UIL Holdings Corp. (UIL, Financial) filed Quarterly Report for the period ended 2009-09-30.
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 $788.1 million; its shares were traded at around $26.33 with a P/E ratio of 12.1 and P/S ratio of 0.8. The dividend yield of Uil Holdings Corp. stocks is 6.6%. Uil Holdings Corp. had an annual average earning growth of 3% over the past 5 years.
In accordance with FASB ASC 820 “Fair Value Measurements and Disclosures” (ASC 820), UIL Holdings applies fair value measurements to certain assets and liabilities, a portion of which fall into Level 3 of the fair value hierarchy defined by ASC 820 as pricing inputs that include significant inputs that are generally less observable from objective sources. As of September 30, 2009, the assets and liabilities that are accounted for at fair value on a recurring basis as Level 3 instruments are contracts for differences, which represent 58.7% of the total amount of assets, and 100% of the total amount of liabilities accounted for at fair value on a recurring basis. The determination of fair value of the contracts for differences is based on a probability-based expected cash flow analysis that is discounted at risk-free interest rates and an adjustment for non-performance risk using credit default swap rates. Certain management assumptions were made in this valuation process, including development of pricing that extended over the term of the contracts. In addition, UIL performs an assessment of risks related to obtaining regulatory, legal and siting approvals, as well as obtaining financing resources and ultimately attaining commercial operation. The DPUC has determined that costs associated with these contracts for differences are fully recoverable. As a result, there is no impact on UIL Holdings net income as any unrealized gains/(losses) resulting from quarterly mark-to-market adjustments are offset by the establishment of regulatory assets/(liabilities) that have been recognized for the purpose of such recovery.
On February 4, 2009, the DPUC issued its final decision regarding UI s application requesting an increase in distribution rates (the “2009 Decision”), the results of which included a $6.13 million increase in revenue requirements for 2009, compared to 2008. Because a larger, previously approved increase in revenue requirements for 2009 had gone into effect January 1, 2009, UI returned approximately $0.97 million to ratepayers through a one-time adjustment in April 2009. The 2009 Decision provides for an allowed distribution return on equity of 8.75%, a decrease from the previously approved 9.75%, and a capital structure of 50% equity and 50% debt compared to the previously approved 48% equity and 52% debt. The 2009 Decision continues the prior earnings sharing mechanism structure, applying to the new 8.75% allowed return, whereby 50% of any earnings over the allowed twelve month level is returned to customers and 50% is retained by UI. Given the effective date of the 2009 Decision, UI s allowed distribution weighted average return on equity for 2009 is 8.84%. The 2009 Decision provides for recovery of updated pension and postretirement expense for 2010, based upon a December 31, 2009 valuation. The 2009 Decision also provides for an additional increase in distribution revenue requirements of $19.14 million for 2010.
UI has wholesale power supply agreements in place for the supply of all of UI s standard service customers for all of 2009, all of 2010, 60% for 2011 and 10% for 2012. Supplier of last resort service is procured on a quarterly basis. UI determined that its contracts for standard service and supplier of last resort service are derivatives under ASC 815 “Derivatives and Hedging” and elected the “normal purchase, normal sale” exception under ASC 815. As such, UI regularly assesses the accounting treatment for its power supply contracts. These wholesale power supply agreements contain default provisions that include required performance assurance, including certain collateral obligations, in the event that UI s credit rating on senior debt were to fall below investment grade. In October 2009,
Prior to the assets being placed in service, for project costs incurred before August 8, 2005, the FERC allowed UI to include 50% of Construction Work In Progress (CWIP) expenditures in the rate base and thus earn a return on that portion of UI s investment before the Project was completed. Effective as of May 23, 2007, for project costs incurred after August 8, 2005, the FERC allowed UI to include 100% of CWIP expenditures in rate base. Several public entities sought rehearing of the order granting incentives, but on January 16, 2009, the FERC denied those requests. On January 29, 2009, the DPUC and the Attorney General of Connecticut filed a petition with the U.S. Court of Appeals seeking judicial review of the FERC s May 22, 2007 and January 16, 2009 orders. UI is unable to predict the outcome of these appeals at this time.
GenConn has approval from the DPUC to build 200 MW of nominal capacity at NRG s existing plant in Devon, CT (the “Devon Project”) and 200 MW of nominal capacity at NRG s existing plant in Middletown, CT (the “Middletown Project”). GenConn expects to finance 50% of its capital requirements with the proceeds of the Project Financing it obtained on April 27, 2009. UI and NRG will each make an equity investment in GenConn on a 50%/50% basis to meet the remaining 50% of GenConn s capital requirements. Such equity investments are expected to occur within the first six months of 2010 in the amount of approximately $57 million for the Devon Project and within the first six months of 2011 in the amount of approximately $64.5 million for the Middletown Project. UI expects to use the proceeds of the EBL it obtained on April 27, 2009 for its portion of those requirements and to replace the EBL with cash on hand and with funds raised in the capital markets. See Part I, Item 1, “Financial Statements and Supplementary Data - Notes to Consolidated Financial Statements – Note (B), Capitalization for further discussion of the EBL.
Read the The complete ReportUIL is in the portfolios of Jean-Marie Eveillard of Arnhold & S. Bleichroeder Advisers, LLC.
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 $788.1 million; its shares were traded at around $26.33 with a P/E ratio of 12.1 and P/S ratio of 0.8. The dividend yield of Uil Holdings Corp. stocks is 6.6%. Uil Holdings Corp. had an annual average earning growth of 3% over the past 5 years.
Highlight of Business Operations:
Two peaking generation projects, each with a nominal capacity of 200 megawatts (MW), are to be built at NRG s existing Connecticut plant locations in Devon and Middletown. GenConn s Devon plant is scheduled to be in commercial operation by June 1, 2010, and its Middletown plant is scheduled to be in commercial operation by June 1, 2011. GenConn recovers its costs under a contract for differences (CfD) agreement which is cost of service based. GenConn has signed CfDs for both projects with CL&P. The cost of the contracts will be paid by customers and will be subject to a cost-sharing agreement whereby approximately 20% of the cost is borne by UI customers and approximately 80% by CL&P customers.In accordance with FASB ASC 820 “Fair Value Measurements and Disclosures” (ASC 820), UIL Holdings applies fair value measurements to certain assets and liabilities, a portion of which fall into Level 3 of the fair value hierarchy defined by ASC 820 as pricing inputs that include significant inputs that are generally less observable from objective sources. As of September 30, 2009, the assets and liabilities that are accounted for at fair value on a recurring basis as Level 3 instruments are contracts for differences, which represent 58.7% of the total amount of assets, and 100% of the total amount of liabilities accounted for at fair value on a recurring basis. The determination of fair value of the contracts for differences is based on a probability-based expected cash flow analysis that is discounted at risk-free interest rates and an adjustment for non-performance risk using credit default swap rates. Certain management assumptions were made in this valuation process, including development of pricing that extended over the term of the contracts. In addition, UIL performs an assessment of risks related to obtaining regulatory, legal and siting approvals, as well as obtaining financing resources and ultimately attaining commercial operation. The DPUC has determined that costs associated with these contracts for differences are fully recoverable. As a result, there is no impact on UIL Holdings net income as any unrealized gains/(losses) resulting from quarterly mark-to-market adjustments are offset by the establishment of regulatory assets/(liabilities) that have been recognized for the purpose of such recovery.
On February 4, 2009, the DPUC issued its final decision regarding UI s application requesting an increase in distribution rates (the “2009 Decision”), the results of which included a $6.13 million increase in revenue requirements for 2009, compared to 2008. Because a larger, previously approved increase in revenue requirements for 2009 had gone into effect January 1, 2009, UI returned approximately $0.97 million to ratepayers through a one-time adjustment in April 2009. The 2009 Decision provides for an allowed distribution return on equity of 8.75%, a decrease from the previously approved 9.75%, and a capital structure of 50% equity and 50% debt compared to the previously approved 48% equity and 52% debt. The 2009 Decision continues the prior earnings sharing mechanism structure, applying to the new 8.75% allowed return, whereby 50% of any earnings over the allowed twelve month level is returned to customers and 50% is retained by UI. Given the effective date of the 2009 Decision, UI s allowed distribution weighted average return on equity for 2009 is 8.84%. The 2009 Decision provides for recovery of updated pension and postretirement expense for 2010, based upon a December 31, 2009 valuation. The 2009 Decision also provides for an additional increase in distribution revenue requirements of $19.14 million for 2010.
UI has wholesale power supply agreements in place for the supply of all of UI s standard service customers for all of 2009, all of 2010, 60% for 2011 and 10% for 2012. Supplier of last resort service is procured on a quarterly basis. UI determined that its contracts for standard service and supplier of last resort service are derivatives under ASC 815 “Derivatives and Hedging” and elected the “normal purchase, normal sale” exception under ASC 815. As such, UI regularly assesses the accounting treatment for its power supply contracts. These wholesale power supply agreements contain default provisions that include required performance assurance, including certain collateral obligations, in the event that UI s credit rating on senior debt were to fall below investment grade. In October 2009,
Prior to the assets being placed in service, for project costs incurred before August 8, 2005, the FERC allowed UI to include 50% of Construction Work In Progress (CWIP) expenditures in the rate base and thus earn a return on that portion of UI s investment before the Project was completed. Effective as of May 23, 2007, for project costs incurred after August 8, 2005, the FERC allowed UI to include 100% of CWIP expenditures in rate base. Several public entities sought rehearing of the order granting incentives, but on January 16, 2009, the FERC denied those requests. On January 29, 2009, the DPUC and the Attorney General of Connecticut filed a petition with the U.S. Court of Appeals seeking judicial review of the FERC s May 22, 2007 and January 16, 2009 orders. UI is unable to predict the outcome of these appeals at this time.
GenConn has approval from the DPUC to build 200 MW of nominal capacity at NRG s existing plant in Devon, CT (the “Devon Project”) and 200 MW of nominal capacity at NRG s existing plant in Middletown, CT (the “Middletown Project”). GenConn expects to finance 50% of its capital requirements with the proceeds of the Project Financing it obtained on April 27, 2009. UI and NRG will each make an equity investment in GenConn on a 50%/50% basis to meet the remaining 50% of GenConn s capital requirements. Such equity investments are expected to occur within the first six months of 2010 in the amount of approximately $57 million for the Devon Project and within the first six months of 2011 in the amount of approximately $64.5 million for the Middletown Project. UI expects to use the proceeds of the EBL it obtained on April 27, 2009 for its portion of those requirements and to replace the EBL with cash on hand and with funds raised in the capital markets. See Part I, Item 1, “Financial Statements and Supplementary Data - Notes to Consolidated Financial Statements – Note (B), Capitalization for further discussion of the EBL.
Read the The complete ReportUIL is in the portfolios of Jean-Marie Eveillard of Arnhold & S. Bleichroeder Advisers, LLC.
