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 ar e 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-lo oking 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