Eversource Energy (D/B/A) · NYSE:ES
Eversource Energy (D/B/A) — Northeast Utilities — Investor Day (October 2012)
72 slides from Eversource Energy (D/B/A)'s investor day presentation, Oct 5, 2012
Slide 1: Northeast Utilities Analyst Day
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Slide 2: NU Safe Harbor Provisions
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
Slide 3: Welcome to Boston!
Northeast |, Utilities - Welcome to Boston!
Slide 4: Today's Agenda
Today’s Agenda Tom May President & CEO The New NU David McHale Merger Integration Executive Vice President & CAO Redefining the Customer Experience Lee Olivier Transmission Development Initiatives Executive Vice President & COO Region’s Increasing Demand for Natural Gas Jim Judge NU’s Attractive Inv
Slide 5: Excellent, Timely Investment Opportunity with a Unique Value Proposition
Excellent, Timely Investment Opportunity with a Unique Value Proposition Significant Transmission & • Diversified across 4 regulatory jurisdictions Gas Opportunities • Strong financial condition; among the highest credit ratings in the industry Low Near-Term Rate Case Risk • Low risk profile No Requ
Slide 6: "Crown Jewel" of a Service Territory
“Crown Jewel” of a Service Territory 6
Slide 7: Boston's Building Boom
Northeast Utilities Boston’s Building Boom YEAR OF THE CRANE ope have bird’ s-eye view of building boom
Slide 8: A Great Management Team that Delivers ...
A Great Management Team that Delivers ... $3,500 NSTAR $3,000 NU $2,500 Utility Index $2,000 $1,500 S&P 500 $1,000 $500 2001 2011 8
Slide 9: Creating Superior Value
Creating Superior Value Growing the Transmission and Gas Businesses Redefining the Customer Service Model 9
Slide 10: Engaged Workforce
“One Company” Delivering Great Service Engaged Workforce 10
Slide 11: Walking the Talk ...
Walking the Talk … Reaching out to regulators and employees … 11
Slide 12: Very Strong Financial Condition
Very Strong Financial Condition Utilities Credit Ratings Distribution(1) Number of Issuers 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
Slide 13: A Leadership that Delivers Significant Shareholder Value
Proud of the Past and Optimistic About Our Future A Leadership that Delivers Significant Shareholder Value $140 of value • Dividend Increased Fourteen Consecutive Years • Total Return #1 in the Industry Dividends Stock Price NSTAR $10 Stock Price 1994 2 for 1 split 2012 13
Slide 14: Integration and Customer Service Review
Integration and Customer Service Review David McHale Executive Vice President & Chief Administrative Officer 14
Slide 15: Topics
Topics • Merger Integration • Redefining the Customer Experience • Connecticut Energy Policy 15
Slide 16: Merger Integration
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 experien
Slide 17: Merger Integration Priorities
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 stand
Slide 18: The "One Company" Model
Merger Integration Priorities The “One Company” Model • Improve customer service through a new customer care organization structured as a “meter to cash” model • Implement a fully integrated supply chain organization • Develop enterprise-wide information technology solutions and investments through
Slide 19: Merger integration initiatives
Merger Integration Priorities Merger integration initiatives Category Activity Staffing Levels Achieving reductions in staff, vendors and contractors Information Consolidating IT infrastructure, data storage, data centers, security Technology Implementing enterprise-wide application investments acro
Slide 20: Merger Cost Savings: Initial Assessment
Merger Cost Savings: Initial Assessment Estimated Cost Savings Ten Year Savings (Source: 2011 Net Benefit Analysis $948 million gross, $784 million net $ Millions (Gross Savings) Labor Administrative Advertising Benefits Insurance IT Professional Services Shareholder Services Vehicles Association Du
Slide 21: Improving the Customer Experience
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
Slide 22: NSTAR Gas, Yankee Gas Have Superior Customer Favorability Ratings
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 Source: 2012 JD Power G
Slide 23: New England Electric and Natural Gas Customers Benefiting From Lower-Priced Gas
New England Electric and Natural Gas Customers Benefiting From Lower-Priced, More Plentiful Gas New England Energy Production Source Data: ISO-NE 23
Slide 24: Natural Gas Prices Have Reduced New England's Wholesale Electricity Costs
Natural Gas Prices Have Reduced New England’s Wholesale Electricity Costs By More Than 50% ISO-NE Wholesale Market Costs, Energy Component $12 $12 Electricity Value $9 $9 Natural Gas (Henry Hub) $ MMBtu $ billions $6 $6 $3 $3 $0 $0 2006 2007 2008 2009 2010 2011 2012 Average Cost (cents/kWh) New Engl
Slide 25: Lower Wholesale Prices Have Reduced Retail Electric Bills Since 2008
Lower Wholesale Prices and Lower Congestion Costs Have Significantly Reduced Our Retail Electric Bills Since 2008 19.51 19.22 14.87 14.20 Cents/KWH Cents/KWH NSTAR CL&P Electric 27.2% 22.6% 2008 Bill Today’s Bill 2008 Bill Today’s Bill Generation/Supply Distribution Transmission Other 25
Slide 26: Connecticut Energy Policy Reflects Today's Marketplace
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
Slide 27: The Connecticut Comprehensive Energy Strategy
The Connecticut Comprehensive Energy Strategy Central to the NU strategy, a number of themes are emerging: The Role of The Feasibility Renewable Energy of Natural Gas Targets and Efficiency Expansion Clean Energy Natural gas as a competitive and cleaner fuel is viewed as critical element in the comp
Slide 28: Low Penetration Result in Significant Natural Gas Expansion Opportunities
Lower Prices, Low Penetration Result in Significant Natural Gas Expansion Opportunities CT & MA Residential Gas Heating CT Residential Market Penetration by Penetration vs. Nearby States Heating Source 80% 72% 60% 50% 60% 53% 48% 47% 40% 40% 31% 31% 20% 20% 15% 4% 0% 0% NJ NY RI MA CT Heating Natura
Slide 29: Summary
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 an
Slide 30: Operations Review
Operations Review Lee Olivier Executive Vice President & Chief Operating Officer 30
Slide 31: NU Transmission Shows Continued Excellence in Planning, Siting, Building
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 (L
Slide 32: The Greater Springfield Reliability Project
The Greater Springfield Reliability Project – A Case Study In NU’s Transmission Development Expertise Greater Springfield Reliability Project $718M Under Construction • Projected in-service: late 2013 • Total projected NU cost: $718 million • Project 83% complete as of 9/15/12 GSRP: Massive Scale an
Slide 33: NEEWS: Interstate Reliability Project
NEEWS: Interstate Reliability Project 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 201
Slide 34: NEEWS: Greater Hartford Central Connecticut Project
NEEWS: Greater Hartford Central Connecticut Project (GHCC) • 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 prese
Slide 35: Northern Pass Transmission Project Overview
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
Slide 36: Transmission's Projected Capital Investment Has Grown to $3.7B
Transmission’s Projected Capital Investment Has Grown by $700M to $3.7B from Last Year’s Forecast Historic Budget Forecast Northern Pass HVDC $3.5 Billion $718M $3.7 Billion Line to Canada US portion estimated at $1.1B; $1.04B in forecast period Successful completion of NEEWS projects SWCT projects
Slide 37: 2013-2017 NU Transmission Capital Program
2013-2017 NU Transmission Capital Program Other Projects – In Millions CL&P NSTAR PSNH WMECO 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 Inf
Slide 38: NU Electric Distribution: Improving Reliability and Customer Service
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 p
Slide 39: Emergency Preparedness a Critical Focus in CT
Emergency Preparedness a Critical Focus in CT • Continuing to make significant steps to improve emergency preparedness and response • CL&P demonstrated strong performance in the Governor’s statewide emergency exercise • Received positive feedback from municipalities, the administration and key state
Slide 40: Gas and Oil Market Dynamics Provide Expansion Opportunity
Gas and Oil Market Dynamics Provide Expansion Opportunity for NU and Benefits to Customers and States Opportunity Benefits to Customers and States • Shale resources in close proximity of Northeast markets Environmental benefits Energy efficiency • Natural gas prices expected to remain $1,200 to disc
Slide 41: Customer Growth Has Picked Up for NU's Gas Business
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) Natural gas prices decreasing Economic downturn Annual customer additions 41
Slide 42: NU's Gas Business Could Be Significantly Expanded
NU’s Gas Business Could Be Significantly Expanded NU Gas Business – NSTAR, Yankee Gas 2013-2022 Annual Customer Additions Projections Potential High Growth Projection • ~$100M incremental 89,000 incremental new customers Annual customer additions capex/year 33% total customer base growth 2012 to 202
Slide 43: Our Capital Plan Continues to Provide Significant Value
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 renewa
Slide 44: Financial Review
Financial Review Jim Judge Executive Vice President & Chief Financial Officer 44
Slide 45: Well Positioned for Success
Well Positioned for Success Focused on Improved Multi-Year Rate Reliability and Customer Agreements Service Experienced Strong Financial Management Team Condition with Premium Growth 45
Slide 46: Outline
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
Slide 47: Regulatory and Business Segment Diversity
Regulatory and Business Segment Diversity Rate Base By State / Federal Rate Base By Business MA Electric Distribution 31% 52% NH 12% FERC 32% Electric Generation 6% Electric Gas Transmission CT Distribution 32% 25% 10% Combined 2011 Rate Base: $12.4 billion 47
Slide 48: Very Strong Ratings Rank Highly in the Industry
Very Strong Ratings Rank Highly in the Industry Utilities Credit Ratings Distribution(1) 1. Wisconsin Energy 2. Northeast Number ofUtilities Issuers 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. Reg
Slide 49: NU Business Segments Have a High Level of Rate Certainty
The Regulatory Environment: NU Business Segments Have a High Level of Rate Certainty NSTAR Electric Rates frozen through 12/31/15; NSTAR Gas reconciling adjustments continue to WMECO operate Rates frozen through 11/30/14; CL&P reconciling adjustments continue to Distribution operate Yankee Gas $7M r
Slide 50: Total Shareholder Return Outperformed All Benchmarks
Total Shareholder Return Outperformed All Benchmarks Cumulative Total Return Periods Ended December 31, 2011 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% 50
Slide 51: Complementary "Best-In-Class" Expertise
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 1st and 2nd by J.D. Power in recent survey of Eastern
Slide 52: Massachusetts Settlement Agreements – Key Provisions
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 inclu
Slide 53: Connecticut Settlement Agreement – Key Provisions
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-recoverab
Slide 54: Additional State Regulatory Proceedings
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 2
Slide 55: Review of FERC-Approved Transmission ROEs
Review of FERC-Approved Transmission ROEs 13.50% 13.10% 12.89% 13.00% 12.56% 12.64% 12.50% 12.00% 11.64% 11.50% 11.14% 11.00% 10.50% 10.00% Local Network Regional Northern Pass 2005-2008 NEEWS M-N Service Network Service Regional Underground Base Projects NU’s Local Network Service Tariff ROE (this
Slide 56: Transmission Update
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
Slide 57: Key Assumptions Through 2015
Key Assumptions Through 2015 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 wa
Slide 58: Merger Has Enhanced Opportunities for Financing Savings
Merger Has Enhanced Opportunities for Financing Savings • NSTAR commercial paper program • NSTAR Electric is refinancing $400M expanded to NU in July of senior unsecured debt this month. Indicative rate would produce $9M of • Effectively lowered short-term annual savings borrowing costs on $700M by
Slide 59: Projected 2012 Recurring EPS
Projected 2012 Recurring EPS Major Drivers vs. 2011 • NSTAR earnings • Higher transmission rate base • Lower interest costs • Initial cost savings • PSNH, Yankee Gas distribution rate increases $2.25 - $2.30 • Higher share count • Additional emergency preparedness expense at CL&P • Higher untracked
Slide 60: Projected EPS Range for 2013
Projected EPS Range for 2013 Major Drivers vs. 2012 • Normal weather • Lower interest costs • Additional transmission rate base • PSNH, Yankee Gas distribution rate increases • Cost savings • Additional PSNH generation $2.40 - $2.60 return • Higher depreciation and property tax expense 60
Slide 61: EPS Growth Beyond 2013
EPS Growth Beyond 2013 Major Drivers • Continued investment in transmission reliability projects, including NEEWS • Northern Pass Transmission • Increase in gas conversions • Increased cost savings Long-term 6% - 9% CAGR off of 2012 • Higher property tax and depreciation expense 61
Slide 62: Dividend Growth In-Line with Earnings Growth
Dividend Growth In-Line with Earnings Growth Annualized Dividend 2009 2010 2011 Q1 2012 Q2/Q3 2012 62
Slide 63: Additional Upside Opportunities Not Reflected in Projections
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 63
Slide 64: Today's Key Takeaways
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
Slide 65: Northeast Utilities
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Slide 66: Appendix
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Slide 67: Schedule for New England Base ROE Complaint
Schedule for New England Base ROE Complaint 10/1 11/20 Transmission Complainants’ Owners Case Case Filed Filed 1/18 2/27 4/17 5/6 9/10 Complainants’ Updated ROE Initial Decision FERC Staff Rebuttal Case Hearings Start Analyses Due From Judge Filed FERC Possible Requests Decision for Rehearing Expect
Slide 68: Near Term Upside: Record Mild Weather Reduced Gas Delivery Margins
Near Term Upside: Record Mild Weather in 2011-2012 Reduced Our Gas Delivery Margins by $30 Million 2000 – Present Winter Heating Degree Days (1) Heating Degree Days 6,500 6,000 5,500 Avg.: 5,331 5,000 4,500 5,680 5,876 5,579 5,682 5,579 5,545 5,318 5,130 5,179 5,151 4,000 4,726 4,529 3,500 3,000 200
Slide 69: Transmission Rate Base Growth Projections
Transmission Rate Base Growth Projections 10% CAGR $6,811 $6,636 $5,424 $4,991 $4,613 $ in millions $4,214 $3,823 69
Slide 70: Projected Distribution/Generation Capital Expenditures
Projected Distribution/Generation Capital Expenditures $889 $ In Millions 70
Slide 71: Total Projected Capital Expenditures
Total Projected Capital Expenditures $1,893 $1,870 $1,711 $1,600 Transmission Electric & Gas Distribution and Generation (including CL&P resiliency) Other, Primarily IT 71
Slide 72: Projected Rate Base Growth - 2015
Projected Rate Base Growth - 2015 Rate Base By Business Projected Combined 2015 Rate Base: $15.6 billion 72