Exhibit 99.1
NU LOGO Northeast P. O. Box 270
Utilities System Hartford, CT 06141-0270
107 Selden Street
Berlin, CT 06037
(860)-665-5000
www.nu.com
News Release
Contact: Jeffrey R. Kotkin
Office: (860) 665-5154
NU TO RESTATE SECOND AND THIRD QUARTER 2004 FINANCIAL STATEMENTS;
REVISES EARNINGS GUIDANCE FOR 2004
BERLIN, Connecticut, January 25, 2005-Northeast Utilities (NU-
NYSE) today announced that it will restate its second and third
quarter 2004 financial statements and is lowering its previous 2004
earnings guidance. These actions result from a determination that
mark-to-market accounting, rather than accrual accounting, is the
correct accounting for certain natural gas contracts established to
mitigate the risk of electricity purchased in anticipation of
winning certain levels of wholesale electric load in New England.
NU reported in November 2004 that its competitive marketing
subsidiary, Select Energy, Inc., had not won its expected level of
New England wholesale load for 2005. NU also said that adverse
movements in commodity prices had negatively affected positions
taken in anticipation of achieving targeted sales goals.
While NU is recording losses on those natural gas contracts in
2004, the electricity contracts Select Energy secured to serve the
anticipated wholesale load currently have significant value and are
expected to benefit 2005 results. Those electricity contracts will
remain on accrual accounting.
Under mark-to-market accounting, changes in the fair value of
the natural gas contracts are recorded in earnings currently,
rather than as the natural gas is delivered, as under accrual
accounting. NU has concluded that its use of accrual accounting
for those natural gas contracts in the second and third quarters of
2004 was not correct and will mark them to market when it restates
results from those quarters and reports year-end 2004 results.
As a result of the use of mark-to-market accounting, NU will
record an after-tax loss of $48.3 million, or $0.38 per share, in
2004 attributable to those contracts. Approximately $42 million of
that loss is attributable to 2005 contracts and $6 million is
associated with 2006 contracts. Reported second quarter 2004
earnings will be increased from $22.9 million to $24.0 million and
third quarter 2004 results will be reduced from previously reported
earnings of $39.1 million to a loss of $7.9 million. A $2.4
million loss on these contracts will be reflected in fourth quarter
earnings, resulting in losses on the contracts in 2004 of $48.3
million.
In addition to the changes in its competitive business
results, NU now expects that its regulated businesses will be at or
above their previously disclosed 2004 earnings range due to better
than anticipated fourth quarter results. NU also expects
previously estimated "Parent and Other" 2004 losses to increase as
a result of write-downs of certain non-core investments totaling
approximately $9 million, or 7 cents per share, for the full year.
As a result of these developments, NU today revised its 2004
earnings per share guidance as follows:
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Previous guidance Current guidance
----------------- ----------------
2004
Regulated $1.13-$1.19 $1.19-$1.24
Businesses
Competitive $0.23-$0.25 ($0.15-$0.10)
Businesses
Parent and ($0.11-$0.09) ($0.19-$0.17)
Other
2004 Total $1.25-$1.35 $0.85-$0.97
Because losses associated with the mark-to-market accounting
will be recognized in 2004, NU now believes that its 2005 earnings
could increase significantly, compared to its previous guidance,
subject to market volatility and other risks. However, Charles W.
Shivery, NU chairman, president, and chief executive officer, said,
"Our competitive businesses have been unable to sustain the kind of
financial performance we expect and, as a result, we are
undertaking a comprehensive review of each of our competitive
business lines in which the full range of alternative strategies
will be considered. We expect to complete this review within the
next several weeks and will provide new 2005 earnings guidance for
those businesses and for NU as a whole at that time."
Shivery added that NU expects its regulated businesses to earn
between $1.22 per share and $1.30 per share in 2005 and losses in
its "Parent and Other" category to total between $0.08 per share
and $0.13 per share in 2005. These ranges are unchanged from
previous guidance.
The application of mark-to-market accounting for these natural
gas contracts is not expected to have an impact on NU's cash flows
or dividend policy in 2005. The company obtained the approval of
the Audit Committee of the NU Board of Trustees and the concurrence
of its independent auditor, Deloitte & Touche LLP, in the
application of mark-to-market accounting and the decision to
restate the second and third quarter 2004 financial statements.
NU has approximately 129 million common shares outstanding.
It operates New England's largest energy delivery system, serving
approximately 2 million customers in Connecticut, New Hampshire and
Massachusetts.
This news release includes 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
Litigation Reform Act of 1995. In some cases the reader 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 are 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, changes in the ability to sell
electricity positions and close out natural gas positions at
anticipated margins, obtaining new contracts at anticipated volumes
and margins, 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 looking statements to reflect
developments or circumstances occurring after the statement is
made.
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