EX-99 4 nu8kq305exh993eeislidestext.htm EXH. 99.3 EEI SLIDES 110705 Converted by EDGARwiz

Exhibit 99.3


SLIDE 1


NU Logo

Northeast Utilities System



EEI Financial Conference

Hollywood, Florida

November 7, 2005



SLIDE 2



Safe Harbor Provisions


This presentation contains statements concerning NU’s expectations, plans, objectives, future financial performance and other statements that are not historical facts.  These statements are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995.  In some cases, a listener can identify these forward-looking statements by words such as “estimate”, “expect”, “anticipate”, “intend”, “plan”, “believe”, “forecast”, “should”, “could”, and similar expressions.  Forward-looking statements involve risks and uncertainties that may cause actual results or outcomes to differ materially from those included in the forward-looking statements.  Factors that may cause actual results to differ materially from those included in the forward-looking statements include, but are not limited to, actions by state and federal regulatory bodies; competition and industry restructuring; changes in economic conditions; changes in weather patterns; changes in laws, regulations or regulatory policy; expiration or initiation of significant energy supply contracts; changes in levels of capital expenditures; developments in legal or public policy doctrines; technological developments; volatility in electric and natural gas commodity markets; effectiveness of our risk management policies and procedures; changes in accounting standards and financial reporting regulations; fluctuations in the value of electricity positions; the methods, timing and results of the disposition of competitive businesses; terrorist attacks on domestic energy facilities; and other presently unknown or unforeseen factors.  Other risk factors are detailed from time to time in our reports to the Securities and Exchange Commission.  We undertake no obligation to update the information contained in any forward-looking statements to reflect developments or circumstances occurring after the statement is made.




SLIDE 3


Today’s Announcements


·

Divest all competitive business and focus solely on regulated utilities

·

Update five-year regulated capital expenditure estimates

·

Issue third-quarter results and reaffirm 2005 guidance

·

Establish 2006 guidance

·

Report on divestiture of wholesale, energy services business


SLIDE 4


Third-Quarter Results


·

Consolidated loss of $94.5 million

·

Regulated business earnings of $38.6 million, up 2.1% from 2004


-

Hot weather, rate increases, higher transmission earnings offset by higher costs, absence of 2004 nonrecurring benefits


·

Competitive business loss of $129.6 million


-

Wholesale and retail mark-to-market losses of $95 million


·

Parent, other costs of $3.5 million


-

Consistent with guidance




SLIDE 5


Key Developments in 2005


·

Transmission

-

Approvals of key southwest Connecticut projects

-

Bethel/Norwalk project ahead of schedule

-

Earnings growth continuing to track increased investment


·

Distribution

-

Major projects (LNG, Northern Wood) on schedule

-

Earnings on track

-

Full pass-through of rising energy, capacity costs


·

Competitive

-

Decided on full divestiture

-

Continued progress exiting wholesale marketing, energy services

-

Signed agreements to divest New England wholesale marketing book by 1/1/06 at a total cost of $230 million; $155 million paid to date

-

Negotiating reduction of PJM, New York wholesale marketing obligations

-

Expect to close on two of six services businesses this month



SLIDE 6


Corporate Strategy for 2006 and Beyond



-

Divest all non-regulated businesses during 2006


-

Simplify business model


-

Reduce business risk and improve financial flexibility


-

Enhance earnings visibility


-

Capitalize on increasing valuation of generation assets



-

Focus on regulated utility infrastructure capital expenditure programs


-

Transmission: To meet customers needs, up to $2.3 billion of capex in 2006-2010 vs. projected 12/31/05 rate base of $650 million


-

Distribution and generation: Approximately $2 billion of capex in 2006-2010 vs. projected 12/31/05 rate base of $2.85 billion


-

Finance regulated capital expenditures with appropriate combination of debt and equity to maintain investment grade ratings


2006: A year of transformation strategically and financially




SLIDE 7



Why Are We Moving in This Direction?


The Reason

 

The Result

   

New England’s energy

infrastructure needs investment

 

Simplified business model

   
  

Lower risk profile and

increased financial flexibility

Greater transmission

investment provides

attractive use of capital

→

 
  

Increased earnings

predictability driven by rate

base growth

   

Coal, hydro generation asset

values rising

  
   

Capacity markets tightening

 

Attractive value proposition




SLIDE 8


We Will Transform Ourselves Into a 100% Regulated Utility



[Chart illustrating transformation of business into a regulated utility]


   

Year End 2005

   
       
   

Northeast Utilities

   
 

Regulated

   

Competitive

 

Electric

Distribution

 

Electric Transmission

 

Retail

 

Wholesale

       

Gas

Distribution

 

Regulated

Generation

 

Generation

 

Services



 

Year End 2006

 
   
 

Northeast Utilities

 

Electric

Distribution

 

Electric

Transmission

   

Gas

Distribution

 

Regulated

Generation





SLIDE 9


Necessary Regulated Capital Investment Will Produce

Substantial Rate Base Growth



Bar Chart Illustrating Cash Capital Expenditures in Millions and comparing Regulated Capital Expenditures and Depreciation


Regulated Rage Base CAGR of 14%



  

Cash Captial Expenditures (shown in millions of $)

 
 

Regulated

Capex

 

Depreciation

2004 Actual

$611

 

$206

2005 Est.

$723

 

$216

2006 Est.

$864

 

$229

2007 Est.

$890

 

$262

2008 Est

$926

 

$238

2009 Est.

$778

 

$296

2010 Est.

$773

 

$323


SLIDE 10


NU is the Focus of New England’s Transmission

Infrastructure Update


-

ISO-NE has identified 272 transmission projects in its Regional System Plan


-

NU’s projects comprise 55% of the projected capital expenditures in the plan


[Pie Chart Illustrating breakdown in percentages by company of the projected capital expenditures in the ISO-NE’s Regional System Plan]


NU

55%

National Grid

14%

VELCO

12%

NSTAR

9%

United Illuminating

6%

Bangor Hydro

3%

Central Maine Power

1%



SLIDE 11


Transmission Will Comprise a Much Larger Share of

NU’s Regulated Mix


Northeast Utilities System


 

Electricity

Transmission

 

YTD Net Income:

 

$31.6 million

   

Rate Base:

 

$650 million

(Est. 12/31/05)

   

’06-’10 Capex:

 

$2.3 billion



 

Electricity

Distribution and Generation

 

YTD Net Income:

 

$72.4 million

   

Rate Base:

 

$2.41 billion

(Est 12/31/05)

   

’06-’10 Capex:

 

$1.8 billion


 

Gas LDC

 

YTD Net Income:

 

$10.3 million

   

Rate Base:

 

$440 million

(Est 12/31/05)

   

’06-’10 Capex:

 

$0.3 billion





SLIDE 11 (Continued)


2005E Rate Base Composition

2005E Rate Base: $3.5 billion


[Pie Chart illustrating percentages of $3.5 billion rate base]


  

Transmission

19%

Gas

12%

Dist. & Reg. Generation

69%


2010E Rate Base Composition

2010E Rate Base: $6.5 billion


Transmission

36%

Gas

9%

Dist. & Reg. Generation

55%



SLIDE 12


Projected Transmission Rate Base Growth


[Bar Chart illustrating Projected Transmission Rate Base Growth]



Projected Transmission Rate Base CAGR of 29%



Shown in millions of dollars


 

CL&P

PSNH

WMECO

2005

$459

$131

$67

2006

$803

$149

$72

2007

$1,036

$163

$72

2008

$1,291

$254

$72

2009

$1,503

$270

$75

2010

$1,913

$332

$79




SLIDE 13


Projected Distribution and Regulated Generation Rate Base


[Bar Chart illustrating Projected Distribution and Regulated Generation Rate Growth]


 Projected Distribution & Generation Rate Base CAGR of 8%


Shown in millions of dollars


 

CL&P

PSNH

WMECO

Yankee Gas

2005

$1,460

$704

$250

$438

2006

$1,566

$840

$271

$469

2007

$1,742

$915

$292

$578

2008

$1,882

$987

$314

$596

2009

$2,016

$1,033

$331

$608

2010

$2,153

$1,087

$349

$620


SLIDE 14


Transmission Strategy




SLIDE 15


We are Confident in Our Ability to Execute the Strategic Plan


A review of our status over the past year shows significant forward progress


 

Fall 2004

Fall 2005

Bethel-Norwalk project

($350 million

Final engineering and design; appeals just

concluded

60% expected this year versus 45% targeted; full completion in 2006

   

Middletown-Norwalk project

($1 billion)

Contentious CT siting process ongoing

Siting approved; detailed design underway; construction expected to begin in 2006

   

Glenbrook Cables project

($120 million)

Preparing for siting application

Siting approved; detailed design underway; construction expected to begin in 2006

   

Other major projects

Several substation and line projects under construction

Haddam, Tioga, Huse Rd & Rochester in service, on budget & on schedule ($41M)

   

2005 Plant-in-service projections

$66 million in-service

Projected $173 million in-service due to accelerated project work

   

Capital spending deployment

2004 spending of $170 million

2005 spending of $256 million





SLIDE 16


New England’s Transmission Needs Provide for a Significant

Investment Opportunity


-

New England faces significant energy challenges, including the need for new transmission infrastructure

-

The current 345 kV backbone grid in New England is inadequate

-

Regional load pockets exist where uneconomic generation resources must be committed for reliability


-

Comprehensive plan will improve reliability while further enabling competitive markets, and creating savings for customers


-

It will also reward NU shareholders with a fair, FERC-regulated return on their invested capital


SLIDE 17


New England uses an Open Stakeholder Process to

Identify Regional Needs and Develop Solutions


{Wagon wheel chart illustrating the ISO NE Regional Plan System)


  

ISO-NE

Inclusive Planning

Process

  

Gas

Supply

   

Operational

Control

  

Regional

System Plan

  
     

Fuel

Diversity

   

Demand Side

Resources

     
 

Generation

Resources

 

Transmission

Projects

 


-

The Regional System Plan is a comprehensive approach to meet regional needs


-

The transmission aspect of that plan forms the basis of NU’s transmission business strategy




SLIDE 18


We Will Deploy Significant Capital Over the Next Five Years


[Bar chart showing capital spending historic and forecast for the period from 2006 – 2010]


(Shown in Millions of $)


Historic

$508 Million

 

Major CT

Other

Preliminary

Total

2001

 

26

 

26

2002

16

39

 

55

2003

13

86

 

99

2004

65

106

 

171

2005

143

113

 

256

  

Forecast

Up to $2.3 Billion

  

2006

353

100

 

453

2007

422

131

 

553

 

$1.3 Billion of major CT projects in 2006-2010 forecast period; $1.5 Billion in total

   

2008

393

142

 

535

2009

120

219

56

395

2010

1

221

142

364


•

Spending on major projects in Connecticut represents 80% of capital spending over the next three years.

•

The majority of our capital spending is secure from a siting viewpoint.

•

During 2006 we expect to complete the Bethel-Norwalk project and be well into the construction phase on the Middletown-Norwalk and the Glenbrook Cables projects.




SLIDE 19


The Changes in the Capital Program from Last Year are

Largely Driven by New Regional System Plan Projects


Bar Chart illustrating costs for new regional system plan projects, comparing prior forecast (2005-2009) to current forecast (2006-2010)


Shown in Millions of $


 

Cost

Prior Forecast

(2005-2009)

$1,410

A

New Middletown-Norwalk and Bethel-Norwalk Estimates

$360

B

Southern New England

Transmission Reliability Project

$265

C

New Regional System Plan Projects

$162

D

Preliminary Projects

$198

E

Construction Work in Progress in Rate Base

($95)

Current Forecast (2006-2010)

$2,300


SLIDE 20


NU’s Transmission Revenue Requirements are 100%

FERC Regulated


100% of Revenue Requirements Regulated At FERC


•

NU’s FERC-approved transmission tariffs fully track all transmission costs


-

Rates are forward looking, based on forecasted investment level


-

Rates are adjusted every six months


-

Rates are trued up annually


•

The combination of forward looking rates and the annual true-up provision lowers the risk associated with recovery of transmission investment


•

FERC’s policies provide strong incentives for transmission investment, including ROE and CWIP in rate base treatment




SLIDE 21


NU Collects its Revenue Requirements Through a

Combination of Regional and Local Tariffs


100% of Revenue Requirements Regulated At FERC


NU Local Network Service


Others

CL&P

WMECO

PSNH

10%

59%

9%

22%


New England Regional Network Service


Others

CL&P

WMECO

PSNH

70%

20%

3%

7%


Recovery at the Retail Distribution Level


CL&P

WMECO

PSNH

Tracker

Tracker

Rate Case

Required


-

ISO determines cost allocation for each project

-

Regionalized cost allocation results in a large component of our revenue requirements being recovered from non-NU companies in New England

-

At the distribution level, we have trackers in Connecticut and Massachusetts that allow for timely recovery





SLIDE 22

Transmission Investment Provides for Strong Growth


Based on current transmission investment schedule, NU’s transmission-related rate base is expected to grow at a 29% CAGR


[Bar chart illustrating growth rate of transmission rate base growth]


Shown in Millions of $


 

Capex

Depreciation

Rate Base

2003

$99

$21

$430

2004

$171

$22

$456

2005

$256

$24

$620

$1035

$453

$26

$1035

2007

$553

$39

$1271

2008

$535

$43

$1617

2009

$395

$50

$1848

2010

Transmission

Rate Base

CAGR of 29%

$364

$67

$2325


*  

Spending levels depend on final level and timing of all projects.  Capital expenditures reflect 50% CWIP in Rate Base treatment for four southwest Connecticut projects.


SLIDE 23


Our Investments Will Provide Significant Benefits for Customers

and Earnings for Shareholders


-

Customers will benefit from:


–

Improved system reliability and operational flexibility

–

Ability to connect much needed generation resources to the grid

–

Increases in deliverability of power within the region, thereby lowering congestion and energy costs



-

Investors will be rewarded through:


–

Strong earnings growth driven by increased rate base

–

Solid returns on equity, consistent with FERC policies and incentives

–

Certainty of cash flow

–

Limited cost recovery risk due to FERC-based tariffs


SLIDE 24

Financial Update


SLIDE 25

Financial Highlights


-

2005 results

–

Overall


–

Utility Group

–

NUEI

-

2005 – 2006 earnings guidance and drivers


-

Cash sources and uses





SLIDE 26


Year-To-Date Results


Shown in Millions of $


($ in millions)

September 30, 2005


EPS

September

30, 2004


EPS

Increase

(Decrease)

Regulated, Parent Results

     

  CL&P

$62.3

$0.48

$65.1

$0.51

($2.8)

  PSNH

29.8

0.23

36.0

0.28

(6.2)

  WMECO

11.9

0.09

8.7

0.07

3.2

  Yankee Gas

10.3

0.08

8.5

0.07

1.8

Total Utility Group Earnings

$114.3

$0.88

$118.3

$0.92

($4.0)

Parent Expenses & Investment

Writedowns

(10.1)

(0.07)

(14.6)

(0.11)

4.5

Earnings Excluding Competitive

Results

$104.2

$0.81

$103.7

$0.81

$0.5


Competitive Business Results

     

  Merchant Energy

     

  Natural gas contract losses

$0.0

$0.00

($45.9)

($0.36)

$45.9

  Wholesale market charges

(239.3)

(1.85)

$0.0

0.00

(239.3)

  Earnings (excl. charges)

(36.5)

(0.28)

27.6

0.21

(64.1)

  Restructuring charges

(7.9)

(0.06)

0.0

0.00

(7.9)

  Retail transfer price to

  wholesale

(25.9)

(0.20)

0.0

0.00

(25.9)

Total Merchant

($309.6)

($2.39)

($18.3)

($0.15)

($291.3)

      

Services

     

Net earnings & NUEI Parent

($2.4)

($0.02)

($1.5)

($0.01)

($0.9)

Restructuring charges

(10.7)

0.08

0.0

0.00

(10.7)

Discontinued Operations

(21.4)

(0.17)

(0.4)

0.00

(21.0)

Total Services & Other

($34.5)

($0.27)

($1.9)

($0.01)

($32.6)

Total Competitive Business Earnings

($344.1)

($2.66)

($20.2)

($0.16)

($323.9)


Net Income

($239.9)

($1.85)

$83.5

$0.65

($323.4)




SLIDE 27


Third-Quarter Regulated Earnings


[Bar Chart Showing Third-Quarter Regulated Earnings for 2004 & 2005]


Distribution and PSNH Generation


$26.8 million in 2004;

$26.4 million in 2005


Shown in Millions of $



 

CL&P

PSNH

WMECO

Yankee

2004

$14.6

$14.5

$1.3

($3.6)

2005

$16.5

$10.4

$3.7

($4.2)




Transmission


$11.0 million in 2004;

$12.2 million in 2005



Shown in Millions of $


 

CL&P

PSNH

WMECO

2004

$7.1

$3.7

$0.2

2005

$9.6

$1.5

$1.1




SLIDE 28


Year-To-Date Regulated Earnings



[Bar Chart Showing Year-To-Date Regulated Earnings for 2004 & 2005]



Distribution and PSNH Generation Distribution


$94.7 million in 2004;

$82.7 million in 2005


Shown in Millions of $



 

CL&P

PSNH

WMECO

Yankee

2004

$49.6

$30.1

$6.5

$8.5

2005

$39.8

$24.0

$8.6

$10.3



Transmission


$23.6 million in 2004;

$31.6 million in 2005


Shown in Millions of $


 

CL&P

PSNH

WMECO

2004

$15.5

$5.9

$2.2

2005

$22.5

$5.8

$3.3





SLIDE 29



2005 NUEI Results


Shown in Millions of $


[Bar Chart Showing NUEI Results for 3Q05 and YTD 2005]





 

Wholesale, Excl.

Contract

Market Changes


Wholesale

Market

Changes,

Restructuring



Retail, Excl.

Transfer

Price



Retail Transfer

Price




Services,

Parent

3Q05

($31.0)

($77.6)

$1.1

($19.6)

($2.5)

YTD 2005

($40.4)

($247.2)

$3.9

($25.9)

($34.5)


SLIDE 30


2005 and 2006 Earnings Guidance


 

2004 Actual

2005 Guidance

2006 Guidance

    

Regulated Distribution

  and Generation

$0.98

$0.96 - $1.00

$0.89 - $0.96

    

Transmission

$0.23

$0.26 - $0.30

$0.32 - $0.35

Total Regulated Business

$1.21

$1.22 - $1.30

$1.21 - $1.31

    

Parent, Other

($0.19)

($0.13 - $0.08)

($0.12 - $0.09)

Total Excluding NUEI

$1.02

$1.09 - $1.22

$1.09 - $1.22




SLIDE 31


Earnings Drivers at NUEI in 2005-2006 Until Divestiture

is Complete


-

Earnings on generation, retail, services until divested


-

Managing wholesale contracts not divested


-

Marking to market remaining wholesale, retail positions

-

Cash termination payments on wholesale contracts



-

Proceeds from competitive business divestitures



SLIDE 32


2006 Regulated Company Earnings Drivers



Distribution

 

Transmission

   

-  Retail sales

 

-  Capital investment progress

   

-  Operating expenses

 

-  Rate base growth

   

-  Distribution rates

 

-  Outcome of FERC ROE case

   

-  Regulatory incentives

  
   

-  NH generation ROE

  




SLIDE 33



Earnings To Be Driven By Investment Growth


Target Utility Capitalization Structure = 45% equity, 55% debt

Estimated Transmission ROE = 11%-12%

Estimated Cost of Capital Distribution ROE = 9 -10%


Rate Base in Millions OF $


Regulated

Rate Base

2004-2010

CAGR of 14%



[Bar Chart illustrating Estimated Earnings in Electric Transmission and Regulated Distribution and Generation]


 

2005 Est.

2006 Est.

2007 Est.

2008 Est.

2009 Est.

2010 Est.

Electric Transmission

$657

$1,039

$1,271

$1,619

$1,848

$2,325

Regulated Distribution and Generation

$2,852

$3,152

$3,527

$3,778

$3,988

$4,208

Total

$3,509

$4,187

$4,798

$5,395

$5,837

$6,533




SLIDE 34

Items Affecting Q4 2005 and 2006 Cash Flows


Additional Sources:

 

Uses:

   

Internal:

  

  Sales Growth

 

  Higher transmission capex

  Higher transmission rates, including 50%

 

  Stable distribution capex

  CWIP in rates for SW CT projects

 

  Divestiture expenses

  Lower CL&P regulatory refunds

 

  Dividend payments

  CL&P, WMECO rate increases

 

  Higher operating, interest expenses

  Tax benefits from wholesale buyouts  

 

  Taxes on merchant plant sales

  Minimal maturities

External:

  
   

  Competitive business divestitures

  

  NU equity issuance

  

  CL&P debt issuance

  

  Larger NU Parent revolvers

  




SLIDE 35



Focus

-

NU will transition toward a 100% regulated business


-

Simplified business model

-

Reduced operating risk profile and improved financial flexibility


-

Enhanced earnings predictability


Growth


-

Substantial regulated investment opportunities will drive superior regulated earnings growth


Financial Success Factors

-

EPS growth

-

Balance sheet strength to finance capital program

-

  Achieved ROEs

-

Consistent dividend policy


SLIDE 36


Questions

and

Answers