NU Reports Strong First Quarter Results

BERLIN, Conn., May 1 /PRNewswire-FirstCall/ -- Northeast Utilities today reported first quarter 2008 earnings of $58.4 million, or $0.38 per share, compared with earnings of $75.1 million, or $0.49 per share, in the first quarter of 2007. Results for 2008 include an after-tax charge of $29.8 million, or $0.19 per share, associated with the settlement of 2001 litigation with Consolidated Edison, Inc. Excluding that charge, NU first quarter 2008 earnings were $88.2 million, or $0.57 per share(1).

(Logo: http://www.newscom.com/cgi-bin/prnh/20060728/NORTHEASTUTILOGO )

Earnings at NU's regulated transmission, distribution and generation segments totaled $86.3 million in the first quarter of 2008, compared with $64.1 million in the same period of 2007.

Charles W. Shivery, NU chairman, president, and chief executive officer, attributed the improved regulated segment results primarily to the company's continued investment in its regulated transmission and distribution infrastructure. "The continued successful execution of our construction program, where we invested more than $300 million in the first quarter of 2008 alone, keeps improving the reliability of the region's energy infrastructure," Shivery said.

Shivery provided the following update on three major infrastructure projects now under construction in southwest Connecticut:

-- The Connecticut Light and Power Company's (CL&P) $1.05 billion investment in a new 69-mile, 345-kV line from Middletown, Connecticut to Norwalk, Connecticut is approximately 79 percent complete. Shivery said CL&P continues to make significant progress on the line and now expects to complete the project in early 2009, rather than mid-2009, as previously projected. -- CL&P's nine-mile, $223 million, 115-kV Glenbrook Cables project between Norwalk and Stamford, Connecticut is approximately 79 percent complete and expected to enter service by the end of 2008. -- CL&P's $72 million share of an 11-mile undersea replacement cable between Norwalk, Connecticut and Northport, Long Island is ahead of schedule and approximately 85 percent complete, and the company continues to expect it to be energized in the second half of 2008.

In the first quarter of 2008, NU's capital expenditures totaled $305.6 million, compared with $221.4 million in the first quarter of 2007. NU continues to project capital expenditures of approximately $1.3 billion in 2008.

Shivery said NU continues to identify solutions to New England's long-term energy and environmental challenges. NU is working with ISO-New England to refine the design criteria of its next series of transmission projects-the New England East-West 345-kV and 115-kV Overhead project and the 115-kv Springfield Underground Cables project-and expects to provide updated cost estimates later this quarter and to file additional state siting applications later this year.

NU also is evaluating building a new high-voltage transmission loop in northern New Hampshire to support the addition of new wind and biomass generation, along with other upgrades to the New England transmission system. NU is working with others on the best configuration and termination points for a new 660-MW undersea DC tie that could run from Newington, New Hampshire to the Boston area. Additionally, the company has discussed a possible 1,200-1500 MW overhead DC tie-line from Quebec to central New Hampshire.

As our next step in the process of identifying solutions to the region's energy and environmental needs, on March 31, 2008, NU formally asked ISO-New England to study potential increases in the north-south high voltage power transfer capacity from New Hampshire into Massachusetts to deliver power from additional renewable and low-carbon emitting resources in northern New England and Canada to southern New England. NU requested that ISO-New England analyze the best methods of increasing that capability by 1,500-2,500 MW. Shivery said investment in these potential projects is not reflected in the company's 2008-2012, $3 billion transmission capital program.

Regulated company results

NU's transmission earnings were $32.5 million in the first quarter of 2008, compared with $15.9 million in the first quarter of 2007. Shivery said the improved results primarily reflected a significantly increased level of investment in NU's transmission system. The 2008 results also included net income of approximately $3.5 million associated with an order on rehearing issued March 24, 2008 by the Federal Energy Regulatory Commission concerning the authorized return on equity (ROE) for New England electric transmission owners. The order on rehearing increased the base ROE by 20 basis points, retroactive to February 2005.

CL&P's electric distribution earnings were $18.9 million in the first quarter of 2008, compared with $20.6 million in the first quarter of 2007. Higher operation, amortization, depreciation and interest expenses and lower sales in the quarter were partially offset by a $77.8 million annualized distribution rate increase that became effective February 1, 2008. CL&P's retail sales in the first quarter of 2008 were down 2.3 percent from same period of 2007, 1.6 percent lower on a weather-adjusted basis.

Public Service Company of New Hampshire's (PSNH) distribution and generation earnings were $11.5 million in the first quarter of 2008, compared with $8.1 million in the first quarter of 2007. The improved results were primarily due to distribution rate increases that took effect July 1, 2007 and January 1, 2008. PSNH's first-quarter 2008 retail sales were essentially flat compared with 2007 on both an actual and weather-adjusted basis.

WMECO distribution earnings were $4.8 million in the first quarter of 2008, compared with $5.9 million in the first quarter of 2007. A distribution rate change that took effect January 1, 2008 was more than offset by higher operating expenses and a 2.2 percent decline in retail sales, down 1.6 percent on a weather-adjusted basis.

Overall, the NU system's retail electric sales fell 1.8 percent in the first quarter of 2008, compared with the first quarter of 2007. Sales were down 1.2 percent on a weather-adjusted basis.

Yankee Gas earned $18.6 million in the first quarter of 2008, compared with earnings of $13.6 million in the first quarter of 2007. The improved results were due primarily to rate changes effective in the summer of 2007 when Yankee Gas's new liquefied natural gas facility in Waterbury, Connecticut entered service. Those factors were partially offset by higher operating costs and milder weather in 2008, which led to a 4.9 percent decline in firm natural gas sales compared with the first quarter of 2007. On a weather- adjusted basis, Yankee Gas firm sales were down 1.5 percent.

Competitive businesses

NU's remaining competitive energy businesses earned $1.9 million in the first quarter of 2008, compared with earnings of $4.8 million in the first quarter of 2007. Results in 2008 include a net after-tax charge of $3.0 million related to the adoption of the Statement of Financial Accounting Standards No. 157, which affected the valuation of the competitive business's remaining wholesale power obligations that are marked to market. NU continues to project that its remaining competitive businesses will break even in 2008.

Parent and other affiliates

NU parent and other affiliates lost $29.8 million after-tax in the first quarter of 2008 due to the previously disclosed charge associated with a $49.5 million payment NU made to Con Edison in March 2008 to settle lawsuits that arose in 2001 stemming from the companies' unsuccessful attempt to merge. Aside from that charge, NU parent and affiliates essentially broke even in the first quarter of 2008, compared with earnings of $6.2 million in the first quarter of 2007. The decline was primarily due to reduced interest income on a significantly lower level of cash in 2008 as a result of increased equity investments in NU's utility subsidiaries.

2008 earnings guidance

NU today affirmed its 2008 consolidated earnings guidance of between $1.45 per share and $1.70 per share, including the litigation settlement charge, and between $1.65 per share and $1.90 per share excluding it. NU continues to project earnings from its regulated electric and natural gas distribution and electric generation segments of between $1.05 per share and $1.15 per share and between $0.75 per share and $0.85 per share for its transmission segment. It projects losses of between $0.30 per share and $0.35 per share at NU parent and affiliates, including the litigation settlement charge, and between $0.10 per share and $0.15 per share, excluding it.

The following table reconciles 2008 and 2007 first-quarter results: First Quarter 2007 Reported EPS $0.49 Competitive business earnings in 2007 ($0.03) Parent earnings in 2007 ($0.04) Regulated segment EPS in 2007 $0.42 Higher transmission earnings in 2008 $0.11 Higher regulated distribution and generation earnings in 2008 $0.03 Regulated EPS in 2008 $0.56 Parent results in 2008, excluding litigation settlement charge $0.00 Competitive business earnings in 2008 $0.01 2008 Reported EPS before litigation charge $0.57 Litigation settlement charge in 2008 ($0.19) 2008 Reported EPS $0.38

Financial results for the first quarter of 2008 and 2007 for NU's regulated and competitive segments and parent and affiliates are noted below:

Three months ended: (in millions, except EPS) March 31, March 31, Increase 2008 2008 2007 (Decrease) EPS(1) CL&P Distribution $18.9 $20.6 ($1.7) $0.12 PSNH Distribution/Generation $11.5 $8.1 $3.4 $0.08 WMECO Distribution $4.8 $5.9 ($1.1) $0.03 Yankee Gas $18.6 $13.6 $5.0 $0.12 Total--Distribution/Generation $53.8 $48.2 $5.6 $0.35 CL&P Transmission $25.8 $13.0 $12.8 $0.17 PSNH Transmission $5.2 $1.9 $3.3 $0.03 WMECO Transmission $1.5 $1.0 $0.5 $0.01 Total--Transmission $32.5 $15.9 $16.6 $0.21 Total--Competitive $1.9 $4.8 ($2.9) $0.01 NU Parent and Other Affiliates, Ex. litigation charge --- $6.2 ($6.2) --- Total--ex. litigation charge $88.2 $75.1 $13.1 $0.57 Litigation charge ($29.8) --- ($29.8) ($0.19) Reported Earnings $58.4 $75.1 ($16.7) $0.38 Retail sales data: % Change Gwh for 3 months ended March 31, March 31, % Change Weather 2008 2007 Actual Norm. CL&P 5,972 6,115 (2.3%) (1.6%) PSNH 2,055 2,057 (0.1%) --- WMECO 1,004 1,026 (2.2%) (1.6%) Total NU 9,026 9,194 (1.8%) (1.2%) Yankee Gas firm volumes in mmcf for 3 months ended 15,101 15,873 (4.9%) (1.5%)

NU has approximately 155 million shares outstanding. It operates New England's largest energy delivery system, serving more than 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 Securities Litigation Reform Act of 1995. In some cases, readers 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 or inactions by local, state and federal regulatory bodies; competition and industry restructuring; changes in economic conditions; changes in weather patterns; changes in laws, regulations or regulatory policy; changes in levels or timing of capital expenditures; developments in legal or public policy doctrines; technological developments; changes in accounting standards and financial reporting regulations; fluctuations in the value of our remaining competitive electricity positions; actions of rating agencies; subsequent recognition, derecognition and measurement of tax positions; 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. 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.

(1) All per share amounts in this news release are reported on a fully diluted basis. The only common equity securities that are publicly traded are common shares of NU. The EPS of each segment does not represent a direct legal interest in the assets and liabilities allocated to any one segment but rather represents a direct interest in NU's assets and liabilities as a whole. EPS by segment is a non-GAAP (not determined using generally accepted accounting principles) measure that is calculated by dividing the net income or loss of each segment by the average fully diluted NU common shares outstanding for the period. Management uses this measure to provide segmented earnings guidance and believes that this measurement is useful to investors to evaluate the actual financial performance and contribution of NU's business segments. This release also references our 2008 earnings and EPS excluding a significant charge associated with the settlement payment to Consolidated Edison, Inc. These non-GAAP measures should not be considered as an alternative to NU consolidated net income and EPS determined in accordance with GAAP as an indicator of NU's operating performance.

Note: NU will webcast an investor call today, May 1, 2008, at 4 p.m. Eastern Daylight Time. The call can be accessed through NU's website at http://www.nu.com/.

NORTHEAST UTILITIES AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited) Three Months Ended March 31, 2008 2007 (Thousands of Dollars, except share information) Operating Revenues $1,519,967 $1,703,518 Operating Expenses: Operation - Fuel, purchased and net interchange power 823,317 1,070,486 Other 285,881 237,233 Maintenance 56,709 45,985 Depreciation 67,754 63,469 Amortization 28,855 6,223 Amortization of rate reduction bonds 53,350 51,799 Taxes other than income taxes 71,829 72,590 Total operating expenses 1,387,695 1,547,785 Operating Income 132,272 155,733 Interest Expense: Interest on long-term debt 42,773 36,213 Interest on rate reduction bonds 13,716 16,350 Other interest 6,152 6,719 Interest expense, net 62,641 59,282 Other Income, Net 13,558 14,069 Income from Continuing Operations Before Income Tax Expense 83,189 110,520 Income Tax Expense 23,406 32,723 Income from Continuing Operations Before Preferred Dividends of Subsidiary 59,783 77,797 Preferred Dividends of Subsidiary 1,390 1,390 Income from Continuing Operations 58,393 76,407 Discontinued Operations: Loss from Discontinued Operations - (316) Losses from Sale/Disposition of Discontinued Operations - (1,908) Income Tax Benefit - 911 Loss from Discontinued Operations - (1,313) Net Income $58,393 $75,094 Basic and Fully Diluted Earnings Per Common Share: Income from Continuing Operations $0.38 $0.50 Loss from Discontinued Operations - (0.01) Basic and Fully Diluted Earnings Per Common Share $0.38 $0.49 Basic Common Shares Outstanding (weighted average) 155,286,111 154,349,473 Fully Diluted Common Shares Outstanding (weighted average) 155,721,610 154,992,044 The data contained in this report is preliminary and is unaudited. This report is being submitted for the sole purpose of providing information to present shareholders about Northeast Utilities and Subsidiaries and is not a representation, prospectus, or intended for use in connection with any purchase or sale of securities. NORTHEAST UTILITIES AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) March 31, December 31, 2008 2007 (Thousands of Dollars) ASSETS Current Assets: Cash and cash equivalents $24,974 $15,104 Special deposits 11,714 18,871 Investments in securitizable assets 265,100 308,182 Receivables, less provision for uncollectible accounts of $27,324 in 2008 and $25,529 in 2007 438,378 401,283 Unbilled revenues 94,310 101,860 Taxes receivable 65,951 13,850 Fuel, materials and supplies 155,687 210,850 Marketable securities - current 77,733 70,816 Derivative assets - current 119,537 105,517 Prepayments and other 47,800 39,923 1,301,184 1,286,256 Property, Plant and Equipment: Electric utility 7,795,322 7,594,606 Gas utility 992,257 977,290 Other 300,121 310,535 9,087,700 8,882,431 Less: Accumulated depreciation: $2,519,435 for electric and gas utility and $168,959 for other in 2008; $2,483,570 for electric and gas utility and $178,193 for other in 2007 2,688,394 2,661,763 6,399,306 6,220,668 Construction work in progress 1,053,273 1,009,277 7,452,579 7,229,945 Deferred Debits and Other Assets: Regulatory assets 2,573,780 2,057,083 Goodwill 287,591 287,591 Prepaid pension 205,707 202,512 Marketable securities - long-term 43,593 53,281 Derivative assets - long-term 332,240 298,001 Other 147,104 167,153 3,590,015 3,065,621 Total Assets $12,343,778 $11,581,822 The data contained in this report is preliminary and is unaudited. This report is being submitted for the sole purpose of providing information to present shareholders about Northeast Utilities and Subsidiaries and is not a representation, prospectus, or intended for use in connection with any purchase or sale of securities. NORTHEAST UTILITIES AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) March 31, December 31, 2008 2007 (Thousands of Dollars) LIABILITIES AND CAPITALIZATION Current Liabilities: Notes payable to banks $358,000 $79,000 Long-term debt - current portion 154,286 154,286 Accounts payable 574,627 598,546 Accrued interest 57,969 56,592 Derivative liabilities - current 70,318 71,601 Other 205,539 246,125 1,420,739 1,206,150 Rate Reduction Bonds 856,300 917,436 Deferred Credits and Other Liabilities: Accumulated deferred income taxes 1,090,864 1,067,490 Accumulated deferred investment tax credits 27,976 28,845 Deferred contractual obligations 214,288 222,908 Regulatory liabilities 752,293 851,780 Derivative liabilities - long-term 852,375 208,461 Accrued postretirement benefits 177,039 181,507 Other 414,766 383,611 3,529,601 2,944,602 Capitalization: Long-Term Debt 3,494,162 3,483,599 Preferred Stock of Subsidiary - Non-Redeemable 116,200 116,200 Common Shareholders' Equity: Common shares, $5 par value - authorized 225,000,000 shares; 176,128,826 shares issued and 155,390,632 shares outstanding in 2008 and 175,924,694 shares issued and 155,079,770 shares outstanding in 2007 880,644 879,623 Capital surplus, paid in 1,466,433 1,465,946 Deferred contribution plan - employee stock ownership plan (23,822) (26,352) Retained earnings 973,971 946,792 Accumulated other comprehensive (loss)/income (8,847) 9,359 Treasury stock, 19,708,136 shares in 2008 and 19,705,545 shares in 2007 (361,603) (361,533) Common Shareholders' Equity 2,926,776 2,913,835 Total Capitalization 6,537,138 6,513,634 Total Liabilities and Capitalization $12,343,778 $11,581,822 The data contained in this report is preliminary and is unaudited. This report is being submitted for the sole purpose of providing information to present shareholders about Northeast Utilities and Subsidiaries and is not a representation, prospectus, or intended for use in connection with any purchase or sale of securities. NORTHEAST UTILITIES AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) Three Months Ended March 31, 2008 2007 (Thousands of Dollars) Operating Activities: Net income $58,393 $75,094 Adjustments to reconcile to net cash flows provided by/(used in) operating activities: Bad debt expense 6,542 5,609 Depreciation 67,754 63,469 Deferred income taxes 29,009 4,353 Amortization 28,855 6,223 Amortization of rate reduction bonds 53,350 51,799 (Deferral)/amortization of recoverable energy costs (2,772) 8,752 Pension expense, net of capitalized portion 2,067 5,993 Regulatory refunds and underrecoveries (84,348) (8,337) Derivative assets and liabilities (17,208) (29,414) Deferred contractual obligations (8,620) (12,108) Other non-cash adjustments (1,248) 10,288 Other sources of cash 2,536 2,981 Other uses of cash (8,518) (13,591) Changes in current assets and liabilities: Receivables and unbilled revenues, net (32,510) (950) Fuel, materials and supplies 55,163 34,565 Investments in securitizable assets 33,316 (30,821) Other current assets (4,646) (2,056) Accounts payable (17,912) (41,824) Counterparty deposits and margin special deposits 7,157 19,926 Taxes receivable/accrued (28,122) (368,454) Other current liabilities (41,902) (48,108) Net cash flows provided by/(used in) operating activities 96,336 (266,611) Investing Activities: Investments in property and plant (288,135) (227,703) Cash payment related to the sale of competitive businesses - (1,908) Proceeds from sales of investment securities 67,509 35,998 Purchases of investment securities (68,564) (37,338) Rate reduction bond escrow and other deposits 9,394 50,654 Other investing activities 1,840 1,241 Net cash flows used in investing activities (277,956) (179,056) Financing Activities: Issuance of common shares 4,041 4,117 Issuance of long-term debt - 300,000 Retirements of rate reduction bonds (61,136) (93,390) Increase in short-term debt 279,000 - Retirements of long-term debt - (442) Cash dividends on common shares (31,283) (29,218) Other financing activities 868 (2,581) Net cash flows provided by financing activities 191,490 178,486 Net increase/(decrease) in cash and cash equivalents 9,870 (267,181) Cash and cash equivalents - beginning of period 15,104 481,911 Cash and cash equivalents - end of period $24,974 $214,730 The data contained in this report is preliminary and is unaudited. This report is being submitted for the sole purpose of providing information to present shareholders about Northeast Utilities and Subsidiaries and is not a representation, prospectus, or intended for use in connection with any purchase or sale of securities.