UIL Holdings Corp. Reports Operating Results (10-Q)

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Aug 06, 2009
UIL Holdings Corp. (UIL, Financial) filed Quarterly Report for the period ended 2009-06-30.

UIL Holdings Corporation is the holding company for The United Illuminating Company and United Resources. United Illuminating Company is aNew Haven-based regional distribution utility that provides electricity and energy-related services to customers in municipalities in the Greater New Haven and Greater Bridgeport areas.(PR) UIL Holdings Corp. has a market cap of $724.1 million; its shares were traded at around $24.69 with a P/E ratio of 11.6 and P/S ratio of 0.8. The dividend yield of UIL Holdings Corp. stocks is 6.9%. UIL Holdings Corp. had an annual average earning growth of 3% over the past 5 years.

Highlight of Business Operations:

On April 27, 2009, UI closed on a bank financing in the amount of $121.5 million with a syndicate of banks (the “Equity Bridge Loan” or “EBL”), the proceeds of which will be used by UI during GenConn s construction to fund its commitments as a 50% owner of GenConn. UI expects that GenConn will direct approximately $57 million of such amount to GenConn Devon LLC (GenConn Devon) and approximately $64.5 million to GenConn Middletown LLC (GenConn Middletown), each of which is a wholly owned subsidiary of GenConn, for use in the construction of peaking generation facilities by those entities. UI will draw on this facility as needed to fund its commitments to GenConn as construction progresses. UI does not have any further funding commitments to GenConn at this time and does not guarantee any of GenConn s obligations. Borrowings under this facility as of June 30, 2009 were $69.3 million.

UI s CTA collection recovers costs that have been reasonably incurred, or will be incurred, to meet its public service obligations and that will likely not otherwise be recoverable in a competitive market. These “stranded costs” include above-market long-term purchased power contract obligations, regulatory asset recovery and above-market investments in power plants. A significant amount of UI s earnings is generated by the authorized return on the equity portion of unamortized stranded costs in the CTA rate base. UI s after-tax earnings attributable to CTA for the six month periods ended June 30, 2009 and 2008 were $3.8 million and $4.7 million, respectively. A significant portion of UI s cash flow from operations is also generated from those earnings and from the recovery of the CTA rate base. Cash flow from operations related to CTA amounted to $19.1 million and $19.2 million, respectively, for the six month periods ended June 30, 2009 and 2008. The CTA rate base has declined from year to year for a number of reasons, including: amortization of stranded costs, the sale of UI s nuclear units, and adjustments made through the annual DPUC review process. The original rate base component of stranded costs, as of January 1, 2000, was $433 million. It has since declined to $170.6 million at June 30, 2009. In the future, UI s CTA earnings will decrease while, based on UI s current projections, cash flow will remain fairly constant until stranded costs are fully amortized. Total CTA cost recovery is currently projected to be completed in 2015, with stranded cost amortizations expected to end in 2013. The date by which stranded costs are fully amortized depends primarily upon the DPUC s future decisions, which could affect future rates of stranded cost amortization.

The unrestricted cash position of UIL Holdings increased by $4.6 million from December 31, 2008 to June 30, 2009, as cash provided by operating and financing activities exceeded cash used in investing activities. Cash used in investing activities during the second quarter of 2009 consisted primarily of capital expenditures of $58.9 million for distribution and transmission infrastructure as well as an additional $33.7 million in funds loaned to GenConn. Cash provided by financing activities during the second quarter of 2009 included $92.0 million from issuances of common stock, $90.0 million from net issuances of long-term debt, partially offset by net payments on short-term notes payable of $139.0 million and the quarterly dividend payments on UIL Holdings common stock totaling $21.8 million.

UIL Holdings and UI have a revolving credit agreement with a group of banks that extends to December 22, 2011. The borrowing limit under the facility for UI is $175 million, with $50 million of the limit available for UIL Holdings. The facility permits borrowings at fluctuating interest rates determined by reference to Citibank s New York base rate and the Federal Funds Rate (as defined in the facility), and also permits borrowings for fixed periods up to six months as specified by UI and UIL Holdings at fixed interest rates determined by the Eurodollar interbank market in London (LIBOR). The facility also permits the issuance of letters of credit up to $50 million. UI had $9 million outstanding under the facility and UIL Holdings had a standby letter of credit outstanding in the amount of $1 million as of June 30, 2009. The UIL Holdings standby letter of credit reduces the amount of credit available for UI. Available credit, under this facility, at June 30, 2009 for UI was $165 million, of which $49 million is available for UIL Holdings.

During the first quarter of 2009, UIL Holdings had elected to significantly reduce its planned capital spending for 2009 in response to conditions in the capital markets. The 2009 capital expenditure projections of $140-$155 million previously disclosed in UIL Holdings Annual Report on Form 10-K for the fiscal year ended December 31, 2008, had been reduced to $75 - $90 million and have now been partially restored. As a result, UIL Holdings estimated capital expenditures for 2009 are $123.9 million as shown below:

UIL Holdings total earnings were $13.8 million, or $0.51 per share, an increase of $2.5 million, or $0.06 per share, compared to the second quarter of 2008. These results include immaterial losses from discontinued operations in the second quarter of both years. The dilutive effect of the May 2009 issuance of an additional 4,600,000 shares of common stock on the second quarter of 2009 was $0.04 per share.

Read the The complete ReportUIL is in the portfolios of Jean-Marie Eveillard of Arnhold & S. Bleichroeder Advisers, LLC.