<PAGE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[x] Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended March 31, 2000
or
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from __________ to __________
Commission file number 1-14768
NSTAR
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Massachusetts 04-3466300
- ------------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
800 Boylston Street, Boston, Massachusetts 02199
- ------------------------------------------ -----
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (617)-424-2000
--------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes x No ____
---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at May 1, 2000
- ----- --------------------------
Common Shares, $1 par value 55,976,546 shares
<PAGE>
Part I -Financial Information
Item 1. Financial Statements
- ----------------------------
NSTAR
Condensed Consolidated Statements of Income
(Unaudited)
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended March 31,
2000 1999
---------- -----------
<S> <C> <C>
Operating revenues $ 665,262 $ 371,870
---------- -----------
Operating expenses:
Fuel, purchased power and cost of gas sold 340,876 153,188
Operations and maintenance 117,211 79,631
Depreciation and amortization 58,292 47,501
Demand side management and renewable energy
programs 18,165 13,268
Taxes - property and other 25,872 20,507
Income taxes 25,445 14,046
---------- -----------
Total operating expenses 585,861 328,141
---------- -----------
Operating income 79,401 43,729
Other income(expense), net 3,495 (2,485)
---------- -----------
Operating and other income 82,896 41,244
---------- -----------
Interest charges:
Long-term debt 21,592 19,458
Transition property securitization certificates 11,946 --
Other 13,057 2,670
Allowance for borrowed funds used during
construction (798) (446)
---------- -----------
Total interest charges 45,797 21,682
---------- -----------
Net income 37,099 19,562
Preferred stock dividends of subsidiary 1,490 1,490
---------- -----------
Earnings available for common shareholders $ 35,609 $ 18,072
========== ===========
Weighted average common shares outstanding:
Basic 57,262 46,946
========== ==========
Diluted 57,402 47,092
========== ==========
Earnings per common share:
Basic and diluted $ 0.62 $ 0.38
========== ==========
Dividends declared per common share $ 0.50 $ 0.485
========== ==========
</TABLE>
Condensed Consolidated Statements of Comprehensive Income
(Unaudited)
(in thousands)
<TABLE>
<CAPTION>
Three Months Ended March 31,
2000 1999
---------- -----------
<S> <C> <C>
Net income $ 37,099 $ 19,562
Other comprehensive income, net:
Unrealized gain on investments 23,454 10,728
---------- -----------
Comprehensive income $ 60,553 $ 30,290
========== ===========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
2
<PAGE>
NSTAR
Condensed Consolidated Statements of Retained Earnings
(Unaudited)
(in thousands)
<TABLE>
<CAPTION>
Three Months Ended March 31,
2000 1999
---------- -------------
<S> <C> <C>
Balance at the beginning of the period $389,989 $360,509
Net income 37,099 19,562
Dividends declared:
Common shares (28,246) (22,476)
Preferred stock (1,490) (1,490)
-------- --------
Subtotal 397,352 356,105
-------- --------
Provision for preferred stock redemption
and issuance costs (60) (60)
Common share repurchase program (2,385) --
-------- --------
Balance at the end of the period $394,907 $356,045
======== ========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
3
<PAGE>
NSTAR
Condensed Consolidated Balance Sheets
(in thousands)
<TABLE>
<CAPTION>
(Unaudited)
March 31, December 31,
2000 1999
---------- -------------
<S> <C> <C>
Assets
- ------
Utility plant in service, at original cost $3,804,344 $ 3,787,295
Less: accumulated depreciation 1,335,828 1,303,893
---------- -----------
2,468,516 2,483,402
Construction work in progress 82,649 67,217
---------- -----------
Net utility plant 2,551,165 2,550,619
Nonutility property 110,933 115,270
Goodwill 482,927 485,990
Equity investments 142,811 173,290
Other investments 231,675 69,942
Current assets:
Cash and cash equivalents 9,310 168,599
Restricted cash 145,979 147,941
Accounts receivable 402,439 392,702
Accrued unbilled revenues 29,520 34,013
Materials and supplies, at average cost 34,511 48,756
Prepaid expenses and other 319,862 251,222
---------- -----------
Total current assets 941,621 1,043,233
---------- -----------
Regulatory assets 887,579 879,547
Other deferred debits 182,437 164,997
---------- -----------
Total assets $5,531,148 $ 5,482,888
========== ===========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
4
<PAGE>
NSTAR
Condensed Consolidated Balance Sheets
(in thousands)
<TABLE>
<CAPTION>
(Unaudited)
March 31, December 31,
2000 1999
---------- ------------
Capitalization and Liabilities
- ------------------------------
<S> <C> <C>
Common equity:
Common stock, par value $1 per share
(56,576,746 and 58,059,646 shares issued
and outstanding) $ 56,577 $ 58,060
Premium on common stock 1,018,618 1,075,483
Retained earnings 394,907 389,989
---------- ----------
Total common equity 1,470,102 1,523,532
Accumulated other comprehensive income, net 43,569 20,115
---------- ----------
Cumulative preferred stock of subsidiary:
Nonmandatory redeemable series 43,000 43,000
Mandatory redeemable series 49,339 49,279
---------- ----------
Total preferred stock 92,339 92,279
---------- ----------
Long-term debt 1,283,729 986,843
Transition property securitization
certificates 616,500 646,559
---------- ----------
Total long-term debt 1,900,229 1,633,402
---------- ----------
Total capitalization 3,506,239 3,269,328
---------- ----------
Current liabilities:
Transition property securitization
certificates due within one year 58,821 50,922
Long-term debt due within one year 106,068 170,470
Notes payable 263,175 458,000
Accounts payable 194,856 193,937
Accrued interest 13,730 21,830
Dividends payable 29,239 29,871
Other 334,279 271,191
---------- ----------
Total current liabilities 1,000,168 1,196,221
---------- ----------
Deferred credits:
Accumulated deferred income taxes 629,436 608,587
Accumulated deferred investment tax credits 41,170 41,946
Other 354,135 366,806
---------- ----------
Total deferred credits 1,024,741 1,017,339
---------- ----------
Commitments and contingencies
Total capitalization and liabilities $5,531,148 $5,482,888
========== ==========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
5
<PAGE>
NSTAR
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(in thousands)
<TABLE>
<CAPTION>
Three Months Ended March 31,
2000 1999
--------- ----------
<S> <C> <C>
Operating activities:
Net income $ 37,099 $ 19,562
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 71,188 53,854
Deferred income taxes and investment
tax credits 11,563 (2,900)
Allowance for borrowed funds used during
construction (798) (446)
Net changes in:
Accounts receivable and accrued
unbilled revenues (5,244) 1,328
Materials and supplies 14,245 (4,455)
Accounts payable 919 (13,728)
Other current assets and liabilities (79,372) 9,835
Other, net (33,080) 5,269
--------- --------
Net cash provided by operating activities 16,520 68,319
--------- --------
Investing activities:
Plant expenditures (excluding AFUDC) (26,155) (22,214)
Nuclear fuel expenditures - (14,160)
Investments (77,350) 10
--------- --------
Net cash used in investing activities (103,505) (36,364)
--------- --------
Financing activities:
Common share repurchases (60,610) (27,145)
Long-term debt redemptions (65,000) --
Transition property securitization
certificates redemptions (22,154) --
Long-term debt issue, net 298,794 --
Net change in notes payable (194,825) 23,000
Dividends paid (30,471) (24,374)
--------- --------
Net cash used in financing activities (74,266) (28,519)
--------- --------
Net (decrease) increase in cash and
cash equivalents (161,251) 3,436
Cash and cash equivalents at beginning of year 316,540 98,989
--------- --------
Cash and cash equivalents at end of period $ 155,289 $102,425
========= ========
Supplemental disclosures of cash flow
information:
Cash paid during the period for:
Interest, net of amounts capitalized $ 41,419 $ 29,133
========= ========
Income taxes $ 750 $ 85
========= ========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
6
<PAGE>
Notes to Unaudited Condensed Consolidated Financial Statements
--------------------------------------------------------------
The accompanying Notes should be read in conjunction with the Notes to the
Consolidated Financial Statements incorporated in NSTAR's 1999 Annual Report on
Form 10K.
A) Merger of BEC Energy and Commonwealth Energy System
---------------------------------------------------
On August 25, 1999, BEC Energy (BEC) and Commonwealth Energy System (COM/Energy)
completed a merger transaction to create a new holding company, NSTAR, an energy
delivery company serving approximately 1.3 million customers in Massachusetts
including more than one million electric customers in 81 communities and 240,000
gas customers in 51 communities. NSTAR is an exempt public utility holding
company under the provisions of the Public Utility Holding Company Act of 1935.
NSTAR's utility subsidiaries include Boston Edison Company, Commonwealth
Electric Company, Cambridge Electric Light Company, Canal Electric Company and
Commonwealth Gas Company. NSTAR's nonutility operations include
telecommunications, district heating and cooling operations, and liquefied
natural gas services.
The merger was accounted for as an acquisition of COM/Energy by BEC using the
purchase method of accounting. Under this method, the accompanying unaudited
condensed consolidated financial statements of NSTAR for the three-month period
ended March 31, 2000 include the results of operations, comprehensive income and
cash flows of BEC for the entire period presented consolidated with those of
COM/Energy. However, the 1999 unaudited condensed consolidated financial
statements reflect the results of operations, comprehensive income and cash
flows of BEC.
7
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B) Basis of Presentation
---------------------
The financial information presented as of March 31, 2000 and for the periods
ended March 31, 2000 and 1999 have been prepared from NSTAR's books and records
without audit by independent accountants. Financial information as of December
31, 1999 was derived from the Audited Financial Statements of NSTAR, but does
not include all disclosures required by generally accepted accounting principles
(GAAP). In the opinion of NSTAR's management, all adjustments (which are of a
normal recurring nature) necessary for a fair presentation of the financial
information for the periods indicated have been included. Certain
reclassifications have been made to the prior year data to conform with the
current presentation.
The preparation of financial statements in conformity with GAAP requires NSTAR
and its subsidiaries to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosures of contingent assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from these estimates.
The results of operations for the periods ended March 31, 2000 and 1999 are not
indicative of the results which may be expected for an entire year. Kilowatt-
hour sales and revenues are typically higher in the winter and summer than in
the spring and fall as sales tend to vary with weather conditions. Gas sales
and revenues are typically higher in the winter months than during other periods
of the year.
C) Securitization
--------------
On July 29, 1999, a wholly owned special purpose subsidiary (SPS) of Boston
Edison, BEC Funding LLC closed the sale of $725 million of notes to a special
purpose trust created by two Massachusetts state agencies. The trust then
concurrently closed the sale of $725 million of electric rate reduction
certificates to the public. The certificates are secured by a portion of the
transition charge assessed on Boston Edison's retail customers as permitted
under the Massachusetts Electric Restructuring Act (the Restructuring Act) and
authorized by the Massachusetts Department of Telecommunications and Energy
(MDTE). These certificates are non-recourse to Boston Edison.
D) Contingencies
-------------
1. Environmental Matters
The utility subsidiaries of NSTAR are involved in approximately 30 properties
where oil or hazardous materials were spilled or released. As such, the
companies are required to clean up these remaining properties in accordance with
a timetable developed by the Massachusetts Department of Environmental
Protection. There are uncertainties associated with these costs due to the
complexities of cleanup technology, regulatory requirements and the particular
characteristics of the different sites. NSTAR subsidiaries also face possible
liability as a potentially responsible party in the cleanup of six multi-party
hazardous waste sites in Massachusetts and other states where it is alleged to
have generated, transported or disposed of hazardous waste at the sites. NSTAR
currently expects to have only a small percentage of the total potential
8
<PAGE>
liability for these sites. Approximately $6.6 million is included in the March
31, 2000 and December 31, 1999, Condensed Consolidated Balance Sheets related to
these cleanup liabilities. Management is unable to fully determine a range of
reasonably possible cleanup costs in excess of the accrued amount. Based on its
assessments of the specific site circumstances, management does not believe that
it is probable that any such additional costs will have a material impact on
NSTAR's consolidated financial position.
Public concern continues regarding electro magnetic fields (EMF) associated with
electric transmission and distribution facilities and appliances and wiring in
buildings and homes. Such concerns have included the possibility of adverse
health effects caused by EMF as well as perceived effects on property values.
NSTAR continues to support research into the subject and participates in the
funding of industry-sponsored studies. It is aware that public concern regarding
EMF in some cases has resulted in litigation, in opposition to existing or
proposed facilities in proceedings before regulators or in requests for
legislation or regulatory standards concerning EMF levels. It has addressed
issues relative to EMF in various legal and regulatory proceedings and in
discussions with customers and other concerned persons. However, to date it has
not been significantly affected by these developments. NSTAR continues to
monitor all aspects of the EMF issue.
ComGas is participating in the assessment of a number of former Manufactured Gas
Plant (MGP) sites and alleged MGP waste disposal locations to determine if and
to what extent such sites have been contaminated and whether ComGas may be
responsible for remedial action. As of March 31, 2000 and December 31, 1999,
ComGas has recorded a liability and corresponding regulatory asset amounting to
$2.2 million as an estimate for site cleanup costs for several MGP sites for
which ComGas was previously cited as a Potentially Responsible Party. The MDTE
has approved recovery of costs associated with MGP sites.
Estimates related to environmental remediation costs are reviewed and adjusted
periodically as further investigation and assignment of responsibility occurs.
NSTAR is unable to estimate its ultimate liability for future environmental
remediation costs. However, in view of NSTAR's current assessment of its
environmental responsibilities, existing legal requirements and regulatory
policies, management does not believe that these matters will have a material
adverse effect on NSTAR's results of operations or financial position.
2. Generating Unit Performance Program
The MDTE's generating unit performance program ceased March 1, 1998. Under
this program, the recovery of incremental purchased power costs resulting from
generating unit outages occurring through the retail access date was subject to
review by the MDTE. However, proceedings relative to generating unit
performance remain pending before the MDTE. These proceedings will include the
review of replacement power costs associated with the shutdown of the
Connecticut Yankee nuclear electric generating unit. Management is unable to
fully determine a range of reasonably possible disallowance costs in excess of
amounts accrued. Based on its assessment of the information currently
available, management does not believe that it is probable that any such
additional costs will have a material impact on NSTAR's consolidated financial
position. However, it is reasonably possible that additional provisions for
disallowance costs that may result from a change in estimate could have a
material impact on the results of a reporting period in the near term.
9
<PAGE>
3. Industry and Corporate Restructuring Legal Proceedings
The MDTE order approving the Boston Edison electric industry restructuring
settlement agreement was appealed by certain parties to the Massachusetts
Supreme Judicial Court. One settlement agreement appeal remains pending.
However, there has to date been no briefing, hearing or other action taken with
respect to this proceeding.
In addition, along with other Massachusetts investor-owned utilities, the NSTAR
utility subsidiaries have been named as defendants in a class action suit
seeking to declare certain provisions of the Restructuring Act unconstitutional.
Management is currently unable to determine the outcome of these outstanding
proceedings. However, if an unfavorable outcome were to occur, there could be a
material adverse impact on business operations, the consolidated financial
position or results of operations for a reporting period.
4. Regulatory Proceedings
In October 1997, the MDTE opened a proceeding to investigate Boston Edison's
compliance with the 1993 order which permitted the formation of Boston Edison
Technology Group (BETG) and authorized Boston Edison to invest up to $45 million
in unregulated activities. Hearings were completed during the first quarter of
1999. An MDTE ruling is expected in the later part of 2000.
Management is currently unable to determine the outcome of this proceeding.
However, if an unfavorable outcome were to occur, there could be a material
adverse impact on business operations, the consolidated financial position or
results of operations for a reporting period.
5. Rate Plan
In July 1999, the MDTE approved a rate plan filed by the utility subsidiaries of
BEC and COM/Energy in connection with the merger. A group of four interveners
and the Massachusetts Attorney General filed two separate appeals of the MDTE's
rate plan order with the Massachusetts Supreme Judicial Court (SJC) in August
1999. While management anticipates that the MDTE's decision to approve the rate
plan will be upheld by the SJC, it is unable to determine the ultimate outcome
of these appeals.
6. Other Litigation
In the normal course of its business NSTAR and its subsidiaries are also
involved in certain other legal matters. Management is unable to fully
determine a range of reasonably possible legal costs in excess of amounts
accrued. Based on the information currently available, management does not
believe that it is probable that any such additional costs will have a material
impact on NSTAR's consolidated financial position. However, it is reasonably
possible that additional legal costs that may result from a change in estimates
could have a material impact on the results of a reporting period in the near
term.
10
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E) Income Taxes
------------
The following table reconciles the statutory federal income tax rate to the
annual estimated effective income tax rate for 2000 and the actual effective
income tax rate for the year ended December 31, 1999.
2000 1999
---- ----
Statutory tax rate 35.0% 35.0%
State income tax, net of federal income
tax benefit 5.2 5.5
Investment tax credit amortization (1.2) (11.3)
Goodwill amortization 2.1 -
Other 2.5 (0.1)
---- ----
Effective tax rate 43.6% 29.1%
==== ====
F) Earnings Per Common Share
-------------------------
The following table illustrates the reconciliation between basic and diluted
earnings per share (EPS) computations.
(in thousands, except per share amounts)
Three Months
Ended March 31,
2000 1999
------ ------
Earnings available for common
shareholders $35,609 $18,072
Basic EPS $ 0.62 $ 0.38
Diluted EPS $ 0.62 $ 0.38
Weighted average common shares
outstanding for basic EPS 57,262 46,946
Effect of dilutive securities:
Weighted average dilutive potential
common shares related to share-based
compensation 140 146
Weighted average common shares
outstanding for diluted EPS 57,402 47,092
11
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G) Segment and Related Information
-------------------------------
For the purpose of providing segment information, NSTAR's principal operating
segments, or its traditional core businesses, are the electric and natural gas
utilities that provide energy delivery services in numerous cities and towns in
Massachusetts. NSTAR subsidiaries also supply electricity at wholesale for
resale to other utilities. The unregulated operating segments engage in non-
utility business activities. Such activities include telecommunications,
district heating and cooling operations, and liquefied natural gas services.
The accounting policies used to develop segment information correspond to those
described in Note B, "Basis of Presentation." NSTAR evaluates performance based
on earnings from operations before income taxes and nonrecurring gains and
losses. NSTAR accounts for inter-segment sales and transfers at current market
prices. Profits on inter-segment sales are not eliminated. Financial data for
the operating segments are as follows:
<TABLE>
<CAPTION>
(in thousands)
Utility Operations Unregulated
------------------------ Nonutility Consolidated
Electric Gas Operations Total
---------- ---------- ---------- -------------
<S> <C> <C> <C> <C>
Three months ended March 31, 2000
- ---------------------------------
Operating revenues $ 515,815 $ 126,021 $ 23,426 $ 665,262
Segment net income (loss) $ 25,790 $ 16,313 $ (5,004) $ 37,099
Three months ended March 31, 1999
- ---------------------------------
Operating revenues $ 371,195 $ - $ 675 $ 371,870
Segment net income (loss) $ 24,857 $ - $ (5,295) $ 19,562
Total assets
- ------------
March 31, 2000 $4,333,261 $ 411,189 $ 938,165 $ 5,682,615
December 31, 1999 $4,411,630 $ 459,887 $ 611,371 $ 5,482,888
</TABLE>
H) RCN Joint Venture and Investment Conversion
-------------------------------------------
Boston Energy Technology Group (BETG), a subsidiary of NSTAR through NSTAR
Communications, Inc. (NSTAR COM)(formerly known as BecoCom, Inc.) is a
participant in a telecommunications venture with RCN Telecom Services, Inc. of
Massachusetts (RCN). NSTAR accounts for its investment in the joint venture
using the equity method of accounting. As part of the joint venture agreement,
NSTAR has the option to exchange portions of its joint venture interest for
shares of RCN common stock at specified periods. During 1998, NSTAR exercised
its option to convert a portion of its interest. In the first quarter of 1999,
NSTAR received 1.1 million shares of RCN common stock in exchange for a portion
of its joint venture interest that had a book value of $11 million. On May 27,
1999, BETG notified RCN of its intention to exercise its option to convert an
additional portion of its joint venture interest that had a book value of $90
million at that time. In March 2000, NSTAR received approximately 3 million
shares of RCN common stock associated with this second exchange. The RCN shares
received are included in other investments on the March 31, 2000 Condensed
Consolidated Balance Sheets at their fair value of approximately $221 million.
This fair value may increase or decrease, at any time, as a result of changes in
the market price of RCN common shares. The unrealized gain due to the increase
in fair value on these shares during each period is reflected, net of associated
income taxes, as comprehensive income on the Condensed Consolidated Statement of
Comprehensive Income for the three months ended March 31, 2000 and 1999. The
cumulative increase in fair value of these shares as of March 31, 2000 and
December 31, 1999 is reflected as accumulated other comprehensive income, net on
the Condensed Consolidated Balance Sheets.
In addition, on April 6, 2000, NSTAR issued its third notice to exchange
substantially all of its remaining interest with a book value of approximately
$152 million in the joint venture into common stock of RCN. The ultimate number
of RCN shares to be received associated with this third notice is expected to be
determined in the third quarter of 2000 based on an agreed upon fair value of
the joint venture interest.
12
<PAGE>
Item 2. Management's Discussion and Analysis
- ---------------------------------------------
NSTAR was created through the merger of BEC Energy (BEC) and Commonwealth Energy
System (COM/Energy) on August 25, 1999 as an exempt public utility holding
company. NSTAR's utility subsidiaries are Boston Edison Company (Boston Edison),
Commonwealth Electric Company (ComElectric), Cambridge Electric Light Company
(Cambridge Electric), Canal Electric Company (Canal Electric) and Commonwealth
Gas Company (ComGas).
The electric and natural gas industries have continued to change in response to
legislative, regulatory and marketplace demands for improved customer service at
lower prices. These demands have resulted in an increasing trend in the
industry to seek competitive advantages and other benefits through business
combinations. NSTAR was created to operate in this new marketplace by combining
the resources of its utility subsidiaries and concentrating its activities in
the transmission and distribution of energy. This is illustrated by the sale of
BEC's and COM/Energy's generating facilities during 1999 and 1998.
Merger of BEC Energy and Commonwealth Energy System
An integral part of the merger is the rate plan that was filed by the retail
utility subsidiaries of BEC and COM/Energy that was approved by the
Massachusetts Department of Telecommunications and Energy (MDTE) on July 27,
1999. Significant elements of the rate plan include a four-year distribution
rate freeze, recovery of the acquisition premium (Goodwill) over 40 years and
recovery of transaction and integration costs (costs to achieve) over 10 years.
Refer to the Retail Electric Rates section of this discussion for more
information.
The merger was accounted for by NSTAR as an acquisition by BEC of COM/Energy
under the purchase method of accounting. Goodwill amounted to approximately
$486 million, resulting in an annual amortization of goodwill of approximately
$12.2 million. Costs to achieve are being amortized based on the filed estimate
of $111 million over 10 years. NSTAR's retail utility subsidiaries will
reconcile the ultimate costs to achieve with that estimate and any difference is
expected to be recovered over the remainder of the amortization period. To date,
a majority of costs to achieve the merger are for severance costs associated
with a voluntary separation program in which approximately 700 employees elected
to participate. These amounts are expected to be offset by ongoing future cost
savings from streamlined operations and avoidance of costs that would have
otherwise been incurred by BEC and COM/Energy.
In July, 1999, the MDTE approved a rate plan filed by the utility subsidiaries
of BEC and COM/Energy in connection with the merger. A group of four interveners
and the Massachusetts Attorney General filed two separate appeals of the MDTE's
rate plan order with the Massachusetts Supreme Judicial Court (SJC) in August
1999. While management anticipates that the MDTE's decision to approve the rate
plan will be upheld by the SJC, it is unable to determine the ultimate outcome
of these appeals.
Generating Asset Divestiture
To complete its divestiture of generating assets, Boston Edison sold Pilgrim
13
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Nuclear Generating Station (Pilgrim) in July 1999 for $81 million to Entergy
Nuclear Generating Company. As part of the sale, Boston Edison transferred
approximately $228 million in decommissioning funds to Entergy. Entergy, by
contract, assumed all future liability related to the ultimate decommissioning
of the plant. The difference between the total proceeds from the sale and the
net book value of the Pilgrim assets plus the net amount to fully fund the
decommissioning trust is included in regulatory assets on the accompanying
Condensed Consolidated Balance Sheets as such amounts are collected from
customers.
Securitization of Boston Edison's Transition Charge
On July 29, 1999, BEC Funding LLC, a wholly owned special-purpose subsidiary of
Boston Edison, closed the sale of $725 million of notes to a special purpose
trust created by two Massachusetts state agencies. The trust then concurrently
closed the sale on $725 million of electric rate reduction certificates as a
public offering. The certificates are secured by a portion of the transition
charge assessed on Boston Edison's retail customers as permitted under the
Massachusetts Electric Restructuring Act and authorized by the MDTE. These
certificates are non-recourse to Boston Edison.
Retail Electric Rates
As a result of the Restructuring Act, the regulated retail electric subsidiaries
of NSTAR currently provide their standard offer customers service at inflation
adjusted rates that are 15% lower than rates in effect prior to March 1, 1998,
the retail access date.
All distribution customers must pay a transition charge as a component of their
rate. The purpose of the transition charge is to allow for the collection of
generation-related costs that would not be collected in the competitive energy
supply market. The plant and regulatory asset balances that will be recovered
through the transition charge until 2009 were approved by the MDTE.
The Restructuring Act requires regulated utilities to obtain and resell power to
customers that choose not to buy energy from a competitive energy supplier. This
is referred to as "standard offer service." Standard offer service will be
available to eligible customers through 2004 at prices approved by the MDTE.
NSTAR is currently evaluating proposals from a number of competitive energy
providers to assume full responsibility for providing customers with standard
offer service through 2004. The cost of providing standard offer service, which
includes purchased power costs, is recovered from customers on a fully
reconciling basis. New retail customers in the NSTAR electric service territory
and previously existing customers that are no longer eligible for the standard
offer service and have not chosen to receive service from a competitive
supplier, are on "default service." The price of default service is intended to
reflect the average competitive market price for power.
Under the restructuring settlement agreement, Boston Edison's distribution
business is subject to a minimum and maximum return on average common equity
(ROE). The ROE is subject to a floor of 6% and a ceiling of 11.75%. If the
14
<PAGE>
ROE is below 6%, Boston Edison is authorized to add a surcharge to distribution
rates in order to achieve the 6% floor. If the ROE is above 11%, it is required
to adjust distribution rates by an amount necessary to reduce the calculated ROE
between 11% and 12.5% by 50%, and a return above 12.5% by 100%. No adjustment is
made if the ROE is between 6% and 11%. This rate mechanism expires on December
31, 2000. The cost of providing transmission service to all NSTAR distribution
customers is recovered on a fully reconciling basis.
Each NSTAR retail electric subsidiary filed proposed adjustments to their
standard offer and transition charges with the MDTE in November 1999. The MDTE
approved these proposed adjustments effective January 1, 2000. The MDTE
continues to examine NSTAR's cost recovery mechanisms.
Natural Gas Industry Restructuring and Rates
In February 1999, the MDTE determined that the capacity market in Massachusetts
was not yet workably competitive to allow it to remove traditional regulatory
controls that were designed to ensure the reliability of gas service to
customers. The MDTE further reaffirmed that the local distribution companies
must continue with their obligation to plan for and procure sufficient upstream
capacity.
Results of Operations - Three Months Ended March 31, 2000 vs. Three Months
- --------------------------------------------------------------------------
Ended March 31, 1999
- --------------------
Due to the application of purchase method accounting, the results for 2000
reflect the combined performance of BEC Energy and COM/Energy, as NSTAR. Results
for the corresponding period in 1999 only reflect BEC Energy.
Basic and diluted earnings per common share for the three months ended March 31,
2000 were $0.62 compared to $0.38 for the same period in 1999, a 63.2% increase
in earnings as described below.
The results of operations for the quarter are not indicative of the results that
may be expected for the entire year due to the seasonality of electric and gas
sales and revenues. Refer to Note B to the Unaudited NSTAR Condensed
Consolidated Financial Statements.
Operating revenues
Operating revenues increased 78.9% during the first quarter of 2000 as follows:
(in thousands)
- --------------
Retail electric revenues $ 151,037
Wholesale electric revenues (20,603)
Other revenues 36,937
Gas revenues 126,021
----------
Increase in operating revenues $ 293,392
==========
Retail electric revenues were $471.1 million in 2000 compared to $320.1 million
in 1999, an increase of approximately $151 million or 47.2%. The change in
retail revenues reflects an increase of $133 million representing
15
<PAGE>
the addition of revenues from the former COM/Energy retail electric subsidiaries
and the impact of a 6.3% increase in retail kilowatt-hour (kWh) sales. The
increase in retail kWh sales is the result of a strong local economy and colder
winter weather than was experienced in 1999. In addition, NSTAR's retail
subsidiaries increased their standard offer rates in January 2000. The revenues
charged for standard offer service are fully reconciled to the costs incurred
and have no impact on net income.
Wholesale electric revenues were $15.4 million in 2000 compared to $36 million
in 1999, a decrease of $20.6 million or 57%. This decrease in wholesale revenues
primarily reflects a decrease in contract sales due to the sale of Pilgrim
station in July 1999.
Other revenues were $52.7 million in 2000 compared to $15.8 million in 1999, an
increase of $36.9 million or 234%. This increase primarily reflects an
additional $26 million for the non-utility operations of COM/Energy.
Gas revenues were $126 million in 2000 representing revenues from COM/Gas.
Operating expenses
Fuel, purchased power and cost of gas sold was $340.9 million in 2000 compared
to $153.2 million in 1999, an increase of $187.7 million or 122%. The increase
reflects $147.7 million of expense from the COM/Energy subsidiaries. Purchased
power expense increased $54.8 million reflecting the increase in purchased power
due to the sale of Pilgrim in 1999. NSTAR adjusts its electric rates to collect
the costs related to fuel and purchased power from customers on a fully
reconciling basis. Fuel and purchased power expenses in the year 2000 reflects
an increase of $11 million in 2000 and $8.7 million in 1999 related to these
rate recovery mechanisms. Due to the rate adjustment mechanisms, changes in the
amount of fuel and purchased power expense have no impact on earnings. Fuel
expense related to Pilgrim station decreased $6.5 million due to the sale of the
plant in July 1999.
Operations and maintenance expense was $117.2 million in 2000 compared to $79.6
million in 1999, an increase of $37.6 million or 47%. This increase reflects
$63.1 million from the COM/Energy subsidiaries related to normal operations and
$2.5 million for bad debts. These increases were partially offset by decreases
of $23 million for nuclear production expenses as a result of the sale of
Pilgrim station in July 1999.
Depreciation and amortization expense was $58.3 million in 2000 compared to
$47.5 million in 1999, an increase of $10.8 million or 23%. The increase
reflects approximately $3.8 million resulting from the amortization of goodwill
and costs to achieve related to the merger and a $16.4 million increase from the
COM/Energy subsidiaries. These increases were partially offset by decreases
resulting from the nuclear generation plant divestiture.
Demand side management (DSM) and renewable energy programs expense was $18.2
million in 2000 compared to $13.3 million in 1999, an increase of $4.9 million
or 37% primarily due to $4.5 million from the COM/Energy subsidiaries. These
costs are collected from customers on a fully reconciling basis. Therefore, the
increase has no impact on earnings.
16
<PAGE>
Property and other taxes were $25.9 million in 2000 compared to $20.5 million in
1999, an increase of $5.4 million or 26%. The increase is due to $9.1 million
from the COM/Energy subsidiaries partially offset by lower municipal property
taxes of $3 million resulting from the Pilgrim station divestiture.
Income taxes from operations were $25.4 million in 2000 compared to $14 million
in 1999, an increase of $11.4 million or 81% reflecting higher pre-tax operating
income in 2000 resulting from the addition of the COM/Energy subsidiaries.
Other income (expense), net
Other income, net was $3.5 million in 2000 compared to other expense of $2.5
million in 1999, a net increase in income of $6 million due to non-utility
operations.
Interest charges
Interest on long-term debt and transmission property securitization certificates
was $26.3 million in 2000 compared to $19.5 million in 1999, an increase of $6.8
million or 35% The increase reflects $12 million of interest related to
transition property securitization certificates and $12.9 million of interest
from the COM/Energy subsidiaries. These increases were partially offset by
approximately $5 million in reductions related to the following retirements: $19
million of 7.8% debentures, $66 million of 9.875% debentures, $91 million of
9.375% debentures during the third quarter of 1999 and $65 million of 6.8%
debentures during the first quarter of 2000.
Retail Electric Sales and Revenues
Retail kWh sales increased 44% in 2000. This increase includes an increase of
38% representing the former COM/Energy subsidiaries. Without the impact of the
merger, kWh sales for 2000 would have increased 6.5% from 1999. This increase in
retail kWh sales is primarily due to weather conditions that favored electric
sales as well as a robust housing market and continued improvement in regional
economic conditions. The commercial sector represents approximately 50% of
electric operating revenues. This sector has also been positively impacted by
improved economic conditions.
Gas Sales and Revenue
ComGas generates revenues primarily through the sale and transportation of
natural gas. Gas sales are divided into two categories; firm, whereby ComGas
must supply gas or gas transportation services to customers on demand; and
interruptible, whereby ComGas may, generally during colder months, temporarily
discontinue service to high volume commercial and industrial customers. Sales of
gas to interruptible customers do not materially affect ComGas' operating income
because substantially all margin on such sales is returned to its firm
customers.
ComGas' tariffs include a seasonal Cost of Gas Adjustment Clause (CGAC) and a
Local Distribution Adjustment Clause (LDAC) that provide for the recovery, from
firm customers or default service customers, of certain costs previously
recovered through base rates. The CGAC provides for rates that must be approved
semi-annually by the MDTE. The LDAC provides for rates that require annual
approval.
17
<PAGE>
Gas sales increased primarily due to the colder than normal temperatures in the
Worcester area during the latter part of January. From January 17th through the
end of the month there was a 22% increase in the number of heating degrees days
which positively impacted sales. On January 17th, firm sales had a record
increase of 13.2% over the last record set on January 19th, 1994. The number of
ComGas customers has increased 1.6% over 1999. The increase in gas sales also
reflects the impact of higher oil prices.
Liquidity
NSTAR companies supplement internally generated funds as needed, primarily
through the issuance of short-term commercial paper and bank borrowings.
In February 2000, NSTAR issued $300 million of long-term debt that was used to
reduce short-term borrowings. NSTAR has a $450 million revolving credit
agreement with a group of banks effective through November 2002. As of March 31,
2000, $350 million of short-term debt was outstanding under this credit
agreement. The purpose of this agreement is to provide financing for general
corporate purposes, to fund the common share repurchase program and for funding
NSTAR's unregulated subsidiary ventures.
In April 1998, Boston Edison announced a common share repurchase program under
which it would repurchase up to four million of its common shares. NSTAR assumed
this program effective as of the merger date. In October 1999, this program was
completed by NSTAR. Four million shares were repurchased at a total cost of
approximately $157 million. NSTAR subsequently announced a new $300 million
common share repurchase program and, as of March 31, 2000, nearly 3.7 million
shares have been repurchased at a cost of $148.5 million. Under the program,
shares are repurchased through open market, block or privately-negotiated
transactions, or a combination. The timing and actual number of shares
repurchased will be impacted by market conditions.
Boston Edison has authority from the Federal Energy Regulatory Commission (FERC)
to issue up to $350 million of short-term debt. Boston Edison has a $200 million
revolving credit agreement with a group of banks that serve as backup to Boston
Edison's $200 million commercial paper program. Boston Edison had no short-term
debt outstanding as of March 31, 2000.
The former subsidiaries of COM/Energy have $147 million available under several
lines of credit. Approximately $69 million was outstanding under these lines of
credit as of March 31, 2000.
In July 1999, BEC Funding LLC, a wholly owned special-purpose subsidiary (SPS)
of Boston Edison, closed the sale of $725 million of notes to a special purpose
trust created by two Massachusetts state agencies. The trust then concurrently
closed the sale on $725 million of electric rate reduction certificates to the
public. The certificates held by BEC Funding are secured by a portion of the
transition charge assessed to Boston Edison's retail customers as permitted
under the Massachusetts Electric Restructuring Act and authorized by the MDTE.
The certificates were issued in five separate classes with variable payment
periods ranging from approximately one to ten years and bearing fixed interest
rates ranging from 5.99% to 7.03%. The certificates are non-recourse to Boston
Edison. Net proceeds ($719 million received by Boston Edison from BEC Funding)
were utilized to finance a portion of the stranded costs that are being
collected from customers under Boston Edison's restructuring settlement
agreement. Boston Edison will collect a portion of the transition charge on
behalf of BEC Funding and remit the proceeds to the SPS. Boston Edison used a
portion of the proceeds received from the financing to fund a portion of the
nuclear decommissioning fund transferred to Entergy Nuclear Generating Company
as part of the sale of the Pilgrim generating station. Boston Edison used the
remaining proceeds to reduce its capitalization
18
<PAGE>
and for general corporate purposes.
NSTAR's goal is to maintain a capital structure that preserves an appropriate
balance between debt and equity. Management believes its liquidity and capital
resources are sufficient to meet its current and projected requirements.
19
<PAGE>
New Accounting Principles
In June 1998, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities" (SFAS 133). SFAS 133 establishes accounting
and reporting standards requiring that every derivative instrument (including
certain derivative instruments embedded in other contracts possibly including
fixed-price fuel supply and power contracts) be recorded on the Consolidated
Balance Sheets as either an asset or liability measured at its fair value, SFAS
133, as amended by SFAS 137, "Accounting for Derivative Instruments and Hedging
Activities-Deferral of the effective Date of FASB Statement No 133", is
effective for fiscal years beginning after June 15, 2000 (January 1, 2001 for
calendar year companies). Initial application shall be as of the beginning of an
entity's fiscal quarter.
NSTAR will adopt SFAS 133 as of January 1, 2001. The impact of adoption cannot
be currently estimated and will be dependent upon the value, nature and purpose
of the derivative instruments held, if any, as of January 1, 2001.
Safe harbor cautionary statement
NSTAR occasionally makes forward-looking statements such as forecasts and
projections of expected future performance or statements of its plans and
objectives. These forward-looking statements may be contained in filings with
the Securities and Exchange Commission (SEC), press releases and oral
statements. Actual results could potentially differ materially from these
statements. Therefore, no assurances can be given that the outcomes stated in
such forward-looking statements and estimates will be achieved.
The preceding sections include certain forward-looking statements about
operating results, environmental and legal issues.
The impacts of continued cost control procedures on operating results could
differ from current expectations. The effects of changes in economic conditions,
tax rates, interest rates, technology and the prices and availability of
operating supplies could materially affect the projected operating results.
The timing and total costs related to the year 2000 plan could differ from
current expectations. Factors that may cause such differences include the
ability to locate and correct all relevant computer codes and the availability
of personnel trained in this area. In addition, NSTAR cannot predict the nature
or impact on operations of third party noncompliance.
The impacts of various environmental and legal issues could differ from current
expectations. New regulations or changes to existing regulations could impose
additional operating requirements or liabilities other than expected. The
effects of changes in specific hazardous waste site conditions and cleanup
technology could affect the estimated cleanup liabilities. The impacts of
changes in available information and circumstances regarding legal issues could
affect the estimated litigation costs.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
- -------------------------------------------------------------------
There have been no material changes since year-end.
20
<PAGE>
Part II - Other Information
Item 6. Exhibits and Reports on Form 8-K
- -----------------------------------------
a) Exhibits filed herewith and incorporated by reference:
Exhibit 4 - Instruments Defining the Rights of Security Holders,
Including Indentures
Management agrees to furnish to the Securities and
Exchange Commission, upon request, a copy of any
agreements or instruments defining the rights of
holders of any long-term debt whose authorization
does not exceed 10% of total assets.
Exhibit 12 - Computation of Ratio of Earnings to Fixed Charges
12.1 - Computation of ratio of earnings to fixed charges for
the twelve months ended March 31, 2000
12.2 - Computation of ratio of earnings to fixed charges and
preferred stock dividend requirements for the twelve
months ended March 31, 2000
12.3 - Computation of ratio of earnings to fixed charges for
the twelve months ended December 31, 1999
12.4 - Computation of ratio of earnings to fixed charges and
preferred stock dividend requirements for the twelve
months ended December 31, 1999
Exhibit 15 - Letter Re Unaudited Interim Financial Information
15.1 - Report of Independent Accountants
Exhibit 27 - Financial Data Schedule
27.1 - Schedule UT
Exhibit 99 - Additional Exhibits
99.1 - Letter of Independent Accountants
Form S-4 Registration Statement filed by NSTAR on
May 12, 1999 (File No. 333-78285); Post-effective
Amendment to Form S-4 on Form S-3 filed by NSTAR on
August 19, 1999 (File No. 333-78285); Post-effective
Amendment to Form S-4 on Form S-8 filed by NSTAR on
August 19, 1999 (File No. 333-78285); Form S-8
Registration Statement filed by NSTAR on August 19,
1999 (File No. 333-85559)
b) NSTAR filed a Form 8-K on March 30, 2000 for the filing of exhibits
related to a Registration Statement on Form S-3 (File No. 333-94735).
21
<PAGE>
Signature
---------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
NSTAR
------------
(Registrant)
Date: May 15, 2000 /s/ R. J. Weafer, Jr.
----------------------------
Robert J. Weafer, Jr.
Vice President, Controller
and Chief Accounting
Officer
22
<PAGE>
Exhibit 12.1
NSTAR
Computation of Ratio of Earnings to Fixed Charges
Twelve Months Ended March 31, 2000
(in thousands)
Net income from continuing operations $164,000
Income taxes 73,430
Fixed charges 169,831
--------
Total $407,261
========
Interest expense $152,831
Interest component of rentals 17,000
--------
Total $169,831
========
Ratio of earnings to fixed charges 2.40
========
<PAGE>
Exhibit 12.2
NSTAR
Computation of Ratio of Earnings to Fixed Charges
and Preferred Stock Dividend Requirements
Twelve Months Ended March 31, 2000
(in thousands)
Net income from continuing operations $164,000
Income taxes 73,430
Fixed charges 169,831
--------
Total $407,261
========
Interest expense $152,831
Interest component of rentals 17,000
--------
Subtotal 169,831
--------
Preferred stock dividend requirements 8,629
--------
Total $178,460
========
Ratio of earnings to fixed charges and
preferred stock dividend requirements 2.28
========
<PAGE>
EXHIBIT 12.3
NSTAR
Computation of Ratio of Earnings to Fixed Charges
Twelve Months Ended December 31, 1999
(in thousands)
<TABLE>
<CAPTION>
<S> <C>
Net income from continuing operations $146,463
Income taxes 60,141
Fixed charges 145,364
--------
Total $351,968
========
Interest expense $128,364
Interest component of rentals 17,000
--------
Total $145,364
========
Ratio of earnings to fixed charges 2.42
====
</TABLE>
<PAGE>
Exhibit 12.4
NSTAR
Computation of Ratio of Earnings to Fixed Charges
and Preferred Stock Dividend Requirements
Twelve Months Ended December 31, 1999
(in thousands)
<TABLE>
<S> <C>
Net income from continuing operations $146,463
Income taxes 60,141
Fixed charges 145,364
--------
Total $351,968
========
Interest expense $128,364
Interest component of rentals 17,000
--------
Subtotal 145,364
--------
Preferred stock dividend requirements 8,406
--------
Total $153,770
========
Ratio of earnings to fixed charges and preferred
stock dividend requirements 2.29
====
</TABLE>
<PAGE>
Exhibit 15.1
Report of Independent Accountants
To the Board of Trustees and Shareholders:
We have reviewed the accompanying condensed consolidated balance sheet of NSTAR
and its subsidiaries as of March 31, 2000, and the related condensed
consolidated statement of income and comprehensive income of retained earnings
and of cash flows for the three month period ended March 31, 2000. These
consolidated financial statements are the responsibility of management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with generally accepted auditing standards, the objective of which is the
expression of an opinion regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the accompanying condensed consolidated interim financial statements
in order for them to be in conformity with generally accepted accounting
principles.
We previously audited in accordance with generally accepted auditing standards,
the consolidated balance sheet as of December 31, 1999, and the related
consolidated statement of income and comprehensive income, of retained earnings
and of cash flows for the year then ended (not presented herein), and in our
report dated January 26, 2000 we expressed an unqualified opinion on those
consolidated financial statements. In our opinion, the accompanying condensed
consolidated balance sheet information as of March 31, 2000, is fairly stated in
all material respects in relation to the consolidated balance sheet from which
it has been derived.
PricewaterhouseCoopers LLP
Boston, Massachusetts
May 15, 2000
<TABLE> <S> <C>
<PAGE>
<ARTICLE> UT
<LEGEND>
THIS SCHEDULE CONTAINS FINANCIAL INFORMATION EXTRACTED FROM THE FORM 10-Q AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 2,551,165
<OTHER-PROPERTY-AND-INVEST> 485,419
<TOTAL-CURRENT-ASSETS> 941,621
<TOTAL-DEFERRED-CHARGES> 1,070,016
<OTHER-ASSETS> 482,927
<TOTAL-ASSETS> 5,531,148
<COMMON> 56,577
<CAPITAL-SURPLUS-PAID-IN> 1,018,618
<RETAINED-EARNINGS> 394,907
<TOTAL-COMMON-STOCKHOLDERS-EQ> 1,470,102
49,339
43,000
<LONG-TERM-DEBT-NET> 1,900,229
<SHORT-TERM-NOTES> 263,175
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 164,889
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 1,640,414
<TOT-CAPITALIZATION-AND-LIAB> 5,531,148
<GROSS-OPERATING-REVENUE> 665,262
<INCOME-TAX-EXPENSE> 25,445
<OTHER-OPERATING-EXPENSES> 560,416
<TOTAL-OPERATING-EXPENSES> 585,861
<OPERATING-INCOME-LOSS> 79,401
<OTHER-INCOME-NET> 3,495
<INCOME-BEFORE-INTEREST-EXPEN> 82,896
<TOTAL-INTEREST-EXPENSE> 45,797
<NET-INCOME> 37,099
1,490
<EARNINGS-AVAILABLE-FOR-COMM> 35,609
<COMMON-STOCK-DIVIDENDS> 28,981
<TOTAL-INTEREST-ON-BONDS> 33,538
<CASH-FLOW-OPERATIONS> 16,520
<EPS-BASIC> .62
<EPS-DILUTED> .62
</TABLE>
<PAGE>
Exhibit 99.1
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: NSTAR
Registration on
Forms S-4, S-8, and S-3.
We are aware that our report dated May 15, 2000 on our review of the condensed
consolidated interim financial information of NSTAR as of and for the period
ended March 31, 2000 and included in NSTAR's quarterly report on Form 10-Q for
the quarter then ended is incorporated by reference in NSTAR's registration
statement on Form S-4 and related amendments (File No. 333-78285), Form S-8
(File No. 333-85559) and Form S-3 (File No. 333-94735). Pursuant to Rule 436(c)
under the Securities Act of 1933, this report should not be considered a part of
the registration statements prepared or certified by us within the meaning of
Sections 7 and 11 of that Act.
PricewaterhouseCoopers LLP
Boston, Massachusetts
May 15, 2000
