Business Context and Reporting Period
This Form 8-K, dated November 29, 2011, is filed by Northeast Utilities (NU) and its subsidiaries: The Connecticut Light and Power Company (CL&P), Public Service Company of New Hampshire (PSNH), and Western Massachusetts Electric Company (WMECO). The report addresses the financial impact of an unprecedented snowstorm in late October 2011 and provides updates on the pending merger with NSTAR.
Key Financial Metrics and Storm Impact
NU announced a $30 million fund to assist CL&P residential customers affected by the storm. The company expects to record a non-recurring after-tax charge of approximately $18 million ($0.10 per share) in the fourth quarter of 2011, which will not be recovered in rates.
Restoration costs related to the storm, expected to be recorded as regulatory or fixed assets in Q4 2011, are detailed below:
| Company | Costs Deferred for Review ($000s) | Capitalized Costs ($000s) | Total Storm Costs ($000s) |
|---|---|---|---|
| CL&P | $144,000 | $18,800 | $162,800 |
| PSNH | $14,250 | $1,900 | $16,150 |
| WMECO | $20,400 | $3,100 | $23,500 |
| Total NU | $178,650 | $23,800 | $202,450 |
Material Changes and Outlook
Merger Update: NU and NSTAR have received all regulatory approvals except for the Massachusetts Department of Public Utilities (DPU) and the Nuclear Regulatory Commission (NRC). The merger is now expected to be consummated in early 2012.
Earnings Guidance: NU is maintaining its 2011 stand-alone full-year consolidated recurring earnings guidance of $2.30 to $2.40 per share (excluding merger expenses and the storm fund). Including these costs, the projected GAAP diluted EPS range is $2.10 to $2.20 per share.
Expense Adjustments: Management revised the estimated merger expense charge for 2011 to approximately $0.10 per share (down from $0.20) due to the expected 2012 closing. This reduction is offset by the $0.10 per share charge associated with the storm fund.
Investor Verification Checklist
- Verify the timing of the NRC consent and DPU proceedings regarding the NSTAR merger.
- Confirm the eligibility criteria for the 200,000 CL&P customers receiving bill credits from the storm fund.
- Monitor the regulatory review process for the $178.65 million in deferred storm restoration costs.
- Review the reconciliation of GAAP EPS ($2.10-$2.20) to Non-GAAP EPS ($2.30-$2.40) in upcoming quarterly reports.