EX-99 2 0002.txt EXHIBIT TO NU FORM 8-K NORTHEAST UTILITIES SYSTEM ANALYST PRESENTATION -------------------- March 13, 2001 New York 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 two company's SEC reports. PRINCIPAL TOPICS FOR TODAY'S PRESENTATION ----------------------------------------- o Con Ed litigation status and improvements at NU since 1999 o Regulated businesses and industry restructuring o Financial restructuring o Unregulated businesses o Strategic initiatives NU LAWSUIT FILED IN SOUTHERN DISTRICT COURT OF NEW YORK ------------------------------------------------------- Key Points ---------- o Con Ed has materially breached Merger Agreement o NU substantially more valuable today o NU seeking recovery of more than $1 billion for its shareholders -- Lost acquisition premium -- Expenditures of time and money -- Lost business opportunities o Trial by jury sought FINANCIAL COMMUNITY RECOGNIZES TREMENDOUS STRENGTHENING OF NU SINCE OCTOBER 1999 (NUCLEAR ISSUES) ----------------
October 1999 NOW ------------ --- o Millstone 2 valued at $22 o NU to receive $1.2 billion from million; Millstone 3 at $143 Dominion next month for million by DPUC Millstone 2, 3 o NU, ratepayers faced $1.5 o Dominion to receive trust fund billion cost for Millstone proceeds, small topoff and assume decommissioning responsibility for Millstone decommissioning o Millstone remained under NRC o Millstone returned to routine special review oversight in May 2000 o NU faced hundreds of millions o NU will now make money on joint of dollars of claims from owner shares as a result of Millstone 3 joint owners settlements, Dominion sale RESTRUCTURING IMPROVEMENTS -------------------------- October 1999 NOW ------------ --- o PSNH restructuring settlement o Restructuring settlement approved faced long road to secure by legislature, regulators, approval state's highest court o Value of NAEC 418-MW share o Seabrook value likely to be of Seabrook pegged at $100 far higher at sale million in NH settlement o Securitization authorization o Over $2 billion of securitization uncertain for stranded cost bonds approved and likely to be recovery; CL&P, WMECO issued this spring, including renegotiating more than 25 $1 billion of IPP buyouts, buydowns high-cost purchase power contracts FINANCIAL IMPROVEMENTS ----------------------- October 1999 NOW ------------ --- o NU had been unprofitable o NU earned more than $205 million since mid-1996 before extraordinary charges in 2000 o CL&P lost $400 million from o CL&P earned $148 million in 2000 1996 through 1999 o Unregulated energy businesses o Unregulated energy businesses in the midst of a year with turned profitable in 2000 nearly $40 million of losses o Yankee Energy merger pending o Yankee merger closed
RATING HISTORY - NU UNSECURED NOTES ----------------------------------- Investment Grade ---------------- S&P/Moody's S&P --- BBB+/Baa1 1995-BBB-- BBBB/Baa3 1996-BB+ (Millstone outages lengthen) BBBB--/Baa3 1996-BB BB+/Ba1 1997-BB-- (NH Restructuring order issued) BB/Ba2 1997-B+ BB--/Ba3 1998-BB-- (Millstone 3 restart) B+/B1 1999-BB+ (PSNH credit profile improves) B/Ba2 2001-BBB (NH Supreme Court upholds PSNH settlement) B--/B3 Moody's ------- 1995-Baa3 1996- Ba1 (Millstone outages lengthen) 1996-Ba2 1997-Ba3 (NH Restructuring order issued) 1998-B1 1998-B2 1998-B1 (Millstone 3 restart) 1999-Ba3 (PSNH credit profile improves) 2000-Ba1 2001-Baa3 (NH Supreme Court upholds PSNH settlement) NU: THE REGULATED BUSINESS --------------------------- o Largest electricity delivery company in New England -- 1.13 million customers in Connecticut (CL&P) -- 435,000 customers in New Hampshire (PSNH) -- 200,000 customers in Massachusetts (WMECO) o Largest natural gas distribution company in Connecticut -- 187,000 customers (Yankee Gas) o Extremely prosperous service territory CT BUSINESSES PERFORMING WELL ----------------------------- o CL&P "overearned" its 10.3% allowed return in 2000 by 500 basis points -- Decision on financial review expected in April; effects will be prospective only -- CL&P proposed sharing of earnings over 11.3% o Sale of $1.4 billion of securitization bonds due this month o Four-year standard offer contracts shield CL&P from supply risk o Yankee rate case to be filed later in 2001 EXCELLENT PLANT SALES, SECURITIZATION ARE SHRINKING CL&P'S STRANDED COSTS -------------------------------------------------------------------------
DPUC Fossil Hydro CL&P to IPP, other Allowed Plants Sell Plants Sell net $600 million stranded costs Level for 6x Book for 7x Book from Millstone securitized ------- ----------- ------------ ---------------- --------------- Non-Nuclear $1.9 $1.9 $1.9 $1.9 $0.5 Nuclear $1.7 $1.4 $0.8 $0.3 $0.3 ---- ---- ---- ---- ---- $3.6 $3.3 $2.7 $2.2 $0.8 ==== ==== ==== ==== ====
NH RESTRUCTURING ISSUES ALMOST RESOLVED; CORE BUSINESS STRONGER --------------------------------------------------------------- o Regulatory relations strong o Strong cash flow from amortization o $500-$550 million securitization bond sale projected in early spring -- Appeal to U.S. Supreme Court unlikely to impede sale o Rates will fall incremental 10%, retail choice begins following securitization o Sale of fossil/hydro plants and Seabrook scheduled in 2002 MASSACHUSETTS RESTRUCTURING DONE; FINANCIAL PROFILE STRONGER ------------------------------------------------------------ o Return to profitability in 2000 o DTE approved $155 million of securitization bonds in February 2001 o Issuance expected in April o DTE allowed 17% price hike in January 2001 to allow full pass through of escalated standard offer and default supply costs NU'S REGULATED BUSINESSES HAD A STRONG 2000 ------------------------------------------- (Net Income ROE) 1999 ROE 2000 ROE -------- -------- CL&P -2.8% 14.67% PSNH 10.9% 8.4%* WMECO -0.2% 18.3% NAEC 19.8% 20.7% *Excludes restructuring write-off. SECURITIZATIONS AND MILLSTONE SALE WILL ALLOW FINANCIAL MAKEOVER OF NU THIS SPRING ------------------------------------------ $3.3 Billion ------------ Millstone Sale $1.2 billion CT Securitization $1.4 billion NH Securitization $500-$550 million WMECO Securitization $155 million PROCEEDS WILL BE USED FOR MULTIPLE PURPOSES ------------------------------------------- $3.3 Billion ------------ Retire Debt, Preferred $1.3 billion IPP Buydowns/Buyouts $1.1 billion Taxes on Millstone Sale $300 million Return of Equity to Parent $600 million PARENT WILL HAVE SEVERAL OPTIONS FOR CASH -----------------------------------------
$600 Million ------------ $215 million to Repurchase more New investments Retain cash for close out 10 mm shares (5 mm strategic use share repurchase authorized; more may be)
EARNINGS FROM OPERATIONS STABLE ------------------------------- o Earnings range remains $1.40 - $1.60 per share before nonrecurring items o Upside from: -- Full year of Yankee Energy earnings, lower share count, use of free cash at NU o Downside from: -- Lower equity base at regulated electric subsidiaries o Low payout ratio, predictable cash flows permit NU to revisit dividend NU UNREGULATED ENERGY BUSINESSES HAVE GROWN RAPIDLY --------------------------------------------------- (Revenue in Millions) 1998 1999 2000 ---- ---- ---- $37 $649 $1.9 billion WHOLESALE ELECTRICITY HAD THE LION'S SHARE OF SELECT REVENUES IN 2000 --------------------------------------------------------------------- Retail Electric/Gas 7% Wholesale Gas 8% Behind the Meter 5% CL&P Wholesale Standard Offer 26% Other Wholesale Electric 55% WHOLESALE BOOK IS BALANCED IN 2001 ---------------------------------- (As of March 1, 2001) Sales Sources ----- ------- Other 23% Off Peak Spot Market 10% Central Maine 7% Owned Units 10% NStar 13% Committed Purchases 53% CL&P 57% Nuclear Purchases 27% SUPPLY IS EXPECTED TO FLOOD INTO NEW ENGLAND IN COMING YEARS ------------------------------------------------------------ (MW) New Plant Coming On Line Under Expected Construction Today Demand Growth ------------------ ------------- 2001 1,754 500 2002 3,169 490 2003 2,750 353 Cumulative 7,673 1,343 NU HAS A NUMBER OF STRATEGIC OPTIONS ------------------------------------ o Intensive strategic review under way o M&A opportunities abound o No sacred cows o Shareholder value paramount NU'S GROWTH STRATEGY FOR REGULATED BUSINESSES --------------------------------------------- o Improve relationships with all regulatory bodies -- Settle NH litigation o Lock in long-term rate orders -- 4 years in CT; 3 years in NH o Improve service and move toward performance-based ratemaking -- CL&P reliability in 2000 was best ever o Promote increased use of existing assets -- Explore expansion of electric transmission o Expand, achieve synergies through M&A -- Yankee Energy NU'S STRATEGY TO BUILD UNREGULATED BUSINESSES --------------------------------------------- o Build energy marketing business while containing risk -- Select Energy leading energy marketer in New England o Acquire generation to support marketing -- Four Northfield Mountain pumped storage units critical to Select, New England o Build up HEC behind-the-meter business -- Denron acquired in 1999 for HVAC skills o Build up generation services business -- Turned profitable in second half of 2000 -- Acquired E.S. Boulos in January 2001 for high voltage work IN SUMMARY, NU IS A FAR STRONGER COMPANY TODAY THAN IT WAS IN 1999 AND POISED TO DELIVER VALUE ----------------------------------------------- o Financially stronger and much less risk o Merger termination frustrating, but legal case strong o Northeast growth strategy in focus o Regulatory relationships strong o Financial performance solid o Unregulated businesses expanding