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Rating Agency Meetings

Rating Agency Meetings

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Rating Agency Meetings

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  1. Rating Agency Meetings APRIL 7, 2011

  2. Key Achievements Over the Past Year • Merger with NSTAR negotiated, announced and several key approvals secured • 2010 earnings, cash flows finished ahead of forecast; 2011 plan above consensus • Fair conclusions to three distribution rate cases • Key endorsements of NEEWS, NPT projects • Revolving credit agreements extended to September 2013 at full $900 million level • Standalone financial metrics, risk profile, record of strong execution justifies higher ratings

  3. 29.5% 2010 Results 15.6% 8.2% Earnings For Common In Millions Distribution and Generation Transmission Competitive Total Parent/Other *Excludes benefit of $15.7 million tax settlement and after-tax merger costs of $9.4 million

  4. 2010 Results vs. April 2010 Forecast ** ** * * * * * Excludes $57 million of WMECO long-term debt offset by spent nuclear fuel trust assets ** Excludes $288 million of equity associated with acquisition premium Better than forecast Similar or weaker than forecast

  5. 2009 Results vs. April 2009 Forecast ** ** * * * * * Excludes $57 million of WMECO long-term debt offset by spent nuclear fuel trust assets ** Excludes $288 million of equity associated with acquisition premium Better than forecast Similar or weaker than forecast

  6. NU’s Payout Ratio is Conservative and Aligned With the Growth Story and Capital Requirements EPS Dividends per share Payout ratios *Excludes merger costs and 2010 NU Parent tax settlement **Excludes litigation settlement charge

  7. Cash Flows Continue to Rise Significantly Net Cash Flows From Operations After Repayment of RRBs 37.5% CAGR In Millions *Excludes payment of $400 million of taxes due to November 2006 generation sale

  8. Board of Trustees Chief Executive Officer Chair Risk & Capital Committee Risk Assessment Teams Executive Vice President Operations Chief Financial Officer Director Corporate ERM Corporate ERM Group Distribution/ Generation Risk Controller Transmission Risk Controller Corporate Shared Services Risk Controller Select Energy Risk Controller Risk Analyst Enterprise Risk Management (ERM) Update • ERM is in its sixth year of implementation at NU • Internal Risk Assessment Teams identify, discuss and assess risks; Accountability for risk mitigation remains with the businesses and corporate shared services functions • Regular reports are made to committees of the Board of Trustees • ERM facilitates a fully functioning Risk and Capital Committee that integrates risk with capital expenditure decisions and evaluates key risks of the NU businesses • ERM principles are integrated into strategic planning and budgeting processes, with strategic and operating plans “risk rated”

  9. NU’s Risk and Capital Committee (RaCC) The RaCC is a senior-level Capital Committee with a governance role to ensure that capital projects are reviewed with a risk perspective. Only the RaCC can authorize spending on capital projects or programs over specified $ thresholds, which institutionalizes a focus on risk identification and mitigation. ERM conducts risk workshops to assist project teams with evaluating capital project risks and also ensures that the risks have mitigation plans that are updated to the RaCC quarterly The RaCC is also the company’s Risk Committee, where NU’s key financial, operational, and strategic risks are reviewed and discussed.

  10. Key Themes for March 2011 Update of Strategic Risks Energy Policy and Regulation: • Yankee Gas rate case is underway in 2011. • Elections brought significant changes and a high level of focus on energy policy in the region, including a proposal for restructuring the utility regulatory commission in CT. Several state commissioners are up for re-appointment in 2011. • Uncertainty surrounding EPA regulation and enforcement increases risk in our generation business. • We are also watching national policy that could impact transmission cost allocation and competition. Revenues: • Weather has positively impacted sales; a focus on renewables and distributed generation continues. Capital Deployment. • NEEWs and Northern Pass transmission projects are moving forward. Financial: • Interest rates remain low; assets are performing well in the pension plan. Business Climate, Customer Satisfaction and Reputation • The business climate, particularly in CT, remains challenging due to continued economic weakness and new legislative proposals that may bring further harm. There is continued focus on customer satisfaction with increased staffing, improved technology and processes, and enhanced storm restoration efforts. Information Technology • Technology and security are monitored to avoid disruptions of operations and information security breaches, as NU companies increasingly use new technologies and data warehousing. There are challenges recognized with handling, managing and securing data. Compliance: • NERC audits have been very positive; reliability compliance department is meeting its objectives. OSHA is adopting a more aggressive approach to enforcement. Environmental: • Historical environmental sites in MA continue to be addressed. There is a strong enforcement mindset at the federal level with respect to environmental regulation.

  11. NU-NSTAR Merger Status

  12. A Compelling Combination – Creates Largest Utility Company in New England NSTAR Gas Service Area Northeast Utilities Electric Service Area Northeast Utilities Gas Service Area • Significant transmission investment opportunities combined with balance sheet strength provides for substantial growth potential • Larger, more diverse and better positioned to support economic growth and renewables in New England • Accretive to earnings in Year 1 and provides enhanced total shareholder return proposition • Enhances service quality capabilities to the largest customer base in New England • Highly experienced and complementary leadership team with proven track record Combined Service Territory NSTAR Electric Service Area

  13. Key Merger Terms Balanced Terms and Governance

  14. Executive Management Organization Tom May President & Chief Executive Officer Greg Butler General Counsel Christine Carmody Human Resources Jim Judge Chief Financial Officer David McHale Chief Administrative Officer Joe Nolan Corporate Relations Lee Olivier Chief Operating Officer Chuck Shivery Non-Executive Chairman

  15. NU-NSTAR Merger Status • NU and NSTAR shareholders approved the merger by needed two-thirds votes on March 4 • Hart-Scott-Rodino waiting period expired in February without objection • FCC review complete without objection • FERC, NRC reviews pending • MA DPU amended standard of review. New schedule calls for evidentiary hearings to begin July 6 • CT DPUC draft decision disclaimed jurisdiction. Now awaiting final decision and monitoring pending legislation • NHPUC waiting for decision on jurisdiction • Waiver sought in Maine

  16. Distribution and Generation Segment

  17. Distribution and Generation segment Achieved Several Milestones in Past 12 Months • Rate cases completed for all three electric companies • Rate case outcomes are moving realized earnings closer to allowed returns – approximately 9% Distribution ROEs projected at each distribution segment in 2011 • Capital investment plans supported at CL&P and PSNH • Yankee Gas rate case filed in January, decision due in June • Strong cost control and lower uncollectible improved performance • Clean Air Project now more than 80% complete and below budget – expected to enter commercial operation by mid-2012

  18. Improving Earnings in Distribution/Generation Businesses Net Income in millions

  19. Final Resolution of All Three Electric Rate Cases • Five-year settlement approved by NHPUC on 6/28/2010 • $45.5 million increase on 7/1/10 in addition to 8/1/09 temporary increase of $25.6 million • $2.9 million decrease on 7/1/11 • 2012 & 2013 projected increases of $9.5 million & $11.1 million • Authorized ROE remains 9.67% (2010 distribution/ generation ROE was 10.2%) • Recovery of ice storm costs over 7 years PSNH CL&P WMECO • Final decision 6/30/2010 • $63.4 million increase effective 7/1/10 • $38.5 million increase effective 7/1/11 • Authorized 9.4% ROE at 6/30/10 (2010 ROE was 7.9%) • 49.2% equity in capital structure • Benefits from full RRB amortization and lower commodity prices resulted in 7.8% standard service rate cut • Initial increase deferred until 1/1/11 • Capex plan approved • Final decision 1/31/11 • $16.8 million increase effective 2/1/11 • Authorized 9.6% ROE (2010 ROE was 4.6%) • Revenue decoupling approved • Distribution capital program reduced by $20 million/year from requested level • $2.1 million write-off taken in fourth quarter 2010

  20. Electric Distribution and Generation Capital Expenditures – By Company 2011-2015 Projected Electric Distribution and Generation Spending $3 Billion $675 $618 $611 $620 $536 $541 2011 – 2015 Capital Expenditures In Millions *Total AMI-related capex through 2016 expected to be approximately $300 million

  21. NU Generation Strategy • Installation of 6 MW solar projected by 2012 • Estimated cost: $41 million • Completed 1.8 MW of solar at first site in Pittsfield, MA in October 2010 • 4.2 MW site in Springfield, MA identified for second project • Constructive regulatory model – fully tracking, segmented rate base WMECO Solar Initiative PSNH Generation Business Plan • Five-year strategy preserves existing 1,200 MW New Hampshire fleet • Completes the Merrimack Scrubber • Estimated cost reduced from $457 million to $430 million • $296.5 million capitalized at 12/31/10 • Ahead of schedule: 82% complete as of 2/28/11 • Assesses additional growth opportunities in renewables

  22. Yankee Gas Capital Expenditures 2011-2015 Projected Yankee Gas Capital Spending $587 Million $129 $126 $120 $113 $99 $95 In Millions

  23. Waterbury to Wallingford Project to Add Needed Supply for System Demand • Project began in April 2010; completion expected by November 2011 • Fills gaps in supply portfolio and eliminates system constraint in Cheshire area • Increases vaporization capacity of Waterbury LNG project • Projected cost reduced from $67 million to $57.6 million; $26.6 million invested in 2010 • Key elements of current Yankee Gas rate case • $29.1 million increase effective 7/1/11 • $10.3 million increase effective 7/1/12 • Maintain current 10.1% ROE

  24. Transmission Segment

  25. Transmission Earnings Continue to Rise Millions

  26. Potential Wind Sites NPT HVDC Renewables & Clean Energy (ME/NH/VT): Projects in Development/ High Wind potential areas 4 Northern Pass Transmission (NPT) Line between Quebec and New Hampshire 3 Transmission Business Strategy: Major Initiatives Expanding Across Wider New England Geography ´ Connecticut Borders (MA, RI): NEEWS Projects Under Way 2 Southwest Connecticut Reliability: Projects Complete 1

  27. Greater Springfield Reliability Project SPRINGFIELD Interstate Reliability Project HARTFORD Central Connecticut Reliability Project 345-kV Substation Generation Station 345-kV ROW 115-kV ROW NEEWS Projects AdvanceCurrent Status Report • Greater Springfield Reliability Project • Received siting approval in CT and MA • Substation construction commenced in MA in Dec. 2010 and overhead construction in February 2011 • Commence overhead construction in CT in early 2012 • Project in-service: late 2013 • Interstate Reliability Project • Joint project with National Grid (NU in CT; NGrid in MA & RI) • ISO-NE confirmed need date in August 2010 • File siting application in CT in late 2011 • Siting decision in CT in mid/late 2013 • Commence construction: late 2013/early 2014 • Project in-service: late 2015 • FERC approved ROE of 12.89%, 100% CWIP in rate base and recovery of abandoned costs in 2008 • Central Connecticut Reliability Project • Awaiting completion of ISO-NE’s reassessment of need and need date • Project milestones estimated 12 months behind IRP

  28. Northern Pass Transmission – a $1.1 Billion Capital Investment ´ • To be owned by Northern Pass Transmission LLC - NU (75%) and NSTAR (25%) • 1,200 MW transfer capability • Northern terminus at Des Cantons (Québec), southern terminus in Franklin (New Hampshire) • Québec terminal will convert the power from AC to DC (rectifier) • US terminal will convert the power from DC to AC (inverter) • 345kV AC leg from Franklin to Deerfield, NH • Capital cost estimate for US segment: $1.1 billion • TSA signed in October 2010 and accepted by FERC on February 11, 2011 • Permitting process began October 14, 2010 with U.S. DOE application • PPAs under discussion Des Cantons Franklin Deerfield HVDC Line HVDC Converter Station 345-kV Line Existing Deerfield Substation

  29. Northern Pass Transmission - Project Milestones as of 3/1/11

  30. Key TSA Terms • 40 year agreement governs the development, construction and operation of the NPT line • Parties are NPT and HQ Hydro Renewable, a newly created subsidiary of HQ • Payments begin with commercial operations; AFUDC accrues to rate base • Payments based on projected cost-of-service calculation with annual true-up; they do not vary with HQ’s utilization of line • 50-50 debt-equity capital structure with 12.56% ROE during construction and 142 bps above ISO-NE Tariff ROE during commercial operation • HQ likely to provide construction debt financing; permanent financing after commercial operation • HQ has numerous termination rights (e.g., cost escalation); NPT is reimbursed for all costs incurred if these rights are exercised • HQ guarantees all amounts owed under the agreement; guaranty is capped at a fixed amount calculated based on project cost

  31. 2001-2015 Transmission Capital Expenditures Historic Forecast $2.8 Billion $261 Million $2.9 Billion Northern Pass HVDC Line to Canada Successful completion of SWCT projects US portion estimated at $1.1 billion with $830 million NU ownership share SWCT projects total $1.6 billion In Millions NEEWS projects ramping up NU’s share of NEEWS project estimated at $1.449 billion $845 million of additional forecasted projects

  32. NU Actual and Projected Transmission Year-End Rate Base Transmission Rate Base CAGR of 10.5% $4,725 $3,733 $3,370 $3,234 $2,933 $2,759 $2,597 In Millions * ** * *100% CWIP assumed for NEEWS projects **NU share of this project is depicted as traditional rate base which accrues AFUDC during construction

  33. Efforts Under Way to Bring Northern New England Wind Generation to Market Vast majority of potential onshore renewables (wind) are in northern NE North-South Interface: 80% of NE electric load is below this line • New England RPS requirements are 21% by 2020, and existing resources provide only 6% • Complement current ISO-NE regional planning and potential FERC changes • Create efficiencies by optimizing multiple wind sites and required transmission • Get clean renewable energy to New England’s load sites • Utilize a “beneficiary-pay” model that provides transparency for customers and regulators NU, NSTAR, National Grid, and United Illuminating working collectively on this model

  34. Capital Program Benefits Customers and Produces Attractive Rate Base Growth Actual and Projected Total Rate Base 2009-2015 CAGR of 8.4% (using 2009 as base year) $11,350 $9,869 Projected Natural Gas Distribution CAGR of 5.8% $9,104 $8,660 $7,772 $7,334 Projected Generation CAGR of 11.0% $6,998 Rate Base in Millions Projected Electric Distribution CAGR of 6.8% Projected Transmission CAGR of 10.5%

  35. Credit Overview

  36. NU’s Improving Credit Story Northeast Utilities’ improving credit story has been evidenced by the positive response it has seen from the investor community Improving Credit Metrics CDS Secondary Bond Spreads New Issue Pricing

  37. Northeast Utilities CDS Spread Performance Despite maintaining its current ratings, Northeast Utilities CDS has outperformed similarly rated peers 5-Year NU CDS vs. Index and Peers (LTM) % Change Last 12 Months 10/18/10: NU / NST Merger Announced 5-Year NU CDS vs. Higher Rated Peers Current Spread (bps) ___________________________ Source: Bloomberg, Markit.

  38. Date CL&P '19 UTY Index Difference 8/10/2009 117 117 0 2/10/2010 110 112 (2) 8/10/2010 104 107 (3) 2/10/2011 59 89 (30) Current 50 96 (46) NU Subsidiaries Outperforming Market Connecticut Light & Power secondary spreads have tightened dramatically over the past two years, outperforming the broader utility space and most peers CL&P 5.5% due 2019 vs. 10-Year A Utility Index CL&P 5.5% due 2019 vs. Peers 10/18/10: NU / NST Merger Announced 10/18/10: NU / NST Merger Announced -52% -56% -58% -67% -72% ___________________________ Source: Bloomberg, Barclays Capital. ___________________________ Source: TRACE, Barclays Capital.

  39. Improving New Issue Indications Connecticut Light & Power and Northeast Utilities have both seen indicative new issue levels improve consistently over the past two years, outperforming comparable indices Connecticut Light & Power Indicative New Issue Levels vs. Single A Utility Credit Index CL&P indicative new issue spreads are lower than the comparable index Northeast Utilities Indicative New Issue Levels vs. BBB Utility Credit Index NU indicative new issue spreads are lower than the comparable index ___________________________ Source: Bloomberg, Barclays Capital.

  40. Consolidated Wisconsin Energy Northeast Utilities Xcel Energy Inc. Peer Average Edison Inc. Corp. Credit Ratings Summary Security: Sr. Unsecured Sr. Unsecured Sr. Unsecured Sr. Unsecured BBB- A- BBB+ BBB+ S&P Credit Rating Positive Stable Stable Stable S&P Credit Outlook Baa2 Baa1 A3 Baa1 Moody's Credit Rating Stable Stable Stable Stable Moody's Credit Outlook Balance Sheet Summary Long-Term Debt $4,633 $10,671 $3,932 $9,263 Short-Term Debt & Current Portion of LTD 66 5 1,131 522 Off Balance Sheet and Other Debt 0 219 58 141 Accrued Interest 0 0 0 164 Total Debt $4,699 $10,895 $5,121 $10,090 Minority Interest 1 0 0 0 Preferred Stock 116 213 30 105 Shareholders' Equity 3,811 11,274 3,802 8,084 Total Book Capitalization $8,628 $22,382 $8,954 $18,278 Credit Ratios Total Debt / Capitalization 56.7% 48.7% 57.2% 55.2% 53.7% EBITDA Interest Coverage 5.6x 4.9x 5.0x 4.4x 4.7x Total Debt / EBITDA 3.9x 3.7x 5.0x 4.0x 4.2x FFO Interest Coverage 5.1x 4.3x 5.3x 4.6x 4.8x FFO / Total Debt 18.5% 18.6% 17.3% 20.8% 18.9% Summary Operational and Financial Statistics LTM Gross Interest Expense $217 $609 $206 $577 FFO $955 $2,029 $888 $2,096 LTM Revenues $4,736 $13,325 $4,203 $10,311 LTM EBITDA $1,209 $2,956 $1,025 $2,528 LTM Net Income from Continuing Operations $363 $992 $323 $727 HoldCo Credit Rating Comparison:Peers With Higher Credit Ratings

  41. 2011 Forecast

  42. Highlights • Continued strengthening of earnings and key financial ratios • Distribution rate case outcomes reflected • Bonus depreciation adds $250 million to cash flows in 2011 alone; estimated $450 - $550 million in 2011 - 2013 • Increased transmission spending as Greater Springfield construction accelerates

  43. 2010 Actual and 2011 Projected Ratios Much Improved Outlook in April 2010 Outlook in April 2011

  44. 2011 Long-Term Debt Issuance Plans April 2011 Forecast April 2010 Forecast CL&P: $200 million PSNH: $210 million WMECO: $170 million Yankee Gas: $ 50 million Total: $630 million CL&P: $0 PSNH: $160 million WMECO: $100 million Yankee Gas: $0 Total: $260 million

  45. Appendix

  46. Stable Stable Slightly Negative Slightly Negative Unfavorable Favorable Unfavorable Unfavorable Unfavorable Favorable Favorable Favorable Strategic Risk Momentum Summary – March 2011

  47. Unfavorable Favorable Stable Stable Stable Slightly Positive Slightly Positive Unfavorable Unfavorable Favorable Favorable Unfavorable Unfavorable Favorable Favorable Strategic Risk Momentum Summary – March 2011

  48. Unfavorable Favorable Stable Slightly Negative Slightly Negative Unfavorable Unfavorable Unfavorable Favorable Favorable Favorable Slightly Positive Slightly Positive Strategic Risk Momentum Summary – March 2011 Unfavorable Favorable

  49. Unfavorable Favorable Stable Stable Stable Unfavorable Favorable Slightly Positive Slightly Positive Unfavorable Favorable Unfavorable Unfavorable Favorable Favorable Strategic Risk Momentum Summary – March 2011 Strategic Risk Momentum Summary – March 2011