Analyst Day October 5, 2012 Exhibit 99.1 |
2 NU Safe Harbor Provisions This presentation contains statements concerning NU’s expectations, beliefs, plans, objectives, goals, strategies, assumptions of future events, future financial performance or growth 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 or reader can identify these forward-looking statements through the use of words or phrases such as “estimate”, “expect”, “anticipate”, “intend”, “plan”, “project”, “believe”, “forecast”, “should”, “could”, and other similar expressions. Forward-looking statements are based on the current expectations, estimates, assumptions or projections of management and are not guarantees of future performance. These expectations, estimates, assumptions or projections may vary materially from actual results. Accordingly, any such statements are qualified in their entirety by reference to, and are accompanied by, the following important factors that could cause our actual results to differ materially from those contained in our forward-looking statements, including, but not limited to, actions or inaction of local, state and federal regulatory and taxing bodies; changes in business and economic conditions, including their impact on interest rates, bad debt expense and demand for our products and services; changes in weather patterns; changes in laws, regulations or regulatory policy; changes in levels and timing of capital expenditures; disruptions in the capital markets or other events that make our access to necessary capital more difficult or costly; developments in legal or public policy doctrines; technological developments; changes in accounting standards and financial reporting regulations; actions of rating agencies; the outcome of our merger; and other presently unknown or unforeseen factors. Other risk factors are detailed in our reports filed with the Securities and Exchange Commission (SEC). Any forward-looking statement speaks only as of the date on which such statement is made, and 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 or to reflect the occurrence of unanticipated events. All per share amounts in this presentation are reported on a diluted basis. The only common equity securities that are publicly traded are common shares of NU parent. The earnings and EPS of each business do not represent a direct legal interest in the assets and liabilities allocated to such business, but rather represent a direct interest in NU's assets and liabilities as a whole. EPS by business is a non- GAAP (not determined using generally accepted accounting principles) measure that is calculated by dividing the net income or loss attributable to controlling interests of each business by the weighted average diluted NU parent common shares outstanding for the period. In addition, the second quarter and first half 2012 earnings and EPS excluding certain charges related to the April 10, 2012 closing of the merger between NU and NSTAR are non-GAAP financial measures. Management uses these non-GAAP financial measures to evaluate earnings results and to provide details of earnings results and guidance by business and to more fully compare and explain our second quarter and first half 2012 and 2011 results without including the impact of the non-recurring merger-related costs. Management believes that this measurement is useful to investors to evaluate the actual and projected financial performance and contribution of NU’s businesses. Non-GAAP financial measures should not be considered as alternatives to NU consolidated net income attributable to controlling interests or EPS determined in accordance with GAAP as indicators of NU’s operating performance. |
Welcome to Boston! 3 3 |
Today’s Agenda 4 David McHale Merger Integration Executive Vice President & CAO Redefining the Customer Experience Jim Judge NU’s Attractive Investment Thesis Executive Vice President & CFO Financial Outlook Lee Olivier Transmission Development Initiatives Executive Vice President & COO Region’s Increasing Demand for Natural Gas 4 Tom May President & CEO The New NU |
Excellent, Timely Investment Opportunity with a Unique Value Proposition • Diversified across 4 regulatory jurisdictions • Strong financial condition; among the highest credit ratings in the industry • Low risk profile • $12 billion market cap enhances liquidity • Strong, experienced management • Top-tier record of producing shareholder value Low Payout Ratio/Strong Dividend Growth Outlook Significant Transmission & Gas Opportunities Low Near-Term Rate Case Risk No Required Equity Issuances Attractive EPS Growth Potential 5 |
“Crown Jewel” of a Service Territory Seaport District Boston, MA Back Bay Boston, MA Cambridge, MA Hospital Expansion Stamford, CT The Summer House Stamford, CT 6 |
Boston’s Building Boom 7 |
A Great Management Team that Delivers ... Utility Index S&P 500 2001 2011 $500 $1,000 $1,500 $2,000 $2,500 $3,000 $3,500 NU 8 NSTAR |
Creating Superior Value 9 Redefining the Customer Service Model Growing the Transmission and Gas Businesses |
“One Company” Delivering Great Service Engaged Workforce 10 |
Reaching out to regulators and employees … 11 Walking the Talk … |
12 Very Strong Financial Condition Number of Issuers Utilities Credit Ratings Distribution (1) 12 1 10 13 9 3 0 4 8 12 16 A A- BBB+ BBB BBB- Below Investment Grade 8 1. Source: Standard & Poor’s, “Industry Report Card: U.S. Regulated Electric Utilities’ Credit Quality Remains Stable” (3/28/12). Long-Term Rating of U.S. Investor-Owned Regulated Electric Utilities, excluding subsidiaries. NU Ratings as of April 5, 2012. |
1994 2012 2 for 1 split $10 Stock Price $140 of value A Leadership that Delivers Significant Shareholder Value • Dividend Increased Fourteen Consecutive Years • Total Return #1 in the Industry Dividends Stock Price Proud of the Past and Optimistic About Our Future NSTAR 13 |
14 Integration and Customer Service Review David McHale Executive Vice President & Chief Administrative Officer |
Topics • Merger Integration • Redefining the Customer Experience • Connecticut Energy Policy 15 |
Merger Integration • Integration is more than just cost savings . . . it’s about bringing together two companies, two cultures and two leadership teams to create one successful company • Realignment of the organization, the people and resources to fully commit towards improving the customer experience while reducing costs • Early indications are that NU is well positioned to not only meet the original strategic intent of the merger, but to outperform expectations • Merger related savings support the company’s O&M targets – achieve a declining cost structure through the 2015 planning horizon 16 |
Merger Integration Priorities Support the company’s strategic, financial and operational objectives through two paths: 1. Implement the one company model Transition to a centralized corporate service delivery model Deploy resources geographically to support the businesses Drive consistency and standardization throughout the company 2. Identify merger integration initiatives Organizational restructuring Non-labor integration opportunities 17 |
Merger Integration Priorities The “One Company” Model • • • • • 18 Centralize corporate relations, community relations and economic development to more effectively support customers and communities Align electricity, natural gas, fuel and renewable procurement under one energy supply organization Develop enterprise-wide information technology solutions and investments through one organization Implement a fully integrated supply chain organization Improve customer service through a new customer care organization structured as a “meter to cash” model |
Merger Integration Priorities Merger integration initiatives 19 Category Activity Staffing Levels Achieving reductions in staff, vendors and contractors Information Technology Consolidating IT infrastructure, data storage, data centers, security Implementing enterprise-wide application investments across major functional platforms, including finance, HR, operations, customer service Supply Chain Achieved significant savings in consolidated vendor and supplier contracts, negotiating most favorable terms Focus on improving inventory turns, inventory reduction where appropriate, standardization of equipment purchases and stocking processes Customer Care Comprehensive assessment of the entire “meter to cash” process Operations Initiated a complete review of the operating company processes to drive performance improvement, standardization and cost reduction |
Merger Cost Savings: Initial Assessment Estimated Cost Savings (Source: 2011 Net Benefit Analysis $ Millions (Gross Savings) Labor Administrative Advertising Benefits Insurance IT Professional Services Shareholder Services Vehicles Association Dues Director Fees Credit Lines Procurement Contract Services Ten Year Savings $948 million gross, $784 million net 20 140 120 100 80 60 20 0 40 2012 2013 2014 2015 2016 2018 2019 2020 2021 |
Improving the Customer Experience • A key tenet of the merger is to improve the customer experience while lowering costs; it’s the linchpin of this company’s success • Recent survey data indicates NU has the highest customer satisfaction ratings among all mid-sized Eastern gas distribution companies • We will re-define the customer experience in the electric distribution business • Increasing the reliability of our service • Increasing situational awareness and customer information during service interruptions • Providing an excellent customer call center experience • Developing an increasing array of customer solutions including energy efficiency (EE), financing options for EE and natural gas conversions, payment and communication options 21 |
NSTAR Gas, Yankee Gas Have Superior Customer Favorability Ratings 1. NSTAR Gas 2. Yankee Gas 3. South Jersey Gas 4. Columbia Gas of Pennsylvania 5. Elizabethtown Gas 6. Rochester Gas & Electric 7. Columbia Gas of Massachusetts 8. NYSEG 9. Peoples Natural Gas 10. Equitable Gas 22 Source: 2012 JD Power Gas Utility Residential Customer Satisfaction Survey for Mid-Size Eastern Companies. |
New England Electric and Natural Gas Customers Benefiting From Lower-Priced, More Plentiful Gas 23 Source Data: ISO-NE New England Energy Production |
Natural Gas Prices Have Reduced New England’s Wholesale Electricity Costs By More Than 50% 6.06 6.76 8.08 4.29 5.10 4.80 3.42 Average Cost (cents/kWh) ISO-NE Wholesale Market Costs, Energy Component New England Wholesale 24 $0 $3 $6 $9 $12 2006 2007 2008 2009 2010 2011 2012 $0 $3 $6 $9 $12 Electricity Value Natural Gas (Henry Hub) |
Lower Wholesale Prices and Lower Congestion Costs Have Significantly Reduced Our Retail Electric Bills Since 2008 25 19.22 14.87 CL&P NSTAR Electric 19.51 14.20 2008 Bill Today’s Bill Generation/Supply Transmission Distribution Other Today’s Bill 2008 Bill 22.6% 27.2% |
Connecticut Energy Policy Reflects Today’s Marketplace and Enhancement of Previous Initiatives • 2011Connecticut legislation required the Department of Energy and Environmental Protection (DEEP) to prepare a comprehensive energy strategy (CES) in 2012 and every three years thereafter • The strategy will develop policy and recommendations in 5 focus areas: • Emphasis placed on 80% carbon reduction by 2050 per the 2008 Connecticut Global Warming Solutions Act • Expect the plan to support the State’s goal of “cleaner, cheaper, more reliable” energy • DEEP initiated the study with a broad-based stakeholder process in April 2012; draft study to be issued shortly Transportation Buildings Industry Electricity Natural Gas 26 |
The Connecticut Comprehensive Energy Strategy Central to the NU strategy, a number of themes are emerging: The Role of Energy Efficiency The Feasibility of Natural Gas Expansion Renewable Targets and Clean Energy Natural gas as a competitive and cleaner fuel is viewed as critical element in the comprehensive plan Commercial Heating and Industrial Process Transportation Electricity Generation Home Heating Fuel 27 |
Lower Prices, Low Penetration Result in Significant Natural Gas Expansion Opportunities Key Policy Issues Incentives to customers to induce conversion, incentives to the utility to incent investment, recovery of capital, financing approaches 72% 53% 48% 47% 31% 0% 20% 40% 60% 80% CT & MA Residential Gas Heating Penetration vs. Nearby States CT NJ NY RI MA 50% 31% 15% 4% 0% 20% 40% 60% CT Residential Market Penetration by Heating Source Heating Oil #2 Natural Gas Electric Heating Propane 28 |
Summary • We are well positioned to capture tremendous value resulting from the merger • Early indications point to significant cost reduction opportunities which are supportive of the company’s desired earnings growth • Improving the customer experience is critical to the success of this company and the recent customer satisfaction ratings for gas LDC prove we know how to delight our customers • The new energy policy emerging in Connecticut creates a supportive environment for growth of our gas business, provides for additional customer solutions and demonstrates the state’s willingness to engage in constructive energy policy 29 |
30 Operations Review Lee Olivier Executive Vice President & Chief Operating Officer |
NU Transmission Shows Continued Excellence in Planning, Siting, Building and Operating High-Voltage Grid • Since 2001, NU has sited and built highly complex and varied transmission projects in densely populated, congested areas High-voltage, long distance underground (Middletown-Norwalk) Undersea (Long Island Replacement Cable) Combination overhead/underground in challenging communities (Bethel- Norwalk, Middletown-Norwalk) Urbanized underground (Glenbrook Cables) Densely populated, multi-state (Greater Springfield) • Projects modified to reflect community and regulatory concerns; still built on or ahead of schedule and on or below budget • NU’s transmission program has achieved national recognition as an industry leader and for excellence in execution • Significant value added to system reliability and the environment 31 |
The Greater Springfield Reliability Project – A Case Study In NU’s Transmission Development Expertise 32 Greater Springfield Reliability Project $718M • • • GSRP: Massive Scale and Scope • • • • Under Construction Continued strong relationships and frequent communications with affected communities Projected in-service: late 2013 Total projected NU cost: $718 million Project 83% complete as of 9/15/12 13 substations and switching stations (new/rebuilt) 38 linear miles spanning 2 states and 8 towns 100 transmission circuit miles 600 structures |
NEEWS: Interstate Reliability Project 33 Interstate Reliability Project $218M • Joint project with National Grid (NU in CT; NGrid in MA & RI) • All major permit applications filed • CT siting hearings are complete with decision in early 2013 • Projected commencement of construction: late 2013/early 2014 • Projected in-service: late 2015 • Total projected NU cost: $218 million |
NEEWS: Greater Hartford Central Connecticut Project (GHCC) 34 • The 345-kV “CCRP” was designed to address east-to-west power flow constraints across CT • As expected, ISO has issued its need reassessment for CCRP, expanding the study to include other electricity connected areas inside CT • ISO-NE presented the preliminary need results of this GHCC study to the Planning Advisory Committee in August 2012 • The results show severe thermal overloads and voltage violations in each of the four study areas • 345-kV and 115-kV solutions are being considered to correct these reliability violations • ISO process expected to provide preferred transmission solutions in 2013 • The previously estimated $301M cost, with a 2017 in-service date, is a good placeholder for the GHCC solutions |
Northern Pass Transmission Project Overview • 1,200 MW clean energy • $1.1 billion HVDC line, terminal and AC facilities • Participant funded structure; no impact on the Regional Transmission Rate • Uses HVDC technology at +/- 300-kV with AC/DC converters in Quebec and NH • AC radial 345-kV line to connect to the New England bulk power grid • Approximately 180 miles of new transmission (140 HVDC, 40 AC) • Provides significant benefits to the region 1. Energy value through reduced wholesale market prices - $200-$300 million per year for New England 2. Environmental value through carbon emissions reductions – up to 5 million tons of CO2 reduction 3. Economic value through construction jobs and new tax base – 1,200 jobs and $25 million per year in property taxes Des Cantons (Quebec) Franklin (New Hampshire) Deerfield (New Hampshire) HVDC Line HVDC Line terminations 345-kV AC line termination 345-kV AC Line 35 |
Transmission’s Projected Capital Investment Has Grown by $700M to $3.7B from Last Year’s Forecast Successful completion of SWCT projects Northern Pass HVDC Line to Canada Historic Forecast $3.7 Billion $3.5 Billion NEEWS projects progressing US portion estimated at $1.1B; $1.04B in forecast period NU’s share of NEEWS project estimated at $1.27B; $569M in forecast period SWCT projects total $1.6 billion Budget $718M $1.47 Billion of additional forecasted reliability projects Greater Boston Reliability $353M SEMA Cape Cod $149M Boston Network Improvements $126M 36 |
2013-2017 NU Transmission Capital Program Other Projects – In Millions CL&P WMECO PSNH Total $1.47 Billion High confidence level in “Other Projects,” 78% in RSP as required. Breakdown of Other Projects: • 78% ($1.14B) - in RSP • 22% ($328M) - not yet in RSP NSTAR 1990 Line Structure Replacement 62.0 Obsolete Equipment Replacements 69.6 NH 10-Yr Study Reliability Projects 231.2 Pittsfield / Greenfield Area Solution 109.0 Greater Hartford / Central CT 53.2 Overhead Infrastructure 101.6 Scobie Tewksbury Line 40.1 West Springfield SS Rebuild 48.2 Stamford Underground Cable 44.6 New Electric Ave SS and T Interconnect 65.7 Manchester Area Solution 34.4 115 kV Hollow Core Insulator Repl 12.8 Southwest CT Upgrades 30.0 New East Boston SS 42.2 Nashua Area Solution 28.4 OPGW Communications Projects 7.3 Obsolete Relay Replacements 26.9 New Seafood Way SS 39.6 New Peaslee SS & 115kV Line 24.1 Obsolete Relay Replacements 6.1 115 kV Hollow Core Insulator Repl 19.0 Baker - Newton Oil Return Line 31.9 Deerfield 2nd Auto Transformer 18.0 SCADA Upgrades 1.9 Replace Montville 345kV Autos (2) 18.7 Underground Infrastructure 30.4 Mane Power Reliability 15.0 Additional WMECO Reliability Projects 25.4 South Norwalk Electric Works SS 13.0 New Control Houses - K Street, Brighton, 21.1 115kV NERC Alert 9.0 OPGW Communications Projects 9.0 Mystic New Pease Substation 6.0 Vehicle Purchases 7.1 BPS Work - Medway, Leland Street 21.1 OPGW Communications Projects 3.3 Obsolete Equipment Repl Prgm. 5.2 Additional NSTAR Reliabiilty Projects 69.6 Additional PSNH Reliabiilty Projects 37.7 SCADA Upgrades 2.0 Additional CL&P Reliabiilty Projects 26.2 316.9 492.8 447.2 210.7 Total: $1.468 Billion 37 |
NU Electric Distribution: Improving Reliability and Customer Service Under Fixed Rates • Strong 2012 reliability across all four companies • Implement synergies to improve customer service, lower costs • Operate successfully under multi-year fixed rate plans • Implement best practices in emergency preparedness and response • Work closely with states to achieve their energy policy goals 38 |
Emergency Preparedness a Critical Focus in CT • CL&P demonstrated strong performance in the Governor’s statewide emergency exercise • Received positive feedback from municipalities, the administration and key state agencies • Created robust emergency preparedness organizational structure • Five-year period, 2013-2017 • PURA hearings planned for late October • PURA final decision expected by year end • Majority of investment will be spent on routine and enhanced tree trimming; remainder invested in structural and electrical hardening of our system • Costs, return on investment to be recovered through new tracking mechanism 39 • Continuing to make significant steps to improve emergency preparedness and response • $300 million distribution resiliency program filed with CT Public Utilities Regulatory Authority (PURA) |
Gas and Oil Market Dynamics Provide Expansion Opportunity for NU and Benefits to Customers and States 40 Opportunity • • • • Economic impact Energy independence Environmental benefits Energy efficiency Business competitiveness Job creation $1,200 to $2,500 savings per year for an average customer Benefits to Customers and States Shale resources in close proximity of Northeast markets Natural gas prices expected to remain disconnected from oil New England unique due to its high reliance on imported heating oil NU owns second largest natural gas distribution system in New England (480,000 customers) |
Customer Growth Has Picked Up for NU’s Gas Business NU Gas Business – NSTAR, Yankee Gas 2007-2012 Annual Customer Additions (Conversions and new construction) 41 Economic downturn Natural gas prices decreasing |
NU’s Gas Business Could Be Significantly Expanded 42 NU Gas Business – NSTAR, Yankee Gas 2013-2022 Annual Customer Additions Projections Base Growth Projection 74,000 new customers 15% customer growth 2012 to 2022 Potential High Growth Projection 89,000 incremental new customers 33% total customer base growth 2012 to 2022 • ~$40M capex/year • No regulatory changes • ~$100M incremental capex/year • Enabling regulatory changes |
Our Capital Plan Continues to Provide Significant Value for Customers, Shareholders and the Environment • The transmission system in New England still has opportunities for improvements to reliability and congestion • A portfolio of smaller, more localized reliability projects that connect to renewable sources will continue to provide investment opportunities • Our transmission footprint and geographic position relative to New England load centers make us well positioned to capitalize on those opportunities • Gas and oil market dynamics are providing significant expansion opportunities for NU’s gas business; as well as benefits to customers and the states of CT and MA 43 |
44 Financial Review Jim Judge Executive Vice President & Chief Financial Officer |
Well Positioned for Success 45 Experienced Management Team Multi-Year Rate Agreements Focused on Improved Reliability and Customer Service Strong Financial Condition with Premium Growth |
Outline A Great Platform for Future Success • Regulatory and business diversity • Strong financial condition • Rate certainty • Experienced management team Regulatory Updates • States • FERC Financial Expectations • Key assumptions • Interest savings • Projections (2012, 2013) • Dividend growth Wrap-up 46 |
47 Regulatory and Business Segment Diversity Rate Base By State / Federal Rate Base By Business Combined 2011 Rate Base: $12.4 billion 47 |
48 Very Strong Ratings Rank Highly in the Industry Utilities Credit Ratings Distribution (1) 48 1. Wisconsin Energy 2. Northeast Utilities 3. Con Edison 4. National Grid Holdings 5. Xcel Energy 6. Integrys 7. Dominion 8. NextEra 1. Source: Standard & Poor’s, “Industry Report Card: U.S. Regulated Electric Utilities’ Credit Quality Remains Stable” (3/28/12). Long-Term Rating of U.S. Investor-Owned Regulated Electric Utilities, excluding subsidiaries. NU Ratings as of April 5, 2012. |
The Regulatory Environment: NU Business Segments Have a High Level of Rate Certainty Distribution NSTAR Electric Rates frozen through 12/31/15; reconciling adjustments continue to operate NSTAR Gas WMECO CL&P Rates frozen through 11/30/14; reconciling adjustments continue to operate Yankee Gas $7M rate increase took effect 7/1/12 PSNH Multi-year rate plan through 6/30/15. Increases of $7M took effect 7/1/12, and another $10M on 7/1/13 anticipated Transmission Fully reconciling rates – no general rate cases Generation PSNH Fully reconciling rates – no general rate cases WMECO (solar) 49 |
50 Total Shareholder Return Outperformed All Benchmarks 5-Year 10-Year 15-Year NSTAR 68.9% 222.7% 597.0% NU 51.4% 185.6% 313.3% EEI Index 22.8% 122.6% 254.8% S&P 500 -1.3% 33.3% 121.2% Cumulative Total Return Periods Ended December 31, 2011 |
Complementary “Best-In-Class” Expertise • NU is a leader in transmission development, siting, construction and operations • NSTAR’s reliability and customer service results are consistently in top quartile/decile • NSTAR Gas and Yankee Gas rated 1 and 2 by J.D. Power in recent survey of Eastern Region – Midsize Category • Customers benefit from improved service and cost efficiencies 51 51 st nd |
Massachusetts Settlement Agreements – Key Provisions MA Attorney General and DOER • One-time $21M rate credit allocated among NSTAR Electric, NSTAR Gas and WMECO • Distribution rate freezes for all three companies until 2016 • Excludes current reconciling tariffs, and exogenous costs provision included • Recovery of lost base revenues (NSTAR Electric) • Storm cost recovery following prudence review • NSTAR Electric – To be recovered over 5 years commencing 1/1/14 • WMECO – Follow storm recovery process approval in January 2011 rate decision • Safety and infrastructure improvement program to continue, up to $15M (NSTAR Electric) • Amortization of merger-related costs (for rate-making) over 10 years • Executive retention and change of control costs excluded MA Department of Energy Resources (DOER) • NSTAR Electric 15-year contract for energy related to 129 MW (27.5%) of Cape Wind Project • Recoverable through reconciling tariff • NSTAR Electric and WMECO target 2.5% energy efficiency savings in 2013 – 2015 • NSTAR Electric pursues 10-year solar contracts for up to 10 MW (Maximum: 5 MW/contract) • NSTAR Electric will have electric vehicle pilot program collaboration with DOER • Enhanced cost reporting requirements and rate base audit 52 |
53 Connecticut Settlement Agreement – Key Provisions CT Attorney General, CT Office of Consumer Counsel • One-time $25M rate credit for CL&P customers • CL&P base distribution rate freeze until December 1, 2014 • Exogenous events provision included • Reconciling provisions continue • $15M non-recoverable payment to fund state energy initiatives • $40M reduction in maximum level of recoverable storm costs • $300M total additional investment in “system resiliency” over multiple years • Recovery at weighted average cost of capital through rate mechanism • Recovery capped at $25M during fixed rate period |
Additional State Regulatory Proceedings PSNH Clean Air Project prudence review • $422M project completed in June 2012 • Excellent performance since scrubber began operating • Supportive report in September 2012 from NHPUC consultant • Hearings in January 2013 and decision expected in first half of 2013 • Currently recovering about 2/3 of equity return and operating expenses and deferring remainder CL&P recovery of approximately $290M of 2011 storm expenses • Filing expected within the next few months • Merger settlement requires CL&P to forego recovery of $40M and to recover allowed costs between 12/1/14 and 11/30/20 54 |
55 Review of FERC-Approved Transmission ROEs 10.00% 10.50% 11.00% 11.50% 12.00% 12.50% 13.00% 13.50% Local Network Service Regional Network Service Base Northern Pass 2005-2008 Regional Projects NEEWS M-N Underground NU’s Local Network Service Tariff ROE (this is the New England base ROE that is subject of 9/30/11 complaint proceeding at FERC) NE RTO Incentive adder of 50 basis points on regional assets ISO-NE Planned Regional projects in-service before 1/1/09 (D.C. Circuit Court rejected appeal on 1/29/10) Middletown-Norwalk advanced technology adder of 46 basis points for underground cable system 125 basis point NEEWS incentive (request for rehearing denied by FERC on 6/28/11) 142 basis point Northern Pass incentive (request for rehearing denied by FERC on 8/5/11) 11.14% 12.64% 12.89% 13.10% 12.56% 11.64% |
Transmission Update • $700M of additional transmission projects • About $2B of equity invested in transmission business expected to grow to $3.5B by 2017 • FERC committed to incentives for needed infrastructure investments 56 56 |
Key Assumptions Through 2015 57 Electric sales: Annual growth of approximately 0.5% - 1.0% Natural gas sales: Weather-normalized annual growth of 1%-2% Impact of a return to normal weather for 2013 adds approximately 7% to sales O&M: Annual decreases of approximately 3% Cost savings more than offset wage increases and inflation Reported 2012 annualized O&M estimated at about $1.6 billion |
Merger Has Enhanced Opportunities for Financing Savings • NSTAR commercial paper program expanded to NU in July • Effectively lowered short-term borrowing costs on $700M by 150 basis points • Renegotiation of $1.6B of bank lines also lowered revolver fees 58 • NSTAR Electric is refinancing $400M of senior unsecured debt this month. Indicative rate would produce $9M of annual savings • NU Parent has $250 million of 5-year 5.65% notes maturing June 1, 2013. Indicative rate would produce $9M of annual savings • $170M of CL&P and WMECO tax- exempt was called effective October 1, 2012. Annual savings of $7M 58 SHORT-TERM Annual Interest/Fee Annual Interest/Fee Savings of Approximately Savings of Approximately $10 Million $10 Million Annual Interest Savings of Annual Interest Savings of Additional $25 Million Additional $25 Million LONG-TERM |
Projected 2012 Recurring EPS $2.25 - $2.30 Major Drivers vs. 2011 • NSTAR earnings • Higher transmission rate base • Lower interest costs • Initial cost savings • PSNH, Yankee Gas distribution rate increases • Higher share count • Additional emergency preparedness expense at CL&P • Higher untracked pension, property taxes and depreciation costs 59 |
Projected EPS Range for 2013 $2.40 - $2.60 • Normal weather • Lower interest costs • Additional transmission rate base • PSNH, Yankee Gas distribution rate increases • Cost savings • Additional PSNH generation return • Higher depreciation and property tax expense Major Drivers vs. 2012 60 |
EPS Growth Beyond 2013 Major Drivers 61 Long-term 6% - 9% CAGR off of 2012 Long-term 6% - 9% CAGR off of 2012 • Continued investment in transmission reliability projects, including NEEWS • Northern Pass Transmission • Increase in gas conversions • Increased cost savings • Higher property tax and depreciation expense |
Dividend Growth In-Line with Earnings Growth 62 2009 2010 Q1 2012 2011 Q2/Q3 2012 62 $1.372 $1.175 $1.10 $1.025 $0.95 |
63 Additional Upside Opportunities Not Reflected in Projections • Additional natural gas expansion investments • Additional transmission investments • Favorable CT energy efficiency/ energy policy outcomes • Accelerated economic recovery |
Today’s Key Takeaways…. • 6% - 9% projected long-term growth rate exceeds peers • Transmission capital spending increases $700 million from previous forecast • Significant interest savings • Top tier financial condition • Strong management team that delivers 64 |
Q & A 65 |
Appendix 66 |
Schedule for New England Base ROE Complaint 67 Complainants’ Case Filed Transmission Owners Case Filed 10/1 11/20 FERC Staff Complainants’ Rebuttal Case Filed Updated ROE Analyses Due Hearings Start Initial Decision From Judge 1/18 4/17 5/6 9/10 2/27 FERC Decision Expected Possible Requests for Rehearing |
Near Term Upside: Record Mild Weather in 2011-2012 Reduced Our Gas Delivery Margins by $30 Million 4,529 5,579 5,151 5,682 5,318 5,179 5,130 5,545 5,579 5,876 4,726 5,680 3,000 3,500 4,000 4,500 5,000 5,500 6,000 6,500 2000 - 2001 2001 - 2002 2002 - 2003 2003 - 2004 2004 - 2005 2005 - 2006 2006 - 2007 2007 - 2008 2008 - 2009 2009 - 2010 2010 - 2011 2011 - 2012 Winter Season Heating Degree Days ___________________________ Source: Haver Analytics. 1. Winter includes October through March of each season. Avg.: 5,331 68 2000 – Present Winter Heating Degree Days (1) |
Transmission Rate Base Growth Projections 69 $3,823 $4,613 $4,214 $4,991 $5,424 $6,636 $6,811 10% CAGR |
Projected Distribution/Generation Capital Expenditures 70 $889 |
Total Projected Capital Expenditures 71 $1,893 $1,711 $1,600 $1,870 Transmission Electric & Gas Distribution and Generation (including CL&P resiliency) Other, Primarily IT |
Projected Rate Base Growth - 2015 72 Projected Combined 2015 Rate Base: $15.6 billion Rate Base By Business |