EX-99 3 nu8keeipresent102703.txt EXHIBIT 99 EEI PRESENTATION 102703 Exhibit 99 SLIDE 1 EEI Fall Financial Conference Orlando, Florida October 27, 2003 NU LOGO Northeast Utilities System 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 these forward-looking statements because of factors such as competition and industry restructuring, changes in economic conditions, changes in weather patterns, changes in laws, regulations or regulatory policies, developments in legal or public policy doctrines, technological developments, volatility in electric and natural gas commodity markets, and other presently unknown or unforeseen factors. Other risk factors are detailed from time to time in the company's SEC reports. SLIDE 3 Topics To Discuss - NU today - strategy overview - Regulated business growth - Competitive business outlook - Financial liquidity and performance SLIDE 4 Strategy - How the Puzzle Fits Together Regulated Businesses Competitive Businesses - Continue to implement best practices among four regulated - Achieve targeted returns operating companies on investments by maintaining gross margins - Build needed transmission facilities to remedy critical SW Connecticut supply situation - Expand CT natural gas infrastructure - Manage risks effectively - Timely recovery of purchased - Build service business energy costs and SMD costs - Important restructuring legislation passed in Connecticut - Maintain strong balance sheet SLIDE 5 2003 Improvements Were Driven by Competitive Business Results (Through September 30) Bar graph chart comparing YTD 2002 and YTD 2003 Competitive Results (Shown as Earnings in Millions) YTD 2002 YTD 2003 CL&P $58.2 $59.0 PSNH $46.4 $34.5 Yankee Gas $ 6.1 $ 3.4 WMECO $26.9 $13.9 NUEI Merchant Energy $(39.9) $22.3 NUEI Services $ 1.8 $ 2.1 SLIDE 6 2003 Earnings Range Tightened At Upper End Bar chart showing Earnings Per Share for the Periods through 9/30/02, 9/30/03 and Projected Year-End 2003 Projected 9/30/02 9/30/03 Year-End 2003* $0.74 $0.99 $1.20 - $1.30 *Excluding any impact regarding LMP cost issue at Select Energy SLIDE 7 Significant Exposure Exists For Select in 2003 with CL&P LMP Costs Bar graph showing Select's share of CL&P LMP costs, in millions, broken up into line losses and congestion costs, actual for the period 3/1/03 - 9/30/03 and estimated for the period 3/1/03 - 12/31/03 3/1/03 to 9/30/03 3/1/03 to 12/31/03 Actual - Select Share Estimated - Select Share Line Line Losses Congestion Losses Congestion $48.1 $23.3 $63.0 $27.0 SLIDE 8 2004 Earnings Guidance Earnings Per Share Regulated Businesses $1.08 - $1.20 Competitive Businesses $0.22 - $0.30 Parent Expense ($0.10) Consolidated NU $1.20 - $1.40 SLIDE 9 Regulated Company Focus: Enhance Service By Modernizing Infrastructure - Extend 345,000-volt system into SW Connecticut - Continue to modernize the distribution system to accommodate advances in technology and customer demands - Build out Connecticut natural gas delivery system SLIDE 10 Chronically Congested Areas of the Northeast Map of Northeastern United States Below Average Pricing 10% of Connecticut Maine New Hampshire 3/4 of New York State Rhode Island Average Pricing 1/4 New York State (adjoining NJ, CT, MA and SW VT excluding New York City) Most of Pennsylvania Portion of Virginia Massachusetts 80% of Connecticut Above Average Pricing Vermont SE New York (closest to Fairfield County, CT and including New York City and the boroughs) New Jersey Southeast Pennsylvania (adjoining NJ, SE NY, Eastern VA, Maryland and Delaware) Maryland Delaware Boston area 10% of Connecticut SLIDE 11 New England Markets Require Additional Transmission Infrastructure NU is Involved in Addressing 4 of 5 Critical Interfaces Map of New England States with arrows showing critical interfaces from: 1. SW border of Maine with arrow pointing Southwest into New Hampshire 2. Southern Border of New Hampshire with arrow pointing into NE Massachusetts 3. SE Massachusetts around Boston and Cape Cod with arrow pointing North out of Rhode Island 4. Western Border of Rhode Island with arrow pointing west to Connecticut 5. Connecticut with arrow pointing to Southwest portion of Connecticut SLIDE 12 Transmission Business: Major Capital Projects Chart with timeline from 2001 - 2008 breaking down cost for Bethel to Norwalk and Middletown to Norwalk projects Bethel to Norwalk* 6/2001 - 11/2003 Siting Process 11/2003 - 10/2005 Construction Total Cost for Siting Process and Construction for period - $200M 7/03-- Siting Council Decision 9/03-- Siting Council Revised Decision 11/03-- Appeal Filing Period Ends 11/03-- Substation Construction Start 04/04--Underground Cable Start 01/05-- Overhead Line Start 11/05-- Project In Service Middletown to Norwalk 10/2002 - End of 2004 Siting Process 1/2005 - 11/2007 Construction Total Cost for Siting Process and Construction for period - $496M** 05/03-- Municipal Consultation 10/03-- File Siting Council Application 11/04-- Siting Council Decision 1/05-- Substation Construction Start 03/05-- Overhead Line/Underground Cable Start 12/07-- Project In Service Capital Program (both projects) 2001 $ 26M 2002 $ 55M 2003 $133M 2004 $270M 2005 $240M 2006 $200M 2007 $200M 2008 $200M *The City of Norwalk has filed an appeal ** NU's 80% share SLIDE 13 Key Federal Issues - PUHCA repeal - Transmission siting - Blackout implications SLIDE 14 Litigation Update ConEd Litigation - U.S. District Court in NY issued positive decision on summary judgment motions in March - Motions in limine were filed in spring - Side issues related to state court lawsuit by individual former shareholder and Brody case NRG - CL&P contract status - On August 15, FERC issued final decision ordering NRG-PMI to serve CL&P contract through 12/31/03 - NRG-PMI appeals pending in Second Circuit and D.C. Circuit courts SLIDE 15 Regulated Businesses SLIDE 16 Operating Company Organization Illustration - Map of Connecticut showing CL&P service area CL&P Customers: 1,165K Residential 1,057K Commercial 104K Industrial 4K Revenues: $2.5B 4,400 Square Miles Illustration - Map of New Hampshire showing PSNH service area PSNH Customers: 455K Residential 388K Commercial 64K Industrial 3K Revenues: $1.0B 5,445 Square Miles Illustration - Map of Connecticut showing Yankee Gas service area Yankee Gas Customers: 192K Residential 168K Commercial 22K Industrial 2K Revenues: $293M 1,995 Square Miles Illustration - Map of Massachusetts showing WMECO service area WMECO Customers: 204K Residential 184K Commercial 19K Industrial 1K Revenues: $369M 1,490 Square Miles SLIDE 17 Utility Group Financial Indicators Bar graph showing Cumulative Net Income (In Millions) 1ST Qtr. $ 57.4 2nd Qtr. $ 72.7 3rd Qtr. $110.8 Key Performance Indicators ------------September YTD------------------ Better/ Worse than Financial Results Targets target Electric Sales (GWH) 27,231 26,125 Better Gas Sales (MMCF) 33,078 36,029 Worse Retail Electric Rev. ($M) 2,744.7 2,571.9 Better (Sept. YTD) Gas Revenues ($M) 255.1 205.7 Better (Sept. YTD) O&M ($M) 555.2 557.6 Better Capital ($M) 379.3 406.3 Worse SLIDE 18 Utility Group Reliability Indicators We're beating our YTD Reliability (SAIDI) target by 21 minutes. Capital improvements and fewer weather events have contributed to this positive YTD performance. Graph of Cumulative SAIDI for calendar year, by month showing actual performance beating goal on a monthly basis Our Gas Leak Response Rate performance continues to be better than target for both normal and after hours. We're beating our Customer Contact Survey goal by 1.0%. Our safety OSHA Incident Rate is better than target, however, we missed our Preventable Motor Vehicle Accidents (PMVAs) year-to-date target. Key Performance Indicators ------------September YTD------------------ Better/ Worse than Operational Results Targets target SAIDI (Minutes) 79.42 100.75 Better Gas Leak Response Rate 99.6% 94.5% Better (Normal) Gas Leak Response Rate 99.7% 96.5% Better (After Hrs.) Customer Contact Survey 81.6% 80.6% Better Safety - OSHA Rate 2.63 4.05 Worse Safety - PMVAs 87 82 Worse SLIDE 19 Distribution Systems Require Increased Investment (Illustration presented as bar graph) Distribution Rate Base Electric and Gas (Shown in Millions of $) 2004 Est. $2606.5 2005 Est. $2886.3 2006 Est. $3231.6 2007 Est. $3532.9 2008 Est. $3739.5 SLIDE 20 CL&P Legislative Status - Public Act 03-135 signed by Governor Rowland on June 25, 2003 - Standard Offer becomes Transitional Standard Offer (TSO) and is extended through 2006, must file TSO case with DPUC - Raises base rate cap up to 11.1% for 2004 and beyond - Must file rate case with DPUC - Procurement fee of 0.5/mill for securing TSO plus additional 0.25/mill incentive can be earned - Flow through of all energy-related and `federally mandated' costs: - LMP - Energy - Reliability Must Run (RMR) - Locational ICAP SLIDE 21 Key Regulatory Items for CL&P - Energy adjustment clause continues to recover 2003 LMP costs, subject to refund as determined by FERC - TSO filing to increase rates 11.1% made July 1 - Initial hearings complete - August 1 rate case was filed - Four-year rate plan - Increases of 6% ($133.5 million) in 2004; 1% annually in 2005-2007 (included within 11% TSO increase) - Recovers rising distribution expenditures - Final decision due December 15, 2003 - TSO RFP released on September 19, 2003; bids due this morning SLIDE 22 PSNH Recent Restructuring History 5/2/01: PSNH implements industry restructuring 5/22/01: NH legislation modifies restructuring statute; PSNH must hold generating plants until 2/04 9/12/02: NHPUC approves Seabrook sale to FPL. Seabrook sale ends power purchase, decommissioning obligations 12/31/02: NHPUC approved recovery of all but $17,000 of PSNH's request to recover about $200M of deferred fuel and purchased power costs 2/1/03: 2% rate increase due to energy rate adjustment 4/23/03: Legislation signed requiring PSNH to retain its generation until at least 4/30/06 SLIDE 23 PSNH Update - Current Items 5/30/03: PSNH bought out 14 small QF hydro rate orders for $20 million; net savings of $5 million 8/28/03: PSNH proposed $70 million conversion of Schiller unit to burn wood chips. NHPUC decision due this fall 9/12/03: PSNH applied to NHPUC to raise its transition service energy rate Year End: PSNH will close on CVEC acquisition - Already approved by NHPUC and FERC Year End: PSNH will file rate case 2/1/04: New energy supply rate to be effective; new delivery rates due to take effect, subject to later adjustment - Surplus generation, lack of congestion mean LMP minor issue SLIDE 24 WMECO Update - Rebidding default and standard offer service - WMECO standard offer RFP was issued 9/29/03; final bids were received on 10/22/03 - Final bids for default service due 11/4/03 - Annual reconciliation filing now before DTE - No rate case until at least 2005 - Lack of transmission congestion means LMP is minor issue SLIDE 25 Yankee Update - 4.4 mile Meriden Gas Turbine pipeline to connect 505 MW combined cycle NRG unit to Tennessee, Algonquin pipeline - DPUC, Connecticut Siting Council approved project - Construction halted in October 2002 when NRG canceled project and defaulted - Yankee pulled $16 million Letter of Credit - Connection to NEGASCO in Rhode Island - 20-year term - DPUC and FERC approval sought - Projected in-service date of 3Q 2004 - LNG facility now before DPUC - Local approvals obtained - $60 million project - Three years to build - Likely filing of rate case in second half of 2004 SLIDE 26 Transforming the Utility Group - Healthy regulated businesses with needed rising capital investments in energy delivery systems - Realize the internal synergies of four operating companies while maintaining distinct external identities - Run each company as a profit center - Develop "best of best" mentality SLIDE 27 Competitive Business SLIDE 28 (Organizational Chart) NU Enterprises Organization Select Northeast Select Northeast Energy Generation Energy Generation Company Services Services - Wholesale - Retail MERCHANT ENERGY ENERGY/GENERATION SERVICES SLIDE 29 NU Enterprises Businesses (Chart showing types of businesses served) The NU Enterprises' Competitive Businesses Participate Across the Energy Value Chain Inside End use Grid Wholesale the Customer Fuel Generation Supply T&D Fence Generation Merchant Energy X X X X Business Northeast X X X Generation Services Company Select Energy X X Services, Inc. Note - End use customers do not include residential market segment SLIDE 30 NU Enterprises 2003 3rd Quarter (Net income in millions) Q3 2003 Q3 2002 YTD 2003 YTD 2002 Retail $2.4 ($ 8.1) ($1.6) ($26.3) Wholesale $4.5 ($ 2.4) $23.9 ($13.6) Total Merchant Energy $6.9 ($10.5) $22.3 ($39.9) Energy/Generation $0.2 $ 1.7 $ 2.1 $ 1.8 Services Total NU Enterprises* $6.9 ($ 9.0) $24.0 ($38.7) * Includes NU Enterprises Parent Costs SLIDE 31 NU Enterprises 2003Year-End Projection 2003 Y/E 2002 Y/E (Net income in millions) Projection Actual Retail ($4) - ($2) ($28) Wholesale $27 - $30 ($25) Total Merchant Energy $23 - $28 ($53) Energy/Generation $2 - $4 $0 Services Total NU Enterprises* $25 - $32 ($53) * Includes NY Enterprises Parent Costs SLIDE 32 What Has Created 2003 Success? NU Enterprises' 2003 success has been driven in large part by changes in the way in which we do business - Improved portfolio management - Resized retail organization - Improved realized retail margins - Refocused trading as a wholesale support function significantly reducing risk Other factors include: - Normal rainfall levels impacting hydroelectric output - Improved results from generation assets SLIDE 33 2004 Net Income Preview Total Projected 2004 Net Income $28-$38 Million Pie Chart Showing Projected Net Income for 2004 Merchant Energy $24 - $31 million Energy/Generation Services $ 4 - $ 7 million SLIDE 34 What Is Needed for 2004 Success? NU Enterprises' 2004 success will be driven by: - Achieve targeted wholesale and retail origination - Successful portfolio management - Achieve targeted growth in services business SLIDE 35 Calendar of Bids in Wholesale Market Total Load Region Company Service Start Date Term (MW) New England MECo Default 11/1/03 3 mos. to 1 yr. 900 NSTAR SO & DS 1/1/04 3 to 14 mos. 1,600 UI TSO 1/1/04 1 to 3 yrs. 1,200 CL&P TSO 1/1/04 1 to 3 yrs. 5,000 WMECO SO & DS 1/1/04 3 to 14 mos. 710 MECO Ind. Default 2/1/04 3 mos. 280 Maine SO 3/1/04 6 mos. 520 NSTAR Ind. Default 4/1/04 3 mos. 450 WMECO Ind. Default 4/1/04 3 mos. 50 PJM NJ IOUs BGS 6/1/04 1 to 3 yrs. 10,400 MD IOUs Full Req. 7/1/04 1 to 3 yrs. 5,500 Total Available 26,610 SLIDE 36 NGC Update - Power plants are operating reliably - Rainfall has benefited conventional hydroelectric - Revenue stream sufficient to cover bonds - New tolling arrangement with Select Energy to be negotiated for post-2005 SLIDE 37 Financial Update SLIDE 38 NU Forecasting Significant Regulated Capital Investment Program [Bar chart illustrating Forecasted Regulated Capital Investment Program] Shown in $ Millions - Excluding AFUDC 2004 2005 2006 2007 2008 Regulated Electric $668 $607 $530 $490 $507 Regulated Natural Gas $ 70 $ 60 $ 77 $ 43 $ 40 NGC $ 11 $ 6 $ 8 $ 5 $ 2 Other $ 26 $ 20 $ 21 $ 19 $ 21 TOTAL $775 $693 $636 $557 $570 SLIDE 39 2004-2008: How We Expect to Fund $3.2B in CapEx and $0.5B in Dividends Pie Chart showing sources of funding for capital expenditures (shown in $Millions) Earnings and Other Internal Sources $1,370 Depreciation $1,390 Debt $ 840 Cash $ 140 SLIDE 40 Strong Current Capitalization Ratios Provide Solid Foundation for Growth (In Millions) ---------------------------9/30/93------------------------------------ Common Preferred Debt RRBs NU Consolidated $2,254 45.3% $116 2.3% $2,605 52.4% $1,773 CL&P $ 724 43.4% $116 6.9% $ 830 49.7% $1,154 PSNH $ 345 42.8% $ 0 0% $ 461 57.2% $ 484 WMECO $ 154 44.9% $ 0 0% $ 189 55.1% $ 135 Yankee Gas $ 217* 47.5% $ 0 0% $ 240 52.5% $ 0 NGC $ 445 52.5% $ 0 0% $ 403 47.5% $ 0 *Excludes equity associated with goodwill. SLIDE 41 Current Credit Ratings Reflect Financial Strength Moody's S&P Fitch Investment Grade A2/A CL&P Bonds A3/A- CL&P Issuer CL&P Bonds CL&P Bonds CL&P Unsecured WMECO Issuer WMECO Unsecured PSNH Bonds Baa1/ NU Issuer NU Corporate CL&P Unsecured BBB+ Credit NU Notes CL&P Corporate WMECO Unsecured PSNH Issuer WMECO Corporate Credit Yankee WMECO Unsecured Issuer PSNH Corporate Credit PSNH Bonds Yankee Corporate Credit Baa2/ CL&P NU Notes NU Notes BBB Preferred NGC Bonds CL&P Unsecured WMECO Unsecured PSNH Bonds NGC Bonds(2005) Baa3/ CL&P Preferred NGC Bonds(2026) BBB- NGC Bonds Below Investment None None None Grade SLIDE 42 Liquidity Supported by Minimal Debt Maturities and Sinking Funds also Modest: None at CL&P, PSNH, WMECO* Bar chart illustrating amount of liquidity supported by minimal debt maturities, and sinking funds (Shown in Millions of Dollars) 2004 2005 2006 2007 2008 NGC $32 $38 $ 4 $ 5 NU $24 $26 $21 $150 Other $ 7 $ 6 $ 6 $ 5 $ 4 Yankee $ 1 $21 $ 1 $ 1 $ 1 *Excludes Rate Reduction Bond maturities; the System has no sinking fund preferred stock SLIDE 43 Status of Credit Facilities Facility Accessed ($millions) ($millions) Parent/Competitive Revolver/LOCs $350 $116 Regulated Revolver $300 $ 10 CL&P Accounts Receivable $100 $ 25 Cash $138 Total (as of October 14, 2003) $888 $151 SLIDE 44 Cash Flows Support Common Dividend Increases [Bar chart illustrating common dividend levels for the period from 1995 - 2003] Dividends/share 1995 $1.76 1996 $1.38 1997 $0.25 1998 $0.00 1999 $0.10 2000 $0.40 2001 $0.45 2002 $0.525 2003 $0.575 SLIDE 45 Key Earnings Issue: Pension Credits Bar chart illustration (In $Millions) 1996 ($1) 1997 $ 13 1998 $ 44 1999 $ 53 2000 $ 89 2001 $100 2002 $ 73 2003 (Estimated) $ 32 2004 (Estimated) ($14) 2005 (Estimated) ($40) Note: Amounts are Pre-Tax. 70% of credit is expensed; 30% is capitalized SLIDE 46 Corporate Governance Status - Board Implementation - New Committee Charters - Senior Financial Officers Code of Ethics - All non-management members "Independent" - Two financial experts on Audit Committee - Sarbanes-Oxley - Plans in place to be fully compliant by required date - Internal controls assessment process ongoing SLIDE 47 Summary - Earnings for 2003 are expected to be at higher end of earlier projections - 2004 earnings projections established - Plans for transmission build-out progressing - New Connecticut legislation signed and regulatory implementation under way - Recovery of competitive businesses on track - Financial profile remains strong - Q&A