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Bank of America Merrill Lynch
September 20,
2011
David McHaleExecutive Vice President and CFO
2011 Power and Gas Leaders Conference
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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 statements” within the meaning of the Private Securities Litigation Reform Act of 1995. In some cases, a listener or reader can identify these forward-looking statements through the use of words or phrases such as “estimate”, “expect”, “anticipate”, “intend”, “plan”, “project”, “believe”, “forecast”, “should”, “could”, and other similar expressions. Forward-looking statements are based on the current expectations, estimates, assumptions or projections of management and are not guarantees of future performance. These expectations, estimates, assumptions or projections may vary materially from actual results. Accordingly, any such statements are qualified in their entirety by reference to, and are accompanied by, the following important factors that could cause our actual results to differ materially from those contained in our forward-looking statements, including, but not limited to, actions or inaction of local, state and federal regulatory and taxing bodies; changes in business and economic conditions, including their impact on interest rates, bad debt expense and demand for our products and services; changes in weather patterns; changes in laws, regulations or regulatory policy; changes in levels and timing of capital expenditures; disruptions in the capital markets or other events that make our access to necessary capital more difficult or costly; 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 contracts; actions of rating agencies; the effects and outcome of our pending merger with NSTAR; 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 (SEC). 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 or to reflect the occurrence of unanticipated events.
NU Safe Harbor Provisions
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Two of NU’s Primary Infrastructure Growth Initiatives
ELECTRIC TRANSMISSIONELECTRIC TRANSMISSION NATURAL GAS DISTRIBUTIONNATURAL GAS DISTRIBUTION
• Significant growth in recent years driven by reliability needs
• Siting regulated by states
• Economics regulated by FERC
• New projects focus on economics, environment, and public policy directives
• Very attractive opportunities in New England due to low saturation and cost and environmental advantages over competing fuels
• Siting and economics regulated by states
• Delivery and regulatory model constraints need to be addressed in Connecticut to increase penetration
PRIMARYPRIMARY EMERGINGEMERGING
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Increased Transmission Investment Has Led to Increased Transmission Earnings
$170.5
$257.3
$465.5
$761.8
$714.3
$291.8$260.9
$444.0
$177.8
$164.3
$28.2
$41.1
$59.8
$82.5
$138.3
$0.0
$100.0
$200.0
$300.0
$400.0
$500.0
$600.0
$700.0
$800.0
2004 2005 2006 2007 2008 2009 2010 2011E
$0.0
$20.0
$40.0
$60.0
$80.0
$100.0
$120.0
$140.0
$160.0
$180.0
$200.0
NU Transmission Investment NU Transmission Earnings
In M
illio
ns
Transmission Capital Expenditures
Transmission Earnings
In M
illion
s
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Increased Transmission Spending in 2011 Driven by NEEWS Reliability Projects
Greater Springfield Reliability Project
• Substation construction commenced in MA in Dec. 2010; in CT in summer 2011
• Army Corps of Engineers permit received last week – full overhead construction to commence in both MA and CT
• Projected in-service: late 2013
• Total projected NU cost: $718 million
Interstate Reliability Project
• Joint project with National Grid (NU in CT; NGrid in MA & RI)
• ISO-NE confirmed need: August 2010
• File siting application in CT: late 2011
• Siting decisions: 2013
• Commence construction: late 2013/early 2014
• Projected in-service: late 2015
• Total projected NU cost: $218 million
SPRINGFIELD
HARTFORD
345-kV SubstationGeneration Station345-kV ROW
115-kV ROW
Central ConnecticutReliability Project
InterstateReliability Project
Greater SpringfieldReliability Project
Central Connecticut Reliability Project
• Expected review to be completed and needs identified in late 2011 with specific projects identified in late 2012
• Total projected NU cost: $301 million
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Northern Pass Transmission – a Non-Traditional $1.1 Billion Capital Investment
´
• To be owned by Northern Pass Transmission LLC - NU (75%) and NSTAR (25%)
• 1,200 MW transfer capability
• Northern terminus at Des Cantons (Québec), southern terminus in Franklin (New Hampshire)
• Québec terminal will convert the power from AC to DC (rectifier)
• US terminal will convert the power from DC to AC (inverter)
• 345kV AC leg from Franklin to Deerfield, NH
• TSA signed in October 2010 and accepted by FERC on February 11, 2011
• Permitting process began October 14, 2010 with U.S. DOE application – comment period extended in mid-June; U.S. Forest Service application filed June 28
• New Hampshire Senate voted June 2 to “re-refer” eminent domain bill
• Capital cost estimate for US segment: $1.1 billion – completion projected for late 2016
Des Cantons
HVDC Line
HVDC Converter Station
345-kV Line
Existing Deerfield Substation
Deerfield
Franklin
7
50%
31%
15%
4%
0%
20%
40%
60%
% C
T H
om
e H
eatin
g M
arke
t
CT Home Heating Market Penetration
Heating Oil #2
Natural Gas
Electric Heating
Propane
72%
53%48% 47%
31%
0%
20%
40%
60%
80%
% o
f p
en
etr
ati
on
of
na
tura
l ga
s
Natural gas penetration CT vs. other states
CTNJ NY RI MA
Natural Gas: A Different Type of Infrastructure Growth Opportunity
• Connecticut is significantly under-penetrated and relies on higher priced fuels for space heating
• Increasing the penetration to 50% of the state would yield long-term benefits
• Significant customer savings
• Reduced emissions
• Reduction in oil demand
• In the short-term the investment in infrastructure to support such expansion would generate additional jobs (construction and craft labor)
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Customer Economics Are Compelling, But Obstacles Exist
$0
$10
$20
$30
$40
$50
$60
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
CT Wholesale Heating Oil #2
Henry Hub + Tport
CT Wholesale Propane
No
min
al $
/MM
Btu
Difference increases from $9 to $28 per MMbtu
Price Differential Forecast $ per MMBTU
Heating Conversion Economics
Type Customer Costs
Service already available
~$7,500 for heating retrofit
Service not available, but near gas system
~$7,500 for retrofit
~$1,000 - $3,000 for service and meter
Service notavailable, line extension required
~$7,500 for retrofit
~$10,000 - $15,000 for service, meter & line extension
Frequent Conversion Obstacles
• No local gas service in place
• Upfront customer capital with long paybacks
• Requirements for upfront customer payments (CIAC) on utility portion of expansion given a “pay as you go” regulatory philosophy
Price differentials, can lead to homeowner savings in the $1,000 - $1,500 per year
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• $57.6 million Waterbury-to-Wallingford/LNG project began in April 2010; completion expected by November 2011
• Fills gaps in supply portfolio and eliminates system constraint in Cheshire area
• Increases vaporization capacity of Waterbury LNG project
• Supports area’s growing customer demand
Yankee Gas Continues to Identify Initiatives to Meet Customer Needs and Sales Growth
3.4
6.26.6
5.0
3.1
Yankee Gas (firm)
2007 2008 2009 2010 2011 YTD
We
ath
er-
No
rma
lize
d%
ch
an
ge
ye
ar-
ove
r-ye
ar
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Potential “Follow-on” Growth Initiatives
Solar / RenewablesSolar / Renewables
• Already building solar generation in Massachusetts
• Recent authorization to invest in Connecticut
Smart GridSmart Grid
• Investing in distribution automation investments across our system
• Examining feasibility of advanced metering technologies
TransportationTransportation
• Investing intellectual capital in electric vehicle infrastructure business models
• Moving forward with charging station infrastructure across our system