $40 million during 2008 related
to bonus depreciation. The cash flow benefit of our accounts payable balances increased
by $122 million, excluding approximately $50 million in unpaid costs at PSNH related to
a major storm in December 2008 that are deferred and expected to be recovered from
customers or insurance proceeds. These factors were partially oset by a net reduction
in other working capital items resulting primarily from a net $136 million increase in
accounts receivable and unbilled revenues items, which also included investments in
securitizable assets.
We project consolidated operating cash flows of approximately $500 million in 2009,
after RRB payments of $244 million, which represents an increase of approximately
$82 million, or 19 percent, from 2008 operating cash flows, after RRB payments.
This projected increase does not include any pension plan contributions, as they are
not required to be paid during 2009, and is primarily due to our major southwest
Connecticut transmission projects being fully reflected in rates in 2009 after their
completion in the second half of 2008 and the absence in 2009 of the Con Edison
settlement payment. These factors are 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 due to our cash return on and recovery of capital investment
program expenditures.
In 2008, NU parent, CL&P, PSNH and Yankee Gas issued a total of $760 million of long-
term debt. On May 27, 2008, CL&P sold $300 million of first and refunding mortgage
bonds due May 1, 2018 and carrying a coupon of 5.65 percent and PSNH sold $110 million
of first mortgage bonds due May 1, 2018 and carrying a coupon of 6 percent. Proceeds
from the CL&P and PSNH issuances were used to repay short-term debt, to fund each
company’s ongoing capital investment programs, and for general working capital
purposes. On June 5, 2008, NU parent sold $250 million of senior unsecured notes due
June 1, 2013 and carrying a coupon of 5.65 percent. Most of the proceeds were used to
repay $150 million of 3.3 percent notes that matured June 1, 2008. The balance of NU
parent’s debt issuance was used to pay down short-term debt, a portion of which was
incurred in March 2008 as a result of the $49.5 million litigation settlement payment to
Con Edison. On October 7, 2008, Yankee Gas sold $100 million of privately placed first
mortgage bonds due October 1, 2018 and carrying a coupon of 6.9 percent. Yankee Gas
used the proceeds to repay its borrowings under the regulated companies’ credit facility,
to fund capital investment programs and for general working capital purposes.
On February 13, 2009, CL&P issued $250 million of first and refunding mortgage bonds
due February 1, 2019 and carrying a coupon of 5.5 percent. Proceeds from this issuance
will be used to repay short-term debt and fund CL&P’s capital investment program. In
mid-2009 or earlier depending on market opportunities, we expect to issue $150 million
of long-term debt at PSNH, subject to regulatory approval, and between $250 million and
$300 million of additional equity. These issuances will be made primarily to repay short-
term debt and fund our 2009 capital investment program, which will also be funded by
available short-term borrowings and the projected growth in 2009 operating cash flows.
A summary of the current credit ratings and outlooks by Moody’s Investors Service
(Moody’s), Standard & Poor’s (S&P) and Fitch Ratings (Fitch) for NU parent’s and
WMECO’s senior unsecured debt and CL&P’s and PSNH’s first mortgage bonds is as
follows:
Moody’s S&P Fitch
Current Outlook Current Outlook Current Outlook
NU Parent Baa2 Stable BBB- Stable BBB Stable
CL&P A3 Stable BBB+ Stable A- Stable
PSNH Baa1 Stable BBB+ Stable BBB+ Stable
WMECO Baa2 Stable BBB Stable BBB+ Stable
On July29, 2008, Moody’s changed the outlook of Yankee Gas to stable from negative
and armed the company’s Baa2 corporate credit rating. On August 8, 2008, Fitch
armed all of its ratings and outlooks on NU parent, CL&P, PSNH and WMECO. In late
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