Northeast UtilitiesNU

Morningstar Rating

Stock Research and Analysis

by Travis Miller

Land constraints and growing energy demands in New England make it an ideal area for regulated utilities. Strategically positioned between New York City and Boston, Northeast Utilities has numerous opportunities to earn consistent, growing profits and Read more

Bulls Say

NU has increased its dividend for seven consecutive years, to $0.95 in 2009, which yields 4% at our fair value estimate.

Environmental concerns and capacity constraints in the Northeast are making the company's existing assets more valuable.

The bulk of NU's planned investment is in transmission, which could earn federally regulated returns on equity near 13%.

High power prices in New England increase the value of any new infrastructure that can reduce congestion and improve reliability. Read more

Bears Say

Without its merchant generation business, NU is fully exposed to the whims of regulators, who could cut rates if utility bills get too high.

The company's aggressive investment plans could slow its industry-leading dividend growth rate in the near term.

NU will need to issue much more debt and equity to fund its huge capital-investment plans.

Free cash flows could be negative until 2013 while NU builds out its infrastructure. Read more

Strategy

As merchant power generation became less attractive and regulated utility investment opportunities became more attractive, NU shifted its strategy. Now, regulators set returns for nearly all of the company's Read more

Management

Charles Shivery spent his career working on the generation side of the utility business before taking the CEO role in 2004. He oversaw one significant transition in 2007 as Cheryl Grise, second in command to Shivery, retired in July 2008 after 27 years Read more

Profile

Northeast Utilities is a diversified holding company with subsidiaries that provide regulated utility services and competitive energy services. The company's regulated electric Read more

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