MERGER OF NU AND NSTAR

12 Months Ended

Dec. 31, 2014

Notes To Consolidated Financial Statements [Abstract]

Business Combination Disclosure

21.       MERGER OF NU AND NSTAR

On April 10, 2012, NU acquired 100 percent of the outstanding common shares of NSTAR. Pursuant to the terms and conditions of the Agreement and Plan of Merger, as amended, (the "Merger Agreement,")NSTAR and its subsidiaries became wholly-owned subsidiaries of NU.

NSTAR was a holding company engaged through its subsidiaries in the energy delivery business serving electric and natural gas distribution customers in Massachusetts. As part of the merger, NSTAR shareholders received 1.312 NU common shares for each NSTAR common share owned (the "exchange ratio") as of the acquisition date. NU issued approximately 136 million common shares to the NSTAR shareholders as a result of the merger.

Purchase Price: Pursuant to the merger, all of the NSTAR common shares were exchanged at the fixed exchange ratio of 1.312 NU common shares for each NSTAR common share. The total consideration transferred in the merger was based on the closing price of NU common shares on April 9, 2012, the day prior to the date the merger was completed, and was calculated as follows:

NSTAR common shares outstanding as of April 9, 2012 (in thousands)*		103,696
Exchange ratio		1.312
NU common shares issued for NSTAR common shares outstanding (in thousands)		136,049
Closing price of NU common shares on April 9, 2012	$	36.79
Value of common shares issued (in millions)	$	5,005
Fair value of NU replacement stock-based compensation awards related to pre-merger service (in millions)		33
Total purchase price (in millions)	$	5,038

*       Included 109 thousand shares related to NSTAR stock-based compensation awards that vested immediately prior to the merger.

Certain of NSTAR's stock-based compensation awards, including deferred shares, performance shares and all outstanding stock options, were replaced with NU awards using the exchange ratio upon consummation of the merger. In accordance with accounting guidance for business combinations, the portion of the fair value of these awards attributable to service provided prior to the merger was included in the purchase price as it represented consideration transferred in the merger. See Note 9C, "Employee Benefits – Share-Based Payments," for further information.

Purchase Price Allocation: The allocation of the total purchase price to the estimated fair values of the assets acquired and liabilities assumed was determined based on the accounting guidance for fair value measurements. The allocation of the total purchase price included adjustments to record the fair value of NSTAR's unregulated telecommunications business, regulatory assets not earning a return, lease agreements, long-term debt and the preferred stock of NSTAR Electric. The fair values of NSTAR's assets and liabilities were determined based on significant estimates and assumptions, including Level 3 inputs, that were judgmental in nature. These estimates and assumptions included the timing and amounts of projected future cash flows and discount rates reflecting risk inherent in future cash flows.

In accordance with accounting guidance for business combinations, the excess of the purchase price over the estimated fair values of the assets acquired and liabilities assumed was recognized as goodwill.

The goodwill from the merger with NSTAR totaled $3.2 billion and was allocated to NU's reporting units based on their estimated fair values. See Note 22, "Goodwill," for the allocation of goodwill to each reporting unit.

Pro Forma Financial Information: The following unaudited pro forma financial information reflects the pro forma combined results of operations of NU and NSTAR and reflects the amortization of purchase price adjustments assuming the merger had taken place on January 1, 2011. The unaudited pro forma financial information has been presented for illustrative purposes only and is not necessarily indicative of the consolidated results of operations that would have been achieved or the future consolidated results of operations of NU.

(Pro forma amounts in millions, except per share amounts)	For the Year Ended December 31, 2012
Operating Revenues	$	7,004
Net Income Attributable to Controlling Interest		630
Basic EPS		2.00
Diluted EPS		1.99

Pro forma net income does not include potential cost savings associated with the merger. Pro forma net income also excludes certain non-recurring merger costs and costs related to the Connecticut and Massachusetts merger settlement agreements described below, with the following aggregate after-tax impacts:

(Millions of Dollars)	For the Year Ended December 31, 2012
Transaction and Other Costs	$	32
Settlement Agreement Impacts		60
Total After-Tax Non-Recurring Costs Excluded from Pro Forma Net Income Attributable to Controlling Interest	$	92

Regulatory Approvals: On February15, 2012, NU and NSTAR reached comprehensive merger settlement agreements with the Massachusetts Attorney General and the DOER. The Attorney General settlement agreement covered a variety of rate-making and rate design issues, including a base distribution rate freeze through 2015 for NSTAR Electric, NSTAR Gas and WMECO and $15 million, $3 million and $3 million in the form of rate credits to their respective customers. On April 4, 2012, the DPU approved the settlement agreements and the merger of NU and NSTAR.

On March 13, 2012, NU and NSTAR reached a comprehensive merger settlement agreement with both the Connecticut Attorney General and the Connecticut Office of Consumer Counsel. The settlement agreement covered a variety of matters, including a $25 million rate credit to CL&P customers, a CL&P base distribution rate freeze until December 1, 2014, and the establishment of a $15 million fund for energy efficiency and other initiatives to be disbursed at the direction of the DEEP. In the agreement, CL&P agreed to forego rate recovery of $40 million of the deferred storm restoration costs associated with restoration activities following Tropical Storm Irene and the October 2011 snowstorm. On April 2, 2012, the PURA approved the settlement agreement and the merger of NU and NSTAR.

The pre-tax financial impacts of the Connecticut and Massachusetts merger settlement agreements that were recognized in 2012 by NU, CL&P, NSTAR Electric, and WMECO are summarized as follows:

(Millions of Dollars)	NU		CL&P		NSTAR Electric		WMECO
Customer Rate Credits	$	46	$	25	$	15	$	3
Storm Costs Deferral Reduction		40		40		-		-
Establishment of Energy Efficiency Fund		15		-		-		-
Total Pre-Tax Settlement Agreement Impacts	$	101	$	65	$	15	$	3