NU Reports Second Quarter Results and Reaffirms Earnings Guidance

BERLIN, Conn., July 26 /PRNewswire-FirstCall/ -- Northeast Utilities continues to make significant progress toward the strategic direction announced in March 2005, Charles W. Shivery, NU chairman, president, and chief executive officer, said today.

Progress in the second quarter of 2005 included the continued deployment of significant capital into the company's regulated transmission and distribution infrastructure, and the completion of several steps in the exit from the wholesale marketing and energy services businesses. NU's second quarter results reflect that progress, Shivery said, but were negatively impacted by the effect of increasing market prices on the wholesale electricity contracts the company is seeking to divest.

For the second quarter of 2005, NU announced a loss of $27.7 million or $0.21 per share, compared with earnings of $24.0 million, or $0.19 per share, in the second quarter of 2004. For the first six months of 2005, NU lost $145.4 million, or $1.12 per share, compared with earnings of $91.4 million, or $0.71 per share, in the first half of 2004.

NU's competitive businesses lost $47.1 million in the second quarter of 2005, compared with earnings of $4.0 million in the second quarter of 2004. In the first half of 2005, those businesses lost $214.5 million, compared with earnings of $22.8 million in the first half of 2004. The lower 2005 results were due primarily to charges associated with NU's previously announced decision to exit two of its four competitive energy business lines. The after-tax charges totaled $41.2 million in the second quarter of 2005 and $150.2 million in the first quarter of 2005. The second quarter charges primarily reflect increases in electricity prices in the forward markets over the next several years, which reduced the mark-to-market value of certain wholesale electric contracts that NU Enterprises, Inc. (NUEI), NU's competitive energy holding company, is seeking to divest. NUEI's earnings are expected to be volatile until those contracts expire, are sold, or are restructured.

NU's regulated utilities earned $22.1 million in the second quarter of 2005, compared with $27.1 million in the second quarter of 2004. In the first half of 2005, NU's regulated companies earned $75.6 million, compared with $80.5 million in the first half of 2004. Lower regulated results reflect an after-tax charge of $4.4 million associated with a decision by Connecticut state regulators concerning refunds to streetlighting customers as well as the absence of certain positive adjustments that had been reflected in 2004 earnings. Regulated electric sales were up approximately 1 percent in the second quarter of 2005, compared with the same period of 2004. For the first six months of 2005, electric sales were essentially flat compared with 2004.

Shivery said NU continues to project 2005 earnings of between $1.22 per share and $1.30 per share at its regulated businesses and parent company expense this year of between $0.08 per share and $0.13 per share. Because of the restructuring of its competitive businesses, NU is not providing 2005 guidance for those businesses.

The following table reconciles 2005 and 2004 second quarter and first half earnings. Additional tables reconciling 2005 and 2004 results by business lines are included near the end of the news release.

Second Quarter First Half 2004 Reported EPS $0.19 $0.71 Investment write-downs in 2004 $0.02 $0.03 Adjusted EPS in 2004 $0.21 $0.74 Lower regulated results in 2005 ($0.04) ($0.04) Lower competitive results in 2005, excluding charges ($0.08) ($0.26) Other $0.02 $0.01 Adjusted EPS in 2005 $0.11 $0.45 Merchant energy restructuring and impairment charges in 2005 ---- ($0.04) Energy services businesses restructuring and impairment charges in 2005 ($0.01) ($0.20) Wholesale mark-to-market charges in 2005 ($0.31) ($1.33) 2005 Reported EPS ($0.21) ($1.12) Competitive businesses

Shivery said NU's competitive business performance includes two components, the costs associated with the two business lines it is exiting and the results of the two business lines NU is retaining. As previously disclosed, retail energy marketing results were negatively impacted by a requirement to account for the sourcing of its customers' electric requirements at current market prices for supply contracts signed in the past at lower prices. This was necessitated by the fact that the source of those contracts, wholesale marketing, is being divested. As a result, a first- quarter 2005 gain on those retail contracts of $59.9 million was recorded, but future quarterly retail marketing results will be negatively affected to a significant extent through 2007. Retail unit margins and volumes, however, continue to meet expectations. Also, competitive generating operating performance in 2005 has been strong.

Excluding other restructuring, impairment, and mark-to-market charges noted below, NUEI's retail marketing business and wholesale business, the latter of which continues to include generation and wholesale supply, lost $3.1 million for the second quarter 2005. That figure includes the negative $6.3 million second quarter impact related to retail electricity sourcing. Excluding the $6.3 million negative impact in the second quarter and the $59.9 million gain in the first quarter, NUEI's retail energy marketing business earned $1.4 million in the second quarter of 2005 and $2.8 million in the first half of 2005, respectively.

Shivery said NUEI continues to make progress in divesting its wholesale power contracts. Fifteen firms indicated interest in NUEI's wholesale contracts and discussions are continuing with a short list of those firms.

NUEI also continues to work to complete the divestiture of its performance contracting, electrical, HVAC, telecommunications, and plumbing contracting businesses by the end of 2005. A number of parties have expressed interest in those businesses, and NUEI is in the process of receiving and evaluating bids. NUEI expects to divest these businesses by the end of 2005.

Regulated businesses

Shivery said he was pleased with the progress NU's regulated utilities have made on their major infrastructure projects in the first six months of 2005. These projects, representing a total capital investment of over $1.4 billion, continue to be on schedule. The Connecticut Light and Power Company's (CL&P) 21-mile, 345-kv transmission project between Bethel, Connecticut and Norwalk, Connecticut is under construction and is now approximately 30 percent complete. The Middletown, Connecticut to Norwalk and Glenbrook Cables transmission projects have been approved and are under way. Work began earlier this year on Yankee Gas Services Company's (Yankee Gas) 1.2 billion cubic foot natural gas storage facility in Waterbury, Connecticut and the project is now about 20 percent complete. Also, Public Service Company of New Hampshire (PSNH) is approximately 55 percent complete on its conversion of a 50-megawatt coal-fired generating unit at Schiller Station in Portsmouth, New Hampshire to burn wood chips.

Financial results for each business line and regulated subsidiaries are as follows:

Three months ended: Increase (in millions) June 30, 2005 June 30, 2004 (Decrease) CL&P $11.1 $17.3 ($6.2) PSNH $9.0 $6.0 $3.0 Western Massachusetts Electric Company (WMECO) $2.4 $3.6 ($1.2) Yankee Gas ($0.4) $0.2 ($0.6) Total - Utility Group $22.1 $27.1 ($5.0) Merchant Energy - excluding gains/charges ($3.1) $5.9 ($9.0) Mark-to-market charges on wholesale contracts ($39.8) --- ($39.8) Restructuring and impairment charges related to Merchant Energy ($0.7) --- ($0.7) Total - Merchant Energy ($43.6) $5.9 ($49.5) Energy Services results and NUEI Parent ($2.8) ($1.9) ($0.9) Restructuring and impairment charges related to Energy Services, NUEI Parent ($0.7) --- ($0.7) Total - Services, NUEI Parent ($3.5) ($1.9) ($1.6) Total - Competitive Businesses ($47.1) $4.0 ($51.1) Investment write-downs ($0.5) ($2.4) $1.9 NU Parent and other ($2.2) ($4.7) $2.5 Reported Earnings ($27.7) $24.0 ($51.7) Six months ended: Increase (in millions) June 30, 2005 June 30, 2004 (Decrease) CL&P $36.2 $43.5 ($7.3) PSNH $17.8 $17.8 --- WMECO $7.1 $7.1 --- Yankee Gas $14.5 $12.1 $2.4 Total - Utility Group $75.6 $80.5 ($4.9) Merchant Energy - excluding gains/charges ($4.7) $25.0 ($29.7) Mark-to-market charges on wholesale contracts ($172.4) --- ($172.4) Restructuring and impairment charges related to Merchant Energy ($5.3) --- ($5.3) Total - Merchant Energy ($182.4) $25.0 ($207.4) Energy Services results and NUEI Parent ($6.0) ($2.2) ($3.8) Restructuring and impairment charges related to Energy Services, NUEI Parent ($26.1) --- ($26.1) Total - Services, NUEI Parent ($32.1) ($2.2) ($29.9) Total - Competitive Businesses ($214.5) $22.8 ($237.3) Investment write-downs ($0.5) ($3.9) $3.4 NU Parent and other ($6.0) ($8.0) $2.0 Reported Earnings ($145.4) $91.4 ($236.8)

NU has approximately 130 million common shares outstanding. It operates New England's largest energy delivery system, serving approximately 2 million customers in Connecticut, New Hampshire and Massachusetts.

This news release includes statements concerning NU's expectations, plans, objectives, future financial performance and other statements that are not historical facts. These statements are "forward-looking statements" within the meaning of the Private Litigation Reform Act of 1995. In some cases the reader can identify these forward-looking statements by words such as "estimate", "expect", "anticipate", "intend", "plan", "believe", "forecast", "should", "could", and similar expressions. Forward-looking statements involve risks and uncertainties that may cause actual results or outcomes to differ materially from those included in the forward-looking statements. Factors that may cause actual results to differ materially from those included in the forward-looking statements include, but are not limited to, actions by state and federal regulatory bodies, competition and industry restructuring, changes in economic conditions, changes in weather patterns, changes in laws, regulations or regulatory policy, expiration or initiation of significant energy supply contracts, changes in levels of capital expenditures, developments in legal or public policy doctrines, technological developments, volatility in electric and natural gas commodity markets, effectiveness of our risk management policies and procedures, changes in accounting standards and financial reporting regulations, fluctuations in the value of electricity positions, obtaining new contracts at anticipated volumes and margins, terrorist attacks on domestic energy facilities, and other presently unknown or unforeseen factors. Other risk factors are detailed from time to time in our reports to the Securities and Exchange Commission. We undertake no obligation to update the information contained in any forward-looking statements to reflect developments or circumstances occurring after the statement is made.

NOTE: NU will webcast an investor meeting Wednesday, July 27, 2005, at 3 p.m. Eastern Daylight Time. The call can be accessed through NU's website at http://www.nu.com/.

Northeast Utilities and Subsidiaries Consolidated Statements of Cash Flows Six Months Ended June 30, 2005 2004 (Thousands of Dollars) Operating Activities: Net (loss)/income $(145,423) $91,434 Adjustments to reconcile to net cash flows provided by operating activities: Wholesale contract market charges, net of tax 137,443 - Restructuring and impairment charges, net of tax 31,362 - Bad debt expense 6,200 4,207 Depreciation 116,349 110,134 Deferred income taxes and investment tax credits, net 2,786 34,478 Amortization 47,119 57,378 Amortization of rate reduction bonds 86,906 81,293 Amortization of recoverable energy costs 31,544 24,193 Pension expense 16,465 5,318 Regulatory (refunds)/overrecoveries (59,886) 8,753 Derivative assets 59,980 (35,437) Derivative liabilities (65,084) 29,580 Other sources of cash 32,335 18,853 Other uses of cash (71,460) (69,381) Changes in current assets and liabilities: Receivables and unbilled revenues, net 94,685 75,311 Fuel, materials and supplies 8,141 51 Investments in securitizable assets (108,491) (23,923) Taxes receivable 25,886 - Other current assets 17,424 9,007 Accounts payable (11,856) 34,267 Other current liabilities 22,900 38,416 Net cash flows provided by operating activities 275,325 493,932 Investing Activities: Investments in property and plant: Electric, gas and other utility plant (317,522) (291,417) Competitive energy assets (12,945) (11,329) Cash flows used for investments in property and plant (330,467) (302,746) Net proceeds from sale of land 23,792 - Restricted cash - LMP costs - (30,257) Other investment activities 5,543 11,450 Net cash flows used in investing activities (301,132) (321,553) Financing Activities: Issuance of common shares 7,565 2,786 Issuance of long-term debt 200,000 82,438 Retirement of rate reduction bonds (96,729) (90,616) Decrease in short-term debt (2,844) (99,193) Reacquisitions and retirements of long-term debt (48,459) (23,621) Cash dividends on common shares (41,629) (38,379) Other financing activities 16,397 (486) Net cash flows provided by/(used in) financing activities 34,301 (167,071) Net increase in cash and cash equivalents 8,494 5,308 Cash and cash equivalents - beginning of period 46,989 43,372 Cash and cash equivalents - end of period $55,483 $48,680

The data contained in this report is preliminary and is unaudited. This report is being submitted for the sole purpose of providing information to present shareholders about Northeast Utilities and Subsidiaries and is not a representation, prospectus, or intended for use in connection with any purchase or sale of securities.

Northeast Utilities and Subsidiaries Consolidated Balance Sheets June 30, December 31, 2005 2004 (Thousands of Dollars) ASSETS Current Assets: Cash and cash equivalents $55,483 $46,989 Special deposits 94,480 82,584 Investments in securitizable assets 247,882 139,391 Receivables, net 700,689 771,257 Unbilled revenues 114,121 144,438 Taxes receivable 35,534 61,420 Fuel, materials and supplies, at average cost 177,039 185,180 Derivative assets - current 275,201 81,567 Prepayments and other 101,018 154,395 1,801,447 1,667,221 Property, Plant and Equipment: Electric utility 6,106,413 5,918,539 Gas utility 800,517 786,545 Competitive energy 909,534 918,183 Other 252,373 241,190 8,068,837 7,864,457 Less: Accumulated depreciation 2,459,733 2,382,927 5,609,104 5,481,530 Construction work in progress 466,112 382,631 6,075,216 5,864,161 Deferred Debits and Other Assets: Regulatory assets 2,561,655 2,745,874 Goodwill 290,791 319,986 Prepaid pension 331,908 352,750 Prior spent nuclear fuel trust, at fair value 49,950 49,296 Derivative assets - long-term 427,156 198,769 Other 412,433 457,777 4,073,893 4,124,452 Total Assets $11,950,556 $11,655,834 June 30, December 31, 2005 2004 (Thousands of Dollars) LIABILITIES AND CAPITALIZATION Current Liabilities: Notes payable to banks $177,156 $180,000 Long-term debt - current portion 45,086 90,759 Accounts payable 809,423 825,247 Accrued interest 52,292 49,449 Derivative liabilities - current 298,719 130,275 Counterparty deposits 102,172 57,650 Other 227,403 230,022 1,712,251 1,563,402 Rate Reduction Bonds 1,449,761 1,546,490 Deferred Credits and Other Liabilities: Accumulated deferred income taxes 1,368,991 1,434,403 Accumulated deferred investment tax credits 97,285 99,124 Deferred contractual obligations 369,338 413,056 Regulatory liabilities 1,092,633 1,069,842 Derivative liabilities - long-term 388,524 58,737 Other 258,714 267,895 3,575,485 3,343,057 Capitalization: Long-Term Debt 2,994,490 2,789,974 Preferred Stock of Subsidiary - Non-Redeemable 116,200 116,200 Common Shareholders' Equity: Common shares, $5 par value - authorized 225,000,000 shares; 151,657,618 shares issued and 129,695,191 shares outstanding in 2005 and 151,230,981 shares issued and 129,034,442 shares outstanding in 2004 758,288 756,155 Capital surplus, paid in 1,121,635 1,116,106 Deferred contribution plan - employee stock ownership plan (53,776) (60,547) Retained earnings 635,221 845,343 Accumulated other comprehensive income/(loss) 1,111 (1,220) Treasury stock, 19,638,426 shares in 2005 and 19,580,065 shares in 2004 (360,110) (359,126) Common Shareholders' Equity 2,102,369 2,296,711 Total Capitalization 5,213,059 5,202,885 Total Liabilities and Capitalization $11,950,556 $11,655,834

The data contained in this report is preliminary and is unaudited. This report is being submitted for the sole purpose of providing information to present shareholders about Northeast Utilities and Subsidiaries and is not a representation, prospectus, or intended for use in connection with any purchase or sale of securities.

Northeast Utilities and Subsidiaries Consolidated Statements of (Loss)/Income Three Months Ended Six Months Ended Twelve Months Ended June 30, June 30, June 30, 2005 2004 2005 2004 2005 2004 (Thousands of Dollars, Except Share Information) Operating Revenues$1,551,005 $1,524,666 $3,795,650 $3,362,953 $7,119,396 $6,517,889 Operating Expenses: Operation - Fuel, purchased and net interchange power 937,235 912,418 2,523,167 2,089,729 4,664,629 4,092,278 Other 301,091 290,175 579,906 532,122 1,132,020 1,037,358 Wholesale contract market charges, net 62,644 - 271,131 - 271,131 - Restructuring and impairment charges 2,295 - 47,859 - 47,859 - Maintenance 55,110 48,235 96,813 90,024 194,901 178,927 Depreciation 58,351 55,561 116,349 110,134 231,069 214,357 Amortization 24,026 28,087 47,119 57,378 128,012 165,880 Amortization of rate reduction bonds 41,116 38,294 86,906 81,293 170,529 159,961 Taxes other than income taxes 55,679 55,695 132,835 133,284 241,718 240,523 Total operating expenses 1,537,547 1,428,465 3,902,085 3,093,964 7,081,868 6,089,284 Operating Income/ (Loss) 13,458 96,201 (106,435) 268,989 37,528 428,605 Interest Expense: Interest on long-term debt 44,270 33,998 82,719 66,736 155,835 131,509 Interest on rate reduction bonds 22,235 25,043 45,273 50,738 93,434 103,873 Other interest 6,649 4,097 10,991 8,444 17,310 13,822 Interest expense, net 73,154 63,138 138,983 125,918 266,579 249,204 Other Income, Net 9,064 2,862 11,105 4,549 21,021 2,783 (Loss)/Income Before Income Tax (Benefit)/ Expense (50,632) 35,925 (234,313) 147,620 (208,030) 182,184 Income Tax (Benefit)/ Expense (24,317) 10,544 (91,669) 53,407 (93,320) 51,112 (Loss)/Income Before Preferred Dividends of Subsidiary (26,315) 25,381 (142,644) 94,213 (114,710) 131,072 Preferred Dividends of Subsidiary 1,389 1,389 2,779 2,779 5,559 5,559 (Loss)/Income Before Cumulative Effect of Accounting Change (27,704) 23,992 (145,423) 91,434 (120,269) 125,513 Cumulative effect of accounting change, net of tax benefit of $2,553 - - - - - (4,741) Net (Loss)/ Income $(27,704) $23,992 $(145,423) $91,434 $(120,269) $120,772 Fully Diluted (Loss)/Earnings Per Common Share: (Loss)/Income Before Cumulative Effect of Accounting Change $(0.21) $0.19 $(1.12) $0.71 $(0.93) $0.98 Cumulative effect of accounting change, net of tax benefit - - - - - (0.04) Fully Diluted (Loss)/Earnings Per Common Share $(0.21) $0.19 $(1.12) $0.71 $(0.93) $0.94 Fully Diluted Common Shares Outstanding (average) 129,520,644 128,182,645 129,399,574 128,121,751 128,967,327 127,824,381

The data contained in this report is preliminary and is unaudited. This report is being submitted for the sole purpose of providing information to present shareholders about Northeast Utilities and Subsidiaries and is not