Standard & Poor’s New York JANUARY 16, 2007

Standard & Poor’s

New YorkJANUARY 16, 2007

Energy / Growth / Leadership

2

Strategic Progress - Divestitures

Northeast Utilities

ElectricDistribution

CompetitiveRegulated

ElectricTransmission

RegulatedGeneration

GasDistribution

RetailSold 6/1/06

WholesaleNew England

ContractsDivested 12/31/05

Services5 of 6 Sold

GenerationSold 11/1/06

We are nearly complete transforming ourselves into a 100% regulated utilityWe are nearly complete transforming ourselves into a 100% regulated utility

3

Benefits Of Transformation

Focused our business model and strategy

Reduced our business risk and improved financial flexibility

Capitalized on increasing valuation of generation

Enhanced our earnings visibility

Increased our focus on regulated infrastructure capital investment to meet customers needs

Each reason provided a year ago has been validatedEach reason provided a year ago has been validated

We have:

4

How About Generation?

CL&P Owned about 5,500 MW before 1998-2002 restructuring Barred by state law from owning generation Sells output from old PURPA contracts into the market Bids out 100% of power and capacity needs

Fully recovers costs WMECO

Owned more than 1,000 MW before 1997-2001 restructuring Barred by state law from owning generation Bids out 100% of power and capacity needs

Fully recovers costs PSNH

Sold nuclear ownership (Seabrook, Millstone 3, VT Yankee), but kept all fossil, hydro generation

Now generates about 70 percent of customer needs; other 30 percent bought through long-term, short-term procurements

Generation charge fully tracks costs and generates 9.62% ROE

5

Rates Reflect Status Of Each State’s Market

1.338 1.338 0.79 1.33 1.905 1.6550.718 0.717

0.4261.062 0.475 0.475

2.754 2.786

0

2.867

3.164

0

2.695 2.695

9.46511.276

10.296

11.383

8.18 8.59

1.833

1.671

0 00.00

2.00

4.00

6.00

8.00

10.00

12.00

14.00

16.00

18.00

20.00

CL&P CL&P2007

WMECO WMECO2007

PSNH PSNH2007

FMCC

Energy

Distribution

Transmission

Other

cent

s/kw

h

Other includes C&LM, DSM, Stranded Costs (a.k.a. CTA, SCRC or Transition), Consumption Tax, SBC, and Renewables.

16.11

17.79

13.42

16.94

14.38

13.26

6

Overview of Regulated Businesses

Residential CommercialIndustrial/

OtherTotal

Distribution

Earnings

(9-months ending

9/30/06)

Transmission

Earnings

(9-months ending 9/30/06)

Total Earnings

(9/30/06)

CL&P(Connecticut)

1,086 101 7 1,194 $114.2 $34.0 $148.2

PSNH(New Hampshire)

418 70 3 491 $21.2 $6.7 $27.9

WMECO(Massachusetts)

187 17 2 206 $8.6 $2.9 $11.5

Yankee Gas(Connecticut)

174 22 2 198 $6.4 N/A $6.4

Total 1,865 210 14 2,089 $150.4 $43.6 $194.0

Number of retail customers in thousands as of 9/30/06 In millions of dollars

*Includes regulated generation

*

7

NU Has Moved Into A Strong Capital Investment Cycle

Need to upgrade transmission system, particularly in SW Connecticut Continued strong peak load growth Inadequate generation built in Connecticut New England generation construction frequently far from load centers

Need to upgrade distribution system Continued strong peak load growth Older system, particularly in urban, rural areas

8

Projected Distribution Capital Expenditures

$206$271 $260 $266 $270 $279

$105

$128 $134 $112 $128$148

$28

$34 $32$31

$31$31

$86

$62$42

$41$41

$41

$0

$100

$200

$300

$400

$500

$600

2006 2007 2008 2009 2010 2011

CL&P PSNH WMECO Yankee Gas

$ M

illio

ns

9

Projected Transmission Capital Expenditures

$420

$600

$517

$343

$231

$333

$87

$85

$37

$35

$6

$54

$45

$43

$42

$25

$17

$10

$0

$100

$200

$300

$400

$500

$600

$700

$800

2006 2007 2008 2009 2010 2011

CL&P PSNH WMECO

$ M

illio

ns

10

2007-2011: Capital Expenditures and Depreciation

$766

$880

$1,217$1,142

$890

$797

$896

$320$309$303$290$265$234$215

$0

$200

$400

$600

$800

$1,000

$1,200

$1,400

2005Actual

2006 Est. 2007 Est. 2008 Est. 2009 Est. 2010 Est. 2011 Est.

Regulated Capex (Incl. AFUDC) Depreciation

Significant capital spending in 2007-2008Significant capital spending in 2007-2008

*Includes approximately $18 million per year at corporate service companies

11

Projected Combined Rate Base

$1,072$1,776

$2,337 $2,531 $2,726 $2,995

$3,465

$3,979

$4,249$4,474

$4,711$4,909

$0

$1,000

$2,000

$3,000

$4,000

$5,000

$6,000

$7,000

$8,000

$9,000

2006 Est. 2007 Est. 2008 Est. 2009 Est. 2010 Est. 2011 Est.

Electric Transmission Regulated Distribution and Generation

Target Utility Capitalization Structure = 45% equity, 55% debtRecently FERC Authorized Transmission ROE = 11.4%-12.4%

Projected PUC Authorized Cost of Capital Distribution ROE = 9% -10%

$5,755

$7,005$6,586

$7,437

Rat

e B

ase

in M

illio

ns

Regulated Rate Base 2006-2011

CAGR of 12%

$4,537

$7,904

Supports EPS CAGR of 10-14%Supports EPS CAGR of 10-14%

Projected Distribution & Generation Rate Base

CAGR of 7%

Transmission Rate Base2006-2011

CAGR of 23%

12

Rate Base Composition

2005 Rate Base Composition

2011E Rate Base Composition

2005 Rate Base: $3.3 billion

2011E Rate Base: $7.9 billion

Rate Base: $605 million (Actual 2005)

’06-’11 Capex: $2.9 billion

Rate Base: $2.25 billion (Actual 2005)


Rate Base: $463 million (Actual 2005)


ElectricityTransmission

ElectricityDistribution & Generation

Gas LDC

Transmission to comprise much larger share of total rate baseTransmission to comprise much larger share of total rate base

18%

14%

68% TransmissionGasDist. & Reg. Generation

38%

9%

53%

TransmissionGasDist. & Reg. Generation

13

About Northeast Utilities Transmission…

Operating Company

Transmission Circuit Miles

Transmission Substations

Projected 12/31/06

Rate Base

($ Millions)

Projected 12/31/11

Rate Base

($ Millions)

CL&P 1,766 103 862 2,428

WMECO 489 36 76 245

PSNH 1,003 52 134 322

Total NU 3,258 191 1,072 2,995

Comparative Ranking of NU (miles)

• Largest in New England

• 4th largest in 11 northeast states

• Nearly 2.4 million retail customers

• About 280 miles of new transmission planned

14

The Next Five Years: Transmission Capital Expenditures

$0.00

$100.00

$200.00

$300.00

$400.00

$500.00

$600.00

$700.00

$800.00

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Other

SNETR

SW CT

Historic Forecast$

Mill

ions

Up To $2.4 Billion

• The Southern New England Transmission Reinforcement family of projects is becoming more defined.

• Over the next three years, a high level of capital spending is associated with projects that have already received siting approval.

$1,062 Million $1.1 Billion of major

CT projects in 2007-2011 forecast period; $1.65 billion

in total

SNETR family of projects estimated

at $710 million during the 2007-

2011 forecast period

15

Four Major SW Connecticut Projects – A $1.65 Billion Investment

SWCT improvements have been a top priority in each of ISO-NE’s last four regional transmission expansion plans. Our four major

projects there total about $1.65 billion in investment.

50% of CT Load

Bethel-Norwalk 345 kV Underground& Overhead$350 Million

21 miles 345kV (56% underground)


Completed October 2006 at a cost of $340 million Middletown-Norwalk 345 kV

Underground & Overhead$1,047 Million (NU Share)Glenbrook Cables

115 kV underground$183 Million

9 miles 115kV underground

Projected in-service date: 2008

Under contract – construction under way, 10% complete

Long Island Cable138 kV cross sound$72 Million (NU share)

11 miles 138kV submarine cable

Joint project with LIPA


Under contract – cable being manufactured



Joint project with United Illuminating


Construction under way, 15% complete

COMPLETE

COMPLETE

16

Status of Connecticut Transmission Infrastructure

Within Connecticut transmission constraints exist that limit the flow of power from external sources

Significant transmission enhancements are under construction in SW Connecticut to meet that area’s needs

Future projects are in the planning phase to address power flows into Connecticut

345-kV Lines

Norwalk-Stamford

Southwest Connecticut

Connecticut

Boundaries of Major Constraints

Power Moves into Connecticut Power Moves into Connecticut and SWCT from MA and RIand SWCT from MA and RI

345-kV Lines under construction

Percentage of Peak Load that Could Be Served by Transmission Imports

0%

20%

40%

60%

80%

100%

NH VT RI MA ME CT

With import capability of only 2,500 MW, CT

is the least interconnected state

in New England.

17

Southern New England Transmission Reinforcement Projects Are the Next Major Undertaking

Planning

Construction

Siting

20052005 2006 2007 2008 20092009 20102010 20112011 20122012 20132013

The SNETR projects with National Grid solve four area problems:

1. Interstate transfer capability

2. Connecticut East-West transfer capability

3. Springfield Reliability

4. New England East-West transfer capability2006 Activities:

• Complete planning studies

• Analyze routing options

2007 Activities:

• Begin siting process in Connecticut and Massachusetts

• ISO-NE technical approval

1

4

3

2

18

LUDLOW MILBURY

CARD

NORTHBLOOMFIELD

Rhode Island

Connecticut

Springfield

Interstate

FROSTBRIDGE

AGAWAM WEST FARNUM

KENT COUNTY

LAKE ROAD

We Have Selected the Southern New England Transmission Reinforcement Project Preferred Routes

The four components, identified to date, are:The four components, identified to date, are:

A Rhode Island Reliability Component

A CT East-West Reliability Component

A Springfield Reliability Component

An Interstate Reliability Component

Post-SNETR Import Capability is

expected to grow to 3600MW

Post-SNETR Import Capability is

expected to grow to 3600MW

19

Sound Progress On Two Largest Projects On Distribution/Generation Side

• Conversion of 50 MW coal unit to burn wood

• Dramatic reductions in mercury, NOx, SOx emissions

• Entered commercial operation 12/1/06

• Completed below $75 million budget

• No rate increase due to RECs, tax credits

• $108 million 1.2 bcf LNG

• Filled from pipeline or via LNG tanker truck

• On budget, on schedule

• Improve reliability

• Save customers money due to lower pipeline charges

20

2006 NU Transmission Project Performance Summary – Excellence, Execution

Project construction milestones were on-time and spending was on-budget

Capital spending of approximately $470 million in 2006

Plant-in-service totaling $390 million -- $10 million greater than budget

We have maintained excellent safety and environmental records

We have completed and energized the $340 million Bethel-Norwalk project as of October 12, $10 million under budget

We have completed and energized the new $29 million Killingly substation in northeast Connecticut, $3 million under budget

Completion of projects will result in significant cost savings for customers

21

Projected Uses

Financing The Growth: 2007

Projected Sources

• Cash from generation sale: $1 billion

• Regulated company long-term debt issuances: $600-$700 million

• Cash from operations: $500-$600 million

• Capital expenditures: $1.2 billion

• Taxes on generation sale: $450-$500 million

• Short-term debt reduction: $300-$400 million

• Dividends: $125 million

Cash from generation sale helps to comfortably fund requirementsCash from generation sale helps to comfortably fund requirements

22

Financing The Growth: 2007-2011

$2.5 BillionCash from Operations

$3 BillionNew Issuances, and Cash from Generation Sale

$5.5 BillionProjected Capital Expenditures

and Dividends

NU will meet its cash needs almost exclusively from internal sources and debt financings

NU will meet its cash needs almost exclusively from internal sources and debt financings

23

NU Undergoes Its Second Major Redeployment Of Capital In 8 Years

IN OUT

• Securitization: $2.1 billion

• Millstone sale: $1.2 billion

• CT and MA plant sales: $0.5 billion

• Seabrook sale: $0.3 billion

• Debt, preferred retirement: $1.3 billion

• IPP buyouts, buydowns: $1.1 billion

• Share repurchases: $0.4 billion

• Taxes on Millstone sale: $0.3 billion

OTHER

• Hydro assets “sold” to NGC

• Yankee Energy acquired in 2000 for NU shares, cash

• $263 million of debt remains outstanding

1999 - 2002

24

Obligations At Year-End (in milions)

FMBsTaxable

UnsecuredTax-

Exempt

Spent Nuclear

Fuel

Preferred Stock

Total

NU - $415 - - - $415

CL&P $870 -$425

($62 secured)$225 $115 $1,635

PSNH $100 -$405

(secured)- - $505

WMECO - $165$55

(unsecured)$55 - $275

Yankee Gas

$265 - - - - $265

Total $1,235 $580 $885 $280 $115 $3,095

**

*

* Private placements**Offset by trust account

*

25

Likely Issuances in 2007

CL&P

$500 million of FMBs ($300 in March)

WMECO:

$40 million of senior unsecured in second quarter

Yankee:

$35 million private placement in second quarter

PSNH:

$50 million of FMBs later in year

26

Main NU Contacts

David McHale CFO 860-665-5601 [email protected]

Jeff Kotkin VP – IR 860-665-5154 [email protected]

Randy Shoop Treasurer 860-665-3259 [email protected]

Patricia Cosgel Asst. Treasurer 860-665-5058 [email protected]

Bud Eckenroth Dir. Financial Policy 860-665-3693 [email protected]

Greg Osgood Dir. Financial Forecasting 860-665-5310 [email protected]

Don Haight Mgr. Financial Policy 860-665-5507 [email protected]

Barbara Nieman Investor Relations Spec. 860-665-3249 [email protected]

mailto:[email protected]








Standard & Poor’s New York JANUARY 16, 2007

Documents

Transcript of Standard & Poor’s New York JANUARY 16, 2007