0000072741-01-500122.txt : 20011019 0000072741-01-500122.hdr.sgml : 20011019 ACCESSION NUMBER: 0000072741-01-500122 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20011011 ITEM INFORMATION: FILED AS OF DATE: 20011012 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CONNECTICUT LIGHT & POWER CO CENTRAL INDEX KEY: 0000023426 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC SERVICES [4911] IRS NUMBER: 060303850 STATE OF INCORPORATION: CT FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-00404 FILM NUMBER: 1757969 BUSINESS ADDRESS: STREET 1: SELDEN STREET CITY: BERLIN STATE: CT ZIP: 06037-1616 BUSINESS PHONE: 8606655000 FILER: COMPANY DATA: COMPANY CONFORMED NAME: NORTHEAST UTILITIES SYSTEM CENTRAL INDEX KEY: 0000072741 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC SERVICES [4911] IRS NUMBER: 042147929 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-05324 FILM NUMBER: 1757966 BUSINESS ADDRESS: STREET 1: 174 BRUSH HILL AVE CITY: WEST SPRINGFIELD STATE: MA ZIP: 01090-0010 BUSINESS PHONE: 4137855871 MAIL ADDRESS: STREET 1: 107 SELDON ST CITY: BERLIN STATE: CT ZIP: 06037-1616 FILER: COMPANY DATA: COMPANY CONFORMED NAME: WESTERN MASSACHUSETTS ELECTRIC CO CENTRAL INDEX KEY: 0000106170 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC SERVICES [4911] IRS NUMBER: 041961130 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-07624 FILM NUMBER: 1757967 BUSINESS ADDRESS: STREET 1: 174 BRUSH HILL AVE CITY: WEST SPRINGFIELD STATE: MA ZIP: 01089 BUSINESS PHONE: 4137855871 MAIL ADDRESS: STREET 1: 107 SELDON ST CITY: BERLIN STATE: CT ZIP: 06037-1616 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PUBLIC SERVICE CO OF NEW HAMPSHIRE CENTRAL INDEX KEY: 0000315256 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC SERVICES [4911] IRS NUMBER: 020181050 STATE OF INCORPORATION: NH FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-06392 FILM NUMBER: 1757968 BUSINESS ADDRESS: STREET 1: 1000 ELM ST CITY: MANCHESTER STATE: NH ZIP: 03105 BUSINESS PHONE: 6036694000 MAIL ADDRESS: STREET 1: 1000 ELM STREET CITY: MANCHESTER STATE: NH ZIP: 03105 8-K 1 slidescover1012018kf.txt OCTOBER 11, 2001 ANALYST PRESENTATION, GREENWICH, CT SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549-1004 FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported) October 11, 2001 ------------------- NORTHEAST UTILITIES Commission File Number 1-5324 State of Incorporation - MASSACHUSETTS IRS. No. 04-2147929 THE CONNECTICUT LIGHT AND POWER COMPANY Commission File Number 1-11419 State of Incorporation -CONNECTICUT IRS No. 06-0303850 PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE Commission File Number 1-6392 State of Incorporation NEW HAMPSHIRE IRS No. 02-0181050 WESTERN MASSACHUSETTS ELECTRIC COMPANY Commission File Number 0-7624 State of Incorporation - MASSACHUSETTS IRS No. 04-1961130 ------------------- ---------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 174 BRUSH HILL AVENUE, WEST SPRINGFIELD, MASSACHUSETTS 01090-0010 ----------------------------------------------------------------- - (Address of principal executive offices Northeast Utilities) (Zip Code) (413) 785-5871 -------------- (Registrant's telephone number, including area code) Not Applicable -------------- (Former name or former address, if changed since last report) ITEM 9. REGULATION FD DISCLOSURE The material attached hereto as Exhibit 99, which is incorporated in this Item 9 by reference thereto, is furnished pursuant to Regulation FD. SIGNATURE Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. NORTHEAST UTILITIES PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE WESTERN MASSACHUSETTS ELECTRIC COMPANY (Registrants) By: /S/ David R. McHale Name: David R. McHale Title: Vice President and Treasurer THE CONNECTICUT LIGHT AND POWER COMPANY By: /S/ David R. McHale Name: David R. McHale Title: Vice President and Treasurer of Northeast Utilities Service Company, as Agent for THE Connecticut Light and Power Company Date: October 11, 2001 EX-99 3 slides1012018k.txt NU OVERVIEW - SLIDE PRESENTATION EXHIBIT 99. SLIDE #1 NU OVERVIEW MICHAEL G. MORRIS CHAIRMAN, PRESIDENT, CHIEF EXECUTIVE OFFICER SLIDE #2 This presentation contains forward-looking statements, which are statements of future expectations and not facts. Actual results or developments might differ materially from those included in the forward-looking statements because of factors such as competition and industry restructuring, changes in economic conditions, changes in historical weather patterns, changes in laws, regulations or regulatory policies, developments in legal or public policy doctrines, technological developments and other presently unknown or unforeseen factors. Other risk factors are detailed from time to time in the company's SEC reports. SLIDE #3 FIVE KEY MESSAGES FOR TODAY NU will focus on energy in the Northeastern U.S. NU plans to grow both regulated and unregulated businesses NU plans to grow its dividend as earnings grow NU will spend shareholder dollars prudently and will continually test new investments against share repurchases NU has more financial flexibility than it has had in decades SLIDE # 4 WHAT'S TO COME PICTURES John Forsgren - Finance Cheryl Grise' - Utility Group Bill Schivley - Select Energy SLIDE #5 WHAT'S TO COME PICTURES Bruce Kenyon - Generation Dave Boguslawski - Transmission SLIDE #6 NU'S GOAL IS TO BE ONE OF THE LEADING ENERGY DELIVERERS AND MARKETERS IN THE NORTHEAST UNITED STATES Map of Northeastern United States showing the states with regulated NU distribution companies, Connecticut, Massachusetts and New Hampshire. SLIDE #7 NU IS EYEING MAJOR NEW INVESTMENT OPPORTUNITIES IN ITS TARGET MARKET More than $600 million in Southwestern CT electric transmission Up to half of invested capital would be equity More than $200 million in CT natural gas distribution Financed through debt, retained earnings Looking hard at acquiring generation in Northeast power pools Reviewing additional energy services businesses to fill in key needs SLIDE #8 MEASURES OF FINANCIAL SUCCESS Graph showing projected earnings from operations for 2001 and 2002. For 2001, projected earnings per share range is between $1.35 and $1.50 and for 2002 projected earnings per share range is between $1.40 and $1.65. SLIDE #9 MEASURES OF FINANCIAL SUCCESS Graph showing returns on equity at major business segment. For Regulated Businesses the projected range of returns is between 10 and 13%. For unregulated businesses the targeted minimum return on equity is 15%. SLIDE #10 MEASURES OF FINANCIAL SUCCESS 3. Dividend Growth Annual Growth Target: 10% Payout Target: 50% of regulated earnings SLIDE #11 GOVERNMENT/REGULATORY UPDATE: THE STATES Strong relationships with regulators and executive and legislative branches 2002 Elections Connecticut Electric choice available for 21 months, but few have switched Below market standard offer contract stifling competition, hurting Select Energy New Hampshire Choice available, but markets will develop slowly Massachusetts Developing a robust market SLIDE #12 GOVERNMENT/REGULATORY UPDATE: WASHINGTON Congress FERC ISOs and RTOs Transmission NRC SLIDE #13 MERGERS AND ACQUISITIONS Deals to date Hydro plants Yankee Energy Denron and E.S. Boulos Niagara Mohawk Energy Marketing Future focus Generation outside New England Strategic partnerships Status of ConEd litigation SLIDE #14 WHERE ARE THE OPPORTUNITIES AND RISKS OPPORTUNITIES RISKS Interest rates remain low Strong O&M control Electric transmission continues projects scaled back Regulated businesses Unfavorable Yankee exceed allowed returns Energy rate decision Economic growth exceeds Accretive unregulated modest targets investments are not found Unregulated business investments achieve superior returns SLIDE #15 WHAT YOU WILL HEAR FROM THE NU TEAM NU has the financial flexibility and strength to grow all lines of business NU's regulated businesses are strong and have very attractive investment opportunities NU's unregulated businesses continue their rapid expansion Strong nuclear plant sales are providing capital to fuel NU's growth NU has an aggressive electric transmission expansion plan SLIDE #16 JOHN H. FORSGREN VICE CHAIRMAN, EXECUTIVE VICE PRESIDENT AND CFO SLIDE #17 PERFORMANCE OF MAJOR BUSINESSES THROUGH JUNE 30, 2001 Chart showing performance of major businesses through June 30, 2001. Net income, excluding extraordinary items for the 12 months ending June 30, 2001 for CL&P were $131 million, for PSNH/NAEC were $104 million, for WMECO were $24 million, for Yankee Energy were $9 million and for unregulated businesses was $13 million. SLIDE #18 SECURITIZATION AND MILLSTONE SALES ALLOWED A FINANCIAL MAKEOVER OF NU THIS SPRING Chart showing that $3.3 billion was made up of (i) $1.2 billion from the Millstone sale, (ii) $1.4 billion for CT Securitization, $155 million form the WMECO Securitization and $525 million form the NH Securitization. >PAGE> SLIDE #19 PROCEEDS WERE USED FOR MULTIPLE PURPOSES Chart showing the use of proceeds of $3.3 billion: $1.3 billion to retire debt and preferred securities, $1.1 billion for buydowns/buyouts of IPP contracts, $300 million for taxes on Millstone sale and $500+ million for return of equity to Parent. SLIDE #20 FINANCIAL MAKEOVER STRENGTHENED NU'S BALANCE SHEET Pie chart showing ratio of common equity, preferred securities, and debt and capital lease obligations to NU's total capitalization as of 12/31/99 and 6/30/01. As of 12/31/99, 7%, or $404 million, was preferred securities; 36%, or $2.1 billion, was common equity; and 57%, or 3.3 billion, was debt and capital lease obligations. As of June 30, 2001, 2%, or $116 million, was preferred securities; 46%, or $2.1 billion was common equity and 52%, or $2.4 billion, was debt and capital lease obligations. SLIDE #21 WITH STRONGER BALANCE SHEET, NU HAS $1.7 BILLION OF REFINANCINGS UNDER REVIEW Northeast Generation Company Issue $440 million of 4 year and 25 year amortizing notes to refinance bank debt PSNH Refinance $287.5 million of 7.65% and 7.5% tax-exempt bonds NU Refinance $263 million of floating rate Yankee acquisition notes with a fixed rate maturity NU System Renew $700 million of existing bank lines with a new facility that includes PSNH and Yankee SLIDE #22 NU NOW HAS A HIGH LEVEL OF FINANCIAL FLEXIBILITY Nothing drawn on $700 million of bank lines Nearly $100 million of cash now invested in money markets as of October 1 All preferred stock is perpetual No significant debt maturities at regulated subsidiaries until 2021 Additional liquidity will be created by refinancing Northeast Generation Company debt this year and selling Seabrook in 2002 SLIDE #23 CREDIT RATINGS HAVE STRENGTHENED AND MAY BECOME STRONGER S&P MOODY'S FITCH NU Senior Notes BBB* Baa3* BBB-** CL&P Bonds BBB+* Baa1* BBB+** PSNH Bonds BBB+* Baa3* BBB-* WMECO Senior Notes BBB* Baa2* BBB+** NGC Bonds BBB-** Baa2** BBB-** *Positive Review or Outlook **Stable Outlook SLIDE #24 HOW HAS NU USED ITS CASH TO DATE? Buy back shares 10.1 million shares in April when forward repurchase was closed 217,000 shares repurchased in June under old authorization 1.3 shares repurchased since August under new 15 million share authorization Lend $15 million to NEON Communications Convertible 18 percent notes Add key niches to unregulated business portfolio Niagara Mohawk Energy Marketing SLIDE #25 NU WILL APPLY CURRENT CASH AND FUTURE EARNINGS TO REBUILD ITS ASSET BASE. Table showing the following: Year Net Plant 1999 $3.95 billion 2000 $3.55 billion 6/30/01 $3.67 billion 2002 (est.) $4.55 billion 2003 (est.) $5.02 billion 2004 (est.) $5.62 billion 2005 (est.) $6.16 billion 2006 (est.) $6.47 billion SLIDE #26 NU NEEDS BETTER UNREGULATED PERFORMANCE TO HELP OFFSET LOWER PENSION CREDITS Chart showing Annual Pension Credit on Income Statement Year Dollars 1997 $13 million 1998 $44 million 1999 $53 million 2000 $89 million 2001 (est.) $100 million 2002 (est.) $71 million SLIDE #27 UNREGULATED ENERGY BUSINESSES HAVE SEEN GREATEST REVENUE GROWTH Chart showing the following: Year Revenues 1998 $37 million 1999 $649 million 2000 $1,900 million 2001 (est.) $2,800 million 2002 (est.) $3,500 million SLIDE #28 BUT PROFITABILITY HAS LAGGED Chart showing the following: Year Net Income 1999 ($37 million) 2000 $14 million 2001 (6 months through 6/30/01) $9 million SLIDE #29 SEVERAL INITIATIVES UNDERWAY TO ENHANCE UNREGULATED BUSINESS PROFITABILITY Enhance energy trading operations Acquire generation outside New England as prices recede Refinance Northeast Generation Company debt Sell Holyoke Water Power hydroelectric facilities and distribution business Acquire niche services businesses Achieve better results on Select - CL&P contract SLIDE #30 NU ALSO LOOKING AT NEON FOR GROWTH Map showing Northeastern United States and Neon Communications logo and locations where it provides gateway services, dark fiber services, transport services and LAMBDA Services. SLIDE #31 NU HAS REVIEWED AND REAFFIRMED SUPPORT FOR NEON BUSINESS PLAN Prices and demand are holding up in NEON niche System would be difficult and costly to replicate Need for additional capital Removal of NEON investment from equity accounting will help NU's EPS SLIDE #32 THE REGULATED DELIVERY BUSINESS CHERYL W. GRISE' PRESIDENT UTILITY GROUP SLIDE #33 Four Businesses in Three States Chart showing information about NU's four businesses in 3 states: CL&P PSNH Yankee Gas WMECO Customers 1,122,000 436,000 188,000 198,000 Residential 1,026,000 374,000 165,000 181,000 Commercial 92,000 59,000 17,000 16,000 Industrial 4,000 3,000 2,000 1,000 Firm Trans. -- -- 4,000 -- Revenues $2.85 B 1.26 B $406 M $514 M Employees 2,100 1,240 430 410 Exempt 24% 31% 31% 26% Non-exempt 16% 33% 24% 24% Union 60% 35% 45% 50% 4,400 Sq. mi. 5,445 Sq. mi. 1,995 Sq. mi. 1,490 Sq. mi. SLIDE #34 WHO WE ARE The Utility Group is a newly formed organization of the electric and gas utilities of NU CHERYL GRISE' President Utility Group LEE OLIVIER GARY LONG KERRY KUHLMAN DENNIS WELCH LISA THIBDAUE President & COO President & COO President & COO Pres. & COO Vice Pres. CL&P PSNH WMECO Yankee Gas Rates & Reg. SLIDE #35 CL&P IS NU'S LARGEST REGULATED BUSINESS AND IS AGAIN PROFITABLE Chart showing Income for Common 1995 $184 million 1996 ($95 million) 1997 ($155 million) 1998 ($210 million) 1999 ($26 million) 2000 $140 million 2001 $131 million (12 mos. ended 6/30/01) SLIDE #36 CL&P IS REBUILDING ITS RATE BASE THROUGH T&D INVESTMENTS Chart showing Investment in Electric Plant 1997 $156 million 1998 $132 million 1999 $180 million 2000 $208 million 2001 (est.) $231 million 2002 (est.) $279 million 2003 (est.) $353 million 2004 (est.) $331 million 2005 (est.) $343 million >PAGE> SLIDE #37 INCREASING INVESTMENT HAS HELPED MAKE CL&P RELIABILITY BEST EVER Chart showing Annual Average Customer Outage Minutes, Excluding Major Storms (approximates) 1992 140 minutes 1993 130 minutes 1994 150 minutes 1995 145 minutes 1996 125 minutes 1997 120 minutes 1998 125 minutes 1999 110 minutes 2000 90 minutes SLIDE #38 ELECTRIC RESTRUCTURING HAS GONE SMOOTHLY FOR CL&P CUSTOMERS CL&P rates fell 5% on 1/1/00 when retail choice began CL&P locked in four-year supply contracts in 1999 when purchase power costs were low Suppliers are Select Energy (50%), NRG (40%) and Duke(10%) Supply costs fixed through 12/31/03 Generation charge overcollects supply costs and surplus used to amortize stranded costs Virtually no load has switched to competitive suppliers Rate freeze ends 1/1/04 and default supply prices will go to market SLIDE #39 EXCELLENT PLANT SALES, SECURITIZATION ARE SHRINKING CL&P'S STRANDED COSTS Chart showing the following: DPUC allowed Fossil Plants Hydro Plants CL&P net IPP, Other Allowed level sell for sell for $400M stranded costs 6x book 7x book from Millstone Securitized Nuclear $1.7B $1.4B $0.8B $0.4 B $0.4B Non-Nuclear $1.9B $1.9B $1.9B $1.9B $0.5B Total $3.6B $3.3B $2.7B $2.3B $0.9B SLIDE #40 YANKEE ENERGY INTEGRATION HAS BEEN SMOOTH Non-core businesses have been sold Unregulated services business combined with Select Gas delivery business undergoing rapid expansion Back-office systems have been combined Meriden, CT headquarters to be closed with staff moving 10 miles to NU's Berlin, CT campus On track to achieve more than $60 million of synergies through 2004 SLIDE #41 CURRENT YANKEE RATE CASE HAS SEVERAL KEY ISSUES 50-50 sharing of earnings above 12.78 ROE Proposal would allow company to keep first 100 basis points above 11.78 ROE Rate support for aggressive capital program sought $29 million increase sought for 2002 - 7.6% Mechanism to allow increases in following years, depending on level of investment $190 million projected for expansion over next five years, plus cost of LNG facility SLIDE #42 YANKEE INVESTMENT WILL SIGNIFICANTLY ENLARGE ITS ASSET BASE Chart showing Total Net Utility Plant and Annual Net Investment in Plant Total Net Utility Plant Annual Net Investment in Plant 2000 $382 M $22 M 2001 (est.) $393 M $39 M 2002 (est.) $434 M $103 M 2003 (est.) $498 M $125 M 2004 (est.) $583 M $78 M 2005 (est.) $645 M $73 M 2006 (est.) $659 M $49 M SLIDE #43 PSNH RESTRUCTURING DISPUTE IS OVER!!! On October 1, 2000, 5% rate cut implemented On April 25, 2001, $525 million securitization bonds sold On May 1, 2001, additional 11% rate cut and retail choice began On May 22, 2001, restructuring law was modified Sale of 1,200 MW of fossil/hydro generation delayed until at least February 2004 Seabrook auction now under way; closing expected in 2002 and NAEC is then dissolved On June 18, 2001, U.S. Supreme Court refused to hear appeal of NHPUC restructuring decision SLIDE #44 PSNH's ABILITY TO RECOVER REMAINING STRANDED COSTS IS ASSURED BY MULTIPLED FACTORS PSNH units and Seabrook produce energy competitively Seabrook proceeds will be used to amortize stranded costs Energy prices for large commercial and industrial customers move to market rates in less than two years Remaining PSNH coal, hydro, oil, and gas units can more than cover remaining residential and small commercial load Low interest rates on securitization bonds (5.9% vs. 7.5% budget) significantly reduce debt service costs Most importantly, state statute allows full recovery of purchased power deferrals beyond 2007, but we expect recovery to be complete well beforehand SLIDE #45 WMECO STORY HAS BEEN SIMPLIFIED No bonds or preferred stock remain No generation, except for small share of Vermont Yankee being sold Pass through of higher purchased power costs allowed 17% rate hike took effect 1/1/01 Standard Offer rate expected to drop to 4.8 cents/kwh on 1/1/02 Service reliability remains solid, but growth slow All purchased power contracts renegotiated Securitization paid the costs Earnings have been strong - - 14.4% ROE for 12 months ended 6/30/01 Distribution rates stable since January 2000 SLIDE #46 CONNECTICUT INVESTMENTS WILL HELP GROW REGULATED EQUITY BASE Chart showing Millions of Dollars of Common Equity (all numbers approximate) CL&P PSNH WMECO NAEC Yankee* 1998 $1 bil $700 mil $300 mil $300 mil ---- 1999 $950 mil $800 mil $300 mil $300 mil ---- 2000 $750 mil $500 mil $200 mil $150 mil $200 mil 6/30/01 $750 mil $300 mil $200 mil $100 mil $250 mil 2002 (est.) $600 mil $300 mil $200 mil -- $250 mil 2003 (est.) $600 mil $300 mil $200 mil -- $300 mil 2004 (est.) $700 mil $150 mil $200 mil -- $325 mil 2005 (est.) $800 mil $200 mil $200 mil -- $350 mil 2006 (est.) $800 mil $250 mil $200 mil -- $400 mil SLIDE #47 BOTTOM LINE AT REGULATED BUSINESS Regulatory, Legislative relationships best in decades System performance is good Intense focus on productivity and cost efficiency Investment in new Connecticut gas and electric projects mitigates sale of plants, amortization of regulatory assets Earnings growth slower at PSNH and WMECO Earnings growth faster at CL&P and Yankee as capital projects proceed, assuming timely regulatory orders Cash generation should remain strong as amortization continues SLIDE #48 THE UNREGULATED ENERGY BUSINESS WILLIAM W. SCHIVLEY PRESIDENT SELECT ENERGY SLIDE #49 ABOUT SELECT ENERGY Recognized market leader in wholesale, trading, retail and behind-the-meter energy business in Northeastern U.S. Provide customer solutions through innovative products in electric power, natural gas, energy management and related energy services Currently serving over 14,000 customer accounts throughout the 12-state region from Maine to Virginia Becoming the premier energy marketing/infrastructure company in the Northeastern quadrant of the U.S. Brand equity strong and growing across multiple business audiences SLIDE #50 SELECT ENERGY ORGANIZATION Table showing the organization of Select Energy Assets Trading Wholesale Retail Behind the Meter Services SELECT ENERGY Holyoke Northeast Commodity Wholesale Retail Select Energy Water Generation Trading Power Sales and Services Power Company Group Marketing Marketing Group Group Mt. Tom Northfield Select Energy Coal Unit Mountain Contracting (147 MW) Pumped Storage (1080 Mw) Hydro Hydro Units Denron Units* (209MW) (43.6 MW) Yankee Energy Services * Expected to be in 2001 SLIDE #51 REVENUE GROWTH BRINGING IMPROVED OPERATING INCOME Chart Showing Revenue and Operating Income Revenue Operating Income 1998 $29 million ($20 million) 1999 $650 million ($50 million) 2000 $2,061 million $105 million 2001 $2,797 million $112 million (est.) SLIDE #52 OUR 2001 BUSINESS AT-A-GLANCE Projected annual revenues (year-end): $2.8 billion) Pie Chart showing percentage of business Wholesale Gas 8% Retail Electric/Gas 9% Behind the Meter 4% CL&P Wholesale Standard Offer 19% Other Wholesale Electric 60% SLIDE #53 ROBUST ENERGY MARKETPLACE = LUCRATIVE GROWTH FOR SELECT ENERGY Over 20% of U.S. population lives and works in our 12-state region $50+ billion energy commodity consumption represents 17% of total U.S. energy consumption [Map of northeastern states] SLIDE #54 GROWTH INITIATIVES Purchase of Niagara Mohawk Energy Marketing Increases Select Energy annual revenues roughly 25% Secures significant business in NY and beyond (PJM, ECAR, Canada) Accelerates foothold in lucrative NY market by 1-2 years Adds important expertise, transmission access, asset management capabilities and contractual assets Additional expansion into neighboring power pools Tolling and asset output arrangements Asset acquisition Expanded trading activity SLIDE #55 WHOLESALE ELECTRIC & GAS 5,000 MW peak load - largest in New England Supported by 1,500 MW of owned generation Unique Northfield Mountain pumped storage facility (1,080 MW)creates energy, optionality and all ancillaries 2001 volume sold: 43,000,000 MWH; 51 BCF physical natural gas $450 million in major wholesale contracts won in 2001: National Grid, NStar, Central Maine Power; also serving 60+ municipalities throughout the Northeast CL&P standard offer contract hedged for final 2 years Average annual growth rate: 15% to 25% SLIDE #56 TRADING Conduit of critical market information Foundation of our Retail and Wholesale business segments Expanded management expertise to optimize market opportunities; strengthen existing skills Products/commodities: electric, gas, oil, weather, options, futures Growth/expansion under way - Electric in New England, NY, PJM, ECAR, SERC, Canada - Natural gas: commodity, basis, liquids (butane, propane, etc.) - Oil: West Texas Intermediate, West Texas Sour, Light Louisiana Sweet, Brent, residual, heating oil and unleaded gasoline Risk management thru industry-standard policies/practices Average annual growth rate: 15% to 25% SLIDE #57 RETAIL ENERGY MARKETING 2001 volume sold to end-user customers (projected year-end): 1,800,000 MWH; 27 BCF natural gas Retail gas sales increased more than thirteen-fold from 1999 to 2001 (from $12 million to $160 million in revenue) $95 million combined electricity and natural gas contract with Mass. Health & Educational Facilities Authority (HEFA) Energy purchasing in New England shifting from wholesale to increased retail Active in all Northeastern states that have retail choice - Approx. 14,000 customer accounts (9,900 electric; 4,100 gas) - Currently providing approx. 25% of gas customers w/electricity Average annual growth rate: 30% to 60% SLIDE #58 BEHIND-THE-METER SERVICES HEC Inc. is now Select Energy Services, Inc. 2001 projections: revenues of $105 million; gross margins of 15% to 25%; operating income of $5 million Behind-the-meter arm differentiates us from competitors Captures additional margin from the value chain; enormous long-term growth potential as energy outsourcing proliferates Select Energy companies awarded 20-year energy outsourcing contract for new Connecticut Juvenile Training School Includes largest single-site fuel cell installation in U.S. to date Acquisitions of well-managed, profitable companies Average annual growth rate: 15% to 40% SLIDE #59 SELECT ENERGY NOW STARTING TO TURN REVENUE GROWTH INTO PROFITABILITY Chart showing Net Income 1998 ($13 million) 1999 ($35 million) 2000 14 million $0.10 EPS 2001 (est.) 20 million $0.15 EPS 15% to 25% Annual Growth 2002 (est.) 25%+ Annual Growth SLIDE #60 LOOKING AHEAD: 2006 BUSINESS AT-A-GLANCE Average annual growth rate 2001-2006: 15% to 25% Pie chart showing Wholesale Trading 47% Wholesale Electricity and Gas 26% Behind the Meter 3% Retail Electricity and Gas 24% SLIDE #61 ON TRACK FOR SUSTAINED, PROFITABLE GROWTH Growth in revenues & gross margins of at least 15% year-over-year in all business segments #1 wholesale energy player in New England; New York and PJM growth and expansion under way Expanding trading operations Aggressively targeting large-volume retail energy users where default/standard offer rates are high Energy project development/outsourcing to be "all-in- one" provider Development of all business segments/revenue sources as competitive markets are slower to open than expected Increased generation asset ownership to support expanding book of business SLIDE #62 THE GENERATION BUSINESS BRUCE KENYON PRESIDENT GENERATION GROUP SLIDE #63 PRESENTATION TOPICS Recent strength of U.S. nuclear industry performance and benefit to NU Status of Seabrook sale Seabrook operations Vermont Yankee sale results Fuel pin search at Millstone Growth of Northeast Generation Services SLIDE #64 SUBSTANTIAL PERFORMANCE IMPROVEMENTS ACHIEVED DURING PAST DECADE BY 103 U.S. NUCLEAR PLANTS Average nuclear production costs have decreased 53% (1.74 cents/KWh in 2000 vs. 3.68 cents/KWh in 1990) Average capacity factor has improved by 40% (89.6% in 2000 vs. 64% in 1990) Average duration of refueling outages has decreased by 62% (40 days in 2000 vs. 105 days in 1990) Nuclear generation increased by the equivalent of adding 23 new 1,000 MW plants, despite 7 plants permanently retired (183 million MWh since 1990) Unusual events reported to NRC dropped 88% (from 151 in 1990 to just 18 in 2000) SLIDE #65 THE NUCLEAR INDUSTRY FUTURE LOOKS BRIGHTER THAN EVER Power Uprates - NRC has approved increases for 2,000MW NRC currently reviewing 17 requests Most around 1.5%, some BWRs up to 20% Industry plans to increase capacity by 1,600 MW over next five years License Renewal will enhance plant's economic value NRC has renewed Calvert Cliffs 1&2, Oconee 1,2,3, and ANO-1 licenses for 20 yrs. Currently NRC reviewing applications covering 12 additional reactors Most other reactors are expected to extend their operating licenses SLIDE #66 THE NUCLEAR INDUSTRY FUTURE LOOKS BRIGHTER THAN EVER (cont.) Industry announced Vision 2020 - to add 50,000MWe of new capacity by 2020 Construct advanced designs on existing sites Order within 5 years Environmental Preservation - of all energy sources, nuclear has lowest impact on the environment Limited emissions Clean water discharge SLIDE #67 SALE PRICES OF NU's NUCLEAR INTERESTS HAVE BENEFITED FROM INDUSTRY PERFORMANCE Millstone was a record sale Millstone 3 sold for $782/kw NU received $532M from its 68% ownership of MP3 Millstone 2 sold for $507/kw NU received $443M from its 100% ownership of MP2 Vermont Yankee sold for $284/kw, seven times original offer NU received $29 million from its 16% share NU's 40% share of Seabrook could be more than $300 million based on Millstone 3 sale SLIDE #68 NU GENERATING ASSETS Operating # of Stations Megawatts Nuclear 2 541 Pumped Storage 2 1,110 Fossil 4 1,137 Hydro 17 272 ICU 2 118 TOTAL 27 3,178 Sales Pending Seabrook (40%) 465 Vermont Yankee (16%) 76 Holyoke Hydro (100%) 44 TOTAL 585 Net After Sales 2,593 Decommissioning Dry Cask Storage (est.completion dates) Connecticut Yankee (49%) Fall 2003 Yankee Rowe (38.5%) Summer 2002 Maine Yankee (20%) Summer 2002 SLIDE #69 SEABROOK STATION Picture SLIDE #70 THE SALE OF SEABROOK SHOULD BE COMPLETED BY END OF 4TH QUARTER 2002 NH Selected Auction Agent (JP Morgan) 10/01 Solicitation to Market 11/01 Due Diligence 1st Qtr 02 Bids Due/Select Winning Bidder 2nd Qtr 02 Closing End of 4th Qtr 02 SLIDE #71 SEABROOK CONTINUES TO BE A STRONG PERFORMER Capacity Factor for Cycle 8 through Sept. 2001 - 92.8% Capacity Factor since commercial operation - 80.5% Next refueling outage scheduled for May 2002 - less than 30 days 203 days on-line through October 10, 2001 On track to earn ISO 14001 Certification by year-end INPO Category 1 NRC performance indicators - all green SLIDE #72 SEABROOK WILL CONTINUE TO AGGRESSIVELY MANAGE THE PLANT TO EXCELLENCE THROUGH SALE COMPLETION Equipment Reliability Develop long term strategies Intolerance to unanticipated equipment failures Improved safe and reliable operation Quality of Maintenance Improve skills & effectiveness Refocus and standardize planning process Corrective Action Reinforce clear expectations Aggressive performance goals SLIDE #73 VERMONT YANKEE SALE WAS SUCCESSFUL Vermont Yankee purchased by New Orleans based Entergy Corp. on 8/15/01 Purchase price was $180 million for $284/kw $145 million for plant and $35 million for fuel Price was $150 million greater than the initial $23.5 million offer in late 1999 by AmerGen JP Morgan retained as auction agent Sale of Vermont Yankee and Seabrook will allow NU to exit the nuclear operating business SLIDE #74 MILLSTONE FUEL ROD ACCOUNTABILITY PROJECT IS NEARLY COMPLETE Two fuel pins disappeared from inventory after May 1979 Discovered missing in November 2000 Extensive search involving - Records review - Physical inspections - Interviews Report submitted to NRC on October 5, 2001 Investigation conclusions - One of four locations: Millstone Spent Fuel Pool, Hanford WA, Barnwell SC, or GE Vallecitos, CA - Not a threat to public health and safety SLIDE #75 NORTHEAST GENERATION SERVICES COMPANY IS A GROWING ENTERPRISE Formed in January, 1999 Offers design, build, manage, operate, maintain and support services for electric generating facilities and medium and large industrial customers Strong foundation of services based upon decades of management and operations experience with NU's fossil and hydroelectric generating plants Construction/build component added by acquiring experienced companies with a proven track record of success in a competitive environment SLIDE #76 NGS LINES OF BUSINESS Manage & Operate Services Industrial Services Manage, Operate and maintain Mechanical and electrical electric generating facilities maintenance Combustion Turbine Electrical Test Services maintenance Environmental Field Services Energy Information Services Analytical laboratory Consulting and Engineering E.S. Boulos Services Engineering and Design Electrical contracting EPC contracting Electrical construction Co-gen evaluations Power generation/substations Environmental support Telecommunications SLIDE #77 NGS FACILITIES PROVIDE READY ACCESS TO THE NORTHEAST MARKET Map showing location of NGS Facilities Boulos Home Office, Westbrook Maine Boulos Satellite Office, Lewiston, Maine NGS Mechanical, Londonderry, NH Boulos Satellite Office. Andover, Mass. Analytical Laboratory, West Springfield, Mass NGS Home Office, Rocky Hill, CT Eastern CT Hydro, Connecticut Maintenance and Machine Shop, Madison, CT South Meadow, Connecticut Housatonic Hydro, Connecticut Cobble Mountain, Massachusetts Mt. Tom, Massachusetts Northfield Mt. And Cabot Hydro, Massachusetts Holyoke Hydro, Massachusetts SLIDE #78 NGS MISSION: TO BE THE LEADING PROVIDER OF INTEGRATED SERVICES TO THE POWER AND INDUSTRIAL MARKETS IN THE NORTHEAST Pie chart breaking down 201 revenues of $113.4 million E.S. Boulos - Electrical Construction $52 million Consulting and Engineering Services $14.1 million Manage and Operate Services $29.6 million Industrial Services $17.7 million SLIDE #79 NGS IS GROWING AGGRESSIVELY Acquired E.S. Boulos in 1/2001 - largest electrical construction contractor in northern New England, adding "build" capability to our integrated services strategy Plan to acquire additional companies in 2001-2004 that offer geographic and service related synergies Managing four M&OS contracts covering 23 facilities, 1,700 MW, increasing to 4,200 MW by 2006 SLIDE #80 NGS IS GROWING AGGRESSIVELY Increasing market presence - bid on more than $90 million of work over 18 months with a 57% success rate (excludes Boulos) Current backlog of work under contract is $77 million vs. $44 million in 12/2000; $100 million additional opportunities Increased portion of work from external, for profit, customers to 64% vs. 24% for 2000 Established NGS Mechanical, Inc. to provide mechanical services and construction SLIDE #81 NGS CONTINUES TO EXCEED AGGRESSIVE REVENUE AND EARNINGS GROWTH TARGETS Chart showing Revenue and Net Income Targets being exceeded 2001 Projected ROE of 35.4% Revenue Net Income 1999 $5.3 million ($1.1 million) 2000 $44.3 million ($0.2 million) 2001 $113.4 million $3.5 million 2002 $123.9 million $5.8 million 2003 $155.8 million $7.9 million 2004 $177.6 million $10.4 million 2005 $213.6 million $13.9 million 2006 $225.5 million $16.4 million SLIDE #82 CURRENT MAJOR OBJECTIVES Manage Seabrook to excellence Accomplish Seabrook auction Continue to aggressively grow NGS SLIDE #83 DAVID H. BOGUSLAWSKI VICE PRESIDENT - TRANSMISSION SLIDE #84 KEY TOPICS Industry changes bring transmission opportunities New transmission organization within NU Status of Regional Transmission Organizations (RTO's) Major transmission initiatives Southwest Connecticut Connecticut to Long Island Merchant Cable Profitability SLIDE #85 INDUSTRY CHANGES BRING TRANSMISSION OPPORTUNITIES FERC is pushing for larger regional transmission organizations Federal focus on improving the energy infrastructure Transmission constraints could cost consumers $1.5B annually in New England and New York New England and New York will have significant price and capability differences in coming years NOW IS THE TIME TO MOVE FORWARD WITH TRANSMISSION SLIDE #86 NU'S FUTURE TRANSMISSION BUSINESS UNIT Table showing Northeast Utilities Structure Northeast Utilities Parent Company Distribution Transco NUSCO Competitive Other Companies Businesses Subsidiaries Traditional Non-Traditional Transmission Transmission Connecticut DC Cable Massachusetts Joint Venture #2 New Hampshire Joint Venture #3 Etc. SLIDE #87 NU's TRANSMISSION BUSINESS Strategy: Build a significant regional transmission company by expanding existing cost-based assets and investing in unique, market-based transmission projects. Initiatives: Implement a for-profit Regional Transmission Organization (RTO) Strengthen existing transmission in southwest Connecticut Build a market-based, DC cable to Long Island by 2004 Form NU Transmission subsidiary Achieve favorable market and regulatory rules Improve system-wide asset condition SLIDE #88 FIRST, LET'S LOOK AT PROPOSED RTOS Map showing the continental United States, shaded to show the locations of various RTOs. Alliance RTO ATC/MISO California ISO Crescent Moon RTO Desert Star RTO Entergy ITC/SPP ERCOT ISO GridFlorida Transco Gridsouth Transco Midwest ISO New England RTO New York RTO Northern Maine ISA PJM/PJM West RTO West Transconnect/RTO West SoTrans Grid Company SPP RTO Translink/MISO Non-participating IOUs Non-participating Cooperatives Non-participating Public Power Non-utility/no electric service area SLIDE #89 AND HOW FERC WANTS US TO BE Map showing the continental United States, shaded to show FERC proposal of RTOs ERCOT RTO Midwestern RTO Northeastern RTO Southeastern RTO Western RTO Non-participating IOUs Non-participating cooperatives Non-participating public power Non-utility/no electric service area SLIDE #90 NEW ENGLAND HAS PROPOSED A BINARY RTO Chart showing the following: RTO made up of ISO + ITC under FERC with a Stakeholder Process in both the ISO and ITC ISO ITC Independent System Independent Transmission Operator Company Non-profit entity For profit entity Similar to ISO-NE Formed by New England Manages the power Transmission Owners markets and grid Manages the reliability Transmission system SLIDE #91 NU PROPOSALS ADDRESS SIGNIFICANT BOTTLENECKS IN SOUTHWEST CONNECTICUT [Map] Surplus Generation - BHE, SME, SEMA, RI Adequate Generation - HQ, NB, ME, NH, VT, CMA/NEMA, WMA, NY, CT Marginal Conditions - Bost. Deficient - SWCT, NOR SLIDE #92 PROJECT 1: AC CABLE REPLACEMENT Replace the existing, 12 mile AC cable between Norwalk and Long Island In Service Date - May 2003 Cost -- $80M, shared 50/50 with Long Island Power Authority (LIPA) Cost Recovery - Include our share in New England's regional rate which is paid by all New England load Technology - AC system capable of transmitting 300 MW of energy SLIDE #93 PROJECTS 2: 345 kV UPGRADE IN CONNECTICUT Expand the 345kV system into southwest Connecticut Location - Phase 1, Bethel to Norwalk (20 miles) Phase 2, Norwalk to Devon to Middletown (65 miles) In Service - Phase 1 early 2004; Phase 2 May 2006 Cost - Phase 1 $125M, Phase 2 $400M Cost Recovery - Include our share in New England's regional rate which is paid by all New England load Technology - Overhead and buried AC system SLIDE #94 PROJECT 3: CONNECTICUT - LONG ISLAND CABLE (CLIC) Connect New England and Long Island with a new merchant project Location - Norwalk, CT to Oyster Bay, Long Island (30 miles) In service - May 2004 Cost depends on Long Island connection point and the capacity of the cable Cost Recovery - Market-based rates, contracts via Open Season Technology - DC system capable of transmitting 330 - 660 MW of energy SLIDE #95 THESE PROJECTS WOULD TRIPLE NU'S TRANSMISSION INVESTMENT WITHIN FIVE YEARS Table showing Transmission Net Plant (numbers in approximates) Year Traditional 345 Upgrades Merchant Projects 2002 $350 million -------- $ --- 2003 $450 million $150 million $ --- 2004 $450 million $100 million $275 million 2005 $450 million $300 million $300 million 2006 $525 million $500 million $400 million SLIDE #96 SUMMARY Now is the time to move forward with transmission investment NU has built a transmission plan and organization to achieve value for customers and shareholders Our for-profit RTO vision is being expanded beyond New England Our plan will triple NU's transmission investments in 5 years