康涅狄格電力 (ES) 2008 Q1 法說會逐字稿

Welcome to the Northeast Utilities first quarter earnings conference call.

At this time all participants are in a listen-only mode, until the formal question and answer session of the conference.

(OPERATOR INSTRUCTIONS).

Your host for today's call is Mr.

Jeffrey Kotkin, Vice President of Investor Relations.

Mr.

Kotkin you may begin.

Thank you very much.

Good afternoon and thank you for joining us.

I'm Jeffrey Kotkin, NU's Vice President for Investor Relations, speaking today will be Chuck Shivery, NU's Chairman, President, and Chief Executive Officer, David McHale, NU's Senior Vice president and Chief Financial Officer, and Lee Olivier, NU's Executive Vice President who oversees our regulated businesses.

Also in the room today is Shirley Pain, our Vice President and Controller, Jim Munst head of our transmission segment, and Jim Rob Senior Vice President for Enterprise Planning.

Before we begin, I'd like to remind you that some of the statements made during this conference call may be forward looking, as defined within the meaning of the Safe Harbor Provision of the u.S.

Private Securities Litigation Reform Act of 1995.

These forward looking statements are subject to risk and uncertainty, which may cause the actual results to differ materially from forecast and projections, some of the factors are set forth in the press release issued today, announcing our earnings for the first quarter of 2008, additional information about the various factors that may cause results to differ, can be found in the annual report on form 10-K for the year ended December 31, 2007.

Now I will turn over the call to Chuck.

Thank you, Jeff.

Good afternoon.

I know this week, including today, has been extremely busy for all of you as companies have tried to report results in advance of the AGA conference, so we appreciate that you are joining us this late in the afternoon.

The past six weeks have been a busy time for us.

On March 24, the FERC issued an order on rehearing, concerning the New England transmission owners return on equity.

A week later, we filed a former request with ISO New England to study the benefits of a new North/South transmission interconnections within New England, and a new high voltage overhead DC link to Hydro-Quebec.

The first quarter of 2008 was a good quarter for NU.

Today we released operating results that are consistent with our earnings guidance for the year, as well as with street consensus.

Also we continued to make very significant progress on completing transmission upgrades in southwest Connecticut.

By early next year, we expect to report to you that in aggregate, our $1.68 billion transmission upgrades in that congested part of New England, have been completed on or below budget, and that they were finished well ahead of the schedule we set out for you in 2005.

Me and David will provide you with more detail on operations (inaudible) quarter, I want to take a few moments to discuss a very important focus for us right now.

That is our work to provide the states we serve, and the greater New England region with a portfolio of solutions to address energy issues.

Increasingly this work focuses not only on meeting environmental targets, such as greenhouse gas reduction and renewable portfolio targets, but doing so in a way that will benefit our customers, who are already suffering from among the highest energy costs in the country.

As we examine these issues, and the potential for additional renewable and non-carbon emitting generation in our part of North America, we are struck by three realities.

One, New England is already extremely dependent on natural gas-fired units, that dependence is likely to increase, not decrease, over the next few years.

Two, southern New England, in particular, does not have the in-state resources to meet the renewable portfolio, and low carbon emitting standards it has set out for itself.

Three, Maine and New Hampshire offer significant untapped potential in the area of wind and bio mass generation.

Additionally, there is vast potential in Canada to generate electricity without emitting carbon, and a great willingness to sell it to New England.

Given these realities, we think there is a fundamental logic to tapping into the renewable resource potential of New Hampshire and Maine, as well as dramatically increasing hydro-wind and perhaps nuclear power imports, into New England over the next decade or two.

We would expect this to lower the import of carbon based fuel in to the region-- [NO AUDIO]

Please continue to standby, your conference will continue momentarily.

Mr.

Kotkin, sir you may continue

Thank you very much, Christine, we are sorry, we lost our feed to Verizon.

We are back in right now.

I'm going to reintroduce Chuck Shivery, and Chuck is going to pick up from where we think we lost the feed, about five minutes ago..

Thank you, Jeff.

I think where we ended up, is we were talking about a lot of the work that we've done to help improve the region's energy issues, and I think the last comment, this is where I'm going to start is we were talking about as we look at those issues, and the potential for new and additional renewable and non-carbon emitting generation is, we were struck by three realities.

The first one is that New England is already extremely dependant on natural gas-fired units, so that is likely to increase, not decrease over the next few years, the second reality is that southern new England in particular, does not have the in state resources to meet the renewable portfolio, and low carbon emitting standards it has set out for itself.

Third, Maine and New Hampshire offer significant untapped potential in the area of wind and bio mass generation.

Additionally there is a vast potential in Canada to generate electricity without emitting carbon, and a great willingness to sell it to New England.

Given these realities we think will there is a fundamental logic to tapping in to the renewable resource potential with New Hampshire and Maine, as well as dramatically increasing hydro-wind, and perhaps even nuclear power imports in to New England over the next decade or two.

We would expect this approach to lower the import of carbon based fuel into the region, and potentially add more stability to the region's electricity cost.

Thus since last summer we have been active in advancing the discussion about possible approaches that would best serve our customers and our shareholders.

We are willing to commit significant capital to help the region meet its energy goals.

We hope to connect renewable generation to markets through the construction of new transmission facilities, and are willing to work with the states to make it possible for us to build renewable generation for the benefit of our customers.

Many of those transmission and generation facilities will need to be built in northern New England.

New Hampshire already has identified the need for a new transmission loop in northern New Hampshire, consistent with the state's desire for 400 megawatts of new renewable generation in that area.

Given the challenges in the region, on March 31, we made a formal request of ISO New England to commence a study of the best ways to significantly increase the north/south transmission transfer capability, within New England.

We asked they include this the study as resource assumptions, 400 megawatts of renewables in New Hampshire, new renewables in Maine, and a new 1200 megawatt or larger line from the Hydro-Quebec system, to central New Hampshire.

Access to Quebec's significant energy potential, could reduce rotational marginal prices, reduce New England's heavy dependence on natural gas, and close a significant portion of the gap New England may face in meeting its energy standards.

It could also improve overall reliability, by creating a better tie with the Hydro-Quebec system.

We also asked ISO to study the feasibility of construction in constructing a 660 megawatt under sea link from coastal New Hampshire to the Boston area.

Our study requests have been supported by [Instar] and by Hydro-Quebec .

There has been significant progress since we spoke with you on the subject last fall.

Over the next year we expect ISO to complete its work on studies that will provide insight on the solutions for meeting the region's needs.

These initiatives are important to begin addressing the relatively high price of electricity in New England, that is driven by a number of factors, including impact of natural gas powered generation, which often sets high prices for merchant nuclear and coal power, that is bid into the New England market.

Reliability must run payments, keep some older units on line, that are in load pockets in the region.

These cost challenges will be exacerbated by new environmental requirements.

If we can access increased renewable and non-carbon emitting resources, through a new transmission, we hope to provide significant benefits to the region.

As we've mentioned previously we created a high level team within NU to pursue these opportunities.

Our success in siting and building our transmission projects attest to our ability to create positive working relationships with our neighbors, policymakers, contractors, and suppliers.

We expect to apply that experience to northern New England in the next several years, and we believe there may be significant developments in that area, later 2008.

We will keep you apprized.

As you know in February and March we made filings in response to Connecticut's need for new peaking generation.

We will provide you with details on Connecticut's current docket to review the filings, but regardless of whether or not our proposals are selected, we are pleased that the state has moved in this direction, something we had advocated for years.

We know that our public service New Hampshire customers benefit from the hybrid merchant and cost of service generation model, and we believe that Connecticut's cost of service peaking generation begins to create, and can provide, similar benefits to our CL&P customers.

Now let me turn over the call to Lee

Thank you Chuck and everyone on the call for joining us here this afternoon.

Before reviewing our operations in the first quarter, I want to follow up on some of the points that Chuck has mentioned.

Our future success in developing transmission related solutions to New England's energy challenges, will greatly be influenced by our track record in developing and completing today's major projects.

With that line, let's turn to what we've accomplished on our four major projects.

The first of which Bethel-Norwalk has operated well since entering into service more than 18 months ago, reducing the cost of congestion in Connecticut over $150 million during the first 12 months of operation.

To date we have spent $1.25 billion on those four projects.

The replacement undersea cable between Norwalk, Connecticut and Northport, Long Island, was late in the first quarter of this year.

Final connections with substations are complete in Connecticut and New York.

Burial of the cable in shallow waters on the Long Island Sound, is ongoing.

The project is on time, on budget, and could be in service as early as June, to help meet the summer's big demand.

Our $223 million Glenbrook cables project is about 79% complete, this 100% underground project will allow us to increase reliability, and power flows deep into lower Fairfield County.

Despite some very challenging soil and rock conditions, and a large amount of existing infrastructure, it's on schedule to be in service by the end of this year.

Our Middletown-Norwalk project continues to run ahead of our schedule.

It is now about 79% complete.

Based on the current case of construction, we expect it to be in service in early 2009.

For every month we can finish the project before the end of 2009, we reduce the $1.47 billion cost of the project, by approximately $4 million.

Through the first quarter of this year, our capital expenditures totaled over $300 million, of which about $200 million was for transmission work.

We continue to estimate that our total capital expenditures will be approximately $1.3 billion this year, including about $700 million for transmission.

I will next turn to the New England east/west solution, or NEEWS set of projects, that set of projects involves our construction of three new overhead 345 kb lines, in Massachusetts and Connecticut, as well associated substation work in 115 kb rebuilds.

One of the projects will connect to our new transmission line-- to national grid meeting along the Rhode Island border.

As I said in February the greatest Springfield reliability project may be the most complicated transmission project we have ever undertaken.

We continue to work with ISO-New England on the final design for the Springfield area solution, including the 115kb underground cables.

Our goal is to strike the right balance between reliability, operational flexibility, and cost.

We expect to initiate the siting process for the greater Springfield project in mid 2008.

The second project we expect to file with state authorities later this year, is our in-state reliability project, that would run from our Card Street substation in Lebanon, Connecticut 40 miles to the Connecticut Rhode Island border, where it would connect with enhancements National Grid is designing now.

This project traverses a rural part of Connecticut, and the project is less complex than the greater Springfield project.

The third part of news is the central Connecticut reliability project, which would involve constructions of a new line between Bloomfield, Connecticut and our Frost Bridge substation in Watertown, Connecticut.

That line would provide us with another 345kb connection, to move power from southwest Connecticut, where half of the state's power is consumed.

The timing of the project will be six to 12 months, behind the other two projects.

We would expect to initiate the siting process in 2009.

As I mentioned in February, we have not yet adjusted our estimated cost for this entire family of projects from the $1.4 billion figure that we provided you last year.

I expect this figure will rise somewhat before we begin the siting progress.

We expect to provide the updated figure to you, later this quarter.

However I should emphasize that during siting required changes in configuration to address local concerns, could raise construction costs.

Our current design for NEEWS contemplates no undergrounding of 345kb lines.

As you know, building 345kb projects underground, would increase cost.

This estimate could be altered during the siting process, similar to our experience with the southwest Connecticut projects.

Operationally, our consolidated reliability measures were on target.

Yankee Gas' 1.2 billion foot LNG facility in Waterbury, Connecticut performed well this past winter.

On the highest natural demand day of the year for Yankee Gas, in January of 2008, inventory withdrawn from the LNG facility represented 11.7% of the total supply for that day.

Through the remainder of the heating season, the LNG plant continued to maintain a capacity factor of the 100%, and added 214 million BTUs, or 20% of the tank's storage capacity, to meet Yankee's customer energy demand.

I should remind you that this facility can (inaudible) by natural gas on-site.

Even if prices for imported energy continue to rise, and become all-- or becomes unavailable, we will have the capability of filling the tank this summer, from pipelines that connect to North American sources.

PSNH's generation had a solid first quarter with an aggregate base load of capacity factor of 87.4%.

It continues to provide PSNH's customers with cost of service base load power that helps keep PSNH's generation routes the lowest in New England.

We expect to provide you with a updated estimate later this year, on the cost of installing a wet scrubber of the coal-fired Merrimack station, which must be installed by mid-2013.

As we said before we believe the update will be higher than the $250 million estimate, we first discussed about three years ago.

Earlier, Chuck referenced our March 3, proposal to build a total of 265 megawatts of peaking generation in Lebanon and Waterbury, Connecticut in connection with the state solicitation for new peaking generation projects.

We've proposed a four unit 200 mega-watt facility in Lebanon, and a 2 unit 65 megawatt facility in Waterbury, adjacent to the Yankee's LNG facility.

Hearings began Tuesday of this week, the DPC is scheduled to issue a final decision by June 18.

At this time the hearings are currently in progress, if our projects are chosen, and no legal or permitting delays are experienced, we would expect to have units in service by mid 2010.

Even then generation would be a very small component of CL&P's earning stream.

Now I would like to turn the call over the David McHale.

Thank you, Lee.

As Chuck mentioned, NU's financial performance was strong in the first quarter of 2008.

Absent the ConEd litigation settlement, we are at $88.2 million or $0.57 a share in the first quarter.

Compared with earnings of $75.1 million or $0.49 a share in the first quarter of last year, amounting to a 16% year-over-year increase in earnings per share.

This improvement was driven by our regulated transmission and distribution segment, where earnings totaled $86.3 million in the first quarter of this year, up nearly 35% from the $64.1 million we earned in those segments, in the first quarter last year.

The most significant increase was in our transmission business, where our earnings totaled $32.5 million in the first quarter of '08, more than double what earned in the first quarter of last year.

This increase was due primarily to the approximately $800 million, we have invested in the transmission projects during the 12 months ended March 31, 2008.

That investment significantly increased our rate base to $1.57 billion at March 31, 2008 excluding about $810 million of construction work in progress, that is not yet in service.

This amount in rate base is about 50% higher than the $1.08 billion transmission rate base at March 31, 2007.

In addition to a higher rate base, our transmission segment benefited from higher AFUDC earnings of $4.4 million, on the projects that will not enter rate base until the new lines are in service, including that 50% of our southwest Connecticut projects.

The transmission segment also benefited from our Q3 on rehearing, concerning the return on equities allowed by the two New England Transmission owners.

On March 24, FERC amended its October 31, 2006 order, by recognizing a calculation error, and adding 20 basis points to the base ROE for transmission owners, it also reaffirmed an additional 74 basis points beginning October 31, 2006 in recognition of higher bond yields, and an additional 50 basis points, FERC allows transmission owners, which turn over operations of its transmission lines to independent system operators, such as ISO-New England.

FERC did make some modifications to order concerning the additional 100 basis points, allowed new projects that are part of the regional system plan.

The initial order allowed the 100 basis points, on all projects in the plan.

The order on rehearing, allowed 100 basis points on projects completed, and in service by the end of 2008.

For projects completed and in service beyond 2008, it requires transmission owners to file project specific applications for additional incentives, which could include items such as higher equity returns, construction work in progress, and or, recovery of investment in projects that are abandoned.

In summary then, for our regional assets which are completed and in service prior to December 31, 2008, our overall return will amount to 12.64%, rather than the previous level of 12.44%.

For assets completed and in service beyond December 31, 2008, we will be required to make additional filings for the FERC to pursue ROE incentives.

We think this is good policy.

FERC wants to ensure that there is a nexus between the incentives granted, and the unique circumstances of each project, such as size, new technology, complexity, and financing or siting, coordination across multiple companies, or multiple power pools.

We've been asked many times over the past several weeks how this will affect NU.

To start, the additional 20 basis points are positive for us, in the first quarter 2008, we recorded an after tax gain of $3.5 million or about $0.02 a share, to reflect the retroactive impact of the order, back to 2005.

Going forward, all of our projects will receive the additional 20 basis points in their authorized ROE.

However, some of our smaller more routine transmission projects that go into service after December 31, 2008 will probably not receive the additional 100 basis points, because they will not satisfy FERC nexus test.

For southwest Connecticut, three of our four projects, Bethel-Norwalk, which entered service in October '06, the Long Island cable replacement, and the Glennburg cable projects, all should be completed by the end of this year, and should be eligible for the incremental 100 basis points.

In our view we expect the Middletown-Norwalk line to qualify for the 100 basis points incentive as well.

As for future projects, we believe that the NEEWS project should clearly qualify for the incentives.

The projects are large complex, address congestion and reliability challenges, need to be coordinated with other major transmission owners, or require cash commitment from us before they enter service, and will require approval from multiple states and agencies.

Later this year we also expect to submit a filing with the FERC, requesting incentives related to NEEWS.

The transmission rate base forecast we provided to you, since last November include the assumption that NEEWS will be approved for 100% CWIF and rate base.

On balance then, we believe this order will be somewhat earnings accretive to our longer term financial outlook, given the additional 20 basis points on the base ROE, and the fact that in our view, much of our transmission investment will qualify for the additional ROE incentives.

Near term, our 2008 guidance for this segment remains between $0.75 and $0.85 a share.

You may recall we raised guidance by $0.05 a share on both ends of the range in February.

After we concluded that construction of our Middletown-Norwalk project would remain ahead of its original schedule through 2008.

Now turning to our distribution business, I think the drivers were pretty well laid out in the earnings news release.

The distribution segment earned $53.8 million, or $0.35 a share in the first quarter of '08, compared with $48.2 million or $0.32 a share 2 of in the first quarter last year.

Two of our distribution companies showed improved results for 2007, and two showed somewhat lower performance.

Let's start with the two that demonstrated stronger performance, those were PSNH and Yankee Gas.

PSNH earned $11.5 million in the first quarter 2008, compared with $8.1 million in the same period of '07.

The increase was primarily due to the approximately $37.7 million permanent rate increase, that took effect July 1, 2007 and on a $3 million distribution increase, that was effective January 1, 2008, partially offset by higher operating expenses.

Unlike the other operating utilities, PSNH's sales were essentially flat in 2008, compared with the first quarter 2007.

PSNH's trailing distribution and generation ROE in composite was 9.8%, for the 12 months ended March 31, 2008.

We expect PSNH to achieve a regulatory ROE between 9% and 9.5% for the calendar year 2008.

Yankee Gas earnings rose to $18.6 million in the first quarter of 2008 from $13.6 million in the first quarter last year.

The improvement was a result of a $22 million July 2007 rate increase, partially offset by lower sales and higher operating cost.

Including depreciation on the $108 million LNG facility Lee mentioned earlier.

Yankee Gas burned sales down 4.9%, mostly due to warmer than average first quarter.

On a weather normalized basis, sales were off 1.5%.

Many of you have begun to inquire about increase in receivables or delinquent payments due to the economy.

We are monitoring this item closely, and seen some modest aging of our receivables, out of utilities, it's not yet become a significant concern, as I said we continue to manage this aspect of our business going forward.

The ROE for Yankee 10.2% for the 12 months ended March 31, 2008.

We expect Yankee to achieve regulatory ROE between 9% and 9.5% for the calendar year '08, somewhat below Yankee's authorized levels of 10.1%.

At CL&P first quarter distribution earnings declined modestly to $18.9 million in 2008, from $20.6 million in '07.

Higher expenses including $2.5 million a month, of additional amortization expense that will affect CL&P all year, more than offset the benefits of the $77.8 million annualized rate increase, that did not become effective until February 1.

CL&P sales were down 2.3% in the quarter, 1.6% weather adjusted, compared with the same period of '07.

CL&P's distribution ROE was 7.6% for the 12 months ended March 31.

We continue to project a distribution ROE for CL&P of about 8% for the calendar year '08, below its 9.4% recently authorized by the DPUC.

We expect CL&P's 2008 distribution net income to show meaningful improvement over '07, due to the recent rate increase, a growing rate base, and higher equity capitalization.

Western-Mass Electrics' earnings were $4.8 million in the first quarter 2008, compared with $5.9 million in the same period of 2007.

A $3 million annualized distribution rate increase effective January 1, 2008 was largely offset by a 2.2% decline in sales, 1.6% weather adjusted.

Additionally, Western-Mass experienced modestly higher operating expenses this year, on a trailing 12 month basis Western-Mass distribution ROE was 9.6%.

We expect Western-Mass Electric to achieve a regulatory ROE between 9% and 9.5%, for the calendar year 2008.

Overall, we continue to forecast earnings in the distribution and generation segment of between $1.05 and $1.15 a share in 2008, compared with earnings of $0.94 a share in 2007.

Turning to our remaining competitive business, we earned $1.9 million in the first quarter of 2008, compared with $4.8 million in the same period last year.

This year's results include a net after tax charge of $3 million, associated with the adoption of financial accounting standard number 157, fair value measurements.

We continue to project break even results at our remaining competitive businesses this year.

I should note, that at the end of this month, the last of our wholesale contracts in the PJN pool will expire, leaving a longer term obligation to a group of New York municipalities, as the only remaining wholesale sales obligation.

NU parent and affiliates broke even in the quarter, excluding the $49.5 million payment to ConEd, compared with a profit of $6.2 million in the first quarter of '07.

The change is primarily the result of the parent company having more than $900 million to invest, for most of the first quarter of last year.

The result of proceeds from our November 2006 competitive generation sale, and having very little excess cash to invest this year as those firms have been reinvested into our utilities over the last year.

We continue to project a loss of $0.10 to $0.15 cents a share in this segment in 2008, excluding the ConEd settlement charge.

As borrowing levels rise over the balance of the year, and the parent refinances at 3.3%, $150 million note that matures in June, and continues to invest equity in the utilities.

For the year we continue to project consolidated earnings of $1.65 per share, and $1.90 per share.

Excluding the ConEd payment, in between $1.45 per share and $1.70 including it.

As the cash flows and financing requirements, we will be heading in to a financing window over the next couple of months, to help finance their on-going capital investment programs, later this quarter, we expect (inaudible) issued $300 million of secure debt, and for PSNH to issue $110 million of secured debt.

As a follow-on NU will issue up to $250 million of senior unsecured debt, in part to pay off the $150 million issue mentioned earlier.

Finally, let me just touch on a couple of balance sheet and cash flow topics.

Total debt is just under 57% of total capital at the end of March, as we has noted earlier, we expect that trend, to trend upward to 60% by the end of the year.

Also our cash flows were relatively low in the first quarter due in part to the $49.5 million payment to ConEd, $85 million of regulatory underrecoveries or refunds, primarily at CL&P, and a timing difference in certain working capital items.

We expect those items to partially reverse by the end of this year, and estimate that we will generate between $450 million and $500 million in cash from operations.

Thank you very much for your time, and Jeff and I look forward to seeing many of you at the ADA conference next week in Florida.

Now I will turn the call back to Jeff.

I will turn the call back to Christine.

Christine, If you could give everybody instructions on how to enter questions.

Thank you sir.

(OPERATOR INSTRUCTIONS).

We have a question from Maury May from Power Insights.

Maury?

Yes.

Good afternoon, folks.

Congratulations on a solid quarter.

Thank you.

My question has to do with the updated projected cost for the news projects.

It's my understanding there is a conference sponsored by ISO-New England on May 19, and that they are going to discuss the cost for the NEEWS projects, should we get the cost from you shortly after this seminar?

Hello Maury.

This is Lee.

We, as I've discussed, we are working with ISO on this final design, should we conclude the final design for the greater Springfield area, then we would be able to provide the updates for NEEWS, I won't say the final updates, because as you know, as you go through the siting process, that could change.

We would provide the next round of cost updates, and those are consistent with what we've just said, at least $1.4 billion and likely to slightly increase.

If we make enough progress, we will have that ready by May 19, or slightly before.

The $1.4 billion, that includes the Springfield project?

That's correct.

That would include what we have talked about, as the Springfield underground cables as well.

The Springfield under ground cables are $350 million is that correct?

That number is not expected to change, is it?

The project as we've described it before was $350 million, we could end up with a design that includes much of the aspects of that, but we-- known as Springfield underground cables, inside of the greater Springfield design.

That could design could look very, very different, to the point where we solve it through upgrades of the 345kb in other upgrades on the 115 kb system.

Okay, I don't want to sound stupid here, just to go over one more thing, the Springfield underground is $350 million, which is part of the $1.4 billion?

That was part of the $1.4 billion.

I thought the $350 million was a fairly hard number.

You're saying that there may be design changes that could increase that?

Yes.

I think what I'm saying is that, if you take that project, if you solve the project through a bigger design of the greater Springfield project, both 345kb and 115kb, then what we've known as the cables, could be part of that design.

It would still be in total, more than the $1.4 billion, but the design solution would be a different design solution, that we described before.

Okay.

Good.

Thank you very much.

Thank you Maury.

Our next question is from Ted [Durvin], from Goldman Sachs.

Ted?

Hello.

I had a question for you, about when you would complete the Middletown-Norwalk project specifically, but the other ones as well.

How big of impact would that make, if you were to complete those before the end of this year, versus early next year in terms of returns?

I will go over the capital.

Dave can talk about the earnings impact on that.

As we've said, for every month on average that we finish the project early, it takes about $4 million of cost off the project in AFUDC cost.

So realistically, could that take $30 million or $40 million of cost off the project?

It could, based upon the current pace we are making with the project.

Dave, you may want to talk about earnings impact.

As Chuck indicated, the other two projects, both at Lindbergh, cables project, which was scheduled to be done this year, will be done this year.

And we expect that to finish basically right around that cost of $223 million.

The Long Island cable replacement project will finish for a cost of total of about $72 million, for the NU portion of that project.

I would only add there may be modest upside overall on earnings, but because the acceleration of the project reduces the carrying cost of it, you got a smaller amount of CapEx, even though you are getting it completed in service, if you see the likes of-- there may be some positive benefit, but in the fiscal year '08 not a tremendous amount.

I think I heard you say that you would assume it would receive the 12.6%, even if it were completed in early 2009.

And that is our view.

If it were completed in 2009, our sense is that would require a separate dialogue and potentially application.

Ted I would say that, the way that project is working, much of that project will be in service by the end of this year, you're talking $600 million, $650 million of that project will be in service.

Part of that project, the first major segment, segment one, is already in service, as well as one of the major switching stations.

So much of it can be put in service over the course of this year, which would leave approximately about $400 million to go into service in 2009.

Next question is on the distribution side, where are you in your thinking in terms of filing your next round of rate cases, given sort of where your ROE levels are, and given it looks like sales growth has actually been pretty weak, at least in the first quarter.

Just maybe explain your thinking on that.

Let me first touch on that last point.

It's instructive to know what we actually expected for sales growth, and driving guidance and the like.

I would say the experience that for Western-Massachusetts is not inconsistent with what we expected going forward, as we've developed our own plans for the year, it's (inaudible) 1% to 1.5%, CL&P had more of a flat expectation.

Probably where we see more erosions PSNH, we expected sales to be up 2%, so (inaudible) we are sort running under there.

On rate case strategy, I think it's safe to say, that you will not see this organization file rate cases.

That's our view in 2008.

It's likely that in 2009 we will begin a new cycle of distribution rate increases, which means generally we file for rates, that will be in service very late in the year, or more likely at the first of January, 2010.

That's something we continue to strategize.

But I think it's safe to say that 2009 will be a year of filing, as opposed to a year in which we actually get rate relief across all of our utilities.

Okay, if I could do one more, where is the Connecticut stuff coming up right now, in terms of the various peak or proposals, have you had a sense from that, in terms of which one they might be favoring, or what they are looking for?

Those hearings are on going right now.

I think it's too early to say what that outcome will be.

The AG's comments, and OCC comments ranked us, I think either number three or number four, as part of the hearings that are on going right now, I think we have provided some additional information, that perhaps would have the staff reconsider that.

Part of the rankings where the generator is located, for instance, and giving additional credit for generators located in southwest Connecticut.

The fact of the matter is, when we finished the Middleton-Norwalk line it doesn't matter where you put the generator, and if you look that up, the fact that our proposal, at least the one in Lebanon is solely fuel oil, and you look at the spreads between oil and gas, they're closing, and also I think they probably estimated too much time in terms of the plant actually being in operation, we think the plant will be used very sparingly, and therefore what you want is the lower overall capital cost, which we think our proposal stacks up quite well.

We are looking for a decision on that, around the middle of June timeframe from the DPUC.

Thank you Ted.

Our next question from Jonathan Arnold, from Merrill Lynch.

Jonathan?

Hello.

Good afternoon.

Hello.

Just wanted to ask a question on the-- we missed some of the call, it was fading in and out, and we had to jump off.

The timing of your update on NEEWS, are you saying that there could be an adjustment to the numbers, before you go ahead with siting and you may have to make further adjustments as you move through the siting process or, you still can go do this in one go?

Jonathan, this is Lee Olivier, very similar to what we previously did with the southwest Connecticut projects, you update the-- we will update hopefully, update the project on May 19, at the planning and advisory committee meeting.

I say hopefully, we are working through final details on what the final design would like with ISO-New England now.

We will update that project, and what we will do is update it to the current cost of materials, of labor, we will also put in that a-- an inflator for the years of construction.

Then as you go through the siting process, to the tune that changes are made, on the project, and you get the so called, ISO-New England technical approval of the I-39.

Generally speaking from our past experience, what happens is the cost of the project goes up, as a result of those changes.

Either caused by more equipment that needs to be added, based on ISO's review, or the fact that you end up undergrounding, or taking some other mitigation action, associated with the project.

So our experience has been, is that those projects increase, and then as we go out for the competitive bids, we will provide another update at that point in time.

So if the prices of materials and labor goes up, that will be reflected in the project then.

The May 19 meeting will you communicate something with the street around the time of that, or will people need to go-- how will that-- ?

That will be communicated through the 8-K process.

Okay.

In an open meeting of the ISO affectively?

In all likelihood, Jonathan, you have the 8-K out before the meeting.

I see.

Because our presentation would be posted, I think it's three days before, 72 hours before, the actual meeting.

The meeting is on May 19.

Yes.

We may learn of it before that, is what you're saying?

That's correct.

Okay.

One other thing, I didn't know if you can talk about this on this point.

I know you've been able to show with prior projects, the impact of congestion is such that customers actually are neutral, and (inaudible) from having the new investment in transmission.

Is this project, or the series of projects something you will be able to say the same things about?

I do.

I think when we look at the congestion essentially to and from Connecticut, Connecticut versus the rest of the region, or the differential L&P prices, there's probably $150 million savings, somewhere between $100 million and $150 million of savings, that the project can eliminate in terms of congestion costs, or L&P costs, differential L&P cost, the other aspect of this is that, if you go back to Chuck's discussion on bringing renewable energy into the region, the only way you can get that renewable energy into Connecticut, and the volume you need to make a difference, to meet things like RGI and RPS, is through the new transmission lines that we would build as part of the NEEWS project.

From that standpoint, it is absolutely needed both for reliability and to solve a whole host of other energy issues in the state.

The $100 million to $150 million, should we expect just purely just congestion, as opposed to the renewable benefits?

That would not include any renewable benefits.

Those numbers I'm using are good estimates right now.

Of course as you know, congestion can change at any given day, as a result of various circumstances.

Are those numbers you're using part of your previous filings, or is that more of a up to date number?

And I think in terms of the congestion we haven't filed any numbers on congestion, those are-- that's behind the envelope mass that we have done, on what we see in terms of the differential pricing, both in Connecticut, and the rest of the region.

Thank you very much.

You're welcome.

Thank you Jonathan.

Next question from Neil Kalton, from Wachovia.

Neil?

Good afternoon everyone.

It seems like the lines in northern New England are moving along a little faster, and there's a lot of motivated parties, but in the past you discussed one of the challenges you would have pulling down power, especially from the north and Canada, is the inability in the U.S.

to enter into long-term contracts.

I wanted to know if there has been movement on the front at the state level, what kind of hearings are being held if anything, and what it would take, would it take a change in legislation, or at the commission level?

This the Chuck, there actually was a movement in that direction in Connecticut, where there was some legislation passed that allowed us to enter into long-term contracts.

The commission currently has defined that as about four years.

That may not be long enough, if we're talking about bringing power into Connecticut.

It would require potentially some legislating, but certainly some regulatory changes to do that.

We are having conversations with a variety of other state (inaudible) now, around those projects, and I think we will continue to do that during the rest of this year.

Our goal as we said a while ago, was to have a specific project that people could actually analyze, and associate with costs and benefits, before the end of this year.

Okay,thanks.

Thank you, Neil.

We don't have more questions, I want to thank you for joining us today.

Thank you for bearing with our-- through our little interruption early in the call.

If you have questions, please give us a call, either later this afternoon or tomorrow.

David and I, as David mentioned will be down at the AGA conference starting on Sunday.

Have a good weekend everybody, and we will talk to you.