Eversource 2010 Annual Report Download - page 50

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common equity issuance. If we complete the proposed merger with NSTAR, we would no longer need to undertake the previously
planned $300 million NU common equity issuance in 2012 nor issue any additional equity in the foreseeable future.
Cash flows provided by operating activities in 2010 totaled $832.6 million, compared with operating cash flows of $745 million in 2009
and $424.1 million in 2008 (all amounts are net of RRB payments, which are included in financing activities on the accompanying
consolidated statements of cash flows). The improved cash flows were due primarily to the absence in 2010 of costs incurred at PSNH
and WMECO related to the major storm in December 2008 that were paid in the first quarter of 2009, a decrease in Fuel, Materials and
Supplies attributable to a $31.8 million reduction in coal inventory levels at the PSNH generation business as ordered by the NHPUC,
and increases in amortization on regulatory deferrals primarily attributable to 2009 activity within PSNH’s ES and CL&P’s CTA tracking
mechanisms where such costs exceeded revenues resulting in an unfavorable cash flow impact in 2009. Offsetting these favorable
cash flow impacts was a $45 million contribution made into our Pension Plan in September 2010. The increase in operating cash flows
from 2008 to 2009 was due primarily to higher transmission revenues at CL&P after significant projects were placed in service in late
2008, as well as cost management efforts; a decrease of approximately $225 million related primarily to amounts spent on CL&P's
FMCC and GSC, the costs of which are passed on to customers; approximately $100 million less in cash expenditures on Fuel,
Materials and Supplies in 2009 due primarily to the lower cost of natural gas being stored by Yankee Gas for the winter heating season;
and the absence in 2009 of the litigation settlement payment of $49.5 million made in 2008.
Excluding the impact of our proposed merger with NSTAR, we project 2011 cash flows provided by operating activities of approximately
$950 million to $1 billion, net of RRB payments. The increase over 2010 is due primarily to the accelerated depreciation provisions of
the 2010 Tax Act, which is expected to result in a cash flow benefit of approximately $250 million in 2011, and the impact of the 2010
distribution rate case decisions. Those benefits are partially offset by projected 2011 contributions to our Pension Plan of
approximately $145 million.
On December 30, 2010, CL&P made its final principal and interest payment on approximately $1.4 billion of RRBs that were issued in
2001. As a result, CL&P will no longer recover any payments from customers associated with these RRBs. A total of $203.2 million of
principal and interest payments were made on these RRBs in 2010. The full amortization of these RRBs in 2010 will reduce CL&P’s
cash flows provided by operating activities in 2011, compared with previous years, but will have no material impact on CL&P’s
operating cash flows net of RRB payments. PSNH and WMECO RRBs do not fully amortize until 2013, therefore the RRBs do not
have an impact on their respective operating cash flows in 2011 when compared to 2010.
A summary of the current credit ratings and outlooks by Moody's, S&P and Fitch for senior unsecured debt of NU parent and WMECO
and senior secured debt of CL&P and PSNH is as follows:
Moody's S&P Fitch
Current Outlook Current Outlook Current Outlook
NU parent Baa2 Stable BBB- Watch-Positive BBB Watch-Positive
CL&P A2 Stable BBB+ Watch-Positive A- Stable
PSNH A3 Stable BBB+ Watch-Positive BBB+ Stable
WMECO Baa2 Stable BBB Watch-Positive BBB+ Stable
On October 18, 2010, following the announcement of the proposed merger of NU and NSTAR, Moody's announced that it had
reaffirmed the ratings and "stable" outlooks of NU parent, CL&P, PSNH and WMECO, and S&P announced that it had placed NU
parent, CL&P, PSNH and WMECO's ratings outlooks on credit watch with "positive" implications. On October 19, 2010, also due to the
announcement of the proposed merger, Fitch announced that it had reaffirmed the ratings and "stable" outlooks of CL&P, PSNH and
WMECO and placed NU parent's ratings outlook on credit watch with "positive" implications. Assuming completion of the proposed
merger with NSTAR, we expect our credit ratings will improve.
On January 22, 2010, Fitch downgraded CL&P’s preferred stock rating from BBB to BBB- as a result of revised guidelines for rating
preferred stock and hybrid securities in general.
If the senior unsecured debt ratings of NU parent were to be reduced to below investment grade level by either Moody's or S&P, a
number of Select Energy's supply contracts would require Select Energy to post additional collateral in the form of cash or LOCs. If
such an event had occurred as of December 31, 2010, Select Energy would have been required to provide additional cash or LOCs in
an aggregate amount of $24 million to various unaffiliated counterparties and additional cash or LOCs in the aggregate amount of $7.4
million to independent system operators. NU parent would have been and remains able to provide that collateral on behalf of Select
Energy.
If the unsecured debt ratings of PSNH were to be reduced by either Moody's or S&P, certain supply contracts could require PSNH to
post additional collateral in the form of cash or LOCs with various unaffiliated counterparties. As of December 31, 2010, if the
unsecured debt ratings of PSNH had been reduced by one level or to below investment grade, PSNH had an adequate amount of
collateral posted and would not have been required to post additional amounts.
We paid common dividends of $180.5 million in 2010, compared with $162.4 million in 2009 and $129.1 million in 2008. The increase
reflects a 7.9 percent increase in our common dividend rate that took effect in the first quarter of 2010, as well as a higher number of
shares outstanding as a result of the March 2009 issuance of nearly 19 million common shares. On February 8, 2011, our Board of
Trustees declared a quarterly common dividend of $0.275 per share, payable on March 31, 2011 to shareholders of record as of