UIL Holdings Corp. Reports Operating Results (10-Q)
Uil Holdings Corp. has a market cap of $817.3 million; its shares were traded at around $27.26 with a P/E ratio of 13.7 and P/S ratio of 0.9. The dividend yield of Uil Holdings Corp. stocks is 6.4%. Uil Holdings Corp. had an annual average earning growth of 6.2% over the past 5 years.UIL is in the portfolios of Jim Simons of Renaissance Technologies LLC.
Highlight of Business Operations:On May 25, 2010, UIL Holdings entered into a Purchase Agreement (the Purchase Agreement), with Iberdrola USA, Inc. (Seller), under which UIL Holdings will acquire (i) Connecticut Energy Corporation, the owner of The Southern Connecticut Gas Company (SCG), (ii) CTG Resources, Inc., the owner of Connecticut Natural Gas Corporation (CNG), and (iii) Berkshire Energy Resources, the owner of The Berkshire Gas Company (Berkshire), for $1.296 billion in cash, less net debt of approximately $411 million. Accordingly, UIL Holdings expects to make a cash payment at closing of approximately $885 million, subject to post closing adjustments. As of December 31, 2009, the companies to be acquired had a combined customer total of approximately 369,000, approximately 130,000 of which will be customers of both UI and SCG. After the closing, UIL Holdings customer base will increase to approximately 694,000. UIL Holdings expects the acquisition to close in the first quarter of 2011.
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 months ended June 30, 2010 and 2009 were $3.0 million and $3.8 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 and other stranded costs. Cash flow from operations related to CTA amounted to $19.7 million and $19.1 million for the six month periods ended June 30, 2010 and 2009, respectively. 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 $136.6 million at June 30, 2010. 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 and potential legislative activities, which could affect future rates of stranded cost amortization.
Cash used in investing activities during the first six months of 2010 consisted primarily of capital expenditures of $85.5 million for distribution and transmission infrastructure as well as an additional $8.2 million in funds loaned to GenConn. Cash provided by financing activities during the first six months of 2010 included $30 million from short-term debt and $3.9 million from net issuances of long-term debt, partially offset by the quarterly dividend payments on UIL Holdings common stock totaling $25.9 million.
UIL Holdings also accesses capital through both long-term and short-term debt financing arrangements. Total current and long-term debt outstanding as of June 30, 2010 was $735.7 million, as compared to $731.8 million at year-end December 31, 2009. On January 28, 2010, $27.5 million principal amount of a tax-exempt bonds were issued without insurance, the proceeds of which were used to refund $27.5 million principal amount of insured bonds on February 1, 2010. UI plans to refund $64.5 million principal amount of Auction Rate Bonds at such time and on such terms as municipal bond market conditions allow.
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 (London Interbank Offered Rate or LIBOR), determined by the Eurodollar Interbank Market in London. The facility also permits the issuance of letters of credit up to $50 million. As of June 30, 2010, UI had $25 million outstanding under the facility and UIL Holdings had $5 million in short-term borrowings outstanding under the facility, as well as a standby letter of credit outstanding in the amount of $1 million. The UIL Holdings standby letter of credit reduces the amount of credit available for UI. At June 30, 2010, available credit under this facility for UI was $144 million, of which $44 million was available for UIL Holdings.
Asset values of funded pension and postretirement plans as of June 30, 2010 and December 31, 2009 were approximately $217.9 million and $231.3 million, respectively. While there was no minimum required pension contribution for the 2009 plan year, UI currently expects to make total contributions of approximately $8 million in 2010 and $21 million in 2011, subject to true-ups of actuarial data.
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