DBRS Rates Northeast Utilities at BBB

Dominion Bond Rating Service (“DBRS”) has today assigned ratings to Northeast Utilities (“NU” or the “Company”) and its related subsidiaries as indicated above, all with Stable trends. The ratings reflect: (1) NU’s intended sale of its non-regulated operations and its renewed focus on its portfolio of lower-risk regulated utilities; (2) strong cash flows at regulated utilities, which operate in a good regulatory environment with a large customer base in stable franchised areas in New England; and (3) solid non-consolidated credit ratios, with adjusted interest coverage at 4.1 times and debt-to-capital at 16%.
DBRS views NU’s plan to completely exit its non-regulated businesses as a positive factor as the proposed divestitures would not have a material impact on NU’s future ongoing earnings. NU’s business risk would be reduced and its liquidity would improve as NU would no longer be required to post collateral or guarantees to support the non-regulated businesses. DBRS does note that the time frame for NU to complete the planned divestitures could stretch into 2007. Although NU will incur cash payments to divest its remaining wholesale contracts, net cash proceeds from the sale of generation assets are expected to be more than sufficient to cover the cash requirements to exit the wholesale business and other non-regulated operations.

Cash flows from regulated utilities have been solid and are expected to improve with recent rate increases, resulting mainly from new investments in the regulated transmission business. As a result of the substantial capital expenditure requirements over the 2006 to 2010 period (approximately $4.3 billion), NU will require an estimated $200 million to $300 million per year in external financing. NU’s future earnings and cash flows should gradually improve as a result of the added capital investment in lower-risk transmission and distribution. DBRS has assessed NU’s financing strategy and believes that the Company’s targeted consolidated debt-to-capital ratio of 60% (currently 56.7%) is appropriate for the assigned ratings category.