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AGA Conference Bonita Springs, Florida

AGA Conference Bonita Springs, Florida. May 3, 2004. Safe Harbor Provisions.

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AGA Conference Bonita Springs, Florida

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  1. AGA ConferenceBonita Springs, Florida May 3, 2004

  2. Safe Harbor Provisions This presentation contains statements that may be considered forward looking statements, such as management’s expectations of future earnings, cash position, sources of funds, coverage ratios, market conditions, customer growth, regulatory action, and the anticipated completion of various projects. These statements speak of the Company’s plans, goals, beliefs, or expectations, refer to estimates or use similar terms. Actual results could differ materially. All forward looking statements included in this presentation are based upon information presently available, and the Company assumes no obligation to update any forward looking statements.

  3. Agenda • Improved first quarter financial performance • Strong financial footing • Growing regulated businesses • More profitable competitive businesses

  4. What is Northeast Utilities Today? (2003 Revenues) Regulated CompaniesUnregulated Companies An electricity delivery company… The Connecticut Light and Power Company ($2.7 billion) Western Massachusetts Electric Company ($390 million) A natural gas delivery company… Yankee Gas Services Company ($360 million) An hybrid electric company… Public Service Company of New Hampshire ($890 million) A competitive energy marketer… Select Energy, Inc. ($2.33 billion) A competitive electricity producer… Northeast Generation Company ($140 million) A supplier of energy services… Northeast Generation Services ($100 million) Select Energy Services ($150 million)

  5. 2004 Off To A Good Start $1.40 $1.20 $/Share of Earnings $1.24 $0.91 $0.53 $0.47 1Q03 2003 Reported 2004 Projected Earnings 1Q04 2003 Excluding Significant Items

  6. First Quarter Improvement Driven By Competitive Business Results Earnings in Millions CL&P PSNH Yankee Gas Merchant Energy Services WMECO

  7. Strong Current Capitalization Ratios Provide Solid Foundation for Growth (In Millions) 3/31/04 NU Consolidated $2,333 45.8% $116 2.3% $2,642 51.9% $1,683 Baa1/BBB CL&P $718 39.3% $116 6.4% $991 54.3% $1,091 A2/A- PSNH $386 46.6% $0 0% $442 53.4% $462 A3/BBB+ WMECO $160 45.7% $0 0% $190 54.3% $130 A3/BBB+ Yankee Gas $231* 50.4% $0 0% $227 49.6% $0 Baa1/BBB+ NGC $441 53.1% $0 0% $389 46.9% $0 Baa2/BB+ BBB/BBB- Target Leverage Common Preferred Debt RRBs Sr. Ratings (Excludes RRBs) 55.0% *Excludes equity associated with goodwill.

  8. Sources and Uses of Cash in 2003 (in millions) Primary Uses Primary Sources PSNH IPP Buyout, CVEC Purchase Depreciation Issuance of Debt, Net of Retirements Net Income SMD Escrow Dividends Deferred, Accrued Taxes Investments In Plant Amortization Net of RRBs Regulatory Overrecoveries

  9. Dividend Has Continued to Grow, But Remains Modest Dividends/Share

  10. Overall Strategy - How the Puzzle Fits Together Regulated Businesses Competitive Businesses • Expand retail, wholesale preservice in Northeast markets • Continue to win significant standard offer, and default service bids • Achieve targeted returns on investments by maintaining gross margins • Manage risk effectively • Build services businesses • Build needed transmission facilities to remedy critical SW Connecticut supply situation • Invest in distribution companies to replace aging infrastructure and to improve reliability • Maintain strong balance sheet • Timely recovery of purchased energy costs • Continue to implement best practices among four regulated operating companies to improve service, contain costs

  11. A Closer Look At The Regulated Businesses PSNH Customers: 468K Residential 399K Commercial 66K Industrial 3K Revenues: $890M Employees: 1,280 5,445 Square Miles CL&P Customers: 1,169K Residential 1,058K Commercial 105K Industrial 6K Revenues: $2.7B Employees: 2,140 4,400 Square Miles Yankee Gas Customers: 192K Residential 168K Commercial 22K Industrial 2K Revenues:$360M Employees: 490 1,995 Square Miles WMECO Customers: 205K Residential 185K Commercial 19K Industrial 1K Revenues: $390M Employees: 410 1,490 Square Miles

  12. NU Forecasting Significant Regulated Capital Investment Program $ Millions - Excluding AFUDC

  13. That Needed Investment Will Result in a Growing Distribution Rate Base $ Millions Distribution Rate Base (Electric and Gas)

  14. For CL&P, 2003 Was Marked By Important Legislation, Regulation • Public Act signed into law June 25, 2003 • Transitional standard offer took effect January 1, 2004 • Rate cap raised 11.1% for 2004 and beyond • Procurement fee of 0.5/mill began January 1 • Additional 0.25 mill incentive can be earned • Could produce $12-$18 million/year of additional revenue • Flow through of all energy related and “federally mandated” costs • Rate decision effective January 1, 2004 • Distribution rates set for four years • Transmission rates increased $28 million • Distribution ROE of 9.85% • Endorsement of $900 million distribution capital program

  15. Key Factors in CL&P’s First Quarter Results Expected to Continue • Positive • Distribution rate increase • Transmission rate increase • Sales growth • Procurement fee • Negative • Lower pension income • Higher depreciation

  16. PSNH Update • December 2003: PSNH filed rate case requesting 2.6% ($21 million) increase • Hearings in early August • Decision will be retroactive to February 2004 • January 2004: PSNH closed on Connecticut Valley Electric Co. acquisition • $9 million for assets (11,000 customer accounts); $21 million to buy down power contract • February 2004: Energy supply rate rose to 5.36 cents/kwh from 4.6 – 4.67 cents • Based on estimated costs of owned generation and market purchases of power PSNH’s NHPUC approved proposed $70 million conversion of Schiller unit to burn wood (waste) • Settlement on risk sharing mechanism now before regulators

  17. Yankee Gas Update • Increasing pension costs hurting financial performance • New rate design produces more balanced quarterly earnings • Rate case to be filed this summer to be effect in 2005 • New projects advance • 9-mile extension of main in southeast Connecticut approved by regulators and due for completion October 1 • Compliance filing on LNG storage facility due with regulators in June

  18. WMECO Update • Power supply costs continue to be fully tracking • Continued cost management needed to offset falling pension credit • More modest capital expenditure program • Transition period ends in March 2005

  19. Surplus Generation Adequate Generation Marginal Conditions Deficient Generation Has Not Been Sited Where It’s Needed, Creating Bottlenecks New England has added 9,000 MW of generation capacity since 1998. But it has been added in the wrong locations! Reserve Margins Source: 2003 CELT Report • More transmission is needed to move power • from capacity rich areas to those in need.

  20. $14B Spent on Buying and Building Generation in 1997–2002; $500M Spent on Transmission (in millions) 1997-2002 NU, Nat Grid. NStar Constructed Transmission 1997-2002 Constructed Generation 1997-2002 Purchased Generation (initial sale from utility)

  21. ISO-NE’s Regional Transmission Expansion Plan (RTEP 03) Calls For Over $1.2B in Investment* By NU • New Hampshire • Deerfield STATCOM $33 M • 115kV Upgrades $37 M • Scobie – Tewksbury 345kV Line** $15 M • Fitzwilliam 345 / 115kV Transformer** $15 M • Bedford/Tioga 115/34.5kV Substation $13 M • Deerfield 345/115kV Transformer $6 M • Upgrades in White Mountains Area $6 M • Total $125 M ME VT NH • Massachusetts • Springfield Area Cable Replacement $32 M • Connecticut • Bethel-Norwalk $200 M • Middletown-Norwalk ** $496 M • Glenbrook Cables $75 M • Card-Lake Rd-Sherman 345kV line** $94 M • Long Island Replacement Cable ** $45 M • Eastern CT $42 M • Glenbrook STATCOM $41 M • Haddam 345/115kV Transformer $26 M • Manchester-Barbour Hill $18 M • Total $1,037 M MA RI CT * For some projects, RTEP 03 cost estimates have been updated based on more current information. ** NU’s Share

  22. Siting Process Construction Transmission Business: Major Capital Projects 2007 2001 2002 2003 2004 2005 2006 2008 Phase I (Bethel to Norwalk) • 7/03: Siting Council decision • 12/03: Norwalk Substation expansion began • 7/04: 115kV & 345kV underground construction begins • 8/04: Gas-Insulated Substation starts • 12/04: Overhead line orders under contract $200 M Phase II (Middletown to Norwalk) $496 M * • 5/03: Municipal consultation • 10/03: Siting Council application filed • 12/03 – 2/04: Public hearings process • 3/04 –6/04: Adjudicative hearings • 6/04: DEP filing (estimated) • 12/04: Siting Council decision Capital Program $26 M $55 M $99 M $270 M $240 M $200 M $200 M $200 M * CL&P’s 80% share

  23. NU Enterprises Had Strong First Quarter (earnings in millions)

  24. Contributing Factors To First Quarter Improvements • Seasonal pricing of wholesale contracts • Retail profitability • Expiration of old Select – CL&P contract • Strong generator operating performance

  25. Calendar of Bids in Wholesale Electric Market

  26. Summary • 2004 earnings projection consistent with street consensus • NU forecast of $1.20 to $1.40 per share • Street range of $1.25 to $1.36 per share • Plans for transmission buildout progressing • Profitability of competitive businesses increasing • Financial and credit profile strong and remains a priority

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